The contracts will be the first chemical futures to be traded as well as the first time chemical futures products will trade on a futures exchange with an electronic link to an online business-to-business (B2B) marketplace.
"Chemical futures trading is a new frontier in the derivatives sector," said CME Chairman Scott Gordon. "These new futures contracts represent a new line of risk management tools offered by CME and will further enhance the value-added services CheMatch already offers to its customers."
"The ability to hedge intermediate and downstream products using regulated futures is an important milestone for the chemical industry", noted CheMatch President Larry McAfee. "This new futures market is a natural extension of the market for physical products and their over-the-counter financial derivatives currently traded on the CheMatch exchange."
"CME-CheMatch benzene and mixed xylenes futures will bring new operational efficiencies and hedging opportunities to the chemicals markets, along with the liquidity, transparency, price discovery and clearing house credit risk management that CME has always offered in its markets," said CME President and CEO Jim McNulty.
Benzene is used in the production of such products as plastics, fabrics, pharmaceuticals, adhesives, detergents, dyes, paints and disinfectants. Trace amounts of benzene occur naturally in crude oil, and benzene can be synthesized from other petroleum-based chemicals as well as from coal or natural gas. Most benzene is produced in conjunction with the gasoline refining process.
Mixed xylenes are used in the production of polyester plastics and fibers for such products as fabrics, carpets, soft drink bottles and packaging. They are also used in other plastics, solvents, adhesives, epoxy resins, dye, paint and as a gasoline additive. Mixed xylenes, composed of paraxylene, metaxylene and orthoxylene, plus ethylbenzene, are produced as a byproduct of the oil refining process and from the conversion of other petrochemicals.
Because benzene and mixed xylenes are used in many products and prices can be volatile, futures contracts for them could have broad appeal within a number of industries, according to CME and CheMatch officials.
Each CME-CheMatch futures contract on benzene or mixed xylenes will represent 42,000 gallons of the chemical and will be cash settled at contract expiration to an index of monthly contract prices compiled and calculated by DeWitt & Company, a Houston-based international petrochemical consulting firm. Contracts will be quoted in U.S. dollars per gallon, with a minimum price increment (tick) of $0.001 per gallon valued at $42.00 per contract.
The contracts will trade on CME's GLOBEX®2 electronic trading system from 8:30 a.m. to 2:15 p.m. (Central Time), Monday-Friday. Contract will be offered in all 12 calendar months, with six consecutive months listed for trading at all times.
Linked via the Internet, CheMatch.com's secure, neutral trading platform and the GLOBEX2 system will provide seamless transitions between the two sites and offer chemical companies, traders and financial institutions the ability to trade both physical and derivative products. Members of the CheMatch.com Global Trading Networksm will be able to enter trades on GLOBEX2 through the CheMatch.com platform at www.chematch.com. The new products will trade exclusively electronically on GLOBEX2 and clear with CME clearing firms through CME's state-of-the-art CLEARING 21® clearing system.
Chicago Mercantile Exchange Inc. (www.cme.com) is an international marketplace that brings together buyers and sellers on its trading floors and GLOBEX®2 around-the-clock electronic trading system. CME offers futures contracts and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. On Nov. 13, 2000, CME finalized its transformation into a for-profit, shareholder-owned corporation as it became the first U.S. financial exchange to demutualize by converting its membership interests into shares of common stock that can trade separately from exchange trading privileges. The exchange moves about $1.5 billion per day in settlement payments and manages $28.4 billion in collateral deposits.
CheMatch.comSM - The Global Trading NetworkTM is a business-to-business, Internet-based market place for purchasers and sellers of bulk commodity chemicals, plastics, feedstocks and fuel products. The marketplace incorporates a real-time, interactive trading exchange where members can trade 24 hours a day, seven days a week. Since inception of the CheMatch.com Global Trading Network, over four million metric tons of product have been transacted, representing a cumulative notional value of over 1.1 billion dollars. Strategic and financial investors include Battery Ventures, Bayer AG (NYSE: BAYZY), (FSE: BAYG.F), E.I. DuPont de Nemours and Company (NYSE:DD), GE (NYSE:GE), Methanex (Nasdaq:MEOH;TSE:MX), Millennium Chemicals (NYSE:MCH), H. Muehlstein & Co., Inc., Reed Elsevier, Sprout Group, Stolt-Nielsen S.A. (Nasdaq:STLTF), (Nasdaq:STLBY), (Oslo Stock Exchange:SNIB) and YourEnergySource.com. Headquartered in Houston, CheMatch.com has international offices in Germany, Korea, Bangkok, Rotterdam and Singapore.
