Frequently Asked Questions: Adjusted Interest Rate (AIR) Total Return futures on Nasdaq-100, Russell 1000, Russell 2000, and DJIA
- What are AIR Total Return Index futures?
- What indices are listed as AIR Total Return Index futures?
- Aren’t there already Total Return futures listed on these indices at CME Group?
- What is the benchmark reference rate for AIR TRFs?
- How are the AIR TRFs constructed?
- Are the futures contracts traded in basis points or index points?
- Why is the quoting notation in basis points?
- Once a trade has been consummated, how will the futures price in index points be determined?
- How will a participant know what the cleared price in index points will be if they only have the BTIC traded level?
- Where can I find the daily details related to trading the product such as Accrued Financing and days to maturity?
- What are the contract specifications for the AIR Total Return Index futures?
- Which trade types are available for AIR Total Return futures?
- What price do I use to submit an EFRP?
- How are AIR Total Return futures final settlement values determined?
- Will the Accrued Financing value be the same for all maturities, and where can I find this amount?
- What are the index codes?
- What are the exchange fees?
Background
1. What are AIR Total Return Index futures?
AIR TRFs are Total Return futures that have a built-in floating rate to accommodate the financing costs associated with funding the equity index exposure.
AIR TRFs were initially launched on the S&P 500 in September 2020, with additional contracts launched on the Russell 2000, Russell 1000, Nasdaq-100, and DJIA in July 2021.
2. What indices are listed as AIR Total Return Index futures?
S&P 500, Russell 2000, Russell 1000, Nasdaq-100, and DJIA.
3. Aren’t there already Total Return futures listed on these indices at CME Group?
CME Group views the AIR Total Return futures as complementary to the currently listed vanilla Total Return futures.
The current vanilla Total Return futures use a “fixed rate,” unlike the AIR Total Return futures which use a built-in floating rate. For more information on the S&P 500, Nasdaq-100, Dow, Russell 2000, and Russell 1000 Total Return futures, please visit this FAQ.
4. What is the benchmark reference rate for AIR TRFs?
The Overnight Effective Federal Funds Rate (EFFR) published by the Federal Reserve Bank of New York will be the underlying reference rate used for financing.
5. How are the AIR TRFs constructed?
The AIR TRFs consist of three components: an Equity Index component, an Accrued Financing component and a Financing Spread Adjustment component. The valuation of the AIR TRF is as follows:
AIR TRF = (Equity Index - Accrued Financing) + Financing Spread Adjustment
For greater detail on these components, please see the fact card and other resources on the AIR TRF homepage.
6. Are the futures contracts traded in basis points or index points?
All AIR TRFs are traded via BTIC, and the quoting notation will be in basis points, analogous with a total return swap spread.
7. Why is the quoting notation in basis points?
The key element traded in AIR TRFs will be the Total Return futures spread (TRF spread). This is the spread over or below the financing reference rate (EFFR) that market participants determine as the cost to fund the equity index exposure. This spread is expressed in basis points.
8. Once a trade has been consummated, how will the futures price in index points be determined?
Once a TRF spread is executed, it will be converted into an AIR TRF price by the exchange using the same business day’s official closing index price as part of the calculation. The resulting cleared price of the futures contract is computational, occurs on a trade-by-trade basis, and is calculated in index points.
9. How will a participant know what the cleared price in index points will be if they only have the BTIC traded level?
The key element traded in AIR TRFs will be the Total Return futures spread (TRF spread). This is the spread over or below the financing reference rate (EFFR) that market participants determine as the cost to fund the equity index exposure. This spread is expressed in basis points.
10. Where can I find the daily details related to trading the product such as Accrued Financing and days to maturity?
Accrued financing data for AIR Total Return futures on the additional US indexes will be published each business day at about 8:35-8:40 a.m. CT. There are multiple ways to get access starting July 26, 2021:
- QuikStrike calculator: The Accrued Financing number is populated within the calculator available here.
- AIR datafiles: View easy-to-use CSV-format datafiles (here’s complete documentation):
- With any web browser at cmegroup.com/ftp/settle/air
- Via anonymous FTP at ftp://ftp.cmegroup.com/pub/settle/air
- Via the Firm FTP Server (SFTP), in the pub/settle/air directory
- Via email: write us at ccs@cmegroup.com to sign up.
- Via EREP: see report IDs AIR_TOP and AIR_COMP
- Via CME DataMine at datamine.cmegroup.com/#/datasets/cme.air
- RDAPI: Access data via Reference Data API (“RDAPI”). View details here.
- Settlements & Valuation Channel: Via the Data Insights: Settlements & Valuation Channel ID 251, part of CME Group’s Market Data Platform. View details here.
Contract specifications
11. What are the contract specifications for the AIR Total Return Index futures?
CONTRACT NAME |
Dow Jones Industrial Average Adjusted Interest Rate Total Return futures |
||||
|---|---|---|---|---|---|
CONTRACT UNIT |
$25 x S&P 500 AIR Total Return Index Price |
$10 x Nasdaq-100 AIR Total Return Index Price |
$10 x Russell 1000 AIR Total Return Index Price |
$10 x Russell 2000 AIR Total Return Index Price |
$2 x DJIA AIR Total Return Index Price |
UNDERLYING INDEX |
S&P 500 Total Return Index (SPTR) |
Nasdaq 100 Total Return Index (XNDX) |
Russell 1000 Total Return Index (RU10INTR) |
Russell 2000 Total Return Index (RU20INTR) |
DJIA Total Return Index (DJITR) |
REFERENCE RATE |
Effective Fed Funds Rate (EFFR) |
||||
TRADING QUOTATION |
TRF spread in basis points expressed as an annualized number |
||||
TRADING HOURS |
CME Globex: BTIC: Sunday - Friday 6:00 p.m. - 4:00 p.m. Eastern Time (ET) |
||||
MINIMUM PRICE FLUCTUATION |
0.5 Basis Points in terms of TRF Spread |
||||
PRODUCT CODE |
CME Globex: ASR ASR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP) |
CME Globex: AQR AQR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP) |
CME Globex: ARR ARR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP) |
CME Globex: A2R A2R is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP) |
CME Globex: ADR ADR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP) |
LISTED CONTRACTS |
Quarterly contracts (Mar, Jun, Sep, Dec) listed for 13 consecutive quarters and 4 additional Dec quarterly contracts. |
Quarterly contracts listed for the 9 nearest quarters on the March Quarterly cycle (March, June, September, and December) and 5 additional December contract months. |
|||
SETTLEMENT METHOD |
Financially settled |
||||
TERMINATION OF TRADING |
Trading terminates on the 3rd Friday of the contract month. |
||||
SETTLEMENT PROCEDURES |
Daily settlement price of contract shall be determined based on the following formula: = (SPTRt - AFt)+SPTRt × τt× stsettle where the Spread Settle (stsettle) for the day shall be determined based on market activities (quotes, traded price) or prior day settle if no market activities, and AFt is the sum of accrued daily overnight financing until settlement. Final settlement price shall be determined based on the following formula: SPTRTSOQ-AFT |
Daily settlement price of contract shall be determined based on the following formula: = (XNDXt-AFt)+XNDXt× τt× stsettle where the Spread Settle (stsettle) for the day shall be determined based on market activities (quotes, traded price) or prior day settle if no market activities and AFt is the sum of accrued daily overnight financing until settlement. Final settlement price shall be determined based on the following formula: XNDXTSOQ-AFT |
Daily settlement price of contract shall be determined based on the following formula: = (RU10INTRt-AFt)+RU10INTRt× τt× stsettle where the Spread Settle (stsettle) for the day shall be determined based on market activities (quotes, traded price) or prior day settle if no market activities and AFt is the sum of accrued daily overnight financing until settlement. Final settlement price shall be determined based on the following formula: RU10INTRTSOQ-AFT |
Daily settlement price of contract shall be determined based on the following formula: = (RU20INTRt-AFt)+RU20INTRt× τt× stsettle where the Spread Settle (stsettle) for the day shall be determined based on market activities (quotes, traded price) or prior day settle if no market activities and AFt is the sum of accrued daily overnight financing until settlement. Final settlement price shall be determined based on the following formula: RU20INTRTSOQ-AFT |
Daily settlement price of contract shall be determined based on the following formula: = (DJITRt-AFt)+DJITRt× τt× stsettle where the Spread Settle (stsettle) for the day shall be determined based on market activities (quotes, traded price) or prior day settle if no market activities and AFt is the sum of accrued daily overnight financing until settlement. Final settlement price shall be determined based on the following formula: DJITRTSOQ-AFT |
BLOCK MINIMUM |
250 |
250 |
50 |
50 |
250 |
12, Which trade types are available for AIR Total Return futures?
Total Return futures can be traded as Basis Trade at Index Close (BTIC) contracts on CME Globex as well as via block trades on CME ClearPort. Please note, as is the case with current vanilla Total Return futures, the outright AIR TRF futures on US indices are not eligible for trading but can be used as part of an EFRP.
13. What price do I use to submit an EFRP?
In any instance where the AIR Total Return futures contract(s) are traded as the futures component of an EFRP transaction, the price of such futures contracts may be made either in Index Point terms outright or in BTIC terms. View Rule 538 in the MRAN to learn more.
14. How are AIR Total Return futures final settlement values determined?
The final settlement value for the expiring contract will be equal to the Special Opening Quotation (SOQ) on the expiry date less the total of the Accrued Financing and will be determined by the formula outlined below;
Total Return IndexTSOQ - AFT
Legend
Total Return IndexTSOQ = Special Opening Quotation of the Total Return Futures on day of expiration
AFT = Sum of the daily financing values since the product’s launch on July 26, 2021 until the day of expiration.
15. Will the Accrued Financing value be the same for all maturities, and where can I find this amount?
Yes, the Accrued Financing (AF) value will be the same value across all maturities. For each contract, the initial value for AF will be determined by the exchange and all the daily financing values will be added to this initial value.
The AF value can be found in the daily CSV files and other sources mentioned in Q11 in the background section above.
16. What are the index codes?
Index Futures Contracts |
Underlying Index (Bloomberg) |
CME BTIC Ticker (Tradeable) |
CME Outright Ticker (Non-Tradeable) |
Bloomberg BTIC Front Month |
Bloomberg Outright Front Month (Non-Tradeable) |
Refinitiv Front Month (Non-tradeable) |
Refinitiv BTIC Front Month (Tradeable) |
|---|---|---|---|---|---|---|---|
Nasdaq-100 Adjusted Interest Rate Total Return futures |
XNDX |
AQT |
AQR |
QATA <Index> |
QARA <Index> |
RQA |
A2T |
Russell 1000 Adjusted Interest Rate Total Return futures |
RU10INTR |
ART |
ARR |
MATA <Index> |
MARA <Index> |
ARA |
TRA |
Russell 2000 Adjusted Interest Rate Total Return futures |
RU20INTR |
A2T |
A2R |
RATA <Index> |
RARA <Index> |
A2R |
A2T |
DJIA Adjusted Interest Rate Total Return futures |
DJITR |
ADT |
ADR |
DATA <Index> |
DARA <Index> |
ARD |
ADT |
17. What are the exchange fees?
There are three fee buckets based on the difference (in months) between trade date and contract’s expiration date.
Months to Expiration |
Fee |
Member Fee (106.J Equity Member Firms) |
Non-Member Fee |
|---|---|---|---|
< 24 months |
1x |
$1.84 |
$2.15 |
24-59 |
2x |
$3.68 |
$4.30 |
60+ |
4x |
$7.36 |
$8.60 |
Margin
18. What are the margin requirements for AIR Total Return futures?
Margin requirements are not finalized but will be available closer to the launch date. The currently listed vanilla Total Return futures margins are found here.
19. What are the available margin credits for offsetting positions between the AIR Total Return futures and CME Group’s major US benchmark index futures?
Adjusted Interest Rate (AIR) Total Return futures
Get total return swap exposure with the capital efficiency of futures, now with a floating rate built in.
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.
