On March 28, the CME issued SER #8299 - the report is here. This report sets forth proposals (still subject to CFTC review) that would modify its Rule 855 that allows offsetting of certain energy spread trades against open positions in the underlying individual contracts. The rule previously set forth a limited number of energy contracts covered by this provision, there is now an expanded number of contracts eligible for these offsets. The contracts are listed in a table attached to the report and are primarily directed towards allowing mini and micro contracts to be offset against the standard futures contract for the same product - though in some instances, the offset is between the standard future and a look-alike future.
More importantly, the NYMEX rule used to read "offset and liquidate". The new rules has removed "and liquidate" from the proposed wording. This would expand the allowable structures for carrying offsetting long and short positions without immediate liquidation, something firms may find advantageous. The other positive impact is that the offset allows a reduction in capital requirements associated with the open positions.
The report indicates the revised Rule 855 is to go into effect on April 15, 2019, subject to any CFTC review periods.
Let's ask the question a different way - are you willing to spend over $10K per month just to size the pre-open?
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.