CME Group Customer Forum

Transcription

1 CME Group Customer Forum Spring 2018 Singapore London US Webinar

2 Agenda 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 2

3 Agenda Product Updates - Interest Rates Futures SOFR Futures CME-CBOT STIR Spreads - CME FX - Equities - Commodities - Metals Performance - Energy Products Market Regulation Globex Technology Roadmap Customer Tools & GUIs Partner Updates Q&A 3

4 Strong Liquidity for Rates Futures & Options in Volatile Markets 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 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) SOFR Futures Launching May 7 th 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: 4

5 CME Group Short Term Interest Rate Inter-Commodity Spreads Eurodollar 10:6 Ratio; 4 Listed (Launching March 12) Fed Funds 1:1 Ratio; 20 Listed SR3 10:6 Ratio; 4 Listed 10:6 Ratio; 3 Listed SR1 1:1 Ratio; 7 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) 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 12 SR3H8-GEH8 IS Yes SOFR 3-Month Eurodollars 1:1 May 7 SR1H8-ZQH8 IS Yes SOFR 1-Month Fed Funds 1:1 May 7 SR1J8K8-SR3H8 EF No SOFR 1-Month SOFR 3-Month (3+3) : 10 May 7 ZQJ8K8-SR3H8 EF No Fed Funds SOFR 3-Month (3+3) : 10 May 7 5

6 STIR Analytics Tools STIR Spreads Tool: Displays synthetic price history, end-of-day settlement, and implied rates Will be enhanced to include SOFR spreads after launch 6

7 Agenda 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 7

8 CME FX Products Notional nearing 40% of all ECN-traded FX: Recognition of advantages offered by listed futures driving growth INRUSD ( SIR ) one of the fastest growing contracts o 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 8

9 CME FX Link - Spot FX Basis Spreads at CME Group LAUNCHED: MARCH 26 th 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 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 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

10 Spot FX Basis Spread Details & Workflow Basis Spread Quotation Quoted and traded as the difference between futures and spot as represented with both legs in OTC price convention CME FX Link Trade Workflow 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) *Inverse Pairs: JPY/USD, CAD/USD, MXN/USD 10

11 FX Monthly Futures Now with Implied Pricing 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

12 Recently Published FX Whitepapers 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: FX-Futures.pdf?aliId= 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: 12

13 Agenda Product Updates - Interest Rates Futures - CME FX - Equities Bitcoin Futures Japanese Index Futures BTIC - Commodities - Metals Performance - Energy Products Market Regulation Globex Technology Roadmap Customer Tools & GUIs Partner Updates Q&A 13

14 14 CME Bitcoin Futures Highlights Recorded highest ADV month in March, 2,578 BTC contracts (equivalent to 12,890 bitcoin) traded per day, up 61% since February March 27, 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, FCMs have cleared the product, 1,100+ unique accounts have traded BTC since the launch

15 15 Bitcoin Futures Average Volume by Hour

16 16 Japanese Equity Index Futures Nikkei 225 Index Futures Strong momentum 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 YTD ADV (80,172 contracts; USD 8.3BN) up 41% vs ADV 56,664 contracts Nikkei 225 Index Futures Implied Spread Launched 30 Oct 2017 CME Group introduced a new inter-commodity spread contract between JPY- and USDdenominated 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

17 17 Japanese Equity Index Futures TOPIX Futures NEW! CME launched TOPIX Futures on February 5 th 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

18 18 Basis Trade at Index Close Record monthly ADVs in 2018 : EST March 36,261 ADV, +227% vs 2017 February 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 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.

