Frequently Asked Questions: BTIC+ and TACO+


What are BTIC+ and TACO+?

BTIC+ and TACO+ are new products listed for trading at CME Group. The products introduce T-plus (T+) trading to the futures market.

BTIC+ and TACO+ are futures contracts that allow market participants to execute a basis trade on E-mini S&P 500 futures relative to the official closing, or opening, of the S&P 500 cash index level for a given trading session, days in advance.

When is CME Group launching BTIC+ and TACO+?

Pending all relevant regulatory review periods, CME Group will launch BTIC+ and TACO+ on E-mini S&P 500 futures on October 7.

What is the difference between BTIC and TACO eligibility on E-Mini S&P 500 and BTIC+ and TACO+ E-mini S&P 500 Futures contracts?

CME Group launched BTIC on E-mini S&P 500 in November 2015 and TACO in May 2018. These transaction types have been popular and active, trading over $2.3T in aggregate since their inception.

BTIC+ and TACO+ differ from BTIC and TACO transactions in that BTIC+ and TACO+ are structured as futures contracts that have daily settlements and expire into the underlying futures via a BTIC and TACO transaction. BTIC+ and TACO+ allow market participants to trade futures at a basis to the index close or open, respectively, days in advance on a T-plus basis, while BTIC and TACO transactions are only available during the same day trading session immediately preceding the index’s open or close. Unlike BTIC and TACO transactions, BTIC+ and TACO+ are not governed by Rule 524.

Why is CME Group launching BTIC+ and TACO+?

Historically, market participants could only execute BTIC or TACO trades within the single trading session immediately preceding the next available closing or opening index auctions. Put simply, one could only trade BTIC for, today’s close, commonly referred to as T, which is shorthand for either trade date or transaction date.

However, the need to recapture the certainty of the close or the open is a risk that can arise days prior to the relevant index closing or opening observation. Some examples include the need to manage expiring cash index option deltas, or to rebalance hedges around swap resets or maturities.

In response to this risk management need, BTIC+ and TACO+ introduce the ability to trade BTIC or TACO on a T+ basis, allowing participants to trade futures against the closing or opening index value days in advance.

What is the lifecycle of the BTIC+ instrument?

In the example above, a trader decides he needs to purchase the cash index close on Friday, September 13.

With the introduction of BTIC+ trading, the trader is now able to trade the Friday close on Monday. On Monday, the trader purchases 10 BTIC+ @2.0.

What is the lifecycle of the TACO+ instrument?

In the example above, a trader decides he needs to purchase the cash index open on Friday, October 18.

With the introduction of TACO+ trading, the trader is now able to trade the Friday open on Monday. On Monday, the trader purchases 5 TACO+ @3.0.

What are the contract specifications for BTIC+ and TACO+?

 

BTIC+

TACO+

Contract Unit

One (1) nearest expiring quarterly E-mini S&P 500 futures contract

One (1) second nearest expiring quarterly E-mini S&P 500 futures contract

One (1) nearest expiring quarterly E-mini S&P 500 futures contract

Minimum Price Fluctuation

0.05= $2.50

0.05= $2.50

0.05= $2.50

Trading and Clearing Hours

Sunday – Friday 6:00 p.m. - 5:00 p.m. New York time/ET (5:00 p.m. - 4:00 p.m. Chicago Time/CT);

Sunday – Friday 6:00 p.m. - 5:00 p.m. New York time/ET (5:00 p.m. - 4:00 p.m. Chicago Time/CT);

Sunday – Friday 6:00 p.m. - 5:00 p.m. New York time/ET (5:00 p.m. - 4:00 p.m. Chicago Time/CT);

Commodity Code

ES1

ES2

EQ1

Listed Contracts

Nearest 6 Monday, Wednesday, and Friday contract days for the nearest expiring month; and the next Friday; and the last trading day of the month, regardless of the day of the week.

Nearest 3 Monday, Wednesday, and Friday contract days for the second nearest expiring month.

3rd Friday of 3 consecutive months

(2 Mondays, 2 Wednesdays, 3 Fridays, at any one time, and last trading day of the month)

 

 

Termination of Trading

The last day of trading is the Exchange business date immediately preceding the delivery date.

