cme group customer forum · 25.02.2018 · owednesday fx options add new short -dated maturities...

© 2018 CME Group. All rights reserved.

CME Group Customer Forum

Spring 2018 SingaporeLondonUS Webinar


• Product Updates- Interest Rates Futures- CME FX- Equities- Commodities- Metals Performance- Energy Products

• Market Regulation

• Globex Technology Roadmap

• Customer Tools & GUIs

• Partner Updates

• Q&A

Agenda

2


• Product Updates- Interest Rates Futures

• SOFR Futures• CME-CBOT STIR Spreads

- CME FX- Equities- Commodities- Metals Performance- Energy Products




• Partner Updates

• Q&A

Agenda

3


Strong Liquidity for Rates Futures & Options in Volatile Markets

4

SOFR Futures – Launching May 7th

• 1month SOFR contracts (SR1): calendar month rolls, 7 listed (similar to FF futures)• 3month SOFR contracts (SR3): March quarterly IMM rolls, 20 listed (similar to ED)• Full details available at: http://www.cmegroup.com/trading/interest-rates/secured-

overnight-financing-rate-futures.html

Driven by deep liquidity and outsized growth in buy-side participation, rates volume has surged to 12.6M contracts/day YTD in the first 2 months. +54% vs. 2017.

Volume Records• Interest Rate complex ADV:15.8M in Feb. Options ADV: 4M in Feb• Invoice Spreads ADV: 114K YTD. Ultra 10 ADV: 310K in Feb• Treasury futures ADV: 6.7M in Feb• *Treasury futures notional volume as of % of underlying cash: 97.6%

February Open Interest and Large OI Holder Records• Total IO: 87M contracts, +36% YTD• Futures IO: Eurodollars (17M). Fed Funds (2.2M), 2 Yr (2.1M), 5 Yr (3.9M), 10 Yr (4M),

Ultra 10 Yr (628K), and Ultra Bond (1M)• Options OI: EDs (49M), 5 Yr (2.3M), 10 Yr (5.3M)• Futures LOIH: total (2.086), 2 Yr (345), 5 Yr (355), 10 Yr (444), Ultra 10 Yr (94), and Ultra

bond (129)

http://www.cmegroup.com/trading/interest-rates/secured-overnight-financing-rate-futures.html


Globex Symbol Example

Spread Symbol

Implied Y/N Front Leg Back Leg Leg Ratio Launch Date

ZQJ8K8-GEH8 EF No Fed Funds Eurodollars (3+3) : 10 March 12SR3H8-GEH8 IS Yes SOFR 3-Month Eurodollars 1:1 May 7SR1H8-ZQH8 IS Yes SOFR 1-Month Fed Funds 1:1 May 7SR1J8K8-SR3H8 EF No SOFR 1-Month SOFR 3-Month (3+3) : 10 May 7ZQJ8K8-SR3H8 EF No Fed Funds SOFR 3-Month (3+3) : 10 May 7

5

CME Group Short Term Interest Rate Inter-Commodity Spreads

Eurodollar Fed Funds

SR3 SR1

10:6 Ratio; 4 Listed

(Launching March 12)

1:1 Ratio;20 Listed



Spread Weightings• Fed Funds and 1-Month SOFR Futures are $41.67 DV01 contracts

• Eurodollars and 3-Month SOFR Futures are $25 DV01 contracts

• To balance DV01 weighting, spreads between instruments with different DV01s will be weighted to have 6:10 leg ratios to balance the corresponding $41.67 : $25 DV01s

• For weighted spreads, Legs are arranged to match exposures between IMM dates: 1 quarterly Eurodollar or 3-Month SOFR Future spread against the next 2 Fed Fund or 3-Month SOFR Futures contract months (i.e. 3 April FF + 3 May FF vs. 10 March ED)

1:1 Ratio;7 Listed


STIR Analytics Tools• STIR Spreads Tool: www.cmegroup.com/stiranalytics• Displays synthetic price history, end-of-day settlement, and implied rates• Will be enhanced to include SOFR spreads after launch

6

http://www.cmegroup.com/stiranalytics






• Partner Updates

• Q&A

Agenda

7


CME FX ProductsNotional nearing 40% of all ECN-traded FX: Recognition of advantages offered by listed futures driving growth

8

• INRUSD (“SIR”) one of the fastest growing contractso End-Feb: ADV approx. $416BB; +340% YoY

• CME Wednesday FX Options:o Wednesday FX options add new short-dated maturities with Wednesday expiries, allowing for

trading opportunities around mid-week events such as FOMC, BOC, and RBA announcements

o Contracts are available on EUR/USD, JPY/USD, GBP/USD, AUD/USD, CAD/USD with exact product specification as weekly, serial, and quarterly options, except with Wednesday expiration


CME FX Link - Spot FX Basis Spreads at CME GroupLAUNCHED: MARCH 26th

• Enables electronic trading of an OTC Spot FX transaction and a CME Group FX futures contract via a single spread trade on CME Group’s liquid and transparent Globex platform

• Traded as the differential between FX Futures and OTC Spot FX, resulting in simultaneous execution of a FX Futures contract and an OTC Spot FX transaction

• Central prime broker intermediates OTC Spot FX transactions resulting from the spread, allowing participants to leverage existing OTC FX interbank credit relationships and prime brokerage network

• Initial scope includes spreads between OTC Spot FX and the front three expiry months of the following currency pairs: EURUSD, JPYUSD, GBPUSD, CADUSD, AUDUSD, MXNUSD

CME FX Link enables market participants to efficiently realize the capital, margin and operational benefits of CME FX Futures

