Appendix D to Tradition SEF Rulebook

Equities Product Listing

Broad-Market Equity Index Swap Product Listing

Tradition SEF, Inc.

I. Discussion of contracts; not readily susceptible to manipulation

 Index Selection: Tradition SEF limits the indexes underlying its equity index swap 

offerings to well-established, publicly available third-party equity index market 

benchmarks. Tradition SEF believes that the size and liquidity of the cash market that 

underlies these indexes creates in each case a deliverable supply of underlying 

securities and volume of trading that would not make them easily susceptible to 

manipulation. Furthermore, Tradition SEF believes that the large number of participants 

in each market, and the calculation of each index being based on actual transaction 

data from major stock markets further limit the susceptibility of manipulation of these 

indexes. The broad-based equity indexes underlying swaps on Tradition SEF are the 

timeliest, recognized and reliable benchmarks for equity prices in their respective 

markets. The index levels are readily available and commercially acceptable as 

benchmarks for investors, portfolio managers and public policy makers. Tradition SEF 

believes that such benchmark indexes, which also underlie liquid index futures 

contracts on major Designated Contract Markets, and equity index exchange traded 

funds on stock exchanges, due to the large number of index members, ubiquity, and 

broad-market nature are not readily susceptible to manipulation. Furthermore, the 

associated index futures contracts and exchange traded funds offer a deep liquidity 

pool to hedge and risk-manage swaps based on such indexes’ index.

Swap Contract Specifications: A discussion of Variance and Volatility Swaps: Equity 

Index Variance and volatility swaps pay out on the degree of stock price fluctuation, not 

the absolute level or direction of the underlying index. Tradition SEF believes that these 

swaps are by their nature less susceptible to manipulation because the payout on the 

swap is based on mathematical calculations of variance or volatility for indexes that 

represent effectively entire stock markets. For example, the buyer of the variance swap 

receives the actual realized variance over the relevant period, and pays a fixed amount 

in return (generally based on the expected / historical variance). The buyer is buying 

implied variance and receives money from the seller if the realized is greater than the 

implied over the term period, or pays money to the seller if the realized is less than the 

implied buyer purchased.

 Discussion of Index Reference Prices

 Standard and Poor’s 500 Index “SPX S&P 500®” 

 The Standard & Poor's 500® index, is a stock market index based on 

the market capitalizations of 500 large companies having common stock 

listed on the NYSE or NASDAQ. The S&P 500 index components and 

their weightings are determined by S&P Dow Jones Indices. It is one of 

the most commonly followed equity indices and many consider it the best 

representation of the U.S. stock market as well as a bellwether for the 

U.S. economy. The S&P 500 was developed and continues to be 

maintained by S&P Dow Jones Indices, which is majority-owned by 

McGraw Hill Financial that publishes many stock market indices. It is a 

capitalization-weighted index meaning that the level of the index 
fluctuates with the market capitalization of its components. “S&P®”, “S&P 

500®” are copyrights of Standard and Poor’s.

 Standard and Poor’s MidCap 400 Index “MID S&P 400®”

 The S&P MidCap 400® provides investors with a benchmark for mid-sized companies. It 

is the most widely followed U.S. mid-cap index. To be included in the index, a stock must 

have a total market capitalization that ranges from roughly $750 million to $3.3 billion. It 

is a capitalization-weighted index meaning that the level of the index fluctuates with the 

market capitalization of its components. “S&P®”, “S&P 400®” are copyrights of Standard 

and Poor’s.

 Standard and Poor’s S&P/BMV IPC MEXBOL

 The S&P/BMV IPC seeks to measure the performance of the largest and most 

liquid stocks listed on the Bolsa Mexicana de Valores. The index is designed to 

provide a broad, representative, yet easily replicable index covering the Mexican 

equities market. The constituents are weighted by modified market cap subject to 

diversification requirements.

