CME Group Launches Term €STR Reference Rates to Enhance Market Transparency

CME Group Unveils Cash-Settled Term €STR Reference Rates

CME Group, recognized as the leading derivatives marketplace globally, has officially launched the Term €STR Reference Rates amid rising client demands for term rates tailored to the €STR marketplace. This new offering aims to enhance transparency and reliability in the increasingly popular €STR ecosystem.

The Term €STR Reference Rates, now available in beta, are derived from a robust dataset that includes vital information from CME Group's liquid €STR futures and over-the-counter (OTC) swap market transactions. Specifically, these rates are provided for various tenures including 1-month, 3-month, 6-month, and 12-month intervals. This wide range allows financial institutions to select the most appropriate term rates for their needs.

Max Ruscher, Head of Benchmark Services at CME Group, stated, "The introduction of the €STR term rates is a direct response to our clients' calls for a more comprehensive and transparent term rate in the €STR ecosystem. The substantial liquidity we have witnessed in our €STR futures market, paired with reliable OTC trade data, informs our term rates, enabling clients to construct lending and fixed income products effectively."

Since the launch of the €STR futures in October 2022, the market has seen significant growth, with open interest surpassing 70,000 contracts. Participation has broadened considerably, with over 250 end users actively involved and a total trading volume exceeding 5 million contracts. This surge underscored the increasing acceptance and integration of €STR into various financial market operations.

The new reference rates are currently displayed only for informational and evaluative purposes; they are not yet available for use as benchmarks, references, or indices in any financial instruments or contracts until a proper licensing agreement is established. This precautionary measure ensures that the rates meet the highest standards of accuracy and reliability prior to implementation in actual trading and lending scenarios.

In addition to the Term €STR Reference Rates, CME Group is the administrator of the CME Term SOFR, which serves as a global benchmark for U.S. dollar lending derived from transactions within derivatives markets. This benchmark has established itself as a standard, having been recommended by the Alternative Reference Rates Committee and used in over $7 trillion of loans across more than 90 countries.

CME Group stands out as not just a marketplace but a comprehensive ecosystem that empowers clients worldwide to trade futures, options, and a variety of asset classes. Their platforms, which include the CME Globex for futures and options trading, BrokerTec for fixed income, and EBS for foreign exchange transactions, facilitate the effective management of risk and the exploration of investment opportunities.

As financial markets continue to evolve, CME Group remains focused on adapting to client needs and market demands, ensuring that their offerings remain relevant in a rapidly changing economic landscape. With the introduction of the Term €STR Reference Rates, they are taking a proactive step to provide the necessary tools for financial institutions to successfully navigate the complexities of the derivatives market.

Investors and institutions seeking more detailed information about the CME Term €STR Reference Rates can explore further on the CME Group’s website. As they initiate this beta phase, feedback and participation from market participants will be crucial for the ongoing refinement and success of these new benchmarks in the financial industry.