Bloomberg Credit Futures

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Bloomberg Credit Futures Daily Settlement Procedure

Normal Daily Settlement Procedure

Daily settlement of the Bloomberg Investment Grade (IQB), Bloomberg High Yield (HYB), and Bloomberg Investment Grade Duration Hedged (DHB) Credit Futures, are determined by CME Group staff based on trading activity on CME Globex.

Lead Month

The designated lead month* is settled according to the following procedure:

Tier 1:  If the lead month contract trades on CME Globex between 14:59:00 and 15:00:00 Central Time (CT), the settlement period, then the lead month settles to the volume-weighted average price (VWAP) of the trade(s) during this period.

Tier 2:   If no trades in the lead month occur on CME Globex between 14:59:00 and 15:00:00 CT, then the most recent trade (or prior settle in the absence of a last trade price) is used.

The lead month settles to the last trade/prior settle assuming that it does not violate the CME Globex  bid or ask in the settlement period. If the bid or ask are violated the settlement will be adjusted accordingly.   

Second Month

When the lead month is the expiry month, then the second month is defined as the calendar month immediately following the lead month. When the lead month is not the expiry month, then the second month is defined as the first expiring non-lead month.

Tier 1:  If the lead month-second month spread trades on CME Globex between 14:59:00 and 15:00:00 CT, then the spread VWAP is calculated and rounded to the spreads nearest tradable tick. The spread differential is then applied to the lead month settlement price to derive the second month settlement, which is rounded to the outright’s nearest tradable tick.

Tier 2:  If a VWAP is not available due to an absence of trades, then the most recent spread trade is applied to the lead month settlement price to derive the second month settlement, which is rounded to the outright’s nearest tradable tick.

If there are no trades in the lead month-second month calendar spread, then the prior-day spread relationship is used to derive the second month settlement.

In either of the above scenarios, if the derived spread differential in the lead month-second month spread is validated against the CME Globex bid/ask and adjusted accordingly.  Additionally, if the derived second month settlement violates the CME Globex bid or ask in the outright market for the second month during the settlement period, the settlement will be adjusted to the nearest bid or ask accordingly – provided the resulting price does not violate the bid/ask in the spread.

Back Months

To derive settlements for all remaining months, the second chronological month’s net change from its prior-day settlement is applied to the back month contracts’ prior-day settlements, provided that this value does not violate the bid or ask for either the respective outrights or the consecutive-month calendar spreads.

*The Lead-Month designations are determined by CME Group.  The Lead Month for the Bloomberg Credit Futures will roll to the next listed quarterly contract effective on the business day prior to the last trading day of the expiring quarterly contract. 

Final Settlement

 Bloomberg Credit Futures are financially settled upon expiration.  Please see the CME Rulebook chapter 90 for more details.  

https://www.cmegroup.com/content/dam/cmegroup/rulebook/CBOT/III/90.pdf