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The new settlement procedure is similar to one instituted on the final day of trading last year. Daily settlement prices for domestic stock index futures and options will be determined on the basis of their "fair value" relative to the daily close of the underlying cash index as reflected at 3:05 p.m. (Central Time).
In addition, stock index futures and options will close at 3:05 p.m. (Central Time) at each quarter's end, five minutes after the close of cash equity trading-instead of the usual 15 minutes after the cash markets' close-in order to coordinate more closely with the close of cash equity markets and index-related products on other exchanges.
The lead months of all CME domestic stock index futures and options will settle according to the new procedure, including the S&P 500, E-mini S&P 500, Nasdaq 100, E-mini Nasdaq 100, S&P 500/BARRA Growth, S&P 500/BARRA Value, S&P MidCap 400 and Russell 2000 indexes.
Fair values will be determined by a survey of market participants by exchange staff. Settlement prices will be made available shortly after the close. Fair value represents the level where cash-futures arbitrage would not be profitable, in the absence of transactions costs. It is the level at which futures theoretically should-but do not necessarily-trade. Fair value is calculated as a function of the cash or spot index value, plus financing charges, less any dividends that would accrue with the purchase and carry of all index constituents until the final futures settlement date.
Many financial news media regularly publish estimates of fair value for stock index futures contracts.
Regular floor trading hours for stock index futures and options are from 8:30 a.m. to 3:15 p.m. (Central Time).
