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Deliverable Swap Futures (DSF) may provide a solution for those looking to obtain interest rate swap exposure, but who want the efficiencies and margin savings of standardised Futures contracts.
DSFs can be executed across multiple venues like electronically via CME Globex, via block trades, or open outcry in the trading pits, and at expiration of the future, all open positions deliver into CME Cleared Interest Rate Swaps. DSFs were created based on client demand from both buy and sell side firms, and help investors and asset managers navigate volatile conditions in the capital market.
DSFs offer the opportunity to trade actual interest rate swaps on a forward basis with the financial protections attendant to a standard futures contract. As such, DSFs blend the advantages of trading both futures and over-the-counter (OTC) derivative instruments in a consolidated package. These instruments provide new opportunities for asset managers to address the risks attendant to the IRS markets and other fixed income securities.
DSF contracts are intended to provide a liquid means of managing rate exposure, offering the opportunity to trade actual interest rate swaps on a forward basis with the financial protections attendant to a standard futures contract. Unlike previously listed cash-settled interest rate swap futures, DSF contracts provide for the delivery of “plain-vanilla” interest rate swaps (“IRS” or “swaps”) carried by the CME Clearing House.
Further reporting by Hedgeweek