CME Launches Implied Butterfly Spread Functionality For Electronic Trading Of CME Eurodollars - New Implied “Out” Trading Functionality For Trading Futures Represents An Industry First

CME, the largest U.S. futures exchange, announced today that it has launched new implied butterfly spread trading functionality for CME Eurodollars on Globex®, the exchange’s electronic trading platform. The new butterfly spread functionality is similar to what currently exists for electronic Eurodollar calendar trades, but now allows users to more efficiently establish and liquidate butterfly positions within the first three years of the yield curve.

The revised implied trading functionality links contract liquidity in CME Eurodollar butterfly spread trades on CME Globex with component outright futures contracts comprising the butterfly spread. The new functionality also includes the following:

Unlike most other futures exchanges, CME will generate both implied “IN” and implied “OUT” bids and offers on butterfly spreads
CME will use both outright and implied calendar spread and leg orders to derive implied bids and offers on butterfly spreads

"This first-of-its kind implied butterfly spread trading functionality on CME Globex further augments the electronic trading environment of our benchmark CME Eurodollar futures,” said Chairman Terry Duffy. “By further adding to our overall liquidity through the introduction of electronic implied butterfly spread trading on CME Eurodollars, our customers worldwide will be able to benefit from more trading volume around the clock, nearly 24 hours every trading day.”

"CME’s ongoing technology initiatives and our strong commitment to growing electronic trading have played key roles in the continued expansion of Eurodollar trading at CME,” said CME Chief Executive Officer Craig Donohue. “In September, CME Eurodollar futures on Globex traded an average of more than one million contracts per day, which represented about 65 percent of total CME Eurodollar volume. As more and more of our Eurodollar volume continues to migrate to CME Globex, we remain focused on making the necessary technology enhancements to ensure our platform can effectively meet the many, varied trading needs of our customers around the world.”

A butterfly spread, quoted in .50 tick increments, is a combination of two calendar spreads such that the makeup is:

Buy 1 - Leg # 1
Sell 2 - Leg # 2
Buy 1 - Leg # 3

Implied “IN” orders in butterfly spreads can be derived from any of the following examples:

existing outright orders in 3 individual contracts (legs);
existing outright orders in 2 individual contract legs and a calendar spread; and,
existing outright orders in 2 outright calendar spreads

Implied “OUT” orders from butterfly spreads can be derived from any of the following examples:

an existing outright order in the butterfly spread and existing outright orders on two of the individual contracts (legs); and,
an existing outright order in the butterfly spread and existing outright orders in a calendar spread and on one of the individual contracts (legs)

“These examples of implied ‘IN’ and ‘OUT’ orders are some of the more common ways to generate implied bids and offers,” said CME Interest Rate Products Director Peter Barker. “However, once the trading community begins to use this functionality more, we expect to see increased use of implied calendars generating more complicated and varied butterfly spread strategies.”

In September, overall CME Eurodollar futures volume hit an all-time record of 32,283,048 contracts, an increase of nearly 30 percent over August 2004. Total volume for January-September 2004 CME Eurodollar futures and options of 322,692,130 has already topped the record volume for 2003 of 309,594,943 contracts. Average daily volume (ADV) for CME Eurodollar futures on Globex in September was over one million contracts as compared to 716,000 contracts in August. As of third quarter 2004, electronic trading represented 61 percent of total CME volume, compared to 52 percent in Q2 2004 and 42 percent in Q3 2003. ADV on CME Globex for September was approximately 2 million contracts, an 87 percent increase from Q3 2003 and up 15 percent from Q2 2004.

Chicago Mercantile Exchange Inc. (www.cme.com) is the largest futures exchange in theUnited States. As an international marketplace, CME brings together buyers and sellers on its trading floors and CME Globex® 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 moved about $1.6 billion per day in settlement payments in the first half of 2004 and managed $39.1 billion in collateral deposits as of June 30, 2004. CME is a wholly owned subsidiary of Chicago Mercantile Exchange Holdings Inc. (NYSE: CME), which is part of the Russell 1000® Index.

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