R5 - Managing Swedish long-term interest rate risk
OMX Nordic Exchange provides central counterparty clearing services for Swedish and Norwegian fixed income products.
The R5 contract constitutes a valuable tool in managing Swedish long-term interest rate risk. The contract base is a synthetic 5-year Swedish government bond. The contract has standardized expiration days, i.e. IMM days. This means that liquidity is concentrated to a limited number of contracts, which benefits trading.
The contract is suitable both for directional trading as well as for spread trading, e.g. government yield curve spreads like 5-year government risk against 10-year government risk or spreads against mortgage bond futures. A combination of cash bonds and futures can be used for creating short-term investments or financing. For the complete description of the contract specification please see OMX Nordic Exchange's Rules and Regulations for Derivatives.
Forward contract with a combination of cash settlement and delivery of underlying cash instrument at fixing rate.
Contract base:
Synthetic Swedish government bond with a maturity of five years at the Expiration settlement day. The bond has an annual coupon of six percent.
Deliverable instruments:
Swedish government bonds with a remaining maturity of five years or as close to five years as possible, at the expiration settlement day.
Contract size:
SEK 1,000,000 nominal value of underlying
Tick size:
0.001
Price quotation:
The forward contract is quoted in accordance with the underlying cash instrument market, effective interest rate with a 30E/360 day convention.
Trading:
Trading is performed OTC and reported to the OMX Nordic Exchange Stockholm for clearing. Trading hours are in accordance with market practice in the Swedish fixed income market
Expiration months:
March, June, September and December
Expiration settlement day:
Third Wednesday of the expiration month
First trading day:
One week before last trading day of the next contract scheduled for expiration.
Expiration day/Last trading day:
Four bank day prior the expiration settlement day
Expiration fixing:
Established at expiration day 11.00 CET
Periodic settlement:
Cash settlement of the difference between the trade price and monthly fix takes place on the last bank day of each calendar month.
Registration:
08.30 – 17.45 CET on normal bank days
Last time for registration:
12.00 CET at expiration day
Most of the trading in Swedish Fixed Income cash products is done OTC between professional investors. The trades are then reported to OMX Nordic Exchange for dissemination to the Swedish FSA, market data vendors and other stakeholders. Electronic trading is conducted between market makers of Swedish treasury bonds. They trade the 2, 5 and 10 year benchmark bonds and are obliged to quote a market for these bonds.
OMX Nordic Exchange is collecting indicative pricing from market makers in treasury and mortgage instruments through our trading system, these quotes are then distributed to market data vendors that provide the data to professional investors.
