Introduction of future contracts on Corporate Bond Indices

In order to enhance liquidity in the bond markets, SEBI on 9th January, 2023, issued a circular allowing exchanges to introduce futures contracts on the Corporate bond indices which are rated AA+ and above.

Here are some of the key highlights:

Permitted Corporate Bond Index:

  • There shall be at least 8 corporate debt issuers with a maximum weightage of 15% per single issuer in the index.
  • The Index shall not have more than 25% weight in a particular group of issuers[excluding securities issued by (PSUs), Public Financial Institutions (PFIs) and Public Sector Banks (PSBs)]
  • The Index shall not have more than 25% weight in a particular sector (excluding securities issued by PSUs, PFIs and PSBs)

Contract Value:

The value of the Corporate Bond Index Futures (CBIF) contracts shall not be less than Rs. 2 lakhs at the time of introduction.

Tenure of the Contracts:

  • Exchanges may introduce contracts with tenure up to 3 years

  • Weekly, three serial monthly contracts one quarterly contract of the cycle March/June/September/December or one half yearly contract of the cycle June/December

Trading Hours:

  • The trading hours shall be between 9:00 AM and 5:00 PM on all working days from Monday to Friday.

Quotation and Tick Value:

  • The quotation shall be in Indian Rupee. The Tick value shall be decided by the stock exchanges based on the underlying index values or contract size etc.

Settlement Time:

  • The contracts shall be settled in Indian Rupees on the next working day of the expiry (T+1)

Price Bands:

  • For every CBIF, stock exchanges shall set an initial price band at 5% of the previous closing price or base price thus preventing acceptance of orders for execution that are placed beyond the set band. Whenever a trade in any contract is executed at the highest or lowest price of the band, stock exchanges may expand the price band for that contract by 0.5% in that direction after 30 minutes after taking into account market trend.However, no more than 2 expansions in the price band shall be allowed within a day

Settlement Price:

  • The daily settlement price shall be the last half an hour volume weighted average price of the contract.
  • The final settlement price shall be the closing price of the underlying index on the expiry day, which shall be the last Thursday of the expiry cycle.


How can future trading enhance liquidity in the bond markets unless they are bond settled not cash? I hope you have understood the query.