Interest Rate Futures (IRF) new product in Market

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On Monday (i.e. 20th Jan, 2014) a new product has been launched in MCX Stock Exchange Ltd. name “Interest Rate Futures”. This product for 10 years benchmark bond has attracted the highest volume of 1.5 billion rupees.

The same product will be launched by National Stock Exchange (NSE) from 21st Jan 2014, while Bombay Stock Exchange (BSE) will launch this product from January 28.

The product has given the reasonable start on MCX and NSE. About Rs.930 crore volumes done on MCX as of 20th Jan and about Rs300 crore was done in the morning as of 21st Jan. So it’s a good start.

It looks like this product will be successful in the market because of its new design. The two very differentiating factors which may help this product to become successful are:

  1. Firstly instead of theoretical bond this is now 10 years actual bond linked product. This is now physical bond which is now trading in the market. So, we can say that future contract is unique in Indian market.
  2. Second is the most important factor which makes this product very unique. This product is now a cash-settled contract. One can settle the price of the contract at the time of maturity. In this you don’t have to deliver the bond.

Clearly with above new changes in the contract I think market is interested in this new product. And this is what market was asking from a very long time and this has been given to the market this year. So one can say that going forward this product will do well.

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