• Volatility-Quoted FX Options Starting Sunday, March 9, 2008 - UPDATED INFORMATION

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      • Market Data Distributors
      • From
      • Market Data Operations
      • #
      • Q2008-017
      • Notice Date
      • 23 January 2008
      • Effective Date
      • 09 March 2008
    • 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                                       205
      RLC Market Data                                            12
       
      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.
       
      Please refer to Exhibit 2, attached, for transmission formats and fractional indicator information.
       
      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 held on Friday, February 29, 2008 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
      Price Formats
      Australian Dollar
      American
      Monthly
      3A
      V6A
      ATM ± 8,
      50 points
      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.
      Australian Dollar
      American
      Weekly
      3A
      VA(1-5)
      British Pound
      American
      Monthly
      3B
      V6B
      ATM ± 8;
      10 points
      ATM ± 24;
      50 points
      British Pound
      American
      Weekly
      3B
      VB(1-5)
      British Pound
      European
      Monthly
      3B
      VXB
      British Pound
      European
      Weekly
      3B
      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
      3J
      V6J
      ATM ± 24;
      50 points
      ATM ± 16;
      5 points
       
      Japanese Yen
      American
      Weekly
      3J
      VJ(1-5)
      Japanese Yen
      European
      Monthly
      3J
      VXJ
      Japanese Yen
      European
      Weekly
      3J
      VJ(A-E)
      Swiss Franc
      American
      Monthly
      3S
      V6S
      ATM ± 8;
      .0.00005 points
      Swiss Franc
      American
      Weekly
      3S
      VS(1-5)
      Swiss Franc
      European
      Monthly
      3S
      VXS
      Swiss Franc
      European
      Weekly
      3S
      VS(A-E)
       
       

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