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CFTC Recognizes New Exchange For Single-Stock Futures

Date 14/06/2002

On June 11, 2002, the Commodity Futures Trading Commission (CFTC) granted contract market designation to OneChicago, LLC Futures Exchange, (OneChicago). This is the CFTC's third exchange designation to permit trading of futures contracts on individual securities and narrow-based securities indices (together, security futures products or SFPs) as the CFTC continues with its implementation of the Commodity Futures Modernization Act of 2000 (CFMA) that lifted an almost twenty-year ban on these contracts.

OneChicago is owned and operated by the Chicago Mercantile Exchange (CME), Chicago Board Options Exchange (CBOE) and the Board of Trade of the City of Chicago, Inc. (CBOT). According to the Exchange's application for designation, CME, a designated contract market, will perform certain self-regulatory functions for the new exchange, including market and financial surveillance, and trade practice investigations. The National Futures Association (NFA), a registered futures association, will provide dispute resolution services for the new exchange. OneChicago has selected the CBOE match engine, known as CBOEdirect, as the platform for the electronic trading facility. Access to CBOEdirect would be through either the CBOE Network or the GLOBEX Network for trading and other front-end access; persons that are already connected to either CBOEdirect or GLOBEX would be able to connect to CBOEdirect for purposes of trading security futures products using those connections.

The Options Clearing Corporation (OCC), in conjunction with CME, both derivatives clearing organizations, will provide clearing and settlement services for the new exchange. Under OneChicago rules, all transactions executed on OneChicago must be entered into or guaranteed by a OneChicago clearing member. OneChicago Clearing Members must be clearing members of either OCC or CME; such clearing members must meet OCC's or CME's minimum capital requirements.

CFTC Chairman James E. Newsome commented, "I am delighted to announce the approval of another platform on which to trade security futures. The various exchanges and firms have invested enormous time, effort, and resources in preparing themselves to offer these important new risk management tools to market participants. I look forward to seeing how the product will be utilized by both existing futures market participants and newcomers. Because all that now remains to be completed before security futures can begin trading are final joint rules on such things as margin, I am also pleased to announce that Chairman Pitt and I have been in close contact this week and are both eager to resolve the outstanding issues as quickly as possible."