Interest Rate Futures In India
Interest rate futures are a type of financial derivative that involve an interest-bearing instrument as the underlying asset. In India, the underlying asset is a 10-year notional coupon bond issued by the Government of India. Eligible securities for trading must have a maturity between 7.5 and 15 years from the first day of the delivery month and a minimum outstanding of Rs 10,000 crore.
Interest rate futures can be traded by companies, banks, foreign institutional investors, non-resident Indians, and retail investors on NSE, BSE, and MCX-SX exchanges between 9am and 5pm. The minimum contract size on NSE is Rs 2 lakh and the quotation is similar to the quoted price of GoI securities with a 30/360-day count convention. The maximum tenor of the contract is 12 months, and it must be rolled over every three months, resulting in four fixed quarterly contracts for the year-end months of March, June, September, and December.
Daily settlement of contracts is based on the weighted average price of the futures contract for the last 30 minutes of trading. In the absence of this trading, the theoretical price as determined by the exchange is considered as the daily settlement price. Settlement is done on a daily mark-to-market basis, and contracts are physically settled in the delivery month of the contract expiry month.