CME Group Customer Forum. Chicago September 23, 2008 London October 1, 2008 New York October 14, 2008 Singapore October 20, 2008

Transcription

1 CME Group Customer Forum Chicago September 23, 2008 London October 1, 2008 New York October 14, 2008 Singapore October 20, 2008

2 Agenda New Product Overview Intercommodity Spreads CME Cleared Swaps Euro-denominated E-mini S&P 500 Nymex Merger BM&F Launch New KRX Agreement CME Globex Enhancements FIX/FAST Migration Upcoming FIX/FAST Releases User-Defined Spreads Q ilink Release FirmSoft Re-architecture CME Globex Credit Controls 2

3 Implied Intercommodity Spreads (ICS) Treasury Yield Curve Futures Spreads Treasury/Swap Futures Spreads All spreads listed as pre-defined ratios Spreads trade in 1 lot increments or minimum clips of 10 contracts for the shortest tenor 1 NOB spread = 10TY/7US NOB Z8 represents a spread where 10 TYZ8 trade versus 7 USZ8 10/ = 6.55; 6.55 is rounded to 7 contracts Implied outrights created by ICS will never have FIFO priority Only 1 st generation implied in market data will be disseminated Implied out prices on ICS legs are not disseminated Spread quotes are based on net change of first leg minus net change of second leg, divided by the current ratio Minimum spread tick is equal to the contract with the smallest tick increment 3

4 Implied Treasury Intercommodity Spreads Treasury Inter-Commodity Spreads Characteristics: Quoted in the shorter-term instrument s tick increment Buying the spread refers to buying the shorter-term contract (front leg) and selling the longerterm contract (back leg) Good till Cancel (GTC) and Good till Date (GTD) order qualifiers not supported Pre-defined Price Ratio New Strategy Type Code = IV Pre-defined Leg quantities as a specific ratio (e.g., a ratio of 10 quantity front leg, 6 quantity back leg) Both components of the spread trade the same month and same year at a specific ratio Notes over Bonds Spread (NOB): Sept Year US Treasury Note vs Sept Year US Treasury Bond NOB Ratios: Price Ratio = 1.54 Quantity Ratio: 10:6 External name: NOB U8 4

5 Example of Pricing the Spreads Bid Price ZBU ZNU ZFUT ZTU Ask Price C. Last C. Net Change Previous Day s Settlement Price NOB U8 FOB U8 FYT U8 TUB U8 TUT U8 TUF U NOB Price: Bid: 7.0 (15.0/1.5265) = Ask: 7.5 (14.5/1.5265) =

6 Key Customer Benefits of ICS Increases matching opportunities by providing automated arbitrage between outright and spread order books Provides tick friction for liquidity providers and prop traders Eliminates slippage for FCMs and point and click spreaders Simplicity of one ratio per spread concentrates liquidity Defining the spread builds a benchmark Implied functionality enhances liquidity Experience suggests implied intercommodity spreads can reduce trading noise in individual legs during volatile markets Improves outright Treasury contract liquidity NYMEX Crack spread experience 6

7 Implied Treasury Intercommodity Spreads New Release: Available Now; Production: November 16 Spread Name Contract Legs Price Ratio Leg Qty Ratio External Name NOB 10-year U.S. Treasury Notes Future vs. 30-year U.S. Treasury Bond Future :6 NOB 16949Z8 FOB 5-year U.S. Treasury Notes Future vs. 30-year U.S. Treasury Bond Future :4 FOB Z8 FYT 5-year U.S. Treasury Notes Future vs. 10-year U.S. Treasury Note Future :6 FYT Z8 TUF 2-year U.S. Treasury Notes Future vs. 5-year U.S. Treasury Note Future :9 TUF Z8 TUT 2-year U.S. Treasury Notes Future vs. 10-year U.S. Treasury Note Future :5 TUT Z8 TUB 2-year U.S. Treasury Notes Future vs. 30-year U.S. Treasury Bond Future :3 TUB Z8 NOS 10-year U.S. Treasury Notes Future vs. 7-year Swap Future :12 NOS 8503 Z8 BOI 30-year Swap Future vs. 30-year U.S. Treasury Bond Future :7 BOI Z8 TOS 10-year Swap Future vs. 10 year U.S. Treasury Note Future :9 TOS Z8 FOS 5-year Swap Future vs. 5-year U.S. Treasury Note future :10 FOS Z8 7

