It is important that BrokerTec Futures Exchange (BTEX) have price integrity and that there be trade certainty in the system. To that end, BTEX Rule 405 provides a scheme for the correction of errors. The purpose of this Bulletin is to outline the BTEX Error Correction Procedures.
- The BTEX Board of Directors has established the No-Cancellation Range at 18 ticks above or below the previous settlement price or the last trade price, whichever occurred most recently. (See Exhibit A) Quantity errors will not be considered.
- In order for a transaction to be busted or re-priced in line with where the market last traded, it must first be outside of the NBR. If not, the trade will stand, even if the parties agree to cancellation.
- If the trade is outside of the NBR, the questioning member must advise BTEX by phone in the US at 201-209-7900 or in the UK 011-44-207-959-6789 within 10 minutes of the trade. If BTEX does not receive notice within 10 minutes from the trade, the trade will stand. A third party or BTEX staff may also question a trade.
- If a trade is questioned, BTEX staff will:
- by phone, contact all Members which are parties to the transaction and BrokerTec Clearing Company (BCC);
- by broadcast market message, advise all users on the platform; and
- by email advise all quotation vendors disseminating quotations of the Exchange,
- If, within 10 minutes after BTEX makes the notifications listed in paragraph 4, all Members that are parties to the transaction agree to its re-pricing or busting the trade and if no other person objects, the transaction shall be re-priced or busted. BTEX staff will then, by broadcast market message, advise all users on the platform and by email alert all quotation vendors disseminating BTEX quotations, that the trade was busted or re-priced.
- If, within 10 minutes after BTEX sends the notices referred to in paragraph 4:
- any Member which is a party to the transaction objects to its being busted or re-pricing; or
- any such Member cannot be contacted; or
- any other Person objects,
- Due to the auto leg feature of the system, spreads may occur as a result of a mistrade on one leg, but the other leg price may be deemed to be a good price. The party that caused the error will be deemed to be the counterparty to the good price, should the original counterparty not want the trade. The party that is the cause of the error must then claim the leg of the good price through OTIS. Should the original counterparty wish to keep the trade, no further action need be taken. The parties to the leg that was busted must reverse the transaction as a misclear through applicable BCC procedures.
- In reaching any determination, the factors that may be considered by the TRP include:
- the market conditions before and after the transaction occurred;
- whether one or more parties to the trade believe the trade was at a valid price;
- whether there is any indication that the transaction in question triggered any contingency orders or resulted in the execution of any Combination Trades;
- whether a third party relied on the price; and
- any other factors that the TRP deems relevant.
- If a transaction is busted as provided by Rule 405, either by agreement of the parties or by a TRP
- the parties must reverse the transaction as a misclear through applicable procedures.
- BTEX shall also cancel all transactions resulting from contingency orders that were resting in the BTEX Trading System at the times the busted transaction was executed and which were triggered by such transaction. BTEX will notify the Clearing Members responsible for such busted transactions.
- under no circumstances shall the parties to the error be permitted to reverse the error by entering into a prearranged transaction.
- As soon as a determination has been made as to whether a transaction shall be busted, BTEX shall send an advisory to all Members and to all quotation vendors disseminating quotations of BTEX, notifying them whether the transaction is being busted or not.
- If a transaction is busted the party making the error must pay a fee to BTEX in the amount of $250, for the first five instances, $500 for the next five and $1000 for each subsequent cancellation.
If you have any questions please contact:
Donald L. Horwitz, Head of Compliance, +1 201-209-7872, donald.horwitz@btec.com
Michael B. Nielsen, Director of Futures Operations, +1 201-209-7882, michael.nielsen@btec.com
Joseph Yurman, Market Support, +1 201-209-7875, joseph.yurman@btec.com
Paul Zubulake , Market Support, 201-209-7877, paul.zublake@btec.com
Tony Cider, Market Support , +44-207-959-6834, tony.cider@btec.com
EXHIBIT A
| BTEX Contract | Minimum Tick Increment | No-Cancellation Range | Tick increment of No-Cancellation Range |
| U.S. Treasury Bond (15 - 30 Year) | 1/32 | 18 ticks | 18/32nds |
| Long-Term U.S. Treasury Notes (6 ½ - 10 Year) | (1/2)/32 | 18 ticks | 9/32nds |
| Medium-Term U.S. Treasury Notes (5 Year) | (1/2)/32 | 18 ticks | 9/32nds |