CME FX Link is the first ever central limit order book for trading spreads between OTC FX Spot and CME FX Futures, seamlessly connecting the two markets

Access the deep liquidity and firm pricing offered in CME Group’s marketplace

Efficiently establish and hold forward exposures via capital and margin advantaged CME FX Futures

Better manage and optimize margin and credit lines across CME FX Futures and OTC Spot FX transactions

9


Spot FX Basis Spread Details & WorkflowBasis Spread Quotation • Quoted and traded as the difference between

futures and spot as represented with both legs in OTC price convention

Basis Spread Construction• Buyer of spread buys CME FX Futures and

sells OTC Spot FX, seller sells CME FX Futures and buys OTC Spot FX

• For FX future currency pairs that are quoted inverse to OTC FX convention*. Buyer of spread sells FX futures and buys OTC FX spot and vice versa for a seller of spreads in the above listed pairs

Basis Spread Leg Pricing• Futures leg price = last Globex Price

• OTC Spot FX leg price = Futures leg price -Traded Basis Spread

Basis Spread Transactions • Basis spread results in simultaneous execution

of FX Futures cleared by CME Clearing, and OTC Spot FX subject to existing OTC FX enabled via central intermediation by the Central FXPB (see details on next slide)

CME FX Link Trade Workflow

*Inverse Pairs: JPY/USD, CAD/USD, MXN/USD

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• New market making program driving liquidity across spreads and outrights• Implied pricing enabling more optimal availability of liquidity across the curve• Increased ADV and open interest with increased participant set• 250 customers already trading across Buyside, Banks, Retail and Corporates• A single-day record of 23,199 contracts was achieved on 11 January 2018

FX Monthly Futures – Now with “Implied Pricing”

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• GREENWICH ASSOCIATES: TCA REPORT ON FX FUTURES- Excerpt: “The results show that FX investors can find significant cost savings (upward of 75% in

some cases) by trading futures rather than executing a trade in the OTC markets. For those entities subject to Basel III costs, switching to futures from OTC trades could garner even greater savings.”

- The full paper is available at: http://pages.cmegroup.com/rs/319-HPA-933/images/Bright-Future-FX-Futures.pdf?aliId=124137297

• CME GROUP: REPLICATING OTC FX POSITIONS WITH CME FX FUTURES- Excerpt: “For OTC FX market practitioners seeking capital and cost-effective means to address

new requirements, CME FX futures, traded on a highly liquid regulated exchange, offer an attractive alternative to many OTC FX trading strategies.”

- The full paper is available at: http://www.cmegroup.com/education/replicating-otc-fx-market-positions-with-cme-fx-futures.html?aliId=124137275

Recently Published FX Whitepapers

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http://pages.cmegroup.com/rs/319-HPA-933/images/Bright-Future-FX-Futures.pdf?aliId=124137297

http://www.cmegroup.com/education/replicating-otc-fx-market-positions-with-cme-fx-futures.html?aliId=124137275


• Product Updates- Interest Rates Futures- CME FX- Equities

• Bitcoin Futures• Japanese Index Futures• BTIC

- Commodities- Metals Performance- Energy Products




• Partner Updates

• Q&A

Agenda

13


CME Bitcoin Futures Highlights

14

Recorded highest ADV month in March, 2,578 BTC contracts (equivalent to 12,890 bitcoin) traded per day, up 61% since February

March 27, 2018 - highest single day volume 4,381 BTC contracts (equivalent to 21,905 bitcoin) Most BTC spread transactions in a single month, 2,696 BTC contracts Asian Hour volume continues to grow, only 53% of BTC volume is traded during US RTH since

launch First block trade this year, 68 contracts on March 27, 2018 23 FCMs have cleared the product, 1,100+ unique accounts have traded BTC since the launch


Bitcoin Futures Average Volume by Hour15


Japanese Equity Index Futures16

Nikkei 225 Index Futures – Strong momentum

Nikkei 225 Index Futures Implied Spread – Launched 30 Oct 2017CME Group introduced a new inter-commodity spread contract between JPY- and USD-denominated Nikkei 225 Index futures, the world’s first cross currency implied spread product via electronic matching algo. Executing the trade via the new implied functionality ensures both legs of the spread are executed simultaneously without a slippage risk and will provide an efficient hedging tool to manage forward quanto risk.

- Long 1 spread contract will represent a purchase of 1 Nikkei 225 USD contract (NKD) and a sale of 1 Nikkei 225 Yen contract (NIY).

- Benefits • Reduced legging risk• Increased liquidity in the outright orderbooks• Tighter spreads• 3-way order books interaction

CME Launched JPY- and USD- denominated Nikkei 225 Index futures contracts on Globex in 2004, and now it trades a combined ~80K contracts* per day, offering investors a deep liquidity and the venue to manage the exposure to Japanese equities for 23 hours around the clock.

• 2018 YTD ADV (80,172 contracts; USD 8.3BN) up 41% vs. 2017 ADV 56,664 contracts


Japanese Equity Index Futures17

TOPIX Futures – NEW!CME launched TOPIX Futures on February 5th 2018, which is a top 10 global benchmark by AUM. The new TOPIX futures offers global investors an additional product to capture benchmark index and spreading opportunities in their Japanese equity index exposure

BTIC (Basis Trade at Index Close) on TOPIX was launched together, providing a unified vehicle to replicate cash close of the Japanese stocks with greater transparency.

Contract Specification


Record monthly ADVs in 2018 : ESTMarch 36,261 ADV, +227% vs 2017February 42,229 ADV ** January 38,120 ADV

Record volume day : 77,884 EST contracts traded ($10.2 billion notional) on February 9th, surpassing the previous record of 75,212 contracts achieved earlier that same week on February 5th. In fact, there were 7 days in which EST volume exceeded 50K contracts traded in Feb, 17 days exceeded 30K contracts in Mar.

