FTSE 100 Adjusted Interest Rate Total Return Futures Frequently Asked Questions

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.

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

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.

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.

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.

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.

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.

• QuikStrike calculator: The accrued financing number is populated within the calculator available here.
• AIR data files: View easy-to-use CSV-format data files (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
  • Coming soon – CME DataMine
• RDAPI: Access data via Reference Data API (“RDAPI”). View details here.
• MDP3:  Coming soon – accrued financing data will be available on our Market Data Platform

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

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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.

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.

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.

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.

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:

UKXDUK_T^{UK EDSP}-AF_T

Legend

UKXDUK_T^{UK 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_T = Sum of the daily financing values since the product’s launch on Jun 7, 2021 until the day of expiration.

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.

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.

Full CME Fee Schedule

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

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

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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.

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

Learn more about margins:

Margins FAQ

SPAN methodology

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