Global derivatives exchange operator CME plans to launch Eurodollar Bundle futures and options to provide investors with a cost-effective alternative to trading OTC products, a practice becoming increasingly expensive due to new regulations.
Bundle futures allow market participants to trade multiple years of short-term interest rate risk exposure at a single price, with a single instrument, providing market participants with operational and margin efficiencies.
The bundles are strips of at least eight consecutive quarterly futures contracts.
The Eurodollar Bundle enables the simultaneous sale or purchase of one each of a series of consecutive Eurodollar contracts, leaving the user with a strip of individual Eurodollar futures positions.
CME’s new offering will go live on 22 September 2014 and will be available in two-year, three-year and five-year tenors.
"Bundle futures and options provide market participants with access to a broad participant pool, deep liquidity, operational simplicity, and price transparency via a single line item for longer term interest rates with same total notional size of an OTC contract," said Sean Tully, senior managing director of interest rates and OTC products.
"With margin levels and capital charges increasing for bilateral OTC products, options on Bundle futures serve the needs of clients seeking a highly liquid, standardised, and cost-effective alternative."
Bundle futures and options will be available through the CME Globex electronic trading platform, open outcry, and block trading.