19 Agenda Product Updates - Interest Rates Futures - CME FX - Equities - Commodities Black Sea Wheat Palm Oil Suite - Metals Performance - Energy Products Market Regulation Globex Technology Roadmap Customer Tools & GUIs Partner Updates Q&A 19

20 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 lots, out to December 18 >1400 lots of Australian Wheat traded, OI of 1,540 lots out to May 18 20

21 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% 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 Participation from physical traders continues to increase, funds participating Further Information: Live trades (size, price) on block futures available at: Black Sea Wheat: Australian Wheat: 21

22 Palm Suite Performance Highlights The group of 6 products broke a few records in 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 Palm Volume, Open Interest 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 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 Contracts are now available out till calendar 2022 and can be traded in both quarterly and yearly strips *FIA data, Jan to Nov 22

23 23 Relationship Based Trading The Agricultural complex has allowed crossing on CME Globex and block trades across all products starting January 8, This will allow for bilateral 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, multilegged options Sourcing liquidity during off hours Grains & Oilseeds ETH RTH Futures Blocks, R-cross, G-cross Blocks, R-cross, G-cross Options Livestock Blocks, R-cross, NO G- cross Blocks, R-cross, NO G-cross 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

24 Grain & Oilseed Extended Trading Hours Liquidity 900, ,000 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 700, ,000 Volume 500, , , , , /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/ /02/2018 Trade Date Chicago SRW Wheat Corn KC HRW Wheat Soybean Soybean Meal Soybean Oil 24

25 Agenda 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 25

26 26 Asia-Pacific Precious Metals Futures Performance 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

27 27 CME Group 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 Friday expiry allows investors to trade around important macro-economic data points and news announcements

28 28 Asia-Pacific Copper Futures Performance 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

29 29 Aluminium Regional Premium Contract Growth Announcement of trump tariffs has caused heightened volatility in regional aluminium physical 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 8 th March 2018 CME Aluminium premium futures offer a unique instrument to hedge against these risks

30 30 CME Group Copper Options continue to grow All top 10 highest open interest days for Copper Options are now in year 2018 record on 23 rd March 2018 ADV has grown in the last 6 months with participation across wide variety of clients

31 Agenda 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 31

32 WTI Futures (CL) - The World s Most Liquid Oil Benchmark Average Daily Volume (ADV) was up 12.5% YoY to 1.24 million in WTI Futures (CL) volume remains strong with 1.46 million contracts traded per day YTD in A daily record of 2,691,028 lots of Open Interest (OI) was set on November 10th, ADV 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 WTI Futures average daily volume and open interest ADV Open Interest 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 Open Interest 0 0 Copyright 32

33 WTI Futures (CL) - The World s Most Liquid Oil Benchmark 1,600,000 NYMEX WTI trades 28% more volume than ICE Brent in ,400,000 1,200,000 1,000,000 Monthly ADV 800, , ,000 Post U.S. export ban 200,000 0 ICE Brent NYMEX WTI Copyright CME CME Group. Group. All All rights rights reserved. reserved. 33

34 WTI Open Interest Surpasses Brent in 2017 Month-end open interest in January 2018 reached all-time high with 2.65 million contracts outstanding Copyright CME CME Group. Group. All All rights rights reserved. reserved. 34

35 Asia s Growing Role in Energy Benchmarks 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. 35

36 Unparalleled Liquidity in Henry Hub Futures Henry Hub Futures (NG) average daily volume reached a record 676,000 in January 2018 and is currently up 26% YoY. Henry Hub Natural Gas Futures (NG) Volume and Open Interest 800,000 1,800,000 ADV 700, , , , , , ,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 Open Interest 0 0 ADV Open Interest 36

37 Henry Hub becomes a global benchmark with U.S. LNG Number of U.S. LNG cargoes by destination in

38 Superior Electronic Liquidity in Henry Hub Options Natural Gas financial options (LN) have traded over 60% electronic for 4 straight months. Electronic average daily volume has increased 124% YoY. 140,000 Henry Hub Options (LN) Electronic Volume Growth 70% 120,000 60% 100,000 50% Electronic ADV 80,000 60,000 40% 30% % Electronic 40,000 20% 20,000 10% 0 0% Electronic ADV % Electronic 38

39 Agenda Product Updates Market Regulation - Overview of US Regulatory Model - Introduction to Market Regulatory - Disruptive Trading Practices - Tag 50 and Consent to Exchange Jurisdiction Globex Technology Roadmap Customer Tools & GUIs Partner Updates Q&A 39

40 US Regulatory Model US Department of Justice Federal Criminal Authority: United States Department of Justice CFTC Federal Administrative Agency Oversight: Commodity Futures Trading Commission (CFTC) CME Group First Line of Defense: Self-Regulatory Organizations (SROs) 40

