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Increasing Futures and Options
Increasingly, futures and options are becoming mainstream as more and more market participants worldwide turn to the safety and soundness of exchange-traded futures products, like those listed at CME, to meet their investment and risk management needs. As a result, the scope of our business continues to expand. In 2005, CME again achieved record growth, with total annual trading volume up 33 percent. Trading in each major product line was up 20 percent or more and 70 percent of our volume was transacted on the CME Globex electronic trading platform, an increase of 62 percent from the prior year. And we are continuing to diversify our product offerings. We recently announced an agreement with NYMEX to become the exclusive electronic trading services provider for NYMEX’s energy futures and options contracts. The addition of energy contracts makes our CME Globex platform the first electronic platform offering global access to every major asset class – interest rate, stock index, foreign exchange, agriculture and now energy (see page 5). In fact, an increasing number of global customers from world-class companies are relying on CME products to manage their risks in an ever-changing global economy. This issue of CME Magazine features some of these customers and their organizations: • In our cover feature, Terry McGraw, chairman and chief executive officer of McGraw-Hill, reveals how the 25-year relationship between CME and S&P, the McGraw-Hill business unit relevant to our S&P index futures, has been a key factor in the dynamic growth of that business. • Separately, Robert Hormats, vice chairman of Goldman Sachs, provides insightful analysis regarding the international flow of capital. • Steven Schoenfeld, chief investment strategist at Northern Trust Global Investments, discusses the art of indexing and his strategies for using our newest index product, CME E-mini MSCI EAFE futures and options. • William Knottenbelt, managing director of Royal Bank of Scotland and global head of futures in London, talks about the benefits of our CME Globex electronic trading platform to his company. • And Kevin Davis, chairman and chief executive officer of Man Financial, offers his view of where the futures industry is heading. Other articles in this issue will keep you up to date on our newest products, services and other news. As always, we are committed to helping you achieve your business objectives by offering the best tools and services possible. We hope you enjoy reading CME Magazine.
Terrence A. Duffy
Chairman of the Board, CME
Craig S. Donohue
Chief Executive Officer, CME
In this issue. CME has created new products. McGraw transformed three seemingly disparate business units into a global powerhouse.Round two of LM TRAKRS comes to CME • Let it snow .New CME Globex technology boosts Eurodollars 24 GUEST COLUMN Where the Futures Industry Is Heading Man Financial’s Kevin Davis leads one of the world’s hottest FCMs Man Financial stands today as the world's leading provider of brokerage services for both institutional and private clients. To recognize the impact of other ground-breaking contributions wherever they have made a difference. creating a successful business model that other leading exchanges are following.com . CME education opportunities 2 cme magazine | www.cme. We invented financial futures and were the first exchange in the United States to demutualize and become publicly traded. Chairman and CEO of McGraw-Hill. CURRENT PULSE • More choices for S&P options • A rising tide • CME Globex platform to host NYMEX energy contracts • CME finds Chinese partner 22 MARKET INSIGHTS • Clearing security . 2 • Issue 1 features 6 10 18 on the cover Terry McGraw began his career with McGraw-Hill in 1980. we are dedicating the cover story in each issue of CME Magazine to individuals or organizations whose ideas have had a similar impact in effecting change.CME now clearing over-the-counter derivatives • Fast TRAKRS . As top executive since 1998. 28 AT YOUR SERVICE MyCME Web site pulls in data users and education seekers.CME launches monthly snowfall futures and options • Special FX . we are featuring Terry McGraw. “Terry McGraw Leading and Learning” appears on page 14. Our breakthrough ideas have generated a range of risk management tools that improve the way markets work for customers everywhere. The Futures Commission Merchant made a splash last year when it purchased the regulated division of Refco Inc. GLOBAL PLATFORM The Ebb and Capital Flow INDUSTRY CONNECTIONS Royal Bank of Scotland Extending Its Reach FINANCIAL FOCUS Northern Trust Global Investments Making Index Investing Look Easy 27 1 4 CUTTING EDGE CME Eurodollar Options on BARX 14 IDEAS THAT CHANGE THE WORLD departments CME INSIGHT CME posted record volumes in 2005 due in large part to the diversity and depth of the world-class companies that are its customers. markets and technologies that have changed the world of modern finance. whose creativity and management skills have transformed a family-run business into a global powerhouse. As a proven leader in innovation.Futures traders have online education option • Electronic avenue .Ideas That Change the World Spring 2006 • Vo l . out of bankruptcy court.
Robert Hormats knows a thing or two about the economy. As vice chairman of Goldman Sachs (International) and managing director of Goldman. Spring 06 | cme 3 . if any. a division of Northern Trust Bank. firms are more plugged in to the world of indexes than Northern Trust Global Investments (NTGI). Sachs & Co. But there is more to index investing than most people think. Barclays Capital is now offering CME Eurodollar options on BARX. making it the first bank to offer these products to customers from its own platform. keep an eye on capital flows. its electronic trading system. managed just under $620 billion in assets at the end of 2005 and offers more than 100 different index-based products to customers. Few. the Royal Bank of Scotland is the second largest bank in the United Kingdom and the world’s sixth largest in market capitalization. Hormats writes that if you want to know where interest rates are going. Known as Greenwich Capital Markets in the United States. NTGI. By any name.. this major world player is distinguished by its tailor-made strategies for customers.
The regular options contracts with American style expiration on the standard and E-mini S&P 500 futures will still be available. Total average daily volume on CME rose 34 percent to 4. commodities.cme.cme. CME Eurodollar options.2 million contracts traded.” Launch of these products is scheduled for May. associate director. www.” said Rick Redding. up 21 percent.” said Tom Boggs.com/2005volume 4 cme magazine | www.News about CME and its products and services S&P 500 MORE CHOICES FOR S&P OPTIONS Customers who trade CME S&P 500 and E-mini S&P 500 options will soon be able to choose monthly option expirations that will expire on the last trading day of the month. reaching 1. and CME E-mini futures.cme. CME equity products. Firms with OTC trades tied to month-end dates will be able to hedge those trades here. meaning that options holders can only exercise their contracts on the date of expiration.com . This is the first time CME is offering end-of-month options for its equity index line of products. “End-of-month options offer customers more flexibility. “We have experienced record open interest levels with our CME S&P 500 product. These new products will build on existing liquidity in both the floor and electronically traded contracts. with electronic trading leading the way. and we hope this builds on our increased customer interest. up 45 percent. Other stellar performers included foreign exchange. up 38 percent. transparent and competitive markets for these products. Electronic volume represented 70 percent of total CME volume in 2005. Average daily volume on the CME Globex electronic trading platform increased 62 percent to 2. up from 57 percent one year ago. The notional value of all CME's 2005 transactions rose 38 percent to $638 trillion.2 million positions on March 10. www.com/e-mini A RISING TIDE CME posted another record-setting year in 2005 as trading volumes across its core product lines recorded at least 20 percent increases over the previous year. CME Eurodollar futures.9 million in 2005. These new end-of-month options will have European style expirations. products and services for CME. Five market makers will help grow electronic end-of-month options for the CME E-mini S&P 500 equity options markets by providing continuous.“ “Customers were asking for these products. “Customers can initiate end-of-month trades here rather than over-the-counter (OTC) and get the benefits of CME Clearing. and will also make it possible to spread between both the monthly and quarterly options on the S&P 500 and E-mini S&P products. and we are happy to meet their needs. up 23 percent. which rose 65 percent. managing director.
