nyse - fixed income derivatives

Overall, NYSE Liffe enjoyed a strong fi rst half of 2010 with our short-term euro denominated products performing particularly well. On 6 May, 2,998,824 lots of Euribor futures contracts were traded, a record trading day. In the current low, but volatile interest rate environment, NYSE Liffe also continues to see strong growth in its options products, with average daily volumes across STIR options of 1 million contracts – open interest in these highly liquid options contracts approached 22 million earlier in the year.

During a time of increased focus on the UK Gilt yield curve and the new opportunities presented by the increased levels of debt issuance, our newly launched Short and Medium Gilt futures are steadily growing in ADV and OI. Currently supported by eight market makers, these products look set to continue to gain momentum and become established during the remainder

of 2010 and into 2011, as an increasing range of market participants partake in curve trading and “TED” spreading the sterling yield curve. We have also seen recent increased activity in the Euroswiss futures contract, which NYSE Liffe supports with a liquidity provider scheme, introduced at the end of last year.

Throughout 2010, we continue to focus on developing our core products - for example, the successful introduction of additional serial expiry months in the Euribor options, which allow you to take a view on the steepness of the yield curve. We are also nurturing some of our younger product offerings such as the Eonia Swap Index future and the Eonia/Euribor inter-contract spread strategy (ICS). The Eonia/Euribor ICS allows you to hedge against anticipated divergence in the EONIA and EURIBOR, and benefi t from the liquidity of Euribor futures which now imply ‘in’ to the ICS strategy.

Fixed IncomeDerivatives

03August 2010

NYSE LIFFE’S FIXED INCOME DERIVATIVES NEWSLETTER

Editorial

CONTENTS

1 EDITORIAL

2 PRODUCT NEWS

STERLING OPPORTUNITIES – SHORT AND MEDIUM GILT FUTURES

NYSE LIFFE EDUCATION PROGRAMME

PACKS AND BUNDLES

SWAPNOTE

6 MARKET DEVELOPMENT: NEW PRODUCTS AND STRATEGIES

STIR OPTIONS

NEW STIR FUTURES ALGORITHM

8 OTHER NEWS

MARKET MAKING AND LIQUIDITY PROVIDER SCHEMES UPDATE

CONNECT TO NYSE LIFFE

Product Performance Update

Traded Volume (YTD July 2010)

Average Daily Volume (ADV) (YTD July 2010)

% Change ADV (YTD July 2010 on 2009)

Short term interest rate futures

232,007,268 1,567,617 38%

Short term interest rate options

133,522,381 902,178 17%

Medium and long term interest rate futures and options

17,026,392 115,043 18%

Euribor Options ADV and Open Interest (OI)

0

100,000

200,000

300,000

400,000

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0

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16,000,000

18,000,000

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08

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AD

V

Open Interest

ADVOpen Interest

2 Fixed Income Derivatives newsletter - issue 03, August 2010

Short and Medium Gilts ADV and Open Interest (OI)

Long Gilts ADV and Open Interest (OI)

Short Gilt Medium Gilt Long Gilt

Bloomberg WBA<CMDTY>CT<GO> WXA<CMDTY>CT<GO> G A<CMDTY>CT<GO>

Reuters 0#G: 0#H: 0#FLG:

Please visit nyx.com/bondderivatives for further information.

500

1,000

1,500

2,000

2,500

5,000

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15,000

20,000

25,000N

ov 0

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Open Interest

Short Gilt ADV

Short Gilt OIMedium Gilt ADV

Medium Gilt OI

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Open Interest

ADVOI

Product NewsSterling Opportunities – short and medium gilt futures

In November last year, NYSE Liffe launched short and medium gilt futures, with a 6% coupon and referenced to underlying delivery baskets of 1.5-3.25 and 4-6 years cash gilts respectively, offering extended coverage along the UK government bond yield curve.

Supported by liquidity providers and market makers, these new contracts join our established Long Gilt futures to offer enhanced opportunities for portfolio management and trading along the sterling yield curve. These contracts open up more efficient hedging opportunities, as well as additional yield curve trading and “TED” spreading opportunities for proprietary groups.

Screen prices have tightened to between 2 ticks and 4 ticks in 50+ lots in the two contracts, and we hope to see further improvement as trading activity increases.

Following a recent re-launch, our Long Gilt options contracts are being used by customers to effectively hedge their exposure to longer term interest rate risk and UK government bonds.