8 CME Cleared Swaps Combines the liquidity of OTC interest rate swap market with the clearing efficiencies and financial safeguards of CME Clearing Forward starting IMM dated swaps in EUR and USD Maturities ranging from 3-months to 10-years as well as Overnight Index Swaps for IMM dates Overnight Index Swaps in EUR and USD ending on monthly IMM dates out to 12 months Matures over time through automatic roll-down feature On Sep 15, USD Sep 10-year becomes a 9 ¾-year Dec forward starting swap Marked to market daily by resetting the coupon to the settlement rate 8

9 CME Cleared Swaps: Key Benefits Launched September 2, 2008 Clears via Clearing 360, the CME Group OTC clearing solution Privately negotiated between counterparties, then submitted to clearing Balance sheet and operational efficiencies Centralized counterparty Automatic position netting Immediate trade confirmation Streamlined trade allocation No ISDA documentation Guaranteed by CME Clearing Financial Safeguards 9

10 Euro-denominated E-mini S&P 500 Futures Launching October 27, 2008 New Release: October 13 U.S. large-cap exposure denominated in Euros Unique correlation trading opportunities Web site: Contract Multiplier Minimum Tick Contract Months Trading Hours Trading Ends on Ticker Cash Settlement 50 x E-mini S&P 500 Futures Price 0.25 index points ( 12.50) Five (5) Months in the March quarterly cycle Mon-Thu: 5:00 pm-3:15 pm and 3:30 pm-4:30 pm; Sun: 5:00 pm-3:15 pm 8:30 a.m. Chicago time on the 3 rd Friday of contract month EME Cash settlement to a Special Opening Quotation (SOQ) of the S&P 500 Stock Price Index based on opening process of index constituents 10

11 Agenda New Product Overview Nymex Merger BM&F Launch New KRX Agreement CME Globex Enhancements FIX/FAST Migration Upcoming FIX/FAST Releases User Defined Spreads Q ilink Release FirmSoft Re-architecture CME Globex Credit Controls 11

12 NYMEX Acquisition CME Group/NYMEX - Strategic Rationale Financial Impact Approximately $60MM in estimated expense synergies Potential growth opportunities Increased Scale Combines complementary product lines and shared technologies Full economics on CME Globex technology agreement; existing agreement helps alleviate execution risk Accelerate NYMEX Growth Expands NYMEX product growth opportunities by leveraging CME Group s global capabilities (marketing, sales, distribution, relationships) Enhances over-the-counter (OTC) capabilities (ClearPort) The transaction closed on Friday, August 22 Equity Indexes 6-Year CAGR ( ) Global Energy Futures: 19% CME Group CAGR: 27% 2007 Global Futures Volume 24% 4% 9% Individual Equities FX Metals Energy Ag Commodities 10% 9% Note: Futures volume only, not including options on futures 44% Interest Rates Goldman Sachs Commodity Index Weightings Energy 72% Metals 10% Ag Commodities 18% 12

13 Yesterday v. Today - 1 st Half 2008 Nearly 30% of our revenue is now from energy and metals Commodities & Other 13 % Standalone Companies Foreign Exchange 8% CME Group $0.98 Billion Eurodollar 23% Combined Company $1.34B Pro Forma Transaction Revenue Mix for First Half 2008 Energy 23% Metals 4% Eurodollar 17% Metals 15% Equities 31% Notes, Bonds & Other 25% Commodities & Other 10% Notes, Bonds & Other 18% NYMEX/COMEX $0.36 Billion Energy 85% Foreign Exchange 6% Equities 22% Source: Company information. Note: CME Group transaction revenue is pro forma for CBOT acquisition. 13

14 Roadmap to Completing Integration 60 days post-close Sep-Dec Q Q Q Staffing process completed Company orientation programs Membership systems integrated Fee systems integrated NYMEX and COMEX floors integrated into one Clearing systems combined Pricereporting systems integrated Industry Advisory Councils and Ongoing Customer Feedback 14

15 Agenda New Product Overview Nymex Merger BM&F Launch New KRX Agreement CME Globex Enhancements FIX/FAST Migration Upcoming FIX/FAST Releases User-Defined Spreads Q ilink Release FirmSoft Re-architecture CME Globex Credit Controls 15

16 Agreement Between CME Group and BM&F BOVESPA Deal closed February, 2008 Aligns the capabilities of the largest and fourth-largest derivatives exchanges in the world Common asset classes include Interest Rates, FX, Equity Indexes and Commodities Equity Swap 10% stake in BM&F is now a 5% stake in BM&F BOVESPA (combined entity) CME Group CEO sits on BM&F BOVESPA Board of Directors Distribution Linkage CMEG-to-BM&F Order Routing launched in September BM&F-to-CMEG Order Routing launches in Q4 16

