Trading of interest rate options to be permitted from Jan 31: Reserve Bank of India

In a bid to further develop India’s debt markets, the Reserve Bank on Thursday said trading of interest rate options will be permitted from January 31, 2017.

Eligible market participants are permitted to take positions in ‘Interest Rate Options’ for their own balance sheet management and for market making purposes, the central bank said in a notification.

Participants, who are eligible as market makers are, however, advised to ensure that appropriate infrastructure and risk management systems are in place, it added.

Interest Rate Options will be be effective from January 31, 2017 on exchanges authorised by Sebi as well as in the Over-the-Counter (OTC) market. Interest Rate Options are contracts whose value is based on rupee interest rates or rupee interest rate instruments.

For orderly market development, Fixed Income Money Market and Derivatives Association of India (FIMMDA), in consultation with market participants, will publish a list of objective and transparent rupee money or debt market rates or instruments that may be used as underlying asset.