Liquidity continues to build on-screen 90% of BTIC volume traded on Globex in March. 85%+ thus far in 2018, up from 80% in 2017 and 64% in 2016.

Basis Trade at Index Close

18

BTIC volume comprised over 36% of the MOC value traded at NYSE and NASDAQ, on average, in March. By comparison, BTIC averaged 14% of the MOC value in 2017.


• Product Updates- Interest Rates Futures- CME FX- Equities- Commodities

• Black Sea Wheat• Palm Oil Suite

- Metals Performance- Energy Products




• Partner Updates

• Q&A

Agenda

19


Black Sea & Australian Wheat Volumes & Open Interest• >13K lots of Black Sea Wheat futures (BWF) traded since launch, all as blocks• BWF record trading day 1 March – 1900 lots • BWF Open Interest 10000 lots, out to December 18• >1400 lots of Australian Wheat traded, OI of 1,540 lots out to May 18

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Why Trade These Contracts?

• Black Sea and Australia global top 5

wheat exporters, regional price setters

• Manage exposure to the Black Sea &

Australian wheat markets 12 months out

• Financially settled using Platts

assessments (no physical deliveries)

• Black Sea vs Australia Wheat arbitrage

opportunities. Margin offsets of 65%

• Participation from physical traders

continues to increase, funds participating

21

Further Information:

Live trades (size, price) on block futures available at: http://www.cmegroup.com/tools-information/quikstrike/

Black Sea Wheat: http://www.cmegroup.com/blacksea

Australian Wheat: http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/australian-wheat.html

• Open interest rising rapidly –

combined >11k, out to December

2018

• Price settlements provided by CME

on a daily basis for all months

• Traded as block futures off-screen

• Numerous brokers providing block

futures liquidity to the market

http://www.cmegroup.com/tools-information/quikstrike/

http://www.cmegroup.com/blacksea

http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/australian-wheat.html


• The group of 6 products broke a few records in 2017. Open Interest (O.I.) continued to grow with both monthly and quarterly end records of 30,702 and 30,198 contracts set in May and Q2 respectively

• Q2 recorded the second highest volume quarter at 35,352 contracts cleared

• Futurization is occurring with 19% of the O.I. now in futures, up from 7% in 2016

22

2017 Palm Suite Performance Highlights

• On a full year basis, O.I. continues to hold steady while volumes dipped only slightly to 111,546 contracts. Comparatively, volumes at global palm futures markets declined significantly, dropping by almost half, or -45.7%*

• Since launch, over 340,000 contracts (representing 8.5 million metric tons) have cleared

• 2017 volumes cleared at the CME represent approximately 14% of annual Malaysian CPO production.

• O.I. is extended out till Dec 2018. Contracts are now available out till calendar 2022 and can be traded in both quarterly and yearly strips

Palm Volume, Open Interest

*FIA data, Jan to Nov

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23

Relationship Based TradingThe Agricultural complex has allowed crossing on CME Globex and block trades across all products starting January 8, 2018. This will allow for bi-lateral or brokered conversations prior to the execution of the orders, including discussions concerning price, size and direction.

This will help facilitate :

• Large transactions relative to the existing

order book liquidity

• Trading in unique instruments

• e.g., farther dated contract months,

crush options, deep in-the-money

strikes

• Executing a complex order type

• strip spreads, broken crushes, multi-

legged options

• Sourcing liquidity during “off hours”

ETH RTHGrains & OilseedsFutures Blocks, R-cross, G-cross Blocks, R-cross, G-cross

Options Blocks, R-cross, NO G-cross Blocks, R-cross, NO G-cross

Livestock

Futures Blocks Blocks, R-cross, G-cross

Options Blocks Blocks, R-cross, NO G-cross

Dairy

Futures Blocks, R-cross, G-cross Blocks, R-cross, G-cross

Options Blocks, R-cross, NO G-cross Blocks, R-cross, NO G-cross


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Grain & Oilseed Extended Trading Hours Liquidity

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Volu

me

Trade DateChicago SRW Wheat Corn KC HRW Wheat Soybean Soybean Meal Soybean Oil

Apr 4: China announces U.S. soybean tariffs of 25%, volumes trade an all time record of 776,774 contracts before the U.S. trading day started, markets functioned normally






• Partner Updates

• Q&A

Agenda

25


• Record ADV in January 2018 across CME Group Precious futures from Asian based clients- Gold futures ADV 72k, +93% YoY- Silver futures ADV 16.6k, +79% YoY

• Increasing liquidity during Asia ours, between 8am-8pm SIN time- Gold futures ADV between 8am-8pm SIN time representing ~31% of global Gold ADV

26

Asia-Pacific Precious Metals Futures Performance


Gold Weekly Options continue to grow in popularity

• Record ADV in January 2018 for Gold Weekly Options- ADV almost 2k, vs just 278 in January 2017- Friday expiry allows investors to trade around important macro-economic data points and news

announcements

27

CME Group


• Record ADV in December 2017 for Copper futures traded by Asia based clients

• FX volatility and Copper inventory levels have led to increased cross exchange arbitrage activity

• Dec’17 APAC ADV of 24k is a 119% increase YoY

28

Asia-Pacific Copper Futures Performance


• Announcement of trump tariffs has caused heightened volatility in regional aluminiumphysical markets, particularly the US Midwest

• Volatility has spilled over to other markets, with Japan Premium MJP contract having an all time record volume day on 8th March 2018

• CME Aluminium premium futures offer a unique instrument to hedge against these risks

29

Aluminium Regional Premium Contract Growth


Copper Options continue to grow

• All top 10 highest open interest days for Copper Options are now in year 2018 – record on 23rd March 2018

• ADV has grown in the last 6 months with participation across wide variety of clients

30

CME Group






• Partner Updates

• Q&A

Agenda

31


WTI Futures (CL) - The World’s Most Liquid Oil BenchmarkAverage Daily Volume (ADV) was up 12.5% YoY to 1.24 million in 2017.

