The Chicago Mercantile Exchange is now accepting Canadian treasury securities as collateral for options and futures contracts traded on the exchange.
The exchange said a growing number of customers had expressed a desire to use sovereign debt securities as collateral on its contracts.
The exchange also said it was looking into accepting the debt securities of other nations besides Canadian treasury bills and bonds. In particular, United Kingdom Gilts, Republic of France OATS, and Brady bonds are under consideration.
Currently, the exchange said it holds an average of $8.5 million in collateral, a portion of which is in U.S. treasury securities.
The exchange also said it was planning to launch futures and options contracts on specific Brady bonds.
The announcement is the latest step by the two big Chicago futures exchanges to address risk management issues in Latin America and emerging markets.
The Merc launched its Mexican peso futures in April and followed in November with the launch of Brazilian real futures. The exchange also created a new growth and emerging markets division in November to house its growing emerging markets product line.
During the same period, the Chicago Board of Trade has also made applications to create emerging markets contracts. In late November, it made its application to the Commodity Futures Trading Commission to list futures and options contracts on the Brady bond index for Latin America, as well as the separate indexes for Mexican and Brazilian Brady bonds.
