Market Data Advisory Notices
To | Market Data Distributors
From | Market Data Operations
Subject | Volatility-Quoted FX Options Starting Sunday, March 9, 2008 - UPDATED CHANNEL AND GROUP CODE INFORMATION
Notice Date | 2008-02-13
Notice Number | Q2008-034
Effective Date | 2008-03-09
Please note the channel and group code changes in RED in the attached Exhibit. As previously announced, starting Sunday, March 9, 2008 (trade date March 10), CME Group will begin trading volatility-quoted FX options. Volatility – based quoting facilitates “delta-neutral” trading, virtually eliminating the execution risk that is inherent to trading in premium-quoted options. Volatility-quoted options will be available in both American- and European-style expiration on the following options products: · EuroFX · British Pound · Japanese Yen · Canadian Dollar · Swiss Franc · Australian Dollar (American-style only, initially) These products will be fully fungible with the existing premium-quoted FX options and futures. The table in Exhibit 1, on the following page, details product and group code information for each product. MDP Channel Information Market data for foreign currency volatility-quoted options will be disseminated via the Market Data Platform as follows: Message Type MDP Channel ITC 2.1 Market Data 214 RLC Market Data 6 Market Depth Information Market data messages in the ITC 2.1 format will display top of book only. Market data messages in the RLC format will display quotes 5 deep . This feature is new with this launch and is a departure from the top of book display associated with other Globex-traded options. Volatility Pricing Conventions The ITC 2.1 market data messages require no changes to support volatility-quoted options. Volatilities will be transmitted in the price field, and will be represented in percentage form; i.e. a volatility of 6 1/4% will be represented by .0625; this will be represented in the ITC 2.1 transmission format as 0006250, with a fractional indicator of 3, which will be interpreted as 6.250. For RLC message enhancements, please refer to the Volatility-Quoted Options Client Impact Assessment document. Volatility Display Recommendations CME Group recommends that quote vendors display volatility rates in percentage terms , followed by the percent sign (%) if possible. If not possible, please be sure to indicate in a prominent place that the volatility rates are displayed in percentage terms, not in full decimal terms. For example, a volatility of 6 ¼% can be expressed as 6.25%; in full decimal terms, however, this becomes 0.0625. Trading Hours Volatility-quoted FX options will trade con the CME Globex platform from 5:00 PM Sunday through 4:00 PM Friday, Central Time. Underlying Futures Contract The underlying futures contract for the volatility-quoted option is the same underlying futures as the premium-based option counterpart. For example, the underlying future for both the premium and volatility quoted British Pound options is the British Pound futures contract. Minimum Tick & Value The minimum tick is 0.025 of a volatility point, equal to $1.25/tick. Contract Months Valid contract months are four months in the March Quarterly Cycle and two not in the March quarterly cycle (serial months), plus four weekly options. Initial contracts will be the April, May, June, September, December 2008 and March 2009. ITC 2.1 Ticker Testing ITC 2.1 ticker testing will be conducted on Friday, February 29 and Friday, March 7, 2008 at approximately 5:00 PM Central Time. RLC Testing Customers can now certify for volatility-quoted options in New Release via AutoCert+. This brief certification is mandatory for all systems that will provide trading access to these options. Exhibit 1 Volatility-Quoted FX Options Codes
Volatility-Quoted Option Product | Expiration Style | Listing Term | Group Code | Ticker Code | Exercise Price Listings and Intervals
Australian Dollar | American | Monthly | 3A | V6A | ATM ± 8, 50 points
Australian Dollar | American | Weekly | 3A | VA(1-5)
British Pound | American | Monthly | B3 | V6B | ATM ± 8; 10 points ATM ± 24; 50 points
British Pound | American | Weekly | B3 | VB(1-5)
British Pound | European | Monthly | B3 | VXB
British Pound | European | Weekly | B3 | VB(A-E)
Canadian Dollar | American | Monthly | 3C | V6C | ATM ± 16; 5 points ATM ± 8; .0.00005 points
Canadian Dollar | American | Weekly | 3C | VC(1-5)
Canadian Dollar | European | Monthly | 3C | VXC
Canadian Dollar | European | Weekly | 3C | VC(A-E)
Euro FX | American | Monthly | 3E | V6E | ATM ± 4; 0.005 points ATM ± 8; 10 points
Euro FX | American | Weekly | 3E | VE(1-5)
Euro FX | European | Monthly | 3E | VXT
Euro FX | European | Weekly | 3E | VT(A-E)
Japanese Yen | American | Monthly | 3Y | V6J | ATM ± 24; 50 points ATM ± 16; 5 points
Japanese Yen | American | Weekly | 3Y | VJ(1-5)
Japanese Yen | European | Monthly | 3Y | VXJ
Japanese Yen | European | Weekly | 3Y | VJ(A-E)
Swiss Franc | American | Monthly | S7 | V6S | ATM ± 8; .0.00005 points
Swiss Franc | American | Weekly | S7 | VS(1-5)
Swiss Franc | European | Monthly | S7 | VXS
Swiss Franc | European | Weekly | S7 | VS(A-E)
Format | American Style Volatility Rate | European Style Volatility Rate
Actual | 10.505 | 10.505
ITC 2.1 Transmission | 0010505 | 0010505
ITC 2.1 Fractional Indicator | 3 | 3
RLC Format | 10505 | 10505
Preferred Display | 10.505% | 10.505%
Note: If possible, please display the % (percent) sign in the preferred display; if not possible, please explain elsewhere that volatility quoted options are expressed in percentage terms, not decimal terms.