krw irs & inr ois - cme group irs & inr ois q1 2017 krw irs & inr ois ... curve input...

© 2017 CME Group. All rights reserved.

KRW IRS & INR OIS

Q1 2017

KRW IRS & INR OISQ2 2017

http://www.cmegroup.com


CME will clear KRW IRS with the following details:

KRW Interest Rate Swaps

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*Refers to the 91 day certificates of deposit set by the Korean Financial Investment Association and published by Bloomberg

Product Type Interest Rate Swap

Maximum Maturity 21 Years

Floating Rate Index KRW-CD-KSDA-Bloomberg*

Settlement Currency USD

Price Alignment Rate Fed Funds Overnight Rate

Variation Margin USD

Coupons and Fees USD

Holiday Calendar Seoul

Settlement & Business Day

Convention

USD will be settled on a next day (T+1) basis

Default will be ACT/365.FIXED

FX Rate

The below FX rate will be used to convert KRW coupon payments to USD:

KRW KFTC18 (KRW02) – the KRW/USD rate published at 5:30pm Seoul time on

Reuters Page KFTC18


• Onshore trades are on a deliverable basis; foreign entities are not allowed to trade onshore but

can trade with Korean entities and offshore with each other on a non-deliverable basis

• Participants in the offshore market primarily tend to be banks and hedge funds

• Trading mainly occurs up to Korean market close (3pm Seoul/2pm Singapore time)

Non-Deliverable Currency

• Restrictions on full convertibility

• On/off spread

Certificates of Deposit (CD)

• Underlying Index: 91-day CD rate published by the KFIA

• Rates track the onshore market closely as onshore participants can trade with foreign entities

• KRW cash flows are converted to USD using NDF market conventions

Korean Market OverviewOne of the largest OTC swap markets in Asia (ex-Japan)

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KRW offshore discount curve

• To accommodate offshore USD funding cost, the KRW discount curve is USD-implied curve, which is

generated from USD Fed-Funds curve, USD/KRW NDF & NDS

KRW offshore forecast curve

• Bootstrap offshore NDIRS to generate the forecast curve

Curve input

KRW Curve Bootstrapping ProcedureKRW is treated as an offshore dual-curve currency

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Tenor Instruments Dependency curves

KRW discount curve

SP, 3M, 6M, 9M, 1YUSD/KRW Non Deliverable FX

Forwards

(NDF) USD discount curve (Fed Funds)

USD Libor 6M curve2-5Y, 7Y, 10Y, 12Y, 15Y, 20Y

USD/KRW Non Deliverable Xccy Swap

(NDS)

KRW forecast curve

3M 3M Certificates of Deposit (CD)

KRW discount curve

6M, 9M, 1-5Y, 7Y, 10Y, 12Y, 15Y, 20YKRW Non Deliverable Interest Rate

Swap (NDIRS)


Daily KRW Clearing Cycle Times

New York Local (Seoul)

1:00 a.m.- 1:15 a.m.

8:30 a.m.

5:00 p.m.

7:00 p.m.

8:00 p.m.

10:00 p.m.

Overnight maintenance window stops clearing cycle

Settlement Banks confirm USD Variation Margin and Initial Margin call

(portfolio) from previous day’s clearing cycle – cash moves on T+1

KRW-CD-KSDA-Bloomberg curve points valuation

Same day trade submission/acceptance deadline for all currencies. Generate

combined end-of-day Clearing reports for all currencies including Trade Register

Calculate Initial Margin for entire portfolio

Settlement instructions for all currencies are sent to settlement banks

4:00 a.m.

2:00 p.m. – 2:15 p.m.

9:30 p.m.

8:00 a.m.

9:00 a.m.

11:00 a.m.

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5:30 p.m. FX Rate to convert KRW coupon payments to USD:

• “ask” price reported on Reuters Page KFTC18

4:30 a.m.


CME will clear INR OIS with the following details:

INR Overnight Indexed Swaps

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*Reference rate equal to the daily overnight Mumbai Inter-Bank Outright Rate (“MIBOR”), as published by the Fixed Income Money Market and

Derivatives Association of India (FIMMDA) as of 11:45 a.m., India Standard Time on that Mumbai Banking Day.

Product Type OIS

Maximum Maturity 10 Years

Floating Rate Index INR-FBIL-MIBOR-OIS-COMPOUND*

Settlement Currency USD

Price Alignment Rate Fed Funds Overnight Rate

Variation Margin USD

Coupons and Fees USD

Holiday Calendar Mumbai

Settlement & Business Day

Convention

USD will be settled on a next day (T+1) basis

Default will be ACT/365.FIXED

FX Rate

The below FX rate will be used to convert INR coupon payments to USD:

INR.RBIB (INR01) – INR/USD rate reported on Reuters “RBIB” screen at about

12:30pm Mumbai time


• Onshore participants are not allowed to trade with offshore participants

• Offshore rates generally track onshore rates but could differ during period of market

stress

• Participants are mainly banks & hedge funds

MIBOR

• IRS and NDIRS trades use the overnight repo rate published by FBIL as the floating index

Indian Market OverviewActive fixed income market onshore. IRS market is growing.

