Client Management Advisory Notice
From | Client Management Operations
Subject | OneChicago Trades -- CME Give-up Processing and Use of GAINS for Give-up Billing.
Effective Date | 10/18/02
Notice Number | CMO#0288
This notice details the requirements for processing give-ups on OneChicago products. Such transactions may occur: Between two CME firms, or Between two CBOE firms, or They may be "cross-exchange" In other words, a CME firm may execute a trade for a CBOE firm, or a CBOE firm may execute a trade for a CME firm. At CBOE, such transactions are called CMTA's, and the mechanism by which the give-up is accepted differs, but, fundamentally, it's the same business. Give-ups Between CME Firms The give-up process for ONE products will be exactly the same as your current process for CME products. The trade may be �marked� as a give-up at the time of execution, or, subsequently, the trade can be marked for give-up via the Front End Clearing �FEC� application, by adding the �G� (give-up) indicator. This is the same process used to specify a GLOBEX trade as a give-up, post-execution. The give-up trades will flow real-time into GUS and can be allocated and accepted as usual. Your existing Give-up Agreements can cover ONE products. CME has no additional requirements for give-ups between our member firms. Cross-Exchange Give-ups For �cross-exchange� give-ups, additional processing is required. If a CME firm and a CBOE firm want to execute a give-up, they must have a previously established give-up agreement in place, and provide a copy to the CME Clearing House. CME will coordinate this information with ONE and CBOE. This step required so that we can set-up the appropriate profiles to allow a CME firm to give-up to a CBOE firm number. Important Note: If you do not file a cross-exchange give-up agreement on file with the CME Clearing House, you will not be able to complete a cross-exchange give-up. In addition, CBOE and CME firms must both set-up default �auto-accepts�. For CME firms, that means, you must enter the auto-accept parameters in the Auto-Acceptance Entry screen on GUS. Release of ONE Give-ups Cross-exchange give-ups may be released. However, please note that for either cross-exchange or CME-to-CME give-ups, if the give-up is released, the executing firm must re-allocate the entire quantity again. EXAMPLE: If firm �A� gives-up a 20 lot to firm �B� and then releases it, firm �A� must give-up the entire 20 lot again to a SINGLE firm. Following the release of a One trade, the entire released quantity will be automatically allocated back to the executing firm. The executing firm will not be able to delete the give-up, nor can they change the quantity. If the trade must be split trade, transfers may be submitted for the multiple legs. CME recognizes that this new practice greatly restricts the flexibility to which our firms are accustomed. However, CBOE is unable to roll-up give-up positions after the initial allocation, as we do. Therefore, it is imperative that firms carefully check before accepting any ONE give-up trades, to reduce the need for releases and reversals. New Exchange ID of �23� for ONE Products on Give-up Records Following the execution of a give-up, CME will generate a GUS data record via GUS-MQM TREX messages or batch records that are routed to firms� sub-directories on the CME FTP server. On GUS batch files and GUS-MQM messages, we will specify the Exchange ID as �23� for ONE products. This is a last minute change, which was done after a request was received from a member firm and reviewed with all firms� software vendors and programmers. You can also denote that GUS trades are ONE products by the commodity code. Likewise, on the GUS MQM messages, the Trade Source Code will remain �GUS.� Lastly, the CME will now populate the Open/Close Indicator field with an �O� ( TREX position 139) on ONE trades. Previously, we only used this field for FLEX trades. We must carry this for our position balancing requirements with the OCC. So, for Trade Source �ONE� transactions, and GUS �MQM Exchange code �23� transactions, you will want to ignore this entry. We ask that you please not start sending the CME Open/Close indicators on TREX messages. GUS On-Line Screen Changes The GUS on-line screens will look and function the same for ONE products. However, please note a new field on the Give-up Allocation Field �O/C,� for the Open/Close indicator. This new field will be carried through from the ONE Match-engine for the OCC. Once again, CME does not require, nor do we allow firms to enter an Open/Close indicator on ANY give-up trades, except FLEX trades. CME firms that clear ONE products at CME, will report position information via PCS, the same as you do for CME products. Using GAINS Billing System for OneChicago Products For OneChicago products, whether the give-up is done via GUS or CMTA, one firm is executing a trade on behalf of another, and needs to be compensated for that execution. CME firms trading OneChicago products may use GAINS to do give-up billing for trades in OneChicago products, exactly as GAINS is used for give-up billing for trades done in CME products. Recognizing that firms may wish to set different rates for OneChicago executions than for CME executions, we are enhancing GAINS to facilitate this. GAINS will have the added functionality to set rates by exchange. We have added "23" as the exchange code for OneChicago. Firms may set rates by exchange, product type, transaction type, and specific commodity codes. So that GAINS can be used for as much OneChicago business as possible, CME is making the GAINS system available to CBOE firms. Such firms will need to execute a special GAINS legal agreement, indicating their acceptance of the terms of usage of the system, and they will need to set up a GAINS settlement bank account at the Harris Bank. (Copies of this document can be obtained from Client Management at the CME). Accessing GAINS GAINS is a 3270 based on-line application used to define rates and make payment adjustments. To save CBOE firms the cost of dedicated network connections, they may access these screens via the CME Portal via the Internet. All you need is a web browser and an Internet connection. GAINS also provides participants with several machine-readable data files. These can be accessed on our FTP server via the Internet. This type of Internet access for data files is only for CBOE firms. For questions concerning this notice, copies of the required legal agreements and for training and support, please contact one of the following Client Management staff: Karen McCoy at (312) 930-4524 kmccoy@cme.com Stacey Jurek (312) 338 2088 sjurek@cme.com Farris Oweimrin (312) 684 4780 foweimri@cme.com Thank you!