Federal Fund futures contracts indicate the average daily federal funds effective rate in a particular month. Investors consider Federal Funds to be a satisfactory means for tracking market expectations on federal monetary actions. Further, Fed Funds are useful tools for traders that want to manage risk and speculate on or hedge against short-term interest rate changes due to changes in monetary policy.
| 30-Day Federal Funds Contract Specifications | |
| Underlying Unit | Interest on Fed Funds having a face value of $5,000,000 for one month calculated on a 30-day basis at a rate equal to the average overnight Fed Funds rate for the contract month. |
| Price Quote | 100 minus the average daily Fed Funds overnight rate for the delivery month (e.g., a 7.25 percent rate equals 92.75). |
| Tick Size (minimum fluctuation) |
Nearest expiring contract month: One-quarter of one basis point (0.0025), or $10.4175 per contract (1/4 of 1/100 of one percent of $5 million on a 30-day basis, rounded up to the nearest cent per contract). All other contract months: One-half of one basis point (0.005), or $20.835 per contract. |
| Contract Months | First 36 calendar months. |
| Last Trading Day | Last business day of the delivery month. Trading in expiring contracts closes at 4:00pm on the last trading day. |
| Last Delivery Day | Last business day of the delivery month. Trading in expiring contracts closes at 4:00pm on the last trading day. |
| Final Settlement | Expiring contracts are cash settled against the average daily Fed Funds overnight rate for the delivery month, rounded to the nearest one-tenth of one basis point. Final settlement occurs on the first business day following the last trading day. The daily Fed Funds overnight rate is calculated and reported by the Federal Reserve Bank of New York. |
| Settlement Procedure | Daily Fed Funds Settlement Procedures |
| Position Limits | Current Position Limits |
| Block Minimum | Block Trade Minimum |
| All or None Minimum | All or None Minimums |
| Trading Hours | Open Outcry: MON – FRI: 7:20am – 2:00pm CT CME Globex: SUN – FRI: 5:00pm – 4:00pm CT |
| Ticker Symbol | Open Outcry: FF CME Globex: ZQ |
| Exchange Rules | These contracts are listed with, and subject to, the rules and regulations of CBOT. |
| Source: CME | |
30-Day Federal Funds Facts
The rates are determined by banks who charge one another for loans held at the Fed. These rates can change every day can be indicative of rate trends. Trading Federal Fund futures can also allow participants to trade curves, strips, or spreads against LIBOR or Eurodollar futures.
The price of Fed Fund futures contracts are determined by daily market opinion of the fed fund rates which are calculated and made public by the Federal Reserve Bank of New York. Since these rates are determined by daily rates that are effective for a whole month, it is closely connected to short term interest rates. These futures can also be helpful in addressing the risk attached to short cash instrument credit costs.
Source: CME
Last updated May 2013
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