In a further expansion of its short-term interest rate product offerings, CME Group, the world's largest and most diverse derivatives exchange, today announced plans to offer 3-month Overnight Index Swaps (OIS) futures and options on futures. The futures contract is scheduled to become available on Sunday, September 7, 2008, for a trade date of September 8, on the CME Globex electronic trading platform and on Monday, September 8, 2008, for open outcry trading.
The new OIS futures contract will track the overnight effective Federal Funds rate, a major benchmark for the U.S. short-term interest rate market. The contract will reflect the Federal Funds rate compounded over a three-month period that ends on the contract's expiration date. Because the OIS futures contract will cover the same time period as a Eurodollar future, the contract will provide market participants with a direct and efficient way to trade the spread between 3-month LIBOR and 3-month overnight financing costs.
"In the current economic environment, an increasing number of short-term interest rate instruments are linked to the overnight Fed Funds rate," said Robin Ross, managing director, CME Group interest rate products.
"Our new contract will be a welcome means of hedging OIS-linked risk exposure. Combining the new 3-month OIS contract with our benchmark Eurodollar futures will enable efficient trading of the Fed Funds/LIBOR spread, which has grown increasingly volatile, creating substantial risk for money market participants. The contract will also provide a direct way to take a view on FOMC policy moves further out the yield curve than is possible with our existing 30-day Fed Funds contracts." -- www.cme.com
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