Effective April 18, 2005 CME will institute a new Messaging Policy which creates fair business guidelines by which customers will receive a surcharge for overly high message rates sent to the CME Globex platform. The policy has been tailored to the needs of each market. CME will define benchmarks based on a two-dimensional approach per product: Message Quality (Trade Ratio) and Liquidity (Volume Ratio). Each Class A firm (active or inactive clearing member firms which maintain relationships with the CME Clearing House) must not exceed product specific benchmarks based on the following ratios:
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Message Quality or Trade Ratio: The Trade Ratio is based on the number of messages (orders, modifies and cancels) submitted for each matched trade. To calculate the Trade Ratio benchmark for a given product, CME will compare the total messages to matched transactions during RTH hours and factor in a percentage variation. The Trade Ratio cannot exceed a limit of 25:1.
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Liquidity or Volume Ratio: The Volume Ratio is based on the number of messages submitted for each executed contract. To calculate the Volume Ratio benchmark for a given product, CME will compare the total messages to volume during RTH hours and factor in percentage variation. The Volume Ratio cannot exceed a limit of 25:1.
Product benchmarks will be calculated based on the aggregate of all messages and trades during the first fifteen (15) business days of the prior month and will be posted to this web page to apply to the following month.
If a Class A firm does not pass both of the above tests they will be issued two "warnings" within a rolling thirty (30) business day period. A $2,000 surcharge, per product, per session, per Class A firm will be applied where the Trade Ratio or Volume Ratio is exceeded and the two warnings have been exhausted. CME-designated Market Makers will be assigned different benchmarks.
Reporting
CME will provide each Class A firm with reports T + 1 for violations which contain trading activity information for the Class A firm segregated by product, with a pass/fail status.
Schedule
CME will implement this policy beginning Monday, April 18, without surcharges. Surcharges (with the two session warnings) will begin effective Friday, July 1, 2005.
Product Benchmarks
Each month's product benchmarks will be posted to the web on this page. Please see sample product benchmarks derived from March's trading activity.
Automated Trading Systems (ATS)
Although this policy does not specifically target ATS, all users of ATS systems that are active in CME Globex products must register their system with CME using the new Schedule 8 of the CME Customer Connection Agreement. The executed Schedule 8 must be returned to your CME Globex Account Manager no later than April 18, 2005 for existing ATS, and prior to implementing any new ATS. An ATS is an electronic system or computer software which is programmed to generate and send orders into CME Globex in an automated or semi-automated fashion.
More Information
Please refer to CME's new Messaging Policy document for additional information. Please contact CME Globex Account Management with any questions at 312-634-8700, or at 44-207-623-2550 in Europe.