The Montréal Exchange launches Overnight Index Swap Futures
The Montréal Exchange (MX) will list Overnight Index Swap Futures contracts (ticker symbol: OIS) on February 24, 2012. MX is expanding product coverage of the Canadian short-term interest rate market in response to growing demand for derivatives products that more accurately reflect shorter term interest rate exposure.
MX will also implement a six-month trading and clearing fee waiver program in support of the 30-Day Overnight Repo Rate Futures contract (ticker symbol: ONX). The program, which aims to encourage market participants to trade the ONX contract, will be effective on February 24, 2012.
The OIS contract is a short-term interest rate futures contract that complements a similar contract, the 30-Day Overnight Repo Rate Futures (ONX) contract. The OIS contract differs from the ONX contract in large part due to its reference to the Bank of Canada Fixed Announcement Dates (FADs). This feature enhances hedging and interest rate exposure opportunities for short-term money market traders, Government of Canada bond desks and treasury risk managers.
OIS trading information
- Each contract shall be for a nominal value of C$5,000,000.
- The underlying is a fixed for floating interest swap where a fixed rate is swapped against a floating rate. The floating rate is the compounded daily overnight repo rate (CORRA) quoted in terms of an overnight repo rate index over the period of the contract.
- The minimum price fluctuation is 0.001 (equal to C$6.25, which is one-tenth of 1/100 of one percent of C$5,000,000 on a 45.625/365-day basis).
- The reporting limit is 300 contracts.
- Trading will begin with the April 2012 contract and all contract months will match the Bank of Canada's schedule of Fixed Announcement Dates (FADs). The 2012 schedule of FADs is available at http://bit.ly/pGvxK0.
- Margin requirements will be published shortly by means of a circular.
- Offer and sale of the OIS contract in the United States: Note that the OIS futures contract will be offered and/or sold in the United States, upon approval of all relevant regulatory bodies.
Should you require technical assistance, or wish to carry out testing in our development environment, do not hesitate to contact our Technical Help Desk at 1-877-588-8489 or by email at samsupport@m-x.ca.
Vendors' access codes
| Vendor | Code | |
|---|---|---|
| ACTIV Financial System, Inc. | OIS | RootSymbol /+ ExpiryYear(2 digit) + Month Code + .M |
| Bloomberg Inc. | OSI | RootSymbol + ExpiryYear(1 digit) + Month Code + Index |
| IRESS Market Data | OIS | RootSymbol + Month Code + ExpiryYear(1 digit) |
| SIX Telekurs Ltd. | OIS | RootSymbol + ExpiryYear(1 digit) + Month Code |
| Thomson Reuters Financial Services | OIS | RootSymbol + ExpiryYear(1 digit) + Month Code |
| Track Data Corporation | OIS | RootSymbol + ExpiryYear(1 digit) + Month Code |
Fees
To support this product launch, MX is waiving OIS futures contract execution and clearing fees for six months as of the aforementioned launch date.
Following the six-month fee waiver, transaction fees will be as follows:
- $0.82 for clients
- $0.33 for approved participants (domestic and foreign)
- $0.05 for participants in the Liquidity Provider Rebate Program
Trading opportunities
Market participants mainly use the OIS market for hedging activities which are often related to risk management (hedge swap books and repo transactions).
Participants may also use OIS futures:
- to hedge their funding costs or their exposure to short-term interest rate movements;
- to alter the term structure (duration) of a portfolio;
- to speculate on the future path of the Bank of Canada's target overnight rate (overnight index swaps provide a gauge of what the overnight rate is expected to average over a given period).
For all business related questions, please contact Customer Relations by telephone at 1-866-871-7878 or by email at info@m-x.ca.
Claude Cyr
Senior Vice-President, Financial Markets
Montréal Exchange