The contract will be based on the AFMA Fixed Interest Index which is independently priced by a large panel of major Australian Investment and Trading Banks. The index methodology is fully transparent with published rules and the entire process is overseen by a committee of senior financial market participants representing borrowers, lenders and intermediaries. This transparency and independence will ensure full support from all market participants.
AFMA Chief Executive Ken Farrow said 'This agreement reinforces AFMA’s position as the only provider of independent end of day prices and indices for the Australian fixed income markets. This new derivative contract will enhance liquidity in the fixed interest market in Australia.'
Peter Hiom, SFE General Manager Exchange Business Development said, “SFE is pleased to be working with AFMA on the delivery of this new risk management product for the Australian interest rate market. In the coming months we will be working closely with market participants to ensure the new contract design complements and supports their existing trading and client activities.”
It is expected that the contract will allow fund managers to better manage their outright and credit based interest rate risks. Dealers will also benefit from the arbitrage and trading opportunities created between it and the already deeply liquid 3 and 10 year Treasury Bond contracts.
Developmental work on the “FIX” has already commenced and, subject to regulatory approval, SFE hope to list the new contract within the next 12 months.
Information regarding the composition and methodology of the AFMA Fixed Interest Index can be found on www.afma.com.au. Live Index prices can also be found on the AFMA web site and on Reuters (AFMAINDEX) and Bloomberg (AFMM 12
