CASH SETTLEMENT

Unlike traditional futures, the Toronto 85 Futures contract features cash settlement. Generally speaking, an exchange of cash takes place between holders of long and short positions, following the last day of trading in a contract month. In the case of Toronto 35 Futures, actual delivery of the shares of the thirty-five companies does not occur.

On the third Friday of the contract month, which is the day following the last day of trading, all open positions are marked to market using the official opening level of the Toronto 35 Index.

The opening index level is calculated by the Exchange only when all of the 35 stocks of the Index have opened for trading (board lots only) on Friday. If any one of the 35 stocks was not traded during Friday's session, then the last trade price from the preceding day would be used in the final calculation.

QUOTATION

Toronto 35 Futures are quoted in the same manner as the underlying Toronto 35 Index, for example, 195.12. The futures contract carries a face value of $500 times the index futures price. For example, a futures price of 195.02 means the contract would carry a value of $97,510. The minimum price fluctuation or "tick" is equal to .02 or $10 per contract.

MARGIN

The minimum client speculative margin set by the Exchange is $9,000 per contract, which is equal to approximately 10% of the approximate $100,000 value of the contract at the time of writing. A higher margin deposit may be required by your broker.

TRADING THE TORONTO 35 FUTURES CONTRACT

All futures market participants have the flexibility to be long or short depending on their market forecast. While selling short in the stock market may be a confusing concept, selling futures is not. To sell futures simply means to take a short position in anticipation of falling prices.

Toronto 35 Futures allow the investor to translate his market opinion into market action by making a single decision to buy or sell. He will sell a futures contract if he thinks equity prices are about to fall, and buy if he believes a general market increase is forthcoming.

An appealing feature of this particular type of contract, and of futures contracts in general, is the leverage provided by the margin requirements. An investor is able to fully appreciate a favorable change in the value of a futures position with a margin deposit that is equal to only a fraction of the contract's actual value.