On July 9, 2006, CME will launch the first phase of user defined spreads functionality.  This first phase will involve “covered” or delta neutral spreads involving CME Eurodollar options and futures.  Subsequent launches of user defined spreads will involve other CME Globex products. 

All market participants should be aware that this new functionality requires users to exercise diligence and care in the real-time creation of spread instruments.  While the system provides some protections such as a reasonability band around futures prices on covered instruments and maximums on deltas for outrights and spreads, within these bands users are expected to act responsibly.

CME will consider it to be a violation of CME Rule 433.B. (“Minor Offenses - to engage in uncommercial conduct”) and/or CME Rule 432.Q. (”Major Offenses - to commit an act which is substantially detrimental to the interest or welfare of the Exchange”) if users enter instruments which are designed to create aberrant prices, aberrant deltas, or which are intended to unfairly disadvantage other market participants.  In addition to the potential rule violations, in some circumstances the Globex Control Center may adjust or bust such trades if they are deemed to negatively impact the integrity of the market.

If you have any questions, please contact the CME Market Regulation Department at 312/930.8525.