Slide 1: Deliverable Interest Rate Swap Futures Webinar
Deliverable Interest Rate Swap Futures Webinar Discover THE Alternative to Swaps Jeff Cranston Kaitlin Meyer
Slide 2: Agenda
Agenda • Product Overview • Flexible Execution • Pricing Conventions & Payment Details • Contract Expiration & Delivery • DSF Tools and Papers Available • Q&A
Slide 3: Deliverable Swap Futures Overview
Deliverable Swap Futures Overview Liquid means of managing rate exposure Product Overview • Created based on strong demand from financial market participants including banks, hedge funds, asset managers and insurers • USD DSF were launched in December 2012 and EUR DSF were launched in April 2014, wi
Slide 4: Capital Efficiencies of a Standardized Product
Capital Efficiencies of a Standardized Product CME Group offers unparalleled capital efficiencies in a capital constrained world Standardized Future: DSFs provide a means to gain exposure to the interest rate swap market with margin levels afforded to a standardized product. Initial Margin Compariso
Slide 5: USD DSF Success Spurs Euro Product Expansion
USD DSF Success Spurs Euro Product Expansion Open Interest Surged 57% Since March • Strong Growth in the first year of US USD DSF Market Activity dollar-denominated DSF ADV Open Interest 14,000 140,000 • 2nd fastest growing IR Futures product in CME 12,000 120,000 Group history 10,000 100,000 • 1.9
Slide 6: Agenda
Agenda • Product Overview • Flexible Execution • Pricing Conventions & Payment Details • Contract Expiration & Delivery • DSF Tools and Papers Available • Q&A
Slide 7: Flexible Execution & Liquidity
Flexible Execution & Liquidity Market Participants Have Choice in Execution Venue Centralized Order Book Privately Negotiated (OTC) • Trading is available via CME Globex and Open • Trades can be privately negotiated off-exchange Outcry • Enables counterparties to leverage existing • Market makers co
Slide 8: Agenda
Agenda • Product Overview • Flexible Execution • Pricing Conventions & Payment Details • Contract Expiration & Delivery • DSF Tools and Papers Available • Q&A
Slide 9: Pricing Conventions
Pricing Conventions DSFs are quoted in terms of net present value (NPV) USD DSF • 100 points represent the par value of $100,000 – each full point equates to $1,000 • The minimum tick size of the contract varies depending on the tenor • 1/32nd of a point represents $31.25 Tenor Ticker Min. Price Dis
Slide 10: Pricing & Payment Details
Pricing & Payment Details • The Deliverable Swap Futures pricing convention is similar to that of CBOT Treasury Note and Bond futures, with the futures price quoted in points with par equal to 100 points • USD DSF calculated as Δ in 32nds x $31.25 x position Price & Payment • EUR DSF calculated as Δ
Slide 11: Agenda
Agenda • Product Overview • Flexible Execution • Pricing Conventions & Payment Details • Contract Expiration & Delivery • DSF Tools and Papers Available • Q&A
Slide 12: Eligibility & Delivery
Eligibility & Delivery • There are no special requirements that must be met for a futures account to trade Deliverable Swap Futures Trading Eligibility • All CME Clearing Members can clear the futures contract, whether an IRS Clearing Member or not • To take delivery, a Futures position holder must
Slide 13: Delivery Example
Delivery Example Variation and Initial Margin Movements MONDAY TUESDAY WEDNESDAY • Last Trading Day • Last VM movement • IM released FUTURES • Position expired MONDAY TUESDAY WEDNESDAY • Position created • First IM movement Cleared OTC • First VM movement • Monday: Last trading day for the futures c
Slide 14: Agenda
Agenda • Product Overview • Flexible Execution • Pricing Conventions & Payment Details • Contract Expiration & Delivery • DSF Tools and Papers Available • Q&A
Slide 15: NEW! Interest Rate Tool & Research Available
NEW! Interest Rate Tool & Research Available High Correlation between DSF prices and their OTC IRS Equivalents • Price Correlation Research: Highlights the strong correlation between DSF prices and corresponding par spot-starting OTC interest rate swap rates http://www.cmegroup.com/trading/interest-
Slide 16: Research Papers and Further Information
Research Papers and Further Information • Correlation Paper: • http://www.cmegroup.com/trading/interest-rates/files/dsf-correlations.pdf • Delivery Manual for Deliverable Interest Rate Swap Futures: • http://www.cmegroup.com/trading/interest-rates/files/dsf-delivery-manual.pdf • Understanding Euro D
Slide 17: Additional Information
Additional Information @CME Group
Slide 18: USD DSF Contract Specifications
