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I think the CME covered it pretty well in their web site announcement:
Following Regular Month-end Procedure, CME to Settle Domestic Stock Indexes
at Fair Value on Wednesday, Feb. 28
Index Products Will Close at 3:05 p.m.
Feb. 26, 2001—Following its regular monthly procedures established last
month, Chicago Mercantile Exchange Inc. (CME) will settle its domestic stock
indexes to "fair value" on the last day of trading in the month, Wednesday,
Feb. 28.
CME will follow the same procedures it had been using for quarter-end fair
value settlements since Dec. 29, 1999.
On Feb. 28 and the last day of trading every month, CME will close its
domestic equity index futures contracts 10 minutes early and revise its daily
settlement procedures to reflect a fair value settlement price. CME stock
index futures and options will close at 3:05 p.m. (Central Time) at month’s
end, five minutes after the close of cash equity trading—instead of the usual
15 minutes after the cash markets' close—in order to coordinate more closely
with the close of index-related products on other exchanges.
All of CME's domestic stock index futures and options will settle according
to the new procedure, including the S&P 500, E-mini S&P 500, Nasdaq-100,
E-mini Nasdaq-100, S&P 500/BARRA Growth, S&P 500/BARRA Value, S&P MidCap 400,
Russell 2000 and FORTUNE e-50™ indexes. While the Nikkei 225 will not be
settled using this procedure, it will also close at 3:05 p.m.
Following its normal procedure, fair values will be determined by a survey of
market participants conducted by exchange staff. Settlement prices will be
made available shortly after the 3:15 p.m. sampling of cash index values.
Fair value represents an "arbitrage free" level at which futures
theoretically should be priced in relation to cash index values in the
absence of transaction costs, although this is not necessarily the level
where they will trade. Fair value is typically calculated as a function of
the cash or spot index value, plus financing charges, less any dividends that
would accrue with the purchase and carry of all index constituents until the
final futures settlement date. Many financial news media regularly publish
estimates of fair value for stock index futures contracts.
Additional Resource: <A HREF="http://www.cme.com/market/equity/fvsettle.htm";>
Q&A Regarding Fair Value Settlement Procedures</A>
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
In a message dated 3/1/01 8:31:58 AM Central Standard Time,
dbewers@xxxxxxxxxxxxx writes:
<< The SP01H futures closed early per the new month end rule around 1239.
After
the new settlement occurred they jumped I believe to 1442 area?
Part of the jump is causing the difference we are seeing in the over night
futures.
John L. can you comment on what really happened from 3:05 to 3:15 and why
this new process?
don ewers >>
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