Trading at Settlement and Matched Order Transactions

This Advisory Notice supersedes NYMEX & COMEX Market Regulation Advisory Notice RA0914-4 from December 10, 2009.  It is being reissued based on the launch of Trading at Settlement (“TAS”) in four NYMEX intra-commodity energy futures calendar spreads trading on CME Globex (February 7 for trade date February 8) and on the trading floor (February 8).  Upon launch, intra-commodity calendar spreads in the nearby month/second month spread and the second month/third month spread in Light Sweet Crude Oil, New York Harbor No. 2 Heating Oil, Henry Hub Natural Gas and RBOB Gasoline may be executed on CME Globex or on the trading floor and priced at TAS. 

The pricing of the legs of a TAS calendar spread will be calculated by assigning the settlement price to the nearby leg of the spread.  The far leg will be priced by applying the TAS price (the settlement price or any valid price increment ten ticks higher or lower) to the far leg settlement price and then subtracting that price from the nearby month leg price. 

            Example 1: 

            Buy the March 2010/April 2010 (H/J) Light Sweet Crude Oil calendar spread at TAS -1.  Assume the March contract settles at 74.71 and the April contract settles at 75.15.

            The March leg will be priced at the March settlement price of 74.71.  The April leg will be priced at  75.16 (the April settlement price of 75.15 minus the TAS price of  -1, or 75.16 – (-.01).

            Example 2: 

            Buy the April 2010/May 2010 (J/K) Henry Hub Natural Gas calendar spread at TAS +3.  Assume the April contract settles at 5.411 and the May contract settles at 5.459.

            The April leg will priced at the April settlement price of 5.411.  The May leg will be priced at 5.456 (the May settlement price of 5.459 minus the TAS price of +3, or  5.459 – (.003).

These spreads have been incorporated into the list of products eligible for TAS pursuant to Rule 524 (“Trading at Settlement (“TAS”) and Matched Order (“MO”) Transactions”) which begins on the next page of this Advisory Notice.  Additional information on trading these spreads at TAS is included in today’s release of CME Group Special Executive Report S-5124.

All market participants are reminded that misuse of TAS (including TAS block trades) or MO trades to acquire a position in order to unfairly affect or attempt to unfairly affect a settlement price may subject the member and/or the market participant to disciplinary action for any of a number of rule violations, including, but not limited to:

·         price manipulation or attempted price manipulation

·         wash trading

·         conduct substantially detrimental to the interests or welfare of the exchange

Any Market Regulation Department investigation of suspected manipulative pricing involving TAS or MO trades will include review of such positions acquired by market participants and whether the offset of those positions during the close was disruptive, collusive, and/or caused or attempted to cause aberrant price movement during the close. 

The list of commodities and contract months in which TAS and MO transactions may take place begins below and continues on pages 2 and 3 of this Advisory Notice and is followed by the text of Rule 524.

Trading at Settlement (“TAS”) Transactions

TAS transactions may take place in the following futures contract months:

Pit-Traded Contracts

Light Sweet Crude Oil

                        spot (except on the last trading day), 2^nd, 3^rd and 7^th months

                        nearby/second month and second/third month calendar spreads

Brent Crude Oil Last Day Financial

                        spot (except on the last trading day)

New York Harbor No. 2 Heating Oil

                        spot (except on the last trading day), 2^nd and 3^rd months

                        nearby/second month and second/third month calendar spreads

Henry Hub Natural Gas

                        spot (except on the last trading day), 2^nd and 3^rd months

                        nearby/second month and second/third month calendar spreads

RBOB Gasoline

                        spot (except on the last trading day), 2^nd and 3^rd months

                        nearby/second month and second/third month calendar spreads

Gulf Coast Gasoline

                        spot (except on the last trading day)

Gulf Coast Ultra Low Sulfur Diesel (ULSD)

                        spot (except on the last trading day)

NYMEX Crude Oil Backwardation/Contango (B/C) Index

                        spot (except on the last trading day)

NYMEX Crude Oil MACI Index

                        spot (except on the last trading day)

CME Globex Contracts

Commodity

Code on                                   Name & Contract Months                                   Cleared Product

CME Globex

     CLT              Light Sweet Crude Oil                                                                       CL