expand the accessibility of our benchmark energy contracts to investors worldwide and allow us to build on the record electronic trading volumes we have been experiencing. with an anticipated third-quarter launch. “Our cooperation with CME provides a great opportunity for us to learn current experiences and practices associated with developing and deepening international financial markets” said CFETS President Xie Duo.cme." said CME CEO Craig Donohue. China’s interbank foreign exchange and bond market. In March. announced a multi-year agreement that allows Chinese financial institutions and investors to gain access to CME foreign exchange (FX) and interest rate products on the CME Globex platform. www. CME and the China Foreign Exchange Trade System & National Interbank Funding Center (CFETS). the euro and the Hong Kong dollar against Chinese Renminbi). which include spot and forward foreign currencies (U. “CME is committed to bringing opportunities in energy trading to our customers around the globe.” Initial trading of NYMEX energy products on CME Globex. “Listing our energy contracts on CME Globex enables us to dramatically increase our distribution much more quickly and cost-efficiently than we could have by building our own capability. Newsome. natural gas. and it is the official market for interest rate and foreign exchange products. In addition to NYMEX liquidity providers. Access to electronic trading of NYMEX products will be available virtually 24 hours a day on the CME Globex electronic trading platform.S. “This agreement establishes the most robust and liquid energy trading model in the world.” “Providing third-party technology services is a key element of CME's growth strategy.” All NYMEX contracts traded on the CME Globex platform will be cleared by the NYMEX clearinghouse. is expected to include side-by-side trading of NYMEX standard-sized and miNY energy futures contracts for crude oil. dollar.” said CME Chairman Terry Duffy. all products trading on NYMEX ACCESS.” said NYMEX President and CEO James E. are expected to transition to the CME Globex platform. Spring 06 | cme 5 .” said CME CEO Craig Donohue. "This agreement will leverage CME's proven electronic trading platform and global distribution network to expand access to the largest and most liquid energy market in the world. and it recently implemented market reforms that modernized trading mechanisms in China. “Our long-standing relationship with NYMEX and our experience in listing their contracts on our platform will greatly benefit market participants seeking access to the world’s most liquid energy derivatives. CME and CFETS will jointly provide consulting and technical services to CFETS members and staff.com/NYMEX “This will provide Chinese institutions and investors with a new range of foreign currency denominated investment and risk management tools that complement CFETS’ product offerings. the country’s central bank. In addition. scheduled for the second quarter of 2006. and Renminbidenominated lending. a specified number of CME market makers will be designated by CME to build electronic liquidity at NYMEX member rates. CFETS also calculates and publishes official key benchmark rates such as the Renminbi benchmark exchange rate and Libor-like (CHIBOR) money market rates in China. the exchange’s after hours electronic trading platform.com/cfets CME FINDS CHINESE PARTNER CME has forged another important partnership with China.cme. CFETS is an arm of the People’s Bank of China. Per the agreement. Japanese yen. providing services for investors based in mainland China who will be trading CME interest rate and FX products. CFETS will become a CME super-clearing member. CME Globex will be the exclusive trading platform for metals products currently listed on the COMEX Division. It is also the only foreign exchange and interbank money market in China. heating oil and gasoline with NYMEX’s floor-based products during open outcry trading hours and when the NYMEX trading floor is closed.CME GLOBEX PLATFORM TO HOST NYMEX ENERGY CONTRACTS On April 6. www. As part of the agreement. The terms of the agreement are subject to final approval by the governing bodies of CFETS and CME and regulatory agencies within China and United States. CME announced a definitive technology services agreement under which it will become the exclusive electronic trading services provider for NYMEX’s energy futures and options contracts. CME products will be added to the instruments currently traded at CFETS. In the third quarter. This agreement will complement and enhance our open outcry trading.
com .cme.Robert Hormats. offers insights on why and how capital flows from one economy to another 6 cme magazine | www. Goldman Sachs. vice chairman.
corporate and agency securities. in turn.S. Where We Have Been To examine just where the U. inflationary picture that was the result of effective Fed policy. a more conservative financial approach was adopted. The term globalization generally applies to trade. credibility and interest differentials of the U. It is interesting to note that even with the ongoing discussion of the U. which move from one economy to another and cause dramatic ripples that can affect currency valuations along with valuations in the Treasury. but it also applies to central banking. These changes can be seen in an ongoing trend in U.S. people and technology. the United States has been able to attract a tremendous amount of foreign investment in longer-dated government. corporations and other investors also had confidence in the quality and transparency of U. a large part of which came into the U. has allowed for a very low bond risk premium.Today’s economy is truly global: Everything from goods and services to information is passed from time zone to time zone. These are among several reasons Spring 06 | cme 7 .S. Asian banks. But what happens if capital flows in the United States slow or if a major shock. Central banks in most major economies have done very well individually and working together to sustain growth and contain inflationary expectations and thus enable investors to lock in a stable.” That has led to a deepening of capital markets. And with inflation risk dramatically reduced.S.S. which far exceed the amounts or products the world buys from the United States. economy. particularly in fixed-income markets.S. a broad collection of countries in Asia and elsewhere have experienced a high savings rate relative to investment. market. investors are searching for and finding good returns and inflationary stability in the U. the biggest gear in the global engine. In the United States. assets. fixed-income arena. economy and its fixedincome markets are heading. not only in Treasury markets but also in the corporate bond market. capital flows.S. The bulk of foreign investment has gone into fixed-income assets. capital inflows. especially in fixed-income assets? What might that do to one of the pillar’s of the U. The massive amounts of money sent abroad to pay for the products the United States imports from the rest of the world. The U. it is helpful to recall what has happened around the world in recent years. the housing sector? This article examines how the gears of the world economy are moving and where that leaves the United States. such as a terrorist attack or natural disaster.S. Part of that is due to the excess capacity many Asian countries built up in the late 1990s. fixed-income market.S. This boosted foreign exchange reserves and private sector precautionary savings. economy and weakens investor confidence in U. capital market. They come to the United States not so much due to the growth outlook or productivity but because of the liquidity.S. and indeed global capital markets are experiencing major changes. That success. Second. real rate of return. Although those deficit concerns are important. so the mortgage market and the average corporation have greater access to a broader range of borrowing instruments and benefit from flows from around the world. comes back in investment in fixed-income assets. the Fed has successfully managed the inflation outlook for years under Alan Greenspan’s stewardship and before that under Paul Volcker’s. driven in part by the reduction in what former Federal Reserve Bank Chairman Alan Greenspan has called “home country bias. capital markets and in a U. stock and housing markets. why there continues to be relatively little concern about inflation in fixed-income markets. In the aftermath of the Asian currency crisis in the late 1990s. A number of trends in the global economy in recent years have affected the way financial markets function and will perform in the future. which meant many Asian companies didn’t need to make huge investments domestically to keep up with growing demand in recent years. That is certainly the case with today’s capital flows.S. thus reinforcing the process of holding down price and wage increases. And the globalization of trade and of the Internet has contributed to international competition. There has been a globalization of good central bank banking practices. investors continue to put massive amounts of money into the U. severely harms the U.S. budget and current account deficits.S.
