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

This Advisory Notice supersedes NYMEX & COMEX Market Regulation Advisory Notice RA1104-4 from April 4, 2011, and is being issued based on the introduction of Trading at Marker (“TAM”) trading on CME Globex based on the London market close at 4:30 p.m. London time (“LT”).  TAM trading will be available in the first three contract months of NYMEX Light Sweet Crude Oil, New York Harbor No. 2 Heating Oil, RBOB Gasoline and Brent Crude Oil Last Day Financial futures, and in intra-commodity spreads between the first and second, first and third and second and third contract months in those products.  TAM trading will launch on Monday, June 13, 2011. 

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 will use a marker price, whereas TAS trading uses the Exchange-determined settlement price for the applicable contract month.  The initial marker price for purposes of TAM trading on CME Globex will be the London market close, which corresponds to 4:30 p.m. LT. 

For TAM trading in NYMEX Brent Crude Oil Last Day Financial futures, the marker price will represent a weighted average of trades in the ICE Brent Crude Futures Minute Marker from 4:29 – 4:30 p.m. LT.

For TAM trading in NYMEX Light Sweet Crude Oil, New York Harbor No. 2 Heating Oil and RBOB Gasoline futures, the marker price in the front month will be the volume weighted average price (“VWAP”) of outright trades on CME Globex for the one-minute period from 4:29 – 4:30 p.m. LT, rounded to the nearest tradable tick.  The marker price in the second and third contract months will be based on prices implied from the VWAPs of the one-month and two-month spreads that are traded on CME Globex during the one-minute period from 4:29 – 4:30 p.m. LT, subject to certain volume thresholds.  Additional information on the determination of the TAM prices is set forth in today’s release of CME Group Special Executive Report S-5788.

As with TAS trading, parties will be 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 trading in these four products will be available exclusively on CME Globex.

The list of TAS- and TAM-eligible products and contract months appear in Sections 6 and 7 and the revised text of Rule 524 appears in Section 8 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 transactions may be executed at the current day’s marker price or at any valid price increment ten ticks higher or lower than the marker price.  TAM transactions may occur only on CME Globex.

MO transactions in pit-traded Copper futures are transactions which are priced at that day’s settlement price for the contract.

All market participants are reminded that any trading activity that is intended to unfairly affect or to attempt to unfairly affect a settlement or marker price to benefit a TAS, TAM or MO position, including a TAS 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 substantially detrimental to the interests or welfare of the exchange

Any Market Regulation Department investigation of suspected manipulative pricing involving TAS, TAM or MO trades will include review of such positions acquired by market participants and whether the offset of those positions during the close or during the time period used to determine a marker price was disruptive, collusive, and/or caused or attempted to cause aberrant price movement during these periods. 

2.         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 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 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.

3.         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, 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. 

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, New York Harbor No. 2 Heating Oil, RBOB Gasoline and Brent Crude Oil Last Day Financial 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 price of the contract. 

            Example 1: 

A July 2011/August 2011 (N/Q) Light Sweet Crude Oil calendar spread trades at   TAS -1.  Assume the July contract settles at 99.59 and the August contract     settles at 100.06.

The July leg will be priced at the July settlement price of 99.59.  The August leg  will be priced at 100.07, which is the August settlement price of 100.06 minus the             TAS price increment of –1 (100.06 minus –.01 = 100.07).

            Example 2: 

            A July 2011/August 2011 (N/Q) New York Harbor No. 2 Heating Oil calendar spread trades at TAM +/- 0.  Assume the July marker price is 2.9213 and the         August marker price is 2.9350.

            The July leg will be priced at the July marker price of 2.9213.  The August leg will be priced at 2.9350, which is the August marker price. 

            Example 3:      

         A June 2011/August 2011 (M/Q) Henry Hub Natural Gas calendar spread trades at TAS +3.  Assume the June contract settles at 4.345 and the August contract           settles at 4.437.

The June leg will priced at the June settlement price of 4.345.  The August leg will be priced at 4.434, which is the August settlement price of 4.437 minus the TAS price increment of +3 (4.437 minus +.003 = 4.434). 

4.         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.

5.         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.

6.         TAS-Eligible Products and Contract Months

Pit-Traded Contracts

Light Sweet Crude Oil

               spot (except on the last trading day), 2^nd, 3^rd and 7^th 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), 2^nd and 3^rd months

               nearby/second month, second/third month and nearby/third month calendar spreads

Henry Hub Natural Gas

               spot (except on the last trading day), 2^nd and 3^rd months

               nearby/second month, second/third month and nearby/third month calendar spreads

Pit-Traded Contracts - continued

Henry Hub Natural Gas Swap

               spot (except on the last trading day), 2^nd and 3^rd months

RBOB Gasoline

               spot (except on the last trading day), 2^nd and 3^rd months

               nearby/second month, second/third month and nearby/third month calendar spreads

European Gasoil (ICE)

               spot (except on the last trading day), 2^nd and 3^rd 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

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), 2^nd, 3^rd and 7^th 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)

     BBT             Brent Crude Oil Penultimate Financial                                              BB

                        Spot, 2^nd and 3^rd months                                                                    

Commodity

Code on           Product Name and Contract Months                                           Cleared Product

CME Globex

     HOT             New York Harbor No. 2. Heating Oil                                                   HO

                        spot (except on the last trading day, 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads

     NGT             Henry Hub Natural Gas                                                                      NG

                        spot (except on the last trading day), 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads      

     NNT             Henry Hub Natural Gas Swap                                                            NN

                        spot (except on the last trading day), 2^nd and 3^rd months

     RBT             RBOB Gasoline                                                                                 RB

                        spot (except on the last trading day), 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads

     7FT              European Gasoil (ICE)                                                                       7F

                        spot (except on the last trading day), 2^nd and 3^rd 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)

     XCT             NYMEX Crude Oil MACI Index                                                           XC

                        spot (except on the last trading day)

     RET             REBCO                                                                                              RE

                        spot (except on the last trading day), 2^nd and 3^rd 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

     CLL              Light Sweet Crude Oil                                                                       CL

                        spot, 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads

     BZL              Brent Crude Oil Last Day Financial                                                    BZ

                        spot, 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads

     HOL             New York Harbor No. 2. Heating Oil                                                   HO

                        spot, 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads

     RBL             RBOB Gasoline                                                                                 RB

                        spot, 2^nd and 3^rd months and

                        nearby/second month, second/third month and nearby/third month calendar spreads

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. 

8.         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 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.

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.