CME Proposes Rule Changes to List and Trade Cash-Settled Single-Stock Futures

The Chicago Mercantile Exchange ("CME") proposed rule changes to list and trade cash-settled futures on individual stocks.

CME said it previously offered physically delivered single-stock futures but stopped in 2011. The new products would settle in cash instead of delivering shares.

The proposal covers four parts of the CME rulebook:

• Chapter iii adds definitions for "narrow-based security index" and "security futures products" to track the Commodity Exchange Act.
• Chapter 700 sets listing standards. To list a future, the underlying stock must have a market value of at least $100 billion, an estimated deliverable supply above 20 million shares, and average daily trading of at least $450 million over the prior six months. CME also set listing maintenance standards, including that the issuer maintained the market value above $50 billion.
• Chapter 701 covers corporate events. It sets how CME would adjust a contract for a stock split, merger, or special dividend. It also sets backup methods to fix a final settlement price if the primary market has an outage or does not report a price.
• Chapter 711 sets the trading rules. A contract would generally cover 100 shares, or 10 shares in a smaller version. Trading hours would match CME's equity index futures. CME set a position limit, generally 200,000 contracts for 100-share contracts. It said futures trading would halt if the primary exchange halts the underlying stock.