foreign goods from Asia have kept prices low in the United States and Looking at the issue more broadly. the fixedincome market valued at $23.S. which park roughly 70 percent of their reserves in dollar assets in the United States.S. consumers and home buyers are continuing to reap the benefits of this capital flow.S. Then there is what Greenspan calls “concentration risk. which leads to pressures for protection and for government support. While U. it can be assumed that more Middle Eastern cash will be used for Foreign goods from Asia have kept prices low in the United States and continue to put pressure on American workers’ wages. continue to put pressure on American wages. thus saving fewer dollars and. Also. but the trend could accelerate as investment opportunities abroad increase and prosperity becomes more broadly based. residential real estate at almost $20 trillion in 2004. Measures will be required to avoid larger numbers of people from being left behind by the forces of globalization and technological advances. Investment of foreign savings in the United States has helped to offset the Fed policy plays a crucial role. fixed-income markets in recent years have made much of the low interest rate real estate boom happen. Although these help to restrain inflation.com . economy over the past decade? Sure enough. But there are structural issues in the United States as well that also keep downward pressure on costs. Part of the competition equation stems from increased transparency in the marketplace. However. therefore. housing market. Of course.S.6 trillion. Inflation in Check Low and stable inflation reassures foreign investors regarding capital flows into the United States. One scenario that could unfold is that Asian companies and banks will invest or consume more at home. giving a boost to the housing market and to consumption that resulted from the wealth effect of the rise in home prices. having less excess savings to invest in the United States. home buyers are in a happy circumstance now does not mean it’s perpetual. they do create job location uncertainty among large numbers of Americans. you guessed it. The Federal Reserve Bank valued U. second only to. Over time. Competition is a powerful force and continues to be so. In today’s global marketplace. even if the macro-economy is.S. The Road Ahead The trend heading forward for mortgage rates still looks relatively benign. it would be wrong to focus simply on Asia. not everyone is a winner in the process. 8 cme magazine | www.” which refers to the large amounts of capital being invested in the United States from abroad.cme. the globalization of financial markets and goods and services sector are working together to keep inflation and interest rates low. Comparative shopping on the internet and the increasing free flow of information today give buyers and sellers a much more accurate and timely view of the cost and price of goods and services. but the fact that U. there is a major trade imbalance with Asia and Europe.S. There is the added competitive element of outsourcing business practices and services. more choices and possibilities enable companies to find the lowest cost sources of production and supply to remain competitive. There is some evidence of this occurring. arguably the largest driver of the U. Capital flows in the second half of 2005 came primarily from London.A significant part of that money comes from foreign central banks. The United States recycles some of this money and its own savings into riskier investments in other regions of the world for a higher return. Income among middle-class Americans has risen only modestly. home refinancing and home equity loans. which leads to pressures to impose restrictions or tariffs on imports. Income among middle-class Americans has risen just modestly. So how does all this affect the U. causing consumption to strengthen over the next several years. Reasons for low inflation levels vary. A closer look shows that money was originally from the Middle East and flows through the United Kingdom into the United States. BOB HORMATS very low American savings rate and thus — in conjunction with sound Fed policy and subdued inflation — enabled interest rates to remain low. the capital flows in U. However.
For ex- Spring 06 | cme 9 . he served as a senior staff member of international economic affairs on the National Security Council staff.S.S. www.cme.S. economy. the United States currently has about $1. That. Prior to joining Goldman Sachs. the net investment income flow so far has been in favor of the United States. foreign countries own about $4. This means that the United States will have to pay more in interest and dividends on the investments foreigners have made in the United States than the country receives from U. the instrument most used by the mortgage industry. And a sustained. So the nature of the adjustment process will mean higher interest rates in the United States to slow consumption and increase savings in this country. How long the United States will continue to attract foreign investment depends on a number of issues. You can tally the votes by watching the capital flow numbers. The reason for that is American investments abroad tend to be equity investments as opposed to bond investments. But when you look at the world from a capital flows and inflationary perspective. yield curve has been flattening. That higher risk investment tends to generate higher returns. their economic growth. Two wings are holding the bond market up: decline of the bond risk premium and excess savings relative to other investments around the world. large deficit could result in protectionist measures or.S. Robert Hormats Robert Hormats is vice chairman of Goldman Sachs (International) and managing director of Goldman. Now the yield curve can be inverted without a very tight monetary policy because the 10-year note has been very desirable due to the lack of concern regarding inflation. that reduces the growth of the U. Once that slows. that will cause weakness in the U. Flatter Curve Logical Some wonder why the U. In the past. such as an act of terrorism. especially with a very tight monetary policy.infrastructure and increased consumption in that region. could take longer or be put off longer than in the past because most parties in this equation feel relatively comfortable with the current circumstances.S. market for their exports. But there are risks of a fall in the dollar in the event of a crisis.S. they will ultimately absorb more of their savings at home.S. and global capital markets. As major emerging economies broaden and deepen their domestic capital markets. because of the nature of U. but the transfer abroad of just one percent of U. consumption slows or foreign demand decreases. an inverted yield curve has been a barometer for a recession. The adjustment process. in turn. If the yield on the 10-year note. then home loan rates will rise as well. spending by consumers will weaken because fewer people will experience a positive wealth effect or borrow equity against their home for big-ticket items.5 trillion more in U. foreigners have been accumulating more assets of all kinds in the United States than Americans have abroad – at a net rate of $700 million. Sachs & Co. and that could impede future growth opportunities.S. more likely.S. Conversely. does rise. investors hold abroad. primarily confidence in the U. gross domestic product (GDP). investments abroad. GDP in a $12 trillion economy is a lot of money. market as well as foreign investors’ own domestic needs for capital. One thing is certain: Countries will provide votes of confidence or no-confidence with their investments. lack of willingness to liberalize trade farther. fixed-income investments than U. thus.S. In recent years.com/gs Sustainability the Issue So how long can this last? Even though the current account deficit has been widening. Over time. will take some demand out of the housing market and slow the rise in the price of real estate. it is quite clear. If U. This trend is not often examined. ample.5 trillion more invested in direct and equity investments abroad than foreign countries do in the United States. the United States is hooked on foreign capital and other nations are hooked on the U. Most foreign governments do not want the value of the dollar to decline because that would weaken their exports to the United States and.S. Ambassador and Deputy United States Trade Representative and Assistant Secretary of State for Economic and Business Affairs. home repairs and other items.
fixed income and swaps trading. 10 cme magazine | www. Debt Markets includes all of its interest rate.S. In terms of RBS’s trading operations. few have any idea that the bank stands as the second largest bank in the United Kingdom or that it is the sixth largest bank in the world in terms of market capitalization. Like other large institutions. The RBS name may not resonate with many CME customers either. global head of RBS Greenwich Futures in London. The deal included Greenwich Capital. All of that is reason enough to get to know one of the larger players in the banking and futures markets. because in the United States the institution has been called by the better-known name of Greenwich Capital Markets.” says William Knottenbelt. “The Royal Bank of Scotland has a significant market capitalization. so people are viewing RBS in a very different light. RBS gained significant market share and a truly global presence through a major acquisition – National Westminster Bank (NatWest) in 2000. Although many in the financial industry know of RBS. which is split internally into two further businesses: Debt Markets and Treasury and Investor Products. a major player in the U.cme.com . fixed income and derivatives space. it recently created the Global Banking and Markets business.Speak with anyone at The Royal Bank of Scotland (RBS) and you’ll probably have an “aha!” moment when you realize you knew more about the bank than you thought.
