Głowacki Law Firm

Constant Maturity Swaps (CMS) / Constant Maturity Futures (CMF)
European Union Electricity Market Glossary

 

 

Constant Maturity Swaps (CMS) or Constant Maturity Futures (CMF) are interest rate swaps where the floating leg is pegged not to a standard benchmark interest rate but to a point on the swap curve (the other leg of swap being usually referenced to LIBOR or to a fixed rate).

 

They are typically used by market participants as a bet on the direction of rates or for hedging purposes.

 

ESMA understands that those products are designed to align as closely as possible to the interest rate swap market they are referenced to (Non-equity transparency, Question 12, Questions and Answers on MiFID II and MiFIR transparency topics, ESMA, ESMA70-872942901-35 ).

 

 

 

Non-equity transparency, Question 12, Questions and Answers on MiFID II and MiFIR transparency topics, ESMA70-872942901-35

 

Non-equity transparency

 

Question 18 [Last update: 12/07/2019]

 

How should constant maturity swaps be treated pursuant to RTS 2 for the purpose of determining whether they have a liquid market and, accordingly, the SSTI and LIS thresholds?

 

Answer 18


Constant Maturity Swaps (CMS) or Constant Maturity Futures (CMF) are interest rate swaps where the floating leg is pegged not to a standard benchmark interest rate but to a point on the swap curve (the other leg of swap being usually referenced to LIBOR or to a fixed rate). They are typically used by market participants as a bet on the direction of rates or for hedging purposes.
ESMA understands that those products are designed to align as closely as possible to the interest rate swap market they are referenced to. Therefore, ESMA considers that it is appropriate to treat those products similarly. For instance, a CMS where one of the legs pays (respectively receives) the ten-year swap rate and receives (respectively pays) the fixed rate should be classified and treated in the same way as a standard fixed-to-float interest rate swap with a ten-year maturity.

 

 

 

 

 

Last Updated on Tuesday, 30 July 2019 09:40
 

Search

TwitterFacebookLinkedin
Copyright © 2009 - 2019 Michal Glowacki. All rights reserved.
The materials contained on this website are for general information purposes only and are subject to the disclaimer