CBOT® President and CEO Bernard W. Dan said, "As part of diversifying our interest rate product mix and responding to the needs of our customers, options on fed funds futures at the CBOT will provide market users with opportunities for managing risk of assets that might be adversely affected by changes in the fed funds target rate during the funding period.
This contract will offer Eurodollar options traders with additional arbitrage opportunities, and bank funding departments, commercial paper issuers, repo traders, and proprietary traders will be able to take advantage of this contract during volatile economic conditions."
Due to technical programming issues on the part of back-office system vendors, the contract will launch with 12 ½ basis point strike price intervals. The CBOT is working with back-office system vendors to determine a date at which to list 30-Day Federal Funds Options with 6 ¼ basis point strike price intervals, and will notify the marketplace as to when this change will occur.
The CBOT Fed Funds futures contract has long been recognized as an effective means of gauging market consensus on possible actions by the Federal Reserve at upcoming Federal Open Markets Committee (FOMC) meetings.
Growth Trading volume in the CBOT's Fed Fund futures contract has grown dramatically since its launch on October 3, 1988., with tThe largest surge in annual volume occurred from 1999 through 2002, when volume jumped from 1,023,716 to 6,285,789 contracts traded, respectively. Year-to-date volume of CBOT Fed Fund futures is more than 1.1 million contracts.