” William Knottenbelt Treasury and Investor Products handles foreign exchange.” Knottenbelt says. So your trade and execution desk is a value-added proposition.“As RBS continues to expand its trading capability in the swaps market and CME advances its electronic trading offering. hedge funds. RBS developed a strategies team that posts information to clients on a Web-based platform. or we can forward ideas via Bloomberg or e-mail. Clearing is handled in three locations – Chicago. Two other offices operate in Greenwich. Spring 06 | cme 11 . Conn. money markets. London and Singapore. banks. we also have the capability to track them and give clients an interactive Web page so the client can follow them. because really. “Customers can enter the Web page and download the idea.” Knottenbelt says this service is considered key to keeping customers and adding new ones. the vanilla futures business is done electronically now. “This allows us to generate trading ideas and also create tailor-made strategies for clients. RBS works with asset managers.” he explains. we are confident that our volumes will continue to grow. and Atlanta. RBS set itself apart by investing heavily in value-added trading support and services that offer customers exclusive investment strategies and data. “Once we’ve enacted those trades and modeled them. We can provide customers the ability to do that themselves. The futures business is completely separate from the bank’s proprietary trading desk to avoid any conflicts of interest. mutual funds and other institutional firms..” Differentiating In an industry where clearing and trade execution services seem pretty similar among institutions. unit trusts. asset management and emerging markets. The futures trading operation is global with about 130 people and offers trading and clearing services on every major exchange. “It basically creates a dialog from which we can move on.
What makes the end product attractive. “Having Globex has significantly improved liquidity in Eurodollars in the Asian and London time zones and this creates a much more consistent and active market when the U. “The functionality that is available now with packs. This fits nicely with RBS’s current strategy of offering customers value-added services that help them profit and efficiently manage money. “And we believe. spreads and the enhanced options system is a great improvement.” “Having Globex has significantly improved liquidity in Eurodollars in the Asian and London time zones. we have worked in conjunction with State Street – one of the world’s largest global custodians with whom we have a very close alliance – to develop systems that eliminate areas of difficulty. gives RBS and its customers more reason to use the exchange. RBS has evolved into an almost exclusively electronic trading and execution firm. “As clearing houses and exchanges get more adaptable. we are confident that our volumes will continue to grow. it will allow more products to become exchange traded. which enables Reuters’s FX spot trading customers to view and trade CME FX futures on Reuters trading screens.” WILLIAM KNOTTENBELT RBS. This creates a much more consistent and active market when the U. coupled with advances in CME’s Globex electronic trading platform. is that the process is customized to client’s systems and needs. “Armed with this detail. RBS has also worked hard to offer clients something unique. a significant player in the swaps market. RBS has developed straight-through processing from order execution to payment of margin. “There’s significant room for exchanges to expand their franchises. By focusing on the communication and the reporting required between investment managers and custodians.” Knottenbelt says.com/rbs 12 cme magazine | www. we will only get more active in the FX suite of products on CME.S. On the clearing side.” Heading forward RBS is looking to grow its business as exchanges look to expand their products. That evolution. RBS recently ranked first in FRA dollar swaps and third in short-term interest rate dollar swaps in Risk magazine.” says Knottenbelt. bundles.com . We’ve developed a lot of interesting tools for our clearing product that make it easy for them to execute and clear a trade. is also looking to increase its trading of interest rate products.S. yet remain flexible enough to suit different client environments and feed a range of custodial systems. Knottenbelt says. “As RBS continues to expand its trading capability in the swaps market and CME advances its electronic trading offering.” Knottenbelt says. “We see a continuation of the trend toward greater volumes on the FX side.cme.cme. This has been achieved through analysis of the major issues and problem areas both clients and custodians face.” www. RBS also offers advice using a combination of fundamental and technical trading tools.” Knottenbelt says.” Knottenbelt says. The institution is among the top five FX houses globally and is one of the initial entrants in CME’s partnership with Reuters. as a house.A team of RBS traders and strategists develop trading strategies that cross the spectrum of asset classes and trading time frames. day comes to an end. day comes to an end. Using CME tools Like virtually every major institutional firm. One of the key asset classes where RBS excels is foreign exchange (FX).
” With that approach. He worked his way up over the next 18 years and took over as CEO in April 1998. Kennedy once said. began his career with McGraw-Hill in 1980. • McGraw-Hill Information & Media. joining the corporation’s finance department after working in pension fund management at GTE. as well as customer satisfaction experts J. 14 cme magazine | www. indexes and ratings and one of the major partners of CME. McGraw has dramatically transformed the company into a leaner and more straight-forward company.cme.D. 57. “Leadership and learning are indispensable to each other. a leading provider of independent investment research.com . a global education and book publishing firm that produces kindergarten to professional titles.” Speak for a minute or two with Harold “Terry” McGraw III. McGraw. adding the chairman’s title in 1999. • McGraw-Hill Education. Chairman and CEO of McGraw-Hill Co. He shrank 15 different business units into three: • McGraw-Hill Financial Services. which trades more than a half dozen futures and options contracts based on S&P indexes.” says McGraw.President John F. “The worst thing to do when you think you have the playbook is to think all you have to do is execute. McGraw has injected innovation and business savvy into the company his great-grandfather James McGraw founded more than 100 years ago. publisher of several business and trade periodicals including flagship magazine BusinessWeek. “You have to constantly put yourself in a position to learn from others in any way you can. the former telecommunications company. and you’ll soon find out how important these ideas are to him. which includes Standard & Poor’s (S&P).. Power and Associates. Since being elected to the top spot.
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which helped revolutionize the way financial markets work and enabled CME to become the top equity index futures exchange. “When I think back to 1980. McGraw-Hill Information & Media publishes several business and trade periodicals including flagship magazine BusinessWeek. McGraw-Hill’s stock price from April 1998 to March 17.” he says. Power and Associates.” McGraw says of the old business model. “One of the things that started to change in the 1990s in a big way is that it became an increasingly global environment. That includes two-for-one stock splits in May 2005 and March 1999. compared with 42 percent a decade ago.5 billion to $21.and includes customer satisfaction experts J.2 billion. The company’s market capitalization rose from $7. you’re going to drive securities analysts crazy because they have to determine where earnings are coming from and whether they are sustainable. the growth of McGraw-Hill and its Standard & Poor’s unit mirror the growth of CME. we also made it easier for Wall Street to understand our growth strategy. in 1990. So you have to keep focused on markets. it gets a little crazy. CME and S&P have worked together since 1980 to make the CME S&P 500 Index futures contract one of the most recognized traded instruments in the world. We started our CME relationship with the S&P 500 futures contract and look what has taken place since 1980. “We are now 35 years into a 75-year trend in the growth of capital markets. the changes taking place.” “We aligned our businesses around three powerful. 2006. acquired education properties and oversaw the dramatic growth at S&P.52 billion in 1997 to $6 billion in 2005. with one eye on what it does well and another on the growth opportunities of tomorrow.” McGraw says. Revenue grew from $3. Today. So we had to simplify the equation and be very clear about the markets we were in.cme. “This has been a terrific relationship with the CME.” He adds that there is much more to come. rose from $18. up 209 percent. roughly half of the corporation’s revenue came from its information and media division. growing global needs – the need for knowledge. The results since he took the leadership position have been impressive for shareholders and on Wall Street. McGraw-Hill Education produces books for kindergarteners to professionals. By doing this. S&P now represents 68 percent of the company's operating profits. the dynamics of each business and each customer’s wants and needs.” The transformation made McGraw-Hill a more focused company. In some ways. the need for capital and the need for business information that enables informed decision making. The CME S&P 500 Index futures contract is known as the world’s first successful stock index futures contract. The relationship between S&P and CME is certainly part of that growth. Both are considered pioneers in the financial markets and both rank at the top of their respective corporate classes today. and together we can figure out anything.As part of the reorganization. Guess what? They just won’t cover companies that take that much time. For example.81 to $58. the capital markets world was still emerging and companies like S&P were still relatively small. Another positive was that the restructuring clarified for Wall Street how McGraw-Hill operated. “From an investor relations standpoint. revenue from that unit with fewer properties has remained relatively flat while revenue from its education branch and financial services group have quadrupled.com .26. The competitiveness has gone up in quantum measures.D. Transforming the company into three well-defined business units produced several benefits for McGraw-Hill. For starters. McGraw had fewer divisional managers to meet with instead of 15. 16 cme magazine | www. It’s been terrific to embark on new areas and have partners you could work with and make things better. a 70 percent increase. our priorities and our prospects – getting to know 15 different markets and submarkets. The two companies renewed a long-term licensing agreement in September 2005 that allows CME to continue to offer futures and options on futures contracts on the S&P 500 Index and other S&P indexes exclusively until 2017. So they’ll have to spend 70 percent of their time on your stock and 30 percent of their time on other companies they cover. up more than 183 percent. McGraw divested the company from some of its slower growing trade-media businesses.
