• CME Group announces the Launch of S&P MLP Index Futures on Monday, September 23, 2013

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6812
      • Notice Date
      • 29 August 2013
      • Effective Date
      • 22 September 2013
    • CME Group announces that S&P MLP Index futures will begin trading at 5:00 p.m. on Sunday, September 22, 2013 for trade date of Monday, September 23, 2013.
       
      Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) intends to offer the S&P MLP Index futures contracts exclusively on the CME Globex electronic trading platform between the hours of 5:00 p.m. to 4:15 p.m., Monday through Friday. Block trading, including BTIC transactions, are allowed with a minimum order quantity requirement of 50 contracts.
       
      S&P MLP Index futures will trade on a quarterly listing cycle. The December 2013 and March 2014 contracts will be the first two futures contract months listed. The contract is listed by and subject to the rules of CME. The listing is subject to the expiration of CFTC regulatory review period.
       
       
       
       
       
      Please contact Mr. John Nyhoff, R&PD at 312-930-2310; Ms. Lucy Wang, R&PD at (312)648-5478 if you have any inquiries regarding this matter.
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
      1. Nature of the Index
       
      Master Limited Partnerships (“MLPs”) are limited partnerships that are publicly traded on a securities exchange, combining the tradability of common stocks with the tax treatment of partnerships. Both the interest in MLPs and the number of listed MLPs has greatly increased in recent years due to investor interest in the energy infrastructure theme and high dividend distributions.
       
      The S&P MLP Index is designed to provide exposure to leading partnerships that trade on major U.S. exchanges. The index includes both master limited partnerships and publicly traded limited liability companies (LLCs), which have a similar legal structure to MLPs and share the same tax benefits. As the vast majority of traded partnerships operate in the energy infrastructure space, the S&P MLP Index focuses on companies in the GICS Energy Sector and the GICS Gas Utilities Industry.
       
      To be eligible for the S&P MLP Index, companies must be a publicly traded partnership with either a master limited partnership or a limited liability company structure. Stocks must have a float-adjusted market capitalization above US $300 million, and have a three-month average daily value traded above US$2 million. The index is rebalanced once a year in October.
       
       
      2. Description of Individual Contract Terms
       
      In order to facilitate the certification process, the Exchange offers the following description and explanation of S&P MLP Index futures contract terms and conditions. Note that this contract replicates other extant stock index futures contracts in most respects. Note further that the Exchange intends to offer S&P MLP futures contract on the CME Globex electronic trading platform only.
       
      Contract Size – Rule 37501., CONTRACT SPECIFICATIONS, provides that “[e]ach futures contract shall be valued at $20.00 times the S&P MLP Index.” As of this writing, the Index was in the vicinity of 2,386 index points which equates to a contract value of approximately $47,720.
       
      Quotation Specification – Rule 37502.C., Price Increments, specifies that “[b]id and offers shall be quoted in terms of the S&P MLP Index. The minimum fluctuation of the futures contract shall be 0.50 index points, equivalent to $10.00 per contract.”
       
      No-Bust Range – The Globex trade cancellation policy is amended to specify a “no-bust range” of 12.00 index points per contract
      Block Trading – Block trading is allowed with a minimum order quantity requirement of fifty contracts.
       
      Other Contract Terms and Conditions – All other terms and conditions of the proposed contract are substantially identical to existing stock index futures. For the reader’s convenience, we provide a table (below) summarizing contract terms and conditions.
       
       
       
       
      S&P Master Limited Partnership (S&P MLP) Index Futures Specifications
       
      Contract Value
      $20 x S&P MLP Index
      Tick Size
      Outrights: 0.50 Index Points=$10.00
      Listing Cycle
      Two (2) months in March Quarterly Cycle, i.e.,
      March, June September & December
      Hours of Trade
      Offered on CME Globex® electronic trading platform on MON – FRI: 5:00 p.m. previous day – 4:15 p.m.; trading halt from 3:15 p.m. – 3:30 p.m.
      Termination of Trading
      8:30 am (CT) on third Friday of contract month
      Final Settlement
      Cash Settlement based on the Special Opening Quotation (SOQ)
      of the Index
      Final Settlement Date
      Third (3rd) Friday of contract month with contingencies if Underlying Reference Value should not be published on that day
      Ticker
      MLP
       
       
      3. Rules GoverningS&P MLP Index
       
      Chapter 375
      S&P MLP Index® Futures
      37500.        SCOPE OF CHAPTER
      This chapter is limited in application to Standard & Poor’s Master Limited Partnership Index (“S&P MLP Index”) futures. In addition to this chapter, S&P MLP Index futures shall be subject to the general rules and regulations of the Exchange as applicable.
       
