Chicago Mercantile Exchange Holdings Inc. Annual Meeting of Shareholders

1

Bond Market Association Conference
September 9, 2003
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Common Clearing Link Landmark Agreement

• Link creates a single combined clearing cycle for
  approximately 85 of US futures/options
• Combined performance bond calculation
• Combined collateral
• Combined settlement
• Combined financial safeguards system
• Performance bond savings is estimated to free up
  to 1.2 billion in performance bond collateral
  now posted by industry participants

3
Common Clearing Link CBOT as DCO

• CBOT to establish a Derivatives Clearing
  Organization (DCO) and to outsource its clearing,
  processing and guarantee services.
• CME will provide clearing and related services to
  CBOT.
• DCO will combine operations in such a manner as
  to deliver maximum benefits to exchanges
  customers and users.

4
Common Clearing Link CBOT as DCO

• CBOT will perform the following functions
• Set daily settlement prices
• Provide real time price feeds for risk management
  purposes
• Manage delivery process
• Deliver matched and unmatched trades to CME from
  CBOTs two trading platforms
• Facilitate provision of necessary regulatory data
  for clearing purposes
• Establish customer level performance bond
  requirements
• Set and collect exchange fees
• Set clearing fees

5
Common Clearing Link CBOT as DCO

• Services that CME will provide CBOT
• Trade matching
• Post-trade processing
• Position management
• Performance bond calculation
• Banking and settlement
• Collateral management
• Financial/risk management and guarantee
• Clearing IT development
• Electronic trading interfaces (e-cbot powered by
  LIFFE CONNECT)
• Daily open interest calculation
• Large trader reports
• Access to risk analysis
• Clearing fee billing

6
Common Clearing Link Implementation

• November 24, 2003
• Agricultural, Fed Funds, Swap, Muni, and DowSM
  futures and options
• Open interest moves to CME Clearing from BOTCC.
• Begin using e-cbot, CBOTs new electronic trading
  system, powered by LIFFE CONNECT
• CME clearing operational for e-cbot products
• No overnight electronic trading of agricultural
  products until January 2, 2004.

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Common Clearing Link Implementation

• January 2, 2004
• Remaining financial futures and option products
• Open interest moves to CME Clearing from BOTCC
• Exclusive use of e-cbot, CBOTs new electronic
  trading system
• CME clearing operational for all CBOT products
• Electronic trading of agricultural products
  during evening hours resumes

8
Common Clearing Link Implementation

• CBOT Open Interest Transfer
• Day 0 7.0 million f/o contracts
• Phase 1 2.5 million contracts
  
  transferred to CME
• Phase 2 All remaining contracts, 4.5 million,
  transferred to CME
• Using August 29, 2003 CBOT open interest volume
  data

9
Common Clearing Link Governance

• CME Clearing House will continue to be governed
  by a Clearing House Risk Oversight Committee
  composed of clearing member and settlement bank
  representatives.
• Current Risk Oversight Committee members
• M. Scott Gordon Tokyo Mitsubishi (Joint Firm)
• John P. Davidson III Morgan Stanley (Joint Firm)
• Mike Dawley Goldman Sachs (Joint Firm)
• Bob Felker Bank One (Joint Firm)
• Jay Finnegan Bear Stearns (Joint Firm)
• Chuck Hohman Harris Trust (Settlement Banker)
• Mark Seruya SMW Trading (Joint Firm)
• Dan Brophy Tenco (CBOT-Only Firm)

10
Common Clearing Link Testing

• Beta testing was performed with selected firms in
  July and August
• Mandatory end-to-end test phase September
  2October 31.
• Member firms to test their systems interaction
  with clearing system from clearing thru
  bookkeeping
• Test cycles will approximate a full trading cycle
  with real daily trade volume/transactions
• Overlap with e-cbot simulation testing

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Common Clearing Link CBOT Deliveries

• Deliveries testing Mid-September thru October

12
Common Clearing Link Industry Benefits

• Largest 10 contributors to current CBOT and CME
  risk pool will save about 120 million in risk
  capital contributions
• Single set of system interfaces, record formats,
  reports, and processing schedules yield
  simplified business practices
• Single pool of collateral, single banking
  transactions, additional collateral types
  accepted, etc. create efficiencies

13
Common Clearing Link Industry Benefits

• Choice of net or portfolio margining methodology
  for CBOT products
• Reduction in direct clearing-related fees
  (transaction and ancillary) generates at least 1
  million annually
• Cross-margining programs with OCC and GSCC
  continue seamlessly
• Combined SPAN files with recognized spreads
  between CME-CBOT products

14
Common Clearing Link Margin Savings

• Portfolio margining efficiencies will enable 10
  firms with largest current combined performance
  bond requirements to save approximately 730
  million.
• Traders will have recognized margin offsets for
  trading strips and bullet Eurodollar strategies
  against all of CBOT interest rate complex.
• CBOT Dow Jones products will have margin offsets
  against CME equity products including e-mini
  futures.
• CBOT Dow Jones will be included in CME-OCC
  cross-margin program for margin offsets against
  equity index options.

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Risk Offset Benefits Interest Rate Example.

• For a portfolio containing CBOT 10 Year Treasury
  Note futures and CME Eurodollar futures in years
  5, 6, 7
• Assumes 75 risk offset
• In this example offset rates are hypothetical.
  Actual rates will be determined shortly before
  Clearing Link is launched to determine most
  appropriate offsets

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Risk Offset Benefits - Equity Index Example

• For a portfolio containing CBOT Dow Jones Index
  futures and CME SP 500 Index futures
• Assumes 85 risk offset
• In this example offset rates are hypothetical.
  Actual rates will be determined shortly before
  Clearing Link is launched to determine most
  appropriate offsets

Dow Jones and SP are registered trademarks
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Common Clearing Link Information

• Visit e-cbot section of www.cbot.com
• Contact CBOT representative
• Bryan Durkin 312.435.3687 or bdurkin_at_cbot.com
• Contact CME Clearing representative
• Kim Taylor 312.930.3156 or ktaylor_at_cme.com