CBOT offers mini Dow hedges

The Chicago Board of Trade (CBOT) will launch a mini-sized Dow futures contract based on the Dow Jones Industrial Average (DJIA) at the end of September via its a/c/e trading platform - created via a tie-up with European derivatives exchange Eurex.

The mini contracts have been established to allow smaller participants to gain the same hedging capability as large institutional players in the derivatives markets.The contract size is $2.00 times the DJIASM - a price-weighted index of thirty of the largest, most liquid US stocks. So on Tuesday, with the DJIA at 10,350, contracts would be worth $20,700. Tick sizes are one average point, each of which is worth $2. No party may hold more than 50,000 contracts. Margins have yet to be disclosed.

"The CBOT... will continue to align its infrastructure and capabilities to grow existing products and develop new products, such as the mini-sized Dow contract, that reflect an economic benefit to the customer," said CBOT chairman Nickolas Neubauer.

The CBOT plans to introduce a number of new products that will provide more effective risk management tools for market participants, particularly those seeking benchmark alternatives to Treasury securities. The exchange already offers mini-sized agricultural fixed-income and precious metals contracts.