A LONGER VIEW
In response to the market's increasing use of the overnight Federal Funds rate for short-term interest rate products, CME Group has launched 3-month Overnight Index Swaps (OIS) futures. These new contracts complement CME Group's 30-Day Fed Funds futures and Eurodollar futures. While similar to the 30-Day Fed Funds futures, the 3-Month OIS futures compound the Fed Funds rate over a 3-month period rather than averaging the rate over a calendar month. Because the new futures contract covers the same period as a Eurodollar future, the OIS contract offers a quick and easy way to trade the spread between 3-month LIBOR and 3-month overnight fi nancing costs. OIS futures also provide a direct way to take a view on FOMC policy moves further out the yield curve than is possible with the existing 30-day Fed Funds contracts.
SPREAD THE WORD
CME Group expanded its existing family of benchmark interest rate products when it launched options on Eurodollar futures calendar spreads (CSOs) on August 18. Eurodollar CSOs are designed to help market participants better manage risk exposures specifi cally tied to the slope of the LIBOR rate curve, allowing them to trade on the curve's direction as well as its volatility.
"Options on Eurodollar calendar spreads complement our implied Eurodollar futures calendar spreads and offer market participants the ability to express views on the direction, as well as the volatility, of the Eurodollar curve," said Robin Ross, managing director, CME Group interest rate products. "With the recent increase in the volatility of short-term interest rates, customers have been asking us for this product. Our ongoing investment in CME Globex and clearing technology has enabled us to quickly respond to this market need." The underlying value for Eurodollar CSOs is the one-year Eurodollar futures calendar spread. Call options are exercisable into one long nearby Eurodollar futures contract and one short deferred Eurodollar futures contract. Put options will be exercisable into a short nearby Eurodollar futures contract and one long deferred contract.
The options trade on the CME Globex electronic trading platform, as well as in open outcry trading.
Re-Up with NASDAQ OMX
CME and NASDAQ have had a successful partnership since 1996, when futures on the NASDAQ- 100 index were launched. Now, as CME Group and NASDAQ OMX Group, Inc., the two companies decided to extend their long-term partnership through two new initiatives. NASDAQ OMX extended CME Group's right to offer futures and options contracts based on the NASDAQ indexes for an additional seven-year period, through 2019. CME Group also moved to a single listing for its common stock on the NASDAQ Global Select, retaining the ticker symbol CME.
"For more than a decade, CME Group and NASDAQ have enjoyed a strong relationship. We are pleased to further extend this productive partnership with this exclusive agreement," said CME Group Executive Chairman Terry Duffy. "Furthermore, after evaluating the trading of our stock and leveraging NASDAQ's corporate services, we believe that single listing on the NASDAQ Stock Market recognizes the value and importance of our relationship."
"The seven-year extension of CME Group's exclusive licensing rights further strengthens our long-term growth prospects and earnings potential in the equity derivatives market, where we also have long-term exclusive rights to offer futures and options based on S&P Indexes through 2016, and on Dow Jones Indexes until 2014," said CME Group Chief Executive Officer Craig Donohue.
"CME Group has been dually listed on the NASDAQ Global Select Market since 2005. After evaluating the significant amount of trading that happens on our trading platform, this was a natural switch," said NASDAQ OMX Group Chief Executive Officer Bob Greifeld.
All Agribusiness
CME Group sponsored the Corporate Council on Africa's (CCA) 2008 U.S.-Africa Agribusiness Forum, which was held this June in Chicago and attracted more than 300 leaders from the private and public sectors of the United States and African nations. CME Group Executive Chairman Terry Duffy delivered the opening keynote address.
During his address, Duffy focused on the state of world agriculture markets, the role of commodity exchanges as a forum for price discovery and risk management, and the importance of price transparency and access to global markets. "The world food shortage, increasing commodity prices, and the biofuel debate have garnered a tremendous amount of attention from global agribusiness industry experts," said CCA President Stephen Hayes.
According to the World Bank, up to 80 percent of Africa's labor force is engaged in agriculture and agribusiness-related enterprises, which had a total value in Sub-Saharan Africa of nearly $207 billion in 2006. In 2007, agriculture generated more than one-third of Africa's gross domestic product growth.
Access Dubai
The Dubai Financial Services Authority (DFSA) granted CME Group the status of Recognized Body within the Dubai International Financial Centre (DIFC) for all CBOT products.
CME Group's Recognized Body status takes effect immediately, enabling market participants in DIFC to apply to CME Group to become members of CBOT and directly access and trade CBOT products via the CME Globex electronic trading platform.
The DFSA previously approved all CME products in December 2007. Through NYMEX, CME Group also has a joint venture with the Dubai Mercantile Exchange, creating an even greater presence in the Middle East.
Special FX
FX Week, the industry newsletter for foreign exchange (FX) and money market professionals, named CME Group the Best Professional e-Trading Venue.
"This year's winner demonstrated success in the one area of the FX market which dealers have disputed would gain serious electronic volume," said FX Week Editor Saima Farooqi, who chaired the judging panel. "According to one of the judges, this year's winner has done more in the past year to develop and open up the electronic options market and will eventually be used as a price barometer for other e-FX options initiatives."
For the first half of 2008, CME Group increased its FX volume 21 percent - 93 percent of which is traded electronically. The company also has expanded its FX options product portfolio and enhanced the platform’s technology, functionality and market data offering.
CME Group created the FX market's fi rst fully functional autoexercise functionality for the global FX options market based on a price mechanism that auto-exercises all in-the-money options. In addition, liquidity in emerging markets has increased 23 percent for the first six months of 2008, compared with the first half of 2007.
Technologically, CME Group made several enhancements to its transaction times and market data distribution. The company cut response times for FX transactions by 50 percent, with execution speed averaging 12 milliseconds per transaction, compared with 70 milliseconds three years ago.
Other initiatives included the development of CME LNET - a co-location facility allowing customers to locate their application servers in the same facility as the CME Globex matching engine - and the implementation of FIX FAST for CME Group's market data distribution, which has reduced customer bandwidth needs by nearly 70 percent.
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