 Russell 2000

 The Russell 2000 Index measures the performance of the small-cap segment of 

the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® 

Index representing approximately 10% of the total market capitalization of that 

index. It includes approximately 2000 of the smallest securities based on a 

combination of their market cap and current index membership. The Russell 

2000 Index is constructed to provide a comprehensive and unbiased small-cap 

barometer and is completely reconstituted annually to ensure larger stocks do 

not distort the performance and characteristics of the true small-cap opportunity 

set. Copyright © Russell Investments 2013.

 Nasdaq 100

 The NASDAQ-100 Index includes 100 of the largest domestic and 

international non-financial securities listed on The Nasdaq Stock Market 

based on market capitalization. The Index reflects companies across 

major industry groups including computer hardware and software, 

telecommunications, retail/wholesale trade and biotechnology. It does not 

contain securities of financial companies including investment companies.

Read more: http://www.nasdaq.com/markets/indices/nasdaq100.aspx#ixzz2q0hgdZ4j

 Dow Jones 30

 The Dow Jones Industrial Average®, also called the Dow 30, or simply the Dow is 

owned by S&P Dow Jones Indices, which is majority owned by McGraw-Hill Financial, it 

is the most notable of the Dow Averages, of which the first (non-industrial) was first 

published on February 16, 1885. It is an index that shows how 30 large publicly owned 

companies based in the United States have traded during a standard trading session in 

the stock market. The average is price-weighted, and to compensate for the effects of 

stock splits and other adjustments, it is currently a scaled average. The value of the Dow 

is not the actual average of the prices of its component stocks, but rather the sum of the 

component prices divided by a divisor, which changes whenever one of the component 

stocks has a stock split or stock dividend, so as to generate a consistent value for the 
index. Since the divisor is currently less than one, the value of the index is larger than 

the sum of the component prices.

 Eurostoxx 50

 The EURO STOXX 50 Index®, designed by STOXX Ltd., is the leading 

Blue-chip index for the Eurozone, provides a Blue-chip representation of 

supersector leaders in the Eurozone. The index covers 50 stocks from 12 

Eurozone countries: Austria, Belgium, Finland, France, Germany, 

Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. 

The index futures and options on the Euro Stoxx 50, traded on Eurex, are 

among the most liquid such products in Europe and the world. The EURO 

STOXX 50 Index® is licensed to financial institutions to serve as 

underlying for a wide range of investment products such as Exchange 

Traded Funds (ETF), Futures and Options, and structured products 

worldwide. ® Copyright STOXX Ltd.

 FTSE 100

 The FTSE 100® is a market-capitalization weighted index of UK-listed 

blue chip companies. The index is part of the FTSE UK Series and is 

designed to measure the performance of the 100 largest companies 

traded on the London Stock Exchange that pass screening for size and 

liquidity. FTSE 100 constituents are all traded on the London Stock 

Exchange’s SETS trading system. ®FTSE Group

 FTSE MIB

 The FTSE MIB® (Milano Italia Borsa) is the benchmark stock market 

index for the Borsa Italiana, the Italian national stock exchange. The 

index consists of the 40 most-traded stock classes on the exchange. The 

index is administered by FTSE Group, which is 100% owned by the 

Borsa Italiana's parent company London Stock Exchange Group. ®FTSE

Group.

 AEX Index

 The AEX index®, derived from Amsterdam Exchange index, is a stock 

market index composed of Dutch companies that trade on NYSE 

Euronext Amsterdam, formerly known as the Amsterdam Stock 

Exchange. Started in 1983, the index is composed of a maximum of 25 of 

the most actively traded securities on the exchange. It is one of the main 

national indices of the stock exchange group NYSE Euronext. ®NYSE 

Euronext

 OMX Index

 The OMX Stockholm 30 Index® consists of the 30 most actively traded 

stocks on the Stockholm Stock Exchange and is a market weighted price 

index. The composition of the OMXS30 index is revised twice a year. The 

index was developed with a base level of 125 as of September 30, 1986. 

