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CME Group, the world's largest and most diverse derivatives exchange, today announced the addition of Options on 5-, 7-, 10- and 30-Year Interest Rate Swap futures, beginning July 13, 2009. These contracts will be listed with, and subject to, the rules and regulations of CBOT.
"Market participants continue to ask us for products that can help them manage both their financial and counterparty risk," said Robin Ross, CME Group Managing Director of Interest Rate Products. "Options on swap futures will be a valuable addition to the risk management toolbox, providing market participants an effective vehicle for hedging medium and long term interest rate exposure and backed by the proven strength of CME Clearing."
Options on 5-, 7-, 10- and 30-Year Swap futures will replicate the European-style convention of over the counter (OTC) swap options, with exercise taking place only at expiration, providing market participants with a familiar tool that has the added benefits of central counterparty clearing. These options offer a number of benefits including:
- Efficiency - The efficiencies of straight through processing and multilateral netting leads to significant operational and capital efficiencies for clients. In addition, the need to manage cumbersome bilateral documentation with multiple counterparties is eliminated.
- Volatility - The best ways to accurately take a view on the volatility of mid-term or long-term swap rates. This makes these contracts invaluable tools for trading volatility relationships at different points along the yield curve or across the trading calendar.
- Convexity - A more accurate means to manage the convexity exposure inherent in mortgage securities, mortgage servicing portfolios, swap books and holdings of callable and putable corporate bonds.
- Transparency - The benefits of exchange traded products, including real-time price reporting and objective end of day settlements.
Options on Interest Rate Swap futures will be available for trading via both CME Globex and open outcry. Block fee surcharges will be waived through December 31, 2009. For additional information about these changes, visit: www.cmegroup.com/swaptions.
