Date:	February 10, 2006
Recipients:	Members and Independent Software Vendors
Authorized by:	Jeffrey S. Hersh
Title:	REMINDER: Treasury Futures Reduced Tick Spread Leg Pricing Changes
Action Date:	n/a
Document Recommended for:	Key Contact, Traders, Compliance, Backoffice
Related Bulletins	Bulletin #75 of 2005, CBOT Notice February 3, 2004
Attachment:	n/a
SUMMARY:

As previously announced in Bulletin #75/2005  distributed on December 2, 2005, as of Tuesday, January 3, 2006, the CME Clearing House implemented a change to the e-cbot spread leg pricing convention on all reduced tick calendar spreads in Treasury futures.   Specifically, the front leg price of all reduced tick calendar spreads will default to the prior day’s settlement price and the differential price will determine the price of the spread’s back leg. The major benefit to the customer is consistency in leg price assignments. 

The CME Clearing House automatically adjusts all e-cbot generated spread leg prices based on the prior day’s settlement. Firms must be aware of the following impact and inform their clients accordingly:

• For Clearing purposes, leg price assignments for quarter tick spreads in CBOT Treasury products will follow the convention established for open auction markets whereby the front month leg is reset to the previous day’s settlement price and the back month leg is established based on the differential.  Firms can use the existing open auction SLED functionality to modify these assigned prices should the customer desire specific prices on the legs.  Clearing confirmation messages will contain the front-month price reset to the previous days’ settlement price.  The documents below provide additional clearing details.  Questions can be directed to the CME Clearing House at 312-207-2525.

          Clearing for CBOT Advisory Notice:

          http://www.cme.com/clearing/clrcus/adv/5615.html

          e-cbot SLEDS Price Changes – Effective January 3, 2006

           http://www.cme.com/clearing/clr/clradv/16913.html

• With respect to execution and confirmations, the e-cbot trading host methodology of assigning leg prices (based on the most current price) will not change.  As a result, order confirmation messages back to the front-end ISV will continue to report the prices prevailing in the front month at the time of execution.  These prices will not necessarily be the prices that appear in clearing.  Firms should review their internal system to determine what values are utilized in their systems that match off executions with clearing data.

eFills

There will be no changes to eFills and prices will continue to reflect trading host generated prices.

If you have any questions about this Bulletin, please contact your Key Account Manager.

 

 

 

 

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