CME and Goldman Sachs Partner To Conduct Economic Derivatives Auctions

Business Wire, June 28, 2005

NEW YORK and CHICAGO -- Goldman Sachs (NYSE: GS) and CME (NYSE, NASDAQ: CME) announced today that they will partner to enhance the auctions for economic derivatives, based on key U.S. and European economic indicators, through integrated clearing and trading solutions. Today's partnership will extend to other financial products the auction framework that Goldman Sachs has been applying successfully in derivatives markets since 2002. The agreement also marks the latest example of CME's efforts to offer its clearing services to third-parties, including the over-the-counter (OTC) derivatives market.

This new partnership, which will operate as CME Auction Markets(TM), is expected to significantly broaden access to the economic derivatives market and increase the level of investor participation. Economic derivatives allow market participants to either hedge or take market risk directly associated with the release of economic indicators. The auctions also reveal the markets' expectations for the indicators, which is valuable information for all investors.

CME will provide centralized clearing, electronic order routing, and marketing services to these auctions, with clearing scheduled to start in September and electronic order routing scheduled to start in the first quarter of 2006. The auctions currently offer digital options, vanilla options and forwards on U.S. nonfarm payrolls, the Institute of Supply Management's PMI index, weekly initial jobless claims, retail sales, European inflation (HICP), the international trade balance and gross domestic product (GDP). Auctions that will include U.S consumer price index (CPI) are expected to be added in September.

"This partnership allows us to leverage CME's core strengths in product development, distribution and clearing," said Terry Duffy, CME Chairman. "CME has authored many of the leading innovations in derivatives over the years, including new ideas in trading and risk management products and platforms, and this partnership reinforces that tradition. The auction format has the potential to accelerate liquidity in innovative new products that may not succeed in a traditional matching environment."

"Over the past two years, CME has established itself as the leading global distribution network for financial derivative contracts and as the world's largest derivatives clearing facility," said CME Chief Executive Officer Craig Donohue. "By partnering with Goldman Sachs, we will expand this innovative market concept to a broader audience and further develop these important risk management tools. It will also further diversify our product portfolio and enhance our presence in the OTC markets."

"Economic derivatives allow investors to hedge their exposure to economic releases more directly. As a result, auction volume has steadily increased in the two and a half years since the introduction of economic derivatives, and nearly tripled in the last year," said Gary Cohn, co-head of Goldman Sachs' Global Securities Division. "By joining forces with CME, we will accelerate this marketplace's growth even further."

Goldman Sachs President Lloyd Blankfein added, "We are excited about the opportunity to partner with CME to advance a market which truly represents the cutting edge in derivatives innovation."

The auctions use a patented process of mutualized order filling developed and operated by Longitude, Inc. This process finds the most efficient results for all orders, with the ability to fill an order with one view on the market against other buy or sell orders with different views. The auctions aggregate liquidity across all instruments and multiply the potential for efficient order filling. The wide variety of instruments available for trading allows investors to tailor very precise hedges or exposures to each economic indicator. It is anticipated that additional CME products will be available through the auctions in 2006.

Following the introduction of economic derivatives in late 2002, Goldman Sachs joined with interdealer broker ICAP (LSE:IAP) to market the economic derivative auctions more broadly. ICAP will continue to be a lead marketer for the CME auctions.

Beginning this September, ICAP customers will be able to trade electronically, as well as place orders by telephone, and investors will be able to place orders for all existing economic derivatives auctions. Central clearing of these products will also create new sales and business opportunities for CME clearing members.

For further information, please go to www.cme.com/economicderivatives.> Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.