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 CHICAGO, Sept. 29 /PRNewswire/ -- The Chicago Mercantile Exchange (CME) was informed today that the Federal Reserve Board has significantly broadened the scope of futures and options products that can be executed and cleared by bank-affiliated firms. In the ruling, which allows Harris Futures Corp., a CME member firm, to execute and clear agricultural futures and options, the FRB acted favorably upon a proposal by the CME to allow all bank-affiliated firms to offer non-traditional banking instruments to their customers.
 CME Chairman Jack Sandner hailed the decision as a significant recognition of the value of futures and options transactions that will lead to the increased use of exchange-traded products for risk management as well as an asset class in investment portfolios.
 By virtue of the FRB order, Harris Futures, a wholly owned subsidiary of Bank of Montreal, becomes the first clearing member affiliate of a bank regulated by the FRB to receive such approval. In the ruling, the FRB opened the doors to other bank-affiliated firms to trade a wide variety of futures and options on both commodities and financial instrument immediately upon notification to regional Federal Reserve Banks. Prior to the Harris ruling, bank-affiliated firms had been prohibited from offering these instruments.
 "This is a sea-change in regulatory philosophy and is a demonstration of flexibility and innovation at the Federal Reserve Board," Sandner said. "The Chicago Mercantile Exchange has proactively assisted Harris and other bank clearing members in this process. This action is good for the banks, for the customers and for the Chicago Mercantile Exchange. We believe opening these markets to bank-FCMs will add another very important user group to our agricultural trading complex."
 "This is an example of effective regulatory oversight," said Tony McCormick, president and CEO of Harris Futures. "We presented a case to the Federal Reserve Board that banks were not permitted to compete on a level playing field due to restricted product authority. We also demonstrated empirically that giving us this authority would add no new risk to the system. The Chicago Mercantile Exchange and the Federal Reserve Bank of Chicago were instrumental in helping us build a credible case through their proactive efforts with the Federal Reserve Board and we thank them for their efforts."
 Sandner added that he was pleased the Fed is taking actions advocated by the CME in a petition that called for allowing banks and affiliates to trade in all U.S. futures and options markets. The CME is the world's largest marketplace, offering a wide variety of financial and agricultural products with an annual volume of trade this year of nearly $100 trillion in underlying value.
 CME President and CEO Bill Brodsky said the new ability of banks and affiliates to offer non-financial futures and options will allow money managers who trade these instruments to take advantage of the low correlation between the price movements in agricultural contracts and many other futures contracts in constructing diversified portfolios.
 "Many sophisticated investors have come to see investments in futures as a separate class of assets which, when managed properly, can provide increased returns with reasonable degrees of risk," Brodsky said. "Allowing bank affiliates to compete for this business is clearly in the public interest."
 -0- 9/29/93
 /CONTACT: Andrew Yemma of the Chicago Mercantile Exchange, 312-930-3434, or fax, 312-930-3439/

CO: Chicago Mercantile Exchange; Federal Reserve Board; Harris Futures
 Corp. ST: Illinois IN: FIN SU:

TW -- NY054 -- 6884 09/29/93 14:16 EDT
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Publication:PR Newswire
Date:Sep 29, 1993

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