Annual Policy Statement for the Year 2010-11- 20th April 2010
Part B. Development and Regulatory Policies
III. Financial Markets
Financial Market Products
Interest Rate Futures
58. The Interest Rate Futures contract on 10-year notional coupon bearing Government of India security was introduced on August 31, 2009. Based on the market feedback and the recommendations of the Technical Advisory Committee (TAC) on the Money, Foreign Exchange and Government Securities Markets, it is proposed:
to introduce Interest Rate Futures on 5-year and 2-year notional coupon bearing securities and 91-day Treasury Bills. The RBI-SEBI Standing Technical Committee will finalise the product design and operational modalities for introduction of these products on the exchanges.
Regulation of Non-Convertible Debentures (NCDs) of Maturity of Less than One Year
59. As indicated in the Second Quarter Review of October 2009, the draft guidelines on the regulation of non-convertible debentures (NCDs) of maturity of less than one year were placed on the Reserve Bank’s website on November 3, 2009 for comments/feedback. The comments/feedback received were examined and also deliberated by the TAC on the Money, Foreign Exchange and Government Securities Markets. Accordingly, it is proposed:
to issue the final guidelines on the issuance of NCDs of maturity less than one year by end-June 2010.
Introduction of Credit Default Swaps (CDS)
60. As indicated in the Second Quarter Review of October 2009, the Reserve Bank constituted an internal Working Group to finalise the operational framework for introduction of plain vanilla over-the-counter (OTC) single-name CDS for corporate bonds for resident entities subject to appropriate safeguards. The Group is in the process of finalising a framework suitable for the Indian market, based on consultations with market participants/experts and study of international experience. Accordingly, it is proposed:
to place the draft report of the internal Working Group on the Reserve Bank’s website by end-July 2010.
Guidelines on Forex Derivatives
61. As indicated in the Second Quarter Review of October 2009, the draft guidelines on OTC foreign exchange derivatives were placed on the Reserve Bank’s website on November 12, 2009 for public comments. The feedback received from stakeholders and industry associations was discussed in the meeting of the TAC on the Money, Foreign Exchange and Government Securities Markets. On the basis of the discussions, it is proposed:
to issue final guidelines by end-June 2010.
Introduction of Exchange-Traded Currency Option Contracts
62. Currently, residents in India are permitted to trade in futures contracts in four currency pairs on two recognised stock exchanges. In order to expand the menu of tools for hedging currency risk, it has been decided:
to permit the recognised stock exchanges to introduce plain vanilla currency options on spot US Dollar/Rupee exchange rate for residents.
63. The risk management and operational guidelines will be finalised by the RBI-SEBI Standing Technical Committee.
Separate Trading for Registered Interest and Principal of Securities (STRIPS): Status
64. As indicated in the Annual Policy Statement for 2009-10, the draft guidelines on stripping/reconstitution of government securities prepared in consultation with market participants were placed on the Reserve Bank’s website on May 14, 2009 for comments and feedback. Taking into consideration the feedback received on the draft guidelines, the final guidelines on stripping/reconstitution of government securities were issued on March 25, 2010. The guidelines, which came into effect from April 1, 2010, will enable market participants to strip/reconstitute eligible Government of India dated securities through the negotiated dealing system (NDS) subject to certain terms and conditions.
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