Frequently Asked Questions: Adjusted Interest Rate (AIR) Total Return futures on Nasdaq-100, Russell 1000, Russell 2000, and DJIA


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 and have quickly grown to have over 120K contracts of open interest in June 2021.

Launching additional US index properties in the AIR TRF format will help broaden the range of products available to clients.

2. Which additional US indices are being listed as AIR Total Return Index futures?

There will be four additional listed AIR TRFs – 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 will be 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. Will the new futures contracts be traded in basis points or index points?

The new AIR TRFs  will be 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:

Contract specifications

11. What are the contract specifications for the AIR Total Return Index futures?

CONTRACT NAME

S&P 500 Adjusted Interest Rate Total Return futures

Nasdaq-100 Adjusted Interest Rate Total Return futures

Russell 1000 Adjusted Interest Rate Total Return futures

Russell 2000 Adjusted Interest Rate Total Return futures

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)

Clearport: BTIC: Sunday - Friday 6:00 p.m. - 4:00 p.m. ET

MINIMUM PRICE FLUCTUATION

0.5 Basis Points in terms of TRF Spread
The resultant cleared AIR TRF future price will be rounded to 2 decimals.

 

PRODUCT CODE

CME Globex: ASR
CME ClearPort: ASR
Clearing: ASR
BTIC: AST

ASR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP)

CME Globex:  AQR
CME ClearPort: AQR
Clearing: AQR
BTIC: AQT

AQR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP)

CME Globex:  ARR
CME ClearPort: ARR
Clearing: ARR
BTIC: ART

ARR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP)

CME Globex:  A2R
CME ClearPort: A2R
Clearing: A2R
BTIC: A2T

A2R is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP)

CME Globex:  ADR
CME ClearPort: ADR
Clearing: ADR
BTIC: ADT

ADR is not tradable (except as BTIC) and will be available only for margining and position assignment (EFRP)

LISTED CONTRACTS

Quarterly contracts listed for 13 quarters and 4 additional December contract months.

 

SETTLEMENT METHOD

Financially settled

 

TERMINATION OF TRADING

Trading terminates on the 3rd Friday of the contract month.
BTIC: Trading terminates on the business day prior to 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

AF= 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

RU10INTR

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

Full CME and CBOT Fee Schedule

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?

As with their initial margins, the margin credits are based on current market conditions. Margin requirements are not finalized but will be available closer to the launch date.

Learn more about margins:

About CME Group

As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.

Follow us for global economic and financial news.

CME Group on Twitter

CME Group on Facebook

CME Group on LinkedIn

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.

Learn more