Dollars and Jens
Monday, August 23, 2004
CME to adopt European expiry rules
The Chicago Mercantile Exchange Inc. said on Monday it will switch to European-style rules on options expiration and waive fees to boost electronic trading as it fends off a European rival.It's not clear to me why this change would help them increase volume, except possibly that theoretical models used for pricing options tend to more easily accommodate European-style options than American-style; it may be that some potential providers of liquidity will feel more secure doing so for options that have European-style exercise rules.
...Under European-style rules, an options holder may exercise a contract only on the date of expiration. In contrast, under U.S.-style rules, the holder may exercise a contract into a futures position at any time prior to expiration.
Also, if you would have guessed before reading that that the Eurodollar contract is the most heavily traded futures contract in the U.S., you're better informed than I.