It’s ingrained in the organization and starts with the founder. “The playbook. ‘All roads go to Asia and all roads go online. who the different players are that make them up and who the future players might be and then building size and scale and executing. The companies that do best are those that train relentlessly. “America was still living within itself.cme. Bush’s Transition Advisory Committee on Trade and accompanied the president on his visit to India in March. Looking globally is what McGraw has been spending much of his time doing in recent years. using the knowledge society and learning agenda.” McGraw has adapted the education maxim to his company. you have to run it like a business and performance counts. understanding why we are essential. India. chairman of the Emergency Committee for American Trade. has been utilized big time by China. That will only make already rising economies even stronger. He also communicates a sense of practicality that fathers often impart to their children. then you really ought to be doing other things. grandfather and great-grandfather instilled in the company. “It’s a very dynamic environment. visionary without being esoteric and motivating without the management empowerment slang. He also is a strong proponent of Bush’s “No Child Left Behind” program that aims to improve education in the United States using standards.” McGraw sees the rising stars of the global economy coming from Asia. “One of the lines I’ve used is.’ So being able to develop cross-sectional capabilities and bring them to bear is very important. science. He is the kind of top executive who is smart without being condescending. measurements and accountability. McGraw is chairman of the Business Roundtable’s International Trade and Investment Task Force.” Family name Although McGraw is the current link in the chain of family members who have run the company.” he explains. he says. education system of decades past. “And then I’d say understanding the talent becomes critical. They start children at a very young age and really develop math.” he says. “All of our business units are global. a member of the Business Council and chairman of the National Council on Economic Education.” www. people take that very seriously. “A lot of what we’ve done over the past 25 years is making sure we recognize the clarity of the markets we’re in. and all will get increasingly more global. Taiwan.Global education It is this “can do” attitude that McGraw exudes.” he says. He also served as a member of President George W.” McGraw says. Now you are not entitled to anything. “One of the things that started to change in the 1990s in a big way is that it became an increasingly global environment. where countries emphasize math. trust and those kinds of things were planted from the very beginning.com/sp Spring 06 | cme 17 . “I’m very proud to be a member of the McGraw family. But when you are talking about the business. To compete in a more competitive and changing global economy. integrity. “The collegiality. which is looking for opportunities and partnership around the world. “You’ve got to separate the notion of being a family member and being a CEO or professional manager. When you talk about ethics and the types of businesses we’re in. And if you’re not about performance. Among a long list of organizational affiliations. McGraw believed so strongly in those. “A lot of the value structure is there.S. McGraw says that he sees some of the qualities that his father. McGraw has pushed his employees to be flexible and transfer their talents used in one division to other business units. science and other key subjects.” McGraw says. James H. computing skills and the like. McGraw believes the United States needs to continue the push to improve its education. The competitiveness has gone up in quantum measures. Singapore and so on. he is careful to differentiate his family name and his title as top executive. What is quickly picked up from McGraw is that those attributes helped him transform McGraw-Hill into a global information services powerhouse across three growing business units.” Still.” CME and Standard & Poor's have worked together since 1980 to make the CME S&P 500 Index Futures contract one of the most recognized traded instruments in the world.” he says of the fragmented U.
chief investment strategist. including: Standard & Poor’s 500. the CME E-mini MSCI EAFE futures. NTGI is also very interested in one of CME’s newest stock index contracts. NTGI. firms are more plugged in to the world of indexes than Northern Trust Global Investments (NTGI). For Steven Schoenfeld. managed approximately $620 billion in assets at the end of 2005.com . Approximately $1. To help manage all that. a benchmark known for measuring international stock market performance. and NTGI is a major manager of international index strategies tracking the index. It offers more than 100 different index-based products to its institutional and high net worth individual customer base. global quantitative management at NTGI. the CME E-mini MSCI EAFE futures contract could be used in the same way that NTGI uses other liquid index futures contracts at CME. a division of Northern Trust Bank.5 trillion is benchmarked to the EAFE Index worldwide. Russell 2000.cme.Few. if any. NTGI uses several index futures offered by CME. NASDAQ-100 and Nikkei 225. “The futures contract will provide an excellent tool for cash equitization within our 18 cme magazine | www. excluding the United States. of which $210 billion is quantitatively-managed in index and enhanced index strategies.
you just go buy the futures. But Schoenfeld points out that offering an index is far more complex than it may appear to customers. not-for-profit programs and insurance companies. Google is an example of a company which the entire index investment community was closely watching as a potential addition to the S&P 500 Index. NTGI also manages money for Mayo Foundation and other health care organizations. who edited a book called Active Index Investing. Chicago Policemen’s Annuity and Benefit Fund and North Dakota State Investment Board.activeindexinvesting. very often we’re buying all 500 stocks. The S&P 500. “There is a myth that managing an index strategy is easy.) “People may think that if you want S&P 500 exposure.” Schoenfeld says.com and is being published in Japanese this spring.” Managing index and quantitative strategies is a key focus at NTGI.” Issues that the team at NTGI must account for include dividends.It looks easy but…. State of Indiana Public Employees. as well as strategies for less correlated classes. Provided that the new EAFE futures contract has sufficient liquidity.” Schoenfeld adds that NTGI’s “current approach of using a basket of local futures often generates additional tracking error compared to the fund’s benchmark. mergers. Clients for corporate and public retirement plans include Motorola. annual and quarterly rebalances and other occurrences that alter the composition of the index. for example. has stocks entering and exiting the index regularly. NTGI’s Global Quantitative Management group does business with some major heavyweights in the institutional investment world. With investment offices in Chicago. The S&P 500. Caterpillar. This year. London and Tokyo.” says Schoenfeld. What is interesting about NTGI and other index-focused firms is that they are often thought of as simple index matchmakers for clients. we would anticipate using it to supplement our current approach and replace the use of futures baskets in many cases. But when you’re managing portfolios of actual securities. such as the S&P 500. Russell 2000 or Wilshire 5000 are not static indexes. New York. index funds and exposure for management in our higher-risk quant active strategies. Spring 06 | cme 19 . STEVEN SCHOENFELD (The book can be found online at www. NTGI plans to offer clients even broader international equity exposure through international small-capitalization strategies. “Currently we use optimized baskets of CFTC-approved local futures contracts to equitize cash accruals and thus enable us to minimize the cash position within our funds.
