FTSE 100 Adjusted Interest Rate Total Return Futures Frequently Asked Questions

Background

  1. What are Adjusted Interest Rate (AIR) Total Return futures (TRF)?
  2. What is the benchmark reference rate for FTSE 100 AIR Total Return futures?
  3. How are the AIR Total Return futures constructed?
  4. Is the FTSE 100 AIR Total Return futures contract traded in basis points or index points?
  5. Why is the BTIC quoting notation in basis points?
  6. Once a BTIC trade has been consummated, how will the futures price in index points be determined?
  7. How will a participant know what the cleared price in index points will be if they only have the BTIC traded level?
  8. Where can I find the daily details related to trading the product such as accrued financing and days to maturity?

Contract Specifications

  1. What are the contract specifications for the FTSE 100 AIR Total Return futures?
  2. Which trade types are available for FTSE 100 AIR Total Return futures?
  3. Will CME Globex prices likely be available in both the BTIC and outright orderbooks?
  4. Will block trades be priced in index points or basis points?
  5. What price do I use to submit an EFRP?
  6. How are AIR Total Return futures final settlement values determined?
  7. Will the accrued financing value be the same for all maturities and where can I find this amount?
  8. What are the codes?
  9. What are the fees? Are there any discounts?
  10. Will the contract be available on a U.K. trading day that is a US holiday?
  11. Will the contract be available on a U.K. holiday that is a US trading day?

Margin

  1. What are the margin requirements for AIR Total Return futures?
  2. What are the available margin credits for offsetting positions between the AIR Total Return futures and CME Group’s major US Benchmark Index futures?

Background

1. What are Adjusted Interest Rate (AIR) Total Return futures (TRF)?

AIR Total Return futures are Total Return futures that have a built-in floating rate to accommodate the financing costs associated with funding the equity index exposure. The launch of FTSE 100 AIR Total Return futures follows the successful launch of the S&P 500 AIR Total Return futures in late 2020.

FTSE 100 AIR TRF references the total return version of the index (UKXDUK) also known as the FTSE 100 Total Return Declared Dividend Index.

2. What is the benchmark reference rate for FTSE 100 AIR Total Return futures?

The Sterling Overnight Index Average (SONIA) published by the Bank of England is the underlying reference rate used for financing.

3. How are the AIR Total Return futures 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, please see the fact card and other resources at cmegroup.com/FTSE100AIRTRF.

4. Is the FTSE 100 AIR Total Return futures contract traded in basis points or index points?

When trading via BTIC, the quoting notation will be in basis points ‒ analogous with a total return swap spread. If the outright future is traded, it will be via index points.

5. Why is the BTIC quoting notation in basis points?

The key element traded in FTSE 100 AIR Total Return futures will be the Total Return futures spread (TRF spread). This is the spread over or below the financing reference rate (SONIA) that market participants determine as the cost to fund the equity index exposure. This spread is expressed in basis points.

6. Once a BTIC trade has been consummated, how will the futures price in index points be determined?

Once a TRF spread is consummated, 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 future is computational and occurs on a trade by trade basis and is calculated in index points.The key element traded in FTSE 100 AIR Total Return futures will be the Total Return futures spread (TRF spread). This is the spread over or below the financing reference rate (SONIA) that market participants determine as the cost to fund the equity index exposure. This spread is expressed in basis points.

7. How will a participant know what the cleared price in index points will be if they only have the BTIC traded level?

CME Group provides an online calculator that can be used to determine the cleared AIR TRF price in index points. This is hosted on the  product web page.

8. Where can I find the daily details related to trading the product such as accrued financing and days to maturity?

More details can be found at cmegroup.com/FTSE100AIRTRF.


Contract Specifications

1. What are the contract specifications for the FTSE 100 AIR Total Return futures?

Contract unit

£10 x FTSE 100 AIR Total Return Index Price

Underlying index

FTSE 100 Total Return Index (UKXDUK)

Reference rate

Sterling Overnight Index Average (SONIA)

Trading quotation

TRF spread in basis points expressed as an annualized number

Trading hours

CME Globex: Outright: Sunday - Friday 5:00 p.m. - 4:00 p.m. Central Time (CT)

BTIC: Sunday - Friday 5:00 p.m. (CT) – 4.30 p.m. London Time (10:30 a.m./11:30 a.m. CT)­

Clearport: Outright: Sunday - Friday 5:00 p.m. - 5:45 p.m. CT­

BTIC: Sunday - Friday 5:00 p.m. (CT) – 4.30 p.m. London Time (10:30 a.m./11:30 a.m. CT)

Minimum price fluctuation

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

Outright futures = 0.01 index points

Product code CME Globex:  AFR
CME ClearPort: AFR
Clearing: AFR
BTIC: AFT

Listed contracts

Quarterly contracts listed for nine quarters and five additional December contract months.

