CME Group to Launch First-Ever TBA Futures for Mortgage Backed Securities Market on October 3

BY PR Newswire | AGENCY | 06/22/22 09:00 AM EDT

CHICAGO, June 22, 2022 /PRNewswire/ -- CME Group,?the world's leading derivatives marketplace, today announced it will expand its suite of long-term interest rate products to offer the first-ever 30-Year Uniform Mortgage-Backed Securities (UMBS) TBA futures contracts on October 3, pending regulatory review.

"Our new 30-Year UMBS TBA futures contracts will provide the mortgage-backed securities market with access to a liquid risk management tool to hedge their risk in a more capital efficient way," said Agha Mirza, CME Group Global Head of Rates and OTC Products.?"This is a significant step in the expansion of our suite of interest rate products, which will enable clients to benefit from the ability to access UMBS TBA futures alongside our deeply liquid U.S. Treasury and short-term interest rate futures and options."

The vast majority of residential mortgages in the U.S. are securitized through the agency mortgage-backed securities (MBS) market, which is the second-largest debt market in the U.S. behind U.S. Treasuries. These securities can be pooled together and traded as forwards in the existing TBA market to provide greater liquidity for participants, like mortgage lenders. In June of 2019, Fannie Mae and Freddie Mac standardized their MBS offerings into what became known as UMBS. During the last 4 quarters (Q2 2021-Q1 2022), the UMBS TBA market had a daily volume of $195 billion, representing 80% of overall TBA volumes per FINRA Trace and NY Fed data.

The 30-Year UMBS TBA futures contracts will be fulfilled by delivery of TBAs cleared by the Fixed Income Clearing Corporation's Mortgage-Backed Securities Division, a subsidiary of The Depository Trust & Clearing Corporation (DTCC).?The contracts will offer mortgage lenders, issuers, servicers and other participants an exchange-traded and centrally cleared tool for price discovery and risk transfer. The futures will represent 30-year residential mortgages pooled into UMBS products backed by Fannie Mae and Freddie Mac. For each delivery month, futures will be listed for delivery of a small number of specified active mortgage coupon rates 2.0%, 2.5%, 3%, 3.5%, 4%, 4.5% and 5%. The three nearest calendar months will be listed at any given time, beginning with the November 2022 contract.

Available to trade on CME Globex and subject to the rules of CBOT, the 30-Year UMBS TBA futures will be cleared by CME Clearing and receive automatic margin offsets against existing interest rate futures upon launch. These contracts will become eligible for portfolio margining against other cleared interest rate swaps and futures after launch.

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As the world's leading derivatives marketplace, CME Group (CME) ( enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data ? empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group (CME) exchanges offer the widest range of global benchmark products across all major asset classes based on?interest rates,?equity indexes,?foreign exchange,?energy,?agricultural products?and?metals.? The company offers futures and options on futures trading through the CME Globex? platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform.? In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing.?

CME Group (CME), the Globe logo, CME, Chicago Mercantile Exchange, Globex, and, E-mini?are trademarks of Chicago Mercantile Exchange Inc.? CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc.? NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc.? COMEX is a trademark of Commodity Exchange, Inc. BrokerTec and EBS are trademarks of BrokerTec Europe LTD and EBS Group LTD, respectively.?Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc.? All other trademarks are the property of their respective owners.??



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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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