• Trading at Settlement ("TAS"), Trading at Marker ("TAM") and Matched Order ("MO") Transactions

      • To
      • Members, Member Firms and Market Users
      • From
      • Market Regulation Department
      • #
      • RA1309-4R
      • Notice Date
      • 28 May 2013
      • Effective Date
      • 28 May 2013
    • This Revised Advisory Notice supersedes NYMEX & COMEX RA1309-4 from April 29, 2013. It is being issued based solely on NYMEX's amendment of the product title of its New York Harbor ULSD Heating Oil futures contract to NY Harbor ULSD futures. That amendment is being adopted during the week of June 3, 2013. No other information in the Advisory Notice has been changed. Additional information on the title change is available in today’s release of CME Group Special Executive Report S-6687.
       
      Important information on regulatory considerations for market participants engaging in TAS, TAM or MO transactions appears in Section 2, a list of TAS- and TAM-eligible products and contract months appears in Sections 7 and 8, and the text of Rule 524 appears in Section 9 of this Advisory Notice. 
       
      1.         General Information on TAS, TAM 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, and, depending on the particular product, may be executed in the pit, on CME Globex or as a block trade. 
       
      TAM trading is analogous to existing Trading at Settlement (“TAS”) trading wherein parties are permitted to trade at a differential to a not-yet-known price. TAM trading uses a marker price, whereas TAS trading uses the Exchange-determined settlement price for the applicable contract month. As with TAS trading, parties are able to enter TAM orders at the TAM price or at a differential between one and ten ticks higher or lower than the TAM price. TAM transactions may be executed on CME Globex or as a block trade.
       
      MO transactions in pit-traded Copper futures are transactions which are priced at that day’s settlement price for the contract.
       
      2.         Regulatory Considerations
       
      All market participants are reminded that any trading activity that is intended to disrupt orderly trading or to manipulate or attempt to manipulate a settlement or marker price to benefit a TAS, TAM or MO position, including a TAS or TAM block position, will 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 detrimental to the interest or welfare of the Exchange or conduct which tends to impair the dignity or good name of the Exchange
      ·         engaging in conduct inconsistent with just and equitable principles of trade
       
      Investigation of suspected manipulative or disruptive activity related to TAS, TAM or MO, or activity in the related underlying markets will include the Market Regulation Department’s (“Department”) review of positions and trading activity in NYMEX markets and any related markets to determine if such activity was disruptive, collusive, and/or caused or attempted to cause aberrant price movement during these periods.  Pursuant to Rule 432.L.3, market participants are reminded that it is an offense to fail to produce any books or records requested by authorized Exchange staff within 10 days after such request is made or such shorter period of time as determined by the Exchange in exigent circumstances. The Department always has the authority to request books and records as well as other relevant information regarding the nature of a participant’s trading and positions in Exchange products and in any related markets as part of its regulatory program. 
       
      A party carrying an open Platts TAM or Platts TAM block position in NY Harbor ULSD futures (“HO”) or RBOB Gasoline futures (“RB”) is prohibited from trading on the opposite side of the market in the underlying HO or RB market during the time period from 3:14:00.000 to 3:14:59.999 p.m. ET. The Department will closely monitor activity in HO and RB futures and Platts-related markets that rely upon pricing in NYMEX HO and RB futures markets at 3:15 p.m. ET. In conducting that surveillance, Market Regulation may routinely request and review books and records related to participants’ positions and trading activities in related markets that settle to or reference floating prices determined by the Platts 3:15 p.m. ET Futures Price Assessment (“FPA”) of the HO and RB markets.
       
      Market participants who engage in or plan to engage in trading any Platts-related markets that rely upon pricing in NYMEX HO and RB futures markets at 3:15 p.m. ET are strongly encouraged to review the regulatory guidance contained in NYMEX & COMEX Market Regulation Advisory Notice RA1307-4 specific to such activity.
       
      3.         Entry of TAS and TAM Orders on CME Globex
       
      Rule 524 permits the initiation of TAS and TAM 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 or TAM trading on CME Globex. The initiation of any TAS or TAM order on CME Globex outside of these time periods is strictly prohibited.
       
      Any market participant who initiates the entry of a TAS or TAM order prior to receipt of the security status message indicating that market has transitioned to the pre-open 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 must ensure that they have appropriate protocols in place to ensure that TAS and TAM orders are not initiated prior to receipt of the security status message.
       
      4.         TAS and TAM 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, NY Harbor ULSD, Henry Hub Natural Gas and RBOB Gasoline futures may be executed on CME Globex or on the trading floor and priced at TAS. 
       
      For the London Marker, intra-commodity calendar spreads in the nearby month/second month spread, the second month/third month spread and the nearby/third month spread in Light Sweet Crude Oil, Brent Crude Oil Last Day Financial, NY Harbor ULSD and RBOB Gasoline futures may be executed on CME Globex and priced at TAM.
       
      For the Singapore Marker, intra-commodity calendar spreads in the nearby month/second month spread, the second month/third month spread and the nearby/third month spread in Light Sweet Crude Oil and Brent Crude Oil Last Day Financial futures may be executed on CME Globex and priced at TAM.
       
      For the Platts 3:15 p.m. ET Marker, intra-commodity calendar spreads in the nearby month/second month spread in NY Harbor ULSD and RBOB Gasoline futures may be executed on CME Globex and priced at TAM.
       
      The pricing of the legs of a TAS or TAM calendar spread will be calculated as follows:
       
      ·         The nearby leg of the spread will always be priced at the settlement or marker price, as applicable, for that contract month. 
       
      ·         The far leg of the spread will be priced at the settlement or marker price, as applicable, for that contract minus the allowable TAS or TAM price increment traded (negative 10 through positive 10), except in circumstances where the traded TAS or TAM price is the actual settlement or marker price of the contract. 
       
                  Example 1: 
       
      An April 2013/May 2013 Light Sweet Crude Oil calendar spread trades at
      TAS -1 (minus 1). Assume the April contract settles at 92.16 and the May contract settles at 92.52.
       
      The April leg will be priced at the April settlement price of 92.16. The May leg
      will be priced at 92.53, which is the May settlement price of 92.52 minus the TAS price increment of -1 (92.52 minus -.01 = 92.53).
                 
                  Example 2: 
       
      A May 2013/June 2013 NY Harbor ULSD calendar spread trades at TAM +/- 0. Assume the May marker price is 2.9684 and the June marker price is 2.9658.
       
      The May leg will priced at the May marker price of 2.9684. The June leg will priced at 2.9658, which is the June marker price.
       
                  Example 3:      
                             
      An April 2013/June 2013 Henry Hub Natural Gas calendar spread trades at TAS +3. Assume the April contract settles at 3.969 and the June contract settles at 4.031.
       
      The April leg will be priced at the April settlement price of 3.969. The June leg will be priced at 4.028, which is the June settlement price of 4.031 minus the TAS price increment of +3 (4.031 minus +.003 = 4.028).
       
      5.         TAS on Gold, Silver and Copper Futures
       
      TAS transactions are allowed in the active contract month in Gold and Silver futures trading in the pit, on CME Globex or as block trades and in the first active contract month in Copper futures trading on CME Globex. TAS transactions are not allowed to be executed in the Copper futures pit and Copper futures may not be executed as a TAS block trade.
       
       
      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 and Copper futures, TAS trades are 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.
       
      6.         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.
       
      7.         TAS-Eligible Products and Contract Months
       
      Pit-Traded Contracts
       
      Light Sweet Crude Oil (CL)
                     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 (BZ)
                     spot (except on the last trading day), 2nd and 3rd months
       
      NY Harbor ULSD (HO)
                     spot (except on the last trading day), 2nd and 3rd months
                     nearby/second month, second/third month and nearby/third month calendar spreads
       
      Pit-Traded Contracts - continued
       
      Henry Hub Natural Gas (NG)
                     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 Last Day Financial (NN)
                     spot (except on the last trading day), 2nd and 3rd months
       
      Henry Hub Natural Gas Look-Alike Last Day Financial (HH)
                     Spot (except on the last trading day), 2nd and 3rd months
       
      RBOB Gasoline (RB)
                     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 (100mt) Bullet (7F)
                     spot (except on the last trading day), 2nd and 3rd months
       
      COMEX Gold (GC)
                     February, April, June, August and December contract months (first active month only)
       
      COMEX Silver (SI)
                     March, May, July, September and December contract months (first active month only)
       
      CME Globex Contracts
       
      For compliance and enforcement purposes, the start of a TAS 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 a TAS trading session is defined by receipt of the security status message indicating that group is closed.
       
      TAS orders may not be entered into CME Globex from the end of a TAS trading session until receipt of the security status message indicating that the group has transitioned to the pre-open state.
       
      Commodity
      Code on           Product Name and Contract Months                                           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      
       
           BZT              Brent Crude Oil Last Day Financial                                                    BZ
                              spot (except on the last trading day)
                              2nd and 3rd months
       
           BBT             Brent Crude Oil Penultimate Financial                                              BB
                              Spot, 2nd and 3rd months                                                                    
       
           HOT             NY Harbor ULSD       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
      Commodity
      Code on           Product Name and Contract Months                                           Cleared Product
      CME Globex
       
           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      
           NNT             Henry Hub Natural Gas Last Day Financial                                        NN
                              spot (except on the last trading day), 2nd and 3rd months
          
           HHT             Henry Hub Natural Gas Look-Alike Last Day Financial                       HH
                              spot (except on the last trading day), 2nd and 3rd months
       
           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
       
           7FT              European Gasoil (100mt) Bullet                                                         7F
                              spot (except on the last trading day), 2nd and 3rd 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)
       
           RET             REBCO                                                                                              RE
                              spot (except on the last trading day), 2nd and 3rd months
       
           GCT             COMEX Gold                                                                                     GC
                              February, April, June, August and December contract months (first active month             only)
       
           SIT               COMEX Silver                                                                                   SI
                              March, May, July, September and December contract months (first active month             only)
       
           HGT             COMEX Copper                                                                                 HG
                              March, May, July, September and December contract months (first active month             only)
       
      7.         TAM-Eligible Products and Contract Months on CME Globex
       
      For compliance and enforcement purposes, the start of a TAM 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 a TAM trading session is defined by receipt of the security status message indicating that group is closed.
       