Settlement method

Financially settled

Termination of trading

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

Settlement procedures

Daily settlement price of contract shall be determined based on the following formula:

= (UKXDUK t - AFt)+UKXDUK × τt× ssettle

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:

UKXDUK UK EDSP-AF T

Block minimum

50

2. Which trade types are available for FTSE 100 AIR Total Return futures?

FTSE 100 AIR TRF can be traded via the Basis Trade at Index Close (BTIC) contracts on CME Globex as well as via block trades on CME ClearPort. Alternatively, the product can be traded in index points on both CME Globex and CME Clearport.

3. Will CME Globex prices likely be available in both the BTIC and outright orderbooks?

It is likely Globex prices will be found mainly in the BTIC order book. This is because the product is typically quoted and negotiated via the TRF spread, which is in basis points. It is envisaged that the Globex outright order book will not be heavily populated with prices.

4. Will block trades be priced in index points or basis points?

When consummating an FTSE 100 AIR TRF price via BTIC (contract code AFT), the trade will be submitted to CME ClearPort in basis point terms. It will then 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 future is computational and occurs on a trade by trade basis and is calculated in index points.

Alternatively, counterparties to a block trade can specify a futures price in index points in the outright future (contract code AFR) and submit it to CME ClearPort.

5. 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.

6. How are AIR Total Return futures final settlement values determined?

The final settlement value for the expiring contract will be equal to the UK Exchange Delivery Settlement price on the expiry date less the total of the accrued financing and will be determined by the formula outlined below:

UKXDUKTUK EDSP-AFT

Legend

UKXDUKTUK EDSP = UK Exchange Delivery Settlement Price (EDSP) for the FTSE 100 Total Return Declared Dividend Index that is calculated by FTSE on the third Friday of the month.

AF= Sum of the daily financing values since the product’s launch on Jun 7, 2021 until the day of expiration.

7. 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 sources mentioned in Q10 in the background section above.

8. What are the 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)

FTSE 100 AIR Total Return futures

UKXDUK

AFT

AFR

AFTA Index

AFRA Index

RAF

FAT

9. What are the fees? Are there any discounts?

There will be a 65% discount applied to the fees outlined below. This fee discount will be in place until April 30, 2022.

There are three fee buckets after the discount has been applied and is 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

$0.64

$0.75

24-59

2x

$1.29

$1.51

60+

4x

$2.58

$3.01

Full CME Fee Schedule

10. Will the contract be available on a U.K. trading day that is a US holiday?

Yes, the contract will be available on all valid U.K. trading days.

11. Will the contract be available on a U.K. holiday that is a US trading day?

No, the contract will be unavailable on U.K. holidays because the underlying cash market is closed.


Margin

1. What are the margin requirements for AIR Total Return futures?

While margin requirements are not finalized, CME Clearing expects the levels to be very similar to the currently listed FTSE 100 Price Return futures (FT1). Those margins are found here.

2. What are the available margin credits for offsetting positions between the AIR Total Return futures and CME Group’s major US Benchmark Index futures?

Indicative margin offsets are as follows and are subject to change:

CONTRACT #1

CONTRACT #2

RATIO

MARGIN OFFSET

FTSE 100 AIR TRF

S&P 500 AIR TRFs

3:1

60%

FTSE 100 AIR TRF

E-mini S&P 500 futures (ES)

3:1

55%

FTSE 100 AIR TRF

E-mini Russell 2000 futures

1:1

50%

FTSE 100 AIR TRF

E-mini Dow futures

2:1

55%

FTSE 100 AIR TRF

E-mini FTSE 100 futures

1:1

85%

FTSE 100 AIR TRF

Nikkei 225 futures (Yen)

2:1

55%

Learn more about margins:

Margins FAQ

SPAN methodology


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