Futures: AMERIBOR Term-90 Futures Imminent

Cboe Futures Exchange Expected to List AMERIBOR® Term-90 Futures Beginning From January 24, 2022

Cboe Global Markets, Inc. (Cboe: CBOE), a provider of global market infrastructure and tradable products, has announced plans to launch futures on the AMERIBOR® (American Interbank Offered Rate) Term-90 interest rate benchmark. The new futures are expected to begin trading on Cboe Futures Exchange, LLC (CFE) on business date Monday, January 24, 2022.

AMERIBOR, disseminated by the American Financial Exchange, LLC (AFX), is a transparent, transactions-based interest rate benchmark that represents market-based borrowing costs. The AMERIBOR Term-90 benchmark is specifically designed to capture wholesale funding costs for American financial institutions over a ninety-day period at a specific moment in time. 

The planned AMERIBOR Term-90 futures (AMT3 futures) further expands Cboe’s suite of AMERIBOR futures products and follows its recent launch of futures on the AMERIBOR Term- 30 benchmark, the thirty-day term rate. As the planned cessation of LIBOR approaches, these futures aim to provide an alternative for market participants to hedge their interest rate risks on loans, or execute interest-rate trading strategies.       

“As client demand for credit-sensitive instruments continues to grow, we are pleased to offer AMERIBOR Term-90 futures and provide additional tools to help market participants manage their transition from LIBOR,” said Michael Mollet, Vice President, Head of Futures at Cboe Global Markets. “We expect these futures to provide market participants with access to a more complete suite of AMERIBOR futures to manage their interest rate exposures going forward.” 

The AMERIBOR Term-90 benchmark has a credit sensitive element and represents a forward- looking interest rate, making it comparable to Three-Month LIBOR, but derived in a transparent and representative fashion and based upon actual financing transactions. 

“The AMERIBOR Term-30 and AMERIBOR Term-90 interest rate benchmarks are designed to be ‘plug-in and play’ replacements for one-month and three-month LIBOR, fostering an easy adoption for end-users,” said Dr. Richard Sandor, Chairman and CEO of the American Financial Exchange. “We expect these rates to fit seamlessly within existing bank models and offer market participants a forward term structure.” 

Banks and other financial institutions may use AMT3 futures to hedge their variable short- term funding costs and interest rate risk. Proprietary trading firms may use AMT3 futures to hedge their exposure to other interest rate derivatives, or conduct trading strategies involving AMT3 futures on the one hand and other interest rate derivatives on the other hand, such as swaps based on the AMERIBOR Term-90 and derivatives based on SOFR and LIBOR. Market participants with exposure to unsecured borrowing costs or borrowing costs better represented by a forward-looking rate may also utilize AMT3 futures to hedge their exposures. 

Currently, AFX membership across the U.S. includes 184 banks and more than 1,100 correspondents, with combined assets of over $5.4 trillion. There are 45 non-bank members, including insurance companies, broker-dealers, private equity firms, hedge funds, futures commission merchants, and asset managers. 

AMT3 futures are Cboe’s fifth AMERIBOR-based contract and will be cash-settled and designed to reflect market expectations of the level of the AMERIBIOR Term-90 benchmark rate on the final settlement date for the applicable AMT3 futures. To learn more about these AMT3 futures and Cboe’s full suite of AMERIBOR futures products, visit Cboe’s website.