News & Views

CME Enforcement Action: Indicative Opening Price (IOP) Violations

CME Enforcement Action: Indicative Opening Price (IOP) Violations

By: Chris Waitz, Director of Regulatory Affairs, Eventus

Two US Futures Commision Merchants (“FCMs”) recently paid fines totaling $120,000 to the Chicago Mercantile Exchange (“CME”) and the Chicago Board of Trade (“CBOT”) for submitting orders which adversely impacted the exchanges’ Indicative Opening Price.

CME and CBOT Rule 573 (“Globex Opening”) states that prior to the opening of each CME Globex electronic trading platform (“Globex”) session, Globex will provide an indicative opening price (“IOP”) or prices. The IOP reflects the price between the buying and selling pressure at which the largest volume of trading can occur based on the Globex equilibrium price algorithm, taking into consideration all pending orders that could be executed on the Globex opening. The IOP is broadcast to all Globex users and to the CME Group market data/ticker feed. During the 30 second period prior to the opening (referred to as the “lockdown” or “no cancel” period), new orders may be entered, although no previously entered order may be modified or canceled. 

In 2019 CME issued an updated Market Regulation Advisory Notice (“MRAN”) and accompanying FAQ which provided a non-exhaustive list of trade practices during the pre-open period that may violate exchange rules. Some of the listed trade practices include:

  • The entry, modification or cancellation of orders during the pre-open period for the purpose of manipulating the IOP, causing artificial fluctuations in the IOP, or identifying liquidity in the order book. (Rule 575 “Disruptive Trading Practices Prohibited”)
  • The intentional or reckless entry of orders priced through the then existing IOP that cause a market disruption on the open (Rule 575 “Disruptive Trading Practices Prohibited”)
  • Opposing orders for accounts with the same or common beneficial ownership entered during the pre-open period which match upon the opening of the market. (Rule 534 “Wash Trades Prohibited”)
  • An attempt to circumvent the “no cancel” period by entering an order that could trade opposite a pending order from the same market participant or a pending order from an account with the same or common beneficial ownership. (Rule 534 “Wash Trades Prohibited”)
  • An algorithmic or automated trading system (“ATS”) deployed during the pre-open period which sends aberrant order messages, which may be disruptive to the IOP. (Rule 432.W “Failure to Diligently Supervise”)

According to the CME and CBOT Notice of Disciplinary Actions, over a period of 6 months the two FCMs placed orders through a third-party trading platform for the purpose of filling customer orders upon the market opening. The FCMs’ traders used the platform’s synthetic market-on-open functionality which entered and modified crossed-market orders during the pre-open session. These orders and modifications adversely impacted the Indicative Opening Price. CME and CBOT found that the FCMs failed to diligently supervise the entry of orders in accordance with exchange rules, a violation of Rule 432.W.


ViP: Validus’ trade surveillance and algo monitoring tools offer a suite of procedures designed to detect potential violations of CME and CBOT Indicative Opening Price rules. The procedures are designed for use across manually and automatically submitted orders. The procedures include the following alerts designed for a range of use cases:

  • Identify any orders placed during the pre-open period
  • Identify any orders placed during the pre-open period that are significantly above or below the last IOP tick
  • Identify any orders placed during the pre-open period that cross the last IOP tick and are subsequently canceled prior to the market open
  • Identify any orders canceled during the last 30 seconds of the pre-open period
  • Identify any orders placed during the pre-open period that cross the last IOP tick by a configuration threshold
  • Identify any direct or indirect wash trades that occur upon market open

These procedures are useful to identify both potentially disruptive/prohibited trading activity and can help to document evidence of diligent supervision as part of a firm’s supervisory program. 


About Eventus

Eventus is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit  www.eventus.com.