we have to carefully buy the securities to minimize the cost. “So you have very complicated trades where we’re selling out of Amoco in the U.“We need to be thinking about additions and deletions and their impact on the rest of the portfolio. EAFE can also include or exclude companies due to cross-border mergers of companies. or the Russell 2000 Value and Growth indexes.cme. “We will work with our clients and have either the index provider calculate a custom index or a custom attribution that would show the S&P. with tobacco stocks and without them.S. without having to buy and sell the underlying stocks in over 20 markets. “And you want to do it in a way that maximizes the wealth of our clients. liability-driven solutions across a variety of products. Take the Russell 2000.” Now take the MSCI EAFE.000 stocks in 21 countries. The MSCI EAFE index futures. One relatively recent trend for money management firms is to exclude investments in companies that do business in countries that sponsor terrorism.” “As we look out over the next 12 to 24 months. which could eliminate a variety of heavily weighted companies ranging from big oil firms to companies that lack diversity in their executive ranks. we see ourselves building our capabilities as a solutions provider in the global context by using our index and enhanced products in conjunction with new portable alpha products. “So if we’re managing $5 billion for a certain client who is adding several hundred million more to the fund.S. You would not want 20 cme magazine | www. NTGI portfolio managers then must take into account 21 potentially different dividend rules and tax laws. CME E-mini MSCI EAFE futures offer the advantage of capturing the value of the entire index in one transaction. including equity long/short. which moved the merged entity’s headquarters to the United Kingdom. which is a component of EAFE. which can make it difficult for institutional money managers to take a position in the individual stocks and fully track a benchmark index.or alcohol-related companies.” Schoenfeld says. “More often than not. portfolio and buying it in the European portfolio. just to buy it in the U. A large state pension fund.” The MSCI EAFE index may also comprise stocks that are not particularly liquid. NTGI recently launched a series of Sudan-Free funds satisfying the demands of its customer base. launched on the CME Globex platform on March 19. One example of that was the energy industry merger of London-based British Petroleum and Chicago-based Amoco.000 securities in the Russell 3000 index.” STEVEN SCHOENFELD “There is much more movement and turnover in these indexes. Managing other indexes isn’t quite as straightforward as the S&P 500. to sell a stock in the U. Another customer may want only socially responsible companies in its portfolio.K.com . we prefer to have a third party (index company) calculate the custom index so there is a separation between the benchmark and the manager. for example. which is comprised of more than 1. a small-cap index which includes the smallest 2.” Schoenfeld says. The Russell 2000 is a very complex index to manage against. So the cross-border component of a globalized world and global investment management company is very challenging. may want NTGI to track the S&P 500 but exclude any tobacco. are one of several ways to trade that index.” says Schoenfeld. Another challenge that NTGI and other index investors face is the different profiles of their customers.” Schoenfeld says.
NTGI plans to offer clients even broader international equity exposure through international small-capitalization strategies as well as strategies for less correlated asset classes including commodities and the global-listed property sector. It also spends a considerable time researching indexes and portfolios to improve performance and meet customer needs. MSCI’s ACWIex-US Index. This year. NTGI is also raising the profile of existing products to the forefront of the marketplace as its overall investment process evolves. Looking forward. “As we look out over the next 12 to 24 months. In addition. and long/short equity strategies across a variety of benchmarks and asset classes. global quantitative management. staff meets regularly with clients to examine existing funds and to see how they can incorporate other quantitative strategies into their overall portfolios.” www.Steven Schoenfeld. NTGI. Although the major focus is on “the blocking and tackling” of managing portfolios. chief investment strategist. we see ourselves building our capabilities as a solutions provider in the global context by using our index and enhanced strategies in conjunction with new innovations. including portable alpha products. NTGI is devoting significant resources to expanding its products in the enhanced index and quantitative active area by increasing research and development and staff for new product development across a number of benchmarks. NTGI constantly monitors existing index products and develops and launches new products for customers. “The growing range of risk-management tools from the CME will certainly play an important role in our expanding investment activities. Schoenfeld says NTGI is looking to expand the current product offering. In addition.” Schoenfeld says.com/ntgi Spring 06 | cme 21 . Building the global business NTGI’s Quantitative Management group employs more than 45 portfolio managers and traders worldwide. It launched two new international equity strategies in 2005 for exposure to emerging markets and a broader “total international” benchmark.cme.
www.com/trak 22 cme magazine | www. such as an interest rate swap or forward rate agreement with flexible settlement dates.5 million in value at its launch on January 31. Clearing360 represents a further expansion into new markets for CME. Clearing360 also offers access to CME's proven history of managing the credit. which expects to expand this service into other OTC derivatives products in the future. “With CME Clearing360 we will offer the full resources of CME Clearing to a market that lacks the benefit of a central clearing process. Clearing360 is available only for bilateral OTC interest rate transactions.Insights on CME Products and Services Clearing security Traders who deal in certain over-the-counter (OTC) derivatives can find clearing security at CME. operational and legal risks of its market participants. traded 2.” said CME Chief Executive Officer Craig Donohue.9 million contracts with more than $72. beginning with “substitutions” using CME Eurodollar futures.cme.cme. These “subs” allow customers to substitute CME futures contracts for an OTC transaction in standard contract terms. which can be faster and more efficient and provides risk offsets against related positions. Round two of LM TRAKRS. At present. which tracks Merrill Lynch's LMC index of selected low-cap growth and value stocks. In addition.com . the service also offers OTC traders the benefits of a centralized clearing process. It holds approximately $45. gold. currency and technology. CME Clearing is the world's largest derivatives clearing house and processes approximately 90 percent of all futures and options on futures contracts in the United States. CME began offering a clearing service called Clearing360. LM II TRAKRS is the ninth TRAKRS futures contract launched through a joint agreement between CME and Merrill Lynch and joins other TRAKRS contracts in commodities.6 billion daily in collateral deposits to support transactions on CME and the Chicago Board of Trade. Clearing360 eliminates perhaps the largest source of risk in OTC derivatives trading: the possibility of counterparty default.com/360 Fast TRAKRS An updated futures contract of a well-known low-cap equity index has already proven popular with CME traders. In April. whereby the exchange serves as counterparty to a customer's OTC trade by converting the contract into a CME-traded futures contract.cme. TRAKRS are the first index products traded on a futures exchange that can be sold by securities brokers and the first futures products that can be held by a non-institutional investor in a securities account. www.
The new features are expected to bring even more liquidity to these already deep markets. aims to build traders' understanding of the political. The course is broken into eight chapters aimed at preparing the trader for dealing in CME FX futures.cme. including history and concepts of FX. www. from 42. Enroll at either the Education or FX section of the CME Web site at www. All course work is conducted via the Internet and e-mail. CME Snowfall futures are based on the CME Snowfall Index.cme.m. currency pricing and using CME E-quivalents. CME's recently released online course. In March CME began trading monthly snowfall futures and options on futures contracts for Boston and New York.000 in 2006. New options capabilities include functionality that rewards a market participant who is the first to quote a price in a given instrument or who augments the market with tighter bids and offers. on the same day as reported by EarthSat.Let it snow Winter whiteouts on the East Coast might not be such bad news in the future for savvy derivatives traders. butterfly. It also automates trades involving a pre-execution discussion and broadens spread strategies on CME Eurodollar options products. trading FX futures and options. functionality was expanded to include an extensive array of possible new spread types for futures. which defines daily snowfall as the total recorded at a location between 12:01 a. In February. aimed at allowing traders to hedge or speculate on winter weather-related risks in those cities. The Dynamics of Foreign Exchange. and 12:00 p.000 in 2005 to 108. Total January volume in all weather contracts traded at CME rose more than two-and-a-half times annually. double butterfly and bundle spreads.com.com/fxcourse Electronic avenue Electronic traders specializing in CME Eurodollar futures and options now have more reasons to trade on the CME Globex platform.m.cme. www.com/snow Special FX Futures traders anxious about getting into the booming foreign exchange (FX) market now have an online education option. including implied pack spreads and new bundle.cme. www.com/enhancedoptions Spring 06 | cme 23 . economic and technical factors that move FX markets.
