CME Group increased the mandatory waiting time to 15 seconds between entry of a request for quote and a request for cross in Chicago Mercantile Exchange and Chicago Board of Trade interest rate options executed on its Globex platform. This change was scheduled to be effective August 24.
Compliance Weeds: CME Group has strict rules regarding pre-execution discussions (ICE Futures U.S. and other designated contract markets have similar requirements). These include discussions that relate to the size, side of market or price of an order or a potential order. In general, pre-execution communications are prohibited in connection with transactions executed on the live trading floors of the CME (subject to limited exceptions), CBOT, New York Mercantile Exchange and Commodity Exchange. Pre-execution communications are permitted for transactions executed on CME Globex for all CME, NYMEX and COMEX futures and options products. Pre-execution communications for some (but not all) CBOT futures and options products executed on Globex are also permitted, but a different rule may apply to a futures contract and the related options contract (e.g., futures and options on grain and oilseed). A person on whose behalf a pre-execution communication occurs must have previously consented to such communication, and no person involved in a pre-execution communication may disclose the details of such conversation to any other person or take advantage of the information discussed in such conversation, except as necessary to execute the trade. Other conditions also apply. CME’s pre-execution communication rules are easy to misapply, but still must be studied and followed strictly. (See the link in the “For More Information” section below for a helpful CME Market Regulatory Advisory Notice on pre-execution communications.) Moreover, the Commodity Futures Trading Commission made clear again last week that unauthorized pre-execution discussions may cause a futures trade to be deemed a non-competitive trade in violation of applicable law and its rules. (Click here to see the article elsewhere in this edition of Bridging the Week entitled “CFTC Fines FirstRand Bank for Unlawful Pre-Execution Discussions Related to Soybean Futures Trades.”)