Effective on April 27, 1998 there was a 4-1 split of the index value.

®NASDAQ OMX

 SMI Swiss Index

 The Swiss Market Index ( SMI® Family), which is the best-known SIX 

Swiss Exchange index comprises the 50 largest and most liquid stocks in 

the Swiss equity market. It represents about 85% of the free-float 

capitalization of the Swiss equity market. The blue-chip index SMI® is 

the most significant equity index in Switzerland. The SMI® Family is 
calculated using the Laspeyres method with the weighted arithmetic 

mean of a defined number of securities issues. The index

 level is calculated by dividing the market capitalization of all securities 

included in the index by a divisor..Detailed calculation methodology can 

be found at: http://www.six-swissexchange.com/index_info/online/share_indices/smi/smifamily_rules_en.p

df. ®SIX Group Ltd.

 DAX 30

 The DAX 30® is a total return blue chip stock market index consisting of 

the 30 major German companies trading on the Frankfurt Stock 

Exchange. Prices are taken from the electronic Xetra trading system. 

According to Deutsche Börse, the operator of Xetra, DAX measures the 

performance of the Prime Standard’s 30 largest German companies in 

terms of order book volume and market capitalization. It is the equivalent 

of the FT 30 and the Dow Jones Industrial Average, and because of its 

small selection it does not necessarily represent the vitality of the 

economy as whole. The Base date for the DAX is 30 December 1987 

and it was started from a base value of 1,000. The Xetra system 

calculates the index after every 1 second since January 1, 2006.

®Deutsche Borse AG

 CAC 40 Index

 The CAC 40®, the most widely-used indicator of the Paris market, reflects 

the performance of the 40 largest equities listed in France, measured by 

free-float market capitalization and liquidity. The index was developed 

with a base level of 1,000 as of December 31, 1987. ®NYSE Euronext

 NKY Nikkei 225

 The Nikkei 225®, more commonly called the Nikkei, the Nikkei index, or 

the Nikkei Stock Average, is a stock market index for the Tokyo Stock 

Exchange (TSE). It has been calculated daily by the Nihon Keizai 

Shimbun (Nikkei) newspaper since 1950. It is a price-weighted index (the 

unit is yen), and the components are reviewed once a year. Currently, the 

Nikkei is the most widely quoted average of Japanese equities, similar to 

the Dow Jones Industrial Average.. ® Nihon Keizai Shimbun

 HSI Hang Seng Index

 The Hang Seng Index® (abbreviated: HSI) is a freefloat-adjusted market 

capitalization-weighted stock market index in Hong Kong. It is used to 

record and monitor daily changes of the largest companies of the Hong 

Kong stock market and is the main indicator of the overall market 

performance in Hong Kong. These 48 constituent companies represent 

about 60% of capitalization of the Hong Kong Stock Exchange. HSI was 

started on November 24, 1969, and is currently compiled and maintained

by Hang Seng Indexes Company Limited, which is a wholly owned 

subsidiary of Hang Seng Bank. ® Hang Seng Indexes Company Limited.

 Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV). 

 The IBOVESPA is a major stock market index which tracks the performance of 

around 50 most liquid stocks traded on the Sao Paulo Stock Exchange in Brazil. 

It is a gross total return weighted index. The index has a base value of BRL 100 

as of January 2, 1968. Since 1968, The Bovespa Index has been adjusted 11 
times by a factor of 100 in 1983 and by factor of 10 in 1985, 1988, 1989, 1990, 

1991, 1992, 1993, 1994, and 1997.

 MSCI® Global Equity Indexes

 MSCI® indexes are built using a maintenance methodology that provides 

indexes that are flexible enough to adjust quickly to a constantly changing 

opportunity set. MSCI® indexes provide timely and consistent treatment of 

corporate events and synchronized rebalancings, globally. MSCI’s indexes are 

created using the Global Industry Classification Standard (GICS®), an industry 

classification system developed by MSCI and S&P Global, which provides a 

common framework to classify stocks. They offer exhaustive coverage of the 

investable opportunity set with non-overlapping size and style segmentation. 

Where other providers use either a long- or short-term liquidity measure to 

assess the eligibility of stocks for their indexes, MSCI uses both, recognizing the 

differences in liquidity between developed and emerging markets and enhancing 

the investability and replicability of MSCI indexes. MSCI puts strong emphasis on 

investability and replicability of its indexes through the use of size and liquidity 

screens. The MSCI Global Equity Indexes are used by institutional investors

worldwide for investment analysis, performance measurement, asset allocation, 

hedging and the creation of a wide range of index derivatives, funds, ETFs and 

structured products. 

 MSCI® Brazil Index 

 The MSCI Brazil Index is designed to measure the performance of the 

large and mid-cap segments of the Brazilian equity market. With 54 

constituents, the index covers about 85% of the Brazilian equity universe.

 MSCI® Brazil Index USD Total Return (Net Dividends) (NDEUBRAF) is part of the 

MSCI Net Total Return Index Series.

 The NDEUBRAF index is based on the MSCI Global Investable Indexes 

(GIMI) Methodology—a comprehensive and consistent approach to index 

construction that allows for meaningful global views and cross regional 

comparisons across all market capitalization size, sector and style 

segments and combinations. This methodology aims to provide 

exhaustive coverage of the relevant investment opportunity set with a 

strong emphasis on index liquidity, investability and replicability. The 

index is reviewed quarterly—in February, May, August and November—

with the objective of reflecting change in the underlying equity markets in 

a timely manner, while limiting undue index turnover. During the May and 

November semi-annual index reviews, the index is rebalanced and the 

large and mid-capitalization cutoff points are recalculated. MSCI Indexes 

are published by MSCI Inc.

 MSCI® EM Asia Net Total Return USD Index (NDUEEGFA)

 MSCI Daily Total Return Net EM Asia USD. MSCI Net Total Return Index Series. 

The MSCI EM Asia Index is a free float-adjusted market capitalization weighted 

index that is designed to measure the equity market performance of 

approximately 8 emerging markets in Asia.
 MSCI® Emerging Markets Net Total Return USD Index (NDUEEGF) 

 MSCI Daily Total Return Net Emerging Markets USD. MSCI Net Total Return 

Index Series. The iShares MSCI Emerging Markets Net Total Return seeks to 

track the investment results of an index composed of large- and midcapitalization emerging market equities.

 MSCI® Emerging Latin America Net Total Return USD Index (NDUEEGFL)

 MSCI Daily Total Return Net Emerging Markets Latin America USD. MSCI Net 

Total Return Index. The MSCI EM Latin America Index is a free float-adjusted 

market capitalization weighted index that is designed to measure the equity 

market performance of emerging markets in Latin America.

 MSCI® Canada Net Total Return USD Index (NDDUCA)

 MSCI Daily Total Return Net Canada USD. Morgan Stanley Capital International 

Equity Indices in US Dollars. Indices with net dividends reinvested use the same 

dividend minus-tax-credit calculations, but subtract withholding taxes retained at 

the source for foreigners who do not benefit from a double taxation treaty.

 MSCI® Daily TR Gross Canada USD (GDDUCA) 

 For the developed markets, indices with dividends reinvested provide an 

estimate of total return that would be achieved by reinvesting one twelfth of the 

annual yield reported at every month-end. The MSCI Canada Index is designed 

to measure the performance of the large and mid cap segments of the Canada 

market. With 91 constituents, the index covers approximately 85% of the free 

float-adjusted market capitalization in Canada.

