Chicago Mercantile Exchange Inc., Chematch.com Announce Sept. 21 Launch of Benzene, Mixed Xylenes Futures Contracts

24-Aug-2001

Chicago Mercantile Exchange Inc. (CME) and CheMatch.com, Inc., today announced a launch date of September 21 for the CME-CheMatch benzene futures contract announced earlier this year. On the same day, CME will launch a second co-branded chemicals product with CheMatch - mixed xylenes futures, officials said today.

The contracts will be the first chemical futures to be traded as well as the first time chemical futures products will trade on a futures exchange with an electronic link to an online business-to-business (B2B) marketplace.

"Chemical futures trading is a new frontier in the derivatives sector," said CME Chairman Scott Gordon. "These new futures contracts represent a new line of risk management tools offered by CME and will further enhance the value-added services CheMatch already offers to its customers."

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"The ability to hedge intermediate and downstream products using regulated futures is an important milestone for the chemical industry", noted CheMatch President Larry McAfee. "This new futures market is a natural extension of the market for physical products and their over-the-counter financial derivatives currently traded on the CheMatch exchange."

"CME-CheMatch benzene and mixed xylenes futures will bring new operational efficiencies and hedging opportunities to the chemicals markets, along with the liquidity, transparency, price discovery and clearing house credit risk management that CME has always offered in its markets," said CME President and CEO Jim McNulty.

Benzene is used in the production of such products as plastics, fabrics, pharmaceuticals, adhesives, detergents, dyes, paints and disinfectants. Trace amounts of benzene occur naturally in crude oil, and benzene can be synthesized from other petroleum-based chemicals as well as from coal or natural gas. Most benzene is produced in conjunction with the gasoline refining process.

Mixed xylenes are used in the production of polyester plastics and fibers for such products as fabrics, carpets, soft drink bottles and packaging. They are also used in other plastics, solvents, adhesives, epoxy resins, dye, paint and as a gasoline additive. Mixed xylenes, composed of paraxylene, metaxylene and orthoxylene, plus ethylbenzene, are produced as a byproduct of the oil refining process and from the conversion of other petrochemicals.

Because benzene and mixed xylenes are used in many products and prices can be volatile, futures contracts for them could have broad appeal within a number of industries, according to CME and CheMatch officials.

Each CME-CheMatch futures contract on benzene or mixed xylenes will represent 42,000 gallons of the chemical and will be cash settled at contract expiration to an index of monthly contract prices compiled and calculated by DeWitt & Company, a Houston-based international petrochemical consulting firm. Contracts will be quoted in U.S. dollars per gallon, with a minimum price increment (tick) of $0.001 per gallon valued at $42.00 per contract.

The contracts will trade on CME's GLOBEX®2 electronic trading system from 8:30 a.m. to 2:15 p.m. (Central Time), Monday-Friday. Contract will be offered in all 12 calendar months, with six consecutive months listed for trading at all times.

Linked via the Internet, CheMatch.com's secure, neutral trading platform and the GLOBEX2 system will provide seamless transitions between the two sites and offer chemical companies, traders and financial institutions the ability to trade both physical and derivative products. Members of the CheMatch.com Global Trading Networksm will be able to enter trades on GLOBEX2 through the CheMatch.com platform at www.chematch.com. The new products will trade exclusively electronically on GLOBEX2 and clear with CME clearing firms through CME's state-of-the-art CLEARING 21® clearing system.

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