 

i.e. 5 p.m. ET on Thursday

The last day of trading is the Exchange business date immediately preceding the delivery date.

 

i.e. 5 p.m. ET on Thursday

The last day of trading is the Exchange business date immediately preceding the delivery date.

 

i.e. 9:30 am. ET on Thursday

Exchange Rulebook Chapter

358B

358B

358B

Settlement Method

Physically settled into one (1) nearest ES future at an assigned price equal to the official closing index level plus the final settlement price of the FBTIC future determined on the LTD

Physically settled into one (1) second nearest ES future at an assigned price equal to the official closing index level plus the final settlement price of the FBTIC future determined on the LTD

Physically settled into one (1) nearest ES future at an assigned price equal to the Special Opening Quotation (“SOQ”) of the index plus the final settlement price of the FTACO future determined on the LTD

CME Globex Matching Algorithm

F-FIFO

F-FIFO

F-FIFO

Underlying Contract

E-mini Standard and Poor’s 500 Stock Price Index Futures/Commodity Code: ES

E-mini Standard and Poor’s 500 Stock Price Index Futures/Commodity Code: ES

E-mini Standard and Poor’s 500 Stock Price Index Futures/Commodity Code: ES

Block Trade Minimum Threshold

500 Contracts

500 Contracts

500 Contracts

How many contracts will be listed at a given time for BTIC+ and TACO+?

BTIC+

Nearest Quarterly (ES1)

Second nearest Quarterly (ES2)

Six nearest expiries in the M/W/F listing cycle

Three nearest expiries in the M/W/F listing cycle

One additional Friday and one month-end

 

TACO+

Third Fridays for the next three calendar months

What if there is a scheduled holiday on the Monday, Wednesday or Friday delivery dates?

BTIC+ and TACO+ will be adjusted in a similar fashion to how E-mini S&P 500 option expirations are listed to account for holidays.

In the event a scheduled holiday occurs on a Wednesday or Friday delivery date for either BTIC+ and TACO+, both the delivery date and last trade date will be brought in time to the immediately preceding trading session, respectively.

For example, if the BTIC+ delivery day occurs on a Friday that was a scheduled holiday, at the time of listing the delivery date would be amended to the day prior, Thursday, and the last trade date would be the exchange business day prior to delivery date, which would be Wednesday.

In the event a scheduled holiday occurs on a Monday that would have been a delivery date for BTIC+, only the delivery date will be extended to the following trading session, Tuesday. The last trade day for the affected BTIC+ contract would remain Friday, which would still be the trading session immediately prior to amended delivery date of Tuesday.

There will be off-pattern adjustment to the BTIC+ contract listed for the last trading day of the month. The determination of the last delivery date for the calendar month will always consider holidays and weekends, and the BTIC+ contract will be listed with that delivery date regardless the day of the week.

If….

Then delivery date will be the….

With a last trade date of the….

Monday is a holiday

Tuesday following

Friday prior

Wednesday is a holiday

Tuesday preceding

Monday prior

Friday is a holiday

Thursday preceding

Wednesday prior

Please note: Regardless of how these listing cycles are adjusted, the ticker symbol will always give you the exact delivery date.

What are the ticker codes and how will the code conventions work for these products?

TACO+: EQ1 (root) + Month Code + Year + Date

Example: EQ1N926, would be the contract code for TACO+ (EQ1) and would deliver the nearest E-mini S&P 500 futures contract at a basis to the S&P 500 official index open on July 26, 2019 – where the Month Code N is for July, the Year 9 is for 2019.

BTIC+: ES (root)+ Nearest Month or Second Nearest Month + Month Code + Year + Date

Example:ES1N926, would be the contract code for BTIC+ (ES1) and would deliver the nearest E-mini S&P 500 futures contract (September 2019, ESU9) at a basis to the S&P 500 official index close on July 26, 2019 – where the Month Code N is for July and the Year 9 is for 2019

Example: ES2X913, would be the contract code for BTIC+ (ES2) and would deliver the second-nearest E-mini S&P 500 futures contract (March 2020, ESH0) at a basis to the S&P 500 official index close on November 13, 2019 – where the Month Code X is for November and the Year 9 is for 2019

What are the vendor codes?

