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CBOT Treasury Invoice Swaps are a type of standardized, forward starting Libor-reference interest rate swap where:

  • The fixed interest rate is set with reference to a specified Treasury delivery invoice yield — the yield to maturity associated with the delivery invoice price for a specified Treasury futures contract, fulfilled by delivery of a given deliverable-grade Treasury security, on a given futures contract delivery date.
  • Fixed-rate interest payment dates, which occur semiannually, are scheduled to align with the coupon payment dates for the specified deliverable-grade Treasury security — typically, but not always, the Treasury issue that is either Cheapest to Deliver (CTD) or a close contender for CTD status, in fulfillment of the specified Treasury futures contract.
  • Floating-rate interest payment dates, which occur quarterly, also are scheduled to align with the coupon payment schedule for the specified deliverable-grade Treasury security.

Accordingly, each CBOT Treasury Invoice Swap shall be standardized in terms of: 

(a) a specified related CBOT Treasury futures contract,

(b) the coupon rate per annum and maturity date of a specified related Treasury security eligible for delivery into Treasury futures contract (a) typically (if not always) the Treasury security that is Cheapest to Deliver (CTD) and

(c) a specified delivery date allowable under the terms of Treasury futures contract. 

CBOT Treasury Invoice Swaps are listed for trading on CME Globex solely in the form of intercommodity spreads, known as Treasury Invoice Spreads, that require the simultaneous execution of a Treasury Invoice Swap and the corresponding related CBOT Treasury futures contract. Additionally, market participants may notify the Exchange of block transactions in such Treasury Invoice Spreads on CME ClearPort.

Implied functionality is not available.

For additional details please refer to the relative CFTC filings available here.

Contents

Mandatory Customer Account Registration

For trading of any swap products, including futures/swap spreads such as Invoice Swaps, registration of accounts is required through the CME Account Manager

 An order submitted from an unregistered account will be rejected with a Session Level Reject (tag 35-MsgType = 3) message with tag 58-Text = This account is prevented from trading interest rate swaps.

Give-Ups

Give-Ups are not supported for the swap leg of Invoice Swaps. The swap leg must initially clear in the registered trading account. Post-trade transfers can be performed in Clearing if desired.

If Give-Up instructions are specified on an order message (using tag 79-AllocAccount in conjunction with tag 9707-GiveupFirm), the Give-Up will be attempted only on the futures leg of the Invoice Swap.

Market Data

MDP Channels

Invoice Swap market data is disseminated on the MDP 3.0 CBOT Globex Interest Rate Futures channel 344.

Market Data Messaging Impacts

The following value is sent in the market data Security Definition message for Invoice Swaps.

Security Definition for Invoice Swap
TagNameValueDescription
762SecuritySubTypeININ = Invoice Swap
Security Definition for Interest Rate Swap

The following values are sent in the market data Security Definition message for the non-tradeable Interest Rate Swap instrument.

TagNameValueDescription
167SecurityTypeIRSIRS = Interest Rate Swap
461CFICodeMRRXXX

CFI code for Swap instrument type.

M = Other

R = Referential instrument

R = Interest rates

X = Undefined

X = Undefined

X = Undefined

Trading Treasury Invoice Swaps

Treasury Invoice Swap contracts shall be permitted to trade only as components of intercommodity spreads with the corresponding related Treasury futures contracts, until such time as the Exchange may decide to enable outright trading in Treasury Invoice Swaps. Specifically, any party entering such Treasury Invoice Swap as the payer of fixed-rate interest shall be required to be a purchaser of the related Treasury futures contract through an intercommodity spread, and conversely any party entering such Treasury Invoice Swap as the receiver of fixed rate interest shall be required to be a seller of the related Treasury futures contract.

Treasury Invoice Spread Security Description

The value sent in tag 55-Symbol for MDP 3.0 will be built as follows:

Spread type: Treasury future symbol /  Maturity Date / Delivery Date (Last/First)

 For example, IN:ZTM50317A translates as:

  • IN: = Strategy type (Invoice Swap) with colon
  • ZTM5 = 2-Yr Treasury Note futures for June 2015 delivery.  Full 4 character XXMY product code of the related treasury futures contract.
  • 03 = March.  Numeric 2-character code for month of maturity date of Invoice Swap and related futures contract’s nominated Cheapest-to-Deliver (CTD) Treasury security.
  • 17 = 2017.  Numeric 2-character code for year of maturity date of Invoice Swap and related futures contract’s nominated CTD Treasury security.
  • A = Related futures contract delivery indicator:
    • AB, or C for related futures contract’s first-, second-, or third-nominated CTD Treasury security, for delivery on contract’s last eligible delivery date.  In example, A = delivery of first-nominated CTD Treasury security on contract’s last eligible delivery date.
    • DE, or F for related futures contract’s first-, second-, or third-nominated CTD Treasury security, for delivery on contract’s first eligible delivery date. In example, D = delivery of first-nominated CTD Treasury security on contract’s first eligible delivery date.

Treasury Invoice Swap Product Codes

The non-tradeable Treasury Invoice Swap follows standard instrument naming conventions.

For example, T1AM4 translates as:

  • Product Code = T1A
  • Month/Year = M4

Each CBOT Treasury Invoice Swap traded as an Invoice Spread on CME Globex will be paired with an underlying future based on market conditions at the time of listing and will be associated with a First or Last to Deliver date, relative to the Cheapest to Deliver swap. More than one Invoice Spread may be listed within a particular maturity, given market conditions.

