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An Interest Rate Futures contract is "an agreement to buy or sell a debt instrument at a specified future date at a price that is fixed today." The underlying security for Interest Rate Futures is either a Government Security or a T-Bill.

Currently, the futures contracts are available on 91 Day T-Bill and the below mentioned government securities:

  1. 6.84% GS 2022
  2. 7.68% GS 2023
  3. 7.59% GS 2026
  4. 6.97% GS 2026
  5. 6.79% GS 2027
  6. 7.59% GS 2029
  7. 6.79% GS 2029
  8. 7.88% GS 2030
  9. 7.61% GS 2030
  10. 6.68% GS 2031

Futures on G-Secs are traded in lots of Rs 2 Lacs with three serial monthly contracts outstanding. These contracts are traded on NSE and BSE exchanges. In its current form, the futures contracts are cash settled on T+1 day. All the contracts expire on the last Thursday of every month. Settlement of outstanding positions in futures contracts is undertaken on the Daily Settlement Price (DSP) determined by the exchange. DSP is the price at which the daily valuation of the futures contract is carried out. In other words, the daily MTM pay-in/ pay-out is calculated as the price at which a trader holds the futures position minus the DSP as determined by the exchange. The calculation of DSP is based on the ‘Volume Weighted Average Futures Price of last half an hour’. In case of absence of last half an hour of trading in a particular futures contract, then the DSP is calculated based on theoretical formula.

However, on expiry, settlement takes place on the Final Settlement price. It is the price at which a futures contract is valued at on expiry. It is calculated as the ‘Weighted Average Price of the underlying bond during the last two hours of the trading on NDS-OM subject to minimum of 5 trades. If less than 5 trades are executed in the underlying bond during the last two hours of trading, then FIMMDA price shall be used as final settlement price.

IRF trading has increased considerably with volumes ranging between Rs 1,500 – Rs 4,000 Crs on daily basis. STCI Primary Dealer Ltd. is an active player in this market and undertakes transactions on a proprietary basis.


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