The following questions and answers relate to the U.S. Index Futures month-end settlement process.
Month-end settlement prices will be the same value currently calculated as the daily 3:00 p.m. Central Time (CT) "Fixing Price" for U.S. Equity Index futures.
Fixing Prices are based on CME Globex trading activity in the respective contracts between 2:59:30 p.m. and 3:00:00 p.m. CT.
For products that have both a standard-size and E-mini futures contract, the E-mini futures contract will determine the fixing price for both products. For the Dow Jones Industrial Average Index futures, the E-mini ($5 multiplier) futures will determine the fixing price for all three futures contracts.
The pixing price methodology consists of three tiers:
The fixing price will be equal to the Volume Weighted Average Price (VWAP) of the designated lead month futures contract. For the purposes of this calculation, the designated lead month is always the contract month closest to expiration until the Monday prior to expiration, when the designated lead month becomes the second contract month.
If no transactions occur from 2:59:30 to 3:00:00 p.m., the fixing price shall be the average of the midpoints of each bid/ask spread in the designated lead month futures contract during that thirty (30) second interval; however, bid/ask spread pairs wider than two ticks, shall not be included in the calculation to determine the reference price.
If the fixing price cannot be determined pursuant to Tiers 1 and 2 above, the fixing price will be calculated by applying the net change of the underlying index to the prior day’s fixing price value.
CME Group makes U.S. Equity Index futures fixing prices available shortly after 3:00 p.m. CT on its website.
Futures prices used to calculate month-end settlement prices are based on CME Globex activity between 2:59:30 p.m. and 3:00:00 p.m. CT.
Trading in U.S. Equity index products closes at 4:00 p.m. CT the last business day of the month — consistent with practices applied on normal trading days.
This procedure is not applicable to non-U.S. Equity Index Futures, including Nikkei Equity Average and Ibovespa.
Equity Index products normally close and settle 15 minutes after the daily close of trading in cash equities. The cash/futures basis may be affected to the extent that futures may fluctuate, sometimes sharply, during those final 15 minutes. As such, this may become a difficulty for institutional traders practicing coordinated cash/futures strategies. Still, the opportunity to lay off equity market exposure during those 15 minutes subsequent to the cash close has proven quite beneficial.
The use of 3:00 p.m. settlement procedures at month-end is intended to address this so-called "tracking error" while still permitting trade to continue past the 3:00 p.m. cash close. Conceptually, the 3:00 p.m. settlement is determined at the same time as the cash market close at 3:00 p.m., since any new information following 3:00 p.m. will not affect the closing price of the Equities or the futures 3:00 p.m. fixing price. However, information or events subsequent to the cash market close may still impact futures prices. Market participants should be aware of the possibility that futures may trade at prices apart from the 3:00 p.m. fixing price based settlement prices between 3;00 p.m. and the close of the futures market at 4:00 p.m. on days on which end-of-month settlement procedures are applied.
Consistent with normal practices, Regular Trading Hours (RTH) for Equity Index futures and options shall be conducted from 8:30 a.m. to 4:00 p.m., with a trading halt between 3:15 p.m. and 3:30 p.m. CT on the last day of each month – unless notified otherwise because of a holiday. As such, this procedure will permit trading to continue after the normal 3:00 p.m. cash close while ensuring that settlements will be tied closely to cash values.
Options on futures end-of-month settlement values shall be established on the basis of the end-of-month futures fixing price settlements on days when fixing price settlement procedures are employed.
Market-on-Close (MOC) orders shall be handled in the typical fashion on days when end-of-month settlement procedures are applied. In other words, an MOC order becomes a market order to be filled at prevailing prices during the last thirty seconds of the trading session, i.e., between 3:14:30 and 3:15:00 CT. The filled price may or may not resemble the settlement price.
Trading shall be permitted during the post-close session on days when end-of-month settlement procedures are applied at prices within the 3:14:30-3:15:00 CT closing range – per normal practices. Note that these prices may depart from the end-of-month settlement price.