CME/CBOT Common Clearing Link Workshop

1. CME/CBOT Common Clearing Link Workshop Futures Industry Association Expo November 2003

2. CME/CBOT Common Clearing Link • We’ve spent the last six months explaining the details and benefits of the CCL to the industry • Today we want to hit the high points in a few key areas: • Performance bond and capital savings • Collateral enhancements • New deliveries systems • Testing recap • Industry communications initiatives

3. CCL Savings to Our Industry • Industry savings from clearing firms’ and customers’ perspective: • Provides cross-market risk offsets without the operational challenges of traditional cross-margining programs • Industry participants will free up more than $1.4 billion in performance bond collateral • Risk capital contributions • Industry participants will free up $200 million in capital • Transactional/ancillary fees • Industry savings of more than $1 million in ancillary fees • Operational efficiencies

4. Impact on Collateral and Margins • Collateral expansion for performance bond (margin) purposes • Expansion of sovereign debt program • Issuances from France, U.K. and Germany • “IEF4” to be launched; allows firms to pledge • Corporate securities, including corporate notes • Commercial paper • CDs • Asset-backed, mortgage-backed securities • Municipal bonds/notes • Enhanced acceptance of “stripped” Treasury securities • Risk Committee approval for direct acceptance of mortgage backed securities • Must work through administrative details with custodians

5. Impact on Collateral and Margins • CME collateral program enhancements driven by a number of factors: • Risk Committee guidance • Commitments to CBOT • Clearing firm feedback • Even with all that has been done, CME collateral programs will continue to evolve to meet the changing needs of clearing firms. For example: • Expanded acceptance of sovereign issues • Risk offsets for certain collateral classes

6. Electronic Delivery System (“EDS”) • One major aspect of the CCL was to build a new electronic delivery system • CME/CBOT Delivery Team worked closely with the Delivery Task Force and FIA to design a new EDS which encompasses improvements over the existing EDS • New EDS offers firms major enhancements: • Web-based system instead of mainframe provides for: • A more user friendly application • Scalability • Flexibility • Access from any computer with access to the CME Portal • New reports for clearing firms that enable easier end-of-day balancing • Real time inquiry/update of long date data and certificate data • Online invoicing data including firm pay/collect by product

7. EDS Interest Rate Delivery Improvements • Substantial improvements for financial deliveries include: • Invoicing will include a list for all deliverable securities for each contract with CUSIPs and will also allow for “what if” invoicing scenarios prior to confirming invoices • Limit on the number of contracts/invoice has been increased from 1,000 to 99,999, which can drastically decrease the number of invoices that a firm must process • 3 invoice alternatives offers firms the flexibility to customize their invoices, thereby drastically reducing the amount of lead time needed for back office processing • By counterparty • Per intent • Across multiple intents

8. EDS Interest Rate Delivery Improvements • Substantial improvements for financial deliveries include: • New real-time online reports allow firms receiving deliveries to quickly summarize the quantities they are receiving and pass information onto the trading desks prior to the close of the cash market • Banking instructions can now be exchanged online between clearing firms rather than by phone/fax

9. CCL Testing Efforts • Multiple testing efforts are designed to ensure smooth transition/conversion of volume, data, open interest and collateral on November 24, 2003 and January 2, 2004 • Involves all CME project teams, CBOT project teams, clearing member firms and service bureaus • 100% firm participation in testing • Most clearing programs have already migrated to production • Beginning in November, we will allow clearing firms to enter a small amount of CBOT trades into CME clearing production systems to test connectivity

10. Clearing Firm Communications • One-on-one firm visits • All firms presented a personal overview of the CCL Link • Additional visits to all firms in September and October to present firm margin and security deposit savings • Seminars held in Chicago and New York to present testing schedule and cost savings • Advisory group meetings • Operational, bookkeeping, deliveries and business advisory groups meet mostly on a weekly basis • FIA-sponsored industry conference call • Relationship managers • All firms are assigned a CBOT and CME relationship manager to assist through the end-to-end testing effort

