FIMMDA- NSE MIBID/ MIBOR

Ruchi Nityanand Prabhu

MMS Sem II Student
Dr. V N Bedekar Institute of Management Studies
Email : ruchi.prabhu@vpmthane.org

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
The Fixed Income Money Market and Derivatives
Association of India (FIMMDA) is an association of Primary
Dealers Insurance Companies, Public Financial Institutions,
and Scheduled Commercial Banks
It was incorporated as a Company under section 25 of
the Companies Act, 1956 on June 3rd, 1998. It is a voluntary
market body for the bond, money and derivatives markets.
The Committee for the Development of the Debt
Market had studied and recommended the modalities for
the development for a benchmark rate for the call money
market. NSE launched and developed the NSE Mumbai Inter-
bank Bid Rate (MIBID) and NSE Mumbai Inter-bank Offer
Rate (MIBOR) for the overnight money market on June 15,
1998. The success of the Overnight NSE MIBID MIBOR
encouraged the Exchange in the development of benchmark
rate for the term money market. NSE launched the 14-day
NSE MIBID MIBOR on November 10, 1998 and the longer
term money market benchmark rates for 1 month and 3 months
on December 1, 1998. The exchange introduced a 3 Day
FIMMDA-NSE MIBID-MIBOR on all Fridays with effect
from June 6, 2008 in addition to existing overnight rate. The
bench mark rate for MIBID/MIBOR deals for Interest Rate
Swaps, Forward Rate Agreements, Floating Rate Debentures
and Term Deposits.
To bring uniformity in the market place the Fixed
Income Money Market and Derivative Association of India
(FIMMDA) have been in the forefront for creation of
benchmarks that can be used by the market participants.
FIMMDA and NSEIL have taken the initiative to co-brand
the dissemination of reference rates for the Overnight Call
rates and Money Market using the current methodology
behind NSE – MIBID/MIBOR.
The product was rechristened as ‘FIMMDA-NSE
MIBID/MIBOR’. The ‘FIMMDA-NSE MIBID/MIBOR’ is
now jointly merged by FIMMDA as well as NSEIL through
their websites and other means and simultaneous
dissemination of the information would be as per
international practice. From 9 to 10 in the morning the rate is
fixed on the basis of “volume based weighted average of
traded rates “.
Importance Of Mibid/ Mibor
Unbiased
The National Stock Exchange of India (NSEIL) is
trusted by the securities market for its unbiased
independence and professionalism. The forecasting
function has become more meaningful as the information
comes from a source, which is not only reliable but has no
vested interested of its own in the market movements.

It has been in the forefront for creation a benchmark Market Representation

that can be used for the market participants to bring
uniformity in the market place. To take the process of
development further, FIMMDA and NSEIL have taken the
initiative to co-brand the dissemination of reference rates
for the Overnight NSE – MIBID/MIBOR. Now it is jointly
disseminated by FIMMDA as NSEIL through their websites
and other means and simultaneous dissemination of the
information would be as per international practice.
A representative panel of 30 banks/ primary dealers
rates FIMMDA – NSE MIBID / MIBOR
Transparent
The market participants are helped by the
Transparency to judge the market mood and the probable
rate one is likely to encounter in the market. Media helps to
maintain the transparency to all the market participants

