CBOT Swap Futures Off To A Good Start

Displaying one of the exchange's best new-product performances, the Chicago Board of Trade's (CBOT®) 10-Year Interest Rate Swap futures contract is showing robust growth in volume and open interest in just the first two weeks since its launch Oct. 26.

Volume in the contract has soared to more than 28,500 contracts from the first-day total of 3,258, while open interest jumped from 1,195 on the Oct. 26 launch date to more than 5,800 after just 11 trading days (see accompanying volume and open interest chart).

Underlying the strong performance and adding to a strong base of liquidity depth is the market participation by fixed income, pension, and hedge funds and swap dealers. The AAA-rated guarantee of clearing by the Board of Trade Clearing Corporation, a feature not available in the cash swap market, also has proved attractive to market participants.

The Swap contract offers multiple advantages for a whole range of users. As proof, participation is solidly diversified, with locals providing 40% of the volume, customers 53%, and 7% attributed to firm proprietary accounts and member-for-member transactions. In addition, firms note the contract's excellent liquidity and that spreads between the CBOT® 10-Year Treasury futures and the Swap contract are particularly good. Spread volume has increased in the contract's second week to 35.6% of total volume, and 99.65% of trading is on the CBOT® floor.

Additional information on the Swap contract is available under Product Information at www.cbot.com/swap, which provides a spreadsheet that converts swap rates (in yield) to a corresponding futures price in 32nds. Also available via that link is a new trading strategy article, Trading the Bank Credit Curve Using CBOT® Swap Futures, under Trading Strategies.