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USD-implied INR offshore discount curve

• To accommodate offshore USD funding cost, the INR discount curve is USD-implied curve, which

is generated from USD Fed-Funds curve, USD/INR NDF & NDS

INR offshore forecast curve

• Bootstrap offshore NDOIS to generate the forecast curve.

Curve input

Indian Curve Bootstrapping ProcedureINR is treated as an offshore dual-curve currency

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Tenor Instruments Dependency curves

INR discount curve

SP, 1W, 1-3M, 6M, 9M, 1YUSD/INR Non Deliverable FX Forwards

(NDF)USD discount curve (Fed Funds)

USD Libor 6M curve2-5Y, 7Y, 10Y

USD/INR Non Deliverable Xccy Swap

(NDS)

INR forecast curve

1D Overnight MIBOR

INR discount curve

1-3M, 6M, 9M, 1-5Y, 7Y, 10YINR Non Deliverable Overnight Index

Swap (NDOIS)


Daily INR Clearing Cycle Times

New York Local (Mumbai)

1:00 a.m.- 1:15 a.m.

8:30 a.m.

12:30 p.m.

7:00 p.m.

8:00 p.m.

10:00 p.m.

Overnight maintenance window stops clearing cycle

Settlement Banks confirm USD Variation Margin and Initial Margin call

(portfolio) from previous day’s clearing cycle – cash moves on T+1

FX Rate to convert INR coupon payments to USD:

• “ask” price reported on Reuters Page RBIB

Same day trade submission/acceptance deadline for all currencies. Generate

combined end-of-day Clearing reports for all currencies including Trade Register

Calculate Initial Margin for entire portfolio

Settlement instructions for all currencies are sent to settlement banks

3:00 a.m.

10:30 a.m. – 10:45 a.m.

6:00 p.m.

4:30 a.m.

5:30 a.m.

7:30 a.m.

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3:30 p.m. INR-FBIL-MIBOR-OIS-COMPOUND curve points valuation6:00 a.m.


Reports Available & CME CORE

CME Group provides direct access to daily reports through a secure FTP site, which enables customers to fully

integrate key OTC data into their internal systems

Position Reporting via the Trade Register • End of day mark to market values for all IRS positions across all clearing members, including existing trades

and any new trades cleared that day

• Available at 4:45pm EST, so customers and their approved administrators/custodians can complete their daily

NAV reports

IRS Curve Data

• CME offers full transparency into IRS valuation, including a detailed white paper on curve construction,

enabling customers to replicate our IRS valuation curve and calculate the value of their IRS positions

• The secure FTP site provides daily IRS curve data across all currencies, including curve inputs that are used

to construct both the forecasting and discounting curves, and the curve outputs like daily forward rates and

discount factors

Client-Level Margin Files

• Gives clients access to the exact margin requirements given to the FCMs for their accounts

To set up a secure FTP site for your firm, please contact: CME Onboarding Group at [email protected] or (312) 338-7112

CME CORE: Clearing Online Risk Engine

• Ideal business user solution for Portfolio Margin Savings analysis

• Allows firms to calculate their margin for their portfolios

• Can upload exact portfolio via a portfolio upload or enter trades manually

• Reports breakdown position transfers in PDF and CSV file format

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mailto:[email protected]


Contacts

New York:

Deepa Josyula +1 212 299 2368 [email protected]

London:

Phil Hermon +44 20 3379 3983 [email protected]

Steph Hicks +44 20 3379 3867 [email protected]

Singapore:

Shawn Creighton +65 6593 5549 [email protected]

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Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of

a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders

should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one

trade because they cannot expect to profit on every trade. All references to options refer to options on futures.

Swaps trading is not suitable for all investors, involves the risk of loss and should only be undertaken by investors who are ECPs within the

meaning of section 1(a)12 of the Commodity Exchange Act. Swaps are a leveraged investment, and because only a percentage of a contract’s

value is required to trade, it is possible to lose more than the amount of money deposited for a swaps position. Therefore, traders should only use

funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because

they cannot expect to profit on every trade.

Any research views expressed are those of the individual author and do not necessarily represent the views of the CME Group or its affiliates.

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The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for

any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should

not be considered investment advice or the results of actual market experience.

All matters pertaining to rules and specifications herein are made subject to and are superseded by official Exchange rules. Current rules should be

consulted in all cases concerning contract specifications.

Disclaimer

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