News
WSE Introduces Futures Contracts On WIBOR And On Treasury Bonds
Warsaw, 18 October 2013 r.
WSE Introduces Futures Contracts On WIBOR And On Treasury Bonds
PRESS RELEASE
- Futures contracts on WIBOR reference rates and futures contracts on short-term, mid-term and long-term Treasury bonds have been introduced to trading on WSE on 18 October 2013.
- WSE has added new derivatives classes, popular among investors on foreign exchanges, to its product offer
18 October 2013 is the first day of trading on Warsaw Stock Exchange in two new derivative instruments: futures contracts on WIBOR reference rates and futures contracts on Treasury bonds. Such products are broadly used on foreign markets as investments, in arbitrage strategies, and as interest rate risk hedging instruments. The new futures contracts on WIBOR rates and on Treasury bonds are mainly addressed to financial institutions including banks, investment funds, asset management firms, hedge funds, investment firms, etc. The new instruments also offer an attractive alternative for companies which can use them to hedge their loans where the interest rate is based on WIBOR reference rates. Futures contracts on bonds may be interesting to individual investors who wish to earn on changes of prices of futures contracts derived from changes of Treasury bond prices.
The market of interest rate futures is the biggest segment of the global derivatives market: the share of this instrument class in the volume of trading in all futures contracts on the global market was 26% in 20121. In 2012, the share of interest rate derivatives in the aggregate trading in all derivatives was 28% on the German exchange EUREX, 47% on the London-based exchange NYSE Liffe, and no less than 72% of the Brazilian exchange BM&FBovespa. WSE will be the fifth European Union market to list Treasury bond futures after EUREX, NYSE Liffe, NASDAQ OMX Nordic and the Spanish exchange MEFF, which all operate trading in such instruments.
“Interest rate risk management is a must in today’s world. From now on, it will be possible with instruments of the transparent and safe public market. We have worked on the introduction of the new instruments together with institutions of the Polish financial market; consequently, the instruments address the needs and expectations of trade participants. We expect that the addition of this class of assets to WSE’s product offer will enhance the attractiveness and liquidity of diverse categories of instruments offered by WSE Group companies. The introduction of futures contracts on interest rates and on Treasury bonds into trading is part of WSE’s efforts aimed at the provision of tools which support the growth of the Polish market and continued development of WSE business lines as well as consistent improvement of the competitiveness of our offer,” said Adam Maciejewski, President of the Management Board of WSE.
Futures contracts on WIBOR interest rates
WSE has introduced to trading three classes of futures contracts on interest rates. The underlying instruments are one-month WIBOR (1MW), three-month WIBOR (3MW), and six-month WIBOR (6MW). The nominal value of 1M WIBOR contracts is PLN 3,000,000 and the nominal value of 3M WIBOR and 6M WIBOR contracts is PLN 1,000,000. The price of the new contracts is the value of 100 less the relevant reference interest rate. An investor expecting the relevant WIBOR reference rates to rise should sell a contract (i.e., take a short position) while an investor expecting the relevant WIBOR rates to fall should buy a contract (i.e., take a long position). The value of contracts is the contract price times the multiplier, which is PLN 2,500 for 1M WIBOR and 3M WIBOR contracts and PLN 5,000 for 6M WIBOR contracts. The tick size is 0.01 percentage point equal to PLN 25 for 1M WIBOR and 3M WIBOR contracts and PLN 50 for 6M WIBOR contracts. Before making a trade, an investor planning to buy or sell a contract should deposit an initial margin required by the broker. After the close of each session, open positions are marked to market at the daily settlement price determined for each contract series. The settlement rules are the same as for other futures contracts. The final settlement price of is determined at the contract series expiry date as the value of 100 less the relevant WIBOR reference rate quoted at that date, and it is settled in cash.
Futures contracts on WIBOR interest rates
Futures contracts on Treasury bonds
Futures contracts on short-term Treasury bonds (STB), mid-term Treasury bonds (MTB) and long-term Treasury bonds (LTB) have been introduced to trading on WSE. The underlying of the instruments is a basket of Treasury bonds which includes at least 3 bonds with the relevant maturities. The nominal value of a contract is PLN 100,000. The tick size is 0.01 percentage point equal to PLN 10. The price of a futures contract on Treasury bonds depends on the forward price determined at the expiry date of the futures contract on the Treasury bond which is the cheapest to deliver in the basket assigned to the contract series. The final settlement price is determined at the contract expiry date based on the price of the cheapest to deliver bond in the basket at the second fixing of Treasury BondSpot Poland, the wholesale market of Treasury bonds operated in WSE Group. The final price is settled in cash.
Futures contracts on WIBOR reference rates and on Treasury bonds will be traded daily at sessions in the continuous trading system from 9 a.m. to 5 p.m. (no fixing at the closing). With a view to the aspiration of building a liquid market in the new instruments as soon as possible, WSE has decided to introduce a temporary waiver of fees for trading in those instruments effective until the end of October 2014.
Futures contracts on Treasury bonds
Detailed information on futures contracts on WIBOR reference rates and on Treasury bonds:
http://www.gpw.pl/kontrakty_wibor_obligacje_skarbowe_EN
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1 Source: World Federation of Exchanges
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Warsaw Stock Exchange is the biggest securities exchange in Central and Eastern Europe. WSE organises trading on one of the most dynamically growing capital markets in Europe. WSE operates a regulated market of shares and derivative instruments and the alternative stock market NewConnect for growing companies. WSE is developing Catalyst, a market for issuers of corporate and municipal bonds, as well as commodity markets. Since 9 November 2010, WSE is a public company listed on Warsaw Stock Exchange. For more information visit http://www.gpw.pl.