Treasury Invoice Swap Unit of Trade

The trading unit for Treasury Invoice Swap is defined in the Security Definition message with the same contract size as the related Treasury future, e.g., 200,000 USD for the 2 YR, and 100,000 USD for the 10 YR, etc. Tag 1147-UnitofMeasureQty from the Security Definition message (tag 35-MsgType=d) provides the information to determine the contract size for each instrument.

The actual trading unit for any Treasury Swap shall be prescribed by the Exchange so that the order of magnitude of a swap’s notional principal amount is comparable to the order of magnitude of the unit of trade for the corresponding related Treasury futures contract.

The intent of this restriction is to enable the Exchange to establish a Treasury Invoice Swap’s unit of trade so that the swap structure is comparable, vis-a-vis the dollar value of a one-basis point change, to that of the related Treasury futures contract exposure.

For any given trade date, the applicable trading unit for each Treasury Invoice Swap instrument will be posted on cmegroup.com on the preceding day.

Treasury Invoice Spread Leg Pricing 

The price basis for quoting or trading a Treasury Invoice Swap contract shall be the corresponding Treasury Invoice Swap spread as established through trading of the corresponding invoice spread as follows:

When executed on CME Globex, the Treasury futures leg of the Treasury Invoice Spread will be assigned its last Exchange Best market price. The Treasury Invoice Swap leg will be assigned a fixed rate equal to the sum of the related Treasury futures contract’s delivery invoice yield and the value of the swap spread (in percent per annum) at which CME Globex has matched the invoice spread trade.

 Expand for Detailed Exchange Best Description

The Exchange Best price, also referred to as CLast, is the most recent of:

  • latest CME Globex transaction price, or
  • CME Globex bid price that betters the bid side of the market, or
  • CME Globex asking price that betters the ask side of the market, or
  • most recent daily settlement price.

In this context, a bid that betters the market is understood to be a bid to buy at a higher price than the preceding Exchange Best price. Similarly, a better ask price is an offer to sell at a price below the preceding Exchange Best price.

The swap leg is initially assigned the spread differential as a placeholder price in the Trade market data and is then assigned the applicable fixed interest rate r as follows:

r = y + s where:

r  = Treasury Invoice Swap fixed rate per annum, accruing on 30/360 day count basis.

y = forward starting yield to maturity of the related Treasury security, for forward start on the related futures delivery date, with the yield based upon the CME Exchange Best price of the Treasury Invoice Swap’s related Treasury futures contract, as of the timestamp of the Treasury Invoice Swap transaction.

s = Treasury Invoice Swap spread.

The final fixed rate of the swap will be distributed to clearing firms through clearing feeds and the trade register, and will be distributed in real time to participants who are subscribers to the CME STP.

Swap Data Repository (SDR)

All Treasury Invoice Swaps traded on CME Globex as part of intermarket Treasury Invoice Spreads will be reported to the CME SDR for Part 43 and Part 45 reporting.

Available Instruments

Each CBOT Treasury Invoice Swap traded as an Invoice Spread on CME Globex will be paired with an underlying future based on market conditions at the time of listing and will be associated with a First or Last to Deliver date, relative to the Cheapest to Deliver Swap. More than one Invoice spread may be listed within a particular maturity, given market conditions. The table below represents the instruments that can be listed for trading.

ProductiLink: tag 55-Symbol
MDP 3.0: tag 1151-SecurityGroup
iLink: tag 1151-Security Group
MDP 3.0: tag 6937-Asset
Delivery
(First or Last)

2 Year Treasury Invoice Swap, Candidate 1-3 per F/L (Non tradable)

06

T1A

Last to deliver

T2A

T3A

T4A

First to deliver

T5A

T6A

2 Year Treasury Invoice Swap Spread, Candidate 1-3 per F/L

ZT

TVA

Last to deliver

TVB

TVC

TVD

First to deliver

TVE

TVF

5 Year Treasury Invoice Swap, Candidate 1-3 per F/L (Non tradable)

06

F1A

Last to deliver

F2A

F3A

F4A

First to deliver

F5A

F6A

5 Year Treasury Invoice Swap Spread, Candidate 1-3 per F/L

ZF

FYA

Last to deliver

FYB

FYC

FYD

First to deliver

FYE

FYF

10 Year Treasury Invoice Swap, Candidate 1-3 per F/L (Non tradable)

06

N1A

Last to deliver

N2A

N3A

N4A

First to deliver

N5A

N6A

10 Year Treasury Invoice Swap Spread, Candidate 1-3 per F/L

ZN

TYA

Last to deliver

TYB

TYC

TYD

First to deliver

TAY

TAB

Treasury Bond Invoice Swap, Candidate 1-3 per F/L (Non tradable)

06

B1A

Last to deliver

B2A

B3A

B4A

First to deliver

B5A

B6A

Treasury Bond Invoice Invoice Swap Spread, Candidate 1-3 per F/L

ZB

UTA

Last to deliver

UTB

UTC

UTD

First to deliver

UTE

UET

Treasury Ultra Bond Invoice Swap, Candidate 1-3 per F/L (Non tradable)

06

U1A

Last to deliver

U2A

U3A

U4A

First to deliver

U5A

U6A

Treasury Ultra Bond Invoice Invoice Swap Spread, Candidate 1-3 per F/L

ZU

UBA

Last to deliver

UBB

UBC

UBI

First to deliver

UBP

UBF

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