CME Group, the world’s leading derivatives marketplace, announced plans to launch Adjusted Interest Rate S&P 500 (AIR) Total Return (SOFR) futures on August 26, pending regulatory review.

AIR Total Return futures on U.S. indices are designed to provide total return exposure with an overnight floating rate built in. The model for the new AIR S&P 500 Total Return futures remains the same; however, the new product will use the Secured Overnight Financing Rate (SOFR) as the embedded rate instead of the current Effective Federal Funds Rate (EFFR).

“As SOFR has become the preferred industry benchmark rate for short-term U.S. overnight financing, the addition of a SOFR-based AIR TRF contract will complement our current offerings and provide additional flexibility for managing swap exposure,” said Paul Woolman, Global Head of Equity Index Products at CME Group. “Year-to-date, we have seen record average daily volume of 9,800 contracts in our existing suite of AIR Total Return futures, up more than 113% year-over-year, underscoring the demand for effective and cost-efficient alternatives to OTC equivalents.”

AIR Total Return futures, based on the EFFR, are available across a range of major global indices – S&P 500, Nasdaq-100, Russell 1000, Russell 2000, Dow Jones Industrial Average, and the FTSE 100.

Launched in May 2018, CME Group SOFR futures have become the leading tool for hedging short-term interest rates, with a year-to-date average daily volume of 3.3 million contracts. Building on the growth and liquidity of the existing AIR TRF suite, these new SOFR-based contracts will combine the risk management strengths of CME Group’s Equity Index and Interest Rate franchises.

Source: CME