Pre-execution communications are defined as communications between market participants for the purpose of discerning interest in the execution of a transaction prior to the exposure of the order to the market. Any communication that involves discussion of the size, side of market or price of an order, or a potentially forthcoming order, constitutes a pre-execution communication.

CME Rule 539.C. allows parties to engage in pre-execution communications with regard to transactions executed on the CME Globex platform where one party wishes to be assured that a contra party will take the opposite side of the order provided they follow the appropriate guidance protocols for execution.

Pre-execution communications are prohibited in connection with pit transactions executed on the trading floor, with the sole exception of CME options on S&P futures transactions executed in accordance with CME Rule 549 (Large Order Execution Transactions – (LOX Orders)).

Pre-execution communications are permitted in all CME, CBOT, NYMEX and COMEX futures and options products, and CBOT invoice swap spreads traded on CME Globex.

After engaging in pre-execution communications, when the parties agree to a price and quantity of their transaction to be executed on CME Globex, they will need to follow the appropriate protocol for that particular product.

See the permissible protocol(s) for a particular product.

The use of an ineligible cross protocol for a particular product or group of products constitutes a violation of Rule 539.C.

There are three types of crossing protocols.

The first crossing protocol is a Request for Quote (RFQ) + Request for Cross (RFC) Cross, or R-Cross. Subsequent to the pre-execution communications, an RFQ for the particular option or spread or combination involving an option must be entered into CME Globex. Thereafter, the RFC order must be entered following the designated wait period after the entry of the RFQ to proceed with the trade.

The RFQ and the RFC order must be entered within the same trading session.

Failure to enter the RFC order within the designated wait period after the entry of the RFQ will require a new RFQ to be entered prior to the entry of the RFC order, which must be entered in accordance with the time parameters just described in order to proceed with the trade. Neither the price nor the quantity of the orders on the RFC is displayed to the marketplace. When using the R-Cross protocol, all orders will interact with the orderbook prior to crossing if the price of the cross is at or worse than what is showing in the market at the time.

Numerous Independent Software Vendors (ISVs) support the R-Cross. For market participants using CME Direct, functionality built into the application will prevent the entry of the RFC outside of the prescribed time requirements. This functionality is intended to facilitate compliance with the relevant entry time requirements.

In a Globex Cross, or G-Cross, the order of the party that initiated the pre-execution communications must be entered into CME Globex first. The second party’s order may not be entered into CME Globex until a period of five seconds has elapsed from the time of entry of the first order. No RFQ is required in a G-Cross.

The list of eligible products and cross types is available.

When using the G-Cross protocol, if the price of the cross is at, or worse than, what is showing in the market at the time all orders will interact with the orderbook prior to crossing.

The final protocol is called the Committed Cross, or C-Cross. In a C-Cross, subsequent to the pre-execution communication, a RFC order, which contains both the buy and the sell orders, must be entered into CME Globex. Upon entry of the RFC, CME Globex will display an indication that a cross has been committed to the market and will occur in five  seconds. The matching algorithm for the C-Cross will depend on whether the group of products is eligible for a better price and volume match (BPVM).

See the Table for information on products eligible for a BPVM allocation and the specific match percentage applicable to those products.

The list of eligible products and cross types is available. C-Cross functionality is supported on CME Direct, and may be supported by other ISVs.