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Introduction to CBOT ® Agricultural and Precious Metals In cooperation with POLARIS MAN FINANCIAL Taipei October 12,

Introduction to CBOT ® Agricultural and Precious Metals In cooperation with POLARIS MAN FINANCIAL Taipei October 12, 2006. CBOT Ags & Precious Metals Agenda. General CBOT Overview Agricultural Complex E-Ag Side-by Side Statistics Contract Highlights Spreads Trading Information

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Introduction to CBOT ® Agricultural and Precious Metals In cooperation with POLARIS MAN FINANCIAL Taipei October 12,

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  1. Introduction to CBOT® Agricultural and Precious MetalsIn cooperation with POLARIS MAN FINANCIALTaipeiOctober 12, 2006

  2. CBOT Ags & Precious MetalsAgenda • General CBOT Overview • Agricultural Complex • E-Ag Side-by Side • Statistics • Contract Highlights • Spreads • Trading Information • Precious Metals Complex • Statistics • Contract Highlights • Benefits of CBOT Markets • Assistance and Information

  3. 2005: 674.65 million

  4. Agricultural ComplexTrading Platforms • Agricultural Futures • Two platforms (open auction and e-cbot®) • Ag Futures Hours (Chicago time) • 6:30 p.m. to 6:00 a.m. (e-cbot only) • 9:30 a.m. to 1:15 p.m. (open auction and e-cbot) • Side-by-side – Since August 1, 2006 • Agricultural Options • Two platforms (open auction and e-cbot®) • Ag option hours (Chicago time) • 6:32 p.m. to 6:00 a.m. (e-cbot only) • 9:30 a.m. to 1:15 p.m. (open auction only) • Not traded side-by-side

  5. Agricultural Complex% of Total Average Daily Volume (ADV) by Platform(August 1 – September 19, 2006)

  6. CBOT Agricultural ComplexAll Ag Products - Average Daily Volume

  7. Agricultural ComplexAg Futures and Options Volume

  8. Agricultural ComplexAg Futures and Options Open Interest

  9. Agricultural ComplexAverage Daily Volume Growth • Corn Average Daily Volume Jan – August, 2006 versus Jan – August 2005 • Up 44% • Wheat Average Daily Volume Jan – August, 2006 versus Jan – August, 2005 • Up 52%

  10. Agricultural Complex Average Daily Volume (ADV) & Open Interest (OI)

  11. Agricultural ComplexVolume and Open Interest Records

  12. Agricultural ComplexCorn Open Interest Distribution – September 19, 2006

  13. Agricultural ComplexAgricultural Volatilities – August 2006 Historical Volatility is expressed as a percentage and is calculated by taking the standard deviation of the log-differences of the daily settlement prices of the underlying commodity over the course of the month. The result is multiplied by the square root of 252 (the number of trading days in a year).

  14. Agricultural ComplexContract Highlights • Corn, Wheat, Soybeans, S.A. Soybeans, Oats • 5,000 bushels (bu) • Tick: ¼ cent ($0.0025 = $12.50/per contract) • Soybean Meal • 100 short tons • Tick: 10 cent tick ($0.10 = $10/contract) • Soybean Oil • 60,000 pounds • Tick: 1/100 cent ($0.0001 = $6/contract) • Rice • 2,000 hundredweight (cwt) • Tick: ½ cent ($0.005 = $10/contract) • Ethanol • 29,000 gallons (gal) • Tick: 1/10 of a cent ($0.001 = $29/contract)

  15. Agricultural ComplexContract Highlights • Contract Months • Corn, Wheat, Oats: Mar, May, Jul, Sep, Dec • Soybeans, S.A. Soybeans: Jan, Mar, May, Jul, Aug, Sep, Nov • Soybean Meal: Jan, Mar, May, Jul, Aug, Sep, Oct, Dec • Soybean Oil: Jan, Mar, May, Jul, Aug, Sep, Oct, Dec • Rice: Jan, Mar, May, Jul, Sep, Nov • Ethanol: All calendar months • Contract Liquidity • Like other complexes, the nearby Ag futures usually have a significant amount of volume and open interest • Unlike other complexes, the deferred Ag futures also have a significant amount of volume and open interest • Spreads are a major component of CBOT Ag markets

