CME Group Exchanges Issue Market Regulation Advisory Regarding Prohibition on Wash Trades

CME Group exchanges, including CME, CBOT, NYMEX and COMEX, issued an Advisory Notice regarding Market Regulation Advisory Notice RA1308-5. The Advisory Notice provides revisions to three answers in FAQ's regarding CME Rule 534 ("Wash Trades Prohibited").

The Advisory Notice revises the answer to Question 8, which contains regulatory guidance on the necessity of ensuring that any freshening of long-position dates in certain futures contracts, which are settled via physical delivery against the oldest open long position, is not done in violation of Rule 534. Specifically, on January 2, 2015, CME will eliminate its existing prohibition on freshening in Live Cattle futures, and, as a result, the answer to Question 8 requires modification. The answer to Question 9 addresses the circumstances under which a block trade between accounts with common beneficial ownership may constitute an unlawful wash trade prohibited by Rule 534. The revisions to Question and Answer 9 clarify that block trades between accounts with the same beneficial ownership are strictly prohibited, and that block trades between accounts with common beneficial ownership are permitted only in circumstances in which the trade meets the three requirements set forth in the answer to Question 9. The answer to Question 11 has been updated based on upcoming Self-Match Prevention enhancements that will become effective on December 21, 2014 and January 11, 2015.

The revisions will become effective on January 2, 2015.