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CME Stock Index Futures & Options Mexico City: October 12, 2006.

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Presentation on theme: "CME Stock Index Futures & Options Mexico City: October 12, 2006."— Presentation transcript:

1 CME Stock Index Futures & Options Mexico City: October 12, 2006

2 © Chicago Mercantile Exchange Inc. All rights reserved. 2 CME Key Strengths Leader of a dynamic industry  Best Stock Index Futures Product Diversity  Unparalleled clearing efficiencies  Well-developed and widely distributed technology Significant growth opportunities  Electronic options  Global expansion

3 © Chicago Mercantile Exchange Inc. All rights reserved. 3 CME ’ s Long Track Record of Success First financial futures: CME Foreign Exchange Products First cash-settled futures: CME Eurodollars First successful equity index futures: S&P 500  First global after-hours electronic trading system: CME Globex E-mini S&P 500 Index futures First U.S. financial exchange to demutualize 1970 Revenue ($ in millions) $4M Revenue CAGR ‘70 – ‘00: 14% Revenue CAGR ‘00 – ‘05: 32% 1990s 2000s 1970s 1980s First IPO of a U.S. financial Exchange Historic Common Clearing Link 2005 $921M

4 © Chicago Mercantile Exchange Inc. All rights reserved. 4 Product Diversity and Clearing Efficiencies Diverse Products Vertically Integrated Business Model 44% 38% 16% 2% CME Equities CME Foreign Exchange CME Commodities CME Interest Rates 1Q06 Revenue by Product Group Trade Matching Clearing CME ® Globex ® Open Outcry Privately Negotiated Eliminates counterparty risk All CME and CBOT products Deep pools of liquidity Economies of scale 152,000 institutional screens Market Data Distribution

5 © Chicago Mercantile Exchange Inc. All rights reserved. 5 ADV Q vs. Q (round turns in 000’s) +16% 15,782 Note: Individual Equity and Equity Index options are not included for Eurex or Euronext, ICE includes futures, not off-exchange volumes Source: Company websites Contribution to Total Industry Growth 13, % +2% Euronext Eurex CBOT Euronext 2% Eurex 25% CBOT 13% % CME 47% NYMEX ICE+82% +25% NYMEX 8% ICE 5% +13% Competitive Position – Industry Volume Growth 3,946 2,838 4,113 1, ,958 3,108 4,638 2,

6 © Chicago Mercantile Exchange Inc. All rights reserved. 6 Annual Average Daily Volume (round turns, in thousands) CME – Long History FXCommoditiesInterest Rates Equities 2006 YTD 5, (round turns in 000’s) Proven track record (June 2006 ADV up 64% versus June 2005)

7 © Chicago Mercantile Exchange Inc. All rights reserved. 7 What Does CME Clearing Do? Largest derivatives clearing house in the world by trading volume cleared  CME Total1,090.4  CBOT Total  CME Clearing House Total1,765.1 (2005 clearing volume, contracts in millions) CME Clearing House is also the LARGEST derivatives clearing house in the world by notional value cleared: $638 trillion in 2005 (Excluding CBOT transactions)

8 © Chicago Mercantile Exchange Inc. All rights reserved. 8 CME Processing Services - Globex Global Distribution Most widely distributed trading platform today in 83+ countries and 150,000+ Institutional Screens AlgeriaChileGreeceKuwaitNorwaySingapore ArgentinaChinaHong KongLebanonPakistanSlovakia AustraliaCosta RicaHungaryLiechtensteinPeruSouth Africa AustriaCyprusIcelandLuxembourgPhilippinesSpain BahamasCzech RepublicIndiaMacauPolandSweden Barbados Democratic People's Republic of Korea IndonesiaMadagascarPortugalSwitzerland BelgiumDenmarkIranMalaysiaPuerto RicoTaiwan BelizeEcuadorIrelandMauritiusRepublic of KoreaThailand BermudaEgyptIsle of Mann Mexico RomaniaTurkey BrazilFinlandIsraelMonaco Russian Federation United Arab Emirates British Virgin Islands FranceItalyMongolia Saint Pierre and Miquelon US BulgariaGreat BritainJamaicaNamibiaSaudi ArabiaUS Virgin Islands CanadaGermanyJapanNetherlandsSenegalVenezuela Cayman Islands GibraltarJordanNew ZealandSeychelles

9 © Chicago Mercantile Exchange Inc. All rights reserved. 9 CME Equities CBOE VIX ® (round turns, in 000’s) Equity StandardE-MiniVIX (new) , % 1Q06 Note: Restated equity ADV’s go back through 2003 only Jun 06 ADV up 90% versus Jun 05 2Q06 QTD Up 39% vs. 2Q05

10 © Chicago Mercantile Exchange Inc. All rights reserved. 10 CME Growth Story Average Monthly Dollar Volume: NYSE vs. CME Equity Futures (in millions) NYSE-listed Equities CME Equity Index Futures How big is the U.S. Equity Marketplace?

