Exchange Recap
CME Group: Interest Rates Recap - May 2019
SOFR Futures' First Year Ranks Among Most Successful in CME Group's 171-Year History
CME SOFR Futures' first year: Total volume of 3.5M contracts ($6.4T in notional, $100M DV01), with open interest reaching 151K contracts ($479B notional).
| SOFR vs. Other Leading Product Launches | ||
| ADV (Last 3 Months of First Year) | Open Interest (Year 1 Peak) | |
| Ultra 10-Year Note | 101,223 | 326,035 |
|---|---|---|
| Ultra T-Bond | 53,548 | 396,692 |
| E-mini Nasdaq-100 | 32,405 | 35,059 |
| SOFR Futures | 31,531 | 151,454 |
| E-mini Dow | 29,840 | 32,516 |
| SOFR, Eurodollars, and Fed Funds At First Anniversary | ||
| ADV (Year 1) | Open Interest (Year 1 Peak) | |
| SOFR Futures | 13,978 | 151,454 |
|---|---|---|
| Eurodollar Futures | 1,240 | 20,336 |
| Fed Fund Futures | 275 | 3,761 |
In today's mature state, Eurodollars and Fed Funds are the world's deepest and most liquid short-term interest rate products.
| Eurodollars and Fed Funds Today (Q1 2019 data) | |||
| Years Since Launch | ADV | Open Interest | |
| Eurodollar Futures | 38 | 2,900,000 | 12,570,000 |
|---|---|---|---|
| Eurodollar Options | 34 | 1,720,000 | 52,320,000 |
| Fed Fund Futures | 31 | 274,000 | 1,900,000 |
ADV and OI in the tables above reported in # of contracts.
SOFR Futures Year One Highlights
- 140 firms have traded CME SOFR futures*
- ADV has grown to 28K in 2019
- Daily volume exceeded 40K contracts 19 times since Feb 15, including a record 81K on Mar 7
- Our active network of block market makers has enabled over $4.4M in DV01 risk to be executed via bilateral block trades
- Inter-Commodity Spreads (ICS) vs. ED and FF account for as much as 20% of volume on some days
- SOFR term structure extending 3+ years
- 0.5 to 1.0 tick wide markets out 18+ months
*As highlighted in the ARRC’s “SOFR: A Year in Review," CME remains the only exchange to report participant count.
KEY ALTERNATIVE REFERENCE RATE DATES
Improved LIBOR Fallbacks
Dec 21, 2018: CME statement on improved IBOR fallbacks
Apr 10, 2019: CME paper reviews ISDA's fallback consultation and examines possible values of its credit spread as a function of measurement window and time period
Apr 25, 2019: The ARRC published recommended LIBOR fallback language for floating rate notes and syndicated loans
Q2 2019: ISDA derivatives fallback consultation for USD LIBOR
End 2019 or 2020: Improved and SOFR-based Fallbacks expected to be incorporated into ISDA 2006 Definitions
Cash & Derivatives Market Adoption
Apr 22, 2019: The ARRC published a "User's Guide to SOFR"
Apr 24, 2019: CME published a discussion document on 'Big Bang' SOFR Discounting & Price Alignment
May 1, 2019: Floating rate note issuance tied to SOFR reached $98 billion** (Issuance by tenor)
May 2019: CME to publish futures-derived SOFR strip rates
H2 2020: Expected transition to SOFR discounting and price alignment
End 2021: NY Fed is expected to publish indicative term rate (ARRC Paced Transition Plan)
Data as of May 6, 2019, unless otherwise specified
Notional shown for illustrative purposes only, computed based on the value of an equivalent money market instrument with the same dollar-value-of-basis-point (DV01). One ED/SR3 contract represents ~$1M notional. One FF/SR1 contract represents ~5M notional.
** Source: Bloomberg
View the current version and an archive of the Rates Recap online at cmegroup.com/ratesrecap.
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