3Fixed Income Derivatives newsletter - issue 03, August 2010

NYSE Liffe education programmeWe have a new list of course dates for 2010, which includes new one and two day Technical Analysis courses:

Technical Trading Techniques 8 September 2010

Options – Part 1 16 September 2010

Options – Part 2 4-5 October 2010

STIR Futures 2-3 November 2010

Please visit nyx.com/liffe-education for more information.


These strategies package multiple futures contract delivery months into ‘packs’ or ‘bundles’, which are traded in one transaction and at one price. They continue to grow in popularity as market participants hedge their exposure to anticipated changes in the shape of the European and UK yield curves.

Product NewsPacks and Bundles

Euribor Packs and Bundles (Leg) Monthly Volume

Sterling Packs and Bundles (Leg) Monthly Volume

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Mar

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Leg

Volu

me

White PacksRed PacksGreen PacksOther PacksTotal Bundles

10,000

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Mar

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Leg

Volu

me

White PacksRed PacksGreen PacksOther PacksTotal Bundles

An increased demand for back month trading in the markets has driven up volumes in our packs and bundles strategy markets, with the majority of activity currently in the red packs. NYSE Liffe’s packs and bundles benefit from reduced trading fees and as such are an attractive proposition for both bank and proprietary traders alike.

Please also refer to nyx.com/packsandbundles

for more information on these strategies.


Product NewsSwapnote

Swapnote futures contracts allow market participants to more efficiently hedge their cash swap exposure using an on-exchange ‘bond’ future. Swapnote futures are gaining momentum with ADV in the two year and five year Swapnote having risen by 23% and 26% YOY respectively (July 2010). Prices have also tightened, on-screen size has improved and OI is growing. This recent growth reflects the divergence of government bond spreads in the Eurozone; in addition these contracts may be set for more growth if the anticipated regulatory reforms are made in respect of OTC swaps trading.

We have reappointed market makers in this product – please see the DMM update section for more information.


Throughout the period of continuing low interest rates, NYSE Liffe’s successful STIR options contracts continue to prove to be highly effective financial tools with which to efficiently trade volatility in a zero rates environment. Across all STIR options contracts, ADVs stand at around one million.

Additional serial expiry months were introduced in our three month and Euribor mid-curve options on 19 January and 20 April respectively to enhance trading and hedging opportunities and also to increase opportunities for longer-term exposure. These new serial options have traded over 3.5 million contracts since launch.

New Products and StrategiesSTIR Options


Euribor Options (inc Mid-Curves) Volume and Open Interest (OI)

Sterling Options (inc Mid-Curves) Volume and Open Interest (OI)

5,000,000

10,000,000

15,000,000

20,000,000

5,000,000

10,000,000

15,000,000

20,000,000

Jan

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Open Interest

VolumeOI

2,000,000

4,000,000

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8,000,000

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4,000,000

6,000,000

8,000,000

10,000,000

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Open Interest

VolumeOI

New STIR futures algorithm

On 11 August, NYSE Liffe upgraded the trading algorithm used in STIR futures contracts. The new algorithm further enhances the existing blended time pro-rata trading algorithm, allocating orders by taking into consideration both the size of orders entered and where the orders on a lot-by-lot basis sit in the sequence of lots entered.

Please refer to London Notices No. 3292 & No. 3317 for more information.