11 © Chicago Mercantile Exchange Inc. All rights reserved. 11 CME E-mini ® S&P 500 ® Futures Average Daily Volume (through August 2006)

12 © Chicago Mercantile Exchange Inc. All rights reserved. 12 CME E-mini NASDAQ-100 ® Futures Average Daily Volume (through August 2006)

13 © Chicago Mercantile Exchange Inc. All rights reserved. 13 CME E-mini Russell 2000 ® & CME E-mini S&P MidCap 400 ™ Futures Average Daily Volume (through August 2006)

14 © Chicago Mercantile Exchange Inc. All rights reserved. 14 CME Growth Story CME stock index line-up Electronic Traded Contracts E-mini TM S&P 500 E-mini NASDAQ-100 E-mini Russell 2000 E-mini S&P MidCap 400 E-mini Russell 1000 ® Nikkei 225 ($ and ¥ based) E-mini S&P Asia 50 (Feb) E-mini MSCI EAFE (March) Pit Traded Contracts S&P 500® NASDAQ-100® Russell 2000® S&P MidCap 400TM Nikkei 225TM ($ based)

15 © Chicago Mercantile Exchange Inc. All rights reserved. 15 Outline Mechanics of Stock Index Futures E-minis vs. ETFs Index Performance and Volatility Fair Value Concept and Arbitrage Spreading Stock Index Futures Hedging with Stock Index Futures

16 © Chicago Mercantile Exchange Inc. All rights reserved. 16 Mechanics of Stock Index Futures Most popular stock index futures … CME E-mini S&P 500 CME E-mini Nasdaq-100 CME E-mini Russell 2000 Contact Multiplier $50 x S&P 500 Index $20 x Nasdaq-100 Index $100 x Russell 2000 Index Minimum Price Fluctuation (Tick) 0.25 index points ($12.50) 0.50 index points ($10.00) 0.10 index points ($10.00) Price Limits Limits at 5%, 10%, 15%, 20% moves Contract Months 1 st 2 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 3 rd 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 Russell contracts Ticker“ES”“NQ”“ER”

17 © Chicago Mercantile Exchange Inc. All rights reserved. 17 Mechanics of Stock Index Futures Futures Contract Value = Contract Multiplier X Quoted Value = $50x1, =$67,940 MonthOpenHighLowSettlementChangeVolume Open Interest Dec 20061, , , , ,2251,489,049 Mar 20071, , , , , ,5771,491,839 Notional Value of futures contract … CME E-mini S&P 500 pricing (10/06/06) …

18 © Chicago Mercantile Exchange Inc. All rights reserved. 18 Mechanics of Stock Index Futures Contract Multiplier March 2005 Contract Contract Value Tick (Index Points) $ Value of Tick CME E-mini S&P 500$50x 1, $67, $12.50 CME E-mini Nasdaq-100$20x1,700.00$34, $10.00 CME E-mini Russell 2000$100x744.40$74, $10.00 S&P 500Nasdaq 100Russell 2000 S&P 500- Nasdaq Russell Pricing (10/06/06) … Correlation of Daily Returns ( ) …

19 © Chicago Mercantile Exchange Inc. All rights reserved. 19 Mechanics of Stock Index Futures S&P 500Nasdaq 100Russell 2000 S&P 500- Nasdaq Russell S&P 500Nasdaq 100Russell 2000 S&P 500- Nasdaq Russell Correlation of Daily Returns ( Sept 15, 2006) Correlation of Daily Returns( Sept 15, 2006)

20 © Chicago Mercantile Exchange Inc. All rights reserved. 20 Mechanics of Stock Index Futures Performance March 2001 through October 2006

21 © Chicago Mercantile Exchange Inc. All rights reserved. 21 CME: E-mini Stock Index Futures Performance 2005 to Present As of October 06, 2006

22 © Chicago Mercantile Exchange Inc. All rights reserved. 22 Mechanics of Stock Index Futures Cash settlement mechanism … Futures ‘Marked-To-Market’ (MTM) like any other day, i.e., pay losses and collects profits daily and in cash Subsequent to final settlement day, positions simply expire and are settled at spot value of underlying index or instrument The Final Settlement Price is marked to a ‘Special Opening Quotation’ (SOQ) on the 3rd Friday of the contract month SOQ is intended to facilitate arbitrage activity by allowing arbitrageurs to enter market on open (MOO) orders to liquidate cash positions at same price that will be reflected in the Final Settlement Price A morning settlement was established in late 1980s to avoid so- called “triple witching hour”

23 © Chicago Mercantile Exchange Inc. All rights reserved. 23 E-minis vs. ETFs Futures offer reduced trading costs relative to Exchange Traded Funds (ETFs) such as SPDRs, QQQQs See trading cost estimates from industry sources Futures offer superior leverage relative to ETFs E.g., initial spec margin for E-mini S&P 500=$3,938 or 6.3% of contract value (=$3,938/$62,740) relative to 50% margin requirements on securities including ETFs

24 © Chicago Mercantile Exchange Inc. All rights reserved. 24 CME E-mini Products vs. ETF ’ s Q 1 03 E-mini S&P 500 vs. SPDR ® (Total $ volume or notional value, in trillions per Quarter ) E-mini NASDAQ-100 vs. QQQ (Total $ volume or notional value, in trillions per Quarter ) The notional value of E-mini S&P 500 futures traded is over 7 1/2 times that of the S&P SPDR The notional value of E-mini NASDAQ-100 futures traded is over 2 1/2 times that of the QQQ Q 1 04 E-mini NASDAQ-100 (CME) QQQ E-mini S&P 500 (CME)SPDR Q 1 05 Q 1 06 Q 1 03 Q 1 04 Q 1 05 Q 1 06 Q 1 02 Q 1 02

25 © Chicago Mercantile Exchange Inc. All rights reserved. 25 E-minis vs. ETFs Estimated Costs of Futures vs. ETFs vs. Stocks (in BPs per $100 mil notional) Source: Goldman Sachs Global Derivatives and Trading Research (7/26/04) CME E-mini S&P 500 SPDRs CME E-mini NASDAQ-100 QQQQs Commission Way Market Impact/Trans Cost Total Entry Cost ETF Mgt Fee/Futures Roll Costs Additional Commission from Roll Total Holding Cost Commission Way Market Impact/Trans Cost Total Exit Cost Total Cost for 1 Year

26 © Chicago Mercantile Exchange Inc. All rights reserved. 26 E-minis vs. ETFs Potential Monthly Savings Using CME E-mini NASDAQ-100 Futures Instead of QQQQ ETFs Source: “E-Mini Futures Can Reduce the Cost of Trading Equities,” Carr Futures Research Note, 1/20/04 QQQQ shares traded/month Round-Turn Trading Cost per QQQQ Share $0.04$0.06$0.08$ ,000$1,750$3,750$5,750$7, ,000$8,750$18,750$28,750$38,750 1,000,000$17,500$37,500$57,500$77,500 5,000,000$87,500$187,500$287,500$387,500

27 © Chicago Mercantile Exchange Inc. All rights reserved. 27 Index Performance and Volatility There is a strong observable negative correlation between movements in index values and volatility Suggesting that equity markets advance slowly and steadily but often decline swiftly and severely If anything, the correlation has become stronger in recent periods S&P NASDAQ Russell Correlation between Change in Index Value vs. Change in Call Implied Volatility (Jan 2001-Dec 2005)

28 © Chicago Mercantile Exchange Inc. All rights reserved. 28 Index Performance and Volatility Inverse relationship between S&P 500 and VIX (Volatility) Through October 6, 2006

29 © Chicago Mercantile Exchange Inc. All rights reserved. 29 Index Performance and Volatility Inverse relationship between price and volatility

30 © Chicago Mercantile Exchange Inc. All rights reserved. 30 Index Performance and Volatility Inverse relationship between price and volatility

31 © Chicago Mercantile Exchange Inc. All rights reserved. 31 Fair Value Concept and Arbitrage Futures Price = Spot Index Value + Finance Charges -Dividends Fair value (FV) of futures contract … The ‘basis’ (=futures price – spot price) normally expected to be > 0 Normally, we expect short-term rates > dividend yields  “negative carry” as finance costs exceed dividend payouts Sometimes rates < dividend yields and basis goes negative  “positive carry” as finance costs exceed dividend payouts This difference reflects the expected premium or discount at which futures are expected to trade relative to the spot index value … often referred to as “Fair Value”

32 © Chicago Mercantile Exchange Inc. All rights reserved. 32 Fair Value and Arbitrage: S&P 500 Basis Relationship Convergence of spot and futures prices: ESU6 vs SPX…

33 © Chicago Mercantile Exchange Inc. All rights reserved. 33 Fair Value Concept and Arbitrage Fair value settlement at end of month … CME stock index futures are settled on last day of every month at their fair value Based upon a survey of applicable interest rates and dividends to accrue until expiration date EXAMPLE: On 12/30/05, rate surveyed at 4.517%; 76 days until 3/17/06 expiration of March 2006 contract; S&P 500 at 1,248.29; dividends estimated at index points Futures should be at 6.51 premium over spot index value of 1, or 1, Fair Value=Finance Charges-Dividends =Rate x (days/360) x Index Value-Dividends ==== 4.517% x (76/360) x 1, = 6.508

34 © Chicago Mercantile Exchange Inc. All rights reserved. 34 Fair Value Concept and Arbitrage Arbitraging mispriced markets … If futures > spot index value + fair value sell futures and buy stock portfolio OR … if futures < spot index value + fair value  buy futures and sell stock portfolio Buy levels reflecting spot index value(1,248.29) Incur finance 4.517%(11.903) Receive dividends of index points5.396 Net cost over 76 days(1,254.80) Expected futures price1, Sell levels reflecting spot index value(1,248.29) Invest 4.517%(11.903) Pay dividends of index points to lender5.396 Net cost over 76 days(1,254.80) Expected futures price1,254.80

35 © Chicago Mercantile Exchange Inc. All rights reserved. 35 Fair Value Concept and Arbitrage Fair Value - Arbitrage Costs < Futures Price < Fair Value + Arbitrage Costs Arbitraging mispriced markets … In practice, one must also consider costs attendant to arbitrage, i.e., slippage, commissions, fees, etc. THUS … futures tend to trade within a “band” above a below its theoretical fair value When futures fall below that band  buy futures and sell stock portfolio When futures rise above that band  sell futures and buy stock portfolio

36 © Chicago Mercantile Exchange Inc. All rights reserved. 36 Standard & Poor’s 500 … Represents 500 leading blue chip US equities, weighted by market capitalization Think of S&P 500 as high-cap, blue chip stock index NASDAQ-100 … Represents top 100 non-financial stocks traded on NASDAQ system Utilizes a modified capitalization weighting system Heavily influenced by technology issues … think of NASDAQ-100 as a high-tech index Russell 2000 … Represents the smallest 2000 stocks sampled from the Russell 3000 Index reconstituted completely on an annual basis Think of Russell 2000 as a small-cap index Spreading Stock Index Futures

37 © Chicago Mercantile Exchange Inc. All rights reserved. 37 Spreading Stock Index Futures

38 © Chicago Mercantile Exchange Inc. All rights reserved. 38 Spreading Stock Index Futures

39 © Chicago Mercantile Exchange Inc. All rights reserved Recession ends, corporate profits and stock values begin to bounce back. Small caps outperform in low rate environment. FOMC begins series of measured tightening in late Stock market declines sharply as tech “bubble” collapses. FOMC aggressively eases Fed Funds down to 1%. This favors small-caps where borrowing costs typically more problematic over high-caps. Still, credit concerns mount by 2002 and small caps tumble High-caps outperform as investment managers compelled to park huge amounts of new investment in high-caps. Russian & Asian financial crises stimulate flight to quality. Tech stocks lead the way given emergence of telecomm technologies such as internet Post-Gulf War era exerts very positive effect on small-caps. Interest rates decline to lowest levels in decades as US T-bill rates dip below 3% by November 1993 and 30-year US T-bond yields fall below 6% Most significant bull market since the 50s begins as high cap stocks race ahead. Weakness in US dollar favored large cap stocks with international markets (e.g., Merck, Coca-Cola, Philip Morris) Small cap stocks outperform high cap stocks by wide margin lead. Small energy stocks lead the way as OPEC crimps oil supplies. High-cap, small-cap & tech stock market cycles … Spreading Stock Index Futures

40 © Chicago Mercantile Exchange Inc. All rights reserved. 40 Spreading Stock Index Futures

41 © Chicago Mercantile Exchange Inc. All rights reserved. 41 CME: E-mini Stock Index Futures Performance 2005 to Present As of October 06, 2006

42 © Chicago Mercantile Exchange Inc. All rights reserved. 42 Weighting an inter-market spread How to structure an inter-market stock index futures spread? Goal is to balance monetary value of each contract that forms the inter-market spread Must reference the value of each contract as function of contract multiplier and price of each leg of spread Multiplier 1 x Price 1 ~Multiplier 2 x Price 2 Spread Ratio= (Multiplier 1 x Price 1 )  (Multiplier 2 x Price 2 ) Spreading Stock Index Futures

43 © Chicago Mercantile Exchange Inc. All rights reserved. 43 Weighting an inter-market spread, cont. EX: How to weight S&P 500/NASDAQ-100 spread on 9/14/06 Dec-06 CME E-mini S&P (ESZ6) has multiplier=$50, price=1, Dec-06 CME E-mini NASDAQ-100 (NQZ6) has multiplier=$20, price=1, THUS … trade 2 NQZ6 vs. 1 ESZ6 CME Clearing House offers margin break for spreads in this ratio Spread Ratio= (Multiplier ESZ6 x Price ESZ6 ) Multiplier NQZ6 x Price NQZ6 ) = ($50 x 1,329.40)  ($20 x 1,644.75) = $66,470 $32,895 = or ~2:1 spread ratio Spreading Stock Index Futures: S&P 500/NASDAQ-100

44 © Chicago Mercantile Exchange Inc. All rights reserved. 44 Spreading Stock Index Futures: S&P 500/NASDAQ-100 Performance Sept 14, 2006 to Oct 6, 2006

45 © Chicago Mercantile Exchange Inc. All rights reserved. 45 Trading the NASDAQ 100 (NQZ6)/S&P 500 (ESZ6) spread 9/14/06Buy or $32,895 (2=$65,790) Sell 1 1, or $66,470 10/06/06Sell or $34,000 (2=$68,000) Buy 1 1, or $67,940 +$2,210($1,470) Spread Performance +$740 Spreading Stock Index Futures: S&P 500/NASDAQ-100

46 © Chicago Mercantile Exchange Inc. All rights reserved. 46 Weighting an inter-market spread, cont. EX: How to weight Russell 2000/S&P 500 spread on 9/14/06 Dec-06 CME E-mini Russell (ERZ6) has multiplier=$100, price= Dec-06 CME E-mini S&P (ESZ6) has multiplier=$50, price=1, THUS … trade 1 ERZ6 against 1 ESZ6 CME Clearing House offers margin break for spreads in this ratio Spread Ratio= (Multiplier ERZ6 x Price ERZ6 ) Multiplier ESZ6 x Price ESZ6 ) = ($100 x )  ($50 x 1,329.40) = $73,420 $66,470 = or ~1:1 spread ratio Spreading Stock Index Futures: S&P 500/Russell 2000

47 © Chicago Mercantile Exchange Inc. All rights reserved. 47 Spreading Stock Index Futures: S&P 500/Russell 2000 Performance Sept 14, 2006 to Oct 6, 2006

48 © Chicago Mercantile Exchange Inc. All rights reserved. 48 Trading the RUSSELL 2000 (ERZ6)/S&P 500 (ESZ6) spread 9/14/06Sell or $73,420 Buy 1 1, or $66,470 10/06/06Buy or $74,440 Sell 1 1, or $67,940 ($1,020)($1,470) Spread Performance +$450 Spreading Stock Index Futures: S&P 500/Russell 2000

49 © Chicago Mercantile Exchange Inc. All rights reserved. 49 Hedging with Stock Index Futures Capital Asset Pricing Model (CAPM) … Systematic risk refers to ‘market risks’ reflected in the economic conditions that affect all stocks Unsystematic risk or ‘firm-specific risks’ are factors that uniquely impact upon a specific stock Beta analysis … uses statistical regression to define relationship between individual stock and market returns ‘Market returns’ often defined by reference to an index such as the S&P 500 Products of analysis include beta (  ) and R 2 Total Risk = Systematic Risks + Unsystematic Risks

50 © Chicago Mercantile Exchange Inc. All rights reserved. 50 Hedging with Stock Index Futures Beta analysis … Beta (  ) identifies the expected relative movement between an individual stock and the market IF > 1.0  it’s considered a more aggressive stock IF  < 1.0  it’s considered a more conservative stock R 2 identifies the degree to which movements in the stock are explained by market movements R 2 varies between 0 and 1.0 IF R 2 = 1.0 this implies a perfect hedge IF R 2 = 0  this implies no correlation or no “hedgeability” An “average” stock has an R 2 of 0.30 which implies that perhaps 30% of its movements are explained by systematic factors and “hedge-able” … the remaining 70% of unsystematic risks are NOT hedge-able with broad-based index futures

51 © Chicago Mercantile Exchange Inc. All rights reserved. 51 Hedging with Stock Index Futures Stock index hedge ratio … Where … V stock may refer to value of a stock portfolio V futures refers to the value of a futures contract, e.g., in the case of E-mini S&P 500 futures … V futures = $50 x Price Beta () refers to the weighted  of the stock portfolio HR represents the number of futures needed to immunize portfolio from systematic risks Hedge Ratio (HR) = Stock Value (V stock )  Futures Value (V futures ) X Beta ()

52 © Chicago Mercantile Exchange Inc. All rights reserved. 52 Hedging with Stock Index Futures EXAMPLE: Stock portfolio with  = 1.06 StockTickerPriceSharesValueBeta 1Anheuser Busch BUD$ ,000$644, Best BuyBBY$ ,000$2,174, Chicago Mercantile ExchangeCME$ ,000$6,982, Walt DisneyDIS$ ,000$479, Dow ChemicalDOW$ ,000$1,752, HalliburtonHAL$ ,000$1,549, Inter Business MachinesIBM$ ,000$822, Coca-ColaKO$40.318,000$322, Knight RidderKRI$ ,000$759, MerckMRK$ ,000$2,067, MicrosoftMSFT$ ,000$1,307, Novell NetworksNOVL$8.8365,000$573, Proctor & GamblePG$ ,000$868, Unisys CPUIS$ ,000$612, Waste ManagementWMI$ ,000$698, Exxon MobilXON$56.179,000$505, $22,119,

53 © Chicago Mercantile Exchange Inc. All rights reserved. 53 Hedging with Stock Index Futures OUTLOOK: You believe the market is overvalued in the near term and want to protect or immunize the portfolio from risk of loss Calculate the appropriate hedge ratio … ACTION: Sell 374 futures HR= (V stock  V futures ) x  = ($22,119,020 $62,740 ) x 1.06 =374 E-mini S&P 500 futures

54 © Chicago Mercantile Exchange Inc. All rights reserved. 54 Portfolio Beta Adjustment with Stock Index Futures OUTLOOK: You anticipate a near-term advance in stocks and wish to strategically increase your portfolio beta from 1.06 to 1.20 while maintaining your current stock holdings Calculate the appropriate hedge ratio … ACTION: Buy 49 futures HR= (V stock  V futures ) x (Target  Current ) = ($22,119,020 $62,740 ) x ( ) =49 E-mini S&P 500 futures

55 CME Stock Index Futures & Options MSCI EAFE Futures: October 2006

56 © Chicago Mercantile Exchange Inc. All rights reserved. 56 Introducing MSCI EAFE Futures CME E-mini MSCI EAFE MSCI (Morgan Stanley Capital International) EAFE (Europe, Australia, Far East) is the premier international benchmark index for active & passive management Comprised of over 1100 stocks from 21 developed market countries, excluding the US and Canada The iShares ETF is currently the 2 nd largest ETF in terms of assets under management Help global managers reduce cost of replicating EAFE exposure Launched: March 19, 2006

57 © Chicago Mercantile Exchange Inc. All rights reserved. 57 Introducing MSCI EAFE Futures CME E-mini MSCI EAFE Contact Multiplier$50 x MSCI EAFE, e.g., if Index=1,600, contract value=$80,000 Minimum Price Fluctuation (Tick) 0.10 index points ($5.00) Contract MonthsMarch quarterly cycle plus 1 st two “serial” months Trading HoursMon-Thu: 5:00 pm-3:15 and 3:30-4:30; Sun: 5:00 pm-3:15 Trading Ends on3 rd Friday of contract month Cash Settlementvs. closing Index value

58 © Chicago Mercantile Exchange Inc. All rights reserved. 58 Thank you for you attention!

59 CME Stock Index Futures & Options Mexico City: October 12, 2006


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