WTI Futures (CL) volume remains strong with 1.46 million contracts traded per day YTD in 2018.

A daily record of 2,691,028 lots of Open Interest (OI) was set on November 10th, 2017.

WTI Futures average daily volume and open interest

Copyright © 2018 CME Group. All rights reserved.

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WTI Futures (CL) - The World’s Most Liquid Oil Benchmark

Copyright © 2018 CME Group. All rights reserved.

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ICE Brent NYMEX WTI

NYMEX WTI trades 28% more volume than ICE Brent in 2017

Post U.S. export ban

33


WTI Open Interest Surpasses Brent in 2017Month-end open interest in January 2018 reached all-time high with 2.65 million contracts outstanding

Copyright © 2018 CME Group. All rights reserved. 34


Asia’s Growing Role in Energy Benchmarks

35

The share of WTI Futures trading during Asian hours has been growing steadily and had doubled to 14% in January 2018 from 7% before the export ban repeal.• This doubling of Asian-hour volume is still more impressive in the context of the major

growth seen in WTI Crude Oil futures over the same period.• With WTI averaging 195,000 lots per day during the Singapore day in January 2018, WTI

has become the most liquid energy futures traded in Asian hours.


Unparalleled Liquidity in Henry Hub Futures

36

Henry Hub Futures (NG) average daily volume reached a record 676,000 in January 2018 and is currently up 26% YoY.

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Henry Hub Natural Gas Futures (NG)Volume and Open Interest

ADV Open Interest


Henry Hub becomes a global benchmark with U.S. LNG

37

Number of U.S. LNG cargoes by destination in 2017


Superior Electronic Liquidity in Henry Hub Options

38

Natural Gas financial options (LN) have traded over 60% electronic for 4 straight months.

Electronic average daily volume has increased 124% YoY.

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Henry Hub Options (LN)Electronic Volume Growth

Electronic ADV % Electronic


• Product Updates

• Market Regulation- Overview of US Regulatory Model- Introduction to Market Regulatory- Disruptive Trading Practices- Tag 50 and 1028- Consent to Exchange Jurisdiction



• Partner Updates

• Q&A

Agenda

39


US Department of

Justice

CFTC

CME Group

US Regulatory Model

Federal Criminal Authority:• United States Department of Justice

Federal Administrative Agency Oversight: • Commodity Futures Trading Commission

(CFTC)

First Line of Defense: • Self-Regulatory Organizations (SROs)

40


US Commodity Exchange ActRegulatory Obligations of a Designated Contract Market

US Commodity Exchange Act requires contract markets to comply with 23 core principles, including requirements to:

- Establish, monitor, and enforce compliance with rules of the contract market, including rules prohibiting abusive trading practices

- Have the capacity and responsibility to prevent manipulation, price distortion, and disruptions in the delivery or cash-settlement process

- Have the capacity to detect, investigate, and apply sanctions for violations of any rule of the contract market

- Have the ability and authority to obtain information

41


Commodity Futures Trading Commission RegulationsRegulatory Obligations of a Designated Contract Market

US Commodity Futures Trading Commission (CFTC) imposes additional regulations on contract markets:

• Market participants must consent to the jurisdiction of the exchange

• Exchanges must have authority to collect information and documents, including the ability to examine books and records

• Exchanges must prohibit abusive practices, such as front-running, wash trading, fraudulent trading, money passes, and conduct commonly known as spoofing (bidding or offering with the intent to cancel the bid or offer before execution)

42


Protecting market integrity, enforcing rules, and proactively mitigating risks to the marketplace

CME Group Market Regulation Department

~160 Employees in 4 Locations - Chicago, New York, London, and Singapore

Strong Commitment to Relationship Building- Externally with Clients- Externally with the Broader Compliance Community- Externally with Federal and Foreign Regulatory Bodies- Internally with Business Colleagues on Strategic Initiatives

5 Functional Groups- Rules & Regulatory Outreach- Technology & Strategic Initiatives- Market Surveillance- Investigations- Enforcement

43


CME Group Market Regulation Department

Rules & Regulatory Outreach - Provide formal and informal rules-based guidance to market participants, firms and colleagues- Draft rules, rule revisions and associated regulatory guidance (MRANs and SERs)

Technology & Strategic Initiatives - Ensure Market Regulation technology/systems are robust

Market Surveillance - Detect, deter and prevent market manipulation- Monitor position limits and exemptions, accountability levels, and large trader positions- Review Exchange for Related Position transactions

Investigations/Data Investigations- Detect and investigate conduct to identify trade practice violations and audit trail inaccuracies

Enforcement- Prosecute rule violations referred by Investigations and Market Surveillance- Administer dispute resolution program

Protecting market integrity, enforcing rules, and proactively mitigating risks to the marketplace

44


Providing participants with information and resources necessary to meet compliance needs

Rules & Regulatory Outreach

The outreach program aims to:

• Effectively communicate rule modifications, rule advisories and other rules-based information to market participants

