GLOBEX Advisory Notices
To |
From | CME Globex Account Management
Subject | Revised CME(R) Globex(R) Error Trade Policy
Notice Date | 2004-10-29
Notice Number | 102904-1
Effective Date |
Dear CME® Globex® Users, At the Regular Meeting on Monday, October 25, 2004, the CME Board of Directors approved the deletion of the current Error Trade Policy and the implementation of the CME Globex Trade Cancellations Rule (Rule 588). Rule 588 will become effective on Friday, October 29, 2004. The Board replaced the current Error Trade Policy with Rule 588 in order to: better accommodate the addition of CME's implied spreading functionality, recently implemented for trading certain CME Eurodollar spreads; reduce the probability of naked leg risk for spread traders; hold error trade makers responsible for inappropriately elected stop orders. Under Rule 588, trade prices that occur within the no-bust range, as determined by the CME Globex Control Center (GCC), will not generally be busted or adjusted. The only exception to this rule is if the GCC determines that not busting or adjusting a trade within the no-bust range will have a material, adverse effect on the market. For CME Eurodollar contracts, the GCC will adjust trade prices outside of the no-bust range to a price equal to the actual or implied market price at the time the trade in question occurs, plus or minus 2.5 or 5.0 basis points. The GCC will use the 2.5 basis points adjustment under normal market conditions and the 5.0 basis points adjustment under a fast market or other significant market event. This procedure will replace the existing process that requires trades occurring outside of the no-bust range to be busted automatically. A party responsible for an order that results in a trade price adjustment involving a CME Eurodollar stop order will be liable for the difference between the adjusted price and the price in the market at the time the party with the stop loss order knew or should have known that his stop order was erroneously elected. Claims for reimbursement under Rule 588 will be forwarded to the party responsible for the order that results in a trade bust or price adjustment and to the clearing firm through which the trade was placed. The liability for losses for a single incident is limited to $500,000.00. The clearing firm is ultimately responsible for any successful claim for damages in the event the party responsible for the order in question fails to satisfy the claim. A contested claim that is otherwise valid under Rule 588 will be submitted to arbitration at the Exchange. A revision to the arbitration procedures (Rule 618) is also required as a result of the new rule. The complete text of Rules 588 and 618 and an example of the application of the new rules can be found on the CME's Web site. If you have any questions regarding the new trade cancellations rule, please contact the CME Globex Control Center at 312.456.2391 or 44.20.7623.4708. Thank you. Chicago Mercantile Exchange To unsubscribe to this mailing list, please reply to this message with "unsubscribe 1" in the subject.