MSE first to get SEBI nod to launch weekly IRF contracts

The Metropolitan Stock Exchange of India (MSE) on January 30 said it has received Sebi approval to launch the country's first weekly derivatives contracts on interest rate futures (IRFs).

This is the second fete for MSE as it was also the first exchange to clear the country's first trade under the interoperability framework for exchanges and clearing corporations.

IRF contracts complete the entire span of the IRF market, creating additional avenues to mitigate short-term risks by hedging and taking more informed speculative positions.

The regulator Sebi has also allowed MSE to launch weekly futures contracts on the currency pairs such as USD-INR, EUR-INR, GBP-INR, JPY-INR, EUR-USD, GBP-USD and USD-JPY, the exchange said in a statement but did not specify when will it launch these new products.

Similarly, the bourse has also been allowed to introduce weekly currency options contracts on these currency pairs.

On the benefits of IRF contracts, Ajit Singh, a vice president at the exchange, said with the addition of weekly IRF contracts, the domestic fixed income market now has the ability to hedge market risk exposures from short-term policy moves without having to deploy month-long futures positions.

"Since weekly IRFs will have weekly convergence to interest rates, short-term speculative spread trading on interest rate futures should logically commence, especially during rate volatilities," he said.

The IRF contracts can enhance effectiveness of the monthly IRF market, thus helping further expand the market.

On the other hand, weekly currency F&O contracts provide can act as another tool to market participants to hedge their currency exposure and manage short-term risks while leveraging opportunities from events like rate actions by central banks or sudden volatility or movement in global currency markets.