Inter-Exchange Block Spread Trades in CME E-mini MSCI Emerging Markets Index Futures and CME E-mini MSCI EAFE Index Futures

As previously announced in CME Group Special Executive Report S-5662 from March 16, 2011, CME will delist the E-mini MSCI Emerging Markets Index futures and E-mini MSCI EAFE Index futures on June 19, 2011, for trade date Monday, June 20, 2011.  Market participants interested in liquidating positions on CME and establishing positions in the equivalent contracts on NYSE Liffe U.S. can do so in accordance with each exchange’s rules.  At CME, positions may be liquidated in the competitive market or via bona fide privately negotiated transactions. 

Block trading in CME MSCI products by eligible market participants is permitted at a minimum block quantity of 50 contracts.  In accordance with exchange rules, a market participant may execute a block trade on CME and an equal and opposite block trade in the same product and contract month on another exchange provided that each block trade is independently consummated opposite a different counterparty.  Additionally, a market participant may engage in the purchase and sale of block trades opposite the same counterparty on CME and another exchange provided that each block trade in the product is executed in a different contract month.  For example, it is permissible for a party to purchase a block in the June 2011 contract at CME and to sell a block in the September 2011 contract at another exchange opposite the same counterparty.

Market participants are reminded, however, that CME Rule 432.D. prohibits parties from engaging in false or fictitious trades, and it is therefore impermissible to execute a block trade contingent upon an agreement to reverse that trade in the equivalent contract at CME or at another exchange.  Accordingly, parties may not execute a block trade in CME E-mini MSCI Emerging Markets Index futures or CME E-mini MSCI EAFE Index futures that is contingent on reversing the trade by executing a block trade in either of these contracts in the same contract month at CME or the equivalent contract at another exchange.  Contingent blocks involving equal and opposite trades in equivalent contracts between the same two counterparties do not constitute bona fide transactions exposed to market risk and, as such, are not permitted.

Questions regarding this Special Executive Report should be directed to Robert Sniegowski, Associate Director, Rules & Regulatory Outreach, at 312.341.5991.

For media inquiries concerning this Advisory Notice, please contact CME Group Corporate Communications at 312.930.3434 or news@cmegroup.com.