Cbot extends Exchange for Risk programme to interest rate futures

Source: CBOT

The Chicago Board of Trade (CBOT) announced today that it has expanded its Exchange for Risk (EFR) program to include interest rate futures.

The move enables exchange customers and market participants to efficiently transfer risk between CBOT financial futures and the over-the-counter (OTC) interest rate option market by enhancing the financial integrity of delta-hedging programs for OTC option positions.

An EFR transaction involves the transfer of a futures position for an OTC option position. The CBOT introduced EFR transactions in 2003 for its agricultural commodity futures. Expanding this service to interest rate futures is expected to contribute to closer integration of CBOT's financial futures markets with the OTC interest rate option market, as well as capitalize upon the deep and growing liquidity pool in the OTC interest rate option market.

CBOT contracts that are newly eligible for EFR transactions include U.S. 30-Year Treasury Bond futures, U.S. Treasury 10-Year, 5-Year, and 2-Year Note futures, 30-Day Fed Fund futures, 10-Year and 5-Year Interest Rate Swap futures, and Dow Jones AIG Commodity Index futures.

CBOT Senior Vice President of Business Development Robert W. Ray said, "There are many benefits to EFR transactions. They provide quick and efficient execution of futures transactions, and they enhance the financial integrity of delta-hedging programs for OTC option positions. This strategy is in line with the CBOT's objective of providing more efficient risk management tools to the marketplace and responding to our customers’ demands."

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