CME Announces Latest Expansion of Equity Index Product Line

CME Announces Latest Expansion of Equity Index Product Line
2005-05-05 07:30 (New York)

with Futures on the Highly Successful ETFs - NASDAQ-100(R) Index Tracking
Stock; S&P 500(R) Depositary Receipts; and iShares Russell 2000(R)



CHICAGO, May 5 /PRNewswire-FirstCall/ -- CME, the largest U.S. futures
exchange, today announced it will launch futures contracts on three of the
largest and most actively traded Exchange Traded Funds (ETFs) in the U.S. New
CME ETF futures contracts on NASDAQ-100(R) Index Tracking Stock
(ticker: QQQQ), S&P 500(R) Depositary Receipts (ticker: SPY) and iShares
Russell 2000(R) (ticker: IWM) are scheduled to begin trading on the exchange's
CME(R) Globex(R) electronic trading platform on June 6, 2005. The futures on
the S&P 500 and NASDAQ-100 will trade exclusively at CME.

ETFs, which are baskets of securities designed to track an index,
represent one of the fastest growing investment vehicles in today's equity
markets. Over the past 10 years, ETF assets under management have grown from
approximately $1 billion to about $226 billion at the end of 2004. The S&P
500, NASDAQ-100 and Russell 2000 ETFs maintain a combined total of more than
$82 billion in assets under management.

"With today's announcement, we are bringing together two of the most
successful financial product innovations in the last decade, the CME E-
mini(TM) stock index futures and ETFs," said CME Chairman Terry Duffy. "More
than 92 percent of all U.S. equity index derivatives trading takes place at
CME. With more than $82 billion in assets under management, the S&P 500,
NASDAQ-100 and Russell 2000 EFTs are the largest, most well-known ETFs in the
U.S. With the launch of these new ETF futures, we are continuing to build on
our success in developing innovative new products to meet the needs of
investors while providing more value for our shareholders."

"Equity market participants want access to a broad array of products and
markets, and the growth of our CME E-mini(TM) S&P 500, CME E-mini NASDAQ-100
and CME E-mini Russell 2000 contracts makes these ETF products a natural
addition," added said Craig Donohue, CME Chief Executive Officer. "Our CME E-
mini S&P 500, CME E-mini NASDAQ-100 and CME E-mini Russell 2000, which average
more than 800,000, 340,000 and 110,000 contracts respectively per day, have
demonstrated the strong demand for smaller-sized futures contracts. With the
addition of our new ETF futures, which are even smaller, we believe we will be
able to attract more new customers - particularly sophisticated retail equity
investors -- to CME."

While CME currently offers both a standard size and an "E-mini" size
contract on all three indexes, the new ETF futures will have a significantly
smaller notional value of one-fifth of the CME E-mini contract. The S&P 500
Depositary Receipts futures contract will have a notional value of
approximately $11,600, the NASDAQ-100 futures contract will have a notional
value of approximately $7,000 and iShares Russell 2000 futures will reflect a
notional value of approximately $12,300. With the smaller size, these
contracts are designed to appeal to sophisticated individual investors.
Unlike CME's other equity products, which are cash settled, ETF futures will
be physically delivered.

"Since its inception in 1993, the S&P 500 Depositary Receipts (SPDR) has
accumulated approximately $50 billion in assets, and is the most actively
traded security in the world in terms of value traded," says Robert Shakotko,
Managing Director of Index Services at Standard & Poor's. "The new CME ETF
futures contracts on the SPDR should provide investors with another strong
product to trade the overall direction of the market."

"The launch of a futures contract on the NASDAQ-100 Index Tracking Stock
(QQQ(R)) is a significant development that reinforces our relationship with
the CME," said John Jacobs, CEO of Nasdaq Global Funds, Inc. "QQQ is the most
actively traded ETF in the world and this development gives investors another
opportunity to own a product that is based on NASDAQ's largest non-financial
companies across major industry groups including computer and office
equipment, computer software and services, telecommunications, retail and
wholesale trade, and biotechnology."

"CME Futures contracts on the iShares Russell 2000 ETF should prove to be
an important tool for professionals investors looking for a way to manage
their exposure in the small-cap market segment," said Kelly Haughton,
Strategic Director of Russell indexes. "Overall, the Russell iShares family of
ETFs, in particular the iShare Russell 2000 ETF, has been experiencing
significant increases in the average daily dollar volume of trading, growth in
assets and a surge in new cash flow from investors."

One of the advantages of ETF futures, like all futures, is that they will
allow investors to take a short position without borrowing shares from a
broker, which is necessary to sell short securities or ETFs. Also, the initial
margin with ETF futures will generally be lower than the Regulation T margins
associated with the underlying ETF.


Following are the specifications for the contracts:

Contract Size -- One-hundred (100) ETF shares of S&P 500 (SPY) or
iShares Russell 2000 (IWM); or two-hundred (200)
shares of NASDAQ-100 Tracking Stock(SM) (QQQQ)

Contract Months -- March Quarterly Cycle and serial months

Trading Hours -- Traded on the CME(R) Globex(R) electronic trading
platform from 8:30 am to 3:15 pm Mondays through
Fridays (Chicago times)

Minimum Price
Fluctuation -- $0.01 or $1.00 per contract in context of SPYs and
IWM; $2.00 per contract in context of QQQs

Trading Halts -- Trading halts are coordinated with halts in the
underlying ETFs

Position Limits -- 13,500 contracts for QQQs and IWM; 22,500 contracts
for SPYs net long or short during the last five (5)
trading days of an expiring contract

Final Settlement
Date -- Third Friday of the contract month

Last Trading Day -- Trades until the normal close of trading on the Final
Settlement Date

Final Settlement -- Final settlement is accomplished through delivery of
the requisite number of ETF shares



For more information on these products, please visit
http://www.cme.com/etf-futures .


