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CME and Dow Jones launch FX dollar index and futures

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CME Group and Dow Jones Indexes have launched the Dow Jones CME FX$Index.

The index will serve as the basis of a new futures contract, which is expected to launch in the third quarter 2010.

The contracts will be listed with, and subject to, the rules and regulations of CME.

The new index combines six currency futures and represents the relative value of the US dollar versus six major currencies. The currencies included are the Australian dollar, British pound, Canadian dollar, Euro, Japanese yen, and Swiss franc.

The Dow Jones CME FX$Index futures contract will provide a more efficient way for global market participants to trade a basket of six major currencies against the US dollar.

"When we launched our joint venture with Dow Jones, the goal was to leverage the collective strengths of both companies and create new index benchmarks across multiple asset classes, as well as develop customized index products," says Scot Warren, CME Group’s managing director of equity index products and services. "The launch of the new Dow Jones CME FX$Index and the futures contract based on the index is the perfect intersection between index calculation and product development."

"This new currency index leverages Dow Jones Indexes’ capabilities and CME Group’s distribution experience and leading role in currency futures," adds Michael A. Petronella (pictured), president designate, Dow Jones Indexes. "The methodology as developed by CME Group includes currency-weighting of the index to reflect the economic realities as indicated by current Fed data, which makes the index a suitable strategic hedging instrument for market participants. This project is one example of how our joint venture will work to bring differentiated index products to market."

The index represents a basket of the most frequently traded CME FX futures (Australian dollar, British pound, Canadian dollar, Euro FX, Japanese yen, and Swiss franc contracts) all traded against the US dollar. The index is currency weighted and inversely quoted. When the US dollar strengthens against the basket of currencies, the index goes down and when the dollar weakens against the basket of currencies, the index goes up. The index is calculated as the basket value divided by USD10,000.

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