NYSE Euronext refers to NYSE Euronext and its affiliates and references to NYSE Euronext in this publication include each and any such company as the context dictates. NYSE Liffe is the brand name of the derivatives business of NYSE Euronext, comprising the derivatives markets in Amsterdam, Brussels, Lisbon, London and Paris; and the futures markets in the U.S. NYSE Liffe U.S. is the brand name for NYSE Euronext’s U.S. Futures Market, operating through NYSE Liffe, LLC, a Commodity Futures Trading Commission designated contract market. All proprietary rights and interest in this publication shall be vested in NYSE Euronext and all other rights including, but without limitation, patent, registered design, copyright, trademark, service mark, connected with this publication shall also be vested in NYSE Euronext. No part of this publication may be redistributed or reproduced in any form or by any means or used to make any derivative work (such as translation, transformation, or adaptation) without written permission from NYSE Euronext. The information contained in this Newsletter was correct at the time of writing but may be subject to change. NYSE Euronext shall not be liable (except to the extent required by law) for the use of the information contained herein however arising in any circumstances connected with actual trading or otherwise. Neither NYSE Euronext, nor its servants nor agents, is responsible for any errors or omissions contained in this publication. This publication is for information only and does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any other transaction. All information, descriptions, examples and calculations contained in this publication are for guidance purposes only, and should not be treated as definitive. Those wishing either to trade in any products available at NYSE Liffe or to offer and sell them to others should consider both their legal and regulatory position in the relevant jurisdiction and the risks associated with such products before doing so. Potential users of NYSE Liffe contracts should familiarise themselves with the full contract specification of the product concerned and any associated information. Euribor® and Eonia® are registered trademarks of Euribor-FBE. Swapnote® is a registered trademark of ICAP plc and has been licensed for use by LIFFE Administration and Management. The Swapnote® contract design and algorithm are protected by patent (US 6,304,858 BI), owned by Adams, Viner and Mosler Ltd (“AVM”) and is exclusively licensed to LIFFE Administration and Management worldwide. NYSE Euronext and NYSE Liffe are service marks of NYSE Euronext. LIFFE CONNECT® is a trademark of LIFFE Administration and Management and is registered in Australia, Hong Kong, Singapore, the United States, Japan, the United Kingdom and as a European Community Trade Mark. LIFFE Administration and Management is a Recognised Investment Exchange under English law and a recognised market operator in Singapore.

Cautionary Note Regarding Forward-Looking StatementsThis Newsletter may contain forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, statements concerning NYSE Euronext’s plans, objectives, expectations and intentions and other statements that are not historical or current facts. Forward-looking statements are based on NYSE Euronext’s current expectations and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Factors that could cause NYSE Euronext’s results to differ materially from current expectations include, but are not limited to: NYSE Euronext’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk and U.S. and global competition, and other factors detailed in NYSE Euronext’s reference document for 2009 (“document de référence”) filed with the French Autorité des Marchés Financiers (Filed on April 22, 2010 under No. D.10-0304), 2009 Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission or the French Autorité des Marchés Financiers. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by NYSE Euronext that the projections will prove to be correct. This Newsletter speaks only as of this date. NYSE Euronext disclaims any duty to update the information herein.

L6219/1009

CONNECT to NYSE LiffeThe delivery of the Universal Trading Platform is now underway with Exchange Data Publisher (XDP) now live in production.

Common Customer Gateway (CCG) for Equities is also now live in production and CCG for financials is planned for go live on Monday 23rd August.

The LIFFE CONNECT API will continue to be available in parallel to CCG and XDP until the end of November 2010. At this point the LIFFE CONNECT API will be decommissioned.

However, co-location customers will need to move to XDP/CCG before 25 October when the trading platform will move to a new location (Basildon).

For further details, contact [email protected]

NYSE Liffe offers a range of designated market maker (DMM) and liquidity provider (LP) schemes to support a number of products in order to encourage market liquidity. Our market making and liquidity provision schemes are open to a range of market participants. Please contact us for further information.

DMM and LP schemes recently renewed• Short & Medium Gilts DMM scheme – effective until 30 November 2010

We have a number of market makers making two-way prices in these new contracts.

• Short & Medium Gilts LP scheme – effective until 30 November 2010We offer this LP scheme to encourage increased activity in the two new contracts.

• Euro Swapnote futures DMM – effective until 31 December 2010Since this scheme’s inception, we have seen an improvement in volume across the two, five and ten year Euro Swapnote futures contracts and a narrowing of the spreads.

Schemes coming up for renewal• Eonia/Euribor Inter-contract Spread (ICS) Strategy DMM scheme – to be extended until

28 February 2011 A DMM scheme in the inter-contract spread strategy between the three month Eonia and three month Euribor futures contracts.

• Eonia/Euribor ICS Strategy LP scheme – to be extended until 28 February 2011 This scheme offers 100% fee rebates in inter-contract spreads between these contracts.

• Packs and Bundles DMM scheme – to be extended until 28 February 2011 A DMM scheme in pack and bundles strategies in Euribor and Short Sterling futures contracts. These strategies make available reductions in trading fees for these contracts.

Please visit: nyx.com/stirs-marketmakers and nyx.com/individuallpschemes for more information.

Market making and liquidity provider schemes update

Other News

Fixed Income Derivatives +44 (0)20 7379 2222 [email protected]

Contacts

Website

www.nyx.com/stirs

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