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September 19, 2023

Christopher J. Kirkpatrick

Secretary

Commodity Futures Trading Commission 

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

 

Re: Cboe Futures Exchange, LLC Rule Certification

Submission Number CFE-2023-017

Dear Mr. Kirkpatrick: 

Pursuant to Section 5c(c)(1) of the Commodity Exchange Act, as amended (“Act”), and 

Regulation 40.6(a) promulgated by the Commodity Futures Trading Commission (“CFTC” or 

“Commission”) under the Act, Cboe Futures Exchange, LLC (“CFE” or “Exchange”) hereby submits 

a CFE rule amendment (“Amendment”) to revise CFE’s error trade policy. Exhibit 1 to this 

submission sets forth the rule changes included in the Amendment. The Amendment will become 

effective on or after October 3, 2023, on a date to be announced by the Exchange through the 

issuance of an Exchange notice. 

Overview

CFE’s error trade policy is codified in Policy and Procedure III (Resolution of Error Trades) 

(“P&P III”) of the Policies and Procedures Section of the CFE Rulebook. The Amendment revises 

the provisions of P&P III relating to notification to the CFE’s Trade Desk (“Trade Desk”) of potential 

error trades and relating to resolution by the Trade Desk of error trades in CFE futures products.

Notification of Potential Error Trades

Part A of P&P III currently provides that any request by a CFE Trading Privilege Holder 

(“TPH”) to invoke the error trade policy with respect to any trade must be made to the Trade Desk as 

soon as possible in a form and manner prescribed by the Exchange. Additionally, Part A provides in 

this regard that if a potential error trade is not brought to the Trade Desk’s attention within eight 

minutes after the relevant trade occurred, the trade stands, except as provided in Part B of P&P III. 

Part B applies if an error trade cannot be busted or adjusted under Part A because it was not brought 

to the Trade Desk’s attention within the eight minute time limit. 

The Exchange currently requires pursuant to the provisions of Part A that a TPH must 

complete a written form and electronically submit that form to the Trade Desk within eight minutes of 

the time of execution of a potential error trade in order to invoke the error trade policy with respect to

that potential error trade.

The Exchange is revising Part A to provide that a TPH must, in a form and manner prescribed 
2

by the Exchange, do both of the following in order to invoke the error trade policy for a potential 

error trade:

(i) notify the Trade Desk of the potential error trade by telephone as soon as possible 

and in no event later than eight minutes following the execution time of the potential 

error trade; and

(ii) electronically submit to the Trade Desk a written notification regarding the potential 

error trade, with the information required to be included in the notification as 

designated by the Exchange, within twenty minutes following the execution time of 

the potential error trade.

The Exchange believes that these revised notification provisions will make it easier for a TPH

to report a potential error trade within the required time frame since a TPH will be allowed to provide 

an initial notification by telephone within eight minutes following the execution time of the trade 

instead of needing to prepare and electronically submit a written form during that time frame. 

Additionally, the Exchange believes that the Trade Desk will still be able to commence its error trade 

review process for a potential error trade within the same eight minute time frame that currently exists 

through the receipt of a telephonic notice regarding the potential error trade during that time frame. 

The Exchange also believes that requiring a TPH to provide an electronic notification with further 

information regarding a potential error trade within twenty minutes following the execution of the 

trade will contribute to ensuring that the Trade Desk has sufficient information relating to the trade

that is in a written and documented form.

As is currently the case, the Amendment also revises Part A to make clear that:

(i) The Trade Desk provides assistance regarding potential error trades only to TPHs. 

Thus, for example, a customer needs to interface with the Trade Desk through the 

broker for the customer that is a TPH.

(ii) If either or both of the notification requirements described above (i.e., the provision 

of a telephonic notification within an eight minute time frame and an electronic 

written notification within a twenty minute time frame) are not satisfied with respect 

to a potential error trade, trade will stand, except as provided in Part B.

(iii) Part A does not apply with respect to trade busts and adjustments under Parts D

through M of P&P III. Parts D through M address other types of trade busts and 

adjustments, such as busting or adjusting a Block Trade or the contract leg of an

Exchange of Contract for Related Position transaction inputted with a mistake, 

inaccuracy, or error; busting or adjusting trades not correctly processed due to a CFE 

trading system malfunction; or busting or adjusting trades to mitigate market 

disrupting events. Parts D through M apply by their own terms and either have 

different notification provisions or do not include notification provisions.

With regard to this third clarification regarding how Parts D through M apply by their own 

terms, the Amendment also removes the current reference in Part A to the Trade Desk being able to 

receive notice of potential error trades from Exchange employees, subject to the current eight minute 

notification time frame. The Exchange views these types of situations as scenarios that could arise 

under Parts D through M rather than under Part A and with respect to which the notification 

provisions under Part A are not applicable.
3 

Consistent with the revisions to Part A, the Amendment also revises Part B to provide that 

Part B is now applicable when either or both of the notification requirements under Part A were not 

satisfied with respect to an error trade rather than when an error trade was not brought to the Trade 

Desk’s attention within the eight minute time limit. The Amendment does not revise any of the other

provisions of Part B. 

Resolution of Error Trades in Futures Products

Part A currently provides that error trades in futures (also referred to as “Futures” under CFE 

rules) will generally be busted and that error trades in options on futures (also referred to as “Options” 

under CFE rules) will generally be adjusted. The Amendment makes the treatment of error trades in 

futures and options on futures products consistent by providing that error trades in both will generally 

be adjusted.

