CME to Release X-Funds

September 14, 2004 ( - The Chicago Mercantile Exchange Inc. (CME) has announced the creation of a new short-term investment vehicle that is aimed at providing flexibility and high-returns.

CME’s X-Funds, which will be open for electronic trading on October 4 are a cash-settled ‘basket’ of up to four futures contracts in an index that settles every two weeks. The X-Funds are similar to exchange-traded mutual funds except that the components change every fortnight. The components of the fund will be selected by “fund designers” who are chosen by CME and the Chicago Board of Trade.

“CME X-Fund Index designers will choose components that they believe have the highest potential for strong returns in each two-week cycle,” said Rick Redding, CME Managing Director, Products & Services, in a press release. “Although the components may be based on economic correlation, fund designers may also include non- correlative components that allow flexibility to market participants in a short-term trading environment.”

CME states that the funds are meant to be open to investors of all types who wish to have short-term flexibility with their investments. The fund can be held long or short-sold, and can be held in one sector or diversified. They are good vehicles, the release states, for leveraging return on margin as well as creating arbitrage positions in component contracts.