On September 8th, CME Group Inc. (CME) announced the launch of trading and clearing services for new “in delivery” month European Union Allowance and Certified Emission Reduction serial options contracts. Trading will be available on the New York trading floor and clearing services will be available through CME ClearPort.
ClearPort is a set of flexible clearing services open to over the counter (OTC) market participants to substantially mitigate counterparty risk and provide neutral settlement prices across asset classes.
Trading on the option contracts is scheduled to begin on Sept. 20 for trade date Sept. 21. These contracts are listed with NYMEX and subject to the rules and regulations of both NYMEX and CME. The contracts and commodity codes for the serial options will be: in delivery month European Union Allowance (9G) and in delivery month Certified Emission Reduction (9E).
These options contracts are listed on a quarterly basis and will expire into the December contract of the same year. As an example, the March, June, and September 2010 serial options contracts will all expire into the December 2010 futures contract. A market participant holding an in-the-money option will receive a position in the December futures contract.
The year-end futures contracts are generally the most liquid. Therefore, market participants will benefit from the lesser time value of these instruments due to higher liquidity. These options provide a set of complementary risk management tools to the marketplace.
The first listed month will be the March 2010 contract. The contracts will be listed on a consecutive quarterly basis through the September 2012 contract month with the exception of the December 2010 and December 2011 contracts months, which will not be listed for trading.
The minimum price fluctuation will be €0.01 per allowance. There will be 10 strike prices in increments of €0.50 per allowance above and below the at-the-money strike price.
CME Group is the largest futures exchange in the world, offering the widest range of benchmark products covering all major asset classes, specifically futures products and options on futures. The broad product groups are futures and options based on interest rates, equity indexes, foreign exchange, commodities, energy & metals, and also alternative investment products such as weather and real estate.
Though we remain optimistic about the continued growth prospects, especially with good progress on the integration of the recent acquisitions and the global expansion initiatives, relative valuation looks stretched and volumes may continue to be near current levels until the underlying markets stabilize.
Therefore, we are maintaining our Hold recommendation on the shares.
Read the full analyst report on “CME”
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