ICE Futures Europe packs and bundles are recognized trading strategies that enable you to easily execute a combination of contract months in Short-Term Interest Rate (STIR) Euribor, Sterling, SONIA, SOFR, Eurodollar and Euroswiss futures contracts. This allows users to gain exposure to longer term interest rates, without the legging risk and cost of trading the individual months.
*Please note, White Packs and Bundles in SONIA and SOFR begin with the first non-accruing contract.
Packs and Bundles prices in the above contracts will be quoted using the annualised price convention, also known as Average Difference Change (ADC) Pricing. The tick increment to be used in the pack and bundle markets for Three Month Sterling Futures will be:
|Packs & Bundles||Screen Price Increment||Price in Basis Points||Leg Price Assignment Increment|
|Three Month Sterling||0.25||0.0025||0.01|
The Exchange will use a price factor of 100 to convert the displayed screen price of a pack or bundle into basis point tick increments. Packs and Bundles leg prices will be assigned in whole basis points and allocated starting from the back months of the strategy and moving forwards. For example: a user submits a price of 2.75, which is then converted to 0.0275 ticks by dividing the price by the price factor (2.75/100). This tick price can then be assigned to each individual leg price.
Example of the ADC Price Convention
A pack consists of the following months:
A transaction occurs in the pack @ 2.75 (screen price).
Trading Engine will divide that price by 100 to give 0.0275. Multiply that price by the number of legs to get how many ticks to give in total: 0.0275 * 4 = 0.11. These ticks are given to the legs in 0.01 increments. The 11 ticks would be given evenly (2 per month) with the 3 leftover ticks given to Dec 22, Sep 22 and Jun 22 ie working forwards from the back month of the strategy. In this example the final leg prices would be:
SONIA, SOFR and Eurodollar Futures Packs and Bundles are to be priced as the arithmetic average of the constituent outright futures contract prices. The minimum price increment for the strategies will be 0.00125 index points. The strategies will imply pricing into and out of the corresponding explicit outright futures markets.
Example of Implied pricing
The below example using Three Month SONIA Futures (“SO3”) highlights how the methodology works.
|Outright Market Leg||Bid||Ask|
|Implied Pack Price||99.49875||99.50875|
When a pack or bundle is traded as a result of two non-implied orders, the leg prices allocated for the outright futures will be based off the exchange anchors at the time of the trade. Methodology is in place for the allocation of additional ticks to certain legs of the strategy when the strategy price is not divisible by the tick size in the outright contracts. For further information please contact the Rates team on [email protected].