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CME Group Products
December 9, 2010
© 2010 CME Group. All rights reserved 2
Contents
CME Group Introduction
CME Stock Index Products Review
Market Depth and Liquidity
Hedging and Beta Adjustments
Fair Value
Index Futures vs ETFs
Index Spreading: S&P 500 vs. DJIA
Review of Statistics for:
FX Products
Agricultural Products
Energy Products
Metals Products
CME Group Options Contract Volumes
© 2010 CME Group. All rights reserved
0
2
4
6
8
10
12
14
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
TD
Nearly 40 Years of 15 Percent Annual Growth
3
(round turns in millions)
CAGR
2000 - 2009
18%
Pro Forma
Average Daily Volume
*compared with same period in 2009
2010TD
12.4M
Up 21%*
CAGR
1972 – 2000
14%
© 2010 CME Group. All rights reserved 44
Diverse Product Portfolio
Other
Revenue
4%
Interest
Rates
23%
Quote Fees
13%
Metals
5%
Energy
23%
Commodities/ Alt.
Investments(1)
9%
Foreign
Exchange
6%
Equities
18%
1. Commodities / Alt Investments includes agricultural commodities (grains, dairy, livestock, forest, NYMEX softs, indexes), weather and real estate
Q1 2010 Revenue Mix
Other
Revenue
5%
Interest
Rates
19%
Quote Fees
13%
Metals
4%
Energy
23%
Commodities/ Alt.
Investments(1)
7%
Foreign
Exchange
4%
Equities
24%
Q1 2009 Revenue Mix
© 2010 CME Group. All rights reserved 55
Diverse Product Portfolio and Customers
Other
Revenue
4%
Interest
Rates
23%
Quote Fees
13%
Metals
5%
Energy
23%
Commodities/ Alt.
Investments(1)
9%
Foreign
Exchange
6%
Equities
18%
1. Commodities / Alt Investments includes agri.commodities (grains, dairy, livestock, forest, NYMEX softs, indexes), weather and real estate
2. Data now includes all products and enhanced categorization. Historically , this data only represented legacy CME/CBOT produc ts.
Q1 2010 Revenue Mix Customer Segment Est2
15% 14% 13% 14%
2% 2% 2% 2%
7% 9% 9% 9%
44% 46% 45% 46%
11% 10% 10% 9%
21% 19% 20% 20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q2 2009 Q3 2009 Q4 2009 Q1 2010
Prop Trading Firm
Hedge Fund
Nonmember Customer
Individual Member
Corporate
Bank / Dealer
© 2010 CME Group. All rights reserved
0
20
40
60
80
100
120
140
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010
Average Order Volume Average Round Trip Time
6
We Continue to Enhance Our Technology
Expanded ServicesRecent Speed Improvements
Estimated Avg Futures
Round Trip Time (ms)*
Average Daily
Total Order Volume
(millions)
5ms
127ms
*Response times for match engine only
New state-of-the-art data center, will go
live in 2010, providing
• Flexibility for future growth
• Platform for performance
improvements
Launching Co-Location services in 2012
Reduced futures response time by 20% from
Q1 2009 to Q1 2010
0
20
40
60
80
100
120
140
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010
Average Order Volume Average Round Trip Time
Stock Index Products
© 2010 CME Group. All rights reserved
Main E-Mini Contracts
E-mini S&P 500 E-mini Nasdaq-100E-mini S&P
MidCap 400E-mini DJIA ($5)
Contact Multiplier$50 x S&P 500
Index
$20 x Nasdaq-100
Index
$100 x S&P
MidCap 400
$5 x Dow Jones
Industrial Avg
Minimum Price
Fluctuation (Tick)
0.25 index points
($12.50)
0.50 index points
($10.00)
0.10 index points
($10.00)
1.00 index points
($5.00)
Price Limits Limits at 5%, 10%, 15%, 20% movesLimits at 10%,
20%, 30% moves
Contract Months 1st 5 months in March quarterly cycle
1st 4 months in
March quarterly
cycle
Trading Hours Mon-Thu: 5:00 pm-3:15 and 3:30-4:30; Sun: 5:00 pm-3:15
Trading Ends at 8:30 am on 3rd Friday of month
Cash Settlement Vs. Special Open Quote (SOQ)
Position Limits or
Accountability
20,000 standard
S&P contracts
10,000 standard
Nasdaq contracts
5,000 standard
MidCap contracts50,000 contracts
Ticker “ES” “NQ” “ER” “YM”
© 2010 CME Group. All rights reserved 9
Ticker
ADV
Contracts
ADV
$Notional
($millions)
Open
Interest
Contracts
O.I.
$Notional
($millions)