• Promote a uniform understanding of Exchange rules and regulations

• Serve as a resource for trade practice and surveillance based questions

• Build constructive, ongoing relationships with industry participants

Rules & Regulatory Outreach staff are located in Chicago, London, and Singapore

45


CME Group Exchange Rules & Advisories

Comprehensive rules and detailed advisories provide market participants notice of prohibited conduct and regulatory processes

• Rules and advisories are filed with the CFTC and are available on the CME Group website

http://www.cmegroup.com/market-regulation/rule-filings.htmlhttp://www.cmegroup.com/rulebook/rulebook-harmonization.html

• Chinese versions of major rules and advisories are available on CME Group’s Chinese corporate website

http://www.cmegroup.com/cn-s/market-regulation/mrans.html

• Rules are harmonized across the four CME Group designated contract markets (CME; CBOT; COMEX; and NYMEX) with limited exceptions

46

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


CME Group Disruptive Practices ProhibitedRule 575 and Market Regulation Advisory Notice RA1516-5

Primary types of conduct prohibited by Rule 575

• Spoofing and layering

• Market conduct intended to mislead or deceive others, including activity during the pre-open sessions

• Intentional or reckless conduct that disrupts the orderliness of the markets

Market Regulation Advisory Notice RA1516-5

• Addresses key terms and definitions within the rule

• Lists factors that may be considered in assessing whether conduct violates Rule 575

• Identifies certain bona fide practices

• Identifies certain non-bona fide practices

47


Factors that Market Regulation may consider in assessing a potential violation of Rule 575:

• Market conditions

• Subject’s pattern of activity:

o Historical trading behavior;o Order entry & cancellation activity, including order duration;o Queue position;o Size of the orders relative to market conditions;o Ability to manage risk associated with orders;

• Subject’s activity in related markets;

• Effect on other market participants

• Other circumstantial evidence demonstrating intent

CME Group Disruptive Practices ProhibitedRule 575 and Market Regulation Advisory Notice RA1516-5

48


CME Group User Identification RequirementsRule 576 and Market Regulation Advisory Notice RA1610-5

A Tag 50 or Operator ID is a user identification that uniquely identifies a party that accesses and/or submits messages to CME Globex

• Point and click traders or a single person that is solely responsible for and monitors at all times the administration and operation of ATS should use an individual Tag 50 ID

• Team Tag 50 ID is use to represent a shift of personnel that administer, operate and monitor the ATS

• An individual may have multiple Tag 50 IDs

• For Tag 50 IDs trading through an undisclosed omnibus account, the clearing member firm must be able to obtain and provide the identity of the individual or team assigned to each Tag 50 ID immediately upon request by Market Regulation

49


CME Group User Identification RequirementsRule 536.B. and Market Regulation Advisory Notice RA1210-5

Tag 1028 is a data field required on all order submissions into CME Globex to indicate whether an order is submitted by manual or automated means

• Manual orders must be submitted with the value ‘Y’ and automated orders must be submitted with the value ‘N’

• Automated orders are orders that are generated and routed without any human intervention

• ATS teams should only send in automated orders

50


CME Group Consent to Exchange JurisdictionRule 418 and Market Regulation Advisory Notice RA1704-5

Any person initiating or executing a transaction on the exchange expressly consents to jurisdiction of the exchange and agrees to be bound by and comply with the rules of the exchange

• Jurisdiction applies whether the transaction was initiated or executed directly or through an intermediary

• Jurisdiction extends to any person for whose benefit such transaction has been initiated or executed

• Failure to fully cooperate and participate in any investigation or disciplinary enforcement matter may result in charges being issued pursuant to Rule 432.L. (Failure to Cooperate)

• The refusal to cooperate or provide requested information based on privacy or other applicable laws of any foreign jurisdiction will in no manner affect the Market Regulation Department’s request that charges be issued for a violation of rule 432.L.

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Market Regulation Department – Resources

Rules & Regulatory Outreach• [email protected]

CME Group Subscription Center• Receive emails related to rule advisories, rule changes, and disciplinary actions

• www.cmegroup.com/subscribe

CME Group Webinars• Disruptive Practices Prohibited and Block Trade webinars available on cmegroup.com

Other Training Resources• FIA Rules & Regulatory Guidance for CME Group Markets, subscription-based, online

training module

52

mailto:[email protected]

http://www.cmegroup.com/subscribe


• Product Updates


• Globex Technology Roadmap- Price Precision Extension- Consolidated Fills- iLink Enhancements - Secure Logon


• Partner Updates

• Q&A

Agenda

53


CME Group Systems Plan to Support a Greater Tick Precision

Price Precision Extension & 2 Year Treasury Futures Tick

Overview

• The supported decimal price precision will be increased from 7 to 9 decimals to provide greater price granularity for future launches

• In conjunction with this change the 2 Year Treasury Futures and Spreads will support trading at 1/8 of 1/32nd with a decimal precision of 8

- Current: 1/4 of 1/32nd, or 0.0078125

- New: 1/8 of 1/32nd, or 0.00390625

• CME Group systems will be updated to support a greater decimal precision before 2 Year Treasury Futures and Spreads tick are expanded

• Certification is required for Globex MDP3 and Streamlined market data

• Technical specifications available

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Price Precision Extension 2 Year Futures Display Format

Example of Current Trading Screen

Fractional Decimal Displayed1/8 0.125 108'071

1/4 2/8 0.250 108'0723/8 0.375 108'073

1/2 4/8 0.500 108'0755/8 0.625 108'076

3/4 6/8 0.750 108'0777/8 0.875 108'078

- 8/8 1.000 108'080

Expectations for Going Forward

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Price Precision Extension - System Impact Overview

