This Advisory Notice supersedes NYMEX & COMEX Market Regulation Advisory Notice RA1101-4 from January 5, 2011, and is being issued based on a delay in the addition of the second active months in Gold, Silver and Copper futures (and the associated calendar spread between the first and second active months) to the list of products eligible for Trading at Settlement (“TAS”) pursuant to Rule 524 (“Trading at Settlement (“TAS”) and Matched Order (“MO”) Transactions”). When a new launch date is determined, the information will be provided via an updated Advisory Notice.
Notwithstanding the above-referenced delay, and as previously announced in the Advisory Notice from January 5, COMEX will enable TAS trading in the first active contract month in Copper futures on CME Globex beginning on Sunday, January 23, for trade date Monday, January 24.
The updated list of TAS-eligible products and contract months begins on page 4 and the text of Rule 524 appears on page 7 of this Advisory Notice.
General Information on TAS and MO Transactions
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. MO transactions in pit-traded Copper futures will be priced at that day’s settlement price for the contract.
All market participants are reminded that trading activity intended to unfairly affect or to attempt to unfairly affect a settlement price to benefit TAS positions, including TAS block positions, or MO positions 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.
Entry of TAS Orders on CME Globex
On November 1, 2010, Rule 524 was amended to permit the initiation of TAS orders into CME Globex only subsequent to the beginning of each group’s pre-open state and during the time period the applicable contracts are available for TAS trading on CME Globex. The initiation of any TAS order on CME Globex outside of these time periods is strictly prohibited. The purpose of the amendment was to ensure appropriate and efficient messaging practices with respect to the initiation of TAS orders.
Market participants are reminded that they are prohibited from initiating the entry of any TAS order into CME Globex prior to receipt of the security status message sent via the FIX/FAST incremental feed identifying that the group has transitioned to the pre-open state.
Any market participant who initiates the entry of a TAS order prior to receipt of the market status message will be subject to disciplinary action by a panel of the Business Conduct Committee, notwithstanding that the order may have been rejected by the CME Globex system. Sanctions for noncompliance may include a fine, disgorgement of any profits realized as a result of any orders accepted by CME Globex which were initiated prior to receipt of the security status message and/or a suspension of access to the market. Market participants are strongly encouraged to ensure that they have appropriate protocols in place to ensure that TAS orders are not initiated prior to receipt of the security status message.
TAS Calendar Spreads
Intra-commodity calendar spreads in the nearby month/second month spread, the second month/third month spread and the nearby month/third month spread in Light Sweet Crude Oil, New York Harbor No. 2 Heating Oil, Henry Hub Natural Gas and RBOB Gasoline futures 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 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 2011/June 2011 (K/M) Light Sweet Crude Oil calendar spread trades at TAS -1. Assume the May contract settles at 92.99 and the June contract settles at 93.30.
The May leg will be priced at the May settlement price of 92.99. The June leg will be priced at 93.31, which is the June settlement price of 93.30 minus the TAS price increment of –1 (93.30 minus –.01 = 93.31).
Example 2:
A June 2011/July 2011 (M/N) New York Harbor No. 2 Heating Oil calendar spread trades at TAS +/- 0. Assume the June contract settles at 2.5301 and the July contract settles at 2.5415.
The June leg will be priced at the June settlement price of 2.5301. The July leg will be priced at 2.5415, which is the July settlement price.
Example 3:
A May 2011/July 2011 (K/N) Henry Hub Natural Gas calendar spread trades at TAS +3. Assume the May contract settles at 4.322 and the July contract settles at 4.431.
The May leg will priced at the May settlement price of 4.322. The July leg will be priced at 4.428, which is the July settlement price of 4.431 minus the TAS price increment of +3 (4.431 minus +.003 = 4.428).
TAS on Gold, Silver and Copper Futures
TAS transactions are currently allowed in the active contract month in Gold and Silver futures. Effective on January 23, TAS transactions will be allowed in the first active contract month in Copper futures trading on CME Globex. TAS transactions are not allowed in any pit-traded Copper futures contract month.
In Gold futures, TAS trades are permitted in the following active contract months: February, April, June, August, and December. Accordingly:
When the February contract becomes spot, the April contract becomes the TAS-eligible month;
When the April contract becomes spot, the June contract becomes the TAS-eligible month;
When the June contract becomes spot, the August contract becomes the TAS-eligible month;
When the August contract becomes spot, the December contract becomes the TAS-eligible month; and
When the December contract becomes spot, the February contract becomes the TAS-eligible month.
In Silver futures, TAS trades are permitted in the following active contract months, and, effective January 23, 2011, TAS trades in Copper futures will be permitted in the following active contract months: March, May, July, September and December. Accordingly:
When the March contract becomes spot, the May contract becomes the TAS-eligible month;
When the May contract becomes spot, the July contract becomes the TAS-eligible month;
When the July contract becomes spot, the September contract becomes the TAS-eligible month;
When the September contract becomes spot, the December contract becomes the TAS-eligible month; and
When the December contract becomes spot, the March contract becomes the TAS-eligible month.
MO Transactions in Pit-Traded Copper Futures
MO transactions in Copper futures are open outcry trades competitively executed in the Copper futures pit where the trade is priced at that day’s settlement price for the contract. MO transactions in Copper futures are eligible to be executed in the spot month and the next six consecutive contract months. Additionally, with the exception of the post close session, members may execute an MO order at any time the Copper futures pit is open for trading, provided that the order is placed as an MO order. Regular trading hours for open outcry trading in the Copper futures pit are from 8:10 a.m. until 1:00 p.m. Eastern Time (“ET”).