      TAM orders may not be entered into CME Globex from the end of a TAM trading session until receipt of the security status message indicating that the group has transitioned to the pre-open state.
       
      Commodity
      Code on           Product Name and Contract Months                                           Cleared Product
      CME Globex
      London Markers
       
           CLL              Light Sweet Crude Oil                                                                       CL
                              spot, 2nd and 3rd months and
                              nearby/second month, second/third month and nearby/third month calendar spreads
       
           BZL              Brent Crude Oil Last Day Financial                                                    BZ
                              spot, 2nd and 3rd months and
                              nearby/second month, second/third month and nearby/third month calendar spreads
       
           HOL             NY Harbor ULSD       HO
                              spot, 2nd and 3rd months and
                              nearby/second month, second/third month and nearby/third month calendar spreads
                                                              
           RBL             RBOB Gasoline                                                                                 RB
                              spot, 2nd and 3rd months and
                              nearby/second month, second/third month and nearby/third month calendar spreads
       
      Singapore Markers
       
           CLS             Light Sweet Crude Oil                                                                       CL
                              spot, 2nd and 3rd months and
                              nearby/second month, second/third month and nearby/third month calendar spreads
       
           BZS             Brent Crude Oil Last Day Financial                                                    BZ
                              spot, 2nd and 3rd months and
                              nearby/second month, second/third month and nearby/third month calendar spreads
       
      Platts 3:15 p.m. Markers
       
           HOP             NY Harbor ULSD                                                                               HO
                              spot and 2nd months and
                              nearby/second month calendar spreads
       
           RBP             RBOB Gasoline                                                                                 RB
                              Spot and 2nd months and
                              nearby/second month calendar spreads
       
      For TAM trading on the FPA in NYMEX HO and RB futures, the marker price is the price established and published by Platts. Additional information on the methodology employed by Platts in establishing the FPA is set forth in its Platts Methodology Statement which is available on the Platts website (www.platts.com).
       
      In connection with Platts TAM, NYMEX publishes several non-tradable volume-weighted average price (“VWAP”) calculations. There is a one- and two-minute VWAP for each of the first two contract months of HO and RB, for a total of eight VWAPs. The one-minute VWAP is based on outright trades on CME Globex in the first and second contract months of HO and RB during the one-minute period from 3:14:00 to 3:15:00 p.m. ET and the two-minute VWAP is based on outright trades on CME Globex in the first and second contract months of HO and RB during the two-minute time period from 3:13:00 to 3:15:00 p.m. ET. These VWAPs are intended to be additional price references for NYMEX HO and RB at the close of the trading day.
       
      The eight VWAPs are displayed on the same page as the daily energy TAM prices, but are uniquely identified as non-tradable. They are displayed at the following location on the CME Group website:   http://www.cmegroup.com/trading/energy/daily-energy-trading-at-marker-prices.html
       
       
      Questions regarding this Advisory Notice may be directed to the following individuals in Market Regulation:
      Nancy Minett, Executive Director, Investigations, 212.299.2940
      Neil Mazer, Lead Investigator, Investigations, 212.299.2874
      Robert Sniegowski, Senior Director, Rules & Regulatory Outreach, 312.341.5991
       
       
      For media inquiries concerning this Advisory Notice, please contact CME Group Corporate Communications at 312.930.3434 or news@cmegroup.com. 
       
      9.         Text of Rule 524
       
      Trading at Settlement (“TAS”), Trading at Marker (“TAM”) and Matched Order (“MO”) Transactions
      The Exchange shall determine the commodities, contract months and time periods during which TAS, TAM 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.    Trading at Marker (“TAM”) Transactions
      The following shall govern TAM transactions:
      1.     TAM orders may be entered on Globex at any time the applicable contracts are available for TAM trading on     Globex and during each TAM contract’s prescribed pre-open time period. The initiation of any TAM order on               Globex outside these time periods is prohibited.
      2.     TAM-eligible commodities and contract months may be executed as block trades pursuant to the requirements of Rule 526.
      3.     TAM transactions may be executed at the current day’s applicable marker price or at any valid price     increment ten ticks higher or lower than the applicable marker price.
      4.     A Party carrying an open long (short) Platts TAM or Platts TAM block position in RBOB Gasoline (“RB”) or NY Harbor ULSD (“HO”) futures may not sell (buy) in the underlying RB or HO market during the time period from 3:14:00.000 to 3:14:59.999 p.m. ET.
       
      524.C.    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.

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