Trading at Settlement and Matched Order Transactions

This Advisory Notice supersedes NYMEX & COMEX Market Regulation Advisory Notice RA1002-4 from February 3, 2010.  It is being reissued based on changes to the list of products eligible for Trading at Settlement (“TAS”) pursuant to Rule 524 (“Trading at Settlement (“TAS”) and Matched Order (“MO”) Transactions”) that take effect on April 12, 2010, and which are described below.  Additional information on the changes is included in CME Group Special Executive Report S-5166 from March 11, 2010. 

·         The addition of TAS in the active month in Gold and Silver futures

·         The addition of TAS in the spot (except on the last trading day), 2^nd and 3^rd contract months in Henry Hub Natural Gas Swap futures

·         The addition of TAS in the spot (except on the last trading day), 2^nd and 3^rd contract months in European Gasoil (ICE) futures

·         The addition of TAS in intra-commodity nearby month/third month futures calendar spreads in Light Sweet Crude Oil, New York Harbor No. 2 Heating Oil, Henry Hub Natural Gas and RBOB Gasoline, and

·         The elimination of TAS in Gulf Coast Gasoline and Gulf Coast Ultra Low Sulfur Diesel (ULSD) futures

These changes are reflected in the list of products eligible for TAS which begins on page 3 of this Advisory Notice.  The text of Rule 524 appears on page 6.

As a reminder, 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.

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. 

TAS Calendar Spreads

Currently, 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.  Effective April 12, 2010, the nearby month/third month spread will also be eligible to be priced at TAS.

The pricing of the legs of a TAS calendar spread will be calculated as follows:

·         The nearby leg of the spread will always be priced at the settlement price determined by the Exchange for that contract month. 

·         The far leg of the spread will be priced at the settlement price determined by the Exchange for that contract minus the allowable TAS price increment traded (negative 10 through positive 10), except in circumstances where the traded TAS price is the actual settlement price of the contract. 

            Example 1: 

            A May 2010/June 2010 (K/M) Light Sweet Crude Oil calendar spread trades at  TAS -1.  Assume the May contract settles at 82.17 and the June contract             settles at 82.59.

            The May leg will be priced at the May settlement price of 82.17.  The June leg will be priced at 82.60, which is the June settlement price of 82.59 minus the TAS price increment of –1 (82.59 minus –.01 = 82.60). 

            Example 2: 

            A June 2010/July 2010 (M/N) New York Harbor No. 2 Heating Oil calendar spread trades at TAS +/- 0.  Assume the June contract settles at 2.1408 and the             July contract settles at 2.1572.

            The June leg will be priced at the June settlement price of 2.1408.  The July leg will be priced at 2.1572, which is the July settlement price. 

            Example 3:      

            A May 2010/July 2010 (K/N) Henry Hub Natural Gas calendar spread trades at TAS +3.  Assume the May contract settles at 3.916 and the July contract settles at 4.101.

            The May leg will priced at the May settlement price of 3.916.  The July leg will be priced at 4.098, which is the July settlement price of 4.101 minus the TAS             price increment of +3 (4.101 minus +.003 = 4.098). 

TAS on Gold and Silver Futures

As of April 12, 2010, TAS transactions will be allowed in the active contract month in Gold and Silver futures.  In Gold futures, the active contract months will be February, April, June, August and December.  In Silver futures, the active contract months will be March, May, July, September and December.   On any given date, TAS transactions in Gold and Silver futures will be allowed only in a single contract month.  Additional information on identifying the active month in Gold and Silver futures is included in CME Group Special Executive Report S-5166.

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, second/third month and nearby/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, second/third month and nearby/third month calendar spreads

Henry Hub Natural Gas

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

                        nearby/second month, second/third month and nearby/third month calendar spreads

Henry Hub Natural Gas Swap

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

RBOB Gasoline

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

                        nearby/second month, second/third month and nearby/third month calendar spreads

European Gasoil (ICE)

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

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)

COMEX Gold

                        February, April, June, August and December contract months (current active month only)

COMEX Silver

                        March, May, July, September and December contract months (current active month only)

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, second/third month and nearby/third month calendar spreads      

     BZT              Brent Crude Oil Last Day Financial                                                    BZ

                        spot (except on the last trading day)

CME Globex Contracts - continued

Commodity

Code on                                   Name & Contract Months                                   Cleared Product

CME Globex

     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, second/third month and nearby/third month calendar spreads

     NGT             Henry Hub Natural Gas                                                                      NG

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

                        nearby/second month, second/third month and nearby/third month calendar spreads      

     NNT             Henry Hub Natural Gas Swap                                                            NN

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

     RBT             RBOB Gasoline                                                                                 RB

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

                        nearby/second month, second/third month and nearby/third month calendar spreads

     7FT              European Gasoil (ICE)                                                                       7F

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

     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)

     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

CME Globex Contracts - continued

Commodity

Code on                                   Name & Contract Months                                   Cleared Product

CME Globex

     GCT             COMEX Gold                                                                                     GC

                        February, April, June, August and December contract months (current active month only)

     SIT               COMEX Silver                                                                                   SI

                        March, May, July, September and December contract months (current active month only)

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.