Cboe latest to offer credit sensitive Libor alternative

Cboe Global Markets has become the latest exchange to offer a credit sensitive US alternative to Libor.

The Chicago-based exchange said on Monday it plans to launch on September 13 a futures contract based on the AMERIBOR (American Interbank Offered Rate) Term-30 interest rate benchmark.

The group said the new contract will trade on the Cboe Futures Exchange and its launch is currently subject to regulatory approval.

The AMERIBOR Term-30, compiled by the American Financial Exchange, is a forward-looking short-term lending rate designed to capture the wholesale funding costs for American financial institutions over a thirty-day period.

"AMERIBOR Term-30 is the result of extensive research, testing, analysis and consensus-building to provide the marketplace with an innovative alternative to One-Month Libor," said Dr Richard Sandor, chairman and CEO of the American Financial Exchange.

Cboe said the rate, which has a credit sensitive element, is comparable to the one-month Libor benchmark being phased out in the US by the middle of 2023.

Michael Mollet, vice president of Futures at Cboe Global Markets, said: "We expect market participants, especially banks who consider the AMERIBOR index representative of their true cost of funding, will find the new futures to be particularly well-suited to manage interest-rate risk on loans or execute interest-rate trading strategies." 

Cboe Futures Exchange also said on Monday it plans to launch the AMERIBOR Term-90 benchmark rate “later this year”, subject to regulatory review.

AFX’s membership comprises 181 US banks, 45 non-banks members including futures commission merchants and asset managers, and over 1,000 correspondents with assets of more than $5.3 trillion.

CME Group launched on Monday a futures contract based on the controversial Bloomberg Short-Term Bank Yield (BSBY) lending rate.