Rule 524 TAS, TAM, BTIC and TACO transactions governs trades that are executed at a yet-to-be-determined price.
Trading at Settlement (TAS) transactions permit parties to trade at a differential to the current day’s not-yet-known futures settlement price.
Trading at Marker (TAM) permit parties to trade at a differential to the current day’s not-yet-known Exchange-determined marker price.
Basis Trade at Index Close (BTIC) permit parties to trade at a differential, or basis, to an eligible futures contract’s underlying cash Index closing level which is not-yet-known.
Basis Trade at Cash Open (TACO) permit parties to trade a differential (basis) to an eligible futures contract’s underlying cash Index special opening quotation (“SOQ”) which is not-yet-known.
Products eligible for TAS, TAM, BTIC or TACO transactions are listed in the Rule 524 Table at the end of Chapter 5 of each Exchange’s Rulebook.
Regulatory considerations- TAS TAM BTIC TACO
All market participants are reminded that any trading activity that is intended to disrupt orderly trading or to manipulate or attempt to manipulate a settlement or marker price to benefit a TAS, TAM, BTIC or TACO position will subject the member and/or the market participant to disciplinary action for any number of rule violations, including, but not limited to:
- Price manipulation or attempted price manipulation
- Wash trading
- Conduct detrimental to the interest or welfare of the Exchange or conduct which tends to impair the dignity or good name of the Exchange
- Conduct inconsistent with just and equitable principles of trade
Investigation of suspected manipulative or disruptive activity related to TAS and TAM, or activity in the related underlying markets will include the Market Regulation Department’s review of positions and trading activity in the applicable exchange markets and any related markets to determine if such activity was disruptive, collusive and/or caused or attempted to cause aberrant price movement during these periods.
Pursuant to Rule 432.L.3, market participants are reminded that it is an offense to fail to produce any books or records requested by authorized Exchange staff within 10 days after such request is made or such shorter period of time as determined by the exchange in exigent circumstances.
The Market Regulation Department always has the authority to request books and records as well as other relevant information regarding the nature of a participant’s trading and positions in exchange products and in any related markets as part of its regulatory program.
Initiating TAS, TAM, BTIC and TACO
Rule 524 permits the initiation of TAS, TAM, BTIC and TACO orders into CME Globex only subsequent to the beginning of each group’s pre-open state and during the time period the applicable contracts are available for TAS, TAM, BTIC or TACO trading on CME Globex, as applicable. The initiation of any TAS, TAM, BTIC or TACO order on CME Globex outside of these time periods is strictly prohibited.
Any market participant who initiates the entry of a TAS, TAM, BTIC or TACO order prior to receipt of the security status message indicating that market has transitioned to the pre-open will be subject to disciplinary action by a panel of the Business Conduct Committee, even if the order was rejected by the CME Globex system. Market participants must have appropriate protocols in place to ensure that TAS, TAM, BTIC and TACO orders are not initiated prior to receipt of the security status message.
Similarly, BTIC and TACO transactions may result in an assigned futures price outside of the applicable futures daily price limits.
Some products are also TAS, TAM, BTIC or TACO block trade and/or EFRP eligible pursuant to Rule 526 and 538 respectively. Market participants should consult the Market Regulation Advisory Notice on Rule 524 and the Table at the end of each Exchange’s Chapter 5 for more information.
This is part of a course on Market Regulation. For official regulatory guidance on Rule 524, reference the applicable Market Regulation Advisory Notice.
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