MDP3 and Streamlined• New MDP3 SBE schema and templates for all markets and will impact and will impact all MDP

systems• Mandatory customer system migration to new template; not backwards compatible

iLink and Drop Copy• All iLink, Drop copy and client risk systems must be able to process fills with a 9 digit decimal

price

Customer clearing systems • CF Confirms, Trade Registers (CSV, XML), Spanky/Span files to support an expanded

decimal

Public FTP Settlement Files and Settle Decks• Current STL file will not support expanded decimal format• Systems must migrate to DataMine or alternative STL file format

CME STP and Clearport• Will support the larger decimal precision

ITC Market Data• Products with price precision greater than 7 decimals will no longer be published on ITC

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There will be a multiphase release schedule to support the increased price precision

Price Precision Extension – Release Schedule

Key DatesiLink - Beginning 1 JulyMDP3 and Streamlined – Beginning 12 August2 Year Treasury Futures Reduced Tick, CPC, Clearing and STP Support – Q4

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Production RoadmapTesting Date Production Date Requirement Risk

Starting 6 May

Order Entry

Starting 1 July iLink/Order Entry: Implement new price decimal requirements and handle new iLink reject message

You may not be able to submit orders due to unsupported price format

Starting 20 May

Market Data

Starting 12 August Implement new MDP 3.0 and streamlined MDP schemas

You will not be able to read market data messages for ANYmarket

In Q2

Downstream Systems

In Q4 Ensure all your front-, middle- and back-office systems that handle prices are able to support up to 9 decimals

Your downstream systems may fail when the 2 Year Note futures and spreads transition

Action Items – Price Precision Extension

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Streamlined iLink execution reports and clearing trade confirmations to improve performance, increase capacity, and reduce costs

• Consolidation of Fill messages on all customer interfaces: - MDP 3.0 – Fill consolidation was already delivered in the Trade Summary Message- Clearing - new Trade Match Report messages will reflect iLink fill consolidation- iLink Order Entry and Drop Copy

• Fill Message Consolidation- Per aggressor order - At a single trade price- Within the same liquidity source (i.e. customer order and/or implied order)

• Order Entry Messaging Impacts- New iLink FIX tags:

• Tag 9700-NumOrdersInMatchStep – identifies the total number of orders matched within a match event

• Repeating group for Fill Reason contains:– Aggressor or Matching Algorithms (i.e. FIFO, Pro-Rata, LMM, TOP, etc.)– Fill Reason Quantity

• Launch Timeline- New Release: Q3 2018- Production: Phased rollout starting Q1 2019

.

Consolidated Fill Messages

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Example: Fill Message Consolidation (FIFO)Bid Ask

10 @ 1.0 - Trader B

10 @ 1.0 – Trader C

20 @ 1.0 – Trader D

50 @ 2.0 – Trader B

10 @ 2.0 – Trader C

Trader A Bid 100 @ 2.0

iLink Fills MDP 3.0 Trade Summary(No Change)

Current State:Trader A 10 @ 1.0Trader B 10 @ 1.0Trader A 10 @ 1.0Trader C 10 @ 1.0Trader A 20 @ 1.0Trader D 20 @ 1.0Trader A 50 @ 2.0Trader B 50 @ 2.0Trader A 10 @ 2.0Trader C 10 @ 2.0

New State:Trader A 40 @ 1.0 (Aggressor)Trader B 10 @ 1.0 (FIFO)Trader C 10 @ 1.0 (FIFO)Trader D 20 @ 1.0 (FIFO)

Trader A 60 @ 2.0 (Aggressor)Trader B 50 @ 2.0 (FIFO)Trader C 10 @ 2.0 (FIFO)

40 @ 1.060 @ 2.0

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Example: Fill Message Consolidation (FIFO - Implied)GEH8

Bid Ask

10 @ 9805 - Trader B

10 @ 9805 – Trader C

20 @ 9805 – Implied Order

50 @ 9806 – Trader B

10 @ 9806 – Trader C

Trader A Bid 100 @ 9806

iLink Fills MDP 3.0 Trade Summary(No Change)Current State:

Trader A 10 @ 9805Trader B 10 @ 9805Trader A 10 @ 9805Trader C 10 @ 9805Trader Y 20 @ 3Trader A 20 @ 9805Trader X 20 @ 9802Trader A 50 @ 9806Trader B 50 @ 9806Trader A 10 @ 9806Trader C 10 @ 9806

New State:Trader A 20 @ 9805 (Aggressor)Trader B 10 @ 9805 (FIFO)Trader C 10 @ 9805 (FIFO)

Trader A 20 @ 9805 (Aggressor) Implied SourceTrader X 20 @ 9802 (FIFO)Trader Y 20 @ 3 (FIFO)

Trader A 60 @ 9806 (Aggressor)Trader B 50 @ 9806 (FIFO)Trader C 10 @ 9806 (FIFO)

GEH8:40 @ 9805GEM8:20 @ 9802GEH8-GEM8:[email protected]

GEH8:60 @ 9806

GEH8-GEM8Bid Ask

20 @ 3.0 – Trader Y

GEM8Bid Ask

20 @ 9802 – Trader X

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Example: Fill Message Consolidation (Pro-Rata)Bid Ask

10 @ 1.0 - Trader B (25%)

10 @ 1.0 – Trader C (25%)

20 @ 1.0 – Trader D (50%)

50 @ 2.0 – Trader B

10 @ 2.0 – Trader C

Trader A Bid 30 @ 2.0

iLink Fills MDP 3.0 Trade Summary(No Change)

Current State:

