Mutual Offset System
Equity Index Settlement Prices
Deliveries – Cash for Futures
Deliveries – Currency
Deliveries – Dairy
Deliveries – Livestock
Contact CME Firm Support at 312-930-3444 for assistance.
Clearing Fees are available on CMEGroup.com at www.cmegroup.com/company/clearing-fees/index.html
CME S&P and Nasdaq contracts are fungible with a five to one ratio. This means every five E-mini S&P/Nasdaq contracts can be offset against 1 full-size S&P 500 or Nasdaq contract. This transaction is conducted using the Trade Entry System. Special note – this offset is done using the prior business day’s pit settlement.
A phrase made popular by program trading, it is the last trading hour on the third Friday of March, June, September and December when options and futures on stock indexes expire concurrently (used by program traders to hedge their positions in stocks). The simultaneous expirations often set off heavy buying and selling of options, futures and the underlying stocks themselves, thus creating the “triple” witching hour.
The pit committees of the respective trading pits determine the front month change in all three-product groups. Generally, the front month rollover in the Equities occurs one week prior to expiration (i.e. the LTD for the March 2001 Equities futures was March 15, 2001, the front month rollover occurred on March 8, 2001). Following that, June S&P’s become front month on March 12th as it the case with the Currencies. The rollover in the Interest Rates products does not follow any general rule and is solely determined according to the pit committee’s discretion. Generally base don volume and open interest.
Here's the basis behind what they are asking. When a customer places an order in the market the clerk assumes the customer wants to trade the front month. Come March 8th (and March 12th) the clerk will be assuming trading June for the customer rather than March. If a customer wants to trade March they have to say March.
The last trade date (LTD) for the U.S. Equities is 3:15 p.m. Chicago time on the business day preceding the third Friday of the contract month. Except for the E-mini contracts (i.e. the E-mini Nasdaq-100 and the E-mini S&P 500), which continue trading on CME Globex up until 8:30 a.m. on the third Friday of the contract month. The final settlement prices are received by the CME Clearing House on the third Friday of the contract month from the respective indices groups and are a weighted average of the opening prices of all the stock components of the relevant indices for that day. Generally we receive the final settlement prices between the hours of 11:00 a.m.-12:00 p.m. Chicago time
The executing firm must initiate MOS reversals. If a CME firm needs to reverse a trade that was sent to and accepted by an SGX firm they should use the following procedures.
If the trade was an SGX execute the SGX firm must initiate the reversal. When the SGX firm has initiated the reversal it will appear in MOS screen 3 as a normal trade in pending status except it will have the ‘Y’ indicator in the reversal field.
EFP trade prices reference the transfer range in the price edit file. The transfer ranges are determined based on the prior day’s settlement price of the futures contract. EFP prices sometimes differ from the futures price by a large enough margin to fall outside of the transfer range and/or the EFP trade is in a contract in which the futures has had little or no trading activity and so the transfer range has either not been created or is too small to incorporate a market EFP price. In any case, the same procedures used to update a price range for an edit error on a transfer should be used. EFP’s can trade at any price, so it is not necessary to verify the price quoted by the CME firm member, just note the price, check the format by referencing the CPM591RTH report if necessary and make the necessary changes in the TIPS System to the HHIGH or HLOW.
PC-SPAN is upgraded quite routinely. Typically “maintenance updates” are available to registered users without charge from the software distribution website or for a nominal charge for CD-ROM.
Technical assistance can be obtained by calling the PC-SPAN hotline (Risk Department at (312) 648-3888. If the problem is more technical than they can handle, an appropriate individual from the Systems Group can be contacted. For assistance with downloading the software from the software distribution webiste, contact Anson Goode (3177), Damien Hinkle (3793), Roman Benko (3032) or Dmitry Glinberg (8680). For installation assistance, contact Alex Bagmet (2893) or Dmitry Glinberg.
The PC-SPAN software can be purchased by using Visa, MasterCard or check.
Yes, this is automatically done when the option strike falls within the standard option price range.
No. Only a matched trade may be exercised.
As with any questions relating to clearing member firms, we can only provide a listing of all our firms, either by fax or preferably on the website. We make no recommendations as to which firms to use and consider all our clearing member firms in good standing with the Clearing House.
Meaning: The caller tried several firms that would not take his/her business. He/she contacts local banks that do trade our markets, but they probably do not take retail business. This call could be forwarded who could give them more details about broker/dealers in the area. A retail customer can be easily defined as someone who trades the market that is not associated with a firm, investment company or bank. Just as if you are going to buy stock, you would be considered a retail customer. Some firms cater to retail business others may not.
