CBOT Chairman Nickolas J. Neubauer said, "By adding 5-Year Interest Rate Swap futures to the exchange's swap complex, the CBOT reaffirms its commitment to offering the marketplace more effective risk management tools. The success of ABN AMRO's market-making and the strong liquidity and volume growth in our 10-Year Swap futures clearly indicate that now is the right time to launch this contract."
On February 1, 2002, the CBOT implemented a market maker program--the first of its kind in the futures industry--with ABN AMRO Bank N. V. to enhance liquidity in the exchange's 10-Year Swap futures contract market. Since implementation of this program, trading volume in 10-Year Swap futures has more than doubled (i.e., from approximately 900 contracts per day for November 2001 through January 2002 to approximately 1865 contracts per day for February through April 2002), and open interest has more than quadrupled (i.e., from approximately 6,000 contracts on February 1 to approximately 25,000 contracts on May 1).
Pat Fay, ABN AMRO's Head of Global Financial Markets, North America commented, "We are tremendously pleased to partner with the CBOT. The success of the ABN AMRO market maker program for the 10-Year Swaps has already broken volume records, and we look to increase liquidity and client-service for the 5-Year Swaps as well."
The CBOT also announced new settlement procedures for 10-Year Interest Rate Swap futures. Under the new procedure, a swap futures contract will stop trading at 10:00 a.m. Chicago time on its last trading day and will expire with reference to the relevant ISDA [International Swaps and Derivatives Association] Benchmark swap rate as published on the Reuters ISDAFIX1 page at or around 10:30 a.m. Chicago time on the same day. *This change will be effective beginning with the June 2002 10-Year Interest Rate Swap futures contract, for which the last trading day is Monday, June 17, 2002.
The CBOT swap complex offers diverse market participants--such as bank treasurers, mortgage pass-through traders, mortgage originators, mortgage servicers, and institutional fixed-income portfolio managers--an effective vehicle for hedging swap rate exposure. CBOT Swap futures entail much lower administrative costs than more common over-the-counter swaps. CBOT Swap futures also virtually eliminate counterparty credit risk, by virtue of their AAA-rated guarantee by the Board of Trade Clearing Corporation. Both features are beneficial to all participants in the interest rate swap market. For more information on CBOT's Swap complex, please visit our website at www.cbot.com/swap.
*(ISDA Benchmark mid-market par swap rates are collected at 11:00 a.m. Eastern time by Reuters Limited and Garban Intercapital plc and are published on Reuters page ISDAFIX1. Source: Reuters Limited.)