Trader A 15 @ 1.0Trader D 15 @ 1.0 Trader A 7 @ 1.0Trader B 7 @ 1.0 Trader A 7 @ 1.0Trader C 7 @ 1.0 Trader A 1 @ 1.0Trader B 1 @ 1.0

New State:

Trader A 30 @ 1.0 (Aggressor)Trader D 15 @ 1.0 (Pro-Rata)Trader B 8 @ 1.0 (Pro-Rata+Leveling)Trader C 7 @ 1.0 (Pro-Rata)

30 @ 1.0

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End-to-End Note Field- New FIX tag carries customer text from iLink to Drop Copy and/or CME STP

Clearing Instructions (i.e. Average Pricing and SLEDS)

- New FIX tags for post-trade clearing instructions on customer orders- Currently, special characters in tag 1-Account are used to signal post-trade instructions- Tag 1-Account support will eventually be phased out post-launch

Executing Party Identifiers - New optional tag allows customer to identify the responsible party of any order

Mandatory Tag 1031 - Provides trading and clearing firms a more effective means to reconcile executing broker

fees- Requires current Tag 1031 - CustOrderHandling on all iLink order messages - Sample Tag 1031 values: Phone Simple, Phone Complex, FCM-provided screen

iLink Enhancements – 2019

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Cancel on Behalf• Improved risk management through the capability to cancel orders and quotes on behalf

of other iLink sessions

• Authorization for on session to Cancel on Behalf of another will be managed through CME Group Customer Center

• Cancel acknowledgement message will be sent to both the session that originated the order and session that submitted a Cancel On Behalf

Mass Order• Allow customers to combine new, modify or cancel orders in a single message

• Supports laddering of orders in a single market

• No changes to mass quote functionality as a result of Mass Order launch

iLink Enhancements - 2019

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In January 2018, secure authentication logon for all iLink and Drop Copy target sessions was fully launched into production. • The new Secure Logon will be supported in parallel until Friday, 27 April.

Customers are strongly encouraged to make the change before the end of April to ensure no business interruption.

• Any iLink or Drop Copy Target session that connects using plain text passwords after 27 April will be subject to surcharges as follows:

- Sunday 29 April – Friday 1 June: $100/session- Sunday 3 June – Friday 29 June: $500/session

- NOTE: A single logon will trigger the surcharge; multiple logons with the same session during each period will not result in multiple surcharges.

- Surcharges will be aggregated by Globex Firm and Drop Copy group and billed to the administrative owner/Registered Entity of each at month end.

Only Secure Logons will be supported starting Sunday, 1 July.

Customer certifications are required for all Front End Systems.

Additional information is available at: https://www.cmegroup.com/confluence/display/EPICSANDBOX/CME+Globex+API+Secure+Logon

Please contact your Global Account Manager with questions.

CME iLink & Drop Copy API Secure Logon

65

https://www.cmegroup.com/confluence/display/EPICSANDBOX/CME+Globex+API+Secure+Logon


To simplify session level behaviors across MSGW and CGW, the following changes to CGW will be launched this year.

These changes are forward-compatible and can be made at any time prior to launch

Real-Time Messages Interleaving

• In resend request scenarios, customer will receive both the resend messages and the real-time messages

• Customers must be able to receive out-of-sequence messages during a resend response without triggering another resend request.

Duplicate Session TCP Connection Attempts

• CGW will no longer support duplicative TCP connection attempts

Launch Timeline• New Release – July 2018

• Certification via AutoCert+ is mandatory for all CGW customers

• Production – TBA

iLink Behavior Harmonization - CGW

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• Product Updates



• Customer Tools & GUIs- Inline Credit Controls- Ref Data API- Self service/tag 50- DataMine

• Partner Updates

• Q&A

Agenda

67


Risk Management Tool Updates

Inline Credit Controls• Launched August 2017• Granular, CME Globex pre-execution risk coverage via the CME Account Manager tool• Historical account activity reporting to facilitate Risk Admin’s limit setting• To date, 24 Clearing Firms have registered over 75,000 unique accounts

Planned Enhancements:• New! Restricted Product Policy: Clearing Firm Risk Admins may set policy to block all

accounts at selected Executing Firms from trading a specific product– Without having to register and set limits on the accounts – For an Executing Firm that has the Restricted Product Policy enforced, the Clearing Firm

Admin may positively permission specific accounts to trade the restricted product– Expected to launch 2nd half of 2018

• Start of Day position upload capability (Q1 2019)• Ability to group accounts together under single limit settings• Contract level granularity

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A new web service JSON API designed to be a real-time source for instrument and product information at CME Group

Replaces current manual process of assembling information from diverse sources like:

• CME Globex market data messaging (Security Definition)• Web specs on www.cmegroup.com• Exchange Rulebooks• FPRF, SecDef.dat, TradingSessionList.dat and .pdf, multiple config.xml and other

flat files on ftp.cmegroup.com and sftp.cmegroup.com• Global Command Center product reference spreadsheet

Additional Uses:• Simplified Cross-Exchange Risk Management• Product risk, audit and reconciliation applications• Human-readable specifications for UI presentation

• E.g., “Contract Termination: Trading in the current delivery month shall cease on the third business day prior to the twenty-fifth calendar day of the month preceding the delivery month.”

Launching Q2 2018

CME Reference Data API

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Additional Transparency for Trading Firms

• Registered Entities have now the ability to see the Tag 50 IDs that have been registered by their Clearing Firms in the Exchange Fee System (EFS) via Request Center.

• Entitled users can see the Person or ATS Team that a specific Tag 50 ID is registered under per Register Entity.

