The Hindu Business Line : Govt proposes new interest rate derivative product

THE Government is planning to introduce a new interest rate derivative product in the market within the next couple of months, as the existing product has not really picked up.

The new product could include both Government and private debt papers, the Chairman of the Securities and Exchange Board of India (SEBI), Mr G.N. Bajpai, said here on Friday while releasing a book titled Futures and Options.

Mr Bajpai said that the SEBI was coordinating with the Reserve Bank of India for launching the new derivative product, which would enable banks, financial institutions and others to hedge interest rate risks.

Commenting on the futures and options market in the country, Mr Bajpai said that while trading in stock futures was growing at a rapid pace, the growth in the options segment was rather slow. This was because the Indian market had a replica of the futures in the form of `badla' trading and, therefore, the knowledge and understanding of the market mechanism was readily available with the operators. That was not true for the options segment. But still, there has been steady growth in this sector also, he said.

Pointing out to the country's success in developing individual stock futures, Mr Bajpai said that the development of single stock futures has drawn the attention of the world and many countries were trying to learn how to develop single stock futures from India.

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