      For purposes of this chapter, unless otherwise specified, times referred to herein shall refer to and indicate Chicago time.
      37501.        CONTRACT SPECIFICATIONS
      Each futures contract shall be valued at $20.00 times the S&P MLP Index. The S&P MLP Index is a modified capitalization weighted index of master limited partnerships as well as publicly traded limited liability companies (LLCs).
      37502.        TRADING SPECIFICATIONS
      37502.A.        Trading Schedule
      Futures contracts shall be scheduled for trading during such hours and for delivery in such months as may be determined by the Exchange.
      37502.B.       Trading Unit
      The unit of trading shall be $20.00 times the S&P MLP Index.
      37502.C.       Price Increments[1]
      Bids and offers shall be quoted in terms of the S&P MLP Index. The minimum fluctuation of the futures contract shall be 0.50 index points, equivalent to $10.00 per contract. Trades may also occur in multiples of 0.05 index points, for S&P MLP Index futures calendar spreads executed as simultaneous transactions pursuant to Rule 542.A.
      37502.D. Position Limits, Exemptions, Position Accountability and Reportable Levels
      The applicable position limits and/or accountability levels, in addition to the reportable levels, are set forth in the Position Limit, Position Accountability and Reportable Level Table in the Interpretations & Special Notices Section of Chapter 5. 
      A Person seeking an exemption from position limits for bona fide commercial purposes shall apply to the Market Regulation Department on forms provided by the Exchange, and the Market Regulation Department may grant qualified exemptions in its sole discretion.
      Refer to Rule 559 for requirements concerning the aggregation of positions and allowable exemptions from the specified position limits.
      37502.E.        [Reserved]
      37502.F.        [Reserved]
      37502.G.       Termination of Trading
      Futures trading shall terminate at the regularly scheduled start of trading at the NYSE on the day scheduled for the determination of the Final Settlement Price.
      37502.H.       [Reserved]
      37502.I.         Price Limits and Trading Halts
      The primary S&P MLP Index futures contract expiration month, as referenced in this rule, shall be determined by the Exchange. The Exchange shall also determine when the primary futures contract month is limit bid or limit offered. All times referenced in this rule are in Central Time.
      Coordinated Market-Wide Trading Halts:  If a NYSE Rule 80B trading halt is declared in the primary securities market as the result of a Level 1 (7%), Level 2 (13%) or Level 3 (20%) decline in the S&P 500 Index, then trading in S&P MLP Index futures contracts shall be halted. When trading in the primary securities market resumes after a NYSE Rule 80B trading halt, trading on the S&P MLP Index futures contract shall resume. At or after 2:25 p.m., the Level 1 (7%) and Level 2 (13%) trading halts in the primary securities market are not applicable. Following the declaration of a Level 3 (20%) trading halt in the primary securities market, there shall be no trading in S&P MLP Index futures until trading resumes on the primary securities market on the next Trading Day.
       
      Reference Price for Exchange Price Limits and Exchange Trading Halts: Daily price limits in S&P MLP Index futures will be established relative to the contract rounded Reference Price (“P”) which shall be determined by the Exchange as follows:
      Tier 1              The Reference Price shall be equal to the volume-weighted average price of transactions in the S&P MLP Index futures contract executed on Globex from 2:59:30 to 3:00:00 p.m.
      Tier 2              If no transactions occur from 2:59:30 to 3:00:00 p.m., the Reference Price shall be the average of the midpoints of each bid/ask spread in the S&P MLP Index futures contract during that thirty (30) second interval; however, bid/ask spread pairs wider than two (2) ticks (1.00 index points), shall not be included in the calculation to determine the Reference Price. 
      Tier 3              If the Reference Price cannot be determined pursuant to Tiers 1 and 2 above, designated Exchange staff shall consider any other information deemed relevant to determine the Reference Price. Alternatives upon which Exchange staff may determine the Reference Price include, but are not limited to, the following: (1) deriving the Reference Price based on the basis relationship to the underlying cash index level; or (2) deriving the Reference Price by repeating Tier 1 or Tier 2 calculations at increasing thirty (30) second increment intervals until data is obtained.
       
