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Informist, Thursday, Jun. 5, 2025

 

--Source:CCIL bond forward trading platform development in preliminary stage

--Source: No internal deadline, timeline for CCIL bond fwd trading platform

--Source: CCIL speaking with mkt participants on bond fwd trading platform

 

By Aaryan Khanna, Shubham Rana, and Pratiksha

 

MUMBAI – The Clearing Corp. of India Ltd.'s work on a trading platform for bond forward transactions is still at a preliminary stage, according to an official aware of the matter. Market participants are eagerly awaiting the platform for over a month after the new derivative instrument was introduced into the market, and four months after final norms for bond forwards were put in place.

 

"We are still in discussions with market participants on the platform," the CCIL official told Informist on condition of anonymity. "It is still some time away from being functional, as there are a lot of technical details that we need to sort out to ensure that the product meets the needs of all market participants."

 

The RBI had issued final guidelines for bond forwards in February, nearly 14 months after the draft norms. These came into effect on May 2. A bond forward is an interest rate derivative contract in which one party agrees to buy a government bond from another party on a future date at a price agreed upon at the start of the trade. These products were not permissible in India until a legal amendment in February gave the central bank the flexibility to introduce any financial instrument.

 

An email sent to a CCIL spokesperson on the bond forward platform remained unanswered at the time of publication.

 

Bond forward rate agreements – a comparable hedging tool that is cash-settled instead of physically delivered like bond forwards - continue to be in vogue and enjoyed a booming market before the central bank allowed forwards. While forward rate agreement trades are conducted bilaterally and reported to the central clearing house, market participants were looking forward to CCIL coming up with a bond forward trading platform to ensure better price discovery in the new product after it secured the RBI's go-ahead. CCIL hosts several electronic trading platforms across the money and foreign exchange markets, including the RBI's Negotiated Dealing System – Order Matching platform for trading government securities.

 

The new instrument has got off to a sluggish start. In May, only a handful of trades were undertaken between life insurers and foreign banks. Kotak Mahindra Life Insurance executed a bond forward trade bilaterally with J.P. Morgan in the 7.34%, 2064 government bond on May 5. Another private life insurer is said to have conducted a bilateral bond forward trade in May.

 

While CCIL does not have an internal deadline for introducing the bond forward platform, it is working towards launching this, according to the official. "It is nice to hear that people are waiting for the platform, but bilateral deals can continue in the interim," the official said.  End

 

Edited by Avishek Dutta

 

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