ASX 3 and 10 Year Interest Rate Swap Futures Interest Rate Markets Fact Sheet Interest rate swaps are one of the most widely traded derivative products in the Australian financial market with over $8 trillion in notional value transacted in 2013. ASX’s Interest Rate Swap Futures provide a cost effective and convenient way to gain direct exposure to prices and trade strategies in this market, combined with the important benefits of being standardised, exchange traded and centrally cleared. Benefits of Interest Rate Swap Futures ASX Interest Rate Swap Futures are an ideal product for managing risk exposures in non-government debt instruments and offer significant advantages compared to OTC swap products including: •L ow Counterparty Credit Risk: being exchange-traded and central counterparty cleared provides for effective reduction of credit risk and the need for bilateral collateralisation agreements. •C ost effective: the absence of complex documentation and reduced ongoing administrative costs makes transacting in a futures market more efficient and cost competitive when compared to the OTC swap market. • Price Transparency: exchange traded markets bring together a potentially larger number of connected users promoting price transparency and reducing the total cost of trade. Key Features •C ontracts are listed on financial quarter months with two months listed at any one time. • Cash Settled – ASX 3 and 10 Year Interest Rate Swap Futures are cash settled against the AFMA 10.00am 3 and 10 year swap reference rates. • Variable Tick Value – ASX 3 Year and 10 Year Interest Rate Swap Futures are traded on the basis of their yield with the futures price quoted as 100 minus the yield to maturity expressed in per cent per annum. Due to this convention the dollar value of the minimum price movement, or tick value, does not remain constant but rather changes in accordance with movements in the underlying interest rate. For information on the pricing of the ASX 3 and 10 Year Swap Futures contracts please see “The Guide to Pricing ASX Interest Rate Products”. International approvals ASX 3 and 10 Year Interest Rate Swap Futures are approved for trading by: • the US Commodities Futures Trading Commission (CFTC); • UK Financial Services Authority (FSA); • Monetary Authority of Singapore (MAS); and •H ong Kong Securities and Futures Commission (SFC Hong Kong). Trading ASX Interest Rate Swap Futures •T rading in ASX’s 3 and 10 Year Interest Rate Swap Futures is conducted ‘on-market’ via ASX’s electronic platform ‘ASX Trade 24’ and ‘off-market’ through ‘Exchange for Physical’ transactions. •S pread trading functionality is available for credit and calendar spreads. •A ttractive spread concessions are available on calendar spreads as well as inter-commodity spreads for offsetting positions held in the ASX 90 Day Bank Bill Futures and ASX 3 Year and 10 Year Treasury Bond Futures contracts. •P re-negotiated Operating Rules are applicable to ASX 3 and 10 Year Interest Rate Swap Futures. These rules provide Participants with the opportunity to facilitate client business off-market prior to disclosing and the crossing orders on ASX Trade 24. Interest Rate Markets Fact Sheet Contract Specification for ASX 3 and 10 Year Australian Interest Rate Swap Futures CONTRACT ASX 3 YEAR INTEREST RATE SWAP FUTURES ASX 10 YEAR INTEREST RATE SWAP FUTURES Commodity Code YS XS Contract Unit A$100,000 swap based on a 6.5% coupon and A$100,000 swap based on a 6.5% coupon and a term to maturity of three years. a term to maturity of ten years. March/June/September/December up to two As for 3 Year Interest Rate Swap Futures. Contract Months quarter months ahead. Minimum Price Movement Contract Expiry 2 Prices are quoted in yield per cent per annum Prices are quoted in yield per cent per annum in multiples of 0.005 per cent. For quotation in multiples of 0.005 per cent. For quotation purposes the yield is deducted from an index purposes the yield is deducted from an index of 100. The minimum fluctuation of 0.005 per of 100. The minimum fluctuation of 0.005 per cent equals approx. $15 per contract, varying cent equals approx. $44 per contract, varying with the level of interest rates. with the level of interest rates. The Business Day preceding the second Friday As for 3 Year Interest Rate Swap Futures. of an expiry month. contract. Trading ceases at 12:00 noon. Settlement Method 2 Trading Hours 2 The Settlement Price shall be 100 minus the The Settlement Price shall be 100 minus the 3 year AFMA 10.00am swap reference rate, 10 year AFMA 10.00am swap reference rate, as determined by AFMA Services Pty Limited. as determined by AFMA Services Pty Limited. The reference rate will be rounded to the The reference rate will be rounded to the nearest 0.005%. All bought and sold contracts nearest 0.005%. All bought and sold contracts in existence as at the close of trading in the in existence as at the close of trading in the contract month shall be settled by ASX Clear contract month shall be settled by ASX Clear (Futures) at the cash settlement price. (Futures) at the cash settlement price. 5.14pm – 7.00am and 8.34am – 4.30pm As for 3 Year Interest Rate Swap Futures. (for period from second Sunday in March to first Sunday in November) 5.14pm – 7.30am and 8.34am – 4.30pm (for period from first Sunday in November to second Sunday in March) Settlement Day The business day following the last permitted day of trading. 2 Unless otherwise indicated, all times are Sydney times. As for 3 Year Interest Rate Swap Futures. ASX 3 and 10 Year Interest Rate Swap Futures Data Vendor Access Codes* CONTRACT ASX 3 YEAR INTEREST RATE SWAP ASX 10 YEAR INTEREST RATE SWAP ASX TRADE 24 Code YS XS Bloomberg XIA <CMDTY> XJA <CMDTY> Bourse Data YS XS Interactive Data YSmy XSmy Interactive Data RTS 17mYSmy 17mXSmy FutureSource / eSignal AYS AXS IRESS Market Technology YSmy XSmy Reuters Full: 0#YYS: Full: 0#YXS: Night: 0#1YYS: Night: 0#1YXS: Day: 0#2YYS: Day: 0#2YXS: Telekurs YSym,359 XSym,359 Thomson Reuters YS/YYM XS/YYM * Data vendor codes are current as at February 2011. A current list of codes is available at www.asx.com.au About ASX ASX is a multi–asset class, vertically integrated exchange group, and one of the world’s top 10 listed exchange groups measured by market capitalisation. ASX’s activities span primary and secondary market services, central counterparty risk transfer, and securities settlement for the equities and fixed income markets. It functions as a market operator, clearing house and payments system facilitator. It monitors and enforces compliance with its operating rules, promotes standards of corporate governance among Australia’s listed companies and helps to educate retail investors. ASX’s diverse domestic and international customer base includes issuers of securities and financial products, investment and trading banks, fund managers, hedge funds, commodity trading advisers, brokers and proprietary traders, market data vendors and retail investors. By providing its systems, processes and services reliably and fairly, ASX generates confidence in the markets that depend on its infrastructure. This is integral to its long-term commercial success. More information on ASX can be found at www.asx.com.au Disclaimer: This is not intended to be financial product advice. To the extent permitted by law, ASX Limited ABN 98 008 624 691 and its related bodies corporate excludes all liability for any loss or damage arising in any way including by way of negligence. This document is not a substitute for the Operating Rules of the relevant ASX entity and in the case of any inconsistency, the Operating Rules prevail. © Copyright 2013 ASX Limited ABN 98 008 624 691. All rights reserved 2013. International Information Line: +61 2 9338 0000 Domestic Information Line: 131 279 [email protected] For this contract the market is operated by Australian Securities Exchange Limited ABN 83 000 943 377