CME Group Licenses FX VolContracts™ from The Volatility Exchange

CHICAGO, Nov. 1, 2010 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, and The Volatility Exchange (VolX®), architect of the world's first listed instruments on realized volatility, announced that in the first quarter of 2011, CME Group will begin offering a set of FX Realized Volatility futures based on CME Group's major currency pairs. These contracts will be listed with, and subject to, the rules and regulations of CME.

The FX VolContracts™ will be the first futures contracts that offer direct trading of foreign exchange volatility.  In addition, they will provide spread trading opportunities against CME's listed FX futures and options products.  These contracts will be offered under a license agreement with VolX, which controls a patent on VolContracts.

"These innovative new contracts provide our growing global customer base who trade FX the ability to express and manage volatility exposures in the currency markets with an effective cash settled product," said Craig LeVeille, CME Group Director of FX Products.  "We know from talking to our global customer base that effectively managing risk between realized and implied volatility, correlation arbitrage, and hedging the volatility of their portfolios with currencies are vital, and offering these new VolContracts will help meet those needs."

This type of control was previously available to only large institutions in the often opaque and unregulated over-the-counter volatility swaps market.  

"CME Group has opened the door to a standardized, listed and transparent approach to controlling the price risk itself," said Robert Krause, VolX Chairman and Chief Executive Officer.  "These innovative instruments offer new hedging and trading opportunities based on the movement of the underlying futures, without regard to the direction of that change.  Industry leaders have confirmed to us the need for exchange-traded realized-volatility products and applaud the listing of VolContracts on CME Group markets because of CME's superior operational infrastructure."

To date, volatility-related instruments trading on regulated exchanges have settled to implied, not realized, volatility.  The FX VolContracts will be cash-settled to either a 1- or 3-month historical or "realized" volatility calculated by reference to daily price movements in major CME currency futures. They will settle according to a transparent and replicable calculation methodology.  

For additional information, please visit: www.cmegroup.com/fxvolcontracts.

About CME Group

As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk.  CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate.  CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago.  CME Group also operates CME Clearing, one of the largest central counterparty clearing services in the world, which provides clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®.  These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets. 

The Globe logo, CME, Chicago Mercantile Exchange, CME Group, Globex, E-mini and CME ClearPort are trademarks of Chicago Mercantile Exchange Inc.  CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago.  NYMEX and New York Mercantile Exchange are trademarks of New York Mercantile Exchange, Inc.  COMEX is a trademark of Commodity Exchange, Inc.  All other trademarks are the property of their respective owners.  Further information about CME Group (Nasdaq: CME) and its products can be found at www.cmegroup.com. 

About The Volatility Exchange

The Volatility Exchange (VolX®) has developed patented, standardized financial futures based on the inter-day realized volatility of underlying assets.  The company will offer VolContract™ instruments to market participants seeking advanced risk-management tools in a regulated and transparent environment.  In addition, it has designed the VolX Realized Volatility Indices to guide trading decisions.  VolX plans to file with the Commodity Futures Trading Commission to be a Designated Contract Market.  The company will partner with established marketplaces globally and as an exchange will outsource its around-the-clock trading execution, clearing, compliance, and surveillance functions.  For more information on VolX, please visit www.volx.us.

The VolX logo and VolX are registered trademarks of The VolX Group Corporation.  VolContract is a trademark of The Volatility Exchange Corporation. 

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SOURCE CME Group