Mumbai: The Reserve Bank of India said on Thursday it would launch an electronic reporting platform for rupee derivative products such as swaps from August 30, a move analysts said would bring more transparency to a fledgling market.
Within 30 minutes of a deal, banks and primary dealers will have to report the trade on the platform, which will be managed by the Clearing Corp of India.
Banks and dealers will have to provide all historical trade information by September 15, but they do not have to give details of their clients, the central bank said.
Traders say a reporting platform for interest rate swaps is a precursor to move derivative trading online.
“This has happened with bond trading and now it is the turn of the swaps market,” said a trader with a foreign bank.
India is also considering setting up a rupee futures contract to rival one launched in Dubai earlier this year. A working group still has to submit a report on how to go about it, and media reports have said the central bank could even set up a separate currency futures exchange.
In India, interest rate swaps trading is done mostly by brokers over the telephone. Deals are settled between market participants after the end of trade each day.
Foreign banks and a few private Indian ones are the major participants in the swaps market, and traders hope the platform would help draw marginal investors such as state-run banks into the market.
“It gives smaller players the confidence to do larger volumes. Otherwise, they normally shy away,” Pradeep Madhav, chief operating officer at Securities Trading Corp of India, said.
Daily volume in these swaps is estimated at Rs80 billion ($1.9 billion), double that of a year earlier, Arvind Sampath, senior vice-president at ICICI Securities, said.
Currently only overnight cash rates and bonds are traded online. The central bank has set up a working group to launch interest rate futures and options.