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ICE to launch US residential mortgage rate lock index futures

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Financial Stability, Industry Spotlight, Nonbank Financial
Wednesday, April 13, 2022
Intercontinental Exchange, Inc. (ICE) announced that it plans to launch its first mortgage futures contracts, subject to regulatory approval.

The two futures contracts will be cash-settled and based on the ICE U.S. Conforming 30-year Fixed Mortgage Rate Lock Index and the ICE U.S. Jumbo 30-year Fixed Mortgage Rate Lock Index. The indices track U.S. residential mortgage loan applications where borrowers and lenders have committed to lock-in the interest rate prior to closing.

The primary market indices are part of a suite of 80 U.S. residential mortgage indices launched by ICE in 2021, based on a daily data from tens of thousands of locked rate applications processed by ICE Mortgage Technology. ICE Mortgage Technology processes nearly half of all residential mortgages in the U.S.

“ICE Mortgage Technology’s industry leading network coverage allows it to deliver a unique risk management instrument based on actual mortgage lending activity across the U.S.,” Chief Operating Officer of ICE Futures U.S. David Farrell said. “As inflationary pressures challenge all major economies and interest rates are being changed more frequently, we believe these mortgage futures will provide a better hedge to manage portfolio exposure to U.S. residential mortgage rates.”

The launch comes just under two years since ICE announced the planned acquisition of Ellie Mae as part of ICE’s strategy to accelerate the analog-to-digital conversion underway across the mortgage industry.

“This is the next step in how ICE is leveraging the rich data ICE Mortgage Technology receives from having the largest electronic network of mortgage stakeholders in the industry,” President of ICE Mortgage Technology Joe Tyrrell said. “ICE is combining this data with its technology and expertise within futures markets to create products to help customers in the mortgage lending and mortgage-backed security market to price, analyze and now manage risk associated with their mortgage exposure.”

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