Interest Rate Futures (Reserve Bank) Directions, 2009

Notification No. FMD. 1 /ED(VKS) - 2009

The Reserve Bank of India having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of the powers conferred by section 45W of the Reserve Bank of India Act, 1934 and of all the powers enabling it in this behalf, hereby gives the following directions to all the persons dealing in Interest Rate Futures.

1. Short title and commencement of the directions

These directions may be called the Interest Rate Futures (Reserve Bank) Directions, 2009 and they shall come into force with immediate effect.

2. Definitions

(i) Interest Rate Futures means a standardised interest rate derivative contract traded on a recognized stock exchange to buy or sell a notional security or any other interest bearing instrument or an index of such instruments or interest rates at a specified future date, at a price determined at the time of the contract.

(ii) Interest Rate Futures market means the market in which Interest Rate Futures are traded.

(iii) The words and expressions used but not defined in these directions shall have the meaning assigned to them in the Reserve Bank of India Act, 1934.

3. Permitted instruments

(i) Interest Rate Futures are permitted on 10-year notional coupon bearing Government of India security or any other product, as may be approved by the Reserve Bank from time to time.

(ii) Persons resident in India may purchase or sell Interest Rate Futures referred to in sub-paragraph (i) to hedge an exposure to interest rate risk or otherwise. Foreign Institutional Investors, registered with Securities and Exchange Board of India, may purchase or sell Interest Rate Futures referred to in sub-paragraph (i) subject to the condition that the total gross long (bought) position in cash and Interest Rate Futures markets taken together does not exceed their individual permissible limit for investment in government securities and the total gross short (sold) position, for the purpose of hedging only, does not exceed their long position in the government securities and in Interest Rate Futures at any point in time.

(iii) Notwithstanding anything contained in sub-paragraph (i), no scheduled bank or such other agency falling under the regulatory purview of the Reserve Bank under the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 or any other Act or instrument having the force of law shall participate in the Interest Rate...

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