In connection with certain of its contracts, ICE Futures U.S. proposes to reduce the time offsetting orders must be exposed to the market prior to activating a crossing order. Currently, when a crossing order is entered into the exchange’s electronic trading system, a request for quote message is automatically generated, and the order is exposed to the market for 5-15 seconds depending on the product. After the mandatory waiting period, if there is no better bid or offer, both sides of the crossing order are executed at the submitted price. The proposed rule amendment will establish a uniform five-second waiting period for all products. This will affect agricultural, precious metals and other financial options where the waiting period currently is 15 seconds. The exchange claims that adoption of this proposal will, among other things, help hedging by certain market participants. The new rule, unless objected to by the Commodity Futures Trading Commission, will be effective January 5, 2015.
Compliance Weeds: Both CME Group and ICE Futures U.S. have detailed requirements related to pre-execution communications and minimum required times orders must be exposed to the market prior to crossing. Violations of these requirements could result in enforcement actions both by the exchanges and, in theory, the Commodity Futures Trading Commission (as a violation of its prohibition against non-competitive executions unless undertaken in accordance with rules of an exchange). Click here to access a CME Group cross trade overview, and here to access a recently issued Pre-Execution Communications FAQ by ICE Futures U.S.