S3 2.4

Question 1

What type of organization is an Exchange?

Answer 1

SRO - sets its own trading and disciplinary rules

Question 2

What are Price Limits?

Answer 2

Maximum Price Increase/Decrease set by Exchange to control Price Volatility

Question 3

What happens when market hits Price Limits?

Answer 3

Trading continues, but only within these limits

Question 4

What are Price Limits based on?

Answer 4

Previous close price

Question 5

Are Price Limits the rule for all Exchanges?

Answer 5

No - some exchanges do not have them

Question 6

Are Price Limits set in stone once set?

Answer 6

No - they will change with varying volatility

Question 7

Is a trader guaranteed the ability to offset (match and close) contract within Price Limits?

Answer 7

Nope

Question 8

When will the Price Limit be modified?

Answer 8

If for 3 consecutive days the market hits High and Low Bid, PL is increase by 150%

Question 9

Who are Price Limit changes approved by?

Answer 9

CFTC

Question 10

What are Position / Trading limits?

Answer 10

Max number of contracts a Speculator can hold

Question 11

What is the objective of Position/Trade limits?

Answer 11

Set to prevent any trader from Cornering The Market and prevent Concentrated Positions

Question 12

Are all traders subject to Position/Trade limits?

Answer 12

Not (Bona Fide) Hedgers (producers and users)

Question 13

When do traders need to report to the CFTC?

Answer 13

Daily - When the aggregate of all accounts they own have reached position/trade limits

Question 14

Are Ex-Pit (outside of the pit) trades OK?

Answer 14

Nope

Question 15

Who will be the arbitrator in case of a dispute?

Answer 15

The CFTC

1) Between members and their employees
2) Between members
3) Between members and their customers

Question 16

What are futures traders not allowed to do in the exchange?

Answer 16

1) Cannot trade from their own inventory

2) Cross positions = merge clients’ accounts