With memorandum S-7258, titled “Implementation of New NYMEX/COMEX Rule Regarding Special Price Fluctuation Limits for Certain NYMEX and COMEX Metals Futures and Options Contracts” released moments ago by the CME Group, and set to become effective on December 21, 2014, and which seeks a 5 minute trading halt when “price movements in lead-month primary futures contracts result in triggering events”… “as a measure that is consistent with promoting price discovery and cash-futures price convergence” in order to “deter sharp price movements that may, for example, be driven by illiquid central limit order books prevailing from time to time in otherwise liquid markets”, one wonders why now, and what does the CME know about upcoming volatility, or lack of liquidity, in the precious metals space that nobody else does (and does any of this have to do with the “berserk” algo test from November 25?)?
To wit, from the CME, highlights ours:
Implementation of New NYMEX/COMEX Rule Regarding Special Price Fluctuation Limits for Certain NYMEX and COMEX Metals Futures and Options Contracts
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Effective Sunday, December 21, 2014 for trade date Monday, December 22, 2014, and pending all relevant Commodity Futures Trading Commission regulatory review periods, the New York Mercantile Exchange, Inc. (NYMEX) and Commodity Exchange, Inc. (COMEX) (collectively, the Exchanges) will implement new NYMEX/COMEX Rule 589 (Special Price Fluctuation Limits) to apply price fluctuation limits to certain metals futures and options contracts. Price fluctuation limits deter sharp price movements that may, for example, be driven by illiquid central limit order books prevailing from time to time in otherwise liquid markets.
NYMEX currently applies price fluctuation limits to its energy complex of futures and options contracts. These limits are referenced in each contract’s respective NYMEX product rulebook chapter. The Exchanges are proposing new Rule 589 to extend price fluctuation limit functionalities to certain metals futures and options as a measure that is consistent with promoting price discovery and cash-futures price convergence. The operation of new Rule 589 for metals futures and options contracts is described below. The full text of the new rule is set forth in Appendix B. Appendix C provides the specific limit levels for the relevant NYMEX/COMEX contracts to which Rule 589 will apply.
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The Exchanges will monitor the price movements of lead-month primary futures contracts in real-time on a daily basis. Price movements in lead-month primary futures contracts will result in triggering events. Triggering events result in monitoring periods, possible temporary trading halts followed by the re-opening of trading, and price fluctuation limit expansions.
If the lead-month primary futures contract is bid or offered via CME Globex at the upper or lower first special price fluctuation limit, the Exchanges will consider such an occurrence a triggering event that will begin a five-minute monitoring period in the lead-month contract. If at the end of this five-minute period the lead-month primary futures contract is not bid or offered at the applicable limit, the Exchanges will expand the limits an additional price limit increment above and below the lead-month contract’s previous-day settlement price. If, however, at the end of the five-minute interval, the Exchanges determine that the lead-month primary futures contract is bid or offered at the applicable limit, they will commence a two-minute temporary trading halt in all contract months of the primary futures contract as well as in all contract months of associated products. Primary contracts and associated products are identified in Appendixes A and C.
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As noted above, when an initial triggering event occurs, the Exchanges will commence a five-minute monitoring period. In each instance, the Exchanges will subsequently expand the price fluctuation limit for all primary futures contract months, as well as all associated products, by an additional increment above and below the lead-month contract’s previous-day settlement price. The incremental adjustment will occur regardless of whether or not a trading halt is triggered. However, no further special price fluctuation limits will be implemented following a trading day’s fourth price fluctuation limit adjustment.
Full article: What Do They Know? CME Implements Gold, Precious Metals Circuit Breakers Up To $400 Wide (Zero Hedge)
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