Index Close
29-Oct-'10
2010
YTD
Price
Return
20 Day Hist.
Volatility
S&P 500 E-mini S&P 500 ES 1,996,244 $118,104 2,692,418 $159,292 1,183.26 6.11% 11.54%
S&P 500 SP 14,131 $4,180 322,669 $95,450
S&P 500 Total 2,010,375 $122,284 3,015,087 $254,742
S&P 400 E-mini S&P MidCap 400 EMD 25,059 $2,078 107,222 $8,890 829.13 14.10% 13.39%
S&P MidCap 400 MD 111 $46 3,148 $1,305
S&P MIdCap 400 Total 25,170 $2,124 110,370 $10,195
S&P 600 E-mini S&P SmallCap 600 SMC 112 $4.18 186 $6.95 373.55 12.30% 16.92%
S&P SmallCap 600 Total 112 $4.18 186 $6.95
S&P Nifty E-mini S&P CNX Nifty EMF 30 $2 1 $0.06 6017.70 15.70% 16.26%
E-micro S&P CNX Nifty MNF 953 $11 321 $3.86
S&P Nifty Total 983 13 322 4
ND100 E-mini NASDAQ-100 NQ 297,570 $12,643 442,957 $18,821 2124.45 14.20% 14.82%
NASDAQ-100 ND 1,178 $250.26 24,878 $5,285
NASDAQ-100 Total 298,748 $12,894 467,835 $24,106
DJIA E-mini Dow $5 YM 127,061 $7,064 97,520 $5,421 11118.49 6.62% 10.80%
DJIA - $10 Dow DJ 465 $52 7,041 $783
DJIA Total 127,526 $7,115 104,561 $6,204
NK225 Nikkei 225 (US$) NK 8,722 $401 35,414 $1,629 9202.45 -12.74% 16.92%
Nikkei 225 (Yen) NIY 17,581 $809 47,801 $2,199
Nikkei 225 Total 26,303 $1,210 83,215 $3,829
EAFE E-mini MSCI EAFE EFE 3,528 $285 30,683 $2,480 1616.41 2.75% 15.82%
EM E-mini MSCI Emerging Mkts EMI 2,367 $131 33,936 $1,876 1105.75 12.76% 12.84%
Average Daily
Volume Open Interest
Oct 2010
© 2010 CME Group. All rights reserved 10
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
De
c-0
3
Fe
b-0
4
Ap
r-0
4
Ju
n-0
4
Au
g-0
4
Oct-0
4
De
c-0
4
Fe
b-0
5
Ap
r-0
5
Ju
n-0
5
Au
g-0
5
Oct-0
5
De
c-0
5
Fe
b-0
6
Ap
r-0
6
Ju
n-0
6
Au
g-0
6
Oct-0
6
De
c-0
6
Fe
b-0
7
Ap
r-0
7
Ju
n-0
7
Au
g-0
7
Oct-0
7
De
c-0
7
Fe
b-0
8
Ap
r-0
8
Ju
n-0
8
Au
g-0
8
Oct-0
8
De
c-0
8
Fe
b-0
9
Ap
r-0
9
Ju
n-0
9
Au
g-0
9
Oct-0
9
De
c-0
9
Fe
b-1
0
Ap
r-1
0
Ju
n-1
0
Au
g-1
0
Oct-1
0
E-mini Index Futures ADVE-mini DOW ($5) E-mini NASDAQ 100 E-mini S&P500
© 2010 CME Group. All rights reserved 11
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
Dec-0
3
Feb-0
4
Apr-
04
Jun-0
4
Aug-0
4
Oct-
04
Dec-0
4
Feb-0
5
Apr-
05
Jun-0
5
Aug-0
5
Oct-
05
Dec-0
5
Feb-0
6
Apr-
06
Jun-0
6
Aug-0
6
Oct-
06
Dec-0
6
Feb-0
7
Apr-
07
Jun-0
7
Aug-0
7
Oct-
07
Dec-0
7
Feb-0
8
Apr-
08
Jun-0
8
Aug-0
8
Oct-
08
Dec-0
8
Feb-0
9
Apr-
09
Jun-0
9
Aug-0
9
Oct-
09
Dec-0
9
Feb-1
0
Apr-
10
Jun-1
0
Aug-1
0
Oct-
10
Additional ADVs | Equity Index Futures Contracts
E-mini MSCI Emerging Mrkts E-mini MSCI EAFE Nikkei 225 - Yen
Nikkei 225 - USD E-mini S&P SmallCap 600 E-mini S&P MidCap 400
© 2010 CME Group. All rights reserved 12
0
25,000
50,000
75,000
100,000
125,000
150,000
175,000
200,000
225,000
250,000
De
c-0
3
Fe
b-0
4
Ap
r-0
4
Ju
n-0
4
Au
g-0
4
Oct-0
4
De
c-0
4
Fe
b-0
5
Ap
r-0
5
Ju
n-0
5
Au
g-0
5
Oct-0
5
De
c-0
5
Fe
b-0
6
Ap
r-0
6
Ju
n-0
6
Au
g-0
6
Oct-0
6
De
c-0
6
Fe
b-0
7
Ap
r-0
7
Ju
n-0
7
Au
g-0
7
Oct-0
7
De
c-0
7
Fe
b-0
8
Ap
r-0
8
Ju
n-0
8
Au
g-0
8
Oct-0
8
De
c-0
8
Fe
b-0
9
Ap
r-0
9
Ju
n-0
9
Au
g-0
9
Oct-0
9
De
c-0
9
Fe
b-1
0
Ap
r-1
0
Ju
n-1
0
Au
g-1
0
Oct-1
0
Index Options ADV
E-mini Dow $5 E-mini NASDAQ-100 E-mini S&P 500 (with EOM and Weekly) S&P 500 (with EOM and Weekly)
© 2010 CME Group. All rights reserved 13
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%D
ec-0
6
Feb-0
7
Apr-
07
Jun-0
7
Aug-0
7
Oct-
07
Dec-0
7
Feb-0
8
Apr-
08
Jun-0
8
Aug-0
8
Oct-
08
Dec-0
8
Feb-0
9
Apr-
09
Jun-0
9
Aug-0
9
Oct-
09
Dec-0
9
Feb-1
0
Apr-
10
Jun-1
0
Aug-1
0
Oct-
10
Historical Volatility
S&P 500 (20 Day) S&P 500 Options Call Implied Volatility (Delta 0.5)
© 2010 CME Group. All rights reserved 14
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%O
ct-0
5
De
c-0
5
Fe
b-0
6
Ap
r-0
6
Ju
n-0
6
Au
g-0
6
Oct-0
6
De
c-0
6
Fe
b-0
7
Ap
r-0
7
Ju
n-0
7
Au
g-0
7
Oct-0
7
De
c-0
7
Fe
b-0
8
Ap
r-0
8
Ju
n-0
8
Au
g-0
8
Oct-0
8
De
c-0
8
Fe
b-0
9
Ap
r-0
9
Ju
n-0
9
Au
g-0
9
Oct-0
9
De
c-0
9
Fe
b-1
0
Ap
r-1
0
Ju
n-1
0
Au
g-1
0
Oct-1
0
20-Day Historical Volatility
DJIA NASDAQ-100
© 2010 CME Group. All rights reserved
Development of Stock Index Markets
