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CME to launch futures and options on the replacement for LIBOR

First Published 2nd August 2017

CME Group announced last week that it will develop futures and options on the Broad Treasuries Repo Financing Rate (BTRFR). This is the rate that was selected in June by the Alternative Reference Rate Committee (ARRC) as the eventual replacement for US dollar LIBOR. CME Group is a non-voting member of the ARRC.

Publication of the BTRFR is expected to begin in the first half of 2018, after which futures and options on the new rate will begin to trade. This is subject to regulatory approval, which seems highly likely.

ICE might also try to develop futures and options on the BTRFR. In July 2012, the exchange launched repo futures referencing the DTCC GCF Repo Index, a much narrower index than the BTRFR. Perhaps as a result, volumes and open interest have been relatively low. While ICE has more experience with futures on repo, CME has the advantage of listing Eurodollar futures, which reference LIBOR. Given that LIBOR is likely to be phased out gradually, having futures on both that rate and the BTRFR listed on the same exchange would make sense for margining and relative value trading.