Adoption of New CME and CBOT Rule 524 (Trading at Settlement (TAS) Transactions) for Certain Grain, Oilseed, and Livestock Products

(This SER supersedes SER – 7350 dated May 11, 2015 and amends the effective date from trade date June 8, 2015 to June 15, 2015.)

Effective on Sunday, June 14, 2015, for trade date Monday, June 15, 2015, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME”) and The Board of Trade of the City of Chicago, Inc. (“CBOT”) (collectively, the “Exchanges”) will adopt New Rule 524 (“Trading at Settlement (“TAS”) Transactions”)[1]. In connection with the adoption of the new Rule, effective on that date:

·         CME will begin to permit orders for the first two listed contract months and the spread between those two contract months in Live Cattle, Feeder Cattle and Lean Hogs futures to be entered into CME Globex for pricing at the settlement price or any valid price increment four ticks higher or lower than the settlement price; and

·         CBOT will begin to permit orders for the first three listed contract months and certain spreads in Corn, Soybean, Wheat, KC HRW Wheat, Soybean Oil and Soybean Meal futures to be entered into CME Globex for pricing at the settlement price or any valid price increment four ticks higher or lower than the settlement price.

In addition to the adoption of new Rule 524 (see Appendix 1), the Exchanges will include a link in the Interpretations & Special Notices Section of CME and CBOT Chapter 5 (“Trading Qualifications and Practices”) to a new TAS Table that will identify the products, contract months and spreads that will be eligible for execution on CME Globex and priced pursuant to the provisions of Rule 524 (see Appendix 2).

For the aforementioned CME and CBOT products, TAS will be available on nearby contracts and spreads that contain the nearby contract through the end of trading two (2) business days prior to the named nearby contract month (e.g., for products with a July contract expiration, TAS will be available on the July 2015 contract month through the end of trade on June 29, 2015).  Once TAS functionality expires on a nearby contract month and spreads containing the nearby contract month, on the next business day (one business day prior to the nearby contract month), TAS functionality is added to a new contract month and spreads.

TAS orders may be entered into CME Globex for Corn, Soybean, Wheat, KC HRW Wheat, Soybean Oil and Soybean Meal during prescribed pre-open hours and from 19:00 to 07:45 and from 08:30 to 13:15 Central Time (“CT”)[2].  All resting TAS orders at 07:45 will remain in the book for the 08:30 opening unless cancelled.

TAS orders may be entered into CME Globex for Live Cattle, Feeder Cattle, and Lean Hogs during prescribed pre-open hours and from 08:00 (09:05 on Mondays or Tuesdays that follow a Monday holiday) to 13:00 CT.

As set forth in the TAS listing cycle, certain intra-commodity calendar spreads are permitted to be entered into CME Globex for TAS pricing.

The legs of TAS spread trades executed on CME Globex at zero or at a negative differential will be priced as follows:

·         If the spread trades at zero, each leg will be priced at the settlement price for the respective contract months; and

  ·         If the spread trades at a negative differential, the nearby leg of the spread will be priced at the settlement price for that contract month.  The far leg of the spread will be priced at the settlement price for that contract month minus the allowable TAS price increment traded.

The legs of TAS spread trades executed on CME Globex at a positive differential will be priced as follows:

·         The far leg of the spread will be priced at the settlement price for that contract month.  The nearby leg of the spread will be priced at the settlement price for that contract month plus the TAS price increment traded.

Notwithstanding that CME Live Cattle, Feeder Cattle and Lean Hogs futures and CBOT Corn, Soybean, Soybean Oil, Soybean Meal, Wheat and KC HRW Wheat futures are subject to daily price limits, market participants executing a trade in one of those products which is priced at a tick increment above or below the settlement price (negative 4 through negative 1 or positive 1 through positive 4) may result in a final trade price above or below the daily price limit.

Additional information regarding TAS is available in a Market Regulation Advisory Notice available here:

http://www.cmegroup.com/rulebook/rulebook-harmonization.html

and on the CME Group Website here:

http://www.cmegroup.com/agtas

Please click here for complete SER-7350R.