Some representatives from the CME Group trading floor at the Chicago Board of Trade don’t believe they are being heard by exchange leaders or regulators. More importantly, they don’t believe the interests of their customers are being heard. To rectify that, they are asking the U.S. Commodity Futures Trading Commission to delay the closing of the pits and to conduct a 90-day public comment period for the rule change the CME Group seeks to allow closure of the futures trading pits.

The issue they are concerned about is something called “user-defined spreads.” There are customers across various trading pits and markets who have entered into trades via the open outcry trading pits that can’t be liquidated with the same level of risk in an electronic market as things stand today.

A ratio spread entered as an open outcry trade is not the same as a ratio spread that is exited as an electronic trade, where the functionality for the ratio is not part of the exchange matching engine, they claim.

The brokers who are complaining claim to be serving the interests of their clients, which is what brokers do. I know, I was one for a long time. The exchange has painted some of these individuals as serving only their own interests, which is not what brokers do.

But the hyperbole aside, if customers don’t have an equal risk process to exit trades they have entered, then their interests are not being protected adequately by the regulators.  The regulators should take the time to listen to the customers – the end-user customers.

The CFTC should declare the 90-day comment period and let all voices be heard. I put my voice behind this idea.

There is a very easy short term answer to all of this, one that would not cost the CME Group very much operationally.  That is to have one futures pit with a 10 to 15 minute trading window for each market. That would allow trades that can be filled most effectively via open outcry to be traded in a call market rather than electronically. When the electronic market can offer the same level of risk for “user-defined spreads” as open outcry, then the utility of the floor for futures will be gone and the final pit closed.

Anyone familiar with the phrase “Any more trading in butter?” knows what I am envisioning here.

If I were a customer with complex user defined spreads on, I would contact the Secretary of the CFTC and let them know my feelings on the matter.  The CFTC Secretary can be reached at

Be as specific as you can about the trades you are concerned about and write to them soon.  Time is running out.

The ironic thing is that the CME bought a match engine from a defunct company (TruExchange) over 13 years ago that featured user defined spreads. The CME gutted that match engine and used it, I recollect, as the chassis for the Eagle Match engine that originally offered implied pricing for Eurodollar calendar spreads, or was it options trading. One of them.

I don’t know if the TruExchange match engine was everything it was supposed to be, but the CME has had plenty to time to finish it. In the meantime, until the functionality is there, let’s take a 90 day time out to hear from the public and give the CME tech team a little more time to develop and deploy solutions for more CME Group customers.

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