A “European Style” option differs from an “American Style” option in that a European Style is exercised (and then assigned) on the settlement date of the underlying future. CME currently has 2 European Style options, the Mini Milk (MQ) and the Mid Sized Milk (JQ). American style options may be exercised on any business day up to and including the last trading day.
Equity FLEX options may also be traded as European Style options rather than American Style options
Firms that have any positions or out-trades in the expiring options, or that have traded in the expiring options on the last day of trading must attend a Friday afternoon out-trade session.
Positions in expired contracts will be removed prior to the intra-day cycle on the business date following the final settlement date for cash-settled contracts. Deliverable contracts are removed during the intra-day cycle on the business day following the delivery assignment.
Unless a firm submits a Final Day Do Not Exercise Notice to abandon in-the-money positions by 4:30 p.m. Eastern (3:30 p.m. Central) for New York products, 6:00 p.m. Eastern (5:00 p.m. Central) for CBT Flex options, 7:00 p.m. Eastern (6:00 p.m. Central) for CBT options or 8:00 p.m. Eastern (7:00 p.m. Central) for CME options all options that are in–the–money by at least the minimum tick valuation will be automatically exercised on the contract's settlement day.
At–the–money and out–of–the–money options are not exercised unless the firm submits a request explicitly instructing the Clearing House to exercise. At–the–money options are generally considered out–of–the–money for exercise and assignment purposes. At-the-money Hurricane options, for example, are in the money.
The newly approved warehouse must be 30 days old before a Pork Belly can be stored and used for CME delivery. Once the Pork belly has been stored the belly must be CME certified before submitting intent to deliver.
No. Only steers may be used for delivery of cattle at CMEGroup.
At 4:30 p.m. there is a Live Cattle Posting report that is available. The posting report list new tenders, retenders, delivery locations and total number of Live Cattle tenders. Once the assignment process has been completed, a Delivery Notice Served becomes available. Callers can be directed to CME website at http://www.cmegroup.com/CmeWeb/html.wrap/wrappedpages/misc/posting/lcposting.htm. Delivery notice served is available by 3:00 p.m. The Delivery Notice Served provides the same information as the Live Cattle posting report but also includes reclaims, demands, partly thru date, delivering/receiving firms, live cattle deliveries that are scheduled live or carcass and completed deliveries.
Subject to the President's approval, a transfer of cash merchandise for futures may be permitted during the contract month after termination of the contract. The rule shall not apply to options contracts.
Such transfer of cash for futures shall be cleared through the Clearing House in accordance with normal procedures and shall be made at the prices as are mutually agreed upon by the two parties at the transaction. (See Rule 719 – TRANSFER OF CASH FOR FUTURES AFTER TERMINIATION OF CONTRACT, in CME Consolidated Rulebook, Volume 1.)
A clearing member representing a short may present a certificate of delivery (on a form prescribed by the Clearing House) to the Clearing House no later than 1:30 p.m. on any business day of the contract month except that Certificates may not be tendered:
a) On or before the first Friday of the month.
b) After the third business day after expiration.
Approximately 36. The Live Cattle contract size is 40,000 pounds of Live Cattle with a 5% weight variance up or down in total contract weight. The cattle must be no less than 1,100 pounds and no more than 1,350 pounds.
At least 2 business days before the intended carcass date.
No. Pork Bellies cannot be approved for CME delivery if the bellies were put into storage before the warehouse was approved by CME.
The following business day that is not a holiday in the country of origin, Chicago or New York.
If the milk is at a warehouse, it needs to stay in that warehouse for re-delivery. And if it is at a plant, it needs to move to a warehouse for re-delivery.
The final settlement price for the S&P 500 is determined by Standard & Poor’s based on the special opening quotation on the settlement day.
Meaning: Standard & Poor’s will monitor the opening of all 500 component stocks in the index. Based on the opening price, they will compute the special opening quotation that CME uses to settle the futures and options. The key here is the “opening” quotation. Customers, firms and members that call disputing that price are often looking at the most recent cash price and find discrepancies. Equity marketing handles these types of questions, but it basically comes down to the understanding how the price is reached. On a related note, the settlement is received on the third Friday of the contract month (generally). This is referred to as “triple witching hour”.
There are no specific delivery points. The buyer can choose the destination as long as it is within the United States and Canada.
If the cattle are late the delivering firm is subject to a $200 per contract penalty. If the cattle are not presented at all on the delivery date the delivering firm is subject to a $600 per contract penalty.