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chairman and chief executive officer. we are more execution and advisory oriented. we didn’t compete directly. we have acquired approximately 14 different businesses in several different countries in various different products. CME: How would you describe the culture at Man Financial? What do you look for in employees today? KD: The culture at Man is one where. In the institutional business. Man. How do you address their different needs? KD: The client staff who deal with retail and institutional bases are vastly different and provide vastly different services. I’m limited in what I can say. out of bankruptcy court. whereas in the retail space our clients tend to be full service. our clients tend to be specialists in one or more product segments such as interest rates or energy. CME: Let’s start with a bit of recent history and where Man came from. From a brokerage perspective. We were interested in Refco because. it’s up to them to succeed. These vary from offering full-service voice execution and clearing services to electronic-only. In the institutional space. Gelderman and Fox Investments. Man Financial. But Man is a major presence in both customer bases. What is driving business today for Man – retail. we offer a unique depth of expertise across a wide variety of markets all over the world.An interview with Kevin Davis. picked up a substantial piece of Refco’s business in bankruptcy court. The main Spring 06 | cme 25 . That said. clearly I think the most important event was my recruitment in April of 2000! Since then. our customers are much more general. hedge fund or CTA business? KD: We hold equal importance of our retail and institutional and CTA businesses. technologically or service-wise? KD: Man offers its clients a wide variety of access points to the markets. you need to be selfmotivated. of course. We give our colleagues the tools to be successful. Man is listed as the number one clearing or executing firm on several exchanges and consistently among the top five in CME’s interest rate volume. other major brokerage acquisitions include GNI. CME: Man Financial stands as one of the largest players in the futures business. while both companies are extremely large in this space. We try to create conditions for the people who are ambitious and honest and who can apply themselves. But in the retail space. with a few exceptions. Man Financial Man Group plc is a leading global provider of alternative investment products and solutions as well as the parent of one of the world's largest futures brokers. Man Financial made a splash last year when it purchased the regulated division of Refco Inc. CME: Beyond another record year for derivatives. GNP. But all of these businesses rely on the same core clearing and settlement and accounting platform. we expect Refco to meet or succeed our expectations. CME: Many firms focus on just retail or institutional business. institutional. but how has Man grown over the last several decades? KD: Among the key events in Man’s recent history was creation of the brokerage business about 35 years ago. which ultimately led to the creation of our funds management business in the early 1980s. perhaps the biggest story of 2005 was the Refco scandal and bankruptcy. While Refco is the most recent and notable. Why the interest? And what has that acquisition done for Man? KD: As a publicly traded company. CME: In today’s competitive market. But in the end. how does Man differentiate itself from others structurally. Each one of those commands vastly different customers. Man dates back to 1783. to be successful. Because we have specialist teams across almost all sectors of global futures.
some positive and some negative.com/manfinancial 26 cme magazine | www. Traditionally.exception was in the retail space. many clients don’t speak to us at all and conduct all of their trading and back office dealings electronically. CME: What impact has the Refco story had on the futures business as a whole? KD: I don’t think it’ll have any longterm negative impact. On the negative side has been the closure of floor operations. CME: What is Man’s strategy heading forward? KD: We want to consolidate the Refco transaction and continue to grow market share and focus quite heavily on growth in the Asia Pacific region. CME: What will the futures landscape look like in your view in the coming year or years? How large can the industry become? KD: Given the growth we’re seeing in Asia today. CME: Everything from financials to metals and energies and agricultural products continues to post record volumes in the futures industry. the crisis itself has had a positive impact on the overall client perception of the safety of these mechanisms. CME: One of the ongoing trends in the industry is the move toward electronic trading. If anything. I see no reason why the traditional agricultural commodities markets cannot remain in an open-outcry format. The second positive impact has come from the ever-increasing needs from banks and other counterparties to use central clearing counterparties for their trading.com . Over time. I am not at all sure that our new electronic world will be as interesting or as much fun. The main countries where we see growth are India. I suspect more markets will go to screens. But Man was much more focused on the specialist/institutional teams and execution whereas Refco was built upon a more generalist approach. CME: Are there any misperceptions from customers or within the industry about Refco’s divisions? KD: Almost all Refco customers were assured that the rules of segregation worked in such a way that they suffered no defaults in their regulated accounts. What do you see in the derivatives space that continues to attract volume into this market? World demand. more capital coming in. Today. Taiwan and Korea where we have a very significant presence. which operate side-byside with futures. there have been synergy-related cost savings in settlements and other support areas. interest rates and FX for starters. Those two factors combined are responsible for the bulk of the increase in volumes the last few years and will be for some time to come. However. the success of CME in managing the crisis shows that we operate in a robust regulatory environment. Clearly. which today represents about 15 percent of our business. client contact was by voice. there is a strong argument that suggests that – in markets that lack the depth of most financial futures – open outcry will benefit. we’ve seen very steep decreases in our operating costs. or in CME’s case. CME: CME offers some of the most liquid contracts in the world and continues to grow volumes across a number of asset classes – stock indexes. What can you say about the exchange’s products and the interest your customers have in them? KD: In general terms. One is growth of alternative investment industries. And it’s changed the nature of the way in which we interface with our customers. CME: What impact has the CMECBOT Clearing Link had on Man and your customers? KD: I’d say it has had a moderately positive impact on our customers’ costs. Furthermore. most particularly interest rates. www. we should expect many more years of similar expansion. CME: What are your thoughts about other markets that CME has been developing or serving? KD: The most important development CME could undertake for its large customers would be one where it manages to create a central counterparty clearing entity for a large portion of the cash markets.cme. It’s also enabled us to distribute these products to a wider audience. Indeed. new users? KD: The overall derivatives market is benefiting from a number of factors. How has electronic trading changed your business? Where does it go from here? KD: Electronic trading has transformed our business in a multitude of ways. the move toward more sophisticated functionality for its Globex platform.cme. most particularly in Europe. On the positive side. which are driving increasingly higher trading volumes. That region is expanding in a way that suggests it will represent close to 50 percent in five years’ time. But both companies did focus on different sides of the business so there was an enormous complementarity about the two companies. Those floors represented a concentration of an incredible variety of talented and interesting individuals. we see CME as the best-run exchange in the world with the best suite of products.
managing director of CME interest rate products. BARX. managing director. has become the first bank to offer CME Eurodollar options trading on its electronic trading system. was recently voted overall winner in Banking Technology magazine’s European Banking Technology Awards. securities. The electronic CME Eurodollar marketplace offers real-time prices from major market-making participants for thousands of outright contracts and complex spread combinations. FX and fixed-income markets.cme. which provides seamless electronic access to futures. Users of Barclays Capital BARX trading platform can now trade products in the world's largest interest-rate options market. The investment banking division of Barclays PLC implemented this service to provide its customers easy and convenient access to products it considers vital to customer needs.“Our clients will greatly benefit from this additional functionality and the market transparency that comes with direct access to the CME Eurodollar options market.” says Robin Ross. Spring 06 | cme 27 . www. BARX clients will be able to utilize the CME Globex platform’s cutting edge options functionality to access an enormous pool of liquidity. Averaging more than 1 million contracts a day in the first quarter of 2006. commodities. head of listed futures and options at Barclays Capital.” says Alasdair Hodge. Barclays Capital. CME Eurodollar options are the world’s largest interest rate options market.com/barcap The tremendous distribution network and sophisticated functionality of the BARX trading system will further extend the reach of the CME Eurodollar options market. Barclay's Capital is “a recognized leader in electronic trading across all markets. the investment banking arm of British bank Barclays PLC. Barclays Capital has offices in 25 countries and has the global reach and distribution power to meet the needs of issuers and investors worldwide.
com . while free-product data users are generally less experienced traders than those paying for premium services. his main aim is getting additional information to users about products and services they're not using now or in which they might be interested. launched last July. provides links to all CME's data products. These range from beginner-level courses in futures markets and brokerage to more advanced courses in market analysis and specialized trading in areas like commodities and options on futures.cme. it begged for a solution. data product users are not the same people as educationservice consumers. MyCME currently offers three paid premium services. which will let MyCME users download CME print products like newsletters and brochures as well as subscribe to CME Magazine. the user base of MyCME is segregated along several dimensions. "CME is a global exchange. new leadership is currently revamping all of CME's online courses and will add new classes over the next year. As part of it. two delayed Flash Quote products and nine historical data sets. For example. Likewise. "But now we're trying to put everything into an easy-to-see. "The functions inside MyCME have always been available. And as their thirst for new and better market information grows. and CME DataMine offers customized historical data on any aspect of any trade." Currently MyCME is divided into two product/service sections. premium charting and a news wire. reflecting the fact that. The result. delayed and historical products. As a direct marketer. was that users who logged on for access to CME's data products often just bookmarked the relevant page and never saw another CME product. Jim Sherman and his team at CME's direct marketing division faced an online challenge: how to get the CME Web site's two most frequent user groups to meet at one web space. for the time being at least. It contains five real-time products. On the education side. one-stop shop. those who visited the sites on educational courses often had no exposure to the exchange's data products. so will MyCME's offerings. called Market Data Services. But Sherman says data users often recommend MyCME's education courses to newcomers while more complex new product offerings are sending more traders back to virtual school. MyCME's Online Education section has an overview of CME's Internet course offerings. as Sherman notes. E-px is a premium data service for the Eurodollar market." said Sherman. separated into free and paid sub-groups. FX and E-mini markets. And he notes that.com/login 28 cme magazine | www. plus an e-mail link to CME publications. was MyCME (www. E-quotes offers real-time market quotes. The problem. Sherman says MyCME tries to appeal to as broad a range of frequent visitors as possible.com/mycme/). MyCME recently began translating some of its course work into several foreign languages. DataSuite is MyCME's centralized free data-product set and includes realtime.Getting on the Same Page MyCME Web site pulls in data users and education seekers About a year ago.cme. a single Web site/portal on the CME Web site with direct links to all CME's free and paid-subscription data products and its educational courses. Sherman said. For a direct marketer. Under Subscription Data Services. including live quotes in the CME Eurodollar.cme. Sherman says MyCME will soon launch a self-service publications portal." www. who is CME's director of direct marketing. The first.
Allan Schoenberg (Technology Public Relations) CME Magazine is published by CME in conjunction with Penton Custom Media. Instructor: Larry Schneider Cost: $320 Electronic Trading Strategies (2 sessions) For dates and times go to www. Lynn Lipsig (Corporate Marketing). as well as webinars available on the Internet.com with your questions and comments. All other trademarks are the property of their respective owners and are licensed for use by CME. a market overview overlooking the trading floor and a hands-on experience with electronic mock trading.CME Magazine CME 20 South Wacker Drive Chicago.com info@cme. The Globe logo. Chicago Mercantile Exchange®. Information made available on our Web site does not constitute part of this document. Pamela Plehn (Product Public Relations). Instructor: Dan Gramza Cost: $250 21st Century Elliott Wave Theory (6 sessions) For dates and times go to www. NASDAQ-100 is a trademark of The Nasdaq Stock Market.com/cmemagazine Spring 06 | cme 29 . CME Magazine is printed on recycled paper.com Editorial Director Darrell Jobman Contributing Editor James Kharouf Art Directors David Bosak Greg Kiskadden Free Online Course The Dynamics of Foreign Exchange www. William Parke Editorial Advisory Board Maz Chadid (Operations). For a complete list of CME classes.pentoncustommedia. Clearing360™. David Prosperi (Corporate Public Relations). Instructor: Dan Gramza Cost: $250 Advanced Japanese Candlestick Trading Strategies (2 sessions) For dates and times go to www. ACCESS® is a trademark of the New York Metals Exchange (NYMEX). MSCI® EAFE® are trademarks of Morgan Stanley Capital Investments.cme. Special College and University Event CME College Day Thursday. (with which its affiliates are the Corporations).com/education.cme. 9th Street Cleveland.com in early May.cme.com/fxcourse On-site Classroom Courses Technical Analysis (7 sessions) Tuesdays and Thursdays April 4 . Instructor: Nina Cooper Cost: $250 Japanese Candlestick Trading Strategies (2 sessions) For dates and times go to www.com CME Education Opportunities In addition to the classes listed here. visit www.cme.com/educatio. Arman Falsafi (Europe). Additional information and registration will be available at www. or to be added to or removed from the mailing list.April 27 4:00 p. John Harangody (Commodity Products). Penton Custom Media 1300 E. David Lerman (Equity Products). . a division of The McGraw-Hill Companies.com/education. Chicago Board of Trade is a trademark of the Chicago Board of Trade. CME®.m. Afternoon activities include scheduled sessions by industry experts. Inc.cme. go to www. E-quivalents®.com. “Standard & Poor’s®“. All matters pertaining to rules and specifications herein are made subject to and are superseded by official CME rules. All rights reserved. OH 44114 216-696-7000 tel 216-931-9441 fax www.com/education.com/education.cme.cme. Senior Editors Anita Liskey. May 25 Juniors and seniors from Illinois and neighboring states are invited to visit and learn about CME and the futures industry.cme. Robin Ross (Interest Rate Products). Instructor: Dan Gramza Cost: $300 Introductory Trading Seminar (1 session) For dates and times go to www.cme. Several online courses are also available. Globex®. E-quotes™. International Monetary Market® and IMM® are trademarks of CME.m. All rights reserved. IL 60606-7499 312-930-1000 tel 312-466-4410 fax www.cme. CME also conducts seminars at locations around the world. The Russell 2000® Index is a trademark of the Frank Russell Company.com/education. Tim Doar (Clearing). “S&P®” and “S&P 500®” are trademarks of Standard & Poor’s. Gail Moss (Corporate Communications). TRAKRS® is a trademark of Merrill Lynch and Co. Bryan Hunter (Foreign Exchange Products).6:00 p. © Copyright 2006 CME. Further information about CME and its products is available on our Web site at www. Current CME rules should be consulted in all cases concerning contract specifications. April 13 Instructor: Ken Shaleen Cost: $320 Principles of Futures (7 sessions) For dates and times go to www. Nikkei 225® is a trademark of Nihon Keizai Shimbun Inc.com/edu To view CME Magazine online. E-mini®.cme. E-px®.cme. Instructor: Mickey Hoffman Cost: $150 Do you have a question for CME Magazine? E-mail us at info@cme. sometimes in conjunction with partner brokerage firms or partner vendors. Note: Class will not be held on Thursday.
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