11. CME/CBOT Common Clearing Link • Everyone in the room has a pretty good idea of what the Common Clearing Link is • With less than 1 month until implementation, we are focusing our discussion today not only on what the CCL Link is about, but also on what it is NOT about • Sometimes, discussing what you are NOT is even more telling than discussing what you ARE

12. The CCL is NOT About Regulatory Uncertainty

13. Rather… CFTC has approved: • the CCL open interest transfer process • the CBOT DCO application • the CBOT rules to support CCL • the CME rules to support CCL Industry has no doubt where it stands.

14. The CCL is NOT About Unsubstantiated Savings

15. Rather… • Spread savings of up to 80% in highly correlated interest rate products • Spread savings of up to 95% in highly correlated equity index products • Industry savings estimated at $1.4 billion from current BOTCC margin requirements based on real positions as of Oct. 3 • Firm ability to select enhanced portfolio margining options Immediate, substantial industry savings.

16. The CCL is NOT About Capital Intensiveness

17. Rather… • Performance bond savings at clearing level • Customers eligible for performance bond savings • $200 million in risk capital reductions from eliminating the need to hold BOTCC stock now used to support CBOT business Capital commitments significantly reduced - $200 million business opportunity for clearing members.

18. The CCL is NOT About Operational Complexity

19. Rather… • Single clearing interface • Standardized business practices • Single set of collateral policies • Elimination of Saturday processing • Elimination of option origins • Web-based deliveries system • Single settlement cycle Easier and cheaper to do business in Chicago.

20. The CCL is NOT About Business Speculation

21. Rather... • 85% of U.S. futures and options business under consolidated clearing umbrella • 34.1 million CBOT and CME open positions • 4.4 million contracts in CME and CBOT Average Daily Volume • Highly successful history of creating liquidity pools Industry gains immediate and real benefits from the CCL.

22. The CCL is NOT About Unrealistic Implementation Expectations

23. November 24 Phase 1 Launch 3 7 6 5 4 2 1 May 16 All functional business requirements completed Sept 2 End-to-end testing begins July 3 End-to-end firm testing plans published Oct 7 CFTC approves CBOT’s DCO application April 16 CCL Announced June 5 First Business Advisory group meeting held Aug 23 Firms begin to submit combined PCS to CME May 22 First Operational Task Force meeting held July 16 CFTC approves open interest transfer rules April 30 Group clearing meetings begin Oct 27 Implementation guide published The Street was informed and included in entire implementation. Rather… Months to Launch

24. The CCL is NOT About Incomplete Information

25. Rather… • Detailed Q&A released at launch announcement • Group member and clearing member meetings in April/May • Multiple rounds of individual firm visits beginning in May/June • Multiple rounds of savings estimates • Industry advisory groups actively involved • Transparent meeting records and documentation on CCL Web site • Key Account Managers worked closely with firms Clearing member information and feedback was central to the CCL philosophy.

26. The CCL is NOT About A CME/CBOT Only Effort

27. Rather… • Significant industry input to requirements and planning process • 61 industry members served on Business Advisory Group, Operational Task Force, Deliveries Task Force and Back Office Software Vendor Task Force • Extensive industry commitment to • Beta testing • End-to-end testing • Production testing • Simulation testing CME and CBOT wish to thank the industry members who have worked so tirelessly to make the link a reality – and to make it even better than we envisioned.

28. The CCL is NOT About FIA Washington Support

29. Rather… • Initial reaction of FIA in Washington was to voice doubts and call for additional details • It soon became clear that • Industry participants were fully informed of the details of the link • General FIA membership supported the goals of the link • FIA Chicago and FIA Futures Services Division in New York have been phenomenal in their support of the link An industry organization is not always better than the sum of its parts.

30. Q&A? Again, CME and CBOT wish to thank the industry participants and vendors who have devoted time and energy to make the CME/CBOT Common Clearing Link a success.