The CME Group, parent of the Chicago Board of Trade, warned on Jan. 12 it would punish traders who try to manipulate opening prices in Chicago by entering and then cancelling orders early on its Globex electronic trading platform.
“Market participants are reminded that all orders entered on Globex during the pre-opening are expected to be entered in good faith for the purpose of executing bona fide transactions,” the exchange said in a notice.
Dur ing the per iod af ter all-Globex trading halts at 7:15 a. m. Chicago time and before the start of side-by-side Globex and open-outcry trade, at 9:30 a. m., market participants can post bids and offers electronically, but pull them before they are filled.
Floor traders have said such “phantom” bids can obscure the market’s direction and the depth of liquidity ahead of the opening bell.
Posting and cancelling bids with the intent of distorting prices or liquidity “is considered uncommercial conduct detrimental to the welfare of the exchange and will result in disciplinary action,” the notice said.
The notice was headlined, “Improper Conduct With Respect to Pre-Opening Orders Entered on CME Globex.” But an exchange spokeswoman said the notice was not a response to any specific activity.
In a second notice, CME also warned it would punish traders who create option spreads “in a manner intended to deceive or unfairly disadvantage other market participants.”
“The Globex Control Center may adjust or bust trades that are deemed to negatively impact the integrity of the market,” the second notice said.