      If the Reference Price is not divisible by 0.50 without remainder, then the Reference Price shall be rounded down to the closest 0.50 point increment. The rounded Reference Price (“P”) shall be used to determine Price Limits.
      In the event of an early close of the primary securities market, the Reference Price shall be determined based upon the time period that corresponds to the last thirty (30) seconds of the primary securities market trading day.
      For a newly listed contract expiration month, there will be an implied Reference Price created by the Exchange for the sole purpose of establishing the Price Limits for the first day of trading. 
       
      Exchange Price Limit Levels: The Price Limits shall be calculated daily based upon the rounded Reference Price, P, and the value of the S&P MLP Index available ten (10) minutes after the close of the primary securities market (“I”). The Offsets used to derive the daily Price Limits shall be calculated as follows:

      5% Offset
      Equals
       
      5% of I, or (0.05 x I) rounded down to the nearest 0.50 point increment
       
      7% Offset
      Equals
      7% of I or (0.07 × I) rounded down to the nearest 0.50 point increment  
       
      13% Offset
      Equals
      13% of I or (0.13 × I), rounded down to the nearest 0.50 point increment  
       
      20% Offset
      Equals
      20% of I or (0.20 × I), rounded down to the nearest 0.50 point increment  
       

       
       
      The daily Price Limits for S&P MLP Index futures shall be calculated as follows:
       
      5% Price Limits
       
      equals
      P plus 5% Offset, and P minus 5% Offset
      7% Price Limit
       
      equals
      P minus 7% Offset
      13% Price Limit
       
      equals
      P minus 13% Offset
      20% Price Limit
      equals
      P minus 20% Offset 
       
       
      Exchange Price Limits from 5:00 p.m. to 8:30 a.m.:  From the start of the new Trading Day at 5:00 p.m. until the suspension of trading at 8:15 a.m., there shall be Price Limits for S&P MLP Index futures corresponding to a 5% increase above and a 5% decrease below the previous Trading Day’s Reference Price. During this time period, there shall be no trading of S&P MLP Index futures at a price more than the 5% Price Limit above, or less than the 5% Price Limit below, the previous Trading Day’s Reference Price.  
      If the primary S&P MLP Index futures contract is limit bid or limit offered at 8:15 a.m. and remains limit bid or limit offered at 8:25 a.m., then there shall be a trading halt in effect for the S&P MLP Index futures contract until 8:30 a.m. During the trading halt, the Exchange shall provide an indicative opening for the re-opening of trading in the S&P MLP Index futures contract trading on Globex pursuant to Rule 573.
      Exchange Price Limits from 8:30 a.m. to 2:25 p.m.: From 8:30 a.m. up to and including 2:25 p.m., there shall be successive Price Limits corresponding to 7%, 13% and 20% declines below the previous Trading Day’s Reference Price. However, if a NYSE Rule 80B trading halt becomes inapplicable, then the corresponding Price Limit in S&P MLP Index futures contracts shall likewise become inapplicable. 
      When the primary S&P MLP Index futures contract is limit offered at the 7.0% Price Limit, a 10-minute period shall commence. If the primary futures contract is not limit offered at the end of the 10-minute period, trading will continue with the 13.0% Price Limit in effect.  If the primary futures contract is limit offered at the end of the 10-minute period, trading shall terminate for a period of two minutes, after which time the market shall reopen. The 13.0% price limit shall apply to such reopening.
      When the primary S&P MLP Index futures contract is limit offered at the 13.0% Price Limit, a 10-minute period shall commence. If the primary futures contract is not limit offered at the end of the 10-minute period, trading will continue with the 20% Price Limit in effect.  If the primary futures contract is limit offered at the end of the 10-minute period, trading shall terminate for a period of two minutes, after which time the market shall reopen. The 20% Price Limit shall apply to such reopening. The 20% Price Limit shall represent the Total Daily Price Limit. Following a Level 3 market-wide (20%) trading halt, trading in S&P MLP Index futures shall remain halted until the open of the primary securities market on the following Trading Day.
      Exchange Price Limits from 2:25 p.m. to 3:00 p.m.: From 2:25 p.m. until the 3:00 p.m. close of the primary securities market, only the 20% Price Limit shall apply. 
      Exchange Price Limits from 3:00 p.m. to 4:15 p.m.: From the close of the primary securities market at 3:00 p.m. until the end of the current Trading Day at 4:15 p.m., there shall be a Price Limit corresponding to a 5% increase above the current Trading Day’s Reference Price.There shall also be a Price Limit corresponding to either a 5% decline below the current Trading Day’s Reference Price or the current Trading Day’s 20% Price Limit, whichever is nearer to the current Trading Day’s Reference Price.
      37503.        SETTLEMENT PROCEDURES
      Delivery under the S&P MLP Index futures contract shall be by cash settlement.
      37503.A.        Final Settlement Price
      The Final Settlement Price shall be a special quotation of the S&P MLP Index based on the opening prices of the index components, determined on the third Friday of the contract month.
       