17 Order Routing Overview: CME Group-to-BM&F BOVESPA Designed to minimize any changes for current CME Globex participants to trade BM&F products May use existing CME Globex software and connectivity ilink will route incoming orders for BM&F products to the BM&F FIX Gateway Market Data Platform will translate and distribute BM&F market data in FIX/FAST format Channels 24 (futures) & 25 (options) BM&F continue to match their products BM&F market rules apply, including foreign investor registration and working through a licensed BM&F broker and clearing firm 17

18 CME Group to BM&F BOVESPA: Account Mapping and Risk Management CONTRACT / PRICE /... GLOBEX API ID/EXECUTING FIRM NUMBER ACCOUNT NUMBER AT FCM SENDER SUB Order data transmitted via CME Globex Broker and client ID Order size limit BM&F TRADING LIMITS Short/long limit per contract/maturity Short/long limit per contract BM&F BROKERAGE HOUSE CLIENT Limit check can be done by BM&F system or by the brokerage house BROKER RISK SYSTEM BM&F routes order to broker Broker system analyzes order Broker routes order back to BM&F ORDER CHANGES TO BID/ASK IN THE GTS BOOK THERE ARE NO CHANGES TO THE POST-TRADE RISK MANAGEMENT PROCESS 18

19 Order Routing Overview: CME Group-to-BM&F BOVESPA Live on September 30, 2008! Front-end systems must certify in order to route BM&F BOVESPA orders and receive market data Must be certified on FIX/FAST Multiple systems have already certified Currently available in the New Release environment and AutoCert+ 19

20 Order Routing Overview: BM&F BOVESPA to CME Group Launching in Q Allows BM&F participants to trade CMEG products with existing software and connectivity BM&F Global Trading System (GTS) will route incoming orders for CME Group products to CME Globex; BM&F will re-distribute CMEG market data CME Group market rules apply 20

21 BM&F BOVESPA to CME Group: Account Mapping and Risk Management CONTRACT / PRICE /... BM&F BROKERAGE HOUSE Fixed trading order info transmitted via GTS CLIENT CME GLOBEX API ID/EXECUTING FIRM NUMBER ilink SESSION Broker and client ID info in BM&F system ACCOUNT NUMBER U.S. clearing firms utilize proprietary risk sytem CME Group risk tool DROP COPY, which allows for real-time client risk management, will be available for BM&F BOVESPA products. FirmSoft will also be available. ORDER CHANGES TO BID/ASK IN THE CME GLOBEX BOOK THERE ARE NO CHANGES IN THE POST-TRADE RISK MANAGEMENT PROCESS 21

22 Order Routing Overview U.S./Europe/Asia BRAZIL CME GLOBEX BM&F GTS CME GLOBEX Communication Network High speed and high capacity international link Approx. 140 ms latency MATCHING GTS Communication Network Settlement in USD through CME Clearing House, which may be facilitated by the BM&F Bank Settlement in Brazilian Reals through BM&F Derivatives Clearing House 22

23 Contacts and Resources Web sites Joint web site: BM&FBovespa: (click on American flag for English) Customer Impact Document Key Contacts CME Group Business Development: Ricardo Sant Anna, (312) , BM&F BOVESPA Contact: Jefferson Bergamo, , CME Globex Account Management: (312)

25 KRX Deal Signed KOREA EXCHANGE CMEG and KRX signed historic deal on September 4, 2008 Product Listing CME Group to list KRX KOSPI 200 futures on CME Globex Provides KRX off-hours trading for global investors Launch targeted for Q Communications Hub CME Group and KRX will jointly implement a telecom hub as a connection point for customers in the Asian region in Seoul Hub targeted for Q1/Q Provides access to CME Group products independent of KOSPI launch 25

