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CME Futures & Options Contracts CME Brady Bond Futures Final Settlement Price CME Options on Brady Bond Futures

CME Futures & Options Daily Settlement Prices

CME Futures & Options Contracts

There are four different CME Brady bond futures and options contracts. Each contract tracks the value of a specific Brady bond issued by Mexico, Brazil, or Argentina. Please note that the bonds that serve as the underlying market for CME Brady bond futures vary considerably with regard to maturity, coupon, and degree of collateralization. The following briefly describes the bonds that serve as the underlying markets for CME Brady bond futures.

Mexican Par Bonds (Both Series A and Series B)

     Features:

     Collateral: Zero-coupon U.S. Treasury securities 
     Coupon: Fixed 6 1/4% semi-annual payments 
     Maturity: December 31, 2019 

Argentine Floating Rate Bonds (FRBs)

     Features:

     Collateral: None 
     Coupon: Floating, 6-month LIBOR + 13/16%, semi-annual payments 
     Maturity: March 31, 2005 


Brazilian C Bonds

     Features: 

     Collateral: None 
     Coupon: Fixed, step-up 
     Maturity: April 15, 2014 


Brazilian Eligible Interest Bonds (EIs) 

     Features: 

     Collateral: None 
     Coupon: Floating, 6-month LIBOR + 13/16%, semi-annual payments 
     Maturity: April 15, 2006

Brady bond futures and options contracts (like the Brady bonds upon which they are based), are denominated in U.S. dollars. Thus, daily profits and losses are likewise denominated in dollars. Listing contracts based on individual Brady bonds gives users the flexibility to modify exposure to a particular issue, a specific country, or spread one bond against another.

CME Brady Bond Futures

The price of each CME Brady bond futures contract is based on the forward value of a specific Brady bond. The characteristics of the bonds underlying the various contracts vary in a number of aspects among them maturity, dollar amounts outstanding, fixed versus floating coupons, and degree of collateralization. These differences aside, each CME Brady bond contract is dollar-denominated, and shares the following features:

Contract Value: $1,000 multiplied by contract price
Minimum Price Fluctuation: .01 (1 basis pt)($10/pt)($10.00)
Expiration Months: Months in the March quarterly cycle
Termination of Trading: 10:30a.m. Chicago time on the second London bank business day prior to the third Wednesday of the contract month
Delivery/Settlement: Cash settlement, no physical delivery of bonds
Final Settlement Price: Determined by CME Clearing House survey of reference dealers and/or brokers who are active participants in the market for Brady bond
Limit: RTH: NO LIMIT; GLOBEX: 5.00 points
Hours: RTH: 7:20 a.m. - 2:00 p.m. (10:30); GLOBEX: 2:30 p.m. -7:03 a.m. Mon-Thurs; 5:30 p.m. - 7:03 a.m. Sun & Hol.
Codes: (Clearing/Ticker) MB MN

Final Settlement Price

To determine the final settlement price for each CME Brady bond futures contract, the Clearing House selects at random four brokers at 10:30 a.m. Chicago time on the contract's last trading day.

Each participant is asked to provide (for information purposes only) its perception of the current best bid and best offer for typically sized trades of each underlying Brady bond. These quotes must be confirmed in writing by telex, facsimile, or other hard copy method before they can be accepted as official, and used to determine the final settlement price for CME Brady bond futures.

The midpoint of each bid-offer pair is determined, and the lowest and highest such midpoints are eliminated. The arithmetic mean of the remaining two midpoints, rounded to the nearest .01 for each security, becomes the basis for the calculation of the final settlement price of each CME Brady bond futures contract.

CME Options on Brady Bond Futures

The liquidity of the Brady bond market, coupled with the market's volatility in recent years, has made it a natural environment for the successful introduction of options trading. Participants in the Brady bond market use options for a number of reasons, including yield enhancement, hedging, adjusting leverage, and volatility trading. As is the case with other markets, Brady bond option liquidity depends to a great extent on the liquidity of the underlying bond market. The CME lists options on each Brady bond contract with six different expiration dates four in the March quarterly cycle, as well as two serial (non-quarterly) month expirations. Brady bond options contract specifications are:

Underlying Trading Unit: One Brady bond futures contract
Minimum Price Fluctuation: .01 (1 basis pt)($10/pt)($10.00) cab=$5.00
Expiration Months: RTH: Mar, Jun, Sep, Dec & Serial Months ; GLOBEX: One quarterly and two serial months
Termination of Trading: Quarterly options: 10:30 a.m. Chicago time on the second London bank business day previous to the third Wednesday of the contract month; serial options: 2:00 p.m. Chicago time on the Friday immediately preceding the third Wednesday of the contract month
Delivery/Settlement: Cash settlement for options in the March quarterly cycle. Serial options exercise into the next March quarterly cycle futures contract.
Exercise: American style
Strike Price (Intervals/Notes): 5.00 intervals, e.g. 60.00, 65.00, 70.00, etc.
Initial Strikes: At-the-money plus strike prices in a range 40.00 points up or down
Hours: RTH: 7:20 a.m. - 2:00 p.m. (10:30)(Serial Months 2:00) ; GLOBEX: 2:30 p.m. - 7:02 a.m. Mon-Thurs; 5:30 p.m. - 7:02 a.m. Sun & Hol.
Codes: MB MN
Limit: RTH: NO LIMIT ; GLOBEX: Trading halted when underlying futures are locked at limit

The information and opinions contained herein do not necessarily express the opinions of BradyNet, Inc. This report has been prepared solely for informational purposes and is not a solicitation of any transaction in the securities with which it deals or an offer to enter into any such transaction. Prices and/or other information in this report are subject to change without prior notice.

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