Market Width …
• Bid-ask spread in E-mini
S&P 500 futures for 500-
lot order averaged $12.51
in Sep-10
• Tick size = 0.25 index
points ($12.50)
15
0%
10%
20%
30%
40%
50%
60%
0
1
2
3
4
5
6
Mar-
08
Apr-
08
May-0
8Ju
n-0
8Ju
l-08
Aug-0
8Sep-0
8O
ct-
08
Nov-0
8D
ec-0
8Ja
n-0
9Feb-0
9M
ar-
09
Apr-
09
May-0
9Ju
n-0
9Ju
l-09
Aug-0
9Sep-0
9O
ct-
09
Nov-0
9D
ec-0
9Ja
n-1
0Feb-1
0M
ar-
10
Apr-
10
May-1
0Ju
n-1
0Ju
l-10
Aug-1
0Sep-1
0
CBO
E V
IX I
ndex
Bid
-Ask in $
s p
er
ticks (
$12.5
0)
E-Mini S&P 500 Market WidthLead Month on CME Globex RTH
S&P 500 VIX Index 50 Cnt Width100 Cnt Width 200 Cnt Width500 Cnt Width 1,000 Cnt Width
© 2010 CME Group. All rights reserved
Development of Stock Index Markets
Market Depth
• Some 659 contracts
shown at top-of-
book for E-mini S&P
500 in Sep-10
16
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Mar-
08
Apr-
08
May-0
8Ju
n-0
8Ju
l-08
Aug-0
8Sep-0
8O
ct-
08
Nov-0
8D
ec-0
8Ja
n-0
9Feb-0
9M
ar-
09
Apr-
09
May-0
9Ju
n-0
9Ju
l-09
Aug-0
9Sep-0
9O
ct-
09
Nov-0
9D
ec-0
9Ja
n-1
0Feb-1
0M
ar-
10
Apr-
10
May-1
0Ju
n-1
0Ju
l-10
Aug-1
0Sep-1
0
Avg D
aily V
olu
me
Depth
in C
ontr
acts
E-Mini S&P 500 Market DepthLead Month on CME Globex RTH
Top-of-Book Qty 2nd Level Qty 3rd Level Qty
4th Level Qty 5th Level Qty Avg Daily Volume
© 2010 CME Group. All rights reserved
Development of Stock Index Markets
(8,000)
(6,000)
(4,000)
(2,000)
-
2,000
4,000
6,000
8,000
17:0
0
18:0
0
19:0
0
20:0
0
21:0
0
22:0
0
23:0
0
0:0
0
1:0
0
2:0
0
3:0
0
4:0
0
5:0
0
6:0
0
7:0
0
8:0
0
9:0
0
10:0
0
11:0
0
12:0
0
13:0
0
14:0
0
15:0
0
16:0
0
No. of
Contr
acts
Hour (Chicago Time)
E-mini S&P Futures Average Depth of Book (Sampled Oct-09)
Ask Qty 1 Ask Qty 2 Ask Qty 3 Ask Qty 4 Ask Qty 5
Bid Qty 1 Bid Qty 2 Bid Qty 3 Bid Qty 4 Bid Qty 5
17
© 2010 CME Group. All rights reserved
Stock index hedge ratio …
• Where …
• Vstock may refer to value of a stock portfolio
• Vfutures refers to the value of a futures contract, e.g., in the case of E-
mini S&P 500 futures … Vfutures= $50 x Price
• Beta (b) refers to the weighted b of the stock portfolio
• HR represents the number of futures needed to immunize
portfolio from systematic risks
Hedge Ratio (HR) =Stock Value
(Vstock)
Futures Value
(Vfutures)x Beta (b)
Beta Adjustment or “Tilting”
18
© 2010 CME Group. All rights reserved
• OUTLOOK: You believe market is overvalued and want to protect or
immunize portfolio from risk of loss
• December 2010 E-mini S&P 500 futures @ 1,187.00 on 11/29/10
Contract valued @ $59,350 (= $50 x 1,187.00)
• Cash Portfolio valued at U$20 million, with a Beta of 1.05
• Calculate appropriate hedge ratio …
• ACTION … Sell 354 futures
• Expectation of “locking-in” short-term rate of return
HR = (Vstock Vfutures ) x b
= ($20,000,000 $59,350 ) x 1.05
= 354 E-mini S&P 500 futures
Beta Adjustment or “Tilting”
19
© 2010 CME Group. All rights reserved
• OUTLOOK: You anticipate a near-term advance in stocks and
wish to strategically increase your portfolio beta from 1.05 to 1.20
while maintaining current stock holdings
• Calculate appropriate hedge ratio …
• ACTION … BUY 51 futures
HR = (Vstock Vfutures ) x (Target b - Current b)
= ($20,000,000 $59,350) x (1.20 - 1.05)
= 51 E-mini S&P 500 futures
Beta Adjustment or “Tilting”
20
© 2010 CME Group. All rights reserved
Defining a “portable alpha” strategy …
• Objective … outperform benchmark returns by adding “alpha”
• Risk that alpha strategy may not actually outperform LIBOR
• Active trading strategies or hedge funds often used to capture alpha
• Further risk that cost of capturing beta may be too high
• Futures or swaps often used passively to capture beta … this only works if
futures offer “cheap beta” … i.e., low tracking error and low transaction costs
Alpha
• Achieved thru active trading
• Goal to create returns > LIBOR
Beta
• Reflects returns on benchmark, e.g.,
S&P 500, DJIA, Nasdaq-100
• Passively created with derivatives
(futures or swaps) at near LIBOR cost
Alpha
• Achieved thru active trading
• Goal to create returns > LIBOR
Portable Alpha Strategies
21
© 2010 CME Group. All rights reserved
• E.g., buy S&P 500 futures to capture beta
• NOTE: performance bond (“margin”) for E-mini S&P 500 futures may be
at 5-15% of notional contract value contingent on market volatility
• That 85%-95% residual may be posted in form of T-bills or other collateral
on which trader earns float
• This only works if futures offer “cheap beta” with … (i) low transaction
costs; and (ii) low tracking error
• Invest residual 85%-95% of contract value in an alpha generating
strategy
• E.g., actively managed investment fund, hedge fund, commodity fund,
real estate, tactical asset allocation strategy
• $23.2 billion from top 200 US retirement funds invested in portable
alpha programs as of Sep-09 … down from $41 billion in 2008
Portable Alpha Strategies
22
© 2010 CME Group. All rights reserved
Low tracking error
• CME essentially eliminates
month-to-month tracking
error with “fair value”
settlements on last day of
month
• Ensures that funds holding
CME stock index futures
deliver a “true” beta month-
to-month
Portable Alpha Strategies
-40
-35
-30
-25
-20
-15
-10
-5
0
5
E-m
ini S&
P 5
00
E-m
ini N
asdaq
E-m
ini M
idC
ap
E-m
ini ($
5)
DJI
A
DJ
Euro
STO
XX
FTSE 1
00
DAX 3
0
CAC
40
Hang S
eng
Nik
kei 225 (
OSE)
Kospi 200
S&
P C
NX N
ifty
Average End-of-Day Mispricing (BPs)
3-Mth
12-Mth
Source: GS Equity Product Strategy, Futures Focus, March 15, 2010
CME Group Products
23
Stock Index Futures Fair Value
© 2010 CME Group. All rights reserved 25
E-mini S&P 500
Trade Date: November 30, 2010
Days to Expiration - December 2010 Futures: 17
Cash Index: 1180.55
Dividends to Expiration: 1.05
Interest Rate: 0.25%
Theoretical Fair Value Spread: -0.91
Theoretical Futures Price: 1179.64
E-mini S&P 500
Trade Date: November 30, 2010
Days to Expiration - March 2011 Futures: 108
Cash Index: 1180.55
Dividends to Expiration: 7.28
Interest Rate: 0.25%
Theoretical Fair Value Spread: -6.39
Theoretical Futures Price: 1174.16
© 2010 CME Group. All rights reserved 26
Theoretical Futures and FV Spreads at Various Risk Free Rates and Days to Expire (DTE)
S&P 500 = 1180.55 S&P 500 = 1180.55 S&P 500 = 1180.55
Est. DIV to EXP = 7.28 Est. DIV to EXP = 3.37 Est. DIV to EXP = 1.01
Est. DIV Yield = 2.09% Est. DIV Yield = 2.09% Est. DIV Yield = 2.09%
DTE 108 DTE 50 DTE 15
Risk Free Rate Theo Futures FV Spread Theo Futures FV Spread Theo FuturesFV Spread
0.00% 1173.27 -7.28 1177.18 -3.37 1179.54 -1.01
0.25% 1174.16 -6.39 1177.59 -2.96 1179.66 -0.89
0.50% 1175.04 -5.51 1178.00 -2.55 1179.78 -0.77
0.75% 1175.93 -4.62 1178.41 -2.14 1179.91 -0.64
1.00% 1176.81 -3.74 1178.82 -1.73 1180.03 -0.52
1.25% 1177.70 -2.85 1179.23 -1.32 1180.15 -0.40
1.50% 1178.58 -1.97 1179.64 -0.91 1180.28 -0.27
1.75% 1179.47 -1.08 1180.05 -0.50 1180.40 -0.15
2.00% 1180.35 -0.20 1180.46 -0.09 1180.52 -0.03
2.25% 1181.24 0.69 1180.87 0.32 1180.65 0.10
2.50% 1182.12 1.57 1181.28 0.73 1180.77 0.22
2.75% 1183.01 2.46 1181.69 1.14 1180.89 0.34
3.00% 1183.89 3.34 1182.10 1.55 1181.01 0.46
3.25% 1184.78 4.23 1182.51 1.96 1181.14 0.59
3.50% 1185.67 5.12 1182.92 2.37 1181.26 0.71
3.75% 1186.55 6.00 1183.33 2.78 1181.38 0.83
4.00% 1187.44 6.89 1183.74 3.19 1181.51 0.96
4.25% 1188.32 7.77 1184.15 3.60 1181.63 1.08
© 2010 CME Group. All rights reserved
Futures vs. ETFs: 1-Dec-2010: S&P 500 = 1200
E-Mini S&P 500 SPDR Trust
Symbol ES SPY
Unit $50 * S&P 500 ~1/10th of S&P 500
Unit $Value $60,000 $120
Average Daily $volume U$120 billion U$22 billion
Min. Margin U$5,625 (~9.4%) Reg T= 50%
Margin to hold $60,000 $5,625 $30,000
Operating Exp na .09% per year
27
© 2010 CME Group. All rights reserved 28
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
E-mini SP500 SPY E-mini ND100 QQQQ E-mini Dow DIA E-mini SP400 MDY
Average Daily $Volume Traded (US$ billions)E-mini Index Futures vs. Exchange Traded Funds
2007 2008 2009 2010
© 2010 CME Group. All rights reserved
Stock Index Spread Relationships
S&P 500 Index (SPX) vs.