26 KRX Fast Facts KOREA EXCHANGE KRX Growth 2.7B total volume in 2007 KOSPI 200 Futures = 194.1K ADV KOSPI 200 Options = 11.1M ADV (97% of total) 10.6M ADV YTD 08 (Jan Jul) KOSPI 200 Futures = 216K ADV 44% 7-year CAGR ( ) Foreign participation grew to 26% in 2006 U.S. participation only 2.14% in futures, 0.5% in options KRX Trading Characteristics (Contracts in 000 s) High volume primarily due to retail participation Smaller notional value size lends to higher retail participation, particularly in options Futures contract notional value = ~USD$540 x KOSPI 200 index = $108,000 per contract Options contract notional value = ~USD$110 x KOSPI 200 index = $27,500 per contract Lot size is indicative of current fee structure Futures avg trade size = 2.8 contracts/trade at ~ 57 per side ~$302,400 notional per trade [~$3.20 fee per avg transaction] Options avg trade size = 21.9 contracts/trade at ~5 per side ~$602,250 notional per trade [~$2.19 fee per avg transaction] Simple trading strategies currently no algorithmic trading (some program trading by institutions) Limited direct market access all retail investors must go through pre-trade credit check Non-retail trading growing (nearly 60% of volume in 2006) ADV 12,000 10,000 8,000 6,000 4,000 2, Korea Exchange Int Rates & Other Equity Futures Equity Options 10,637 Thru Jul 26

27 Additional Benefit: Telecom Hub Telecom hub in Seoul facilitates CME Group customers connecting from Korea CME Group ADV growth in Korea 154% from 2006 Hub in Seoul is compelling for Korean customers to trade CME Globex products Cost to connect to hub is Seoul are less than connecting through Singapore Latency is greatly reduced Can serve Far East customers for access to CME Group products as well as KOSPI futures Global Network South Korea 80 ms 210 ms 229 ms ~100ms latency saved for East Asian customers to connect via Seoul hub vs. Singapore hub 27

28 Trading Hours The chart below identifies when the KOSPI 200 futures will trade on CME Globex vs. KRX in the two different timezones 1. KRX System Hours CME Globex Hours Central Standard Time Korea Chicago 8:00 am 3:15pm 5:00pm 12:15am 5:00pm 6:00am 2:00am 3:00pm Central Daylight Savings Time Korea Chicago 8:00 am 3:15pm 6:00pm 1:15am 5:00pm- 6:00am 3:00am- 4:00pm Note: Globex will follow KRX holiday schedule [1] Korea is 13 hours ahead (CST), 12 hours ahead (CDT) 28

29 Functional Overview Korea Chicago KRX Customers FCM Member (Relationship required) CME Group Customers (QII) ilink KRX Clearing KRX FCM Member KRX USN* CMEG Telecom HUB In Seoul WAN ~210 ms Message data Market data Matched trades (M1) Chicago Network MDP Trade Reports CME Globex Match Engine KRX Customers Routing & Trade Matching: Trades originating from Qualified Institutional Investors (~all U.S. investors) will match directly on CME Globex. U.S. customers must have clearing arrangement with KRX member firm to permission KOSPI trading on CME Globex. Trades originating from retail or other investors (e.g. existing Korean customers) must first route to KRX for pre-trade margin and credit controls. The CME Globex order will be routed by the ilink order routing system to the appropriate CME Globex matching engine for processing. * KRX USN (Unified System for Night trading) to be developed by KRX for: Message translation Member connectivity Pre-trade credit controls Market data transmission Data Delivery: CMEG will deliver message traffic, market data, and matched-trades to KRX in real-time for clearing. Timestamps on records on the M1 (matched trades), market data, and audit trail files will be in U.S. Central time. Clearing and settlement will be conducted at KRX. 29

30 Trading Details and Requirements 1 Requirements Account with KRX clearing member firm Exchange Fees TBD by KRX, to follow existing KOSPI 200 fee structure through KRX Market maker programs under discussion CFTC Approval KRX to receive No-Action part 30 exemption which will allow KRX to offer the KOSPI to U.S. customers; will be in place prior to launch [1] Details subject to change prior to launch date 30

31 Agenda New Product Overview Nymex merger BM&F launch New KRX Agreement CME Globex Enhancements FIX/FAST migration Upcoming FIX/FAST Releases User-Defined Spreads Q ilink release FirmSoft Re-architecture CME Globex Credit Controls 31

32 CME Globex Performance Enhancements & Impacts In Q4 2008, CME Group will implement an upgrade to futures markets on CME Globex that will result in reduced message response times Expected to reduce response times by an average of 40-50% From an average of milliseconds currently to approximately 5-7 milliseconds Bandwidth utilization in these futures markets is expected to ultimately increase by as much as 20% 32

33 Schedule for Futures Performance Enhancements Sunday, November 2: All listed futures and future spreads: Legacy CME & CBOT Interest Rates Legacy CME Commodities TRAKRS Sunday, November 9: All listed futures and future spreads: MGEX & KCBT Legacy CBOT Commodities Legacy CBOT Equities Sunday, November 16: All listed futures and future spreads: NYMEX Energy, Metals and Softs COMEX Metals Sunday, November 23: All listed futures and future spreads: Legacy CME Equities FX futures are scheduled for a number of enhancements in Q that will include performance improvements 33

