Electronic Trading Platform

Not every interest rate derivative trades on a stock exchange. A large share of OTC business happens on privately run, screen-based venues instead. The workbook groups these under one label: Electronic Trading Platforms, or ETPs.

An IRD contract can be transacted through only two kinds of venue under the workbook's framework: a recognised stock exchange, or Over-the-Counter (OTC) — and OTC transactions expressly include those conducted on Electronic Trading Platforms.

The governing rule. RBI, vide notification No. FMRD.DIRD.20/2019 dated 26 June 2019 (updated as on 8 August 2022), issued the "Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019." These Directions superseded various earlier RBI directions on rupee interest rate derivatives and apply to Rupee IRD transactions on both recognised stock exchanges and OTC markets, "including on electronic trading platforms (ETPs)."

Who can use them. The Directions govern eligible participants — resident persons and eligible non-residents — and eligibility criteria for using an ETP flow from the same non-retail/retail user classification that applies to IRDs generally.

What ETPs are not. An ETP is not a recognised stock exchange. The workbook keeps the two trading venues — exchange, and OTC (including ETPs) — as a clean either/or split, with separate directions governing activities on each.

The workbook does not give further mechanical detail — such as registration criteria or a list of operating ETPs — beyond naming them as part of the RBI Directions' scope; where the workbook is silent on a specific ETP rule, that detail should not be assumed rather than stated as fact.

A bank's treasury desk wants to enter an interest rate swap of Rs 200 crore notional with a corporate counterparty, referencing Overnight MIBOR. This is not a contract that trades on the NSE or BSE's exchange order book — it is negotiated OTC.

Instead of a bilateral phone-negotiated deal, the two parties execute the swap on a screen-based Electronic Trading Platform. The transaction is still an OTC transaction under RBI's 2019 Directions — the ETP does not convert it into an exchange-traded contract — but it gains the audit trail, price transparency and straight-through processing that a screen-based venue provides over a purely voice-negotiated deal.

Chapter 8 (Regulatory Environment for Exchange Traded IRD), section 8.3 (RBI guideline on Exchange Traded Interest Rate Derivatives), names the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 and states that OTC transactions include those on ETPs. Expect a question on which notification governs ETPs (FMRD.DIRD.20/2019, 26 June 2019) and on the two-venue split (exchange, or OTC including ETPs).

• An ETP transaction is still classified as OTC, not as an exchange trade — the workbook is explicit that OTC "includes" transactions on ETPs.
• The governing notification is dated 26 June 2019, updated as on 8 August 2022 — a specific, examinable date pair.
• The 2019 Directions superseded earlier RBI directions on rupee IRDs — treat them as the current, consolidated source, not one instruction among several still in force.
• The workbook does not detail ETP registration or operating criteria beyond naming them within the Directions' scope — do not answer a question on ETP mechanics with detail this workbook does not give.