Chicago Mercantile Exchange Inc. ( http://www.cme.com ) is the largest
futures exchange in the United States. As an international marketplace, CME
brings together buyers and sellers on CME Globex(R) electronic trading
platform and on its trading floor. CME offers futures and options on futures
primarily in four product areas: interest rates, stock indexes, foreign
exchange and commodities. The exchange moved about $1.42 billion per day in
settlement payments in 2004 and managed $44.3 billion in collateral deposits
as of March. 31, 2005, including $3.99 billion in deposits for non-CME
products. CME is a wholly owned subsidiary of Chicago Mercantile Exchange
Holdings Inc. (NYSE: CME), which is part of the Russell 1000(R) Index.


Statements in this news release that are not historical facts are forward-
looking statements. These statements are not guarantees of future performance
and involve risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual outcomes and results may differ materially from
what is expressed or implied in any forward-looking statements. More detailed
information about factors that may affect our performance may be found in our
filings with the Securities and Exchange Commission, including our most recent
quarterly report on Form 10-Q, which can be obtained at its Web site at
http://www.sec.gov . We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.


Chicago Mercantile Exchange, CME, the globe logo and CME Globex are
registered trademarks of Chicago Mercantile Exchange Inc. E-mini is a
trademark of CME. CLEARING 21 is a registered trademark of CME and New York
Mercantile Exchange, Inc. S&P, S&P 500, NASDAQ-100, Nikkei 225, Russell 1000,
Russell 2000, TRAKRS, Total Return Asset Contracts and other trade names,
service marks, trademarks and registered trademarks that are not proprietary
to Chicago Mercantile Exchange Inc. are the property of their respective
owners, and are used herein under license. Further information about CME and
its products is available on the CME Web site at http://www.cme.com .


Nasdaq(R), Nasdaq-100 Index(R), Nasdaq-100 Index Tracking Stock(R) and
QQQ(R) are registered trademarks of The Nasdaq Stock Market, Inc. (which with
its affiliates are the Corporations) and are licensed for use by Chicago
Mercantile Exchange Inc. The Single Stock Future Product has not been passed
on by the Corporations as to its legality or suitability. The Single Stock
Future Product is not issued, endorsed, sold, or promoted by the Corporations.
The Corporations make no warranties and bear no liability with respect to the
Single Stock Future product.


SOURCE Chicago Mercantile Exchange Inc.


CONTACT:
Media, Anita S. Liskey, +1-312-466-4613, or Pamela Plehn, +1-312-930-3446,
news@cme.com , or Investors, John Peschier, +1-312-930-8491, all of Chicago
Mercantile Exchange
-0- May/05/2005 11:30 GMT
 
How do these contracts differ from the existing futures contracts and why would anyone bother with them -- i.e. where will the volume come from?
 
sounds great to me. A way to trade the major ETF`s with less money. And a better way to manage position sizes for the smaller trader......AND no more "my crappy broker doesn't have the Q`s to borrow today" threads
 
Quote from SWScapital:

sounds great to me. A way to trade the major ETF`s with less money. And a better way to manage position sizes for the smaller trader......AND no more "my crappy broker doesn't have the Q`s to borrow today" threads
Sounds more like broker's cash cows to me. Don't forget you will have to pay real commissions on these peanut sized thingies.
 
Quote from nononsense:

Sounds more like broker's cash cows to me. Don't forget you will have to pay real commissions on these peanut sized thingies.

Dont know where you clear but I already pay comm on anything I trade through GS.
 
Well this is some innovation. It gives stock traders lower margin and FUTURES TAX BENEFITS. These are deliverable and that is a first for stock index futures. At first glance, these may seem like no big deal. However, many stock traders and average joes do not like or understand stock index futures. The futures industry has always been baffled that folks wont trade stock index futures and will trade the damn ETF's which are the same thing. This is probably a way to bring in more customers and get them trading futures with a very recognizable investment vehicle.

We will see. With electronic trading you can introduce new futures quite easily. And if they do not work---no big loss.
 
Quote from TGM:

Well this is some innovation. It gives stock traders lower margin and FUTURES TAX BENEFITS. These are deliverable and that is a first for stock index futures.

Are you sure about this? I assume that these instruments will be taxed like SSFs. Thus, you will not get 60/40 treatment. For example, when you trade the DIA contract on OneChicago you do not get 60/40 treatment?
 
Quote from JohnL111:

Are you sure about this? I assume that these instruments will be taxed like SSFs. Thus, you will not get 60/40 treatment. For example, when you trade the DIA contract on OneChicago you do not get 60/40 treatment?

They had to redo the futures tax status when they introduced the SSF's. If I remember correctly congress/cftc etc. decided that any index containing more than 30 or so stocks was considered a futures or something like this. These indexes are above the limitation whereas the DIA is not.

We will hear more about the specifics. But these are trading at the CME and NOT One Chicago. There was a big fight because they tried to get futures tax status on all SSF's! And the politicians went nuts and had to redo the rules to clarify what is a "stock index" for tax purposes and what is NOT.
 
Seems to me this is moving in the wrong direction. They should be offering the big contract on globex. If a one lot e-mini is too big for you, I really question if you should be playing with futures.
 
Quote from AAAintheBeltway:

Seems to me this is moving in the wrong direction. They should be offering the big contract on globex. If a one lot e-mini is too big for you, I really question if you should be playing with futures.

I agree with you but you don't understand the product. It can be delivered. They will most likely kill the big contract and let the emini go all you can eat before they let it trade on Globex all day long.
 
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