34 Expansion of Options to 3-Deep Book New Release: Available Now Production launch date: Sunday, November 9 Legacy CME Equities :Channel 8 Legacy CBOT Equities: Channel 114 Legacy CBOT Ags: Channel 112 FX: Channel 12 NYMEX Crude: Channel 35 NYMEX Non-Crude/Energy : Channel 36 NYMEX Soft/Metals: Channel 37 34

36 FIX/FAST Migration Deadline for RLC migration to FIX/FAST is October 17, Due to market conditions and customer feedback, we are extending deadline to Friday, November 14. Any sites not migrated by this date will be surcharged retroactively. Support Surcharges begin October 17 $2000/week in October $4000/week in November $6000/week in December RLC is eliminated on Dec. 29, No extensions possible due to internal systems dependencies Saturday testing window: 11:30 a.m. - 12:30 p.m. CT Replay of production market data in production environment Customer support available Details in CME Globex Notices at 36

37 Calculated Bandwidth Projections: 2008 & 2009 Projection Futures Only Options Futures & Options Now 19 Mbps 12 Mbps 31 Mbps RLC Mbps 43 Mbps 72 Mbps 09 N/A N/A N/A Now 6 Mbps 5 Mbps 11 Mbps FIX/FAST 08 6 Mbps 12 Mbps 18 Mbps Mbps 13 Mbps 28 Mbps ITC (top of book only) Now 6 Mbps 18 Mbps 24 Mbps Mbps 34 Mbps 48 Mbps Mbps 38 Mbps 60 Mbps Assumption: all options will be 3-deep by EOY 2008 (except ITC); includes estimates for expanded depth in futures Does not include any recovery bandwidth RLC retired at end of 2008; ITC targeted for mid

38 Reminders Perform audit on market data configuration Ensure no redundant data being pulled, particularly with multiple formats No static joins for recovery channels For customers currently on 40Mbps and taking futures and options, upgrade to 100Mbps where available If not available, order a second 40Mbps line Accommodates multiple formats, running in parallel, bandwidth for recovery and future growth For customers currently on a 20Mbps line for futures only, upgrade to 40Mbps Split network configurations not recommended Note: you may reach MPS limitations on your router prior to exceeding bandwidth 38

39 FIX/FAST Recovery Options Recovery choices will impact bandwidth Recovering books via snapshot or recovering instrument definitions can consume significant bandwidth Instrument Definition Replay: Continuous loop of instrument definition messages plays at roughly 1,500 MPS per channel Normally should be stored safely for week; unusual to lose them Snapshot Replay: Continuous loop of snapshots for active books runs at roughly 1,500 MPS per channel Recovery mechanisms designed for ASAP recovery, though bandwidth and process scaling must be considered when determining recovery strategy FIX/FAST bandwidth requirements should account for both the incremental price feed and recovery snapshot 18 Mbps = end of 2008 projections for futures & options Worst case: additional 23 Mbps is required for FIX/FAST recovery Recovery bandwidth is estimated for both futures and options based on current message rate configuration 39

40 FIX/FAST Recovery Guidance If a customer loses connectivity or is a late joiner to the market then the recommended method of recovery for each channel is as follows Begin queuing messages in the incremental stream Connect to the Snapshot Replay channel and synchronize the sequence with the queued incremental stream. Leave the snapshot channel when synchronized Later, if required, join the Instrument Definition Replay channel to validate you have all the instruments. Leave the channel when done Recovery Bandwidth Requirements include: Recovering all channels (Futures and Options) at the same time Recovering all channels during a market data peak (measured at 1 second interval) Absolute worst case scenario 40

41 Bandwidth Projections for Multiple Protocols 2008 EOY 2008 Projection Futures Only Options Only Futures & Options RLC & ITC 43 Mbps 77 Mbps 120 Mbps RLC & FIX/FAST* 35 Mbps 49 Mbps w/ Recovery 55 Mbps 64 Mbps w/ Recovery 90 Mbps 113 Mbps w/ Recovery ITC & FIX/FAST* RLC, ITC & FIX/FAST* 20 Mbps 46 Mbps 66 Mbps 49 Mbps 89 Mbps 138 Mbps FIX/FAST and RLC bandwidth statistics available at: * Recovery implies all snapshot channels at once, i.e., worst case scenario 41