• Search results can be filtered and exported through a user friendly interface

Registered Tag 50 ID View in Request Center

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Clearing Firms will Manage the Tag 50 View Access by Registered Entity

• Clearing Firms that have signed the Self-Service Agreement can authorize their customers to access their Tag 50 data via the Request Center

• Customers must also sign the Self-Service Agreement before being granted access to Tag 50 data

Tag 50 Permissions Management in Request Center

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DataMine Past:• Delivery of Data: SFTP or Disk• Data available: CME Group

Historical • Time consuming process from

inquiry to completion of order. • Small Support team

DataMine Present:• Cloud Based• Delivery of Data: SFTP, API, S3

transfer or File Browser• Data now available:

- Growing library of CME Group Historical data

- Bitcoin BRR and BRTI- Partner Exchange Data (DME)- Third Party Data (TellusLabs)

• Order process takes <1 day• Global Support team

CME DataMine is a self-service cloud solution offering an integrated, streamlined process with four different delivery mechanisms in the marketplace.

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DataMine


• Two New Delivery Mechanisms- Query API (end of May)

• RESTful solution to optimize download of DataMine datasets- Python API (end of Q2)

• Ability to leverage CME Market Data with native Python tool kit

• New Datasets- MBO FIX (Available)- Volume and Open Interest (Available)- IRS/OIS (Q2)- Eris- Intraday and EOD (Q2)- Registrar e.g., CUSIPS, Deliverable Commodities Under Registration (September)- CME SPAN (August)- Other Third Party datasets relevant to CME markets (mid April)

• Quicker Order Processing- Credit Card Payments (May)- Click Through Agreement (June)

DataMine

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• Product Updates




• Partner Updates

• Q&A

Agenda

74


• Dubai Mercantile Exchange2017, DME auctioned off more than 25 million barrels of different crude oil grades; including Oman Blend, Basrah Light and Heavy, and the Malaysian Kimanis.

• Korea Exchange (KRX)KRX trading volume on CME Globex reached its highest level in over five years in February, with ADV at 40,679 for the KOSPI Index and USD/KRW. Elevated volume and participation rates, attributed to global equity volatility, continued throughout March.

• Bursa Malaysia (BMD)BMD Expanded their Listing for Palm Oil Suite on 25 Feb 2018:

• FCPO (Crude Palm Oil Futures in RM): Expanded trading hours and listing cycle. • OCPO (Crude Palm Oil Options in RM): Expanded trading hours and listing cycle. • FUPO (Crude Palm Oil Futures in $US): Expanded trading hours

Partner Updates

75


• Product Updates




• Partner Updates

• Q&A

Agenda

76


Reference of Important DatesTopic DatePrice Precision FTP Schema Launch – New Release 22 ApriliLink/Drop Copy Secure Logon Deadline 27 AprilLaunch of Reference Data API Q2 2018DataMine Query API Q2 2018DataMine Python API Q2 2018Price Precision iLink Update – New Release 6 May thru 20 MaySOFR Futures Launch 7 MayPrice Precision MDP3 & Streamline Schema Update – New Release 20 May thru 3 JuneConsolidated Fills – New Release Q3 2018Price Precision Production iLink Update 1 July thru 28 JulyCGW Behavior Change in New Release July Price Precision Production MDP 3.0 & Streamline SBE Schema launch 12 Aug thru 18 Nov

Consolidated Fills – ProductionPhased rollout starting

Q1 2019

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Futures and swaps trading is not suitable for all investors, and involves the risk of loss. Futures and swaps are leveraged investments, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money initially deposited for a futures and a swap position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.

The information and any materials contained in this brochure should not be considered as an offer or solicitation to buy or sell financial instruments, provide financial advice, create a trading platform, facilitate or take deposits or provide any other financial products or financial services of any kind in the People's Republic of China ("PRC", which does not include Hong Kong, Macau and Taiwan for such purposes). The information contained in this brochure is provided for general information purposes only and is not intended to provide, and should not be construed as, advice. It does not take into account your objectives, financial situation or needs. You should obtain appropriate professional advice before acting on or relying on this brochure. This brochure or any information contained or incorporated by reference herein is not an advertisement and is not intended for public distribution within China. The information contained in this brochure is provided as is and without any warranty of any kind, either express or implied. CME Group assumes no responsibility for any errors or omissions.

CME Group and “芝商所” are trademarks of CME Group Inc. The Globe logo, E-mini, E-micro, Globex, CME and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. (“CME”) CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. (“CBOT”) ClearPort and NYMEX are trademarks of the New York Mercantile Exchange, Inc. (“NYMEX”) These may not be modified reproduced, stored in a retrievable system, transmitted, copied, distributed or otherwise used without the written permission of the party owning these materials.

CME, CBOT and NYMEX are each registered as a Recognized Market Operator in Singapore and authorized as Automated Trading Serviceproviders in Hong Kong S.A.R. Further the information contained herein does not constitute the provision of direct access with any foreign financial instrument market or clearing services for foreign financial instrument market transactions defined under Japan’s Financial Instrument & Exchange Act (Law No. 25 of 1948, as amended). CME Europe Limited is not registered or licensed to provide, nor does it purport to provide financial services of any kind in any jurisdiction in Asia including Hong Kong, Singapore or Japan. None of CME Group entities are registered or licensed to provide, nor does it purport to provide, financial services of any kind in People’s Republic of China or Taiwan. This brochure is for distribution in Korea and Australia solely to “professional investors”, as defined in Article 9(5) of the Financial Investment Services and Capital Markets Act and related rules and in the Corporations Act 2001 (Cth) and related rules respectively, circulation should be restricted accordingly.

Copyright © 2018 CME Group and 芝商所. All rights reserved.

Disclaimer

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