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Informist, Monday, Mar. 24, 2025

 

By Aaryan Khanna

 

NEW DELHI – The Clearing Corp. of India last week introduced interest rate swaps benchmarked to the modified Mumbai Interbank Forward Offer Rate to its derivatives trading platform. The new system went live on Mar. 17, though trading houses are still getting their bearings on the new contract, dealers said.

 

CCIL's Anonymous System for Trading in Rupee OTC Interest Rate Derivatives, or 'ASTROID' platform, earlier only had an interface for trading in swap rates indexed to the overnight Mumbai Interbank Offer Rate, the benchmark rate for uncollateralised funding in India's banking system. It also allowed spread trading between these overnight indexed swap rate contracts.

 

The modified MIFOR is based on a currency forward spread over the Secured Overnight Financing Rate, the benchmark rate for collateralised dollar funding. It has replaced the vanilla MIFOR contract in the domestic market over the last few years, which was based on the London Interbank Offered Rate that was phased out globally at the end of 2021. Modified MIFOR swap contracts are priced in rupees and are actively quoted on the over-the-counter market as a hedge for foreign exchange liabilities, with the two- and five-year swaps being the most traded.

 

"Getting it on CCIL will no doubt boost liquidity in these contracts," a dealer at a private bank said. "The overall market sees both trading and investment flows, so its more of an access thing rather than market development. But it is definitely a step forward."

 

The clearinghouse has offered its services as a central counterparty for over-the-counter trades in the modified MIFOR contract since 2023, before adding it to the platform last week. Getting those volumes to transfer to the 'ASTROID' has proved a struggle in the early days. There have been only a handful of daily trades in the modified MIFOR contracts on the platform, with only one trade worth a notional amount of INR 50 million in the three-year segment on Monday.

The trade was likely associated in part with positioning due to the Reserve Bank of India's 36-month, dollar/rupee buy/sell swap auction on Monday, dealers said. The platform shows quotes in contracts of two-year, three-year, four-year, five-year, seven-year and 10-year maturities – the last two introduced as part of CCIL's offerings only in the past week.

 

"It is a well-established and an old market with banks often hedging but not a huge market when compared to OIS," an official from the clearinghouse told Informist. "We are expecting to help it grow slowly, slowly, but at the same time allow more transparent trading that could draw in more interest." An email to CCIL asking for comments on the introduction of modified MIFOR swaps remained unanswered.

 

While foreign banks are the most active market-makers in the modified MIFOR swap market, their strict internal compliance may delay their shift to the CCIL platform, particularly with the clearinghouse lacking recognition from the European Union's markets regulator. Meanwhile, several domestic banks and traders are still getting their trading systems to converse with and place bets on the CCIL's new offering. These are expected to be completed in the first half of April, dealers said.

 

"I am rushing to get my systems integrated so that I can trade the modified MIFOR on the 'ASTROID' platform," a dealer at a primary dealership said. "When the market shifts from over-the-counter system to the trading platform, I think it'll have a decent interest from us traders also."  End

 

Edited by Saji George Titus

 

 

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