Australian swap derivatives

ASX 3, 5 and 10 year deliverable swap futures

Interest rate swaps are one of the most widely traded derivative products in the Australian financial market with over $10 trillion in notional value transacted in 2013. ASX's deliverable swap futures (DSF) contracts are an innovative set of products closely matching the characteristics of OTC interest rate swaps.

With a calculation methodology and trading convention that closely matches the Australian market, DSF allow for the replication of 3 month forward at the money fixed for floating interest rate swaps at 3, 5 and 10 year tenors. DSF provides customers with an alternative to OTC markets that is integrated with ASX's OTC clearing service.

Benefits of interest rate swap futures

ASX's DSF offers customers improved margin and capital efficiencies compared to OTC equivalents. This is coupled with the advantages of exchange traded markets including centralised clearing, reduced counterparty risk and price transparency.

Trading on ASX offers the following specific benefits of exchange traded markets such as:

  • Price transparency and liquidity
  • Immediate execution and confirmation
  • Reduction of counterparty risk
  • Centralised clearing supported by a clearing guarantee

Interest rate swap futures features

  • Contracts are listed on financial quarter months with two months listed at any one time.
  • Contract unit: A$100,000 fixed for floating interest rate swap with term to maturity of three/five/ten years. The floating reference rate is 6 month BBSW. The fixed rate is the yield of the contract at expiry.
  • Deliverable into an ASX Clear (Futures) OTC clearing facility. At expiry open long positions will be delivered into an ASX cleared swap where the buyer is the fixed rate receiver and the floating rate payer. Open short positions will be delivered into an ASX cleared swap where the seller is the fixed rate payer and the floating rate receiver.
  • Variable tick value - ASX 3, 5 and 10 year deliverable 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.

International approvals

ASX 3, 5 and 10 year deliverable swap futures are approved for trading by:

  • UK Financial Services Authority (FSA);
  • Monetary Authority of Singapore (MAS);
  • Hong Kong Securities and Futures Commission (SFC Hong Kong)

For regulatory and legal reasons ASX 24 cannot accept orders in the ASX 24 Deliverable Swap Futures Contract from US Persons. As a result Participants are requested to confirm that they and their customers for whom they submit orders to trade ASX 24 Deliverable Swap Futures Contracts do not qualify as US Persons under the Interpretive Guidance of the CFTC.

Trading Participants are requested to sign the "ASX 24 Deliverable Swap Futures US Person Representation Letter" to confirm that:

  • The Participant represents that itself does not qualify as a US Person; and
  • In respect of each customer for which the Participant enters into ASX 24 Deliverable Swap Futures Contracts, the Participant confirms that it has received a representation from such customer stating that the customer does not qualify as a US Person.

This is a once-off attestation which Trading Participants are required to provide to ASX Compliance before they trade the Deliverable Swap Futures Contract.

Trading ASX interest rate swap futures

  • Trading in ASX’s 3, 5 and 10 year deliverable interest rate swap futures is conducted ‘on-market’ via ASX’s electronic trading platform and ‘off-market’ through ‘exchange for physical’ transactions.
  • Spread trading functionality is available.
  • Attractive spread concessions are available on calendar spreads as well as inter-commodity spreads for offsetting positions held in the ASX 3 year and 10 year treasury bond futures contracts.