RBI rejigs trade norms in gilts

The Reserve Bank of India (RBI) has amended directions on Interest Rate Futures (IRFs) on government securities (G-Secs) for permitting 2-year and 5-year tenure IRFs which would be cash-settled at expiry by the stock exchanges offering the contracts.

In a notification, RBI said the amendment directions will come into effect immediately. As per the directions, the 2-year and 5-year IRF contracts would be on 2-year and 5-yr notional coupon bearing Government of India security respectively and the notional coupon shall be 7 per cent per annum for both the tenure bonds with semi-annual compounding, said RBI on its website.

The final settlement price of the 2-year and 5-year IRF contracts would be based on the yields of the basket of securities (as specified by respective stock exchanges) and disseminated by Fixed Income Money Market and Derivatives Association of India (FIMMDA) for the limited purpose of settlement of IRF contracts, as per the guidelines issued by the RBI from time to time.

It may be recalled that the Reserve Bank had announced the issue of final guidelines on cash settled 2-year and 5-year IRFs by end-December 2011 in the Second Quarter Review of Monetary Policy 2011-12.