October 2010

Long-Term U.S. Treasury Bond futures—the “Ultra” T-Bond—will begin trading on January 10, 2010 (trade date January 11). Ultra T-Bond futures will be a natural complement to the U.S. Treasury futures complex, providing market participants with a more direct way to manage long-term risk and add duration to their portfolios.

The deliverable basket for Ultra T-Bond futures will comprise cash Treasury bonds with at least 25 years of remaining term to maturity. By comparison, deliverable securities for the existing T-Bond futures contract are bonds with remaining terms to maturity of 15 years or more. In all other respects, the specifications for Ultra T-Bond futures resemble those for the existing T-Bond futures contract. They are identical in terms of their notional value, minimum tick size, contract critical dates, and coupon.

On October 19, 2009, CME Group issued a Market Regulation Advisory Notice regarding Exchange of Futures for Futures (EFF). The Notice addresses inaccurate information that has circulated recently regarding CBOT rules governing Exchange for Related Positions (EFRPs). CBOT rules do not permit the execution of EFF transactions. CBOT also does not permit contingent or transitory Exchange for Related Position (EFRP) transactions.

Monthly volume in implied, Intercommodity Treasury and Swap spreads continues to reach new highs, with 121,859 spreads traded in September. This includes volume of more than 17,000 in the TUF (2-Year T-Note vs. 5-Year T-Note) spread, surpassing the previous monthly high of 2,037 TUFs traded in August.

CME Group has created the Intercommodity Spread Curve (ICS) Tracker to make it simple and easy for you to track implied Treasury and Swap spreads. The "ICS Curve Tracker" displays the difference in the weighted prices of the two legs of the spread rather than the net change, providing both daily settlement prices and spread history. This provides a time series, allowing you to track Treasury and Swap spreads over time, make decisions about when to put trades on and take them off, and get a clearer picture of profits and losses.

Bloomberg users can now get quotes and chart Treasury and Swap spreads. To view spread quotes on Bloomberg, enter:

Commodity Code (Front Leg) Month(Front Leg) Commodity Code(BackLeg) Month(BackLeg) <CMDTY>

For example, to see quotes on the December 2009 FYT Spread (5-Year T-Note vs. 10-Year T-Note) enter:

FVZ9TYZ9 <CMDTY>

Users can employ the same methodology used in the ICS Curve Tracker to follow ICS levels on Bloomberg via its "Custom Index" (CIX) screen. For example, to create an index of the FYT spread (5-Year T-note vs. 10-Year T-note), open the CIX screen and enter the expression by keying in:

3 * FV1 <cmdty> - 2 * TY1 <CMDTY>

The factors 3 and 2 are used because the FYT spread has a ratio of 3:2. After you have created the custom index you can plot the spread as you would any other contract, and you can also use it in many of Bloomberg's other analytical screens.

Currently, approximately 360,000 option spreads per week are pre-listed on CME Globex, commonly known as Exchange-Defined Spreads (EDS). Less than one percent of these EDS have activity. In response to customer and system provider demand, CME Group has chosen to remove all EDS and make all option strategies 100 percent user defined, effective November 1, 2009. A User Defined Spread (UDS) is an option spread that a trader creates by defining the underlying legs and their ratios. CME Globex takes the legs and creates a tradable instrument that is disseminated to the entire market. If the created spread matches a known CME Group spread type (e.g., a straddle), CME Globex will properly identify the spread as that specific type.

On November 1, 2009:

• CME Group will add the following as recognized spread types: Jelly Roll, Iron Butterfly, Guts, 3-Way Straddle vs. Call, 3-Way Straddle vs. Put, and Vertical. See following link to see list of CME recognized spread types:
   http://www.cmegroup.com/globex/files/ElectronicTradingConcepts.pdf
• CME Group will cease pre-listing option spreads. All option spreads must be created by traders using their trading software’s UDS functionality.
• Horizontals (HO) UDS will be harmonized so all product complexes have the same construction:
  
  • Buy deferred front leg with strike 1
  • Sell near back leg with strike 1

New CME EOS Trader Strategy Builder Window

CME Group has added a "Strategy Builder" window to CME EOS Trader, a new feature designed to simply and improve the creation of User Defined Spreads (UDS). The Strategy Builder Window replaces the "Create Generic" and "Create Covered" buttons on the List Window with a new button called "Build Strategy."

Benefits of the Strategy Builder Window include:

• Fast, intuitive way to create and trade common options strategies and User-Defined Spreads
• Simplified creation of Delta Neutral or "Covered" strategies
• Combines two current windows into one view - without eliminating existing functionality
• The ability to send outright or existing strategies from the List Window to the UDS table, add additional legs, or create Delta Neutral trade strategies.

Webinar Archive: Enhanced Interest Rate Options Trading

On September 30, 2009 a webinar was presented which discussed key changes to trading options on CME Globex, including Strategy Builder and other recent enhancements to CME EOS Trader functionality. Topics included:

• Update on electronic options trading
• The move to User Defined Spreads (UDS) on CME Globex
• The new EOS "Strategy Builder" window and faster strategy entry
• Request for Cross (RFC) functionality

January 2010 Treasury and TOMMI Option Expiration Schedule

Due to the 2009 Christmas holiday, all January 2010 U.S. Treasury options and the Eurodollar Treasury Matched Mid-Curve (TOMMi) options will expire on Thursday, December 24, 2009.

December 24, 2009 hours:

• Open outcry will close at 12:00 p.m.
• CME Globex will close at 12:15 p.m.

The 12:00 p.m. open outcry settlement price will be used to determine if an option is in- or out-of-the-money for the purpose of automatic exercise. Expiring options will continue to trade on CME Globex until 12:15 p.m.

Third Quarter 2009 Quarterly Interest Rate Update

The Quarterly Interest Rate Update (QIRU) for the third quarter of 2009 is now available. The QIRU is a global trading summary of all CME Group interest rate products and includes trading highlights from the quarter and product updates, as well as cash market information.

Latest Issue of CME Group Magazine Now Available

Articles in this issue include:

• A look at the current inflation scenarios and what investors can do to hedge their exposure.
• Individual traders now have another way to enter the global foreign exchange market.
• CME Group's 2nd annual Global Financial Leadership Conference is coming this fall.

Are you LinkedIn to CME Group Interest Rate Markets?

CME Group has created an Interest Rates Products group on the LinkedIn network to connect global interest rate market traders with the exchange in a private forum. Our goal is to help facilitate open discussions within the trading community to network, share ideas and discuss trends. We will also occasionally post news and other relevant information on CME Group interest rate markets.

Your CME Group Interest Rate Products and Services Team

If you have questions on CME Group interest rate markets, please contact a member of the Products and Services team: