Cboe Launches AMERIBOR Futures

Basel Committee Consults on Interest-Rate Risk
  • New interest rate futures aim to support market participants’ transition away from LIBOR
  • AMERIBOR Term-30 benchmark designed to serve as “plug in and play” replacement for One-Month LIBOR

Cboe Global Markets, a leading provider of global market infrastructure and tradable products, announced plans to launch futures on the AMERIBOR® (American Interbank Offered Rate) Term-30 interest rate benchmark. The new futures are expected to be available for trading on Cboe Futures Exchange, LLC (CFE) on business date Monday, September 13, 2021, subject to regulatory review.

The AMERIBOR Term-30 benchmark, disseminated by the American Financial Exchange, LLC (AFX™), is designed for financial institutions in need of forward-looking short-term interest rates as the planned cessation of LIBOR approaches. The benchmark is designed to capture wholesale funding costs for American financial institutions over a thirty-day period at a specific moment in time.

AMERIBOR Term-30 futures (AMT1 futures) will be cash-settled and are designed to reflect market expectations of the level of the AMERIBOR Term-30 benchmark rate, which is used in the determination of the final settlement value of the applicable AMT1 futures contract. Cboe Futures Exchange plans to initially offer futures on the 30-day term rate, followed later this year by futures on the AMERIBOR Term-90 benchmark rate, subject to regulatory review.

The AMERIBOR Term-30 benchmark has a credit sensitive element and represents a forward-looking interest rate, making it comparable to One-Month LIBOR, but derived in a transparent and representative fashion and based upon actual financing transactions. As such, the benchmark is expected to serve as a “plug-in and play” replacement for One-Month LIBOR.

“We are pleased to further collaborate with AFX and provide market participants with the tools they need to help ease their transition away from LIBOR,” said Michael Mollet, Vice President, Futures at Cboe Global Markets. “We expect market participants, especially banks who consider the AMERIBOR index representative of their true cost of funding, will find the new futures to be particularly well-suited to manage interest-rate risk on loans or execute interest-rate trading strategies.”

Banks and other financial institutions may use AMT1 futures in connection with hedging their variable short-term funding costs and interest rate risk. Proprietary trading firms may use AMT1 futures in connection with hedging their exposure to other interest rate derivatives or to conduct trading strategies involving AMT1 futures on the one hand and other interest rate derivatives on the other hand, such as swaps based on the AMERIBOR Term-30.

“AMERIBOR Term-30 is the result of extensive research, testing, analysis and consensus-building to provide the marketplace with an innovative alternative to One-Month LIBOR,” said Dr. Richard Sandor, Chairman and CEO of the American Financial Exchange. “We are excited to further expand our suite of offerings with Cboe to include futures on the AMERIBOR Term-30 benchmark and to deliver more choices so that market participants can use the products that best suit their trading needs.”

Currently, AFX membership across the U.S. includes 181 banks and more than 1,000 correspondents, with combined assets of over $5.3 trillion. There are 45 non-bank members,  including insurance companies, broker-dealers, private equity firms, hedge funds, futures commission merchants, and asset managers.

Cboe Futures Exchange now offers a range of futures products on the AMERIBOR interest rate benchmark, including three-month, one-month and seven-day contracts.

Source: Cboe

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