RBI issued final guidelines for 6-year and 13-year Interest Rate Futures

In Banking and Finance
June 13, 2015

The Reserve Bank has issued final guidelines for the 6-year and 13-year cash settled interest rate futures (IRF).

For the 6-year cash settled IRF contracts, the underlying shall be a coupon bearing government security of face value of Rs 100 and residual maturity between 4 and 8 years on the expiry of futures contract.
Another option for the 6-year IRF is that the underlying shall be coupon bearing notional 6-year government security with a face value of Rs 100.
For the 13-year cash settled IRF contracts, the underlying can be a coupon bearing government security of face value of Rs 100 and residual maturity between 11 and 15 years on the expiry of futures contract.

Among other requirements for cash settled 6-year, 10-year and 13-year IRF contracts shall cash-settled in the rupees.

The RBI has also expanded the residual maturity for the existing 10-year cash settled IRF from 9-11 years to 8-11 years to “provide market participants greater choice and flexibility to hedge their interest rate risk across different tenors.”