Strips

A strip is the simultaneous purchase or sale of an equally weighted series of BAX futures contracts. They are quoted on an "average net change" basis from the previous day's settlement price. All contracts in the strip are executed at the same time in a single transaction. The three years of quarterly expirations provide market participants with five standardized strips – 1-year strip, 2-year strip, 3-year strip, red strip and green strip.

There are many benefits in the use of standardized strips such as executing multiple futures contracts in a single transaction, rapid trade execution in a fast market, eliminating partial fills and more efficient trading in the back months.

Enhance Strip Facilities:

During the current day's trading session, strips are quoted on a net change basis from the previous day's settlement prices. Specifically, the price quotation will reflect the average of the net price changes of each of the strip's constituent contracts. With the enhanced strip facilities, participants are permitted to assign equal or different net price changes to each individual contract of the strip as long as they average out to the agreed upon net change in price and both counterparties agree to the assigned changes. If individual price changes cannot be agreed upon, the average net change will be added to or subtracted from the previous day's settlement price for each of the strip's constituent contracts.

Example: on April 2, the Green strip is purchased at an average net change of +2. The average net change of +2 indicates the addition of two ticks to the close of the previous day's settlement price.

The actual price changes assigned to each contract could be as follows:

JUN 05

+5

SEP 05

+4

DEC 05

-1

MAR 06

0 (no change to the previous day's settlement price)

Although each contract was assigned a different price change, the average net change on the transaction equals +2.