      If the S&P MLP Index is not scheduled to be published on the third Friday of the contract month, the Final Settlement Price shall be determined on the first earlier day for which the Index is scheduled to be published.
      If the primary market for an index component does not open on the day scheduled for determination of the Final Settlement Price, then the price of that component shall be determined, for the purposes of calculating the Final Settlement Price, based on the opening price of that component on the next day that its primary market is open for trading.
       
      If an index component does not trade on the day scheduled for determination of the Final Settlement Price while the primary market for that component is open for trading, the price of that component shall be determined, for the purposes of calculating the Final Settlement Price, based on the last sale price of that component. However, if the Exchange determines that there is a reasonable likelihood that trading in the index component shall occur shortly, the Exchange may instruct that the price of the component shall be based, for the purposes of calculating the Final Settlement Price, on the opening price of the component on the next day that it is traded on its primary market. Factors to be considered in determining whether trading in the component is likely to occur shortly shall include the nature of the event and recent liquidity levels in the affected component.
       
       
      37503.B.       Final Settlement
      Clearing members holding open positions in an S&P MLP Index futures contract at the time of termination of trading in that contract shall make payment to or receive payment from the Clearing House in accordance with normal variation performance bond procedures based on a settlement price equal to the final settlement price.
      37504.        [Reserved]
      37506.        BASIS TRADE AT INDEX CLOSE (“BTIC”) TRANSACTIONS
                        A Basis Trade at Index Close (“BTIC”) Transaction is a futures transaction on an  S&P MLP Index future that is priced with reference to the S&P MLP cash index close price for the specific index.
                              The futures price assigned to a BTIC Transaction shall be based on the current day’s S&P cash index close price, or the current day’s S&P cash index close price adjusted by any valid price increment (“the basis”) higher or lower than the applicable S&P cash index close price. The Basis must be fair and reasonable, taking into account financing rates, expected dividend income, time remaining until the Equity Index futures contract expiration and any of the factors set forth in Rules 526.D., as applicable.
                              37506.A.        BTIC Block Trade Requirements
      BTIC Transactions in S&P MLP Index futures may be executed as block trades pursuant to the requirements to Rule 526. Both the block trade quantity and the valid price increment (the “Basis”) for BTIC block trades must be reported within five minutes of the agreement of the parties to execute the trade in accordance with Rule 526.F.
                              In addition to complying with the reporting requirements set forth above, BTIC block trades for BTIC-eligible Equity Index futures must be reported to the Exchange at least 10 minutes prior to the scheduled close of the underlying primary securities market to establish the BTIC futures price on the current Trading Day. The BTIC futures price for BTIC-eligible Equity Index futures orders that are not reported to the Exchange at least 10 minutes prior to the scheduled close of the underlying primary securities market shall be based on the index close price for the next available Trading Day for the primary securities market.
                              37506.B.       Price Assignment Procedure for BTIC Futures
                              The futures price of a BTIC Transaction will be determined by the Exchange at 3:45 p.m. Central time and the Exchange determined price will be deemed final at that time. In the event of an early scheduled close of the primary securities market, the futures price of a BTIC Transaction will be determined by the Exchange 45 minutes after the early scheduled close time for the primary securities market and the Exchange determined price will be deemed final at that time.
                             
