Currency pair: EUR / USD
What is BTIC and BTIC+?
A BTIC transaction provides the ability to trade the futures at a price understood to be the theoretical equivalent of the official WMR 4:00 p.m. London fixing rate with given assumptions on interest rate differentials. BTIC and BTIC+ are two unique instruments.
How they work
- BTIC will be traded as the futures basis to the T+0 (i.e., top day) or T+1 (i.e., next good WMR publishing day) WMR 4:00 p.m. London fixing rate.
- BTIC trades executed from CME Group’s FX market open until 3:40 p.m. London (9:40 a.m. Chicago / 10:40 a.m. New York) will be against the T+0 (top day) WMR fix. Trades executed from 4:30 p.m. London (10:30 a.m. Chicago / 11:30 a.m. New York) until CME Group close of business will be executed against the T+1 (next day) WMR fix1.
- BTIC trades will deliver into a EUR/USD FX futures contract on the same day immediately after the WMR 4:00 p.m. fix is published. As such, BTIC on FX futures trades executed by 3:40 p.m. London time will be included in that day’s clearing cycle.
- BTIC+ will be traded as the futures basis to the WMR 4:00 p.m. London fixing rate published on the final business day of the calendar month.
- BTIC+ will trade as a basis against the WMR 4:00 p.m. London fixing rate on the final business day of a calendar month, up to close of trading on CME Globex on the penultimate business day of the month.
A BTIC+ futures contract will be treated as its own position until the delivery date and will require its own initial margin to be posted. This differs from the BTIC contract, because BTIC clears into a EUR/USD FX futures contract as soon as the fix is published. BTIC contracts are, therefore, only ever margined as a ‘normal’ FX future contract.
How a trade will work if no BTIC position carried to 3:40 p.m. London:
- Assume EUR/USD BTIC is trading at 0.004995 bid at 0.005000 offered. A customer lifts the 0.005000 offer prior to 3:40 p.m. London for 1,000 contracts. A futures contract is created by CME Clearing, referencing the current value for EUR/USD as the preliminary fill. This contract would be assigned the final price of the WMR fixing rate plus basis at 4:00 p.m. London, should the customer hold the BTIC position through the WMR print2:
- Position: Long 1,000 EUR/USD BTIC @ 0.005000.
- Margin impact: No initial margin movement.
- Sometime later, still prior to 3:40 p.m. London, BTIC is trading at 0.005005 bid at 0.005010 offered. The customer hits the 0.005005 bid for 1,000 contracts:
- Position: none.
- Variation margin impact: 125,000*1,000*[0.005005 – 0.005000] = +625 USD. The VM impact is the difference between the basis levels on the two trades; there is no outright risk if closed prior to 3:40 p.m. London.
How a trade will work if BTIC position carried past 3:40 p.m. London:
- Assume EUR/USD BTIC is trading at 0.004995 bid at 0.005000 offered. A customer lifts the 0.005000 offer prior to 3:40 p.m. London for 1,000 contracts:
- Position: Long 1,000 EUR/USD BTIC @ 0.005000.
- Margin impact: No immediate initial margin movement.
- The customer decides they would like to maintain exposure to the WMR 4:00 p.m. fix, so they hold the long BTIC position through 4:00 p.m. London. The WMR 4:00 p.m. fix prints at 0.98575:
- Position: Long 1,000 EUR/USD futures @ WMR fix + traded basis: 0.98575 + 0.00500 = 0.9907503. The position is transposed into a EUR/USD futures, the position has outright and basis risk and will be margined as a regular future on a go-forward basis.
- Margin impact: The position will be margined like a normal EUR/USD futures contract when the clearing cycles run.
How BTIC+ trades will work:
- While BTIC contracts deliver into outright EUR/USD FX futures contracts on the same day (or T+1 depending on time of execution) trading session, BTIC+ are futures contracts that allow market participants to execute a basis trade on EUR/USD futures in advance of the WMR 4:00 p.m. fix on the final business day of the calendar month. For example, suppose a customer trades the BTIC+ on trade date October 14 for the BTIC instrument that will ultimately deliver into EUR/USD futures on October 31. Each day the BTIC+ position would be marked to market; the position will incur final mark-to-market after the Globex 5:00 p.m. close on October 30 before being delivered into a BTIC contract on the morning of October 31. The BTIC contract is then delivered into a futures position on October 31 after the WMR 4:00 p.m. London fix is published. BTIC+ will settle at 2:00 p.m. Chicago time and trade up to 4:00 p.m. Chicago on the penultimate business day of the calendar month. Between the penultimate business day and the final business day, the BTIC+ position will be transformed into a BTIC position.
- Each BTIC+ will have its own daily settlement price and will require variation margin based on the changes in daily settlement.
1Daylight savings adjustments will alter the relationships between U.S. and London times. In all cases, the fixing value is the WMR 4:00 p.m. fix and trading will cease at 3:40 p.m. London. Note that CME Globex is closed for FX futures trading between 4:00 p.m. and 5:00 p.m. Chicago.
2Further information on BTIC trade messaging can be found here: https://www.cmegroup.com/clearing/files/tas-tam-btic.pdf
3Note the futures contract precision for BTIC contracts delivered into EUR/USD FX futures contracts will adhere to the BTIC price granularity, not the existing futures granularity. Futures contract precision is 0.00005; BTIC precision will be 0.000005 on Globex and 0.000001 for Blocks.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.