Brazilian Real

Brazilian real futures provide a way to:

• Assess the relative value of the U.S. dollar compared to the Brazilian real
• Manage the risks associated with currency rate fluctuations in the FX markets
• Take advantage of profit opportunities stemming from those changes

Things to know:

• You can view free real-time prices in spot equivalent terms at www.cme.com/e-quivalents
• You can trade 12 consecutive contract months
• Cash-settled, like our equity contracts, rather than physically-delivered
• Trading terminates on the last business day of the month preceding the contract month
• Settlement day is the business day following the last day of trading
• Trades electronically on the CME Globex platform
  • Available virtually around the clock, around the world
  • Complete price transparency and anonymity
• Also trades side-by-side on the CME Group trading floor during open outcry trading hours
• CME Clearing clears and settles all trades and guarantees counterparty creditworthiness

About This Currency

Brazil has the largest economy in Latin America and the tenth largest in the world. It also has the strongest and most diversified export base in the region. Structural reforms are underway to ensure that gains from monetary and political change foster economic stability and keep inflation down.

One of the most important of these reforms was the Real Plan which Brazil introduced as a successful economic stabilization program in July 1994. The Real Plan and its new “real” currency (plural: reais) dramatically lowered the country’s historically high inflation rate to single digit figures by 1998.

Another aspect of the reform process, designed to encourage long-term investment, is a program to privatize state and semi-state entities. Additionally, lower tariffs opened the economy to foreign competition, keeping prices for basic goods down. With a more stable economic environment, Brazil has posted higher growth rates.

During the cash settlement process, we mark all open Brazilian real positions to the final settlement price determined in the futures pit on the last trading day. Then on the settlement day, all of those positions are cash-settled to a dollars-per-real rate. This rate is equal to the reciprocal of the "reais per commercial U.S. dollar exchange rate for cash delivery” as calculated by the Central Bank of Brazil, and represents the volume-weighted Brazilian real transaction price for 48-hour delivery of spot commercial U.S. dollars.

Structure of Real Rates

The foreign exchange market in Brazil currently has two rates: the official commercial rate and the official floating market rate. The Brazilian real contract is based on the commercial market rate, which is used for most domestic trade and financial trans actions. Participation in the commercial market is restricted and all transactions are executed through authorized financial institutions. Currently the Central Bank of Brazil designates exchange rate bands and intervenes to keep the commercial rate within them. The Central Bank can and has altered these bands as it deems necessary. The floating market was established to oversee transactions relating to tourism, fixed income investments and non-regulated exchange transactions.

Trading in Brazilian real futures and options on futures began at CME Group in 1995.

©2008 CME Group, Inc.