From the May 01, 2007 issue of Futures Magazine • Subscribe!

USFE launches contracts on CBOT merger

USFE launches contracts on CBOT merger

The United States Futures Exchange (USFE) has launched binary event futures (BEF) that allow traders to take a “yes” or “no” position on whether or not an event will take place on or by a specified date, starting with contracts based on whether the CBOT will merge with either the CME or ICE.

There are two contracts reflecting these events: The FECC contract denotes the CBOT will merge with the CME by Dec. 31, 2007, and the FECI contract denotes the CBOT will merge with the ICE by Dec. 31, 2007. Should you purchase one FECC contract, and the CBOT does in fact merge with the CME on or before Dec. 31, 2007, as defined in the contract specifications, you are entitled to the full contract value. The same result would occur if the CBOT merged with ICE on or before Dec. 31, 2007 for the FECI contract.

The buyer of this futures contract holds the right to collect a fixed cash payout if the defined event occurs.

USFE’s contracts are designed by the exchange to be easily understood and clearly defined. The “event” in question for each contract is established by exchange rules prior to listing, and may be associated with a financial, commercial or economic consequence. These fixed rules dictate if and when the contract is settled prior to expiration. All settlements occur and are guaranteed by USFE’s clearing house, The Clearing Corporation.

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