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NYSE Liffe, the Europe-based derivatives business of NYSE Euronext (NYX), launched new two year mid-curve options on Euribor and Short Sterling futures today. The move follows strong growth in its existing short-term interest rate options business so far this year.
Mid-curve options are American-style options that can be exercised to take delivery of an underlying futures contract. They offer a low-premium way to hedge or trade the mid-range yield curve.
The new two year mid-curve options will give exchange users a new way of achieving exposure into the futures contracts representing the yield curve two years forward (known colloquially as “Green” month futures), which have seen a considerable increase in traded volume, up 40% on the same period last year.
This year has also seen growing demand for the one year mid-curve options that NYSE Liffe already lists on its Euribor and Short Sterling futures contracts. Combined average daily volume in both contracts has broken through 100,000 contracts this year, a rise of 32% on the same period of 2008.
Despite challenging economic conditions and falling interest rates worldwide, NYSE Liffe’s short-term interest rate options contracts traded over 850,000 lots per day in June 2009, an increase of 30% over 2008. The exchange’s Euribor option is the strongest performing option contract, with volume up 25% in the year-to-date.
Paul MacGregor, Director of NYSE Liffe Fixed Income, said: “This is the right moment to launch these contracts. The yield curve has steepened now that the market is anticipating interest rate rises when the recession ends, and so there has been a significant increase in trading of longer-dated futures. As a result of this uncertainty, our customers need more ways to trade the mid-term yield curve, and this is what these new contracts offer. We would also like to thank our members, liquidity providers, and end-customers for their business despite the continuing difficult market conditions.”