A spot call contract is essentially a trade and immediate delivery of a product. This differs from a future in that you may trade a future and deliver it in the future. The Buyer and Seller of a spot call contract must make and take delivery of the physical product.
An Order-to-Pay is a guarantee between the banks, firms and the CME that the bank will make the required funds available for delivery when they are needed.
Trading shall terminate on the last business day of the contract month.
The Clearing House shall assign Seller's Delivery intents by matching the oldest long position with the seller's intents as received.
First Notice Day is the first day that holders of long positions may be informed that they have been assigned a delivery of a future contract.
Beginning on the day following the first day on which longs may be assigned delivery, all purchases and sales made in one day in the lead month contract by a person holding a long position in that contract, must first be netted out as day trades with only the excess buys considered new longs or the excess sales being offsets of the long position. See CME Rule 807 in Consolidated Rulebook.
Meaning: Firms inform the Deliveries unit of their earliest open long dates. Long dates are used by the unit to assign deliveries for butter, live cattle, lumber, oriented strand board and pork bellies. When a firm submits intent to deliver, the unit will assign that delivery the firm with the earliest open long date. The long dates tell us when the actual long position was put on. After the first intent day, firms are not allowed to freshen or roll their dates. More technical questions can be directed to Market Regulations.
The caller knew that the last day of trading for March currency futures was March 19. The caller also knew that the physical delivery of currency took place on Wednesday, March 21st. What the caller could not figure out was why the open interest was still reported for the expired contracts by the Wall Street Journal for two or three more days. The reason the contract remained open and on the books is because physical delivery had not taken place. Until physical delivery occurs, the Clearing House continues to charge performance bond. In the event of a delivery failure, the Clearing House has the performance bond on deposit. For cash settled products, unlike physical delivery, the Clearing House sets the array value to zero once the final settlement price is determined. This is done because there is no price exposure once the final settlement price has been determined.
The CME will not pay interest on funds submitted early. To avoid losing overnight interest we recommend that firms instruct their banks to use the Order-to-Pay mechanism, thus avoiding the loss of interest.
CME Clearing accepts a wide range of collateral for deposit into trading accounts, including U.S. dollars, select foreign currencies, U.S. Treasuries, select foreign sovereign debt, asset-backed securities, and agency bonds. View a full list of acceptable collateral including 30.7
From time to time clearing members may need to withdraw collateral from CME Clearing. Whether it is FX cash or securities this can be done in two ways: via Clearing 21 or by faxing a withdrawal form to CME Clearing. To make the withdrawal through Clearing 21, the firm will need a user name and password. If you do not have access, please contact CME Group Customer Support at 312-930-3444. To withdraw securities via fax, go to the Forms and Instructions section of the CME Clearing website and select Margin Account Securities Withdrawal Authorization from the forms dropdown menu. Fill out the form completely and fax it to 312-930-3187.
If a firm has a credit and/or debit posted to its account that it cannot identify, please send an email to CME Clearing Financial Unit at firstname.lastname@example.org. Indicate all debits/credits in question with value dates, the amounts in question. If possible, include a copy of the statement in your email. Please note that debits/credits can come from various departments within CME Group at any time and will not necessarily be coming from the financial area. ACH debits/credits specifically, are NOT generated by the financial area. These debits/credits will typically come from our operations group or our accounting department. In these cases please send an email to email@example.com and firstname.lastname@example.org
Yes, CME Clearing adheres to a designated timeline for daily performance bond collateral transactions and settlement cycle processing. The time frames apply to all specialized programs supported by CME Group, unless noted otherwise.
At times firms may post pieces of collateral that are not in the Clearing 21 system. This does not mean the collateral is not acceptable. If the collateral is not in the Clearing 21 system, simply send an email to email@example.com indicating the CUSIP and the maturity date. We will do some research on the collateral and do our best to respond quickly as to its acceptability.
CME Clearing currently has settlement bank relationships with the following U.S. banks: Harris Trust & Savings, JP Morgan Chase, Bank of New York, Lakeside Bank, Bank of America, Brown Brothers Harriman and Fifth Third Bank.
Currently CME Clearing will only allow cash, treasuries or select IEF2 to meet guaranty fund requirements.
In order to post physical gold, you must sign a title transfer agreement in order to conform to London law. You may phone the CH Financial Unit in order to obtain the agreement. For transaction purposes, any firm must also fill out a form indicating the detail of the collateral being pledged or withdrawn from the Exchange. This form as well as other details related to the posting of gold as collateral can be located in the Clearing Advisory #09-452.