On-the-Run U.S. Treasury futures

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On-the-Run U.S. Treasury futures
Exchange CME Group
Settlement Cash settled
Pricing Unit Need pricing unit!
Tick Value Need tick value!
Contract Months Need contract months!
Last Trading Day Need LTD rules!
Note: This contract is electronic ONLY -- no open outcry
  No Open Outcry Electronic
Trading Hours N/A N/A
Ticker Symbol N/A N/A
Price Limits N/A N/A

Notes

CME Group was scheduled to launch On-the-Run (OTR) U.S. Treasury Futures on Oct. 25, 2010. The contracts would be aimed at providing market participants with efficient and cost-effective price exposure to 2-Year, 5-Year, and 10-Year U.S. Treasury on-the-run yields. The new contracts will be listed with, and subject to, the rules and regulations of the CBOT.

OTR U.S. Treasury futures are cash-settled based on the yields of the most recently auctioned Treasury securities, which are typically the most actively traded and serve as the primary benchmarks used in pricing many fixed income instruments.

Applications for the new contract include on-the-run yield curve strategies, as well as inter-commodity spread with CME Group’s existing U.S. Treasury, Eurodollar and Swap futures contracts.

Each expiry’s life cycle would match up to the underlying Treasury note’s life cycle as the "on-the-run" issue. Each expiry would be listed around the beginning of cash-market When Issued (WI) trading and will continue to trade after such Treasury note is auctioned, throughout the underlying note’s life as the "on-the-run" Treasury security. Trading in the expiry would terminate on the morning of the next new auction, approximately two hours before the underlying note would become the "old."

The OTR Treasury futures would trade in price and are cash-settled utilizing on-the-run Treasury yields on the last day of trading. The final settlement pricing formula transforms the underlying on-the-run Treasury yield into a price index, whose price dynamics resemble those of a hypothetical $100,000 face-value Treasury note paying a semi-annual coupon rate of 4 percent per annum. Final settlement occurs on the last trading day. OTR Treasury futures trade both open outcry and on CME Globex.[1]


References

  1. On-The-Run (OTR) U.S. Treasury Futures. CME Group.