CME to convert equity index options to European-style expiration

The Chicago Mercantile Exchange has said it will convert all its equity index options to European-style expiration by the end of the year as part of an aggressive growth strategy.

Conversions will take place in two shifts. E-mini Standard and Poor’s (S&P) 500, S&P 500 Barra Value and S&P 500 Barra Growth Index will move to European-style exercise from January 2005. S&P 500 and MidCap 400, Nasdaq-100, Russell 2000 and Nikkei 225 options will change from July 2005. The conversion will apply to all equity index options traded either electronically or by open outcry, the exchange added.

European-style rules allow option holders to exercise options only on the date of expiration, as opposed to American-style rules, allowing the holder to exercise the option any time before the expiration date.

The CME will also introduce a nine-month Globex customer fee waiver for customers trading e-mini S&P 500 options, starting in October. It will also add designated market makers, which the CME said will bring increased levels of flexibility, transparency and execution to the market.

“One of CME’s main strategies is to promote growth in all our financial options products, and the introduction of European-style exercise, as well as market maker and customer pricing incentives for our e-mini S&P 500 equity options, is part of this broader strategy,” said Craig Donohue, CME's chief executive.