Swap futures expire on the second business day prior to the third Wednesday of the contract month and settle to the International Swaps and Derivatives Association (ISDA) benchmark mid-market par swap rates for that specific maturity. The swap rate assumes fixed semi-annual coupon (per 30/360 basis) vs. 3-month LIBOR (per actual/360 basis).
The ISDA Benchmark rates are posted daily at 11:30 a.m. (Eastern Time) over the entire swap curve for maturities of 1-, 2-, 3-, 4-, 5-, 6-, 7-, 8-, 9-, 10- and 30-years on the Reuters quote system ("ISDAFIX1") and published in the Federal Reserve’s H.15 circular at: http://www.federalreserve.gov/releases/H15/update/.
The ISDA Benchmark rates are based on quotes sampled at 11:00 a.m. from sixteen (16) major swap dealers. The poll is conducted by Reuters and Garban Intercapital PLC. The specific rate polled is the mean of where the dealer would offer and bid a swap in the relevant maturity for a notional equivalent amount of 50 million U.S. dollars or whatever amount is deemed market size in that currency for that tenor to an acknowledged dealer of good credit in the swap market.
The computation is made by eliminating the top four and bottom four quotes and calculating a simple average of the remaining values, provided that a minimum of 12 rates have been submitted. Conveniently, this is identical to the procedure employed by the British Bankers’ Association (BBA) in calculating the quote used for final settlement of Eurodollar futures.
The International Swaps and Derivatives Association (ISDA) is the global trade association representing leading participants in the privately negotiated derivatives industry, a business that includes interest rate, currency, commodity, credit and equity swaps, as well as related products such as caps, collars, floors and swaptions. ISDA was chartered in 1985, and today numbers more than 500 member institutions from 41 countries on six continents. These members include most of the world's major institutions who deal in and leading end-users of privately negotiated derivatives, as well as associated service providers and consultants. CME Group is an Associate Member of ISDA.
Since its inception, the ISDA has pioneered efforts to identify and reduce the sources of risk in the derivatives and risk management business. Among its most notable accomplishments are: developing the ISDA Master Agreement, publishing a wide range of related documentation materials and instruments covering a variety of transaction types, producing legal opinions on the enforceability of netting (available only to ISDA members) securing recognition of the risk-reducing effects of netting in determining capital requirements, promoting sound risk management practices, and advancing the understanding and treatment of derivatives and risk management from public policy and regulatory capital perspectives.