CME Group Issues Update MRAN On Prohibited Wash Trades: MRAN 1308-5

On November 19th, the CME issued its Market Regulation Advisory Notice 1308-5, relating to CME Group Rule 534 ("Wash Trades Prohibited").  The notice itself is relatively short and sets forth the text of the rule - this posting is intended to provide our readers with a brief overview of the particular "questions and answers" ("Q & As") that relate to unintentional and incidental crossing (or self-match) situations.

A "wash trade" is a trade that gives the appearance of a bona fide purchase and sale of an exchange-traded contract, but for the fact that the trades had been entered into without the intent to i) take a bona fide market position; or ii) executed bona fide transactions subject to market risk or price competition. In essence, a wash trade can result from the simultaneous purchase and sale of the same instrument at the same price for commonly owned trading accounts.