Trading in interest rate futures began on the National Stock Exchange (NSE) on Monday. The contracts are based on 10-year government bonds bearing a notional coupon of 7% per annum, compounded every six months.
More than 10,000 contracts were struck in the December futures in the first two hours of trade on the NSE, the country's largest bourse. The open interest stood at 2,890.
At 1:57 p.m., the December contract was at Rs91.84 after opening at Rs94.50. The March futures eased to Rs90.94 from Rs91.11 at the start.
Banks and companies can hedge against interest rate risks using interest rate futures. "The launch of interest rate derivatives means a lot to the NSE, its constituency of brokers and all economic entities who face interest rate risk," NSE Managing Director Ravi Narain said.
The contracts would be settled in March, June, September and December. The maximum maturity will be 12 months. The Reserve Bank of India (RBI) has laid down detailed guidelines for trading in the interest rate futures. Commercial banks are allowed to take trading positions for themselves but can not trade on behalf of their clients.
The rival Bombay Stock Exchange (BSE) said last week it had received regulatory approval for interest rates futures and would launch in 8-10 weeks. The Multi Commodity Exchange's foreign exchange derivatives bourse has sought permission to launch trade in interest rate futures.