                        spot (except on the last trading day), 2^nd, 3^rd and 7^th months and

                        nearby/second month and second/third month calendar spreads

                        (except on last trading day)                                                               

     BZT              Brent Crude Oil Last Day Financial                                                    BZ

                        spot (except on the last trading day)

     BBT             Brent Crude Oil Penultimate Financial                                              BB

                        Spot, 2^nd and 3^rd months                                                                    

     HOT             New York Harbor No. 2. Heating Oil                                                   HO

                        spot (except on the last trading day, 2^nd and 3^rd months and

                        nearby/second month and second/third month calendar spreads

                        (except on last trading day)                                                               

     NGT             Henry Hub Natural Gas                                                                      NG

                        spot (except on the last trading day), 2^nd and 3^rd months and

                        nearby/second month and second/third month calendar spreads         

                        (except on last trading day)                                                               

     RBT             RBOB Gasoline                                                                                 RB

                        spot (except on the last trading day), 2^nd and 3^rd months and

                        nearby/second month and second/third month calendar spreads         

                        (except on last trading day)                                                               

     LRT              Gulf Coast Gasoline                                                                          LR

                        spot (except on the last trading day)

     LUT              Gulf Coast Ultra Low Sulfur Diesel (ULSD)                                        LU

                        spot (except on the last trading day)

     KTT              NYMEX Coffee                                                                                   KT

                        spot (except on the last trading day)

     CJT              NYMEX Cocoa                                                                                   CJ

                        spot (except on the last trading day)

     TTT              NYMEX Cotton                                                                                  TT

                        spot (except on the last trading day)

     YOT             NYMEX No. 11 Sugar                                                                        YO

                        spot (except on the last trading day)

Commodity

Code on                                   Name & Contract Months                                   Cleared Product

CME Globex

     XKT             NYMEX Crude Oil Backwardation/Contango (B/C) Index                    XK

                        spot (except on the last trading day)

     XCT             NYMEX Crude Oil MACI Index                                                           XC

                        spot (except on the last trading day)

     RET             REBCO                                                                                              RE

                        spot (except on the last trading day), 2^nd and 3^rd months

Matched Orders (“MO”)

MO transactions may take place in the following pit-traded futures contract months:

Copper – spot and next four consecutive months

Questions regarding this Advisory Notice may be directed to the following individuals in Market Regulation:

Nancy Minett, Director, 212.299.2940

Russell Cloughen, Associate Director, 212.299.2880

For media inquiries concerning this Advisory Notice, please contact CME Group Corporate Communications at 312.930.3434 or news@cmegroup.com.

Text of Rule 524

Trading at Settlement (“TAS”) and Matched Order (“MO”) Transactions

The Exchange shall determine the commodities, contract months and time periods during which TAS and MO transactions shall be permitted.

524.A.   Trading at Settlement (“TAS”) Transactions

The following shall govern TAS transactions:

1.   TAS transactions executed in the pit must be made open and competitively pursuant to the requirements of Rule 521 during the hours designated for pit trading in the particular contract and must be identified as such on the member’s trading records.

2.   TAS transactions on Globex may take place at any time the applicable contracts are available for trading on Globex.

3.   TAS-eligible commodities and contract months may be executed as block trades pursuant to the requirements of Rule 526 except that TAS block trades may not be executed on the last day of trading in an expiring contract.

4.   TAS transactions may be executed at the current day’s settlement price or at any valid price increment ten ticks higher or lower than the settlement price.

      524.B.   Matched Order (“MO”) Transactions

The following shall govern MO transactions:

1.   The price of the MO will be the settlement price for that contract.

2.   Only Market on Close (“MOC”) orders are eligible to trade as an MO.  Members may execute an MOC order during an eligible MO time period as an MO unless specific instructions to the contrary are provided, and such instructions are denoted on the order.  Failure to enter specific instructions when placing the MOC order will forfeit a customer’s right to cancel the MOC, in whole or in part, if the order or any portion of the order has been previously executed.  An MOC order executed as an MO must be reported to the customer as an MO upon execution.  An order entered as an MO will be executed during the closing period as an MOC order if not previously executed as an MO or  specifically designated to be executed only as an MO.  An order specifically designated for execution only as an MO must be designated as such at the time the order is placed.

3.   Members must identify an MOC order executed as an MO on their trading record.