In response to customer feedback, effective with the listing of the December 2009 contract on June 15, 2009, CME Group will reduce the notional coupon of its 5-Year, 7-Year, 10-Year and 30-Year Interest Rate Swap futures contracts from 6 percent to 4 percent.
This modification will bring the Swap futures notional coupon within closer proximity to market rates for par swaps. As a result, the Swap futures price levels, price dynamics and yield-to-price relationship will correspond more closely to the OTC market, providing a more effective risk management tool for market participants.
Specifically, a Swap futures contract priced on the basis of a 4 percent notional coupon versus a 6 percent coupon will have:
· A lower market price
· A smaller DV01
· Less convexity
In addition, to the conversion to a 4 percent notional coupon, Swap futures will be listed out to four consecutive months in the March-June-September-December quarterly cycle, a change from the current three quarterly month cycle.
Swap Futures 4 Percent Conversion Timeline:
This change to the Swap futures notional coupon rate will be implemented as follows:
· June 15, 2009
o June 2009 contracts expire
o December 2009, March 2010 and June 2010 contracts are listed with 4 percent notional coupon
o September 2009 contracts continue to trade based on a 6 percent notional coupon
· September 14, 2009
o September 2009 contracts expire – the last contracts based on a 6 percent notional coupon
o December 2009, March 2010, and June 2010 contracts continue to trade
o September 2010 contracts are listed with 4 percent notional coupon
For additional information regarding this change, please visit http://www.cmegroup.com/trading/interest-rates/swaps/4-percent-coupon.html.
Please contact Market Data Operations (MDO) at firstname.lastname@example.org, if you have any questions concerning this notice.