  16. Agricultural ComplexContract Highlights • First position day • Second to last business day of the month preceding the delivery month. • Example June 29, 2006, is first position day for July 06 delivery; • To avoid possibility of delivery, the Long MUST offset their position prior to first position day • Important: Daily price limits are removed effective first position day • Last trading day • All ag futures except for Rice: • Business day prior to 15th calendar day • Rice: • Seventh business day prior to the last business day of the delivery month • Last delivery day • Corn, Soybeans, S.A. Soybeans, SoyMeal, Wheat, Ethanol: • 2nd business day after last trading day of delivery month • Rice, SoyOil • Last business day of the delivery month; Note Soyoil last delivery day will change to seventh business day following last trading day effective with the January 2007 contract • Oats: • Seventh business day following last trading day of delivery month

  17. Agricultural ComplexContract Highlights • All CBOT Grain and Oilseed Contracts – Physical delivery • Delivery: 3-day Process • Position day • Second to last business day of the month prior to the delivery month • Short (seller) gives notice to the clearing provider of its intent to deliver • Notice day • Last business day of the month prior to the delivery month • Oldest Long (buyer) on record is matched to the Short making delivery • Both the Long and Short are notified; Long receives an invoice from the Short • Delivery day • First business day of delivery month • Long makes payment to Short; Short transfers delivery instrument to Long

  18. Agricultural ComplexSpreads and Seasonality • Old crop / New crop • Distinguishes one growing season (past or current) from the next (current or future) • Carry over reserves (ending stocks) from one crop year to the next crop year, also known as beginning stocks, are added to current year's production to determine supply. Primary old crop/new crop spreads: • Corn: Jul vs. Dec • Soybeans: Jul vs. Nov • Wheat: Dec vs. Jul

  19. Agricultural ComplexSpreads & Carry • Cost of carry • Storage costs, insurance & interest to hold physical commodity from one delivery month to the next. • Reflected in the price difference between contract months. • Full carry is a price differential that reflects the total cost. • Normal ag markets reflect “carry” • Ample supply • Market wants grain to remain in storage. • Ag markets are usually “carry” markets • Ag markets are usually less than “full carry.” • Inverted markets reflects • Supply shortage • Market needs grain to come out of storage

  20. Agricultural ComplexCost of Carry Calculation • Formula # days x { (Interest rate/365 x Futures Price) + .0015} • Example: 30 days x {(.055/365 x $6.00) + .0015} = $.072/bu/month Notes LIBOR = 5.5% CBOT Carrying Charges for Corn, Wheat and Soybeans = $.0015/bu/day August Soybean Futures = $6.00/bushel

  21. Agricultural ComplexCommon Spreads • Intra-market spreads • Calendar or inter-delivery • Reflect the cost of carry between contract months of the same commodity. • Examples • Corn: Mar/May; May/July; July/Dec • Soybeans: Jan/Mar; Mar/July; July/Nov • Wheat: Mar/May; May/Jul; Dec/July

  22. Agricultural ComplexCommon Spreads • Inter-market spreads • Reflect the relationship between the same commodities from different exchanges • CBOT vs. KCBOT • CBOT vs. MGEX • Note: Soft red winter wheat, which is the primary delivery class for the CBOT Wheat futures, has the lowest world production numbers but the CBOT futures volume is greater than all of the Wheat futures markets in the world combined….WHY???? • CBOT Liquidity

  23. Agricultural ComplexCommon Spreads • Inter-commodity spreads • Reflect the relationship between different but related commodities • Relationships usually reflect “substitutability” • Examples • Corn vs. Wheat • Corn vs. Soybeans • Corn vs. Hogs

