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CME Rule 575

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One of the concerns I have is whether this has a knock on effect on the people that make a living providing liquidity in the markets.

I think the "intent" part is actually covered in there:

"Q1: What factors may Market Regulation consider in assessing a potential violation of Rule
A1: Market Regulation may consider a variety of factors in assessing whether conduct violates Rule
575, including, but not limited to:
• whether the market participant’s intent was to induce others to trade when they otherwise
would not;
• whether the market participant’s intent was to affect a price rather than to change his
• whether the market participant’s intent was to create misleading market conditions;
• market conditions in the impacted market(s) and related markets;
• the effect on other market participants;
• the market participant’s historical pattern of activity;
• the market participant’s order entry and cancellation activity;
• the size of the order(s) relative to market conditions at the time the order(s) was placed;
• the size of the order(s) relative to the market participant’s position and/or capitalization;
• the ability of the market participant to manage the risk associated with the order(s) if fully
• the duration for which the order(s) is exposed to the market;
• the duration between, and frequency of, non-actionable messages;
• the queue position or priority of the order in the order book;
• the prices of preceding and succeeding bids, offers, and trades;
• the change in the best offer price, best bid price, last sale price, or Indicative Opening
Price (“IOP”) that results from the entry of the order; and
• the market participant’s activity in related markets."

But I do think that legitimate market makers (who we do need) might be the baby that gets thrown out with the bathwater...

Also - what is the method of enforcement - does each case need to go through the courts? If so - I have to wonder how effective it will be when the larger outfits get lawyered up and argue their case.

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