Clearing House Advisory Notice
To | CFO's, Treasury Staff, Back Office Managers
From | CME Clearing House
Subject | Thirteen New Foreign Exchange Futures Contracts
Effective Date | 05/03/02
Notice Number | 02-33
The Chicago Mercantile Exchange Inc. (CME) is pleased to announce that on Thursday, May 16th, 2002, it will launch thirteen new foreign exchange futures contracts, including: USD/SKr & USD/NKr, EC/AD, EC/CD, EC/SKr, EC/NKr, CD/JY, AD/CD, AD/NE, AD/JY, BP/SF, BP/JY and SF/JY. Bank Accounts Prior to launch, banking relationships must be established at one of the approved settlement banks for purposes of effecting settlement transactions. The settlement currencies, for which bank accounts must be opened, are Australian dollar, Canadian dollar, Swedish krone, Norwegian krone, New Zealand dollar, Swiss franc and Japanese yen. A clearing firm wishing to trade and to settle the above-mentioned products must submit in writing their associated account numbers and banking institutions. The letter must be received by May 9, 2002. The CME will utilize four U.S. banks for settlement purposes. They include: Bank One, N.A.* Harris Trust & Savings Bank Brown Brothers Harriman & Co. JP Morgan Chase Bank* *Bank accounts for Bank One, N.A. and JP Morgan Chase Bank will be operated out of London. For each cross rate contract traded, the Clearing House will accept each currency as a valid form of performance bond collateral. Settlement The Clearing House will issue foreign currency denominated settlement instructions on the trade date for value on a T+2 basis except for Canadian currency which is T+1. This will only be done at the RTH settlement cycle unless market volatility requires a change to include the ITD cycle. The settlement banks will confirm settlements by 6:40 a.m. on T+1, as per usual. Combined Cash Flow The CME minimizes bank transaction costs for its firms by employing a foreign currency settlement methodology called Combined Cash Flow (CCF). Significant features of CCF: There will not be an automatic release of excess foreign currency performance bond cash. However, withdrawals of currency can be made at any time via submission of a C21 withdrawal. Settlement variation collects will not be released automatically, but will be credited to the firm�s performance bond account at the Clearing House. Settlement variation pays in a particular currency will be first compared to the firm�s foreign currency cash performance bond on deposit, and deducted from the amount on deposit with the Clearing House. Should the amount of foreign currency on deposit be equal to or greater than the amount of the pay, the CME will debit that amount from the firm�s performance bond cash on deposit, and will not send a separate instruction to the firm�s bank. Should the amount of foreign currency on deposit be less than the amount of the pay, the Clearing House will issue a settlement instruction to debit the firm�s foreign currency account at the settlement bank for the remaining amount of the pay. The CCF procedure reduces the number of bank transactions and saves all participants transaction costs, yet gives the firm enough flexibility to withdraw currency when desired. MoneyChanger All of the new settlement currencies associated with the launch of the thirteen cross rate contracts is eligible for trading through MoneyChanger. MoneyChanger is an optional service in which firms may buy or sell odd-lot foreign currencies for settlement on a T+1 basis. This service is used exclusively for buying or selling foreign currency to meet or to redeem variation pays and collects. For information regarding the MoneyChanger service or to request a set-up form in which to add your additional foreign currency set ups, please contact Marc Garcia, Supervisor, Financial Management at 312/930-2327.