 MSCI® Emerging Markets Mexico Net Total Return USD Index (NDEUMXF)

 MSCI Daily Total Return Net Emerging Markets Mexico USD. Morgan Stanley 

Capital International Equity Indices Emerging Markets in US Dollars. The MSCI 

Mexico Index is designed to measure the performance of the large and mid cap 

segments of the Mexican market. With 25 constituents, the index covers 

approximately 85% of the free float-adjusted market capitalization in Mexico.

 MSCI® Daily TR Net Emerging Markets Chile USD (NDEUSCH)

 Morgan Stanley Capital International Equity Indices Emerging Markets in US 

Dollars. The MSCI Chile Index is designed to measure the performance of the 

large and mid cap segments of the Chilean market. With 17 constituents, the 

index covers approximately 85% of the Chile equity universe.

 MSCI® Daily TR Net Emerging Markets Peru USD (NDEUSPR).

 Morgan Stanley Capital International Equity Indices Emerging Markets in US 

Dollars. The MSCI Peru Index is designed to measure the performance of the 

large and mid cap segments of the Peruvian market. With 3 constituents, the 

index covers approximately 85% of the Peruvian equity universe.

 MSCI® Daily TR Net Emerging Markets Colombia USD (NDEUSCO)

 Morgan Stanley Capital International Equity Indices Emerging Markets in US 

Dollars. The MSCI Colombia Index is designed to measure the performance of 
the large and mid cap segments of the Colombian market. With 9 constituents, 

the index covers approximately 85% of the Colombian equity universe.
II. Terms and Conditions

General:

 Equity Index Swaps traded on Tradition SEF are not cleared.

 Equity Index Swap trades are reported in accordance with SDR requirements.

 Minimum and Incremental Prices: 

 There is no minimum price for a contract. 

 There is no minimum incremental price for a contract 

(1) Total Return Swaps (TRS) and Price Return Swaps (PRS):

A broad market equity index total return swap is a product which allows the ability to gain 

exposure to the returns of a broad market equity index, or broad-market custom basket of 

equities ("equity leg") in exchange for payment or receipt of regular fixed or floating payments 

("floating leg") usually interest based, plus a differential. 

Trade types:

Total Return Swap (TRS) – The calculation of the value of which the equity leg is based will be 

the appreciation/depreciation of the underlying equity leg plus any returns due from the 

components of underlying index.

Price Return Swap (PRS) – The calculation of the value of which the equity index leg is based 

will be the appreciation/depreciation of the underlying equity index leg.

Contract 

Description

A contract to pay or receive regular fixed or floating interest payments on a 

notional amount of an equity index in exchange for the notional based 

return performance of an equity index.

Available 

Underlying 

Indexes

Index Currency

SPX S&P 500 USD

RTY Russell 2000 USD

NDX Nasdaq 100 USD

DIA Dow Jones 30 USD

MID S&P Mid 400 USD

Eurostoxx 50 EUR

FTSE FTSE 100 GBP

FTSE MIB EUR

AEX Index EUR

OMX Index SEK

SMI Swiss Index CHF

DAX 30 EUR

CAC 40 Index EUR

NKY Nikkei 225 JPY
HSI Hang Seng IndexHKD

MSCI® Daily Total Return Net Brazil USD – USD

MSCI® Brazil Index USD Total Return (Net Dividends) USD

MSCI® Emerging Markets Net Total Return USD Index USD

MSCI® Emerging Latin America Net Total Return USD Index USD

MSCI® Canada Net Total Return USD Index USD

MSCI® Daily TR Gross Canada USD

MSCI® Emerging Markets Mexico Net Total Return USD Index USD

MSCI® Daily TR Net Emerging Markets Chile USD

MSCI® Daily TR Net Emerging Markets Peru USD

MSCI® Daily TR Net Emerging Markets Colombia USD

Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV)

Custom Baskets Currency of underlying equities in basket.

Contract Size 1 unit, incremental size is 1 unit

Tenor As agreed by Participants, 1 day to 50 years.