42 Tips for Minimizing Recovery Bandwidth Consider natural refresh as a means for recovery on liquid channels Natural refresh allows recovery of highly liquid channels without joining snapshot recovery channel No additional bandwidth impact Prioritize the order of channel recovery Recover channel by channel (or multiple channel based on priority) instead of recovering all channels at once Note that scaled recovery will take longer; approximately 15 seconds per channel Scale and stagger recovery as MPS limitations might not allow for single process full recovery Scale recovery processing; attempting to recover all channels on a single process may not be possible Leave the recovery channels as soon as they are no longer needed No static joins 42

43 FIX/FAST Migration Guidance & Scenarios A customer may choose among several migration strategies. In each scenario available bandwidth must be considered. The below scenarios include only RLC and FIX/FAST formats. 1) Full parallel May not be able to recover all channels at once during peak For futures only 40Mbps For futures and options 2 X 40Mbps or 100Mbps Recommend split: futures on one redundant connection, options on the other 2) Channel by channel Consider bandwidth per channel No worries of all-channel recovery during migration Operational considerations of managing multicast addresses during migration 3) Channel groupings Migrating multiple channels based on bandwidth considerations Consider multiple channel recovery bandwidth issues May be a better option for custom channel configurations (i.e., customer does not receive all options or futures) 43

45 FIX/FAST 2008 Release Additional information will soon be available via FIX/FAST as a result of customer requests and new functionality Launched in production on September 28 Trade Block in Incremental Refresh message (35=X) Tag 5799 MatchEventStartIndicator String(1) Tag is set to 1 (Match Event Start), in the trade report block that belongs to a new trade event Example: In an incremental refresh message (35=X) reporting trades for the following events: Event 1 An order with 10 lots matches fully against 10 orders of 1 lot Event 2 An order with 5 lots matches fully against a 3-lot order and a 2-lot order This message will contain a total of 12 blocks, block 1 and 11 will have tag 5799 =1 indicating that block 1 is the first trade report for Event 1 and block 11 is the first trade report for Event 2; all other blocks of data will not have tag 5799 Tag 5797 Aggressor Side String(1) This tag was already present in the FIX/FAST templates. Its tag number has been updated to 5797 (from 1200) for FIX compliancy. Will be populated beginning in January 45

46 FIX/FAST 2008 Release Security Definition (35=d) tag 5770 PriceRatio Price(20) Indicates price ratio associated with the new implied Treasury intercommodity spreads Example: For instrument NOB U8, tag 5770 will be set to 1.54 Templates Changes on Security Definition and Incremental Refresh messages resulted in the change of nine templates Decoder A new version of the Java Reference Code has been published on CME Group website (C++ version not changed) at Re-categorization of legs on opening trades TradeCondition (tag 277) will be set to 1 No template changes New Release: October 19; Production: November 2 Please note that in the future, FIX/FAST changes may be made with the template changes first, and data populated later 46

47 FIX/FAST 2009 Enhancements There will be multiple releases in 2009 reflecting recent customer requests as well as anticipated future requests Additional book depth on selected futures channels. Current plans for 10-deep books in futures targeted for late Q1/early Q2 Bandwidth implications Addition of a preamble to all messages so it will not be necessary to decode to get sequence, timestamp and message type Indicator for the end of Sunday startup Add settle date information to the snapshot message Multiple book depths within the same channel Security Definition (tag 35=d) message identifies book depth FIX/FAST for the floor Phase 1 does not include NYMEX floor data FIX/FAST for Open Interest, Actual Volume and Settlements Replaces ITC2 messages 47

48 Calculated Bandwidth Projections: 2008 & 2009 Projection Futures Only Options Futures & Options Now 19 Mbps 12 Mbps 31 Mbps RLC Mbps 43 Mbps 72 Mbps 09 N/A N/A N/A Now 6 Mbps 5 Mbps 11 Mbps FIX/FAST 08 6 Mbps 12 Mbps 18 Mbps Mbps 13 Mbps 28 Mbps ITC (top of book only) Now 6 Mbps 18 Mbps 24 Mbps Mbps 34 Mbps 48 Mbps Mbps 38 Mbps 60 Mbps Assumption: all options will be 3-deep by EOY 2008 (except on ITC); includes estimates for 10-deep book in futures Does not include any recovery bandwidth RLC retired at end of 2008; ITC targeted for mid

