Market model and central counterparty clearing
R2-, R5-, and R10 options are traded in the current market structure for Swedish interest rate derivatives. Trades in options will be reached through bilateral negotiations between buyers and sellers, and reported to NASDAQ OMX for central counterparty clearing.
Following the transaction trade details are reported to NASDAQ OMX Stockholm for clearing. Novation, meaning when the exchange substitutes existing contracts with two new ones, in relation to the buyer and seller, takes place when trade details are matched and the trade is registered on each parties clearing account. Subsequently, there is no counterparty relationship between the buyer and seller; instead both parties have the exchange as counterparty.
Contract base and settlement principles
The contract base is one R2-, R5, or R10 forward contract with the same expiration settlement day as the relevant option contract. Only the contract base is deliverable.
In practice, no payment takes place between the buyer and seller when the contract is cleared; instead, each party receives/pays from/to the exchange (the clearing house).
Settlement and offsetting
All purchased and sold contracts are entirely off-settable against each other. This means that only one net position is held against the clearing house and, if the contracts sold equals those purchased, the portfolio may be said to be closed in practice. No periodic settlement takes place.
Name standard
Contracts are listed by the forward contract short name followed by the expiration year, expiration month, the exercise price and type of option (put or call) Example a call option with a R2 December contract as contract base and with 1.80% strike and December expiration will be named R2XX1.800C
Clearing listed
Contracts are only clearing listed, i.e. they are not admitted for trading on the Exchange.
Facts
| Contract type | Option contract with delivery |
| Style of option | European |
| Contract base | One R2, R5 or R10 forward contract |
| Contract base size | One forward contract (underlying value nominal SEK 1,000,000) |
| Trading | OTC trading with NASDAQ OMX central counterpart clearing |
| Price/Premium | Expressed in SEK for 1/100 option contract |
| Tick size | 0,01 |
| Premium settlement day | The third bank day after registration |
| Exercise price | Expressed as effective interest rate |
| Exercise price interval | Upon request |
| Expiration months | March, June, September and December |
| Expiration settlement day | The third Wednesday of the expiration month |
| Expiration day/finalday of trading | Four bank days prior to the expiration settlement day. Last time to registration is 11:00 CET on the expiration day. |
| Expiration fix | Fix shall be determined on the Expiration day for the relevant contract and equal to the fix for the corresponding R2, R5, R10 contract in accordance with 4,12 R2-, R5- and R10-forwards (forwards in Swedish government bonds) |
| Periodic settlement | No periodic settlement |
| Offsetting | Offsetting can take place during the entire term |
| Series term | Three and six months |
R2-, R5- and R10-Options (Options in Forwards in Swedish Government Bonds)»
