Cboe Futures Exchange and American Financial Exchange Announce Planned Launch of AMERIBOR® Futures
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies announced plans to launch futures on the AMERIBOR® (American Interbank Offered Rate) interest rate benchmark on Cboe Futures ExchangeSM (CFE). The new futures will launch on trade date August 16, in honor of the 42nd anniversary of the launch of Treasury bond futures.
AMERIBOR futures will be cash-settled and are designed to reflect the market expectations of either compounded daily annualized AMERIBOR interest or average simple daily annualized AMERIBOR interest. CFE plans to initially offer two AMERIBOR futures products: three-month and seven-day contracts, followed by other short-term products.
AMERIBOR, disseminated by the American Financial Exchange, LLC (AFXTM), is a transparent, transactions-based interest rate benchmark that represents market-based borrowing costs. The AMERIBOR rate is calculated daily as the transaction volume-weighted average interest rate of the AMERIBOR overnight unsecured loans on AFX. AMERIBOR is not based on expert opinion, judgment, estimates or submissions.
“We are pleased to expand upon our existing collaboration with AFX to launch AMERIBOR futures,” said Ed Tilly, Chairman, President and CEO of Cboe. “We expect these futures to help banks, proprietary traders and other market participants achieve greater precision and accuracy when managing risk or executing interest rate trading strategies."
U.S. banks and other financial institutions may use AMERIBOR futures in connection with hedging variable overnight funding costs and interest rate risk. Proprietary traders may use AMERIBOR futures as a vehicle for implementing trading strategies related to interest rates and in connection with hedging interest rate risk.
“We are delighted to launch AMERIBOR futures at this time,” said Dr. Richard Sandor, Chairman and CEO of AFX. “As our volume and membership continues to gain momentum and reaches critical mass, the launch of AMERIBOR futures is the natural next step that will provide market participants with the tools they need to manage their risk and seek trading opportunities. The inherently straightforward and transparent design of the AMERIBOR interest rate benchmark allows for ease of execution and spreading strategies between the cash and the futures markets.”
AFX has 155 participants across the U.S., including banks, broker-dealers, private equity firms, business development corporations, hedge funds, futures commission merchants, insurance companies, asset managers and finance companies. AFX has more than 1,000 correspondent bank participants that are able to conduct loan transactions through their respective AFX Member correspondent banks. AFX has seen continued volume growth since its inception in 2015. On July 23 AFX announced a record volume milestone, reaching $502 billion transacted since its inception in 2015.
An introductory class on how to trade AMERIBOR futures was held on July 30, 2019. View video of the class here.