41 Regulatory Obligations of a Designated Contract Market US Commodity Exchange Act 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

42 Regulatory Obligations of a Designated Contract Market Commodity Futures Trading Commission Regulations 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

43 CME Group Market Regulation Department Protecting market integrity, enforcing rules, and proactively mitigating risks to the marketplace ~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

44 CME Group Market Regulation Department Protecting market integrity, enforcing rules, and proactively mitigating risks to the marketplace 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 44

45 Rules & Regulatory Outreach Providing participants with information and resources necessary to meet compliance needs The outreach program aims to: Effectively communicate rule modifications, rule advisories and other rulesbased 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

46 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 Chinese versions of major rules and advisories are available on CME Group s Chinese corporate website Rules are harmonized across the four CME Group designated contract markets (CME; CBOT; COMEX; and NYMEX) with limited exceptions 46

47 CME Group Disruptive Practices Prohibited Rule 575 and Market Regulation Advisory Notice RA 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 RA 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

48 CME Group Disruptive Practices Prohibited Rule 575 and Market Regulation Advisory Notice RA Factors that Market Regulation may consider in assessing a potential violation of Rule 575: Market conditions Subject s pattern of activity: o o o o o Historical trading behavior; Order entry & cancellation activity, including order duration; Queue position; Size of the orders relative to market conditions; Ability to manage risk associated with orders; Subject s activity in related markets; Effect on other market participants Other circumstantial evidence demonstrating intent 48

49 CME Group User Identification Requirements Rule 576 and Market Regulation Advisory Notice RA 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

50 CME Group User Identification Requirements Rule 536.B. and Market Regulation Advisory Notice RA 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

51 CME Group Consent to Exchange Jurisdiction Rule 418 and Market Regulation Advisory Notice RA 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. 51

52 Market Regulation Department Resources Rules & Regulatory Outreach CME Group Subscription Center Receive s related to rule advisories, rule changes, and disciplinary actions 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

53 Agenda Product Updates Market Regulation Globex Technology Roadmap - Price Precision Extension - Consolidated Fills - ilink Enhancements - Secure Logon Customer Tools & GUIs Partner Updates Q&A 53

54 Price Precision Extension & 2 Year Treasury Futures Tick CME Group Systems Plan to Support a Greater Tick Precision 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 1/32 nd with a decimal precision of 8 - Current: 1/4 of 1/32 nd, or New: 1/8 of 1/32 nd, or 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 54

55 Price Precision Extension 2 Year Futures Display Format Example of Current Trading Screen Expectations for Going Forward Fractional Decimal Displayed 1/ '071 1/4 2/ '072 3/ '073 1/2 4/ '075 5/ '076 3/4 6/ '077 7/ '078-8/ '080 55

56 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 56

57 Price Precision Extension Release Schedule There will be a multiphase release schedule to support the increased price precision Key Dates ilink - Beginning 1 July MDP3 and Streamlined Beginning 12 August 2 Year Treasury Futures Reduced Tick, CPC, Clearing and STP Support Q4 57

58 Action Items Price Precision Extension Production Roadmap Testing 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 ANY market 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 58

59 Consolidated Fill Messages 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: Launch Timeline Aggressor or Matching Algorithms (i.e. FIFO, Pro-Rata, LMM, TOP, etc.) Fill Reason Quantity - New Release: Q Production: Phased rollout starting Q

60 Example: Fill Message Consolidation (FIFO) Bid Trader A Bid 2.0 Ask Trader B 1.0 Trader C 1.0 Trader D 2.0 Trader B 2.0 Trader C ilink Fills MDP 3.0 Current State: Trader A 1.0 Trader B 1.0 Trader A 1.0 Trader C 1.0 Trader A 1.0 Trader D 1.0 Trader A 2.0 Trader B 2.0 Trader A 2.0 Trader C 2.0 New State: Trader A 1.0 (Aggressor) Trader B 1.0 (FIFO) Trader C 1.0 (FIFO) Trader D 1.0 (FIFO) Trader A 2.0 (Aggressor) Trader B 2.0 (FIFO) Trader C 2.0 (FIFO) Trade Summary (No Change)

