AMERIBOR Term-90 futures to start trading on Cboe from late January

As the Libor era draws to a close, Cboe moves to expand its suite of futures products based on the American Interbank Offered Rate.

The New Year will see Cboe Global Markets start trading futures based on the AMERIBOR [American Interbank Offered Rate] Term-90 interest rate benchmark, an alternative to the London Interbank Offered Rate, or Libor, which is gradually being phased out.

The new futures will commence trading on Cboe’s Futures Exchange on January 24. As the planned cessation of Libor approaches, Cboe said these futures products provide an alternative for market participants to hedge their interest rate risks on loans, or execute interest-rate trading strategies.

“As client demand for credit-sensitive instruments continues to grow, we are pleased to offer AMERIBOR Term-90 futures and provide additional tools to help market participants manage their transition from Libor,” said Michael Mollet, vice president and head of futures at Cboe Global Markets. “We expect these futures to provide market participants with access to a more complete suite of AMERIBOR futures to manage their interest rate exposures going forward.” 

AMERIBOR is disseminated by the American Financial Exchange (AFX), and is a transparent, transactions-based interest rate benchmark that represents market-based borrowing costs.

The AMERIBOR Term-90 benchmark is designed to capture wholesale funding costs for American financial institutions over a 90-day period at a specific moment in time.

The planned AMERIBOR Term-90 futures (AMT3 futures) further expands Cboe’s suite of AMERIBOR futures products and follows its recent launch of futures based on the AMERIBOR Term-30 benchmark, the 30-day term rate

The AMERIBOR Term-90 benchmark has a credit sensitive element and represents a forward-looking interest rate, which Cboe said made it comparable to three-month Libor, but it is derived in a transparent and representative fashion and based upon actual financing transactions.

“The AMERIBOR Term-30 and AMERIBOR Term-90 interest rate benchmarks are designed to be ‘plug-in and play’ replacements for one-month and three-month Libor, fostering an easy adoption for end-users,” said Dr. Richard Sandor, chairman and CEO of the American Financial Exchange. “We expect these rates to fit seamlessly within existing bank models and offer market participants a forward-term structure.”

Banks and other financial institutions may use AMT3 futures to hedge their variable short-term funding costs and interest-rate risk. Proprietary trading firms may use AMT3 futures to hedge their exposure to other interest rate derivatives, or conduct trading strategies involving AMT3 futures on the one hand and other interest rate derivatives on the other hand, such as swaps based on the AMERIBOR Term-90 and derivatives based on SOFR and Libor.

Cboe said market participants with exposure to unsecured borrowing costs or borrowing costs better represented by a forward-looking rate may also utilize AMT3 futures to hedge their exposures.