50 User-Defined Spreads (UDS) for Options on Futures CME Group lists over 360,000 exchange-defined options spreads (EDS) to facilitate trading in complex options In late Q2 2009, CME Group will change the way options spreads are listed on the CME Globex platform to substantially reduce the number of instruments systems need to manage All Higher Order Spread types (HOS) will be supported across all CME Group exchanges & products All new spreads will need to be created through the UDS creation method by customer systems As today, current HOS will be identified in Security Definition creation message (tag 35=d) to enable classification Existing exchange-defined spreads (EDS) will be eliminated as expirations occur 50

51 User-Defined Spreads (UDS) for Options on Futures CME Group will add new Higher Order Spread types to the CME Globex platform Reduces confusion about spread definitions and spread construction Analysis of new spread types to add in process Standardizes across asset classes There will be no change to listing duration Instruments will live two weeks or to the duration of shortest leg maturity Instrument life will be extended one week if there is RFQ or trading activity Covereds creation & lifecycle remains unchanged (1 day) As a result, front-end systems which support options trading must develop to User-Defined Spreads functionality by June

53 Reminder: ilink Enhancements Q Enhancements to: Improve processing Operator ID (Tag 50) Expand Order Identifier (Tag 11 & 41) Harmonize instrument identifier with FIX/FAST (Tag 48) Add an Aggressor indicator (Tag 1057) Improve processing of trades through new tags (Tag 14, 393, 442) Improve FIX compliancy for trade leg reports New Release: November 6, Production: February 1, 2009 Client Document: available now at New tags will be reflected in AutoCert+ beginning November All clients are strongly recommended to re-run the business section of the ilink certification suite with the new tags. See Appendix A for details 53

55 CME FirmSoft Re-Architecture Background Based on customer feedback, FirmSoft and related back-end components are being redesigned to improve query performance, usability and ease of access/administration. Launch expected in Q4. Key Features Legacy order management database redesigned for improved query performance Improved clearing firm administration tools allow for faster turnaround of access requests and greater clearing firm control Use of the SMARTClick profile management system eliminates the need for Schedule 9 paperwork and separate user IDs per Clearing Firm relationship Redesigned user interface for improved navigation through search and reporting screens Access via a secure Internet connection eliminates the need for a multistage logon via the CMEG Connect portal More information will become available in early November. Please contact your CME Globex Account Manager with any questions 55

57 CME Globex Credit Controls Provides high-level, centralized risk management for products traded on CME Globex; not intended to replace existing clearing firm systems nor account-level risk management Pre-execution risk controls that enable risk administrators to set credit limits through the CME Group Risk Administration GUI Triggers a set of real-time actions if these limits are breached, including notification, order blocking, and order cancellation Phase 1: Launched September 28 Phase 2: New Release: December 15 Production: March 1,

58 CME Globex Credit Controls: Phase 1 The risk administrator sets clip size values per CME Globex API ID via the CME Group Risk Administration GUI. These values can be defined at any time; default value is set to No Limit. Sell order clip size for futures / options Buy order clip size for futures / options Updated real-time CME Globex rejects all new orders and cancel/replace messages with a quantity greater than the defined clip size set in the Risk Administration GUI. The risk administrator can: Override the clip size by setting it to 0 to reject orders Re-enable order acceptance at any time by changing the value of the clip size to a positive value other than 0 Once clip size is set to 0 and order rejection is enabled, the risk administrator must enter a clip size value or choose No Limit to permit order submission again. 58

59 Phase 1: CME Group Risk Administrator GUI 59

60 CME Globex Credit Controls: Phase 2 Credit Limit The risk administrator sets a credit limit per CME Globex API ID via the CME Group Risk Administration GUI Credit Limit defined in dollar value Futures overall credit limit in USD (default is set at No Limit) Options overall credit limit in USD (default is set at No Limit) Position also tracked in dollar value; aggregate of working and traded orders The clip size (maximum order quantity) is dynamically updated as the position approaches the credit limit value Margin rate of reference calculated using CME SPAN based on selected product Clip size = (Credit limit $ position limit $) / margin rate of reference contract ($/lot) If a position reaches the credit limit, CME Globex rejects all new orders and cancel/replace messages on the exceeding side. The position can be reduced by canceling working orders, or by sending risk-reducing orders 60

61 CME Globex Credit Controls: Phase 2 Position Calculation Positions are calculated by CME Globex API ID per futures and options across the following exchanges: CME, CBOT, NYMEX, COMEX, NYMEX ECM, NYMEX MTF, MGEX and KCBT Notification Levels Set by the risk administrator, the notification level is a percentage and defined as the (current position) / (credit limit) The 100% notification level is pre-defined as a notification in the CME Group Risk Administration tool Three additional notification levels are possible, pre-defined at: 50%, 60%, 70%, 80% or 90% Risk Administrator may identify additional s to receive notifications If a position reaches a defined notification level, the risk administrator and GCC staff will receive an notification 61

