Options on CME LIBOR on futures are based on one-month LIBOR rates on a $3 million deposit. LIBOR is often used as the benchmark rate for commercial loans, mortgages and floating rate debt issues. CME LIBOR futures and options are of particular value to fixed income managers who need short-term intervals for managing their interest rate risk.

Options on interest rates can be thought of as insurance policies. They provide the opportunity to limit losses while maintaining the possibility of profiting from favorable changes in the futures price. The combination of options and futures, both risk management tools, can give market participants the leverage of futures and the more limited risk of options. Options offer flexibility, pre-determined risk and exposure to a different risk paradigm.

Advantages of CME Interest Rate Markets

• Concentrated liquidity - More than 1.5 million CME interest rate futures trade every day, resulting in consistently tight spreads
• Price transparency - At CME, trading transactions take place in an open, fair and anonymous trading environment with market prices universally available in real time
• Market integrity - CME Clearing serves as counterparty to every trade, protecting the financial integrity of CME markets
• Regulatory assurance - The highest trading standards and supervision are assured through the integrated compliance and market surveillance functions of CME