Constant Maturity future

 

LDX, together with Eurex, provides the LDX Interest Rate Swap Constant Maturity Future (IRS CMF) to address regulatory imperatives to centrally clear interest rate swaps (IRS) by aligning the IRS CMF as closely as possible to the underlying IRS market. At the same time it avoids the complications that arise from standard quarterly maturing futures contracts. Moreover, the IRS CMF is listed and centrally cleared at Eurex providing centralised liquidity, effective hedging of interest rate exposure and immediate capital efficiencies.

LDX IRS CMF product features

  • IRS CMF Contracts never expire, have no time decay and do not mature

  • Trades as a rate

  • Buyer pays fixed/seller receives fixed

  • Notional size of contract varies by tenor

  • Listed and traded on Eurex Exchange - no need to onboard a new trading venue

     

Central clearing

  • Overnight margining against settlement value of the IRS Constant Maturity Index

  • Margin offsets against positions in other products available at Eurex Exchange, optimising the market’s leading interest rate product suite (listed and OTC), based on the whole EUR-denominated yield curve

  • Cleared via Eurex Clearing - helping you manage risk and become more efficient with capital usage

     

Price discovery

  • Yield / Rates based quotes
  • Quoted to 1⁄4 of a Basis Point

  • Example prices: Bid = 2.0025% (Payer of Fixed) Offer= 2.0075% (Receiver of Fixed)

     

Index based on Volume Weighted IRS quoted prices

  • Index is streamed in real-time incorporating tradable prices from market recognised IRS trading platforms

  • Settlement value determined by applying our methodology to tradable prices published in the last 3 minutes of the trading day

     

Maturity calibration

  • Maturity calibration process used to keep positions in the same maturity from one day to the next.

  • At EOD, all positions VAR margined to the Index Settlement Value - thus Index becomes OI position price and is used to calculate the 1 day forward price

  • OI transferred to 1 day forward price (‘maturity calibration’) with no P&L impact.

  • This removes structural cost differential of the daily change in the IRS rates.

     

Incorporation of Carry Costs

  • The maturity calibration process incorporates the overnight carry costs into the values of the IRS CMF.
  • The following day the market will adjust back to the spot price.

 

Maturities & contract provision

  • Every annual maturity from 2 - 30 years

 

Convexity

  • Closely replicates IRS convexity
  • Tick Value calculated using OIS discount curve
 

GDI

 

Global Derivatives Indices is a company specialising in the development of products, data and indices for financial markets. The product lines are designed to enable markets to find solutions  to problems created by the changing regulatory and economic environment as a result of the financial crisis, and fallout since.

Having developed the Constant Maturity Future (CMF) and launched the initial market, the Interest Rate Swap CMF, GDI will look to add currencies and products to the create a full suite of structurally similar products. These products will provide economic and structural similarities to the OTC markets on which they are based, however with all the advantages of the listed markets in both cost savings and regulatory cover. In using a combination of GDI products traders will be able to create structured products in a bespoke fashion.

GDI is also able to provide a number of unique data sets and indices both from its own products and the underlying markets the futures contracts are based on.

 
 

London Derivatives Exchange Ltd is authorised and regulated by the Financial Conduct Authority.