Though the government has taken steps to encourage retail interest in gilts, it remains to be seen whether the investors would be interested.

At present, all outstanding and newly issued central government securities are being traded on the stock exchange. The treasury bills, state government securities and other securities eligible under the government securities would be introduced in phases. The NSE, BSE and OTCEI are permitted to trade in the government securities. They are allowed to trade on automated order-driven system of these exchanges only.

The model similar to equity trading is adopted because it gets with it not only familiarity but several advantages. No additional infrastructure or connectivity issues need to be resolved to use the equity-trading model for trading government securities. There is also no requirement for fresh membership on the exchange or on the clearing corporation to trade in government securities. It is an order-driven system with the most important anonymous trade matchingT+3 rolling settlement is followed. The settlement cycle would be further shortened with the shortening of the settlement cycle for the equities. The clearing corporation would provide the finance guarantee for the settlement of obligations to the clearing members. But for this purpose the exchanges are setting up a trading or settlement guarantee fund which is from the funds used to guarantee trades for equity markets.

Risk is being managed in the similar way as that of equities. Risk management mechanism of mark to market and VAR are used. The volatility borne out in government securities is much less than that in equity and hence the margin levels would be less in this case when compared to equities. In addition, every permitted exchange is designing and building intra-day risk containment system for position on government securities. For encouraging retail participation the brokers play a very important role. Any registered broker of the equity markets is eligible to deal in government securities provided the conditions of minimum capital requirements are satisfied.

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