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Notice
Participants are advised that ASX intends to list a 5 Year Treasury Bond Futures contract on the ASX24 market in late Q4 2020, subject to regulatory approval and internal/external readiness. The first expiry month is expected to be the March 2021 contract.
The 5 Year Treasury Bond Futures contract is designed to complement the existing interest rate futures complex and support the evolving structure of the underlying market. The contract will provide an additional liquidity point and hedging tool at the 5 year point on the curve, allowing participants to manage their risk exposure in a more efficient and effective manner.
A significant amount of Treasury Bonds sit in between the lines that currently underpin the 3 and 10 Year Treasury Bond Futures. These bonds represent approximately $175 billion in physical exposure that could be more effectively hedged using a 5 Year contract. This number is expected to grow with the Australian Office of Financial Management’s (AOFM) increased issuance program. New maturities between 3-5 years and 10-12 years are likely to be established with syndicated taps into existing lines also considered.
Given the amount of physical exposure that sits in between the 3 and 10 Year contract and upcoming issuance from the AOFM, there is heightened need and demand for a 5 year point on the yield curve. ASX believes that the 5 Year Treasury Bond Future will support the underlying market by introducing an additional transparent price point with which to manage risk exposures.
Target listing date
The target listing date is late Q4 2020, subject to regulatory approval and internal/external readiness. ASX will be in contact with Trading and Clearing Participants and software vendors over the coming weeks to discuss the contract specifications and change management program.
The external ASX24 test environment is expected to be available from September 2020. A market notice will be published in August 2020 to confirm the availability of the Customer Development Environment (CDE) and target go live date.
Draft Contract specifications (subject to regulatory clearance)
The 5 Year Treasury Bond Future will apply the same bond basket structure and Expiry Settlement Price methodology as the existing 3, 10 and 20 Year Treasury Bond Futures. Further details on the underlying bond baskets will be provided via a Market Notice prior to the contract listing. The key contract specifications are outlined below.
Commodity Code |
VT (TBC) |
Target go live date |
Late Q4 2020 |
List on CDE/CDE+ |
September 2020 |
Contract Unit |
Australian Government Treasury Bonds with a face value of A$100,000, a coupon rate of 2% per annum, and a term to maturity of five years. |
Contract Months |
March/June/September/December up to two quarter months ahead. |
Minimum Price Movement |
Prices are quoted in yield per cent per annum in multiplies of 0.005 per cent except during the period of the roll. During the roll (5:10pm on the 8th of the expiry month, or next business day if the 8th is not a business day, to 4:30pm on the day of expiry) prices are quoted in multiples of 0.0025 per cent. For quotation purposes the yield is deducted from an index of 100. The minimum fluctuation of 0.005 per cent equals approximately $25.66 per contract, varying with the level of interest rates. |
Contract Expiry |
The 15th day of the contract month (or the next succeeding business day where the 15th day is not a business day). Trading ceases at 12:00pm. |
Settlement Method |
For each bond in the bond basket, ASX will take the best bid and best offer available in the market by reference to live market prices taken from bond trading venues as determined by the Exchange. The average of the best bid and best offer for each bond will be calculated at 9:45am, 10:30am and 11:15am. An indicative session price, calculated as an arithmetic mean, will be published after each session. The Expiry Settlement Price will be the average of the best bids and offers from all sessions rounded to the nearest tradable increment and subtracted from 100. Expiry settlement price will be published by 12:00pm on the Last Trading Day. |
Trading Hours |
5:10pm-7:00am and 8:30am- 4:30pm (for period from 2nd Sunday in March to 1st Sunday in November) 5:10pm- 7:30am and 8:30am- 4:30pm (for period from 1st Sunday in November to 2nd Sunday in March) |
Last Trading Day |
The fifteenth day of the contract month (or the next succeeding business day where the fifteenth day is not a business day). Trading ceases as 12:00 noon. |
Settlement Day |
The business day following the last permitted day of trading. |
Block trade threshold[1] |
1000 (night session only) TBC |
Expiry Position Limit |
TBC |
Spreads |
3’s/5’s and 5’s/10’s spread. |
Fees |
Headline ASX24 fee $0.90 per side, Exchange For Physical fee $0.70 per side. |
[1] This applies to the spot month only. Change of spot month occurs 5 trading days prior to expiry (including expiry day).
What do I need to do by when?
Participants and vendors should review the draft contract specifications and consider any changes required to support a Q4 2020 listing. ASX will be in contact with Trading and Clearing Participants and software vendors over the coming weeks to discuss the contract specifications and change management program.
Need more information?
Issued by
Monique Bell, Manager Interest Rate Products.