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Australian short term derivatives

Australian short term interest rate futures and options include:

ASX 30 day interbank cash rate futures and options

ASX’s 30 day interbank cash rate futures contract, based on the interbank overnight cash rate published by the Reserve Bank of Australia, allows users to hedge against fluctuations in the overnight cash rate and better manage their daily cash exposures. The 30 day interbank cash rate futures and options also present both outright and spread trading opportunities for traders.

The ASX 30 day interbank cash rate futures and options contracts can specifically be used for:

  • Managing interest rate risk at the short end of the yield curve
  • Managing balance sheet mismatches
  • Hedging against anticipated fluctuations in the overnight cash rate
  • Outright trading on anticipated changes, or lack of changes, in the official cash rate
  • Trading on anticipated changes in the yield curve shape
  • Income enhancement opportunities for portfolios with cash exposures
  • Spread trading against 90 day bank bill futures and options.

The 30 day interbank cash rate futures and options are approved for trading by:

  • US Commodity Futures Trading Commission (CFTC)
  • UK Financial Services Authority (FSA)
  • Monetary Authority of Singapore (MAS) and
  • Hong Kong Securities and Futures Commission (SFC Hong Kong).

30 day cash rate futures features

  • Contract unit: Average monthly Interbank Overnight Cash Rate payable on a notional sum of AUD 3,000,000
  • Monthly contracts available up to 18 months ahead
  • Minimum price increment of 0.005 per cent (0.5 basis points). A one basis point move is equal to AUD24.66
  • Cash settled against the monthly average of the interbank overnight cash rate as published by the Reserve Bank of Australia for that contract month
  • Official market makers provide two way quotes in all 18 months

30 day cash rate options

Monthly options are listed on the first four 30 day interbank cash rate futures months.

Pre-negotiated business rules are applicable to the 30 day interbank cash rate options. These rules provide participants with the opportunity to facilitate client business off market prior to disclosing and then crossing orders on the trading platform, ASX Trade24.

Trading ASX 30 day interbank cash rate futures

  • Trading in ASX's 30 day interbank cash rate futures is conducted on-market via ASX's electronic platform ASX Trade 24
  • Spread trading functionality is available for calendar spreads
  • Attractive spread concessions are available on calendar spreads as well as inter-commodity spreads for off-setting positions held in other ASX interest rate futures

An example of the cash settlement price calculation is accessible here.  

ASX 90 day bank accepted bill futures and options

ASX’s 90 day bank bill futures and options product is Australia’s benchmark indicator for short term interest rates. Launched in 1979, the 90 day bank bill contract was the first interest rate futures contract to be listed outside the United States. The 90 day bank bill contracts are cost effective tools for enhancing portfolio performance, reducing and managing risk and outright trading.

90 day bank bill futures are an efficient way to gain exposure to the Australian debt markets. Their trading behaviour and liquidity make them ideal for short term trading, long term trend following and hedging of short term AUD fixed interest securities and interest rate swaps.

90 day bank bill futures and options are approved for trading by:

  • US Commodities Futures Trading Commission (CFTC)
  • UK Financial Services Authority (FSA)
  • Monetary Authority of Singapore (MAS) and
  • Hong Kong Securities and Futures Commission (SFC Hong Kong).

The negotiable securities market

Bank accepted bills of exchange and negotiable certificates of deposit are negotiable short term securities issued by trading banks used to effect short term financing for periods typically between 30 and 180 days. Bank bills and other discount securities issued by banks totalled AUD235 billion at the end of June 2013 with annual turnover of AUD2,949 billion.

90 day bank bill futures features

  • 90 day bank bill futures contract is ranked among the top 10 short-term interest rate futures contracts in the world by turnover
  • Average daily turnover in 2013 was 120,000 contracts
  • Contract unit of AUD1,000,000 face value 90 day bank accepted bills of exchange or EBAs  
  • Deliverable – 90 day bank bill futures contract is deliverable. Approved bank accepted bills of exchange and negotiable certificates of deposit are eligible securities for delivery
  • Variable tick value – 90 day bank accepted bill futures are valued using a simple interest formula for pricing discount securities. Due to this convention the dollar value of the minimum price movement, or tick value, does not remain constant but changes in accordance with movements in the underlying interest rate.

Quarterly and serial options

  • Quarterly options expire in the same calendar month as the underlying futures contract. Serial options are listed in non-financial quarter months
  • Pre-negotiated business rules are applicable to quarterly and serial 90 day bank bill options. These rules provide participants the opportunity to facilitate client business off market prior to disclosing and then crossing orders on the trading platform, ASX Trade24.

Trading ASX 90 day bank bill futures

  • Trading in ASX's 90 day bank accepted bill futures is conducted on-market via ASX's electronic platform ASX Trade24 and off-market through block trade and exchange for physical transactions
  • Spread trading functionality is available for calendar spreads and inter-commodity spreads
  • Attractive spread concessions are available on calendar spreads as well as inter-commodity spreads for off-setting positions held in other ASX interest rate futures.

ASX 3 month overnight index swap futures

3 month overnight index swap futures (3 month OIS futures) are based on the OTC 3 month overnight index swap rate. The contract allows users to hedge against fluctuations in the official cash rate, better manage their cash exposures and take advantage of outright and spread trading opportunities.

3 month OIS Futures are approved for trading by the following regulators:

  • Australian Securities and Investment Commission (ASIC)
  • US Commodities Futures Trading Commission (CFTC)
  • UK Financial Services Authority (FSA)
  • Monetary Authority of Singapore (MAS) and
  • Hong Kong Securities and Futures Commission (SFC Hong Kong).

3 month OIS futures features

  • Contract unit: Amount payable on a notional sum of AUD1,000,000 at the 3 month Overnight Index Swap rate
  • Quarterly contracts listed up to 12 months ahead
  • Cash settled against the 3 month overnight index swap rate on the last trading day. The cash settlement price is calculated from quotes obtained from fifteen banks active in the OIS market
  • Minimum price increment of 0.005 per cent (0.5 basis points). A one basis point move is equal to AUD24.66
  • Two official market makers providing two way quotes in all months listed.

Trading 3 month OIS futures

Trading in 3 month OIS futures is conducted ‘on market’ via ASX’s electronic platform ASX Trade24 and ‘off market’ through ‘exchange for physicals’ transactions.

Spread trading functionality is available for calendar and inter-commodity spreads against ASX’s 90 day bank bill futures (IR).

Attractive spread concessions are available on calendar spreads as well as inter-commodity spreads for offsetting positions held in other ASX interest rate futures.