Interest Rate Derivatives:

India's first trading on interest rate derivatives began in the National Stock Exchange of India (NSE) in June 2003 with futures on 91-day treasury bills and a 10 year notional bond. Trading in the Mumbai Inter-Bank Offered Rate (MIBOR) and other instruments would also be introduced subsequently. The first day of the launch (June 24, 2003) started with 4 trades of Rs.25 crore each, involving two deals on the 10-year zero-coupon bond and two others on a 91-day bill.

The list of securities on which futures contracts would be available and their symbols for trading are as follows:

Symbol Description

NSETB91D Futures contract on notional 91-day T-bill

NSE10Y06 Futures contract on notional 10-year coupon bearing bond

NSE10YZC Futures contract notional 10-year zero-coupon bond

NSE defines the characteristics of the futures contract such as the underlying security, market lot and the maturity date of the contract. Interest rate futures contract shall be for a period of maturity of one year with three months continuous contracts for the first three months and fixed quarterly contracts for the entire year.

Minimum lot size for the interest rate futures contracts is fixed at 2000. To start with, the minimum value of a interest rate futures contract would be Rs.2,00,000. Base price of the interest rate future contracts on introduction of new contracts would be theoretical futures price computed based on previous day's closing price of the notional underlying security. The base price of the contracts on subsequent trading days will be the closing price of the futures contracts. There is no day minimum/maximum price ranges applicable for the futures contracts. But for practical purposes, operating ranges for interest rate futures contracts will be kept at ±2% of the base price.