B3, Brazil’s exchange, has just launched two new types of structured transactions (strategies): DI1 EDS (Nominal Interest Rate) and DAP EDS (Effective Interest Rate).

B3, Brazil’s exchange, has just launched two new types of structured transactions (strategies): DI1 EDS (Nominal Interest Rate) and DAP EDS (Effective Interest Rate).

With these new strategies, the market will have four new products available to trade Yield Curve strategies efficiently with no execution risk, with differentiated pricing and transparency.

The EDS (Exchange Defined Strategies) Project is one of several deliveries anticipated in the B3 Roadmap for the Interest Rate Market.

 

Strategies

Two different types of structured transactions are now available. The first is the Neutral or Slope DV01, a strategy that combines two product maturities with calibrated quantities in order to neutralize the leg DV01, that is, the goal is to trade the price differential between them.

The Neutral PU or FRA strategy also combines two product maturities. However, the quantities are calibrated in order to neutralize the leg PU (unit price), that is, the goal is to trade the FRA rate between the legs.

 

New tickers

The ticker structure for the new products is similar to the current rollover structure with 3 characters indicating the product and 6 characters indicating the expiration month and year that makes up each strategy.

PRODUCT	Neutral DV01 (Slope)	Neutral PU (FRA)
DI1 Strategies	DII + MAAMAA	DIF + MAAMAA
DAP Strategies	DAI + MAAMAA	DAF + MAAMAA

 

To learn more about this topic, click here to watch the EDS Project Technical Workshop video, where you can get further information about how each strategy works.