Client Management Advisory Notice
From | Client Management
Subject | CME Give-Up Processing And Use Of GAINS For Give-up Billing On ONE Products -- UPDATED INFORMATION.
Effective Date | 11/06/02
Notice Number | CMO#0299
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 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.. Please note the following exceptions for SSF products ONLY. � You cannot Memo-add Single Stock Futures give-ups. � Any next day movement of positions must be done via type �8� transfer with a �Y� Reason code. This is because CBOE does not �know� next day. Everything is turned over to the OCC. 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. Cross-Exchange Give-ups For �cross-exchange� give-ups, a give-up agreement and special set-ups MAY be required. See the matrix below.
Executing Firm | Carrying Firm | Give-up Agrmt Filed w/CME - CH. | Auto Accepts Must be Set-up
CME | CBOE | Yes - by CBOE firm | Yes - by CME CH
CBOE | CME | No | Yes - by CME Firm
Important Note: If a CBOE firm does not file a cross-exchange give-up agreement with the CME Clearing House, specifying that it will accept give-ups from a specific CME firm, then if the CME firm gives up a trade to that CBOE firm, the give-up will not be accepted. The trade will clear with the original CME firm. CME firms must set-up default �auto-accepts� for all CBOE firms from which they intend to receive cross-exchange give-ups. In other words, CME firms must enter the auto-accept parameters in the Auto-Acceptance Entry screen on GUS. Legal Agreement for CME-Firm to CBOE-Firm Cross-Exchange Give-Ups CBOE member firms, that want give-up trades in OneChicago products from CME firms, must execute an agreement specifying the CME firms from which they will accept such give-ups. The agreement must be delivered to the CME Clearing House no later than 5pm on the business day prior to the day on which the rule will become effective. The agreement is on the web site at: http://www.cme.com/files/Cross_Exchange_Agreement.pdf 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 a GUS-MQM TREX message or batch record (that is usually 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.� Please note that on the TREX confirmation messages for the original trade, the exchange code will remain "16" and the Trade Source Code will be "ONE." GUS Open Close Indicator 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. CME firms that will clear at the OCC can now enter or change the Open/Close indicator on the GUS allocation screens on ONE give-up trades. The Open/Close indicator will be passed to OCC at the end of the day with the trade record. CME firms that clear ONE products at the CME, will report position information via PCS, the same as you do for CME products. Open/Close Indicator on TREX messages CME will now populate the Open/Close Indicator field (TREX position 139) with the Open/Close indicator on the trade on the TREX message. Note that the default value is "O" for Opening. Again, please note that this field has meaning only for firms clearing at OCC. For firms clearing at CME, the Open/Close indicator is not required, and it is not used. 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. CME is also making the GAINS system available to CBOE firms, so that GAINS can be used for as much OneChicago business as possible. Such CBOE 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, and are available at: http://www.cme.com/files/CBOE-firm-GAINS-agreement1.pdf 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!