 

Underlying Index (Bloomberg)

CME Globex

Bloomberg*

Thomson Reuters

BTIC+

SPX Index

ES1

ES1BTIC yyyymmdd Index

tbd

SPX Index

ES2

ES2BTIC yyyymmdd Index

tbd

TACO+

SPX Index

EQ1

EQ1TACO yyyymmdd Index

tbd

What are the trading hours for the BTIC+ and TACO+?

Sunday – Friday 6:00 p.m. - 5:00 p.m. Eastern Time (ET), 5:00 p.m. - 4:00 p.m. Central Time (CT)

BTIC+: Termination of trading occurs on the exchange business date immediately preceding the delivery date at 5:00 p.m. ET.

TACO+: Termination of trading occurs on the Exchange business date immediately preceding the delivery date at 9:30 a.m. ET.

How is the daily settlement price of the BTIC+ and TACO+ futures determined?

Daily settlement price for each expiration will be determined independently based on their own trading activities.

Are these eligible for block trading?

Yes, both BTIC+ and TACO+ contracts are eligible for block trades, subject to a minimum threshold of 500 contracts.

How will the final delivery of the underlying ES futures be administered?

Trading of the BTIC+ and TACO+ futures contracts will terminate on the day prior the delivery date (last trade date). On the delivery date, BTIC+ or TACO+ position will be transformed by CME Clearing into a BTIC or TACO transaction. This transformation occurs at the last settlement value of the respective BTIC+ and TACO+ contracts. If the transformed BTIC or TACO position is held throughout the trading session on delivery date, the final BTIC or TACO position will be processed as per normal and the resultant outright E-mini S&P 500 futures contract will be delivered.

The processing of the transformed BTIC and TACO trades on delivery date, and therefore the resultant ES futures contracts, will be at the daily settlement value of the BTIC+ and TACO+ on last trade date. The daily settlement value on last trade date can be at a different spread price than the original traded basis on the BTIC+ or TACO+ transaction. In this circumstance the accumulated variation margin on the carried BTIC+ or TACO+ position will offset the differential between the traded basis traded and the one applied to the processed E-mini S&P 500 futures contract on delivery date.

Watch a video about the variation margin and processing of BTIC+ and TACO+.

In the example below, the daily settlement for the last trade date was 4.0, meaning that it was 2.0 points higher than the originally transacted ES1U913 at 2.0.

Fees, Margin, and Miscellaneous

What are the fees?

Fees for BTIC+ and TACO+ transactions will be levied at applicable rates under the EFP/EFR/Block/BTIC/TACO transaction types for E-mini Equity Index futures.

See the CME Fee Schedule for the latest figures.

In which division will BTIC+ and TACO+ reside?

As far as membership, they will reside in the IOM Division.

Will there be additional market data fees to trade BTIC+ and TACO+?

Market participants who currently subscribe to CME DCM market data will receive the BTIC+ and TACO+ data as part of that existing package at no additional charge.

How will initial margin work for BTIC+ and TACO+ contracts?

A BTIC+ or TACO+ futures contract will be treated as its own position until the delivery date, and will require its own initial margin to be posted.

This differs from the traditional BTIC and TACO contracts, because when you trade BTIC or TACO clears into an E-mini S&P 500 futures contract that same day. Therefore you are inherently carrying an ES position immediately and are charged margin at the next margin cycle, never having to post any unique margin for BTIC or TACO transactions.

How will variation margin work?

Each BTIC+/TACO+ will have its own daily settlement price, and will require variation margin based on the changes in daily settlement.

Watch a video about the variation margin and processing of BTIC+ and TACO+.

Where can I find more information on BTIC+ and TACO+?

Basis Trade at Index Close (BTIC)

See how BTIC enables market participants to execute a basis trade relative to the official close.

Learn more:

TACO

Better manage risk around the cash open with TACO

Learn more: