Pre-execution communications (“Pre-Ex”) are discussions between market participants for the purpose of discerning interest in the execution of a transaction prior to the exposure of the order to the market. Pre-Ex communications allow for size, price, and direction to be discussed prior to the entry of orders into CME Globex.
CME permits Globex Cross (G-Cross) for all equity index futures, including the recently launched BTIC on E-mini S&P Select Sector futures. In a G-Cross, the order of the party that initiated the pre-execution must be entered into CME Globex first. The second party’s order may not be entered into Globex until 5 seconds after the first order was submitted.
Please see the Market Regulation Advisory Notice on pre-execution communications for complete and accurate regulatory guidance attendant to G-Crosses in equity index futures.
Suppose that two market participants want to transact a BTIC trade for E-mini Financial Select Sector futures based on the closing index value of the Financial Select Sector Index. The market participants engage in pre-execution communications and agree to the following terms:
Since 20 contracts is below the minimum BTIC block threshold of 50 contracts, the optimal way to execute this trade is via Globex Cross. In accordance with the Globex Cross protocol, the order of the participant who initiated the pre-execution must be sent to Globex first. 5 seconds thereafter, the second participant’s order is sent to Globex, and the trade is executed: XFTM8 20x @ -6.35.
Suppose the closing Financial Select Sector index level is 359.80. The trade price will be applied to the official closing level (i.e. 359.8 + (-6.35)) at the end of the trading session, and a futures position of XAFM8 20x @ 353.45 will be created.
|Select Sector Futures||Underlying Index||Corresponding ETF||CME Globex||Bloomberg Front Month||Thomson Reuters Front Month|
|Select Sector Futures||Underlying Index||Corresponding ETF||BTIC Block and CME Globex||Bloomberg Front Month||Thomson Reuters Front Month|
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