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ICE Dollar Index FAQ

ICE Dollar Index FAQ

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Published by: hammerfx on Dec 22, 2009
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U.S. Dollar Index Futures
FAQJanuary 2009
!
Copyright Intercontinental Exchange, Inc. 2009. All Rights Reserved.
 
 
www.theice.comICE Futures U.S. USDX Frequently Asked Questions v2.5 January 2009 Page 2
1) What is the U.S Dollar Index
 ® 
?
The US Dollar Index (USDX
®
) is a geometrically-averaged calculation of six currencies weighted againstthe US dollar. The US Dollar Index was created by the US Federal Reserve in 1973. Following the endingof the 1944 Bretton Woods agreement, which had established a system of fixed exchange rates, the USFederal Reserve Bank began the calculation of the US Dollar Index to provide an external bilateral trade-weighted average of the US dollar as it freely floated against global currencies.
2) When did the USDX become available for exchange trading?
Futures contracts based on the US Dollar Index were listed on November 20, 1985. Options on thefutures contracts began trading September 3, 1986.
4) Which currencies are included in the US Dollar Index?
The US Dollar Index contains six component currencies: the euro, Japanese yen, British pound,Canadian dollar, Swedish krona and Swiss franc. Before the creation of the euro, the original USDXcontained ten currencies—the ones that are currently included (but not the euro), plus the West Germanmark, the French franc, the Italian lira, the Dutch guilder, and the Belgium franc. The euro replaced thelast five of these currencies.
5) What are the formula and the percentage weights of the component currencies?
The formula for the calculation of the US Dollar Index is 50.14348112 multiplied by
 
the product of allcomponents raised to an exponent equal to the % weighting ((EURUSD ^ - 0.576) * (JPY ^ - 0.136) *(GBP ^ - 0.119) * (CAN ^ - 0.091) * (SEK ^ - 0.042) * (CHF^ -.036) ) All currencies are expressed in unitsof currency per U.S. dollar.
Currency Weights
Euro = 57.6% Canadian dollar = 9.1%Japanese yen = 13.6% Sweden krona = 4.2%British pound = 11.9% Swiss franc = 3.6%
6) Is the ICE US Dollar Index adjusted or rebalanced?
 There are no regularly scheduled adjustments or rebalancings of the ICE US Dollar Index. The USDX hasonly been adjusted once, when the euro was introduced as the common currency for the European Union(EU) bloc of countries. Without any other adjustments, the combination of components and their respective weightings in the USDX have yielded performance results similar to other commonly used USdollar indexes, whether those index methodologies are based on trade weights or capital flow weights
7) How is the US Dollar Index calculated?
 The ICE US Dollar Index is calculated by Reuters in real time from a multi-contributor feed of the spotprices of the Index’s component currencies. The price used for the calculation of the Index is the mid-point between the Reuters top of the book bid/offer in the component currencies.This real-time calculationis delivered to the Exchange and redistributed to all data vendors. The prices of the DX futures contractsare set by the market, and reflect interest rate differentials between the respective currencies and the USdollar.
8) What is the contract symbol for the US Dollar Index?
ICE Futures U.S.’s symbol for the contract is DX, followed by the month and year code. The US Dollar Index is commonly referred to as the USDX. The Exchange symbol for the value of the underlying Dollar Index (sometimes called the cash or spot index) is DXY, although different data providers may usedifferent symbols. A list of the data vendor symbols for the US Dollar Index is available athttp://data.theice.com/documents/Vendor_Codes_11-2008.xls 
 
 
www.theice.comICE Futures U.S. USDX Frequently Asked Questions v2.5 January 2009 Page 3
9) Given the foreign exchange market is a 24-hour marketplace, can I trade the US Dollar Indexcontracts at any time?
The DX futures contracts trade electronically on the ICE electronic trading platform from 8:00 pm through6:00 pm. ET the next day Monday through Thursday. Trading ends at 6:00 p.m. on Friday afternoon. OnSunday evening, trading in the Dollar Index begins at 6:00 p.m. ET; the trading session that begins onSunday evening ends at 6:00 p.m. on Monday evening. The ICE trading platform is available thirtyminutes before the opening of trading for order entry.Exchange rules also allow EFP trades in US Dollar Index futures contracts. If an EFP is executed duringelectronic trading hours, the futures leg of the EFP must be posted within two minutes of the transation. If the EFP transaction occurs outside of electronic trading hours, the futures leg of the transaction must beposted immediately at the start of the next trading session. EFPs can be entered by an ICE Futures U.S.clearing member directly into the Exchange’s trade processing system Clearing members should consultthe Exchange Notice dated ????? for a description of using the Exchange’s ICE Block system to postEFPs.
 10) How does the market trade the performance of the US dollar now? Why is the ICE US Dollar futures contract a better choice?
Institutional investors, hedge fund managers, commodity trading advisors and high net worth investors alltrade variations of US dollar indexes with commercial and investment banks. These various formulationsof dollar indexes are proprietary indexes and do not offer the price discovery and transparency of anexchange-listed contract. The ICE DX futures contract is the only successful, publicly-available, regulatedmarket for US Dollar Index trading allowing access to all investors and offering competitive pricing and fullmarket liquidity
.
 
11) What are the contract specifications of the US Dollar Index futures contract?
The size of the US Dollar Index futures contract is $1,000 times the index value—e.g., with the Index at89.45, the value of the contract is $89,450. Each full Index point is worth $1000 (1.00=$1000). Thesmallest price increment for trading in the US Dollar Index futures contract is .005, which is worth $5.The futures contracts are listed for the March/June/September/December quarterly cycle. The futurescontracts settle daily to the volume-weighted average price of all transactions executed in electronictrading in the closing period (2:59 – 3:00 p.m. Eastern time).
 
The DX contract is settled quarterly. The quarterly settlement at the expiration of the contract is on thethird Wednesday of the contract month. The last day of trading is the two business days prior to the thirdWednesday of the contract month, and trading ends at 10:16 am Eastern time on the last trading day.
Unlike many index contracts, the US Dollar Index contract is settled by the delivery of its sixcomponent currencies (see below).
Full contract specifications for the US Dollar Index futures contracts are available at:https://www.theice.com/productguide/productDetails.action?specId=194 
12) How is the US Dollar Index contract settled at its expiration?
Unlike many index futures contracts, the US Dollar Index futures contract is a physically deliveredcontract. The contract settles by physical delivery of the Index’s six component currencies in thepercentages indicated in the composition of the Index (see above, percentages and weights of component currencies). If a Dollar Index contract is held through final settlement, the holder of a longposition is required to deliver the basket of currencies in the Index in the weights specified and in turnreceives US dollars; the holder of the short position receives the basket of currencies and pays USdollars.

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