The Sydney Futures Exchange will launch an interest rate futures contract referenced to the Australian Financial Markets Association's Fixed Interest Index in coming months. Ken Farrow, chief executive of the AFMA in Sydney, said, "We hope to get this up and running by the end of the year."
The Fixed Interest Index is calculated daily using yield data from market participants incorporating government, semi-government and corporate investment grade debt to provide a snapshot of the Australian fixed income universe. Farrow said fund managers will be able to use the contract to hedge their investment portfolios. The futures instrument, which has been in development over the last year, will likely be a quarterly contract, though Farrow said details such as size and actual contract name are still being finalized. "This has been a very successful instrument in other countries and we expect this to benefit our market," he added.