Guidelines on Exchange Traded Interest Rate Derivatives - RBI - Reserve Bank of India
Guidelines on Exchange Traded Interest Rate Derivatives
June 11, 2003 IDMD.PDRS. 4802(A)/03.64.00/2002-03 To Dear Sir, Guidelines on Exchange Traded Interest Rate Derivatives Please refer to our circular IDMC.PDRS. 4802 /03.64.00/2002-03 dated June 3, 2003 on the captioned subject in terms of which Primary Dealers are allowed to transact in Exchange Traded Interest Rate futures for the purpose of hedging the interest rate risk of their underlying government securities portfolio. 2. Based on the feedback from Primary Dealers requesting for permitting them to hold trading positions in Interest Rate futures subject to the prudential regulations , the issue has been revisited and it has now been decided to allow Primary Dealers to hold trading positions in Interest Rate Futures subject to the following prudential regulations:
3. Capital Adequacy : The charges for credit risk for trading positions in Interest Rate Futures should be in terms of our previous circular IDMC.PDRS. 4802 /03.64.00/2002-03 dated June 3, 2003. Guidelines for charges on market risk in respect of derivatives (OTC and Exchange traded) in line with international norms is being issued separately. 4. ALM Classification: Trading positions in Interest Rate futures should be classified as a risk sensitive asset or liability under 0-30 day maturity bucket. 5. Disclosures: The PDs undertaking interest rate derivatives on exchanges may disclose as a part of the notes on accounts to balance sheets the following details: (Rs. Crores)
6. Reporting: Primary dealers should submit a monthly statement to IDM Department as per the revised enclosed format. 7. These guidelines may be placed before the respective Board of Directors for formulating the policy, framework and appropriate risk control measures before the regulated entities undertake trades in interest rate futures on the stock exchanges. 8. Please acknowledge receipt. Yours faithfully, sd/-
MONTHLY RETURN ON EXCHANGE TRADED INTEREST RATE FUTURES Name of the PD: As on last working day of the month: I. Activity during the month :
II. Analysis of "highly effective" hedges: A certificate from the concurrent auditor stating the size of the hedge portfolio and that the hedge is highly effective as per the definition of the RBI circular. III. Analysis of Trading positions:
* NPA- Notional principal amount
|