CBOT messaging policy

Discussion in 'Financial Futures' started by mats, Nov 29, 2005.

  1. mats


    Please`inform me about the CBOT messaging policy for sending automated bid/offer prices to their platform. As you know CME has calculated benchmarks based on a per product volume ratio. By the way does anybody know what would happen when I would send 2999 messages (limit of 3000) in a particular contract to cme with for example only 1 or 2 fills.

    Thanks in advance for information.
  2. Usually, both CBOT and CME would "socialize" the messaging policies a long time before they are actually implemented. CME was socializing the messaging policies with members throughout 2004, and then finally implemented this year. I have heard rumblings from the eCBOT, but nothing definite as a definition of ratio, etc.

    As for CME, your example is pretty straight forward, your clearing firm would receive two warnings (or "notices"), then the third occurance would mean a fine of $2k per product per day. Naturally, like the 5 msg / sec rule, if the situation persists, the member seat can be revoked.
  3. mats


    thanks rufus,

    could you please inform me why I would receive this penalty. I understood that you would get the penalty for 3000 messages or more.
    Furthermore I would like to know what would be the policy of CME when these trades/messages take place before regular trading hours. (if I understand correct from CME there are no exact rules during non RTH).

    by the way, its great you answered some of my questions, thanks
  4. It is correct that during non-RTH (other than 7-4), the policy won't apply. It is not just the 3000 active message rule, it is the per product volume ratio rule.

    Let's take ES for instance, the ratio is 5 :1, so you need a fill of 1 contract for every 5 messages (note new, cancel and modify each counts as an individual message), if you exceeded the ratio greatly. Like in your example, you sent 2999 messages, get a 2 lot fill (only), so your ratio is 1500 : 1 (actually maybe higher since you would needto cancel), which far exceeds the 5:1 ratio, therefore you (actually your clearing firm) would receive a "notice", three strikes (2 notices) and you will be getting a 2k fine.

    See the actual policy here.


    The per product benchmark here:


    While the policy is not specifically targeted at Automated Trading Systems (ATS), but at even 5 : 1, it will just weed out the small ATS (and the small noise-traders that just put on a pile of one-lot orders) that throws a tonne of 1 lot orders on the book, hope one of them would get filled.

    Of course, a large ATS, say throwing 2000 orders of 50 lots each, and get filled on just 20 orders won't be affected (don't forget the 1980 cancellations, or cancel and replaces!), since the volume ratio is (2000 + 1980) / (50 * 20) or 4:1 which is below 5:1.
  5. Sorry for my ignorance, what the purpose of such 'messages'?
  6. mats


    thanks rufus, i will study your examples, in the meantime i would like to give you following example:

    volume ratio for product abc is 1: 30
    i send 1600 messages and have 40 fills

    please also take in consideration that in my example total volume for the particular (illiquid month) is for example 80 contracts

    CME could say that my ratio is not good, 1600/40 = 40 and therefore give me a penalty.

    what will happen when I would also trade in the liquid month of the same contract where I would send out 40 messages with 40 fills, ratio 1:1, do they take the average of these months

    Bernard, a message could mean a bid, offer or cancel/replaces.
    ATS (automated trading systems send out these messages automatically).
  7. If you trade multiple months of ED, for instance, it would be considered as one product. But futures and options (ED and ED options) are considered two different products.
  8. mats


    so It means that in my example (both same future, but different months, the ratio will be the average of the 2 months , which is about 1: 20 , which is better than the benchmark, correct?
  9. That would be correct, as based on my understanding of the policy.
  10. Is the ECBOT / CBOT including the precious metals complex in this policy ?

    I just glanced at their website and only saw a reference to dow and note / bonds
    #10     Nov 29, 2005