The Montréal Exchange further expands range of Canadian equity index futures

Please be advised that the Montréal Exchange will be launching mini futures contracts on the S&P/TSX 60^TM Index (SXM^TM) on May 6, 2011. The new SXM contract represents one-quarter the value of current S&P/TSX 60 Index Standard Futures (SXF^TM).

SXM trading information

• The SXM contract is cash settled against the opening level of the underlying S&P/TSX 60 Index on the third Friday of the expiration month. The opening level of the S&P/TSX 60 (spot index) is provided by Standard & Poor's.
• The trading unit (contract multiplier) is C$50 times the price level of the SXM contract.
• The tick size (or minimum price fluctuation) of the SXM contract is 0.10 index point or C$5 per tick (0.01 for calendar spreads = C$0.50 per contract).
• The position limit for the launch is 30,000 contracts, determined in conjunction with existing SXF contract position limits. An SXM contract shall be deemed equivalent to one-quarter of an SXF contract.
• The reporting level is 1,000 S&P/TSX 60 Index futures contracts gross long and short in all contract months combined (standard SXF and mini SXM combined).
• Trading will begin with the June 2011 (M11) contract and will be listing regular quarterly expiries.
• Margin requirements for the launch are $1,600 for speculators and $1,500 for hedgers. Compared to SXF futures, SXM margins are also reduced by factor of four as well.
• Offsetting of opposite positions in SXM and SXF contracts at the ratio of one SXF contract against four SXM contracts is offered by the Canadian Derivatives Clearing Corporation in order to limit the risk of market fragmentation between the two futures contracts.
• Offer and sale of the SXM contract in the United States: Note that for the time being the SXM contract cannot be offered and/or sold in the United States. MX will inform market participants when the SXM contract becomes available to US participants.

Should you require technical assistance or wish to carry out testing in our development environment, do not hesitate to contact our Technical Help Desk at 1-877-588-8489 or by email at samsupport@m-x.ca.

Vendors' access codes

Fees

Transaction fees for the SXM contract will be:

• $0.21 for clients
• $0.09 for approved participants (domestic and foreign)
• $0.06 for participants in the Liquidity Provider Rebate Program ("LPRP")

The LPRP table will be modified to include rebate thresholds for the SXM contract. In order to qualify for rebates on the SXM, liquidity providers will be required to provide passive liquidity (price maker) on at least 40% of all trades.

Potential users of the SXM contract

Small notional size SXM futures will motivate all account types:

• portfolio managers with Canadian equity exposure;
• professional traders who prefer a smaller notional size and a lower cost of trading;
• Commodity Trading Advisors (CTA) and hedge funds who prefer lower margin requirements;
• arbitrageurs who conduct cross market arbitrage trading activities;
• retail investors who want to speculate on the Canadian equity marketplace.

Trading opportunities

• Portfolio managers benchmarked to the S&P/TSX 60 Index and currently using OTC index derivatives based on such index could hedge their risk exposure with SXM futures. The miniature sized SXM futures also allow participants to fine tune SXF contract hedges.
• Individual investors with reduced capital and with a diversified stock portfolio that is highly correlated to the S&P/TSX 60 Index could protect their portfolio against the impact of a short-term bearish market by selling the low-cost SXM futures.
• Speculators, proprietary traders and hedge funds could trade SXM futures to manage directional trading and to execute spread trades against other benchmark stock indices and sector indices.
• Market participants could arbitrage the market by trading the spread between the SXF and the SXM futures contracts.
• Institutional investors could effect exchange-for-physical (EFP) transactions by exchanging a portion of their stock holdings against SXM futures, or vice versa. These transactions free up capital to benefit from other opportunities while maintaining equity market exposure.

For all business related questions, please contact our Customer Relations representative at 1-866-871-7878 or by email at info@m-x.ca.

Claude Cyr
Senior Vice-President, Financial Markets
Montréal Exchange

Montréal Exchange Informational Site

• SXM Contract Specifications
• Trading Strategies for the S&P/TSX 60 Mini Futures Contract (SXM)
• MX Index Futures and Options – Contract Information
• Liquidity Provider Rebate Table

If you do not wish to receive any further e-mails from the Montréal Exchange, write us at info@m-x.ca.

Warning and disclaimer

This document is sent to you on a general information basis only. The information provided in this document, including financial and economic data, quotes and any analysis or interpretation thereof, is provided solely on an information basis and shall not be interpreted in any jurisdiction as an advice or a recommendation with respect to the purchase or sale of any derivative instrument, underlying security or any other financial instrument or as a legal, accounting, tax, financial or investment advice. Bourse de Montréal Inc. recommends that you consult your own advisors in accordance with your needs. All references in this document to specifications, rules and obligations concerning a product are subject to the Rules and Policies of Bourse de Montréal Inc. and its clearinghouse, the Canadian Derivatives Clearing Corporation. Although care has been taken in the preparation of this document, Bourse de Montréal Inc. takes no responsibility for errors or omissions and it reserves itself the right to amend or review, at any time and without prior notice, the content of this document.

Bourse de Montréal Inc., its directors, officers, employees and agents will not be liable for damages, losses or costs incurred as a result of the use of any information appearing in this document.

SXM^TM and SXF^TM are trademarks of Bourse de Montréal Inc.

"S&P®" and "Standard & Poor's®" are registered trademarks of The McGraw-Hill Companies, Inc. and "TSX®" is a trademark of TSX Inc. ("TSX"). The products mentioned in this document are not sponsored, endorsed, sold or promoted by S&P or TSX; and S&P and TSX make no representation, warranty or condition regarding the advisability of investing in them.