• Dynamic Listing of New Exercise Prices in Options on CME Three-Month Eurodollar Futures, on CME Three-Month Eurodollar Futures Calendar Spreads, and on CME One-Month Eurodollar Futures

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6732
      • Notice Date
      • 26 June 2013
      • Effective Date
      • 14 July 2013
    • Effective Sunday, 14 July 2013, for first trade date of Monday, 15 July 2013, Chicago Mercantile Exchange Inc. (“CME”) shall amend terms and conditions for three short-term interest rate option products: options on Three-Month Eurodollar (“ED”) futures, options on ED futures calendar spreads, and options on One-Month Eurodollar (“GBL”) futures.
       
      In each case, the rule change will enable dynamic listing (i.e., on an as-soon-as-possible basis) of new option contracts with exercise price levels that lie outside established exercise price arrays. Appendices 1 through 3, attached, display these rule amendments, as follows:
       
      Appendix 1       CME Rulebook Chapter 452A – Options on ED futures
      Appendix 2       CME Rulebook Chapter 452D – Options on ED futures calendar spreads
      Appendix 3       CME Rulebook Chapter 453A – Options on GBL futures
       
       
      Procedures for Dynamic Listing of New Option Contracts in Open Outcry
      A market participant who seeks dynamic listing of a new option contract (i.e., an option with an exercise price outside the extant exercise price array) shall initiate the process by informing the Exchange Market Reporter(s) in the appropriate option trading pit.
       
      To be eligible for dynamic listing, the new option contract must conform to the pertinent rules for allowable exercise price increments (as set forth in Appendices 1 through 3 herein). Upon verification of its eligibility by the Exchange Market Reporter(s), the new option contract is enabled in the Exchange Price Reporting System, and is then implemented immediately for trading in open outcry.
       
      Thereafter, the new option contract is implemented for trading on the CME Globex electronic trading platform as of the opening of the next following Globex trading session (typically 5:00 p.m. Chicago time on the same day).
       
      (See also CME Group Market Data Advisory Notice Q2009-214, 24 September 2009.)
       
       
      Questions in this matter may be referred to:
       
      Jonathan Kronstein, Products & Services           jonathan.kronstein@cmegroup.com       312 930 3472
      David Reif, Products & Services                        david.reif@cmegroup.com                     312 648 3839
      Frederick Sturm , Research & Development       frederick.sturm@cmegroup.com                312 930 1282
                 
      Media enquiries concerning this Special Executive Report should be directed to:
       
      CME Group Corporate Communications             news@cmegroup.com                           312 930 3434


      Appendix 1
      Amendments to CME Rulebook Chapter 452A –
      Options on Three-Month Eurodollar Futures
       
      (Additions are shown in bold underlined font.)
       
       
      452A01.E. Exercise Prices
       
      1. Twenty-Five Point Exercise Prices
       
      Exercise prices shall be stated in terms of the IMM Index for the Eurodollar futures contract that is deliverable upon exercise of the option and shall be stated in intervals whose last two digits are 00, 25, 50, and 75 ("twenty-five point exercise prices") for all IMM Index levels, e.g., 88.00, 88.25, 88.50, 88.75, etc.
       
      For Options in the March Quarterly Cycle, Options Not in the March Quarterly Cycle, and all Mid-Curve Options
       
      At the commencement of trading in a contract expiration, the Exchange shall list put and call options at the exercise price that is nearest the previous day's settlement price of the respective underlying futures contract. All eligible exercise prices in a range of 5.50 IMM Index points above and below the exercise price that is nearest the futures price shall be listed for trading. Thereafter, the Exchange shall add for trading all eligible exercise prices in a range of 5.50 IMM Index points above and 5.50 IMM Index points below the exercise price nearest the previous day's settlement price. New options may be listed for trading up to and including the termination of trading.
       
      2. Special Listings of 12.5 Point Exercise Prices
       
      Additional exercise prices shall be stated in intervals whose last three digits are 12.5, 37.5, 62.5, and 87.5 ("twelve and a half point exercise prices") for all IMM Index levels, e.g., 93.125, 93.375, 93.625, 93.875, etc.
       
      For Options in the March Quarterly Cycle, Options Not in the March Quarterly Cycle, and all Mid-Curve Options, the Exchange shall list put and call options with a 12.5 point exercise price in a range of 1.50 IMM Index points above and 1.50 IMM Index points below the exercise price [nearest the previous day's settlement price of the underlying futures contract month.
       
