1. CME Group Weather Derivatives
Felix Carabello
December 5, 2007

2. Disclaimer
Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.
All references to options refer to options on futures.
The globe logo, CME®, CME Group™, Chicago Mercantile Exchange® are trademarks of Chicago Mercantile Exchange Inc. CBOT® and the Chicago Board of Trade® are trademarks of The Board of Trade of the City of Chicago, Inc. NYMEX® is a registered trademark of the New York Mercantile Exchange, Inc.  All other trademarks are the property of their respective owners.
The information within this presentation has been compiled by CME Group for general purposes only. Although every attempt has been made to ensure the accuracy of the information within this presentation, CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.
All matters pertaining to rules and specifications herein are made subject to and are superseded by official CME, CBOT and CME Group rules. Current rules should be consulted in all cases concerning contract specifications.
Copyright © 2007 CME Group. All rights reserved.

3. Intro to CME Group
The Chicago Board of Trade (CBOT) was established in 1848, and the Chicago Mercantile Exchange (CME) in 1898.
Economic functions
Hedging and risk management
Price discovery
Price dissemination
The world’s largest and most diverse exchange
All transactions cleared, settled, and guaranteed by the CME Clearing House
World’s largest
100+ years of default free performance
Virtual 24 hour trading on the CME Globex® electronic trading platform

4. CME Group Market Environment
Especially during periods of market turmoil, customers are concerned about:
Liquidity
Capital efficiency
Anonymity
Counterparty risk
CME Group has:
a diverse multi-asset product base
Interest rate
Equities
Foreign exchange
Agricultural commodities
Alternative investments
Energy and metals
a broad customer base
CME Group provides an open-access model with instantaneous access to deep liquidity with low transaction cost.

5. Global Presence CME Globex live access from more than 80 countries
6 European/Asian hubs
Regionally focused sales, education and marketing to key targets
Broadening relationships in emerging markets
CME provides access to highly liquid markets across all major asset classes on an industry leading technology platform.

6. CME Group ADV by Year (contracts in thousands)
CME Group ADV by Quarter (contracts in thousands)
Sep 07 up 35% vs. Sep 06
11,135
13,000
4-Yr CAGR: 27%
up 52%
8,476
6,837
8,530
5,484
77%
4,265
2003
2004
2005
2006
2007 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07
to date
Ex-Pit
Open Outcry
Electronic (CME Globex and e-CBOT)
Q3 volume has not exceeded Q2 volume since 2002

7. Alternative Investments at CME Group

8. Alternative Investments Product Line
Standardized Weather:
U.S. Weekly Monthly & Seasonal Weather (18 cities)
European Monthly & Seasonal Weather (9 cities)
Asian-Pacific Monthly & Seasonal Weather (2 cities)
Canadian Monthly & Seasonal Weather (6 cities)
Frost Day Monthly & Seasonal
Snowfall & Seasonal Snowfall (2cities)
Hurricane Seasonal, Seasonal Maximum based on Carvill Hurricane Index
Real Estate:
Residential Housing, based on S&P/Case-Schiller Home Price Indices
Dow Jones U.S. Real Estate Index Futures
Energy:
Ethanol
Ethanol Forward Month Swaps (OTC)
Ethanol Basis Swaps (OTC)

9. CME Group Weather - A Developing Market
February 27
Summer 1999
September 26th
March 8th/April 12th
July 26th
June 20th
CME launches first
exchange weather derivatives
Launch 10 new US seasonal cities & 12 new US monthly cities.
Change contract size from $100 to $20
Expand the Option strike range
Add 3 new US cities and 4 new European cities
Launch Snowfall Contacts for New York
And Boston
1999
2003
2004
2005
2006
August 22, 2002
Announce the LMM (Wolverine)
October 3rd
June 14th
Launch of additional 5 US seasonal cities
Total is 15 US Monthly/Seasonal cities
September 23th
October 16th
Launch 6 Canadian
Monthly and Seasonal
Strip Contracts
Launch five monthly and seasonal European cities
Launch CME Weather
Seasonal Strips/ Frost contracts
Volume
24,094
( )
122,094
867,681
801,122
Launched Hurricane/Weeklies
YTD ADV 4,800 (April 6,400)

10. CME Group Weather – A Developing Market
2007 Volume
ADV +21% over 2006; (October ADV is at 7,000)
Screen trading has increased by 150%
Increased Summer trading (CDD) by 26%
Traded over 2.5 Million contracts since 2005
New market participants up 23%
Records
Surpassed open interest in 2007
Set daily record of over 29,000 in August
2007 OI surpassed 490,000
Increase of 10% over 2006
Surpassed OI of Live Cattle, Lean Hogs and other “mature” products
Market Participants
Re-Insurance, Hedge funds, Utilities, Power, Gas and other energy.

11. Benefits of CME Group Weather Derivatives
Standardized contract specifications or flexible options (bespoke)
Anonymous central counterparty clearing
Frees up valuable counterparty credit lines
Secured by CME Financial Safeguards system
Centralized price discovery & universal price dissemination
Streamlined processing and allocations
Daily mark to market minimizes financial risks
Positions are automatically netted
No ISDA documentation required
No bilateral collaterals
Offer a standard, transparent reference point for marking and valuing OTC positions
Electronic trading platform & other trading venues
Immediate execution, Increased transparency, Enhanced liquidity
Broaden Products
Broaden Participants
Link to CME Clearing

12. CME Group Managing Risk
CME Group weather futures and options are used to manage many risk factors:
Margin
Liquidity risk
Settlement risk
Market concentration
Credit (non-performance) risk
Deal replacement risk
Contagion risk

13. Accurate Weather Data is Vitally Important1
Historical 2
Margins 3
Contract Settlements 4
Market Confidence

14. Contact Us John Harangody
Director, Commodity Products
Felix Carabello
Director, Alternative Investments Products
Christina Hanson
Associate Director, Alternative Investments Products
Tony Zaccaria
Associate Director, Alternative Investments Products

15. CME Group Weather Derivatives
Felix Carabello
December 5, 2007