Trade Date Date which trade terms are agreed.

Trade Types Outrights, Spreads: Equity swap in one index versus an equity swap in 

another

Trade Start 

Types Immediate and delayed start

Quote 

Conventions Quoted in bps as a spread or fixed rate.

Trading Hours Trading Hours of Tradition SEF

Settlement Cash settlement based on floating rate schedule.

Settlement 

Payments

An equity index TRS Payor of LIBOR / Receiver of Index Return receives 

appreciation and dividends of the index / pays depreciation of, if any, on 

index, and pays a rate of interest plus a differential on the underlying 

notional amount of the TRS.

An Equity Index TRS Receiver of LIBOR / Payer of Index Return pays 

appreciation and dividends of the index / receives depreciation of, if any, 

on index, and receives a rate of interest plus a differential on the 

underlying notional amount of the TRS.

Payment 

Frequency Determined by agreed Libor (3m, 6m, etc.) or agreed fixed rate frequency.

Day Count Act/360

Maturity As agreed by Participants; any maturity up to 50 years.

Notional Amount Any amount as agreed by Participants.

Leg Conventions

Floating Leg - Cashflow: xM LIBOR + Spread or an agreed fixed rate

Equity Leg - Notional x (% increase of equity index over floating rate 

period)
Business Day 

Convention As agreed by Participants.

Breaks/Resets As agreed by counterparties. 

Minimum and 

Incremental Price There is no minimum price or incremental price for a contract.
(2) Variance Swaps:

Contract 

Description

The variance swap is a product that is used to take a direct view on the 

volatility of a broad-based security index.

Available 

Underlying 

Indexes

Index Currency

SPX S&P 500 USD

RTY Russell 2000 USD

NDX Nasdaq 100 USD

DIA Dow Jones 30 USD

MID S&P Mid 400 USD

Eurostoxx 50 EUR

FTSE FTSE 100 GBP

FTSE MIB EUR

AEX Index EUR

OMX Index SEK

SMI Swiss Index CHF

DAX 30 EUR

CAC 40 Index EUR

NKY Nikkei 225 JPY

HSI Hang Seng IndexHKD

MSCI® Daily Total Return Net Brazil USD – USD

MSCI® Brazil Index USD Total Return (Net Dividends) USD

MSCI® Emerging Markets Net Total Return USD Index USD

MSCI® Emerging Latin America Net Total Return USD Index USD

MSCI® Canada Net Total Return USD Index USD

MSCI® Daily TR Gross Canada USD

MSCI® Emerging Markets Mexico Net Total Return USD Index USD

MSCI® Daily TR Net Emerging Markets Chile USD

MSCI® Daily TR Net Emerging Markets Peru USD

MSCI® Daily TR Net Emerging Markets Colombia USD

Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV)

Custom Baskets Currency of underlying equities in basket.

Contract Size

Variance Swap contracts are quoted in “Vega” amounts.

The minimum contract size is 1,000 of the currency of which the underlying 

index settles in.

Tenor Tenors of any duration greater than 0 years and less than 50 years.

Trade Types

Capped – The maximum payout of the contract is capped at an agreed 

price.

Uncapped – There is no maximum payout on the contract.

Trade Start 

Types

Immediate – The observation period of the swap begins immediately.

Forward – The observation period of the swap begins on an agreed-upon 

date in the future.

Quote 

Conventions

BPS – Vega; Variance Swap contracts are quoted in volatility percentage 

points.

Trading Hours Tradition SEF trading hours.

Expiration Date This is the date on which the swap expires, and the date upon which the 

final rate of volatility shall be calculated on using the detailed formula. [As 
agreed by the counterparties.

Settlement

Variance swaps are cash settled. If the difference between the realized 

Variance and the Variance Strike is positive, then the seller pays the 

difference to the buyer. If the difference between the realized Variance and 

the Variance Strike is negative, then the buyer pays the difference to the 

seller. 

