The KRX will introduce 10-yr KTB futures on the upcoming February 25, 2008. Over the years, the issuance and circulation of long-term treasury bonds have increased steadily. Hence, to make available an instrument that is appropriate for managing risks associated with long-term bonds and promote the development and trading of long-term interest rate futures, the KRX made the decision to introduce 10-yr KTB futures.
Underlying asset of 10-yr KTB futures is the benchmark 10-yr KTBs and the trading unit is KRW 50,000,000. The first 3 contract months of 4 contract months (March, June, September and December) are listed and the settlement by physical delivery on T+2 (the third day counting from the trading day) is adopted to promote arbitraging between the spot and futures markets.
It is expected that with the introduction of 10-yr KTB futures, the KRX is able i) to provide the investors with an effective tool to manage the risks associated with the price fluctuation of long-term treasury bonds, ii) to encourage the foreign investors to invest in long-term KTBs, iii) to promote establishment of fair price through arbitrage trading and enhance the liquidity in the Government Bond Market (GBM) and iv) to support the advancement and stimulation of Korean bond market.
To fully test the preparatory arrangements and systems of the member securities companies and KRX and familiarize the investors with the trading system and regulations, the KRX has been conducting a mock trading daily from 10:00 to 17:30 (trading session from 10:00 to 16:45; clearing & settlement from 16:45 to 17:30) since January 28, 2008 (to be completed on February 21, 2008). The trading system of 10-yr KTB futures will be thoroughly tested and any deficiency will be corrected and improved before launching the product.
The interest rate futures currently listed and traded on the KRX are 3-yr KTB futures, 5-yr KTB futures and MSB (Monetary Stabilization Bond) futures.
