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Futures Exchange PCL (TFEX) will launch two more short-term interest rate futures, i.e., 3-month BIBOR Futures and 6-month THBFIX Futures, on November 29.
“These two short-term interest rate futures are after TFEX introduced 5-year government bond futures last month,” noted TFEX Managing Director Kesara Manchusree.
The BIBOR interest rate is what the Bank of Thailand (BOT) aims to be underlying rate for Thailand’s financial market. THBFIX was calculated and provided by Reuters, and used by entrepreneurs and commercial banks as an underlying rate for a wide variety of financial transactions. Both BIBOR and THBFIX will give involved parties more effective risk management alternatives.
Both 3M BIBOR and 6M THBFIX’s contract values were worth THB10 million per contract and required clearing in cash. The collateral for institutional investors will be THB1,350.00 for 3M BIBOR futures and THB12,150.00 for 6M THBFIX futures. The collateral will be subject to the fluctuating prices of futures. However, when compared to index futures or other securities with underlying benchmarks, interest rate futures’ collateral will be lower, since interest rates fluctuate less than equities.
“Moreover, from November 29 onwards, foreign investors will be allowed to place collateral in foreign currency to help them manage collateral more effectively, increase trading flexibility, and be in line with international practices. During the initial period, USD and EURO will be the only foreign currencies allowed as collateral,” concluded Ms. Kesara.
