December 2010

Topics in this issue include:

TREASURY FUTURES AND OPTIONS

Announcing Weekly Treasury Options – Coming January 24, 2011

Weekly Options on U.S. Treasury futures begin trading on Sunday, January 23, 2011 (trade date Monday, January 24, 2011), offering an expanded range of standardized, short-dated options on our benchmark Treasury futures. Complementing the standard and "Flexible" options, Weekly Treasury options (WTOs) provide users with increased flexibility in managing existing option positions, and new opportunities to trade high impact economic events, such as Treasury auctions and economic reports.

Features of WTOs:

• WTOs available for 2-Year, 5-Year, 10-Year, T-Bond and Ultra T-Bond futures
• Expire every Friday that is not already a quarterly or serial Treasury option expiration
• Have same tick size and strike price interval as their respective serial and quarterly options
• Exercise into the next quarterly futures expiry—unless the WTO expires after the nearby expiration of the standard quarterly option. Then it will exercise into the first-deferred quarterly delivery month for the underlying futures contract
• Trade both open outcry and on CME Globex

For more information on Weekly Treasury options, visit www.cmegroup.com/wto, or contact Dave Reif at 312 648 3839.

 

Ultra T-Bond Futures Win FOW Award for Innovation

On December 10, 2010 the Ultra T-Bond futures contract was recognized by FOW Magazine as the “Best Innovation by an Exchange in the Field of Customer Service – North America.” This prestigious award recognizes CME Group’s response to the market’s need for a tool for managing the long end of the yield curve. Ultra T-Bond futures has been the fast growing Interest Rate futures contract ever listed by a CME Group exchange, trading more than 7.5 million contracts since its launch on January 11.

November 2010 was the biggest month for Ultra T-Bond futures so far, highlighted by:

• A daily volume record of 348,547 on November 24, paced by electronic volume of 297,177, and smashing the previous record of 186,501 posted on August 27, 2010
• Record open interest of 381,439, also established on November 24
• Record monthly average daily volume of more than 80,000 contracts, which resulted in cumulative November volume of more than 1.5 million contracts

Ultra T-Bond Options Update. Also in November month-end open interest in Ultra T-Bond options surpassed 15,000 contracts, which was a 61 percent increase from October and new record.

On-The-Run U.S. Treasury Futures Update

On-The-Run (OTR) U.S. Treasury futures provide cost-effective price exposure to 2-Year, 5-Year and 10-Year U.S. Treasury on-the-run yields—the most liquid points on the Treasury yield curve. Since the launch on October 25, 2010, average daily volume (ADV) has been approximately 2700 contracts.

Because OTR Treasury futures track the yields of specific treasury issues, they create an interesting array of yield curve and relative value trading opportunities, such as synthetic basis trades and TED spreads, with the added benefit of cross-margining with other interest rate products at CME Group exchanges.

Webinar Archive: View an archive of the webinar "An Overview of On-The-Run U.S. Treasury Futures" to learn more about the key aspects of OTR Treasury futures, including contract design, pricing and settlement, and trading strategies

Reminder: New Deliverable Basket for T-Bond Futures

Effective with the March 2011 expiration the deliverable grade for U.S. Treasury Bond futures has been modified to include cash Treasury bonds with remaining terms to maturity of at least 15 years, but less than 25 years. This change in deliverable grade does not apply to the contract for delivery in December 2010.

This change ensures that the T-Bond and the Ultra T-Bond futures contracts serve two distinct points on the yield curve. The T-Bond serves as the principal short-term bond futures contract. The Ultra T-Bond, with a delivery basket calling for the physical delivery of Treasury bonds with a remaining maturity of at least 25 years, serves as the primary long-term bond futures contract.

As a result of this change, we now distinguish the "Classic" or "30-Year" Treasury Bond contracts as the "Treasury Bond" or "T-Bond" futures and options, and the long-term T-Bond contracts as the "Ultra Treasury Bond" or the "Ultra T-Bond" futures and options.

 

EURODOLLAR FUTURES AND OPTIONS

Robust Eurodollar Trading Activity Leads to Product Expansion

Eurodollar futures and options continue to be the leading global short term interest rate products. Facilitated by our deep, liquid markets, Eurodollars have seen exponential growth in volume and liquidity this year, particularly in the Back 32 (the third year and beyond) where the average daily volume of 333,000 represents a 40 percent increase from 2009. There has also been increased activity in Packs and Bundles, with several individual spread records set on November 10, including 4,196 Green Packs and 9,513 Blue Packs.

 

Expanded Eurodollar Mid-Curve Options Listings Now Available

2-Year ("Green") Eurodollar Mid-Curve options also experienced record trading activity in November vs. the same time last year, with average daily volume of 160,000 (up 1200 percent), and open interest of 2.3 million (up 332 percent).

In response to this heightened demand, additional expirations were added to the Mid-Curve options listings on Monday, December 20, 2010:

• Two-Year (Green) serial Mid-Curve options have been added to the quarterly Green Mid-Curve expirations.
• Three-Year (Blue) Mid-Curve options have been introduced for the first time, with quarterly expirations.

As with all Mid-Curve options, the new listings are traded via open outcry as well as on CME Globex. Get details on expanded Eurodollar Mid-Curve options listings

To learn more about Eurodollar Mid-Curve options visit www.cmegroup.com/midcurves, or contact Dave Reif at 312 648 3839.

 

CLEARED OTC PRODUCTS

CME Group Now Clearing OTC Interest Rate Swaps

Working in close collaboration with premier swap dealers, clearing firms, and buy-side participants, CME Group has created a real-time, open access clearing solution for OTC interest rate swaps.

Buy-side participants: BlackRock, Citadel, Fannie Mae, Freddie Mac, and PIMCO.

Sell-side participants: BofA Merrill Lynch, Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, Nomura, UBS and RBS.

Cleared OTC Interest Rate Swaps Key Benefits:

• Maintains current execution processes, affirmation platforms and product economics of bilateral OTC contracts
• Provides the risk management and legal safeguards of CME Clearing to protect customer funds
• Offers operational flexibility of an open access solution that integrates into existing OTC infrastructure and extends across asset classes; with an anticipated goal of offering capital efficiencies via cross margining of OTC products with benchmark futures.

For additional information visit www.cmegroup.com/irs, or contact Steve Dayon (312 466 4447), or Jack Callahan (312 454 8312).

 

TRADING TECHNOLOGY

New CME EOS Trader Filtering and Top 10 Trades List

CME EOS Trader users now have advanced filtering features for the Active Contract Viewer and the Market History windows. The enhanced filtering allows users to view data at the Product Complex, Group and/or Instrument level. In addition, users can select the type of data to display: Outrights, Spreads or both. The new Actives window, which will provide volume statistics for the Top 10 most active instruments or overall activity, also offers the advanced filtering capabilities.

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Your CME Group Interest Rate Products and Services Team

If you have questions on CME Group interest rate markets, please contact a member of the Products and Services team: