CME has launched several technology enhancements for trading CME Eurodollar futures and options on CME Globex, its electronic trading platform.

According to CME, the world's largest and most diverse financial exchange, the move is in response to increased global demand for electronic trading.

The enhancements, which build on those launched in August 2005 when CME integrated its Enhanced Options System (EOS) onto the CME Globex platform, include:

  • A Top Order Allocation, which is an improved order algorithm that gives preference to options traders who augment the market with tighter bids and offers;
  • Market maker protections allowing options market makers to post more prices and better size orders;
  • Automated Request for Cross (RFC) to automate and simplify procedures for trades which involve a pre-execution discussion;
  • Additional spread strategy functionality for CME Eurodollar futures and options on futures; and,
  • Expanded implied functionality for CME Eurodollar futures and pack spreads.

"Our commitment to further grow our electronic options volume and deliver on our business strategy remains strong, and this new functionality will provide additional liquidity, transparency and price discovery to the electronic CME Eurodollar options market," said Rick Redding, Managing Director, Products and Services for CME. "Market maker protections and top order allocation will encourage tighter and deeper markets, and the additional spread types will make it easier for customers to execute complex trading strategies electronically."

Robin Ross, Managing Director, CME Interest Rate Products, added: "These new enhancements will greatly increase execution efficiency and flexibility for trading CME Eurodollars electronically. We have significantly expanded electronic trading over the past two years of CME Eurodollars, and our continued technology improvements expand the trading of short-term interest rate products where users primarily trade complex spreads. With the implied spreading technology being implemented we will now link outright CME Eurodollar Pack markets with Pack spread markets."

In January 2006, CME Eurodollar futures traded on CME Globex accounted for a monthly record percentage of 84 per cent of total CME Eurodollar futures volume. On January 27, CME Eurodollar options volume on CME Globex reached a daily record of 183,672 contracts, representing 18 per cent of the total Eurodollar options volume for that day.

Background notes: CME Eurodollar futures are the world's most actively traded futures contract and serve as a benchmark for investors worldwide. Launched in 1981, CME Eurodollar futures, which track three-month LIBOR (London Interbank Offered Rate), were the first futures product to be settled in cash, rather than physically delivered. The vast majority of CME Eurodollar futures, representing average daily volume in 2006 of 1.85 million contracts, trade on the CME Globex electronic trading platform. CME Eurodollar options are the most actively traded exchange-listed interest rate options in the world, trading an average of over one million contracts per day in 2006. Their liquidity provides traders and hedgers an opportunity to take advantage of their views on the direction of US interest rates.

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