Cme Group Inc. · NASDAQ:CME

Cme — Debt Investor Presentation (November 2013)

25 slides from Cme's debt investor presentation, November 2013

  1. Slide 1: US Treasury “Classic” Bond Futures

    US Treasury “Classic” Bond Futures Describing the Gap in the Delivery Basket & Presenting Potential Options to Address November 2013

  2. Slide 2: Agenda

    Agenda US Treasury Bond Futures – Gap in Delivery Basket Potential Options to Address Gap in Delivery Basket • Option A – Maintain Status Quo • Option B – Preemptively Exclude Bonds with Shortest Terms to Maturity • Option C – Strategic Option: Redefine Deliverable Terms to Maturity Note: Currently,

  3. Slide 3: Treasury Bond Futures Delivery Basket Issue

    Treasury Bond Futures Delivery Basket Issue 5-Yr maturity gap in current delivery basket of Treasury Bond futures • Result of Treasury’s suspension of bond issuance between early 2001 and early 2006 • Maturity gap is not considered a significant issue for currently available expiration months. Possi

  4. Slide 4: Current front month has multiple competitors for cheapest status

    Current front month has multiple competitors for cheapest status © 2013 CME Group. All rights reserved 4

  5. Slide 5: Basket size is still significant but…

    Basket size is still significant but… Treasury Bond Futures-Delivery Basket # of issues & cumulative size of baskets # of Issues Notional 16 $450 14 $400 $ Blns of Face Value Outstanding Yet-to-be Listed Months $350 12 Currently Listed Months $300 Number of Issues 10 $250 8 $200 6 $150 4 $100 2 $50

  6. Slide 6: …basket size before gap is diminishing

    …basket size before gap is diminishing Treasury Bond Futures-Delivery Basket # of issues & cumulative size of basket before gap # of Issues (Before Gap) Notional 6 70 Currently Listed Months 60 5 $ Blns of Notional Outstanding Yet-to-be Listed Months 50 4 Number of Issues 40 3 30 2 20 1 10 0 0 Sep.

  7. Slide 7: Gap will increase price differences of cheapest to deliver

    Gap will increase price differences of cheapest to deliver Futures Equivalent Prices Three Cheapest to Deliver Bonds (Sept '13, '14, '15) CTD1 CTD2 CTD3 150 Futures Equiv. (CTD Price/Conv Factor) 147.5 145 142.5 140 Sep-13 Sep-14 Sep-15 Futures Expiration Month Sources: Bloomberg, CBOT © 2013 CME Gr

  8. Slide 8: Option A Maintain status quo

    @ CME Group Option A Maintain status quo

  9. Slide 9: Option A – Maintain status quo

    Option A – Maintain status quo Make no changes to deliverable grade of Treasury Bond (US) futures. Number of close candidates for cheapest-to-deliver (CTD) status gradually shrinks to one bond, until Mar 2016 delivery when minimum deliverable-grade term to maturity jumps from approx 15 years to appr

  10. Slide 10: Diminishing number of issues at front end of basket

    Diminishing number of issues at front end of basket for Jun 2015 through Dec 2015 deliveries -- © 2013 CME Group. All rights reserved 10

  11. Slide 11: No change might maintain current term-to-maturity relationship between US & UB

    No change might maintain current term-to-maturity relationship between US & UB as long as possible -- Shortest Deliverable Term to Maturity Option A - T-Bond (US) and Ultra T-Bond (UB) 30 Remaining Term to Maturity as of Futures Last Delivery Day 25 20 15 UB US 10 5 0 Sep-14 Sep-15 Sep-16 Sep-17 Sep

  12. Slide 12: Option B Exclude Shortest Bonds

    Option B Exclude Shortest Bonds

  13. Slide 13: Option B – Preemptively exclude bonds with shortest terms to maturity

    Option B – Preemptively exclude bonds with shortest terms to maturity Preemptively exclude a bond (or two) from delivery eligibility. Delivery months under consideration include -- a) Jun15, Sep15, Dec15 (1 issue, $16.4 bln total face value) b) Possibly also Sep14, Dec14, Mar15 (2 issues, $33.5 bln

  14. Slide 14: Preemptively excluding shortest-dated deliverable issues hastens the inevitable

    Preemptively excluding shortest-dated deliverable issues hastens the inevitable © 2013 CME Group. All rights reserved 14

  15. Slide 15: US & UB CTD terms to maturity become closer sooner

    US & UB CTD terms to maturity become closer sooner Shortest Deliverable Term to Maturity Option B - T-Bond (US) and Ultra T-Bond (UB) 30 Remaining Term to Maturity as of Futures Last Delivery Day 25 20 15 UB US 10 5 0 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Futures Delivery Month Sources: C

  16. Slide 16: Option C Redefine Terms to Maturity

    Option C Redefine Terms to Maturity The Strategic Option

  17. Slide 17: Option C -- Redefine Deliverable Terms to Maturity

    Option C -- Redefine Deliverable Terms to Maturity Strategic Option: Change deliverable-grade terms to maturity. Currently, bonds eligible for delivery into US must have remaining terms to maturity of at least 15 years and less than 25 years. Redefining basket could result in: • Shifting shortest te

  18. Slide 18: Redefining US deliverable grade may delay gap’s impact

    Redefining US deliverable grade may delay gap’s impact © 2013 CME Group. All rights reserved 18

  19. Slide 19: …and creates new balance between UB, US, TY

    …and creates new balance between UB, US, TY, with US CTD initially closer to 10 year maturity point Shortest Deliverable Term to Maturity Second Longest Deliverable Term to Option C- US 10Yrs+(FV,TY, US, UB) Maturity-Option C UB US 10 TY FV UB US 10 TY FV 35 35 Remaining Term to Maturity as of Futur

  20. Slide 20: Next Steps

    Next Steps CME Group wants to hear from you! You are encouraged to reach out to one of the following to arrange a follow up call or meeting to provide your feedback and recommendations: 1. Call or email your primary contact on the CME Group’s Client Development & Sales team 2. Email the relevant mem

  21. Slide 21: Basket tables for Options A & B

    Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Fron

  22. Slide 22: Basket tables for Options A & B (continued)

    Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month

  23. Slide 23: Basket tables for Option C

    Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Fron

  24. Slide 24: Basket tables for Option C (continued)

    Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Becomes Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month Front Month

  25. Slide 25: Futures trading is not suitable for all investors

    Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders sh

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