Trade Marker at Close (TMAC) contracts allow market participants to transact E-mini Equity Index futures trades at or near the settlement price of four different U.S. Index futures markets: S&P 500, Nasdaq-100, Russell 2000, and Dow Jones Industrial Average.

While TMAC is similar to other products at CME Group, like Basis Trade at Index Close (BTIC) contracts and Trade at Settlement (TAS) contracts, there are a few key differences traders should be aware of.

In a TMAC transaction, buyers and sellers agree to a spread tied to a to-be-determined fixing price established at the close of the U.S. futures market, rounded to the nearest .01 index point increment. 

BTIC transactions are priced at a spread to the official closing value of the corresponding underlying index.

TAS trades are priced at a spread to the daily settlement value of the underlying futures contract, which is rounded to the nearest minimum trading tick increment. TAS products are available in several CME Group asset classes, such as Energy, Metals and Agriculture products.

CME Group does not currently offer TAS products on E-mini Equity Index futures products since TMAC contracts provide risk management around the close and use a more granular fixing price as its reference (instead of the settlement price).

The fixing price that underlies TMAC is determined by the 30-second volume weighted average price (VWAP) of the U.S futures market leading up to its close at 4:00 p.m. Eastern Time (ET).

This same marker price is used for moneyness determination of options on futures, allowing market participants to more accurately hedge futures delivery exposures.

The fixing price and settlement price both use the same VWAP calculation, just with different granularity. The fixing price is at .01 granularity, whereas the settlement price granularity is equal to a minimum tradable tick of the respective E-mini futures contract.

For example, E-mini S&P 500, Nasdaq-100, and Russell 2000 futures settle in increments of .25, and E-mini Dow Jones Industrial Average futures settle to the nearest whole point (equal to each respective product’s minimum tick). However, the fixing price for TMAC is rounded to the nearest cent, allowing for precise positioning.

Assume a trader at a hedge fund wants to buy an E-mini S&P 500 futures contract near the settlement price and is willing to pay a premium to ensure the order is fulfilled. He could enter a TMAC trade at a spread of +0.05. 

A liquidity provider is willing to sell an E-mini S&P 500 futures contract at this level and transacts with the buyer on Globex at his bid price.

As the trade is executed at a level above the fixing price, the resultant positions assigned to both traders will be at a level 0.05 over the marker price, in this case the E-mini S&P 500 fixing price, also known as ESF.  

At the conclusion of cash market trading, the fixing price is determined at a level of 4,490.39. Considering that the trade occurred at a level of +0.05, both participants would transact one E-mini S&P 500 futures contract at 4,490.44, which is the fixing price plus the spread of 0.05.

For comparison, the futures contract would have settled at 4,490.50 in this scenario, which is equal to the fixing price rounded to the nearest tradable tick of 0.25.

TMAC is a useful tool for option traders looking to hedge delta exposures resulting from the exercise and assignment process, as option moneyness and TMAC trades reference the same price.

TMAC orders can be entered into CME Globex as soon as the pre-open period prior to the opening of trading starts, and TMAC is also eligible for block trades via CME ClearPort. Please note that only same day orders are accepted.

For more information about Trade Marker at Close, visit cmegroup.com/TMAC.