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Interest Rates Products
View an Interest Rate Product
EURODOLLAR 
 

The Eurodollar futures contract is the most widely traded and versatile interest rate futures product in the world. It provides a valuable, cost-effective tool for hedging interest rate fluctuations on Eurodollars – U.S. dollars deposited in commercial banks outside the United States. Eurodollar deposits play a major role in the international capital market, and have long served as a benchmark interest rate for corporate funding.

Eurodollar futures provide a way to:

  • Hedge short term interest rate risk
  • Execute a variety of trading strategies, such as Butterflies, Packs and Bundles
  • Express a view on the direction of interest rates

Things to know:

  • Eurodollar futures reflect the London Interbank Offered Rate (LIBOR) for a 3-month, $1 million offshore deposit maturing at some point in the future
  • More than 85% of Eurodollar futures now trade electronically on the CME Globex platform
    • Available virtually around the clock, around the world
    • Complete price transparency and anonymity
    • Market prices universally available in real time
  • Product also trades side-by-side on the CME Group trading floor during open outcry trading hours
  • CME Clearing clears and settles all trades and guarantees counterparty creditworthiness
  • Flexibility
  • Concentrated liquidity
    • Consistently tight bid/ask spreads and lower transaction costs
  • Price transparency
    • Open, fair and anonymous trading environment
    • Market prices universally available in real-time
  • Variety of trading opportunities, including:
    • Outright long or short positions
    • Spreading against other instruments
    • Hedging and arbitrage strategies
  • Ease of trading
    • Electronic trading on CME Globex provides
      • Reduced connectivity costs
      • Increased accessibility
      • Fast, efficient trading
  • Implied electronic spread functionality
    • 3-, 6-, 9-, 12-, 15- and 18-month Calendar spreads are implied along the entire length of the Eurodollar futures curve
    • 3-, 6- and 12-month Butterfly spreads are implied along the entire length of the Eurodollar futures curve
    • Pack Spreads implied through the first Orange contract 

More about Eurodollars

  • Eurodollar deposits are direct obligations of the commercial banks accepting the deposits
    • They are not guaranteed by a government entity
    • Although they represent low-risk investments, Eurodollar deposits are not risk-free
  • Eurodollar futures and options lead the industry with open interest exceeding 40 million and average daily volume of 3.0 million [update with end 07 data]
  • Through December 2007, Eurodollar futures and options on futures set a record pace, trading over 500 [update with end ‘07 data] million contracts
  • Since CME launched Eurodollar futures in 1981:
    • They have evolved into one of the world's most innovative and popular contracts
    • They are now the most actively traded futures contract in the world, with open interest recently surpassing the X million mark
    • Due to their exceptional adaptability and versatility, they continue to evolve due to nonstop enhancements
    • They now offer even more trading opportunities than when they were first launched