The American Financial Exchange (AFX) today announced plans by Cboe Futures ExchangeSM (CFE®) to launch futures on the One-Month AMERIBOR® (American Interbank Offered Rate) interest rate benchmark. The new futures contract will launch on June 8, 2020. The one-month futures contract will complement CFE’s current AMERIBOR futures complex which includes three-month and seven-day futures contracts.
AMERIBOR futures are cash-settled and are designed to reflect the market expectations of either compounded daily annualized AMERIBOR interest or average simple daily annualized AMERIBOR interest.
AMERIBOR, disseminated by the AFX, is a transparent, transactions-based interest rate benchmark that represents market-based borrowing costs. The AMERIBOR rate is calculated daily as the transaction volume-weighted average interest rate of the AMERIBOR overnight unsecured loans on AFX. AMERIBOR is not based on expert opinion, judgment, estimates or submissions.
U.S. banks and other financial institutions use AMERIBOR futures in connection with hedging variable overnight funding costs and interest rate risk. Proprietary traders may use AMERIBOR futures as a vehicle for implementing trading strategies related to interest rates and in connection with hedging interest rate risk.
“We are delighted to include a One-Month AMERIBOR futures contract to our stable at this time,” said Richard Sandor, Chairman and CEO of AFX. “We are pleased that AFX volume continues to grow, but more importantly, that we are able to be a source of liquidity in these turbulent times. The AFX has performed flawlessly. Volume is at record highs while volatility is low, and the launch of this particular AMERIBOR futures contract is the natural next step that will provide market participants with the additional tools they need to manage their risk. The inherently straightforward and transparent design of the AMERIBOR interest rate benchmark allows for ease of execution and spreading strategies between the cash and the futures markets.”
AFX member, Reed Whitman, Treasurer of Brookline Bancorp, Inc. in Boston, MA, added, “As the banking industry moves toward pricing commercial loans with a monthly reset based on the average daily AMERIBOR rate, a one-month futures component tied to this rate will be a particularly useful pricing mechanism to find the best loan rate for our customers.”
To learn more about AMERIBOR futures, including product specifications, go to cboe.com/products/futures/ameribor-futures. For more information on AMERIBOR, visit www.ameribor.net.
