On-Exchange and Over The Counter (OTC) Trading Features To fully meet the needs of its customers, on-exchange trading is supported by state-of-the-art trading features and OTC trading facilities. USFE provides the following trading functionality and OTC trading features that recognize the need of the wholesale market to provide guaranteed execution and to support defined trading strategies: Integrated Calendar Spreads Strategy Wizard for Options Exchange for Physicals (Basis Trades) Exchange for Swaps Wholesale Trading Vola Trading (Delta Neutral Trading) In providing these features, USFE meets the market's needs while ensuring the balance between the central order book driven markets and the guaranteed execution of trades. On-Exchange Trading Features Calendar Spreads A calendar spread is the simultaneous purchase and sale of two futures contracts with the same underlying but with different expiration dates. At USFE, the regular (single leg) and combination (spread) order books for futures products are integrated from a matching perspective, with no execution risk on the spread. Integrated calendar spreads ensure best price execution for the individual legs and the spread through implied pricing. Orders automatically match against the single leg or the spread order book, depending on which order book features the better price. USFE offers integrated calendar spreads at a 1/5 tick size for Russell Index products. Please note that only the implied prices which represent the inside market (best bid and best ask prices) are disseminated to the market. Trader Benefits include: 1. Best execution guaranteed 2. Liquidity in both the spread and the outright books enhanced dramatically, particularly during the roll period 3. Calendar rolls integrated into single legs can be electronically traded for the first time in liquid markets Price-time priority applies. For futures trading, the following types of integrated calendar spread combinations are available: First Month and Second Month Spread (e.g. March / June) First Month and Third Month Spread (e.g. March / September) Second Month and Third Month Spread (e.g. June / September) Strategy Wizard A new feature, the Strategy Wizard, was developed in response to market demand for a sophisticated exchange supported options trading facility. This feature enables market participants to create a strategy and announce it to the entire market from a range of 42 predefined strategy types (e.g. Straddle, Butterfly, Condor etc.). The created and published strategies are visible to the whole market and can be traded via public strategy order books. In addition, Wholesale Trading for strategies is available. Separate order books are introduced for strategy trading. The matching algorithm for strategy orders is based on the price-time priority principle. The strategy builder does not include explicit strategies for futures products, albeit an option strategy may contain futures products e.g. Covered Calls. Over The Counter (OTC) Trading Features An OTC trade in this context is an off-exchange agreement between two counterparties to enter into a standard exchange contract, which is then reported to USFE and cleared by the clearing house. The price of the OTC trade for index futures must be inside the daily high and low of the futures/options contract, plus or minus 0.2 percent for Russell Index Futures and 1.0 percent for Binary Event Futures. OTC trade prices do not trigger contingent orders. An entry of an OTC trade is only possible during the trading phase. OTC trades are reported via the Online Times and Sales Sheet as soon as the trade is ratified by the seller of the OTC trade. Exchange for Physical (Basis Trades) An Exchange for Physical (EFP), is defined as the simultaneous exchange of a long/short futures contract against a short/long position in a related cash instrument. The two legs must have comparable sensitivities to market prices in the case of stock index products (normally expressed through a hedge ratio). Exchange for Swap (EFS) Exchange for Swap (EFS) is comparable to an EFP, or a basis trade. A swap, however is defined to be the "cash leg" of the trade rather than a bond. It is defined by the simultaneous exchange of a long/short futures position against a payer/receiver swap position, while the two legs have a related comparable sensitivity to interest rate changes (normally expressed through a hedge ratio based on the basis point value of the futures and the swap). Wholesale Trading Wholesale, or block, trading involves a prearranged trade negotiated off the exchange trading system by two qualified parties consisting of at least a certain threshold amount of exchange contracts, and reported through the USFE Block Trading Facility. See USFE Rule 415 for the definition of a qualified party. Wholesale trading is subject to certain threshold levels set by the exchange, and under certain circumstances, orders may be aggregated to reach the threshold. See USFE Rule 415 for details. Wholesale trading is possible in the following products: Block Trading Minimum Thresholds See individual product specifications for detail. Vola Trading (Delta Neutral Trading) Vola Trading (Delta Neutral Trading) is a futures transaction that is linked to an option transaction, and the maximum futures volume is a function of the options delta and the options traded volume.