In a further expansion of its short-term interest rate product offerings, CME Group, the world’s largest and most diverse derivatives exchange, today announced plans to offer 3-month Overnight Index Swaps (OIS) futures and options on futures. The futures contract is scheduled to become available on Sunday, September 7, 2008, for a trade date of September 8, on the CME Globex® electronic trading platform and on Monday, September 8, 2008, for open outcry trading.
The new OIS futures contract will track the overnight effective Federal Funds rate, a major benchmark for the U.S. short-term interest rate market. The contract will reflect the Federal Funds rate compounded over a three-month period that ends on the contract’s expiration date. Because the OIS futures contract will cover the same time period as a Eurodollar future, the contract will provide market participants with a direct and efficient way to trade the spread between 3-month LIBOR and 3-month overnight financing costs.
"In the current economic environment, an increasing number of short-term interest rate instruments are linked to the overnight Fed Funds rate," said Robin Ross, managing director, CME Group interest rate products. "Our new contract will be a welcome means of hedging OIS-linked risk exposure. Combining the new 3-month OIS contract with our benchmark Eurodollar futures will enable efficient trading of the Fed Funds/LIBOR spread, which has grown increasingly volatile, creating substantial risk for money market participants. The contract will also provide a direct way to take a view on FOMC policy moves further out the yield curve than is possible with our existing 30-day Fed Funds contracts."
The OIS futures will complement CME Group’s rapidly growing 30-Day Federal Funds contracts, which reflect the average level of the overnight Federal Funds rate over a calendar month. CME Group’s 30-Day Federal Funds futures and options have experienced strong growth over the past year. For the first six months of 2008, the contracts had average daily volume of 115,673 contracts a day, up 52 percent over the same period last year. For more information on 3-month OIS futures please visit http://www.cmegroup.com/trading/interest-rates/files/3month_OIS_Contract_Specs.pdf.
CME Group interest rate products span the entire U.S. dollar denominated yield curve and are among the world’s most actively traded futures and options on futures contracts. They are an important risk management tool for managing short-, medium- and long-term interest rate risk with products based on Eurodollars, U.S. Treasuries, swaps and other dollar-related instruments as well as products for managing interest rate risk in Europe and Japan. In 2007, an average of 6.9 million interest rate contracts a day traded at CME Group.