Dow Jones Industrial Average (DJIA)
29
© 2010 CME Group. All rights reserved
S&P 500 vs DJIA
The Standard & Poor’s 500 (S&P 500) Index and the Dow Jones Industrial
Average (DJIA) are the two most widely known U.S. stock indexes. The
S&P 500 Index is the leading large-cap benchmark for the U.S. stock
market and is the main barometer for institutional and professional
investors. The DJIA is the popular measure of the U.S. stock market,
especially among the media and general population. In addition:
The S&P 500 index contains 500 stocks, while the DJIA has 30 stocks. All
30 of the stocks in the DJIA are also in the S&P 500.
The S&P 500 is a capitalization-weighted, float-adjusted index.
The DJIA is a price-weighted index.
30
© 2010 CME Group. All rights reserved
What Factors Affect the S&P 500 vs. DJIA Spread?
Although the spread between the S&P 500 and DJIA may be affected by
potentially many factors, basically there are three main factors which
account for the majority of changes in the spread:
Sector Weightings, Index Constituents and Index Methodology.
The factor which has the strongest and most significant influence on the
spread, however, is the difference in Sector Weightings.
31
© 2010 CME Group. All rights reserved
Index Sector Weightings (As of October 29, 2010)
32
S&P
500
S&P
MidCap 400 NASDAQ-100 DJIA
Basic Materials 3.36% 4.20% 0.40% 3.49%
Communications 11.27% 5.19% 27.12% 8.05%
Consumer, Cyclical 8.11% 12.54% 7.85% 10.29%
Consumer, Non-cyclical 22.18% 19.81% 17.06% 18.99%
Diversified 0.05% - - -
Energy 12.40% 5.91% 0.61% 11.54%
Financial 16.80% 19.56% - 11.28%
Industrial 9.89% 18.23% 3.21% 19.75%
Technology 12.40% 7.74% 43.76% 16.61%
Utilities 3.54% 6.82% - -
Total 100.00% 100.00% 100.00% 100.00%
© 2010 CME Group. All rights reserved
Index Beta, Correlations, Volatilities
One of the most popular spread
trades is S&P 500 vs DJIA
• High Correlation of 98.5% - Both
indexes are large cap blue chips
• DJIA has a Beta of .903 vs. the
S&P 500
• Due to the Beta of .903, the DJIA
will tend to lag the S&P 500, both
on upside and downside..ie, S&P
500 will tend to be about 10~11%
more volatile than the DJIA.
33
Jan2005~Nov2010 SP500 DJIA ND100
Beta vs SP500 0.903 0.991
Correlation vs SP500 0.985 0.926
Historical Volatility SP500 DJIA ND100
a/o 30-NOV-2010
20 Day HV 15.52% 14.63% 17.33%
63 Day HV 13.27% 12.11% 15.22%
ATM Implied Volatility SP500 DJIA ND100
a/o 30-NOV-2010
January 2011 (54 DTE) 20.40% 18.10% 22.30%
February 2011 (82 DTE) 21.20% 18.90% 23.00%
March 2011 (110 DTE) 22.10% 19.50% 23.60%
© 2010 CME Group. All rights reserved 34
90%
91%
92%
93%
94%
95%
96%
97%
98%
99%
100%2
/3/2
00
5
6/3
/20
05
10
/3/2
00
5
2/3
/20
06
6/3
/20
06
10
/3/2
00
6
2/3
/20
07
6/3
/20
07
10
/3/2
00
7
2/3
/20
08
6/3
/20
08
10
/3/2
00
8
2/3
/20
09
6/3
/20
09
10
/3/2
00
9
2/3
/20
10
6/3
/20
10
10
/3/2
01
0
50-day Rolling Correlation of Percent Price Changes
S&P 500 vs. DJIA
© 2010 CME Group. All rights reserved
Calculating the Spread Ratio
Buying the spread means buying the E-mini S&P 500 contract and selling the E-mini Dow
contract
Selling the spread means selling the E-mini S&P 500 contract and buying the E-mini Dow
contract.
For example, if a trader expects the S&P 500 to outperform the DJIA (either up or down
regardless of time frame), the trader would want to “buy the spread” – buy the E-mini
S&P 500 contract and sell the E-mini Dow contract. If the spread ratio was at 1.1020, the
trader who bought the spread would be looking to sell it for a ratio above 1.1020.
When trading the spread between the E-mini S&P 500 and the E-mini Dow futures, the
different index levels and their respective multipliers need to be taken into account.
Ideally, a spread ratio which closely balances the notional values of the contracts should
be used, so that the net effect of market movements is captured more precisely. This can
be called a “dollar neutral” spread when it is initiated.
35
© 2010 CME Group. All rights reserved
Trading the Spread as a Ratio
How many contracts of the respective index futures do you buy and sell?
For traders who prefer to trade the smallest quantities, trading the spread on a 1:1 basis is
the obvious choice.
For traders who are trading larger quantities, however, and for those who are “position
traders” trading a ratio of quantities is the preferred method. CME Clearing offers
reduced margins via Spread Credits for traders who use a ratio of 5:6 (five contracts of
E-mini S&P 500 futures vs. six contracts of E-mini Dow futures).
Trading the spread as a ratio allows you to enter the spread as “dollar neutral”
36
© 2010 CME Group. All rights reserved
Ratio Trade History
Trading the spread between E-mini S&P 500 and E-Mini DJIA: Need to trade a Ratio
of the U$ notional amounts
E-Mini S&P 500 * U$50 / E-Mini DJIA * U$5
= (1180 * U$50) / (11006 * U$5 ) = U$59,000 / U$55,030 = 1.07
37
S&P 500 vs. DJIA Spread Ratio Year-End Calculations
A B C D E
Year End S&P 500 $notional DJIA $notional Ratio
= A x $50 = C x $5 = B / D
2000 1320.28 $66,014 10787.99 $53,940 1.22384
2001 1148.08 $57,404 10021.57 $50,108 1.14561
2002 879.82 $43,991 8341.63 $41,708 1.05473
2003 1111.92 $55,596 10453.92 $52,270 1.06364
2004 1213.75 $60,688 10783.01 $53,915 1.12561
2005 1248.29 $62,415 10717.50 $53,588 1.16472
2006 1418.30 $70,915 12463.15 $62,316 1.13799
2007 1468.36 $73,418 13264.82 $66,324 1.10696
2008 903.25 $45,163 8776.39 $43,882 1.02918
2009 1115.10 $55,755 10428.05 $52,140 1.06933
Nov. 30, 2010 1180.55 $59,028 11006.02 $55,030 1.07264
© 2010 CME Group. All rights reserved 38
0.950
1.000
1.050
1.100
1.150
1.200
1.250
1.300
1/3
/2001
5/3
/2001
9/3
/2001
1/3
/2002
5/3
/2002
9/3
/2002
1/3
/2003
5/3
/2003
9/3
/2003
1/3
/2004
5/3
/2004
9/3
/2004
1/3
/2005
5/3
/2005
9/3
/2005
1/3
/2006
5/3
/2006
9/3
/2006
1/3
/2007
5/3
/2007
9/3
/2007
1/3
/2008
5/3
/2008
9/3
/2008
1/3
/2009
5/3
/2009
9/3
/2009
1/3
/2010
5/3
/2010
9/3
/2010
Dollar Weighted Notional Ratio - S&P 500 ~ DJIA
Recovery in technologyand advances in energy sector. S&P 500 overweight in both tech and energy vs. DJIA. Spread Ratio increases from 1.0245 to 1.1810 during July 2002 to January 2006.
Financial shares crash. S&P 500 overweight financials vs. DJIA. Spread Ratio declines from 1.1267 to 0.9963during June 2008 to November 2008.
Foreign Exchange Products
© 2010 CME Group. All rights reserved 40
Q3 2010
ADV
Contracts
ADV
$Notional
($millions)
Open Interest
Contracts
O.I.
$Notional
($millions)
EUR/USD E-mini Euro 4,034 $326 4,370 $373
Euro 308,107 $49,819 187,493 $32,237
Euro Total 312,141 $50,145 191,863 $32,610
JPY/USD E-mini Japanese Yen 341 $25 1,534 $115
Japanese Yen 130,770 $19,098 127,050 $19,058
Japanese Yen Total 131,111 $19,123 128,584 $19,173
GBP/USD British Pound 110,340 $10,692 82,218 $8,083
CHF/USD Swiss Franc 40,896 $4,970 53,675 $6,840
CAD/USD Canadian Dollar 86,252 $8,286 103,622 $10,064
AUD/USD Australian Dollar 96,166 $8,635 137,530 $13,185
MXN/USD Mexican Peso 26,823 $1,040 123,447 $4,871
RMB/USD Chinese RMB 14 $2 409 $62
Average Daily Volume Open Interest
© 2010 CME Group. All rights reserved 41
Q3 2010 - OPTIONS ADV
Contracts
ADV
$Notional
($millions)
Open Interest
Contracts
O.I.
$Notional
($millions)
EUR/USD Euro 23,789 $3,849 324,807 $55,363
JPY/USD Japanese Yen 5,938 $867 94,158 $14,126
GBP/USD British Pound 5,385 $522 62,105 $6,097
CAD/USD Canadian Dollar 3,693 $355 60,830 $5,908
CHF/USD Swiss Franc 716 $87 14,325 $1,826
AUD/USD Australian Dollar 2,066 $186 42,451 $4,069
© 2010 CME Group. All rights reserved 42
050,000
100,000150,000200,000250,000300,000350,000400,000450,000500,000550,000600,000650,000700,000750,000800,000850,000900,000950,000
1,000,0001,050,0001,100,0001,150,0001,200,0001,250,000
Ju
n-0
3
Se
p-0
3
De
c-0
3
Ma
r-0
4
Ju
n-0
4
Se
p-0
4
De
c-0
4
Ma
r-0
5
Ju
n-0
5
Se
p-0
5
De
c-0
5
Ma
r-0
6
Ju
n-0
6
Se
p-0
6
De
c-0
6
Ma
r-0
7
Ju
n-0
7
Se
p-0
7
De
c-0
7
Ma
r-0
8
Ju
n-0
8
Se
p-0
8
De
c-0
8
Ma
r-0
9
Ju
n-0
9
Se
p-0
9
De
c-0
9
Ma
r-1
0
Ju
n-1
0
Se
p-1
0
FX Futures Average Daily Volume and Notional Value
AUD/USD CHF/USD CAD/USD GBP/USD JPY/USD EUR/USD
160
Approximately Notional Value (in billions of dollars)
Average Daily Volume (in contracts)
80
60
40
0
20
140
120
100
© 2010 CME Group. All rights reserved 43
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000Ju
l-0
7
Au
g-0
7
Se
p-0
7
Oct-
07
No
v-0
7
De
c-0
7
Jan-0
8
Fe
b-0
8
Mar-
08
Ap
r-0
8
May-0
8
Ju
n-0
8
Ju
l-0
8
Au
g-0
8
Se
p-0
8
Oct-
08
No
v-0
8
De
c-0
8
Jan-0
9
Fe
b-0
9
Mar-
09
Ap
r-0
9
May-0
9
Ju
n-0
9
Ju
l-0
9
Au
g-0
9
Se
p-0
9
Oct-
09
No
v-0
9
De
c-0
9
Jan-1
0
Fe
b-1
0
Mar-
10
Ap
r-1
0
May-1
0
Ju
n-1
0
Ju
l-1
0
Au
g-1
0
Se
p-1
0
FX Options Average Daily Volume and Notional ValueCHF/USD EUR/USD GBP/USD JPY/USD CAD/USD
Approximately Notional Value (in billions of dollars)
10
0
7
4
3
Average Daily Volume (in contracts)
9
8
2
1
6
5
Agricultural Products
© 2010 CME Group. All rights reserved 45
October 2010
Contracts
$ Notional
($ Millions) Contracts
$ Notional
($ Millions)
Spot Month
Close on
29-Oct-'10
Spot Month
Close in
US$/MT
29-Oct-'10
20-Day
Historical
Volatility
Corn 357,195 $10,394 1,614,062 $46,969 582 $229.12 40.62%
Wheat 72,752 $2,609 532,892 $19,111 717 1/4 $263.54 40.58%
Soybeans 221,913 $13,714 620,516 $38,348 1236 $454.15 27.04%
Soybean Oil 75,662 $2,238 352,992 $10,442 49.30 $1,086.88 25.37%
Soybean Meal 50,225 $1,696 205,558 $6,942 337.70 $372.25 31.56%
Live Cattle 39,387 $1,473 316,374 $11,829 98.83 12.91%
Lean Hog 32,550 $957 200,768 $5,901 66.20 27.75%
Average Daily
Volume Open Interest
© 2010 CME Group. All rights reserved 46
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Co
ntr
ac
tsCorn Futures - Average Daily Volume by Trading Platform
Electronic Open Auction % Electronic ADV
© 2010 CME Group. All rights reserved 47
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50,000
100,000
150,000
200,000
250,000
Co
ntr
ac
tsSoybean Futures - Average Daily Volume by Trading Platform
Electronic Open Auction % Electronic ADV
© 2010 CME Group. All rights reserved 48
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Co
ntr
ac
tsCombined Futures and Options
Grain and Oilseed - Average Daily Volume
Options
Futures
© 2010 CME Group. All rights reserved 49
0%
10%
20%
30%
40%
50%
60%
CFTC COT Report - Commodity Index Funds Long Positions as a Percent of Total Open Interest
CORN Wheat Soybeans Soy Oil
Source: CFTC
© 2010 CME Group. All rights reserved 50
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Co
ntr
ac
ts
Chicago Time
Average Hourly Electronic Volumes - All Hours - October 2010
Lean Hog Futures
Live Cattle Futures
Soybean Oil Futures
Soybean Meal Futures
Soybean Futures
Wheat Futures
Corn Futures
© 2010 CME Group. All rights reserved
CMEG Ag Product Review-Market Expression
Corn
CME Group provides traders numerous ways to express their opinions within a single commodity.
Exchange
Linear
Cleared OTCs
Convex
•Options
•Calendar Spread Options
•Intercommodity Spread
Options
•VIX*
•Asian Options*
•European Options*
•Futures
•Calendar Spreads
•Intercommodity
Spreads
•Calendar (Asian Swaps
•Bullet (Euro) Swaps*
*Pending Approval
© 2010 CME Group. All rights reserved
Grain Calendar Swaps Summary Grain Swaps Summary
• CME Group lists Corn Calendar Swaps (CCS), Soybean
Calendar Swaps (SNS) and Wheat Calendar Swaps
(WCS)
• Launched in April 2009
• Calendar Swap=Asian or Average Price Swap
• European (Bullet) Swaps Petitioned and on-hold with
CFTC
• No price limits on swaps
• Swaps are available for clearing when the market isn’t
open
• Swap settles to underlying futures contract daily, until the
last month, which settles to the average closing price of
the underlying futures
• Swaps can be liquidated or EFRed into the underlying
futures contract prior to the averaging period
• Volume has grown 756% from the previous year
-
1
2
3
4
5
6
7
-
50
100
150
200
250
300
350
400
Th
ou
sa
nd
s O
I
YTD Average Daily Volume and Open Interest
Grain Swaps
ADV Open Interest
© 2010 CME Group. All rights reserved
Commodity Index Summary
Commodity Index Summary
• Commodities provide portfolio diversification
• Benchmark commodity indexes are available as a
cleared alternative to bi-lateral off-exchange
commodity index swaps
• CME cleared commodity index products reference
S&P-GSCI and DJ-UBS indices
• Centralized clearing increases the pool of potential
counterparties, and reduces the regulatory capital
• CME has about 3.8 Billion in notional value on its
books
• CME offers 75% margin credit between offsetting swap
and underlying futures in the index basket
12.6%
0.3%
2.1%
77.3%
2.6%2.8%
2.3%
YTD Commodity IndexVolume Composition
DJ-UBS ER FUTURE
DJ-UBS CI SWAP
S&P-GSCI ER FUTURES
S&P-GSCI FUTURE
OTC SP GSCI ER 2-MTH FWD SWAP
OTC SP GSCI ER 3-MTH FWD SWAP
OTC SP GSCI FUTURE
Energy Products
© 2010 CME Group. All rights reserved 55
October 2010
Contracts
$
Notional
($
Millions) Contracts
$
Notional
($
Millions)
US$ Spot
Month
Close
29-Oct-'10
US$/MT
Except
NG=US$/
Cubic
Meter
29-Oct-'10
20-Day
Historical
Volatility
Light Sweet Crude Oil CL 686,803 $55,926 1,416,888 $115,377 81.43 $597.13 29.00%
Natural Gas NG 281,906 $11,383 794,742 $32,092 4.038 $0.15 36.57%
Heating Oil HO 106,234 $9,984 317,464 $29,836 223.77 $701.03 26.87%
RBOB Gasoline RB 124,478 $10,767 270,680 $23,412 205.94 $737.87 28.63%
DME Oman Crude Oil OQ 3,234 20,721
PJM Financially Settled Electricity
Futures & Swap Futures JM+L1* 498 50,283
Options JO 2,601 404,018
* L1 is adjusted to JM contract size.
Average Daily
Volume Open Interest
U.S. and Metric
Spot Price &
Conversion
Electronic/Pit Ticker
Symbols
© 2010 CME Group. All rights reserved 56
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Co
ntr
ac
tsFutures - Average Daily Volumes
DME Oman Crude Oil Futures
RBOB Gasoline Futures
Heating Oil Futures
Natural Gas Futures
Light Sweet Crude Oil Futures
© 2010 CME Group. All rights reserved 57
84%
86%
88%
90%
92%
94%
96%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Co
ntr
ac
ts
Light Sweet Crude Oil Futures - Electronic Average Daily Volume
Total ADV Electronic ADV % of Electronic Volume
© 2010 CME Group. All rights reserved 58
70%
75%
80%
85%
90%
95%
100%
0
50,000
100,000
150,000
200,000
250,000
300,000
Co
ntr
ac
tsNatural Gas Futures - Electronic Average Daily Volume
Total ADV Electronic ADV % of Electronic Volume
© 2010 CME Group. All rights reserved 59
0
50,000
100,000
150,000
200,000
250,000
300,000
Co
ntr
ac
ts
New York Time
Average Hourly Total Volume - All Hours - October 2010
Heating Oil Futures
RBOB Gasoline Futures
Natural Gas Futures
Light Sweet Crude Oil Futures
Metals Products
© 2010 CME Group. All rights reserved 61
October 2010
Contracts
$ Notional
($ Millions) Contracts
$ Notional ($
Millions)
US$ Spot Month
Close
Except
Copper=Ave
Month Close 29-
Oct-'10
US$/Gram
Except
Copper=US$/MT
Steel=US$/MT
29-Oct-'10
20-Day
Historical
Volatility
Gold 183,754 $24,946 608,083 $82,553 1357.60 $43.65 18.67%
Silver 62,579 $7,686 154,866 $19,021 24.56 $0.79 31.62%
Copper 39,159 $3,694 161,220 $15,208 377.31 $8,318.31 22.11%
Platinum 4,724 $403 37,867 $3,234 1708.10 $54.92 15.13%
Palladium 3,315 $214 26,190 $1,690 645.10 $20.74 26.78%
HRC Steel 15 $0.17 11,279 $127 565.00 $622.93 18.12%
Average Daily Volume Open Interest
U.S. and Metric
Spot Price & Conversion
© 2010 CME Group. All rights reserved 62
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Co
ntr
ac
ts
Futures - Average Daily Volume
Palladium Futures Platinum Futures Copper Futures Silver Futures Gold Futures
© 2010 CME Group. All rights reserved 63
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
50,000
100,000
150,000
200,000
250,000
300,000
Co
ntr
ac
ts
Gold Futures - Electronic Average Daily Volume
Total ADV Electronic ADV % of Electronic Volume
© 2010 CME Group. All rights reserved 64
0%
20%
40%
60%
80%
100%
120%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Co
ntr
ac
ts
Silver Futures - Electronic Average Daily Volume
Total ADV Electronic ADV % of Electronic Volume
© 2010 CME Group. All rights reserved 65
0
10,000
20,000
30,000
40,000
50,000
60,000
Co
ntr
ac
ts
New York Time
Average Hourly Total Volume - All Hours - October 2010
Copper Futures
Silver Options
Silver Futures
Gold Options
Gold Futures
CME Group Options
© 2010 CME Group. All rights reserved 67
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Interest
Rates
Energy Commodity
Agri
Equity Index FX Metals
CME Group Options - Average Daily Volume - 2010
© 2010 CME Group. All rights reserved 68
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Eurodollars 10 Yr Treasury 30 Yr Treasury Fed Funds 5 Yr Treasury
CME Group Options - Average Daily Volume - 2010
© 2010 CME Group. All rights reserved 69
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
E-mini S&P 500 S&P 500 S&P 500 EOW/EOM
CME Group Options - Average Daily Volume - 2010
© 2010 CME Group. All rights reserved 70
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
WTI Crude Oil Natural Gas Gold Silver
CME Group Options - Average Daily Volume - 2010
© 2010 CME Group. All rights reserved 71
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Corn Soybeans Wheat Live Cattle Soy Oil Soy Meal Lean Hogs
CME Group Options - Average Daily Volume - 2010
© 2010 CME Group. All rights reserved 72
Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a
leveraged investment, and because only a percentage of a contract’s value is required to
trade, it is possible to lose more than the amount of money deposited for a futures position.
Therefore, traders should only use funds that they can afford to lose without affecting their
lifestyles. And only a portion of those funds should be devoted to any one trade because they
cannot expect to profit on every trade.
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The information within this presentation has been compiled by CME Group for general
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every attempt has been made to ensure the accuracy of the information within this
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all examples in this presentation are hypothetical situations, used for explanation purposes
only, and should not be considered investment advice or the results of actual market
experience.
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