      3. Dynamically-Listed Exercise Prices.
      Upon demand and at the discretion of the Exchange, a new option contract with an out-of-current-range exercise price may be added, on an as-soon-as-possible basis, provided that the last two digits of the exercise price of such newly added option contract must be 00, 25, 50, or 75 (e.g., 88.00, 88.25, 88.50, 88.75).
       
      The Exchange may modify the provisions governing the establishment of exercise prices as it deems appropriate.


       
      Appendix 2
      Amendments to CME Rulebook Chapter 452D –
      Options on Three-Month Eurodollar Futures Calendar Spreads
       
      (Additions are shown in bold underlined font.)
       
       
      452D01.E. Exercise Prices
       
      Exercise prices shall be stated in terms of the IMM Index for the Eurodollar futures contract that is deliverable upon exercise of the option and shall be a positive or negative integer multiple of 0.05 IMM Index points, e.g., -0.10, -0.05, 0, 0.05, 0.10, etc.
       
      At the initial listing of One-Year Calendar Spread options contract month, all eligible exercise prices in the range of -1.00 to 1.00 IMM Index points from the exercise price closest to the previous day’s daily settlement price of the underlying calendar spread of Eurodollar futures shall be listed for trading.
       
      Therefore, at the beginning of a new trading session, all eligible exercise prices in the range of -1.00 to 1.00 IMM Index points from the exercise price closest to the previous day’s daily settlement price of the underlying Eurodollar futures calendar spread shall be added for trading, if they are not already listed for trading.
       
      Upon demand and at the discretion of the Exchange, a new option contract with an out-of-current-range exercise price may be added, on an as-soon-as-possible basis, provided that the exercise price of such newly added option contract must be a positive or negative integer multiple of 0.05 IMM Index points (e.g., -0.10, -0.05, 0, 0.05, 0.10).
       
      New options may be listed for trading up to and including the termination of trading. The Exchange may modify the provisions governing the establishment of exercise prices as it deems appropriate.


       
      Appendix 3
      Amendments to CME Rulebook Chapter 453A –
      Options on One-Month Eurodollar Futures
       
      (Additions are shown in bold underline font.)
       
       
      453A01.E. Exercise Prices
       
      Exercise prices shall be stated in terms of the IMM Index for the One-Month Eurodollar futures contract that is deliverable upon exercise of the option, and shall be at intervals of .125 Index Points, e.g., 92.125, 92.25, 92.375, 92.50, 92.625, 92.75, etc.
       
      At the commencement of trading in a contract month, the Exchange shall list put and call options at the exercise price that is nearest the previous day's settlement price of the underlying futures contract.
       
      For option contracts with terms to expiry of 12 months or less, the Exchange shall list all eligible exercise prices within a range of 1.50 IMM Index points above and below the exercise price that is nearest the underlying futures contract daily settlement price. Thereafter, the Exchange shall add for trading all eligible exercise prices within a range of 1.50 IMM Index points above and 1.50 IMM Index points below the exercise price nearest the previous day's underlying futures contract settlement price.
       
      For option contracts with terms to expiry that are greater than 12 months and that are less than or equal to 15 months, the Exchange shall list all eligible exercise prices within a range of 1.75 IMM Index points above and below the exercise price that is nearest the underlying futures contract daily settlement price. Thereafter, the Exchange shall add for trading all eligible exercise prices within a range of 1.75 IMM Index points above and 1.75 IMM Index points below the exercise price nearest the previous day's underlying futures contract settlement price.
       
      For option contracts with terms to expiry that are greater than 15 months, the Exchange shall list all eligible exercise prices within a range of 2.25 IMM Index points above and below the exercise price that is nearest the underlying futures contract daily settlement price. Thereafter, the Exchange shall add for trading all eligible exercise prices in a range of 2.25 IMM Index points above and 2.25 IMM Index points below the exercise price nearest the previous day's underlying futures contract settlement price.
       
      Upon demand and at the discretion of the Exchange, a new option contract with an out-of-current-range exercise price may be added, on an as-soon-as-possible basis, provided that the exercise price of such newly added option contract must be an integer multiple of 0.125 Index points (e.g., 92.125, 92.25, 92.375, 92.50, 92.625, 92.75).
       
      New options may be listed for trading up to and including the termination of trading. The Exchange may modify the provisions governing the establishment of exercise prices as it deems appropriate.

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