Basis trades can be arranged in the following short term interest rate futures contracts:

• Euribor®
• Eurodollar
• Short Sterling
• Euroswiss
• Euroyen

All these contracts can be basis traded against either cash bonds (government and non-government), or OTC interest rate swap contracts, forward rate agreements (FRAs), sale and repurchase agreements (repos), OTC options, OTC option strategies and non-Liffe exchange traded futures contracts.

The following outlines the characteristics of the approved cash legs.

Bonds:

• fixed coupon
• bullet maturity issue
• no embedded optionality or early redemption features
• has an ISIN code
• fixed principal amount
• denominated in a permitted currency

Swaps:

• spot, forward-starting or existing plain vanilla OTC swap
• written under the terms of an ISDA® Master Agreement
• comprised of regular fixed rate payments against regular floating rate payments
• both payments must be denominated in the same permitted currency and be represented as a percentage of a fixed nominal amount.

FRAs:

• conventional FRA
• written under the terms of an ISDA® Master Agreement
• predetermined interest rate
• agreed start/end date

Repos:

• spot or forward starting repo
• constructed under the terms of the Bond Market Association/ISMA 'Global Master Repurchase Agreement'
• defined start and end dates
• not repayable on demand
• incorporating a defined bond which has an ISIN code
• traded in a permitted currency
• have a defined interest (repo) rate

OTC Options and OTC Option strategies:

• any individual or combination of stock equity index options can form the cash leg of a basis trade against any of Liffe’s FTSE or MSCI index futures
• any individual or combination of bond, interest rate swap or FRA options (e.g. caps, floors, collars) can form the cash leg of a basis trade against any of Liffe’s STIR, bond or swap futures contracts.

For all cash legs (bond, swap, FRA, repo and OTC option) the following list of permitted currencies applies:

• Euro
• Sterling
• US dollar
• Japanese Yen
• Australian dollar
• Swiss franc
• Swedish Krona
• Danish Krone