Nasdaq Launches U.S. Treasury Futures Product

Nasdaq Launches U.S. Treasury Futures Product
03.07.2018 08:10 am

Nasdaq Launches U.S. Treasury Futures Product

Trading Systems

Nasdaq (Nasdaq:NDAQ) today announced it will launch U.S. DV01 Treasury Futures, a new interest rate risk product trading on the Nasdaq Futures Exchange (NFX).  U.S. DV01 Treasury Futures, or "the dollar value of one basis point," will allow clients to hedge against the price sensitivity of a portfolio of cash market U.S. Treasuries across the yield curve from 2-year to 30-year maturities.  The new product will be available for trading on Thursday, July 19, 2018, pending regulatory approval.

"Combined with our experience in the U.S. Treasury cash markets on Nasdaq Fixed Income (NFI), the launch of U.S. DV01 Treasury Futures moves us closer to our goal of helping our clients gain greater certainty of their U.S. Treasury portfolio interest rate risk," said Ted Bragg, Head of NFI at Nasdaq. "The U.S. Treasury market needs additional instruments to help manage interest rate risk, and U.S. DV01 Futures provides increased optionality and alternatives in the fast growing interest rate futures market." 

"Our NFX platform launched three years ago as an all-commodities exchange to expand on our existing global commodities business and provide more choice for clients,"  added Tom Wittman, Executive Vice President and Head of Market Services at Nasdaq. "Based on the growth of NFX and client feedback, we feel the next step is to expand into financial futures and work closely with the futures marketplace to build off the strength of our technology."

As the deepest and most liquid government securities market in the world, the U.S. Treasury market is highly reliant on and influenced by an array of economic factors.  Futures market participants will benefit from U.S. DV01 Treasury Futures through the following:

  • U.S. DV01 Futures will be cleared by The Options Clearing Corporation (OCC), and allow clients to hedge against the price sensitivity of a portfolio of 2-year, 5-year and 10-year notes, or 30-year bonds.
  • U.S. DV01 Futures are cash settled On-The-Run U.S. Treasury futures contracts expressed as 100 minus the yield of the corresponding U.S. Treasury security. 
    • Example:  A 10-year note yield of 3.065 percent shall be expressed as a futures yield-derived price of 96.935.
  • The underlying interest is the dollar value ("DV01"), assigned by the Exchange at the time of listing for each contract month, of a one basis point change in yield of the current On-The-Run U.S. Treasury security, with a face value of one million dollars having fixed semi-annual coupon payments available for trading on the NFI Alternative Trading System Order Book (the "NFI Order Book"). 
    • Example:  A 10-year note DV01 designated by the Exchange of $850 will result in a minimum trading increment of one-tenth of one basis point (0.001) which equals $85.00.
  • Trading in U.S. DV01 Treasury Futures contracts will be Sunday through Friday, 7:00 PM - 6:00 PM EPT. 

NFI is the second largest dealer-to-dealer institutional trading venue for U.S. Treasury securities. The six On-The-Run U.S. Treasury securities are among the highest in volume and the most liquid financial instruments in the world.  The U.S. Treasuries cash marketplace is extremely efficient - there are over a dozen multi-billion dollar principal trading firms whose core strategy is to transfer liquidity between U.S. Treasury trading venues at ultra-high speeds.  In 2018, The Nasdaq Fixed Income trading platform will move to Nasdaq's state-of-the-art matching engine, business functionality and protocol technologies - the Nasdaq Financial Framework.   

Since 2013, Nasdaq has been one of the leading electronic trading platforms for cash U.S. Treasury securities, providing real-time, intraday, end-of-day, historical and indicative data formats for U.S. Treasury data. Treasury securities include Treasury bonds (T-bonds), Treasury notes (T-notes) and Treasury bills (T-bills) and U.S. Treasury Floating Rate Notes.

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