CME Group announced plans to introduce options on €STR futures, with the launch scheduled for the first quarter of 2024. These new offerings will be listed and governed by the regulations of CME, providing more avenues for market participants to navigate economic uncertainty and manage their risk in European interest rate markets.
The following details encapsulate the recent activities surrounding the €STR futures. CME Group experienced a surge in trading activity for €STR futures in Nov., achieving an average daily volume of 17,000 contracts. Notably, on Nov. 10, a record-breaking single-day volume of 39,836 contracts was traded, according to a press release by CME Group.
Here's how Mark Rogerson, CME Group EMEA Head of Interest Rate Products, detailed this development. "With consistently strong volumes, open interest in our €STR futures has continued growing exponentially during 2023, now up to 29,000 contracts, with over 80% of market participants choosing CME Group as their home for European Short Term Rate futures trading," said Mark Rogerson. "Adding options to our growing €STR futures contracts will provide clients with the first holistic €STR derivatives solution that allows them to navigate continued economic uncertainty and more accurately manage their risk in European interest rate markets."
Let's delve deeper into what exactly these Euro Short-Term Rates (€STR) entail. The Euro Short-Term Rate (€STR) serves as the primary benchmark for overnight money-market rates in the Euro area, reflecting the unsecured overnight borrowing costs of banks within the euro area. CME Three-Month €STR futures provide a glimpse into anticipated euro overnight interest rates, representing a key source of centralized liquidity for €STR, which has become the preferred benchmark in EUR swaps and cash markets. These futures offer features and benefits such as effective hedging of EUR overnight markets, capital-efficient futures for euro-based overnight balance sheet hedging, seamless trading of IBOR/OIS basis, and the ability to capitalize on rapidly deepening liquidity with various trading options within the leading STIR ecosystem. CME Direct provides a trading front end for accessing liquidity across various trading workflows, according to the CME Group €STR website.