In response to customer feedback, effective with the listing of the December 2009 contract on June 15, 2009, CME Group will reduce the notional coupon of its 5-Year, 7-Year, 10-Year and 30-Year Interest Rate Swap futures contracts from 6 percent to 4 percent.
This modification will bring the Swap futures notional coupon within closer proximity to market rates for par swaps. As a result, the Swap futures price levels, price dynamics and yield-to-price relationship will correspond more closely to the OTC market, providing a more effective risk management tool for market participants.
Specifically, a Swap futures contract priced on the basis of a 4 percent notional coupon versus a 6 percent coupon will have:
· A lower market price
· A smaller DV01
· Less convexity
In addition, to the conversion to a 4 percent notional coupon, Swap futures will be listed out to four consecutive months in the March-June-September-December quarterly cycle, a change from the current three quarterly month cycle.
Swap Futures 4 Percent Conversion Timeline:
This change to the Swap futures notional coupon rate will be implemented as follows:
· June 15, 2009
o June 2009 contracts expire
o December 2009, March 2010 and June 2010 contracts are listed with 4 percent notional coupon
o September 2009 contracts continue to trade based on a 6 percent notional coupon
· September 14, 2009
o September 2009 contracts expire – the last contracts based on a 6 percent notional coupon
o December 2009, March 2010, and June 2010 contracts continue to trade
o September 2010 contracts are listed with 4 percent notional coupon
For additional information regarding this change, please visit http://www.cmegroup.com/trading/interest-rates/swaps/4-percent-coupon.html.
Please contact Market Data Operations (MDO) at email@example.com, if you have any questions concerning this notice.
CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.