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​Industry, Compliance, Strategy and Regulatory Updates

Let's ask the question a different way - are you willing to spend over $10K per month just to size the pre-open?

3/8/2019

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In a pair of linked cases issued today, the CME fined a company $75K total for entering  "Lean Hogs, Feeder Cattle and Live Cattle spread futures orders on CME Globex during the pre‐opening period that were not made for the purpose of executing bona fide transactions, but instead to identify the depth of the order book." They noted the orders caused the indicative opening price to fluctuate. They issued an order for the Trader for very similar actions - in the same markets - for trades in a different year.
As DCM has been noting, the company got the bigger fine - $75K - for failure to train and supervise. This is a common them - if you don't have a track record of effective training and oversight, the company is considered to be at least allowing - if not encouraging - inappropriate behavior. The notice is here
Many firms train about manipulative behavior during market trading but don't always stress that the pre-open is still observed for disruptive trading. In many instances, with the reduced activity in the pre-open, the pre-open may be easier for the exchanges to see the impact of transient orders.
In the case covering the same issue, the trader was fined $20K and suspended from any market access for ten days.  The notice is here 
This occurred several years after the corporate case - an indication that this is an ongoing concern that the exchanges watch for. There had been previous cases in the agricultural markets with even larger fines for just a small number of pre-open disruptive trading action.
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    Thomas Lord

    DCM Founder
    Commodity Adviser

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