Corporate Bond Index Derivatives: SEBI-RBI Talks
Why in the news
SEBI and RBI were discussing derivatives on corporate bond indices to enliven corporate debt trading, reviving futures SEBI had permitted in January 2023.
Key facts
- Instrument: Cash-Settled Corporate Bond Index Futures (CBIF), for launch by stock exchanges.
- Eligibility: indices of corporate bonds rated AA+ and above only.
- Settlement: no bonds change hands; the gap between contract price and final index value is paid in cash.
- Investors can take a view on a basket of high-quality bonds.
Significance
- Hedges interest rate and credit risk; improves liquidity and participation.
- Aids price discovery and debt market infrastructure.
Exam angle
- CBIF: cash settled; minimum bond rating AA+.
- Regulators in talks: SEBI and RBI.