The derivatives market is continuing its globalization with the announcement of a new product launched by the Sydney Futures Exchange and the Chicago Board of Trade.

The SFE announced the signing of a licensing agreement with the CBOT to launch options products based on two CBOT futures contracts, the CBOT mini-sized Dow index futures contract and the CBOT 100oz Gold futures. The initiative is a result of a joint Memorandum of Understanding between the two exchanges signed in October 2004.

The first of the two new contracts will be the Dow index option, which will be launched in the first half of 2006 subject to regulatory approval from the Australian Securities & Investments Commission and the U.S. Commodity Futures Trading Commission. A launch date for the other product has yet to be determined.

The contract will be available on the SFE electronic trading platform 16 or 18 hours per day (dependent on daylight saving time), be cash settled and will offer trading opportunities to both those wishing to hedge or speculate on daily movements in U.S. equity markets.

The licensing agreement between the CBOT and SFE will permit the use of the settlement prices of the CBOT futures contract to cash settle the new SFE contract. Dow Jones Indexes and the SFE separately entered into a license agreement with Dow Jones Indexes granting the SFE the right to use the Dow Jones Industrial Average for the new contract.

“The SFE CBOT mini-sized Dow 1-Day Option represents the first contract that SFE has produced in collaboration with CBOT.” said Robert Elstone, managing director and CEO of SFE. “We look forward to working with them to make it a success and, hopefully, it will be the first step towards broader cooperation between our two exchanges.”

Bernard Dan, president and CEO for the CBOT, said, “We hope the hedging activity from market participants will translate into increased volume & liquidity for these contracts during the Asian time zone. We appreciate the collaborated effort put forth by SFE and Dow Jones & Company in bringing SFE’s new contracts to fruition.”