Overnight Options on SFE’s Bank Bill Futures will provide portfolio managers and other institutional investors with a flexible and cost-efficient means of managing their overnight exposure to interest rate volatility. The product will also give traders and professional option market makers an additional tool with which to take leveraged exposure to the physical market via futures.
SFE was the first futures exchange in the world to introduce overnight options when it listed such products on its 3-Year and 10-Year Treasury Bond Futures contracts in 1993. These existing Overnight Options are currently trading a combined average of 2,130 contracts per session at a nominal value of A$213 million.
The listing of Overnight Options on 90-Day Accepted Bank Bill Futures is the first in a series of enhancements that SFE is making to its suite of interest rate products. Other initiatives include the halving of the tick size (or minimum price movement) for 3-Year Treasury Bond Futures on 30 November (subject to regulatory approval) and the reduction of the coupon rate on both the 3-Year and 10-Year Treasury Bond contracts in 2001.
The halving of the tick size will reduce entry and exit costs for users, while a reduction in the coupon rate is designed to bring the duration (or average life) of bond futures into closer alignment with that of the physical bond market, thereby improving the efficiency of the futures contracts for hedging. Contract specifications for SFE’s new Overnight Options on 90-Day Bank Accepted Bill futures can be located on SFE’s website – www.sfe.com.au
