NSE sets position limits for clients in IRF

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The National Stock Exchange has asked stock brokers to ensure that exposure of clients to Interest Rate Futures (IRF) remains within a prescribed limit.

The bourse today launched its IRF -- 'NSE Bond Futures' -- on 10-year government securities, one of the most liquid debt paper instruments in the country.

"The gross open positions of the client across all contracts should

not exceed three per cent of the total open interest or Rs 200 crore whichever is higher," NSE said in a note to trading members.

Open position generally refers to trading position that is active and yet to be closed with opposing position.

Trading members or clearing members are required to adhere to client-level position limits with effect from today.

The exchange is required to keep information about aggregate gross open positions of clients in IRF on a daily basis.

An IRF is a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing assets such as government bonds.

The exchange will have to disseminate "client level position violation" if the gross open position of the client across all members and contracts exceeds three per cent of the total open interest or 10,000 contracts, whichever is higher, on a daily basis.

In case the client level position limits are breached, the trading members will have to upload information pertaining to the nature of the position held, position in underlying, and positions held by related entities, among others.

On the breach of position limits, the members should ensure that "positions are not increased further and the positions are to be brought down immediately."

Yesterday, trading in IRF based product on MCX-SX debuted with trades worth Rs 930 crore.

Last month, market regulator Sebi allowed stock exchanges to launch cash settled IRF on 10-year government security.

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