New Delhi: Leading stock exchange Bombay Stock Exchange (BSE) will introduce new interest rate futures (IRF) contracts from 30 December on six-year government bonds maturing in 2022.

The IRF contract is based on 6.84% central government security maturing on 19 December 2022, and will be available for trading from 30 December this year, BSE said in a circular.

An IRF contract is an agreement to buy or sell a debt instrument at a specified future date at a pre-determined price. The cash-settled IRFs provide market participants an option to hedge risks arising from fluctuations in interest rates, which depend on various factors, including RBI policy, demand for liquidity and flow of overseas funds.

The IRF market gets participation from retail investors, trading houses, foreign portfolio investors (FPIs) and other institutions. Last week, the National Stock Exchange (NSE) had announced that IRF contracts based on 6.84% central government security having maturity on 19 December 2022, will be available for trading with effect from 30 December this year.

The exchange, earlier this year, had introduced IRF contracts on government bonds maturing in May 2030.

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