NSE launches ‘NSE Bond Futures II’ on 10-year GOI bonds

India Infoline News Service | Mumbai |

First day volumes were Rs. 3081.49 crs with open interest of 16057 contracts.

The National Stock Exchange (NSE), India’s premier bourse launched the NSE Bond Futures II (NBF II) on 10-year Government of India bonds today. The NSE Bond Futures II were launched by the Chief Guest , SEBI Chairman, Mr U K Sinha , in the presence of the  RBI Governor Dr. Raghuram Rajan.

So far a simple product like this was not available to hedge risk from volatile interest rate movements, and investors and institutions will be able to use this effectively to mitigate risk from any asset class that is affected by interest rate movement.

On the first day of trade, the NBF II volumes were Rs. 3081.49 crs with open interest of 16057 contracts.

The NBF II is based on underlying Government of India 10-year bonds - the 8.83 percent 2023 bond and the 7.16 percent 2023 bond. The product is cash settled.

The first trade was done between East India Securities Ltd. and Prompt Corporate Services.

The first financial institution to trade today was ICICI Securities PD and the first bank to trade was IDBI Bank. ICICI Securities PD is the entity to trade the highest volume; while L&T is one of the large corporates who participated today.

Banks that traded today were Axis bank, bank of America NA, Bank of Baroda,  Bank of India, Canara Bank, Central bank of India, HDFC Bank Ltd, ICICI Bank ltd, IDBI Bank limited,  Punjab National Bank, Standard Chartered Bank, State Bank of India,  the Federal Bank ltd,  the Hong kong and Shanghai Banking Corporation ltd, Union Bank of India,  and YES Bank ltd.

Trading Members who participated in NBF II today include Edelweiss Securities limited, J M Global equities private limited, Kotak Securities Ltd, to name a few.

Chitra Ramkrishna, MD & CEO, NSE, said, “NSE is not only committed to providing the best trading platform, but also to building the infrastructure needed to support this. We are taking one more step today by launching the NSE Bond Futures linked to a single underlying bond. We hope to bring to this space the same depth, breadth and efficiency that other asset classes have today.”

She added “This product has been designed with feedback that regulators have been receiving from all of you (addressing market participants), after collaborating and taking inputs from the market. It has been a hugely consultative process and we believe this will be a product every one of you will be able to make use of from day one.

SEBI Chairman Mr. U.K. Sinha said, "I would like to emphasize our belief that the product this time is going to succeed, primarily because of all the support and cooperation that we are getting from the RBI. I would like to thank Dr. Raghuram Rajan personally and his entire team for the faith they are exhibiting in the market and the market mechanism.”

“Banks have been permitted this time, FIIs have been permitted, mutual funds are already there, insurance companies will be trading, and I am quite sure, with all these participants, there is a very good chance for the product to succeed,” Mr. Sinha added.

Market participants like banks, primary dealers, FII, mutual funds, insurance companies, corporate houses, NBFC’s (after permission from RBI), trading members and HNI’s can trade it this product.

NSE bond futures will benefit market participants to hedge risk, balance portfolios, do view-based trading and use different trading strategies to manage interest rate risk.

The progressive step taken by the regulators will help in deepening the bond market and provide a product which is currently a missing link in the capital markets.
 

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