  24. Agricultural ComplexCommon Spreads • Commodity-Product spreads • Reflect the relationship between a raw product and the processed products or by-products • Relationships usually reflect “substitutability” • Examples • Soybean Crush • Buy Soybeans, Sell SoyMeal, Sell SoyOil • 1 to 1 ratio or 10 Beans, 11 Meal, 9 oil ratio • Fundamentals can change dramatically depending on whether Beans are being crushed for meal or oil demand • Reverse Soybean Crush • Sell Soybeans, Buy SoyMeal, Buy SoyOil

  25. Agricultural ComplexTrading Information & Resources • Numbers and news that may impact ag prices • USDA, CFTC and CBOT reports • Key reports can be accessed through: www.cbot.com > Market Data > Reports > Ag Fundamental Reports • Examples from the above url: • Periodic Reports • Fundamental Reference • Supply Charts • Demand Charts

  26. Agricultural ComplexTrading Information & Resources • Agricultural Homepage: • www.cbot.com > Products > Agricultural • Tutorials, Webinars and Publications: • www.cbot.com > Education > Tutorials, Webinars, Publications • Position limits: • www.cbot.com > About CBOT > Rules & Regulations > 4C • Margins: • www.cbot.com > Clearing > Margins

  27. Agricultural ComplexTrading Information & Resources • Ticker Symbols, Trading Hours & Clearing Codes: • www.cbot.com > Education > Trading Hours and Symbols • Exchange Transactions Fees: • www.cbot.com > Clearing > Exchange Transaction and Clearing Fees • Commodity News For Tomorrow • Daily commodity publication • Provided by the CBOT in partnership with Dow Jones Newswires • www.cbot.com > Market Data > Commodity News for Tomorrow

  28. Agricultural FuturesTicker Symbols and Hours

  29. Agricultural OptionsTrading Symbols and Hours

  30. Agricultural ComplexTrading Hour Highlights Important Notes: • Only Ag Futures are traded side-by-side • Ag Options are available on the electronic platform only over night • All CBOT Ag Futures close at NOON on last trading day • Modified close only available in Open Auction (1:23 pm - 1:25 pm) • Both trading platforms settled to Open Auction Settlement Prices • All times listed in tables are based on Chicago time

  31. Precious Metals ComplexAverage Daily Volume (ADV) & Open Interest (OI)

  32. Precious Metals ComplexVolume and Open Interest Records

  33. Precious Metals ComplexGold Futures Contract Highlights • Contract size: 100 ounces (oz.) • Price quote: Dollars and cents per ounce (oz.) • Tick size: 10 cents ($0.10)/oz. ($10/contract) • Months: First 3 months; 2 Feb, 2 Apr, 5 Jun, 2 Aug 2 Oct & 5 Dec • Last trading day: Third to last business day of delivery month • Last delivery day: Last business day of the month • Trading Platform: 100% Electronic • Ticker symbol: ZG • Trading hours: 6:16 p.m. – 4:00 p.m. Chicago time (Sun – Fri) • Last trading day: Expiring contracts close at 12:30 p.m. Chicago time

  34. Precious Metals ComplexGold Options Contract Highlights • Contract size: 1 CBOT 100 ounces (oz.) Gold futures contract • Price quote: Dollars and cents per ounce (oz.) • Tick size: 10 cents ($0.10)/oz. ($10/contract) • Standard Months: Feb, Apr, Jun, Aug, Oct, Dec • Serial Months: Jan, Mar, May, Jul, Sep, Nov • Last trading day: Third to last business day of delivery month • Last delivery day: Last business day of the month • Trading Platform: Electronic and Open Auction • Ticker symbol: • Electronic: OZGC (calls) and OZGP (puts) • Open Auction: ZGC (calls) and ZGP (puts) • Trading hours: • Electronic: 6:18 p.m. – 4:00 p.m. Chicago time (Sun – Fri) • Open Auction: TBD (Mon – Fri) • Last trading day: Expiring contracts close at 12:30 p.m. Chicago time

