CME integrates enhanced Eurodollar options system with Globex

The patent pending Request for Quote (RFQ) methodology on CME Globex provides customers with real-time indicative prices on more than 70,000 outright contracts and complex spread combinations, including calendars, straddles, strangles and butterfly spreads. More than a dozen committed market makers respond instantly to RFQs with transactable two-sided quotes, guaranteeing that customer orders are filled at the best available price. In addition, market makers will stream actionable bids and offers for hundreds of outrights and standard spreads.

"Increasing the volume of electronically-traded CME Eurodollar options on futures is part of our growth strategy," said CME Chairman, Terry Duffy. "Merging the proven capabilities of our enhanced option system with the worldwide availability of CME Globex dramatically increases the distribution of electronic options execution."

"This innovation enables global risk managers, who already rely on the speed and liquidity of CME Eurodollar futures on CME Globex, even greater latitude in executing their interest rate option strategies," said CME Chief Executive Officer Craig Donohue. "Most importantly, CME's new enhanced options technology revolutionizes the trading of short-term interest rate products where complex strategies dominate. Our centralized order book facilitates transparency and competition among market makers in electronic options markets, which are the hallmarks of CME's successful market model."

Options on CME Eurodollar futures are the most actively traded interest rate option contracts in the world with year-to-date average daily volume of 740,000. The enhanced option system was launched on its own platform at CME in August 2004 and has executed more than 3.2 million CME Eurodollar option contracts. In July 2005, average daily volume for options on CME Eurodollar futures traded on the enhanced option system totaled more than 25,000 contracts. This is an increase from 5,000 contracts per day in January 2005. Volume of Eurodollar options has increased by 42 percent in the first half of 2005 versus the same period in 2004. Integration of the enhanced option system onto CME Globex will provide CME Eurodollar options traders with the following key benefits and features:

• Compatibility with standard CME APIs and integration with major ISVs and proprietary front end trading platforms. Twelve CME-Certified Options Partners will be providing access to the new functionality;
• Maximum transparency is ensured since orders are placed anonymously and every electronic RFQ is sent to every participant simultaneously;
• Trade confirmations are immediate and are broadcast system wide; additionally, activity on the CME Globex platform is presented in real time;
• Efficiency is improved because the integration of the enhanced options system technology into CME Globex will bring option traders cost effectiveness via instant trade confirmations, Straight Through Processing (STP) and automatic linkage to analytical/risk management systems; and,
• Increased liquidity commitments from major CME Eurodollar market makers for 23 hours a day.

Electronic CME Eurodollar options trading on CME Globex provides opportunities for all market participants - customers, brokers and liquidity providers - anonymous and transparent execution, combined with the efficiencies of a central order book, straight through processing, and lower transaction costs.

CME Eurodollars are U.S. dollars on deposit in commercial banks located outside of the United States. CME Eurodollars deposits play a major role in the international capital market, and they have long served as a benchmark interest rate for corporate funding. In July 2005, average daily volume for Eurodollar futures on CME Globex was 1,120,412 contracts and represented nearly 84 percent of total Eurodollar futures traded at CME.