Settlement of a Variance Swap occurs after the expiration date and in line 

with the settlement convention of the underlying equity index.

Settlement 

Payments

Payment Date: T+2 (adjustments according to Following Business Days 

Conventions)

Minimum Price 

or Incremental 

Price

There is no minimum price or incremental price for a Variance Swap 

contract.

Payment 

Frequency One time

Payments 

Exchange

The buyer of a variance swap pays a fixed rate (the Variance Strike) in 

exchange for a payout based on the daily realized variance.

The seller of a variance swap receives a fixed rate (the Variance Strike) in 

exchange for a payout based on the daily realized variance.

Day Count Business Days Per Year = 252

Notional Amount Minimum size 1 contract

Leg Conventions

Floating Leg Rate - The realized variance rate that is calculated on the 

expiration date.

Fixed Leg Rate - The agreed fixed rate of Variance (Traded Price).

Observation 

Start Date

This is an agreed trading day of the underlying either on or an agreed 

number of days after the date on which the contract is agreed.

Number of 

Observations (N)

The number of observations will be the number of trading days of the 

underlying index between the observation start date and the expiration 

date.

Business Day 

Convention

The “Target Following” business day convention will apply (if any date is a 

non-business day, the date is moved forward to the next business day).

Minimum and 

Incremental 

Price

Variance Swap contracts are quoted in volatility percentage points. There 

is no minimum price or minimum incremental price for a Variance Swap 

contract.

Applicable 

Formula

Variance Calculation Formula - The final realized rate of variance shall 

be calculated using the following formula:

Actually realized Daily Volatility is defined according to the following 

formula;

where,

n = Number of Observations, meaning the number of days that, as of the 

Trade Date, are expected to be Scheduled Trading Days for the period 
from the Trade Date to, and including, the Scheduled Valuation Date;

m = n, unless there is a market disruption event

Pi = the daily closing price of the on the ith business day starting on the 

day following Trade Date (i=2), and Pm shall be equal to the Closing 

Level of the on the Final Valuation Date.

If the Final Valuation Date is a listed option expiration date, then Pm is 

equal to the expiration print. Business Days Per Year = 252

Market 

Disruption 

A Market Disruption event is triggered if member shares of the Index which 

account for 20 percent or more of capitalization of the Index are not 

trading. If a Market Disruption occurs on a business day, then that day will 

be omitted from the series Pi, so that m is reduced by one, but no 

corresponding adjustment will be made to the count n of business days.
(3) Volatility Swaps

Contract 

Description

A volatility swap is a swap on the future realized volatility of a given 

underlying asset. Volatility swaps allow trading of volatility of an asset 

directly, much as they would trade a price index.

Available 

Underlying 

Indexes

Index Currency

SPX S&P 500 USD

RTY Russell 2000 USD

NDX Nasdaq 100 USD

DIA Dow Jones 30 USD

MID S&P Mid 400 USD

Eurostoxx 50 EUR

FTSE FTSE 100 GBP

FTSE MIB EUR

AEX Index EUR

OMX Index SEK

SMI Swiss Index CHF

DAX 30 EUR

CAC 40 Index EUR

NKY Nikkei 225 JPY

HSI Hang Seng IndexHKD

MSCI® Daily Total Return Net Brazil USD – USD

MSCI® Brazil Index USD Total Return (Net Dividends) USD

MSCI® Emerging Markets Net Total Return USD Index USD

MSCI® Emerging Latin America Net Total Return USD Index USD

MSCI® Canada Net Total Return USD Index USD

MSCI® Daily TR Gross Canada USD

MSCI® Emerging Markets Mexico Net Total Return USD Index USD

MSCI® Daily TR Net Emerging Markets Chile USD

MSCI® Daily TR Net Emerging Markets Peru USD

MSCI® Daily TR Net Emerging Markets Colombia USD

Ibovespa Brasil Sao Paulo Stock Exchange Index (IBOV)

Custom Baskets Currency of underlying equities in basket.

