MUMBAi: NSE launched interest rate options on 10-year Government of India bonds today. The first day of launch witnessed turnover of 5926 contracts. Participation was observed from more than 50 trading members.
Mr. Vikram Limaye, MD & CEO of NSE, said, “By launching Interest Rate Options, we have added one more instrument to the fixed income derivatives asset class. Interest rate options will provide institutional investors the ability to manage risk through a non-linear product which is otherwise not available to them. Market participants can use options to trade and hedge interest rate risk on a transparent platform.
With different categories of investors being allowed to participate from day one such as banks, primary dealers, foreign portfolio investors, corporates, etc., we hope to bring the same depth, breadth and efficiency that other asset classes have to this product.”
Interest rate options are based on the underlying Government of India 10-year bonds – the 7.26% 2029 bond and the 6.45% 2029 bond. The unit of trading is Rs. 2 lakhs face value of GOI securities, corresponding to 2000 units. The order quotation is the premium quoted as the price of GOI security and the tick size is INR 0.0025. The options contracts available are European Call & Put Options with minimum 8 in-the-money, 8 out-of-the-money and 1 near-the-money strike prices and a strike interval of INR 0.25. The contracts will be available for 3 serial monthly contracts followed by 3 quarterly contracts of the cycle March/June/September/December. The contract expiry is on the last Thursday of the expiry month and will be cash settled.
Currently, interest rate futures are available on 7 Government of India bonds as the underlying, for residual maturity ranging from 4 years to 15 years. The contracts are available for 3 Serial months followed by 3 quarterly contracts of the cycle March/June/September/December. The contract expiry is on the last Thursday of the expiry month and will be cash settled. An average daily turnover of around Rs 1,480 crores is observed in the current financial year on NSE.
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