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SEBI has permitted the launch of futures contracts on 91-day treasury bills (T-Bills) with immediate effect.
The instrument will be traded on the currency derivatives segment of stock exchanges. Exchanges have been advised to introduce these contracts after permission from SEBI.
The minimum size of the contract is Rs 2 lakh and would be traded from 9 AM to 5 PM. The contract would be quoted on a 100 minus futures discount yield basis. For a future discount yield of 5 per cent the quote would be 100-5 = 95. A change in one-basis point in futures discount yield would be equal to Rs 5 in money terms.
The maximum tenor of the contract is 12 months comprising three monthly contracts (near next and far months) followed by three quarterly contracts with March June September and December maturities.
The contract would be cash settled in rupees. Daily contract settlement value would be computed on the weighted average futures yield of last half an hour or theoretical yields in case data is not available. The contract would expire on the last Wednesday of every month and on the previous day in case Wednesday is a trading holiday.
The final contract settlement value would be computed using weighted average discount yield disclosed by RBI and computed from weekly auction of 91 day T- Bill on the day of expiry. The initial margin requirement would cover 99 per cent value at risk over a one day horizon. It translates into a one in a 100 chance of a worst case loss equal to the value of the portfolio.
Position limits
The gross open positions of clients across all contracts should not exceed 6 per cent of the open interest or Rs 300 crore whichever is higher. Exchanges have been asked to generate alerts whenever the gross open position of the client exceeds three per cent of the total open interest at the end of the previous day's trade.
For trading members the gross open positions across all contracts should not exceed the higher of 15 per cent of the open interest or Rs 1000 crore. Clearing members do not have separate position limits but have been asked to ensure that the combined position of theirs and their trading members is within the limits specified above.
For FIIs, the total gross long (bought) position in cash and Interest Rate Futures markets taken together should not exceed their individual permissible limit for investment in G-Secs.
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