Contract Size The minimum contract size is 1,000 of the currency of which the underlying 

index settles in.

Tenor Tenors of any duration greater than 0 years and less than 50 years.

Trade Types

Capped – The maximum payout of the contract is capped at an agreed 

price.

Uncapped – There is no maximum payout on the contract.

Trade Start 

Types

Immediate – The observation period of the swap begins immediately.

Forward – The observation period of the swap begins on an agreed-upon 

date in the future.

Quote 

Conventions volatility percentage points

Trading Hours Operating hours of Tradition SEF

Settlement

If Realized Volatility is greater than the Volatility Strike the Swap Seller 

pays Swap Buyer a final payment as follows: Vega Notional * (Realized 

Volatility - Volatility Strike)
If Realized Volatility less than Volatility Strike then Swap Buyer pays Swap 

Seller a final payment as follows:

Vega Notional * (Realized Volatility - Volatility Strike)

Settlement 

Payments

Payment Date: T+2 (adjustments according to Following Business Days 

Conventions)

Payment 

Frequency One time

Payments 

Exchange

If Realized Volatility > Volatility Strike, swap seller pays swap buyer a final 

payment as follows:

Vega Notional * (Realized Volatility - Volatility Strike)

If Realized Volatility < Volatility Strike then swap buyer swap seller a final 

payment as follows:

Vega Notional * (Realized Volatility - Volatility Strike)

Day Count Business Days Per Year = 252

Maturity the date upon which the final rate of volatility shall be calculated on using 

the detailed formula

Notional Amount Minimum size 1 contract

Leg 

Conventions

Floating Leg Rate - The realized volatility rate that is calculated on the 

expiration date.

Fixed Leg Rate - The agreed fixed rate of Volatility (Traded Price).

Observation 

Start Date

This is an agreed trading day of the underlying either on or an agreed 

number of days after the date on which the contract is agreed.

Number of 

Observations (N)

The number of observations will be the number of trading days of the 

underlying index between the observation start date and the expiration 

date.

Business Day 

Convention Business Days Per Year = 252

Minimum and 

Incremental 

Price

There is no minimum price or minimum incremental price for a Variance 

Swap contract.

Applicable 

Formula

Realized Volatility 

Actual realized Daily Volatility is defined according to the following formula;

where,

n = Number of Observations, meaning the number of days that, as of the 

Trade Date, are expected to be

Scheduled Trading Days for the period from the Trade Date to, and 

including, the Scheduled Valuation

Date;

m = n, unless there is a market disruption event

Pi = the daily closing price of the underlying on the ith business day starting 

on the day following Trade

Date (i=2), and Pm shall be equal to the Closing Level of the underlying on 

the Final Valuation Date.

If the Final Valuation Date is a listed option expiration date, then Pm is 

equal to the expiration print.
√

∑ [ln (

Pi

Pi−1

)]^2

m

i=1

n

x √Business Days Per Year x 100

where, 

n = the number of days that, as of the Trade Date, are expected to be 

Scheduled Trading Days for the period from, but excluding, the Trade Date 

to, and including, the Scheduled Valuation Date;

m = n, unless there is a market disruption event

Pi = the daily closing price of the SPX on the ith business day, and Pm shall 

be equal to the Closing Level of the SPX on the Final Valuation Date

P0 = the closing price of SPX on Trade Date

If the Final Valuation Date is a listed option expiration date, then Pm is 

equal to the expiration print

Future Price Valuation: Applicable. Business Days Per Year = 252

Market 

Disruption 

A Market Disruption event is triggered if member shares of the Index which 

account for 20 percent or more of capitalization of the Index are not trading. 

If a Market Disruption occurs on a business day, then that day will be 

omitted from the series Pi, so that m is reduced by one, but no 

corresponding adjustment will be made to the count n of business days.