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Fimmda-Nse Mibid/ Mibor: Ruchi Nityanand Prabhu
Fimmda-Nse Mibid/ Mibor: Ruchi Nityanand Prabhu
Fimmda-Nse Mibid/ Mibor: Ruchi Nityanand Prabhu
Abstract: The fixed income money markets and derivatives association (FIMMDA) and foreign exchange dealers’ association
of India (FEDAI) as the nodal agencies to administer rupee interest rate and foreign exchange benchmarks in the markets, in
order to standardize and strengthen the benchmarks for these financial instruments. Mumbai Inter-Bank Offer Rate (MIBOR)
and Mumbai Inter-Bank Bid Rate (MIBID) are the benchmark rates at which Indian banks lend and borrow money to each
other. The bid is the price at which the market would buy and the offer (or ask) is the price at which the market would sell.
These rates reflect the short term funding costs of major banks. In other words, MIBOR reflects the price at which short term
funds are made available to participating banks.
This Article is focusing on the interbank Bid and Offer rates and how does it affect the Stock Market. It also says about the
role of Fixed Income Money Markets and the Derivatives Association of India in maintaining the rates.
Key Words: Stock Markets , Derivatives, Money Market, Interbank rates.
FImmda- Nse Mibid/ Mibor To bring uniformity in the market place the Fixed
Income Money Market and Derivative Association of India
The Fixed Income Money Market and Derivatives (FIMMDA) have been in the forefront for creation of
Association of India (FIMMDA) is an association of Primary benchmarks that can be used by the market participants.
Dealers Insurance Companies, Public Financial Institutions, FIMMDA and NSEIL have taken the initiative to co-brand
and Scheduled Commercial Banks the dissemination of reference rates for the Overnight Call
It was incorporated as a Company under section 25 of rates and Money Market using the current methodology
the Companies Act, 1956 on June 3rd, 1998. It is a voluntary behind NSE – MIBID/MIBOR.
market body for the bond, money and derivatives markets. The product was rechristened as ‘FIMMDA-NSE
The Committee for the Development of the Debt MIBID/MIBOR’. The ‘FIMMDA-NSE MIBID/MIBOR’ is
Market had studied and recommended the modalities for now jointly merged by FIMMDA as well as NSEIL through
the development for a benchmark rate for the call money their websites and other means and simultaneous
market. NSE launched and developed the NSE Mumbai Inter- dissemination of the information would be as per
bank Bid Rate (MIBID) and NSE Mumbai Inter-bank Offer international practice. From 9 to 10 in the morning the rate is
Rate (MIBOR) for the overnight money market on June 15, fixed on the basis of “volume based weighted average of
1998. The success of the Overnight NSE MIBID MIBOR traded rates “.
encouraged the Exchange in the development of benchmark
Importance Of Mibid/ Mibor
rate for the term money market. NSE launched the 14-day
NSE MIBID MIBOR on November 10, 1998 and the longer Unbiased
term money market benchmark rates for 1 month and 3 months
on December 1, 1998. The exchange introduced a 3 Day The National Stock Exchange of India (NSEIL) is
FIMMDA-NSE MIBID-MIBOR on all Fridays with effect trusted by the securities market for its unbiased
from June 6, 2008 in addition to existing overnight rate. The independence and professionalism. The forecasting
bench mark rate for MIBID/MIBOR deals for Interest Rate function has become more meaningful as the information
Swaps, Forward Rate Agreements, Floating Rate Debentures comes from a source, which is not only reliable but has no
and Term Deposits. vested interested of its own in the market movements.
DR VN BRIMS, THANE 99
simultaneously with the aspiration of the market. Floating Rate Notes
Reliable GE Capital
Reliability is the high level of co-relation between Corporate Debentures
actual deals and the reference rate.
L&T Finance
Scientifically Computed
GE Capital
The method of “Polling” with “Bootstrapping” is
scientific and the values are generated through a system Term Deposit
that has been extensively tested. Bank : ICICI
Consistency Interest Rate Swaps
The Exchange ensures that everyday FIMMDA – NSE Standard Chartered Bank & Multinational entity
MIBID/MIBOR along with the respective standard deviation
are disseminated to the market at 09:55 (IST) for overnight SBC & Corporate entity
rate and at 12:00 (IST) for 14 day, 1 month and 3 month rates.
HDFC Bank & KEC International
Method Of Computing Nse Mibid/Mibor ABN AMRO N. V. & Multinational entity
To compute MIBID/MIBOR values the NSE uses the
ABN AMRO N. V. & Reliance Industries
“polling” and “bootstrapping” method.
Deutsche Bank & ICICI Ltd.
The methodology generates multiple data sets based
on the polled with a dynamically determined number of Deutsche Bank & Multinational entity
iterations, trimming the data set for extreme values and
computation of the mean and its standard deviation. No Forward Rate Agreements
trimming may lead to excessive influence of extreme values Bank : HSBC
whereas Excessive trimming may lead to loss of information.
It’s a true representative benchmark for the market, the NSE Revised Methodology for Overnight MIBID/MIBOR
ensures that trimming at any point does not exclude more from 22 July 2015
than 20% of the observation for bid and ask rates
The Reserve Bank of India today said the methodology
The steps followed are: for the FIMMDA-NSE-Overnight Mumbai Interbank Bid/
Offer Rate (Overnight MIBID/MIBOR) benchmark in India
Step 1 : Market representation /polling will be revised with the introduction of the FBIL-Overnight
FIMMDA – NSE MIBID / MIBOR is based on rates MIBOR on July 22.
polled by the NSE from a representative panel of 31 banks/ The Financial Benchmarks India Pvt Ltd (FBIL) will
institutions / primary dealers. act as an independent benchmark administrator and
Step 2 : Computation through bootstrapping gradually take over the benchmarks currently being
disseminated by other agencies. The FBIL-Overnight
The bootstrap technique is a non-paramatic method MIBOR will be based on actual traded rates and will be
for computing the test statistics i.e. administered by a new company Financial Benchmarks India
Private Ltd (FBIL).The existing benchmark, based on polled
Computing the reference rate as an average of the rates, is set by the Fixed Income Money Market and
polled rates for an appropriate amount of trimming to Derivative Association of India (FIMMDA) and the National
minimize noise. Stock Exchange (NSE).
Computing a measure of dispersion i.e. the confidence
“Over a period of time, FBIL will also take over the
intervals for the trimmed means
administration of foreign exchange benchmarks and other
The methodology used by FIMMDA – NSE MIBID/ Indian Rupee interest rate benchmarks in consultation with
MIBOR is not only seeks to tackle the limitation of the polling the stakeholders,” RBI said. FBIL has been jointly formed
method but also uses adaptive trimming to identify and as an independent company for administration of
isolated the extreme value and derives at a true representative benchmarks in financial markets by FIMMDA, the Foreign
benchmark for the market. Exchange Dealers’ Association of India (FEDAI) and the
Indian Banks’Association (IBA).
Product Linked To Mibid / Mibor