DR VN BRIMS, THANE 99
simultaneously with the aspiration of the market.
Reliable
Reliability is the high level of co-relation between
actual deals and the reference rate.
Scientifically Computed
The method of “Polling” with “Bootstrapping” is
scientific and the values are generated through a system
that has been extensively tested.
Consistency
The Exchange ensures that everyday FIMMDA – NSE
MIBID/MIBOR along with the respective standard deviation
are disseminated to the market at 09:55 (IST) for overnight
rate and at 12:00 (IST) for 14 day, 1 month and 3 month rates.
Method Of Computing Nse Mibid/Mibor
To compute MIBID/MIBOR values the NSE uses the
“polling” and “bootstrapping” method.
The methodology generates multiple data sets based
on the polled with a dynamically determined number of
iterations, trimming the data set for extreme values and
computation of the mean and its standard deviation. No
trimming may lead to excessive influence of extreme values
whereas Excessive trimming may lead to loss of information.
It’s a true representative benchmark for the market, the NSE
ensures that trimming at any point does not exclude more
than 20% of the observation for bid and ask rates
The steps followed are:
Step 1 : Market representation /polling
FIMMDA – NSE MIBID / MIBOR is based on rates
polled by the NSE from a representative panel of 31 banks/
institutions / primary dealers.
Step 2 : Computation through bootstrapping
The bootstrap technique is a non-paramatic method
for computing the test statistics i.e.
Computing the reference rate as an average of the
polled rates for an appropriate amount of trimming to
minimize noise.
Computing a measure of dispersion i.e. the confidence
intervals for the trimmed means
The methodology used by FIMMDA – NSE MIBID/
MIBOR is not only seeks to tackle the limitation of the polling
method but also uses adaptive trimming to identify and
isolated the extreme value and derives at a true representative
benchmark for the market.
Product Linked To Mibid / Mibor
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Floating Rate Notes
GE Capital
Corporate Debentures
L&T Finance
GE Capital
Term Deposit
Bank : ICICI
Interest Rate Swaps
Standard Chartered Bank & Multinational entity
SBC & Corporate entity
HDFC Bank & KEC International
ABN AMRO N. V. & Multinational entity
ABN AMRO N. V. & Reliance Industries
Deutsche Bank & ICICI Ltd.
Deutsche Bank & Multinational entity
Forward Rate Agreements
Bank : HSBC
Revised Methodology for Overnight MIBID/MIBOR
from 22 July 2015
The Reserve Bank of India today said the methodology
for the FIMMDA-NSE-Overnight Mumbai Interbank Bid/
Offer Rate (Overnight MIBID/MIBOR) benchmark in India
will be revised with the introduction of the FBIL-Overnight
MIBOR on July 22.
The Financial Benchmarks India Pvt Ltd (FBIL) will
act as an independent benchmark administrator and
gradually take over the benchmarks currently being
disseminated by other agencies. The FBIL-Overnight
MIBOR will be based on actual traded rates and will be
administered by a new company Financial Benchmarks India
Private Ltd (FBIL).The existing benchmark, based on polled
rates, is set by the Fixed Income Money Market and
Derivative Association of India (FIMMDA) and the National
Stock Exchange (NSE).
“Over a period of time, FBIL will also take over the
administration of foreign exchange benchmarks and other
Indian Rupee interest rate benchmarks in consultation with
the stakeholders,” RBI said. FBIL has been jointly formed
as an independent company for administration of
benchmarks in financial markets by FIMMDA, the Foreign
Exchange Dealers’ Association of India (FEDAI) and the
Indian Banks’Association (IBA).
ISSN 2456-4079 Dr. VN Brims Srujan
 FIMMDA and FEDAI, who are the current benchmark
administrators for the Indian rupee interest rate and foreign
exchange benchmarks, respectively, will continue to act as
administrators for the Rupee interest rate and foreign
exchange benchmarks till they are shifted to FBIL.
The RBI further said it “will set up an appropriate oversight
mechanism for ensuring that the benchmark determination
process and its governance framework remain robust and
credible”.
Taking note of the concerns arising from reports of
manipulation of key benchmark rates in certain financial
markets, the RBI had sought to strengthen the existing
framework for benchmark setting process with various
measures. Considering that financial benchmarks need to
be robust and reliable, it had advised the benchmark
submitters to implement various measures for strengthening
the governance framework for benchmark submission.
Moreover, FIMMDA and FEDAI had also notified a code of
DR VN BRIMS, THANE
conduct for the submitters.
References
Books
 NCFM NSE’s Certification in Financial Market (2015)
Financial Market (Beginners) Module: National
Stock Exchange of India Ltd.
 NCFM NSE’s Certification in Financial Market (2016)
FIMMDA-NSE-Debt Market (Basic) Module Work
Book : National Stock Exchange of India Ltd.
 NCFM NSE’s Certification in Financial Market (2016)
Derivatives Market (Dealers) Module Work Book :
National Stock Exchange of India Ltd.
Robert E Whaley (2007) Derivative : Markets,
Valuation, and Risk Management : John Wiley & Sons
Web Source
https://www.nseindia.com/
https://www.nseindia.com/education/content/
module_ncfm.htm
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