61 Example: Fill Message Consolidation (FIFO - Implied) Bid Trader A Bid 9806 GEH8 Ask Trader B 9805 Trader C 9805 Implied Order 9806 Trader B 9806 Trader C GEM8 Bid Ask 9802 Trader X GEH8-GEM8 Bid Ask 3.0 Trader Y ilink Fills Current State: Trader A 9805 Trader B 9805 Trader A 9805 Trader C 9805 Trader Y 3 Trader A 9805 Trader X 9802 Trader A 9806 Trader B 9806 Trader A 9806 Trader C 9806 New State: Trader A 9805 (Aggressor) Trader B 9805 (FIFO) Trader C 9805 (FIFO) Trader A 9805 (Aggressor) Implied Source Trader X 9802 (FIFO) Trader Y 3 (FIFO) Trader A 9806 (Aggressor) Trader B 9806 (FIFO) Trader C 9806 (FIFO) MDP 3.0 Trade Summary (No Change) GEH8: 9805 GEM8: 9802 GEH8-GEM8: 20@3.0 GEH8:

62 Example: Fill Message Consolidation (Pro-Rata) Bid Trader A Bid 2.0 Ask Trader B (25%) 1.0 Trader C (25%) 1.0 Trader D (50%) 2.0 Trader B 2.0 Trader C ilink Fills MDP 3.0 Current State: New State: Trade Summary (No Change) Trader A 1.0 Trader D 1.0 Trader A 1.0 Trader B 1.0 Trader A 1.0 Trader C 1.0 Trader A 1.0 Trader B 1.0 Trader A 1.0 (Aggressor) Trader D 1.0 (Pro-Rata) Trader B 1.0 (Pro-Rata+Leveling) Trader C 1.0 (Pro-Rata)

63 ilink Enhancements 2019 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 Provides trading and clearing firms a more effective means to reconcile executing broker fees - Requires current Tag CustOrderHandling on all ilink order messages - Sample Tag 1031 values: Phone Simple, Phone Complex, FCM-provided screen 63

64 ilink Enhancements 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 64

65 CME ilink & Drop Copy API Secure Logon 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: Please contact your Global Account Manager with questions. 65

66 ilink Behavior Harmonization - CGW 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 66

67 Agenda Product Updates Market Regulation Globex Technology Roadmap Customer Tools & GUIs - Inline Credit Controls - Ref Data API - Self service/tag 50 - DataMine Partner Updates Q&A 67

68 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 2 nd half of 2018 Start of Day position upload capability (Q1 2019) Ability to group accounts together under single limit settings Contract level granularity 68

69 CME Reference Data API 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 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 Q

70 Registered Tag 50 ID View in Request Center 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 70

71 Tag 50 Permissions Management in Request Center 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 71

72 DataMine CME DataMine is a self-service cloud solution offering an integrated, streamlined process with four different delivery mechanisms in the marketplace. 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 72

73 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) 73

74 Agenda Product Updates Market Regulation Globex Technology Roadmap Customer Tools & GUIs Partner Updates Q&A 74

75 Partner Updates Dubai Mercantile Exchange 2017, 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 75

76 Agenda Product Updates Market Regulation Globex Technology Roadmap Customer Tools & GUIs Partner Updates Q&A 76

77 Reference of Important Dates Topic Date Price Precision FTP Schema Launch New Release 22 April ilink/drop Copy Secure Logon Deadline 27 April Launch of Reference Data API Q DataMine Query API Q DataMine Python API Q Price Precision ilink Update New Release 6 May thru 20 May SOFR Futures Launch 7 May Price Precision MDP3 & Streamline Schema Update New Release 20 May thru 3 June Consolidated Fills New Release Q Price Precision Production ilink Update 1 July thru 28 July CGW Behavior Change in New Release July Price Precision Production MDP 3.0 & Streamline SBE Schema launch 12 Aug thru 18 Nov Consolidated Fills Production Phased rollout starting Q

78 Disclaimer 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 Service providers 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. 78

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