Sebi and RBI in talks on giving a boost to interest rate futures

Sebi and RBI in talks on giving a boost to interest rate futures

With RBI we are re-looking at IRF which is currently seeing less traction, says Sebi chairman Ajay Tyagi

The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are in consultations to give a boost to interest rate futures (IRF) which is currently struggling under low volumes, Sebi chairman Ajay Tyagi said on Thursday.

“With RBI we are re-looking at IRF which is currently seeing less traction,” Tyagi said at the NSE-NYU conference on Indian Financial Markets in Mumbai.An interest rate future is a financial derivative with an interest bearing instrument such government bonds as the underlying asset. It is used to hedge risks related to interest rate volatility.

IRF was relaunched for a third time during its lifetime in January 2014 by exchanges. Even in the third attempt, it has struggled to garner volumes due to limited participation. The average daily volume of IRFs on both NSE and BSE stands at Rs1,800 crore, according to Sebi data. On NSE, the average daily turnover for IRF from April to date is Rs1,318 crore.

Insurance companies, non-banking financial companies and housing finance companies cannot use the instrument for their hedging requirements.“NBFCs participating as clients are not allowed to take any trading position. They are only allowed to use IRF for hedging asset and liabilities. Housing finance companies have not been permitted to hedge their interest rate exposure using IRFs,” said Tyagi.

Currently, IRF usage is restricted to foreign banks and a few private sector banks. Public sector banks have lately stayed away from this segment.“In the past few years, since we were mostly into a secular interest rate down-cycle, there was no need for banks to buy futures as there were no contrary views on rates.

Additionally, in the view of lower credit growth, banks preferred investing in government securities rather than IRFs. Now that we are at the bottom of the easing rate cycle, there will be contradictory calls on interest rates, depending on each participant’s view on inflation and other headwinds. So volume can possibly go up,” said Soumyajit Niyogi, associate director at India Ratings.

On the sidelines of the event, Tyagi also said that Sebi is working on a formula for default disclosures in consultation with credit rating agencies and banks. The formula will determine how a default is defined for the purpose of disclosures.In August, Sebi had mandated that listed companies disclose all loan defaults within a day. It withdrew the directive on 30 September, just a day before it was to take effect.

The circular was withdrawn following feedback from banks that a default definition needs to be crystallized.On the leakage of earnings and key company information on WhatsApp and other social media, Tyagi said out of the 12 companies under examination, in seven, the information leaked on social media was very similar to the actual earnings.“We have sought information from compliance officers of these companies,” said Tyagi.

The Mint , New Delhi, 15th December 2017

Data storage norm splits digital payments industry

Data storage norm splits digital payments industry India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move. In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET. “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week. RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...

Offer’s for all of you

Great Bumper Dhamaka Offer’s for all of you... It's Time to see your Business Online, WebeCreator Offer Website Designing with domain & Email @ nominal charges. For a year For More information visit us http://goo.gl/KlpppF call on 9890151261/9773197533 drop a mail to sales@webecreator.com

Sebi to finalise options in commodities today

The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...

CA Online

Search This Blog