      37506.C.       BTIC Order Minimum Price Increment
                              (Refer to Rule 37502.- Trading Specification –Minimum Price Increment or Tick Size). The valid Basis of Price Increment applied to the index close price to establish the BTIC futures price must be stated in full tick increments, e.g. 0.50 index points for S&P MLP Index futures.
       
      37506.D.       BTIC Orders Prohibited on Last Day of Trading
                              BTIC orders for BTIC-eligible Equity Index futures may not be initiated on the last day of trading in an expiring contract.
                              37506.E.        Market Disruption Events
                              In the event of an equity market disruption in the primary securities market, a BTIC-eligible Equity Index futures block trade order shall be cancelled. Equity market disruption events shall be declared at the sole discretion of the Exchange. Equity market disruptions may include, but are not limited to:
       
      1.      an unscheduled early closure for the day of the primary equity securities market, or
       
      2.      the occurrence of a Level 3 NYSE Rule 80B trading halt that requires an early closure of the       primary securities market.
       
                             
      (End Chapter 375)
      INTERPRETATIONS AND SPECIAL NOTICES
      RELATING TO CHAPTER 3      75
      S&P/Dow Jones Indices LLC (“S&P”) licenses the Exchange to use various S&P stock indices (“S&P Stock Indices”) in connection with the trading of futures contracts and options on futures contracts based upon such indices. S&P and its affiliates (including Standard & Poor’s Financial Services LLC) shall have no liability for any damages, claims, losses or expenses caused by any errors or delays in calculating or disseminating the S&P Stock Indices.
       
      S&P/Dow Jones Indices LLC (“S&P”) and its affiliates (including Standard & Poor’s Financial Services LLC) do not guarantee the accuracy and/or completeness of the S&P Stock Indices or any data included therein. S&P and its affiliates make no warranty, express or implied, as to the results to be obtained by any person or any entity from the use of the S&P Stock Indices or any data included therein in connection with the trading of futures contracts, options on futures contracts or any other use. S&P and its affiliates make no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the S&P Stock Indices or any data included therein. Without limiting any of the foregoing, in no event shall S&P or any of its affiliates have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.
       
       
       
       
       
       
       
       
       
      4. Other Rule Amendments Associated withS&P Sector Index futures
       
      The following amendments to Exchange Rules are necessitated by the introduction of S&P MLP Index futures. Additions are underlined, deletions are bracketed and overstruck.
       
      CHAPTER 5
      5.C. POSITION LIMIT AND REPORTABLE LEVEL TABLE

      Contract Name
      Options
      First Scale-Down Spot Month
      Second Scale-Down Spot Month
      Spot Month
      Single Month
      All Months Combined
      Position Accountability
      Report Able Fut Level
      Report Able Opt Level
      E-mini SmallCap 600
       
       
       
       
       
      25,000 (B)
       
      25
      25
      S&P MLP
       
       
       
       
       
      5,000
       
      25
       

       
      POSITION LIMIT, POSITION ACCOUNTABILITY AND REPORTABLE LEVEL TABLE
      588.K.             GLOBEX No Bust Ranges
      Previous rules are unchanged.
       
            Futures Contracts
            No Bust Range
       
       
       
       
      S&P MLP
      12.00 index points or less
       
       

      [1] See Rule 37506.C. (BTIC Orders Minimum Price Increment) for information on the minimum price increment or Tick Size for BTIC Transactions. BTIC trades that are completed are based on the closing stock index value, and will be cleared in price increments of 0.01 index points, because the underlying stock index is reported to a two decimal place level precision.

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