Instructions to execute the order as an MO must be denoted on the order and members must identify an order executed as an MO on their trading record.
An order entered as an MO will be executed by the floor broker as a Market on Close order if the order is not previously executed as an MO or specifically designated to be executed only as an MO. An instruction to execute an order only as an MO must be communicated at the time the order is placed.
TAS-Eligible Products and Contract Months
Pit-Traded Contracts
Light Sweet Crude Oil
spot (except on the last trading day), 2nd, 3rd and 7th 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), 2nd and 3rd months
nearby/second month, second/third month and nearby/third month calendar spreads
Henry Hub Natural Gas
spot (except on the last trading day), 2nd and 3rd 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), 2nd and 3rd months
RBOB Gasoline
spot (except on the last trading day), 2nd and 3rd months
nearby/second month, second/third month and nearby/third month calendar spreads
European Gasoil (ICE)
spot (except on the last trading day), 2nd and 3rd 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 (first active month only)
COMEX Silver
March, May, July, September and December contract months (first active month only)
CME Globex Contracts
The No-Activity Periods set forth below are provided solely for informational purposes. Market participants are reminded that for compliance and enforcement purposes, the start of the pre-open period is defined by receipt of the security status message indicating that the group has transitioned to the pre-open state and the end of the trading session is defined by receipt of the security status message indicating that group is closed.
Commodity
Code on Name, Contract Months & CME Globex No-Activity Period Cleared Product
CME Globex
CLT Light Sweet Crude Oil CL
spot (except on the last trading day), 2nd, 3rd and 7th months and
nearby/second month, second/third month and nearby/third month calendar spreads
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
BZT Brent Crude Oil Last Day Financial BZ
spot (except on the last trading day)
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
BBT Brent Crude Oil Penultimate Financial BB
Spot, 2nd and 3rd months
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
HOT New York Harbor No. 2. Heating Oil HO
spot (except on the last trading day, 2nd and 3rd months and
nearby/second month, second/third month and nearby/third month calendar spreads
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
NGT Henry Hub Natural Gas NG
spot (except on the last trading day), 2nd and 3rd months and
nearby/second month, second/third month and nearby/third month calendar spreads
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
NNT Henry Hub Natural Gas Swap NN
spot (except on the last trading day), 2nd and 3rd months
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
RBT RBOB Gasoline RB
spot (except on the last trading day), 2nd and 3rd months and
nearby/second month, second/third month and nearby/third month calendar spreads
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
Commodity
Code on Name, Contract Months & CME Globex No-Activity Period Cleared Product
CME Globex
7FT European Gasoil (ICE) 7F
spot (except on the last trading day), 2nd and 3rd months
No-Activity Periods: 12:00 p.m. – 5:45 p.m. (ET) Monday – Thursday
12:00 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
KTT NYMEX Coffee KT
spot (except on the last trading day)
No-Activity Periods: 12:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
12:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
CJT NYMEX Cocoa CJ
spot (except on the last trading day)
No-Activity Periods: 11:50 a.m. – 5:45 p.m. (ET) Monday – Thursday
11:50 a.m. (ET) Friday – 5:15 p.m. (ET) Sunday
TTT NYMEX Cotton TT
spot (except on the last trading day)
No-Activity Periods: 2:15 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:15 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
YOT NYMEX No. 11 Sugar YO
spot (except on the last trading day)
No-Activity Periods: 12:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
12:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
XCT NYMEX Crude Oil MACI Index XC
spot (except on the last trading day)
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
RET REBCO RE
spot (except on the last trading day), 2nd and 3rd months
No-Activity Periods: 2:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
2:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
GCT COMEX Gold GC
February, April, June, August and December contract months (first active month only)
No-Activity Periods: 1:30 p.m. – 5:45 p.m. (ET) Monday – Thursday
1:30 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
SIT COMEX Silver SI
March, May, July, September and December contract months (first active month only)
No-Activity Periods: 1:25 p.m. – 5:45 p.m. (ET) Monday - Thursday
1:25 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
HGT COMEX Copper HG
March, May, July, September and December contract months (first active month only)
No-Activity Periods: 1:00 p.m. – 5:45 p.m. (ET) Monday – Thursday
1:00 p.m. (ET) Friday – 5:15 p.m. (ET) Sunday
Questions regarding this Advisory Notice may be directed to the following individuals in Market Regulation:
Nancy Minett, Director, Investigations, 212.299.2940
Russell Cloughen, Associate Director, Investigations, 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 orders may be entered on Globex at any time the applicable contracts are available for TAS trading on Globex and during each TAS contract’s prescribed pre-open time period. The initiation of any TAS order on Globex outside these time periods is prohibited.
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
MO transactions are open outcry trades competitively executed pursuant to Rule 521 where the price of the trade is that day’s settlement price for the contract.
The following shall govern MO transactions:
1. Members may execute an MO at any time during pit trading hours except during the post close session. Members may execute an order as an MO provided the order is placed as an MO and such instructions are denoted on the order. An order entered as an MO will be executed during the closing period as a Market on Close 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.
2. Members must identify an order executed as an MO on their trading record.