INTEREST RATESEuro Short-Term Rate (€STR)
Three-Month Single Contract Basis
Spread Futures
ASSIGNMENT AT FINAL SETTLEMENT

Designed to provide efficient liquidity between forward-looking
benchmarks, such as 3-Month Euribor, and realized-in-arrears
benchmarks, such as €STR or Repo Funds Rates, CME Group islaunching Three-Month Single Contract Basis Spread futures.
These contracts aim to provide hedging for risks that havetraditionally been managed using OTC FRA/OIS transactions
by offering exposure to both the series of OIS rates and3-Month Euribor in a single product.
Each contract is sized to be the same as their associatedoutright OIS STIR contracts where 1 basis point pricemovement is valued at €25 per contract.
The tradable price of these futures is designed to represent thedifference between the expected or projected value of theprevailing forward-looking rate, such as Euribor, and the
projected value of the realized-in-arrears rate, such as €STR or
Repo Funds Rates.
The price relationship is maintained by reference to the final
settlement process.

Final settlement of spread futures
Final settlement of an €STR Three-Month Single Contract Basis
Spread Future occurs at the beginning of its interest period.
Settlement is by assignment into the adjacent outrightcontract covering the same interest period. For example, theSeptember-2022 €STR Three-Month Single Contract Basis
Spread futures contract (contract code EUSU2) will assign into
the associated September 2022 €STR future (contract codeESRU2). This in turn will settle approximately three months later
when all the required overnight benchmark rates in thereference period are known.

This process is intended to be analogous the settlement ofFRA/OIS transactions in the OTC world.
Final settlement of Three-Month Single Contract Basis Spread
futures will occur two good business day prior the IMM
Wednesday, typically on the Monday preceding an IMM
Wednesday. Upon the publication of the 3-Month Euribor rate
the exchange will calculate the assignment price.
Assignment price will be used to assign long (short) holders ofThree-Month Single Contract Spread futures contracts intolong (short) positions of same month in their associatedoutright contracts. Assignment will be on a 1:1 basis.

ASSIGNMENT PRICE IS DETERMINED BY THEFOLLOWING FORMULA:

100.00–3-month
EuriborBenchmark
RateThree-MonthSingle Contract+Spread Future last
Daily Settlement

WHERE:

Last daily Settlement is in the normal end-of-day
settlement price for the Three-Month Single Contract
Spread futures as at the end of the day on the Friday, orprior good business day, preceding the Monday prior to
IMM Wednesday.

Examples
The September 2022 €STR Three month Spread futures will assign into the September 2022 €STR outright future.
Recalling that the contract critical dates for outright €STR or RFR futures are defined for a given delivery months as follows:	The Reference Quarter shall be the interval that ends on (and does not include) the third Wednesday of the contract delivery
month, and that begins on (and includes) the third Wednesday of the third calendar month preceding the contract delivery month.
And that an €STR or RFR futures delivery month is three months after the contracts named month, we can observe that for
the September named month the dates in 2022 are defined as:
From and including September 21, 2022, to and not including December 21, 2022.
USING SEPTEMBER
September 16, 2022
2022 AS OUR EXAMPLE,
September 19, 2022
WE WILL HAVE THE
FOLLOWING CONTRACT September 21, 2022
CRITICAL DATES:

December 21, 2022

Friday preceding IMM dateFixing date for 3-Month Euribor rate with value on IMM date
IMM date
IMM date three months hence

ADDING HYPOTHETICAL Spread contract Daily settlement price on September 16, 2022
SETTLEMENT PRICES
3-Month Euribor fixing rate on September 19, 2022
AS FOLLOWS:

Daily Settlement price of €SRU2 on September 16, 2022

0.22500.451199.7750

Assignment price of long and short positions into new Sep2022 €STR (ESRU2) contracts at

100 – 0.4511 + 0.2250 = 99.7739

In this example the assignment price is very close to theprevious settlement price of the outright contract with thedifference being within the bid/ask spread of valid tick prices.
Let us see what happens if that is not the case. We start withthe same settlement prices as above. In this example we see achange in future expectations for €STR rates, such that theoutright €SRU2 contract trades up to 99.81 in early Monday
trading. We do not see any corresponding change in theexpectations for Euribor. As a result, the spread contract
EUSU2 trades up to 0.2600.
Here at assignment the spread contract assigns into theoutright contract at exactly the same price as in the firstexample. A long position in the spread that was valued at0.2250 at previous settlement and is now trading at 0.2600
realises the gain in value by assignment into the outrightcontract at 99.7739 relative to the market trading at 99.81.

Similarly, a short position who sees a benefit in the assignment
price at 0.2250 relative to current market finds that benefitoffset by the assignment into a short outright position in€SRU2 at a price lower than current market.
This settlement mechanism means that the holders of spread
contracts achieve assignment at prices that are effectively themarket price of the spread at the time of the three-monthbenchmark publication.
Once a participant is assigned into an outright €STR or RFR
futures position, they may either trade out of the position toneutralize risk and crystallize profit and loss or hold theoutright futures contract to the end of its reference period andsubsequent cash settlement based on the calculation
methodology represented in this paper, European OvernightIndex futures: Final settlement calculation.

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PM22IR015/0922