Exchange Traded Fund- Interest Rate Futures from January

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New Delhi, Sep 2 (UNI) The Securities and Exchange Board of India (SEBI) would commence Exchange Traded Fund (ETF) - Interest Rate Futures from January next year to enable banks, financial institutions and Foreign Institutional Investors to absorb shocks, arising out of fluctuations in interest rates, it was announced here today.

The move aims at stabilising fluctuations and volatility in interest rates and hedge the situation from upside fluctuation and downside risk, SEBI Wholetime Member T C Nair told a Press Conference here.

Dr Nair said another 22 to 25 Foreign Institutional Investors (FIIs) would be registered with SEBI in the next three months as their applications for registration are still to be cleared by the market regulator.

"We hope to clear them by December or January 2008-2009", Dr Nair said, adding that until today, 1,400 FIIs have already registered their operations with SEBI. Their number till about October 2007 was around 1,000, he said.

"SEBI would shortly permit FIIs to trade in currency futures once the market gets stabilised and matured", Dr Nair said this while releasing the ASSOCHAM Study on Hedge Funds : Panacea or Problem' with its Secretary General D S Rawat.

Dr Nair, however, chose not to make any firm commitment to accept the proposal mooted by ASSOCHAM for separately registering hedge funds with SEBI on lines of FIIs, as the market regulator does not make any distinction between FIIs and hedge funds.

The Study, however, recommends that the market regulator should evolve a strategy to monitor movements of hedge funds so that their operations remain transparent on which the SEBI can keep a strict watch.

The Study says that assets of hedge funds currently estimated worldwide is in the range of 2-2.5 trillion dollars. Their assets have grown at over eight per cent annually even with the sub-prime crises.

It is expected that by 2012, the assets would be over four trillion dollars. With a leverage of a minimum of five times, the asset play under management currently crosses 10 trillion dollars.

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