CME Chairman Terry Duffy and CBOT President and CEO Bernard W. Dan lauded Chairman Greenspan's statement that the spread of derivatives has reduced rather than increased the risk that a wave of losses in some markets could trigger a financial meltdown. The exchanges also noted the salient features of exchange-traded derivatives as they relate to recent comments and coverage in the media.
"We sincerely appreciate Chairman Greenspan's continued recognition of the importance of derivatives in allowing the world to manage its risk," said Duffy.
Duffy also underscored that in any discussion of derivatives, it is important to distinguish between exchange-traded contracts and over-the-counter derivatives. "We should not ignore," said Duffy, "the fundamentally sound nature of exchange traded futures and options contracts, which provide valuable tools that help institutions, individuals and corporations manage risk in a regulated environment. Derivatives products traded on exchanges, such as Chicago Mercantile Exchange, are transparent allowing for 'price discovery,' with real-time prices published on all contracts for the world to see. We provide transparent, centralized and liquid markets that allow investors to easily enter and exit positions anonymously, opposite multilateral counterparties. The CME Clearing House guarantees each and every transaction that takes place on our exchange, providing a central counterparty clearing mechanism that requires timely posting of collateral from each party and ensures all trades are 'marked to market' twice daily and settled every day. And, contrary to opaque, bilaterally negotiated OTC transactions, exchange traded futures and options adhere to standardized capital and accounting treatment."
CBOT's Dan added, "Exchange-traded derivatives have made the world a safer place because they have made it possible for businesses to more effectively manage their risk. I believe the combined self-regulatory practices of our exchange and the Board of Trade Clearing Corporation, with its triple A-rated guarantee, provide our customers with the highest level of confidence of any marketplace; a level of confidence that has been earned over time. We have been in business for nearly 155 years, and our market surveillance programs are unsurpassed. When you combine these programs with the integrity, transparency, flexibility and liquidity found in our markets, they contribute to the Chicago Board of Trade's international reputation as an institution that protects its markets from manipulation and its market participants from abusive practices.
CME and CBOT are the two largest futures exchanges in the United States. Combined trading activity in futures and options on futures contracts on the two exchanges in 2002 totaled 902 million contracts in federally regulated financial and commodity products.
Chicago Mercantile Exchange Inc. (www.cme.com) is the largest futures exchange in the United States and the second largest exchange in the world for the trading of futures and options on futures. As an international marketplace, CME brings together buyers and sellers on its trading floors and GLOBEX® around-the-clock electronic trading platform. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moves an average of about $1.8 billion per day in settlement payments and manages $27.4 billion in collateral deposits. On Dec. 6, 2002, Chicago Mercantile Exchange Holdings Inc. (NYSE: CME) and its CME subsidiary became the first publicly traded U.S. financial exchange. For more information about Chicago Mercantile Exchange Holdings Inc. or about Chicago Mercantile Exchange's products, visit the CME Web site at www.cme.com.
The Chicago Board of Trade (CBOTÒ), established in 1848, is the world's oldest derivatives exchange. More than 3,600 members trade 47 different futures and options-on-futures products at the CBOT, resulting in 2002 annual trading volume of more than 344 million contracts. Early in its history, the CBOT listed for trading only agricultural products such as corn, wheat, and oats. In 1975, the CBOT expanded its product offerings to include financial contracts, initially, the U.S. Treasury Bond futures contract which today is one of the world's most actively traded contracts. The CBOT product listings expanded again in 1982 when options on futures contracts were introduced, and on October 6, 1997, the CBOT again made history when it launched futures and options-on-futures on the Dow Jones Industrial Average. For more information about the CBOT's products and markets, visit the exchange web site at www.cbot.com.
