CBOT Reduces Tick Size In 10-Year Interest Rate Swap Futures

The Chicago Board of Trade (CBOT®) announced today it will reduce the minimum trading increment, otherwise known as a contract’s “tick size,” of its 10-Year Interest Rate Swap futures contact from 1/32 of a price point to one half of 1/32. The change is expected to go into effect on February 12, 2006, for the trade date of February 13, 2006.

The reduced tick size better aligns the 10-Year Swap futures contract with the tick size of the CBOT’s 10-Year Treasury Note futures contract, as well as with the cash market for Treasury notes, by enabling finer price gradations in trading. The move is also designed to help market participants facilitate tighter bid-offer spreads.

CBOT Senior Vice President of Business Development Robert W. Ray said, “Adjusting the tick size of our Swap futures contract will help to boost its utility among interest rate swap dealer desks, institutional portfolio managers, and mortgage industry participants because it will enable them to quote a tighter market. Offering a smaller tick size also enhances spread strategies and adds more flexibility for executing Exchange-for-Physical and Exchange-for-Swap transactions at the CBOT.”