  35. Precious Metals ComplexCBOT mini-sized Gold Futures Contract Highlights • Contract size: 33.2 ounces (oz.) • Price quote: Dollars and cents per ounce • Tick size: 10 cents ($0.10)/oz. ($3.32/contract) • Months: First 3 months; 2 Feb, 2 Apr, 5 Jun, 2 Aug, 2 Oct, & 5 Dec • Last trading day: Third to last business day of delivery month • Last delivery day: Last business day of the month • Trading Platform: 100% Electronic • Ticker symbol: YG • Trading hours: 6:16 p.m. – 4:00 p.m. Chicago time (Sun – Fri) • Last trading day: Expiring contracts close at 12:30 p.m. Chicago time

  36. Precious Metals ComplexSilver Futures Contract Highlights • Contract size: 5,000 ounces (oz.) • Price quote: Dollars and cents per ounce (oz.) • Tick size: 1/10 cent ($0.001)/oz. ($5/contract) • Months: First 3 months; 2 Jan, 2 Mar, 2 May, 5 Jul, 2 Sep & 5 Dec • Last trading day: Third to last business day of delivery month • Last delivery day: Last business day of the month • Trading Platform: 100% Electronic • Ticker symbol: ZI • Trading hours: 6:16 p.m. – 4:00 p.m. Chicago time (Sun – Fri) • Last trading day: Expiring contracts close at 12:25 p.m. Chicago time

  37. Precious Metals ComplexSilver Options Contract Highlights • Contract size: One 5,000 ounce (oz.) Silver futures contract • Price quote: Dollars and cents per ounce (oz.) • Tick size: 1/10 cent ($0.001)/oz. ($5/contract) • Standard months: Mar, May, Jul, Sep & Dec • Serial months: Jan, Feb, Apr, Jun, Aug, Oct & Nov • Last trading day: Third to last business day of delivery month • Last delivery day: Last business day of the month • Trading Platform: Electronic and Open Auction • Ticker symbol: • Electronic: OZIC (calls) and OZIP (puts) • Open Auction: ZIC (calls) and ZIP (puts) • Trading hours: • Electronic: 6:18 p.m. – 4:00 p.m. Chicago time (Sun – Fri) • Open auction: TBD (Mon – Fri) • Last trading day: Expiring contracts close at 12:25 p.m. Chicago time

  38. Precious Metals ComplexCBOT mini-sized Silver FuturesContract Highlights • Contract size: 1,000 ounces (oz.) • Price quote: Dollars and cents per ounce • Tick size: 1/10 cent ($0.001)/oz. ($1/contract) • Months: First 3 months; 2 Jan, 2 Mar, 2 May, 5 Jul, 2 Sep & 5 Dec • Last trading day: Third to last business day of delivery month • Last delivery day: Last business day of the month • Trading Platform: 100% Electronic • Ticker symbol: YI • Trading hours: 6:16 p.m. – 4:00 p.m. Chicago time (Sun – Fri) • Last trading day: Expiring contracts close at 12:25 p.m. Chicago time

  39. Precious Metals ComplexUseful Links • Metals Complex Homepage www.cbot.com/metals • Chart Book • Live Books • Futures • Options

  40. Precious Metals ComplexFutures and Options Live Books

  41. e-CBOT®Highlights • Over 40 Recognized Strategies • Futures and Options • Points of Presence (POPS) • 13 POPS routes orders directly to the host • Located in Chicago, Amsterdam, Gibraltar, London, New York, Paris, Singapore • 262 direct connections

  42. CBOT MarketsBenefits • Liquidity • Financial integrity • Transparency • Innovative • Variety • Ag, Metals, Financial, Equity & Energy Complexes • Futures and Options • Customer Service – Customer Friendly – Customer Choice • Two trading platforms – one pool of liquidity • Electronic – Straight thru processing • Open auction – Side by side technology • Accessibility • Metals trading day: 22 hours (Sunday night – Friday afternoon) • Ags trading day: 15.25 hour (Sunday night – Friday afternoon)

  43. CBOT Ags & Precious MetalsAssistance • Electronic Trading Issues: • Market Operations: 312-347-4600 • Electronic Platform Connectivity Issues: • Functional Member Readiness: 312-341-7955 • Product Issues: • Business Development: 312-341-7955

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