USD DSF Contract Specifications Deliverable Swap Futures Reference Tenors • 2, 5, 10, 30 Year Delivery Months • March Quarterly Cycle (March, June, Sept, Dec) Contract Fixed Rate • Set by the Exchange when a futures contract is listed for trading, as a rate per annum with 30/360 day count fraction,
Slide 19: USD Deliverable Swap Futures Details
USD Deliverable Swap Futures Details Delivery Day* • First CME Clearing Business Day before 3rd Wednesday of Delivery Month • Fixed Rate Payer Short Futures position holder making delivery • Floating Rate Payer Long Futures position holder taking delivery rd • IRS Effective Date 3 Wednesday of Deliv
Slide 20: USD DSF Vendor Codes
USD DSF Vendor Codes For primary coupons Product TT Bloomberg (Trading Esignal CQG ThomsonReuters DTN Tenor Technologies) 2- Year CTPA T1U T1U T1U 0#T1U @T1 5- Year CFPA F1U F1U F1U 0#F1U @F1 10- Year CNPA N1U N1U N1U 0#N1U @N1 30- Year CBPA B1U B1U B1U 0#B1U @B1 © 2014 CME Group. All rights reserve
Slide 21: USD Block Trading of Deliverable Swap Futures
USD Block Trading of Deliverable Swap Futures Block Trading Rules* Minimum block trade volume thresholds for outright transactions are: • 2-year USD Deliverable Swap future 3,000+contracts • 5-year USD Deliverable Swap future 1,500 contracts Outrights: • 10-year USD Deliverable Swap future 1,000+ co
Slide 22: USD DSF Block List Contacts
USD DSF Block List Contacts Below is a list of firms that have volunteered as contacts for clients interested in DSF block trades. Many other market makers are willing to engage in block transactions. Firm Contact Name Email Phone Number Bank of America Paul Scurfield Paul.Scurfield@baml.com 646 855
Slide 23: EUR DSF Contract Specifications
EUR DSF Contract Specifications European Deliverable Swap Futures Reference Tenors • 2, 5, 10 Year Delivery Months • March Quarterly Cycle (March, June, Sept, Dec) Contract Fixed Rate • Set by the Exchange when a futures contract is listed for trading, as a rate per annum with 30/360 day count fract
Slide 24: Euro Deliverable Swap Futures Details
Euro Deliverable Swap Futures Details Delivery Day • First CME Clearing Business Day before 3rd Wednesday of Delivery Month • Fixed Rate Payer Short Futures position holder making delivery • Floating Rate Payer Long Futures position holder taking delivery rd • IRS Effective Date 3 Wednesday of Deliv
Slide 25: EUR DSF Vendor Codes
EUR DSF Vendor Codes For primary coupons Product TT Bloomberg (Trading Esignal CQG ThomsonReuters DTN Tenor Technologies) 2- Year PTEA T1E T1E T1E 0#T1E @T1E 5- Year PFEA F1E F1E F1E 0#F1E @F1E 10- Year PNEA N1E N1E N1E 0#N1E @N1E © 2014 CME Group. All rights reserved. 25
Slide 26: EUR Block Trading of Deliverable Swap Futures
EUR Block Trading of Deliverable Swap Futures Block Trading Rules* Minimum block trade volume thresholds for outright transactions are: • 2-year EUR Deliverable Swap future 1,500+ contracts Outrights: • 5-year EUR Deliverable Swap future 750+ contracts • 10-year EUR Deliverable Swap future 500+ cont
Slide 27: EUR DSF Block List Contacts
EUR DSF Block List Contacts Below is a list of firms that have volunteered as contacts for clients interested in EUR DSF block trades. Many other market makers are willing to engage in block transactions. Firm Contact Name Email Phone Number Philipp de Cassan Philipp.de.Cassan@nomura.com +44 20 7103
Slide 28: Final Settlement Price
Final Settlement Price The contract’s final settlement price: Represents the amount of money a market participant would be willing to pay or require to receive in return for taking delivery of the underlying referenced interest rate swap contract In the event prevailing swap rate are below the coupo
Slide 29: Deliverable Swap Futures Deliver Explanation
Deliverable Swap Futures Deliver Explanation Treasury Futures vs. DSF Comparison Treasury Note USD IRS and Bond Futures Futures By 6pm CT – 2pm CT– Short clearing firm notifies CME Clearing that it intends to make Futures terminate trading. Open short (long) contract positions held delivery on an ex
Slide 30: Cash Flows Example
Cash Flows Example Action Details Cash Flows Contract • CME sets the fixed coupon for the 10 Year Swap Future at • N/A Listing 2.00% before the contract begins trading Trade • Thursday, 2 days before the contract expires, Client buys 100 • Client receives positive VM of (101-21 - 101-19)*31.25*100 =
Slide 31: For More Information
For More Information To learn more about Deliverable Swap Futures, visit cmegroup.com/dsf or contact a member of our product team: Jeff Cranston Kaitlin Meyer Jeff.cranston@cmegroup.com kaitlin.meyer@cmegroup.com Senior Director, Interest Rate Products Senior Analyst, OTC Products & Services +1 312
Slide 32: Futures trading is not suitable for all investors, and involves the risk of loss.
Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders sh