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Chicago, Paris, Singapore Form the First Global Electronic Trading Alliance

Date 08/02/1999

A group of prominent international financial exchanges today announced the first major electronic trading alliance to offer trading of futures and options spanning the world's three major time zones. The Chicago Mercantile Exchange (CME), the Société des Bourses Françaises (SBF Paris Bourse) and the Singapore International Monetary Exchange (SIMEX) signed a tripartite agreement covering trading in the North American, European and Asian time zones using a common electronic trading platform, to begin in the third quarter of this year. Called the GLOBEX® Alliance, the agreement forms a network of exchanges to offer common access to the broadest range of derivatives products denominated in the world's leading currencies. The alliance will give members of each institution cross-exchange trading privileges with respect to the others' electronically traded products, as well as opportunities for cost savings with cross-margining between products traded at the exchanges. As part of the agreement, SIMEX will adopt the NSC electronic trading platform developed by the SBF as its new electronic trading system, putting all three exchanges on the same trading platform. The agreement includes the two subsidiaries of the Paris stock exchange for futures trading, MATIF SA and MONEP SA. There are long-standing relationships between the CME and SIMEX in open outcry trading, and between the CME and the French exchanges in electronic trading. The new agreement marks the first co-operative effort between the Paris and Singapore exchanges, as well as the first co-operative electronic trading effort between the CME and SIMEX. The CME introduced its new electronic trading system, GLOBEX®2, in September 1998. The system is based on the NSC platform acquired from the SBF in a state-of-the-art technology swap for the CLEARING 21® system. The French will adopt CLEARING 21, developed by the CME and the New York Mercantile Exchange, by June. MATIF and the CME established their relationship in 1990 when the French exchange joined the Merc as a partner in the original GLOBEX. The CME and SIMEX have the world's oldest and most successful international trading link with the mutual offset system (MOS) they established in 1984. The system enables members to establish positions on one exchange and offset them on the other. As part of today's agreement, the two exchanges extended the MOS - which was set to expire in September 2000 - until 2004. The MOS currently covers Eurodollars, Euroyen and Japanese Government Bonds. Said CME Chairman Scott Gordon: "The Chicago Mercantile Exchange is particularly pleased to sign this agreement with our two long-standing international partners. As electronic trading becomes ever more important in this dynamic environment, the agreement furthers our strategy for increasing product breadth and distribution and helping to reduce our technology costs. This is one in a series of major upcoming initiatives for the CME as we continue to pursue discussions with other potential major alliance partners. It continues the CME's tradition of fully understanding and responding to the needs of its customers." Said Paris Bourse Chairman and CEO Jean-Francois Theodore; "The Paris Bourse is extremely pleased to sign this historic Cupertino agreement between three prominent exchanges present in three different time zones. This agreement creates a real world-wide network of electronic trading, benefiting our members and also developing on a European scale with the Spanish MEFF and the Italian MIF through Euro Globex®. The Paris Bourse is also particularly proud that the first global network is based on its NSC technology now acquired by the SIMEX, (after thirteen other exchanges) thus becoming a world-wide standard." SIMEX Chairman Victor Liew said, "SIMEX is proud to co-pioneer another groundbreaking trading alliance on the basis of its strong and successful relationship with the CME. This move will further benefit our members and customers by expanding the product range and liquidity. This Alliance will fortify SIMEX's position as an international exchange for the trading of Asian derivatives and the Asian Exchange for international derivative products." The networks of each exchange will be interconnected through a common interface, also known as a Hub API (Application Programming Interface). The routing and messaging technology gives exchange members direct access to the whole range of electronically traded futures and options offered by the three exchanges. Orders will then be routed to the appropriate trading engine to be matched and confirmed back to the member. As a result of the Hub API, independent software vendors will be able to efficiently connect their front-end systems to the separate platforms of each exchange through a single interface. The GLOBEX Alliance also intends to establish Cupertino on clearing whereby each clearing house will cross margin interest rate and equity positions with the other two clearing houses in order to offer members a simple and cost-effective way to reduce capital requirements (see note). The strategic alliance also will establish a set of harmonised electronic trading rules and policies, ensuring that traders are not burdened by different sets of policies at each exchange. The agreement calls for the inclusion of additional exchanges with the approval of the three initial parties. The exchanges also have agreed to share in the costs of further enhancements of and modifications to the NSC system. The Chicago Mercantile Exchange trades futures and options on futures on agricultural commodities, foreign currencies, interest rates and stock indexes. The MATIF and MONEP trade futures and options on interest rates, commodities, stocks and stocks indexes. The Singapore International Monetary Exchange trades futures and options on interest rates, stock indexes and energy.