With the commencement of Interest Rate Futures trading under a new framework, the Indian financial markets would achieve another milestone. Interest rates are linked to a variety of economic conditions. They can change rapidly, influencing investments and debt obligations. In a market environment where long term debt issuance by the government is increasing and the demand for it is growing, there is a strong need for a cost efficient hedging instrument against interest rate risk. Electronic trading platform of NSE ensures transparency of prices, volumes and trade data.
Products
Currently, Interest Rate Futures segment of NSE offers two instruments i.e. Futures on 6 year, 10 year and 13 year Government of India Security (NBF II) and 91-day Government of India Treasury Bill (91DTB).
The NSE Bond Futures II (NBF II) contracts are available for trading based on Government of India (GOI) security of face value 100 with semi-annual coupon and residual maturity between 4 and 8 years, 8 and 11 years and 11 and 15 years on the day of expiry of IRF contract, as decided by stock exchanges in consultation with FIMMDA. Three Serial monthly contracts followed by three quarterly contracts of the cycle March/June/September/December will be made available along with functionality for spread contract trading on the NSE electronic trading platforms.
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Trading
NSE's automated screen based trading, modern, fully computerised trading system designed to offer investors across the length and breadth of the country a safe and easy way to invest. The NSE trading system called 'National Exchange for Automated Trading' (NEAT) is a fully automated screen based trading system, which adopts the principle of an order driven market.
Clearing & Settlement
NSE Clearing carrries out the clearing and settlement of the trades executed in the equities and derivatives segments of the NSE. It operates a well-defined settlement cycle and there are no deviations or deferments from this cycle. It aggregates trades over a trading period, nets the positions to determine the liabilities of members and ensures movement of funds and securities to meet respective liabilities. More
Risk Management
NSE Clearing has put in place a comprehensive risk management system, which is constantly upgraded to pre-empt market failures. The Clearing Corporation ensures that trading member obligations are commensurate with their net worth. The most critical component of risk containment mechanism for derivatives segment is the margining system and online position monitoring, which is is carried out on-line through Parallel Risk Management System (PRISM). PRISM uses SPAN1 (Standard Portfolio Analysis of Risk). SPAN system is for the purpose of computation of on-line margins, based on the parameters defined by SEBI.
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