Press

On January 27, 2003, Eurex, the international derivatives market, will be the first exchange to introduce futures on the reference interest rate for overnight money, EONIA (European Overnight Index Average). Eurex made the announcement on January 13, 2003. The new EONIA future is based on the monthly average of the reference rate computed daily for overnight transactions in the interbank market, which is calculated by the European Central Bank on the basis of actual transactions. The EONIA future rounds out the Eurex product portfolio of one-month and three-month Euribor futures at the short end of the yield curve.

Eurex CEO Rudolf Ferscha noted that "the EONIA future is a very useful product, as one can see from the above-average growth in the swap market, especially in the short-term segment." The new product is designed to appeal above all to banks and institutional investors who want to hedge their short-term interest-rate risks in a cost-effective way. Aside from the changing expectations in European monetary policy that have an influence on the overnight rate, there are above all two times per month when fluctuations in the overnight market are especially high and generate a corresponding need for hedging: the last few days immediately preceding the minimum reserve deadline (the banks have to meet their specified minimum reserve requirement by the 23rd calendar day of the month, at the latest) and the last trading day of the month. Intensive discussions with major international banks confirm the market interest in the new Eurex product, the exchange said.

The new futures contract has terms of one to 12 months with monthly maturity dates, the minimum price movement is 0.005 percentage points. The new products will be traded at Eurex from 8:00 a.m. to 7:00 p.m. CET. Designated Market Makers who quote binding bid and ask prices will provide for underlying liquidity in the EONIA future. The EONIA has established its benchmark position since being introduced on January 4, 1999 and forms the basis for the bulk of activity in the European money market business of the banks. Moreover, the EONIA also functions as the underlying instrument for numerous OTC derivatives. At the short end of the yield curve, the swap market is based almost exclusively on the EONIA as a reference rate.