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.