Introduction to STIR Futures

In a world where short-term interest rates fluctuate, access to liquid reference rate-based derivatives is important to manage risk.

CME Group’s short-term interest rate products (STIRs) provide deep pools of actionable liquidity virtually 24 hours a day.

STIRs generally refer to interest rate futures contracts whose underlying period has a maturity of less than one year. These are sometimes referred to as money market instruments.

However, while the underlying instruments refer to rates of less than one year, CME Group may list contracts beyond one year. For example, 1-month Fed Fund futures are listed out three years and 3-month Eurodollar futures are listed out 10 years. This allows participants the flexibility to trade wherever their risk lies on the curve.

STIR Product Offering

CME Group STIRs complex consists of benchmark products: Eurodollar and Fed Fund futures, along with recently launched Alternative Reference Rate products: SOFR and SONIA futures. Each CME Group STIR futures contract references an underlying interest rate.

Eurodollars reference a forward looking 3-month ICE LIBOR rate at contract expiration.

Fed Fund futures cover a one-month period and settle based on the average daily effective Fed Funds rate, or EFFR as reported by the Federal Reserve Bank of New York.

SOFR futures contracts, both 1-month and 3-month, reference the daily SOFR rate published by the Federal Reserve bank of New York and are based on Treasury repurchase transactions.

SONIA futures contracts, both IMM and MPC, reference the overnight SONIA rate published by the Bank of England.

For details on the individual contracts, please refer to the product contract specifications.

Understanding Price Terms

All CME Group STIR futures contracts trade in price terms, rather than in yield terms. In order to facilitate trading in price terms, CME Group developed the IMM price quotation, which is the implied yield subtracted from 100.

For example, a Eurodollar futures quote of 97.51 represents an equivalent yield of 2.49%.

Benefits of Trading STIRs

The ability to trade all of these highly correlated products on one platform and to clear them through one clearinghouse allows significant capital efficiencies for both risk managers and traders.

Market participants can utilize margin savings of up to 80% versus Eurodollar, Treasury and Fed Fund futures. Additionally, futures contracts can be used to offset other positions in OTC interest rates and FX products.

CME Groups STIR futures contracts offer market participants liquidity, capital efficiency and numerous trading opportunities. All in one centralized marketplace.