RBI panel rec­om­mends guide­lines for bond op­tions

The Pak Banker - - COMPANIES/BOSS -

MUM­BAI: A cen­tral bank panel has is­sued rec­om­men­da­tions for in­tro­duc­ing bond op­tions in In­dia that in­clude sim­ple struc­tured con­tracts and al­low­ing com­pa­nies to trade up to 50 mil­lion ru­pees ($736,024.73) with­out doc­u­mented un­der­ly­ing ex­po­sures.

The work­ing group, set up by the Re­serve Bank of In­dia, has called for in­tro­duc­ing a call and put op­tion for­mat for trad­ing over-the­counter (OTC) as well as on ex­changes, the panel said in its re­port. "To be­gin with, sim­ple call and put op­tions, caps, floors, col­lars and swap­tions may be per­mit­ted. Com­plex struc­tures may be in­tro­duced sub­se­quently," it said.

All do­mes­tic en­ti­ties with an un­der­ly­ing in­ter­est rate risk may be al­lowed to trade th­ese "in­ter­est rate op­tions," the re­port said. The RBI called for com­ments on its re­port by Feb. 26 and will is­sue fi­nal guide­lines by endMarch. In­dia's cen­tral bank cur­rently al­lows trad­ing of bond fu­tures, and had long been ex­pected to in­tro­duce op­tions in In­dia.

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