62 CME Globex Credit Controls: Phase 2 Cancel All Ability to automatically trigger a one-time cancel all open orders on the book for the specified CME Globex API ID when it reaches the 100% level In addition to order blocking Does not include GTC and GTD orders and mass quotes Order Blocking Reset If order blocking is triggered automatically (100% level reached), then it will be reset automatically at the end of the day If order blocking is triggered manually, the risk administrator must disable order blocking by changing the credit limit or clip sizes to a value different than 0 It will not reset automatically To obtain access to the Risk Administrator GUI, Clearing Firms should complete the Schedule 6 of the CME Connection Agreement, Exhibit C Client Overview document found at: 62

63 Summary Reference Information Upcoming FIX/FAST Releases Q1 ilink Release CME Globex Credit Controls BM&F Order Routing Agreement All spreads supported on the CME Globex platform are defined in two new documents; they provide detailed information on the construction of each spread type. This Customer Forum presentation is available at 63

64 Quiz and Questions 64

65 Appendix A: ilink Enhancements ilink Order entry message changes New Release: November 6, Production: February 1, 2009 Header tags: Identifiers: Tag 50 SenderSubID String(20) Tag 57 TargetSubID String(20) The length of these two tags changes from 32 to 20 bytes; CMEG will return all 20 Tag 57 will now be returned on all outbound messages Tag 11- ClOrdID String(20) Tag 41 OrigClOrderID String(20) The length of these two tags changes from 32 to 20 bytes The full 20 bytes of the tag 11 ClOrdID and tag 41 OrigClOrdID will now be sent on all messages Tag 48 SecurityID Int(12) Change of format from String(12) to Int(12) to match the type and content of tag 48 in FIX/FAST 65

66 Appendix A: ilink Enhancements Fill, Partial Fill Tag 1057 Aggressor Indicator New tag, which will indicate if your order was the aggressor in the trade. The Aggressor is the order triggering the trade event (vs. resting order) Tag 14 CumQty Qty(9) Currently, tag 14 is returned always set to 0, it will now contain the cumulated traded quantity for the order throughout its life. Tag 393 TotalNumSecurities Int(3) Now present on execution report - Fill Notice for spreads and indicate the number of Leg Fill Reports associated with this trade Very useful for trader reports involving implied orders, Covereds and volatility-quoted options instruments. 66

67 Appendix A: ilink Enhancements Leg Fill and Partial Fill Notices February 1, 2009 The following tags will now be submitted on Leg reports following the same rules as for the Fill and Partial Fill Notices. Tag 75 TradeDate LocalMarketDate(8) Tag 39 OrdStatus String(1) Tag 1 Account String(12) Tag 40 OrdType String(1) Tag 60 TransactTime UTCTimeStamp(21) Tag 150 ExecType String(1) Tag 6 AvgPx Price(20) [Always 0] Tag 20 ExecTransType String(1) Tag 14 CumQty Qty(9) Currently, tag 14 is returned always set to 0; it will now contain the cumulated traded quantity for the order throughout its life. Tag 14 will be set to 0 for trades involving Covereds and volatility-quoted options. The following tag is currently working in the production environment. If your system is leaning on the tags listed above to identify Leg execution reports, we strongly advise you to start leveraging tag 442 in order to take advantage of the other tags when they re added to the Leg execution reports: Tag 442 MultiLegReportingType Currently in Production Now present on execution report - Fill Notice for spreads and indicate the number of Leg Fill Reports associated with a trade 67

68 Appendix A: ilink Enhancements Give-Up Functionality New Release = November 6, Production = February 1, 2009 Currently the Give-Up functionality only works at the Firm ID (CME Globex API ID) level, we introducing the following tags in order to support give-up at the account level: Tag 78 NoAllocs Int(1) [Always 1] Tag 79 AllocAccount String(11) This repeating group allows to provide 1 (and only 1) give-up account The current Give-Up functionality with 9708 set to GU and 9707 set to the give up firm ID remains unchanged. These tags are submitted in New Order (tag 35 MsgType = D), Cancel/Replace (tag 35 MsgType = G) and New Order Cross (tag 35 MsgType = s) messages and returned in the corresponding execution report messages. 68