Presentation to Ukraine Commodity Market Development Conference The author of the presentation: Fred Seamon, CME Group (US)

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Product Development Process
06 December 2017

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• Key responsibilities of Research and Product Development
• Overview of the Product Launch Framework
• Product Launch Example
Objectives

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Key Responsibilities of Research & Product
Development
1. Maintain existing product portfolio to ensure our products meet the changing needs
of the marketplace;
2. Design and launch new products to expand our offerings ensuring we are
responsive to customer needs; and
3. Conduct research – general research to support our product offerings, macro –
economic research to be utilized with our customer facing teams, Market Insights
(CME published research reports), academic research to advance work on CME
topics of interest, and research to support our regulatory positions.

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Product Launch Framework

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What a Product Development Process is:
• Mechanism to capture, communicate, and filter product ideas to get the best product ideas into the
marketplace (from Idea to Commercialization)
• Introduces new products that address Market and Customer needs and result in targeted revenue
generation
• Enhances understanding and predictability of revenues and costs associated with new products
• Process that incorporates best practices, tracks success, and enables continuous improvement
over time
Expected Outcomes:
• Establish a more focused, consistent and disciplined product development process (client-focused,
formalized client validation, commercially viable)
• Require new product/capabilities enhancements to be based on specific, identifiable, scalable and
validated client needs
• Increase thoughtfulness around timing and sequencing of product launches and changes; align with
both internal and external readiness
• Fully engage sales teams throughout design, validation, pre-/during-/post-launch to support efforts of
Research and Product Development and Business Line teams

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Ideas
Potential
Products
Products in
Development
Focus of Idea Screen Stage: Is this worth exploring?
Focus of Assessment Stage: Does this have real commercial potential?
Focus of Business Case Stage: Should we launch this product?
Pre‐Launch
Launch
Focus of Commercialization Stage: Are we ready to launch?
Stage‐Gate® Concept
STAGE 1: IDEA SCREEN
STAGE 2: FEASIBILITY ASSESSMENT
STAGE 3: BUSINESS CASE
STAGE 4: COMMERCIALIZE

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Idea Screen: Is there a need for a new product?
Does the market need a new product to fill a unique
need or address a change in the underlying market?
• Few products providing the similar function
• Difference may be compelling enough to change behavior
• Underlying marketplace is changing creating a new opportunity
Does the market have an accepted underlying benchmark
or does product create a new benchmark?
• Benchmarks must be relevant with an accepted and transparent
methodology
• A benchmark or reference price must be recognized and established
Does a large, competitive market exist?
• There are many natural buyers and sellers in this market
• There are supporting economic and political factors
• There are positive trends in market size and growing turnover
of interest

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Product Feasibility: How can a product be designed to
fit the market’s needs?
Development of Contract Specifications
• Contract design including notional size, tick size, expiration
dates, delivery or cash settlement
• Product design should reflect industry standards
Intellectual Property (IP) and 3rd Party Collaboration
• Does this product design create new IP for CME Group? Is there
existing IP held by a 3rd party which we need to further investigate?
• Does this new product design provide an opportunity for licensing or
collaboration with a 3rd party?
Early Adopter Interest and Feedback
• Develop a standardized survey of questions to refine contract
specifications and obtain feedback from different types of clients
• Identify if liquid offsets exist for this product and if liquidity providers
have access to these products

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Validation: Does this product meet customer needs and
is it feasible to launch?
Product Fit and Strategic Positioning
• Does this new product complement or cannibalize existing
products?
• Consider experience of exchanges and OTC marketplaces
Pricing and Incentives
• Develop fees and discounts
• Establish incentives for liquidity providers
Customer Feedback
• Validate product design
• Assess if this product meets the demand from a variety of clients
• Identify willing market makers

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Positioning: How to Tell the Story
Positioning the Product in the Marketplace
• Craft the unique value proposition by segment
• Substantiate the value proposition by segment
Crafting the Message
• Create positioning brief
• Articulate the “why” for the product in each segment
Gaining Mindshare with Customer Facing Teams
• Conduct new product overview session
• Participate in account planning to support sales targets

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Launch: Bringing the Product to Market
Approval Process
• Internal process to approve new product specification, fees, and
market maker programs
• Onboard Delivery Facilities
• Preparation and submission of CFTC materials
Systems Setup of Product Specifications
• Complete product template
• Identify matching algorithms and spread types
• Work with Product Launch Coordination Team to secure launch
date
Marketing Efforts
• Development of collateral material, press releases, website
• Campaign creation: seminars, special events, liquidity
programs

12. © 2017 CME Group. All rights reserved.
Summary
Contract
Specs
To
Launch
Checklist
Position
Limits
Fees
Walk-
through
Internal
Set-Up
DCO/DCM
Rules
Analysis
DAO
Approval
Publish
SER
CFTC
Submission
Launch
Technical
Set-Up
Web Info
Sales &
Marketing
Product Development Process
Launch: Process at CME Group

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Thank you

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by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and
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errors or omissions. All examples are hypothetical situations, used for explanation purposes only, and should not be considered investment advice
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