Liffe announced that the Exchange will launch one month futures contracts on the "Eonia" (Euro Overnight Indexed Average) and the "Sonia" (Sterling Overnight Indexed Average), and a three month "Eonia" Swap Index futures contract in June 2008.
The one month Eonia futures contracts will be referenced to Eonia rates, calculated each night by the European Central Bank, and published by Reuters. Similarly, the one month futures contracts on Sonia will be referenced to Sonia rates, calculated and published each night by the Wholesale Markets Brokers’ Association (WMBA).
The one month futures contracts on Eonia and Sonia will have accrual periods in line with central bank reserve maintenance periods, providing a cost effective means of gaining or hedging exposure to overnight Euro and Sterling interest rates. The product will therefore offer a centrally cleared, very near term interest rate futures contract, which will free up capital for Treasury, Repo and Reverse Repo traders, currently trading in the OTC markets.
The three month Eonia futures contract will be referenced to the Three Month Eonia Swap Index, sponsored by the European Banking Federation (FBE) and published by Reuters. The three month Eonia Swap Index futures contract will settle in line with IMM dates, offering a spread trading opportunity against the established and liquid three month Euribor futures contract.
Garry Jones, executive director of Business Development and Strategy at Liffe, commented; "The current tight market conditions in both the Euro and Sterling short term money markets, require us to offer a broader range of short term interest rate futures contracts, which are Exchange-based with central counterparty clearing. Therefore we believe offering these products will be of real tangible benefit to the money markets, and will complement our existing three month Euribor and Short Sterling futures contracts."
Liffe will be inviting market makers to make competitive tenders for providing two-way liquidity into the new contracts, as well as a liquidity provision scheme. In addition, Wholesale trading facilities, Block Trading, Asset Allocation and Basis Trading, will be available for the new contracts.