VOLUME 21 - BULLETIN #193
TO:
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ALL CLEARING MEMBERS
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FROM:
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BUSINESS SYSTEMS GROUP
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DATE:
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September 24, 2001
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SUBJECT:
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Fungibility of the Mini Dow and Dow contracts
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On September 30, 2001 the Chicago Board of Trade will launch the mini-sized Dowsm futures contract (“Mini Dow”). This contract will be 1/5 the size of the current full sized Dow Jones Industrial Averagesm futures contract. Firms will be able to offset positions in the Mini Dow contract with opposite positions in the Dow contract. A firm could close out, for example, 5 Mini Dow long positions with 1 Dow short position in the same contract month and in the same account.
• The Clearing Corporation will facilitate these offsets as a normal type “7” adjustment with the Clearing Corporation taking the opposing side as firm 990.
• Firms will enter two transactions - one for the Mini Dow, and one for the full sized Dow.
• The trade date and trade price must be the same on both transactions.
• The type “7” request can be entered via the OTIS trade entry screen, or through a TREX formatted MQM record.
• All positions must be in the correct ratio of five minis to one full size.
• Offsets that are correctly entered will be matched; if not, they will be considered an out trade and displayed on the back office unmatched trade report.
• The Trade Register will identify these adjustments as position offsets, and the register data file will indicate position offsets with a unique transaction type of “X” in card column 46.
• The Clearing Corporation will report open interest for all cleared net offset positions in the Mini Dow, and Dow, under firm 990.
• Trade type “7” transactions do not generate MQM messages back to the firm’s bookkeeping system, firms will have to manually add in the offsetting positions to books.
The following is an example of how a firm would report and enter an offset request.
DAY 1 - Firm ‘A’ is holding the following positions:
Long 1 December 2001 Dow
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Short 5 December 2001 Mini Dow
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DAY 2 – The firm then enters two type “7” transactions using firm ‘990’ as the opposite firm holding the following positions:
Selling 1 December 2001 Dow
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Buying 5 December 2001 Mini Dow
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The trade date and trade price must be the same on both entries, or the transaction will be unmatched. There will be no block or equal quantities cleared (EQC) match process performed for these transactions. Only like quantities will be matched.
On the same day, Firm ‘A’ will report no Open Interest. The Clearing Corporation reports the following Open Interest for the day:
Long 1 Dow
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Short 5 Mini Dow
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Should you have any questions, please call or e-mail one of the following Business Systems Analysts:
“Dow JonesSM”, “The DowSM”, “Dow Jones Industrial AverageSM” and “DJIASM” are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by the Board of Trade of the City of Chicago (“CBOT”). The CBOT’s futures and futures options contracts based on the Dow Jones Industrial AverageSM are not sponsored, endorsed, sold or promoted by Dow JonesSM, and Dow JonesSM makes no representation regarding the advisability of trading such product(s).
CBOT is a registered trademark of the Board of Trade of the City of Chicago, Inc.
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