The S&P Europe 350 is a broad market equity index whose constituents account for approximately 70 percent of the total market value of European equities. The index is the European equivalent of the widely followed S&P 500 in the U.S. market, and is part of the S&P Global 1200. Constituents in the S&P Europe 350 are drawn from 15 European countries, including the United Kingdom. Among the larger companies in the '350' are BP Amoco (UK), Nokia (Finland), Royal Dutch Petroleum (Netherlands), Novartis (Switzerland), Vivendi International (France), Telefonica (Spain), and Siemens (Germany).
The three sector indexes on which futures contracts will be launched concurrently - Financial, Information Technology and Telecom Services - represent economic activities that have generated significant interest in the European equity environment in recent months. Together, these three sectors account for 46 percent of the market capitalization of the S&P Europe 350. Contracts on the remaining seven sector indexes derived from the S&P Europe 350 index will be launched for trading later this year, including Consumer Discretionary, Consumer Staples, Energy, Health Care, Industrials, Materials and Utilities. All sector indexes are calculated using the new GICS classification system that has been jointly developed by MSCI and S&P.
The new futures and options on futures contracts will trade on the MEFF S/MART system, and the transactions will be transmitted electronically to the CME Clearing House. MEFF has joined CME's Clearing House as a Special Clearing Member for these products. MEFF members' trades will clear on CME through MEFF via this special clearing member status.
"The field for European index products will be significantly expanded with the introduction by MEFF and CME of futures and options on the S&P Europe 350 index and its sectors. This move brings their partnership within the GLOBEX® Alliance to a new level," MEFF Chief Executive Officer José Massa, said "We are convinced that the benchmark for Europe will be a broad-based index, and the composition and structure of the S&P Europe makes it the likely winner. The novel alliance of CME, S&P and MEFF answers the new demands that globalization poses to international investors; by virtue of this alliance, these new products can be American in America and European in Europe."
CME Chairman Scott Gordon said, "By combining MEFF's solid electronic trading sytem and strategic location in the heart of Europe with Standard & Poor's indexing expertise and the strength of CME's Clearing House, we are bringing the best European index product to global markets."
Robert A. Shakotko, Managing Director of Index Services, Standard & Poor's, said, "Standard & Poor's is especially proud of its 18-year partnership with CME in bringing equity index futures to the trading community and of the long track record of success for S&P futures. Our new partnership with MEFF contributes to our goal of having S&P index products trading in all the world's major financial markets."
The agreement between MEFF and CME also offers customers a margin offset between the European indexes traded at MEFF and the flagship S&P 500 products traded on Chicago Mercantile Exchange Inc. CME's S&P 500 and E-mini S&P 500 are the most active equity index futures contracts in the world.
CME members and their customers will be granted cross-exchange access to trade the index contracts on MEFF, with CME members gaining access to trade on the MEFFS/MART system. (Regulatory approval for U.S. customers to trade these products is pending.)
Standard & Poor's granted CME an exclusive license to trade futures and futures options on S&P indexes, stemming from their successful partnership dating to the 1982 launch of S&P 500 futures contracts on CME. CME has sublicensed the S&P Europe 350 Index and its sectors to MEFF for trading.
The S&P Europe 350 Index capitalizes on S&P's strengths in developing portfolio indexes that provide regional sector representation, and serve as investable benchmarks. Since S&P indexes feature highly liquid and investable securities, fund managers can easily replicate them. Standard & Poor's provides additional information, as well as free real-time and 12 years of historical data, on its Web site, www.spglobal.com.
Exchange officials said the S&P Europe 350 Index and its sectors will appeal to a variety of market participants, including:
- Investors who want to use regional portfolios as a proxy for the investable universe in the region;
- Fund managers with a strategy to replicate an index portfolio, who prefer a representative index without more stocks than necessary;
- Strategists following a sector/country mix allocation;
- Active investors looking for sector or regional indexes with low turnover rates; and
- Equity Derivative Groups that use index futures to hedge index portfolio risk.
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 currencies and agricultural commodities. All over the world, pension funds and investment advisers, portfolio managers, corporate treasurers, commercial and investment banks, broker/dealers and individuals are among those who trade on CME as an integral part of their financial management strategy. In 2000, more than 231 million contracts with an underlying value of more than $155 trillion changed hands at CME. The exchange moves about $1 billion per day in settlement payments, manages $30 billion in collateral deposits and administers more than $1 billion of letters of credit. On November 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.
Standard & Poor's, a division of The McGraw-Hill Companies, provides independent financial information, analytical services and credit ratings to the world's financial markets. Among the company's many products are the S&P Global 1200, the world's first real-time, investable global equity index, the S&P 500, the premier U.S. portfolio index, and credit ratings on more than 220,000 securities and funds worldwide. With more than 5,000 employees located in 21 countries, Standard & Poor's is an integral part of the global financial infrastructure.
