DTCC Connection

Jan 31, 2013 • DTCC Connection

‘Interest Rate Contract of the Year’

NYSE Liffe U.S. CEO Thomas Callahan was presented by Futures & Options World (FOW) Magazine with the “Interest Rate Contract of the Year” award at the 2012 FOW International Awards gala ceremony in London in December.

According to FOW Magazine, the innovative futures contracts were recognized for being “a more accurate reflection of funding costs than Libor and other benchmarks that are based on estimated costs,” and for providing the market with a “better hedge against real exposures.”

Interest Rate Contract of the Year

Since the product’s launch in July 2012, NYSE Liffe U.S. has traded more than 375,000 total contracts valued at nearly $2 trillion, as of December 17.

The futures are based on the DTCC GCF Repo Index, which is the only index that tracks the average daily interest rate paid for the most-traded GCF Repo contracts for U.S. Treasury, federal agency and mortgage-backed securities issued by Fannie Mae and Freddie Mac. These are instruments that clear at the Government Securities Division (GSD) of DTCC’s Fixed Income Clearing Corporation (FICC).

The index’s rates are par-weighted averages of daily activity in the overnight GCF Repo market and reflect actual daily funding costs experienced by banks and investors, per underlying asset class.

The index is different from most existing benchmarks in that it is not based on subjective rate estimates. Instead, it reflects actual, fully collateralized and centrally cleared repo transactions. This key difference ensures that the index cannot be manipulated, which provides the market with greater transparency and better risk mitigation.

DTCC began publishing the DTCC GCF Repo Index in November 2010. The index was developed in response to concerns of the Treasury Markets Practice Group, sponsored by the Federal Reserve Bank of New York, regarding the need for enhanced transparency in the Treasury, agency debt and mortgage backed securities markets.

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