Specifically, the Amendment applies the same provisions that currently apply with regard to 

the resolution of error trades in Options to the resolution of error trades in Futures. Under these 

provisions:

(i) The Trade Desk is authorized in its sole discretion to adjust a Futures error trade or 

an Options error trade that was outside the “no bust range” for the relevant Contract, 

with the following exception. 

(ii) If the adjustment of an error trade involving the execution of a Limit Order with a 

Customer Type Indicator Code of 4 (“CTI Code 4”) would result in an adjusted trade 

price for the transaction that is greater than the limit price of the Limit Order if it was 

an Order to buy or that is less than the limit price of the Limit Order if it was an 

Order to sell, the Trade Desk will not adjust the trade and instead is authorized in its 

sole discretion to bust the trade. 

(iii) If the Trade Desk determines that the trade price of a potential error trade was outside 

the “no bust range” for the relevant Contract, the Trade Desk will review the 

circumstances surrounding the trade to determine whether the trade should be 

adjusted or whether in the circumstance described in the preceding paragraph the

trade should be busted. The factors that may be considered by Trade Desk in this 

connection include: the market conditions immediately before and after the trade 

occurred; the volatility of the market; the prices of related instruments in other 

markets; whether one or more parties to the trade believe that the trade was made at a 

valid price; and any other factors that the Trade Desk may deem relevant. The Trade 

Desk shall make its decision as promptly as practicable. The decision shall be final.

(iv) If a trade is adjusted, the Trade Desk will adjust the price of the transaction to a price 

that is equal to the highest level of the “no bust range” if the original trade price was 

above that level or will adjust the price of the transaction to a price that is equal to the 

lowest level of the “no bust range” if the original trade price was below that level. If 

a trade is busted, the Trade Desk will cancel the trade.

(v) If a Futures or an Options trade is not adjusted or busted, the parties to the trade

cannot reverse the trade, except as provided in Part B, and cannot “trade out” of the

trade by entering into a pre-arranged offsetting transaction, except pursuant to CFE 

rule provisions relating to pre-execution discussions. 
4 

The Exchange has received feedback from market participants that adjusting an error trade is 

generally preferred to busting an error trade because an adjustment only impacts the value of the trade 

whereas a trade bust impacts a market participant’s position in the applicable product and potentially 

impacts positions from other trades that the market participant has made in relation to the original 

position. At the same time, the Exchange recognizes that adjusting an error trade involving a 

customer limit order with CTI Code 4 past the customer’s limit price may not be consistent with a 

customer’s expectations and thus treats error trades in that context differently.

Statutory Basis

CFE believes that the Amendment is consistent with the Designated Contract Market 

(“DCM”) Core Principles under Section 5 of the Act. In particular, CFE believes that the 

Amendment is consistent with:

(i) DCM Core Principle 4 (Prevention of Market Disruption) in that the error trade 

provisions provided for in the Amendment are intended to reduce the potential risk of price 

distortions and market disruptions;

(ii) DCM Core Principle 7 (Availability of General Information) because the 

Amendment describes in CFE’s rules the notification requirements relating to potential error trades 

and the manner of resolution of futures error trades and makes CFE’s error trade policy more 

straightforward for market participants by harmonizing the manner in which error trades are resolved 

in futures and in options on futures; and

(iii) DCM Core Principle 9 (Execution of Transactions) in that CFE’s error trade 

provisions enhance the ability of CFE to facilitate price discovery and an efficient, fair, and orderly 

market by seeking to balance the adverse effects on market integrity of executing trades and 

publishing trade information inconsistent with prevailing market conditions while preserving 

legitimate expectations of trade certainty by market participants. 

CFE believes that the impact of the Amendment will be beneficial to the public and market 

participants. CFE is not aware of any substantive opposing views to the Amendment. CFE hereby 

certifies that the Amendment complies with the Act and the regulations thereunder. CFE further 

certifies that CFE has posted a notice of pending certification with the Commission and a copy of this 

submission on CFE’s website (http://www.cboe.com/us/futures/regulation/rule_filings/cfe/) 

concurrent with the filing of this submission with the Commission.

Contact Information 

Questions regarding this submission may be directed to Arthur Reinstein at (312) 786-7570 

and Shane Wilkerson at (484) 798-9350. Please reference our submission number CFE-2023-017 in 

any related correspondence.

Cboe Futures Exchange, LLC

/s/ Laura Fuson

By: Laura Fuson 

Managing Director
5 

EXHIBIT 1 

The Amendment, marked to show additions in underlined text and deletions in stricken text, 

consists of the following:

Cboe Futures Exchange, LLC 

Policies and Procedures Section of Rulebook

* * * * *

III. Resolution of Error Trades (Rule 416)

A. General Policy

1. Invoking Error Trade Policy

Any request by a Trading Privilege Holder to invoke the error trade policy with 

respect to any trade must be made to the Trade Desk as soon as possible In order to 

invoke the error trade policy for a potential error trade, a Trading Privilege Holder 

must, in a form and manner prescribed by the Exchange, do both of the following:

(i) notify the Trade Desk of the potential error trade by telephone as 

soon as possible and in no event later than eight minutes following

the execution time of the potential error trade; and

(ii) electronically submit to the Trade Desk a written notification 

regarding the potential error trade, with the information required to 

be included in the notification as designated by the Exchange, within 

twenty minutes following the execution time of the potential error 

trade. 

Additionally, an employee of the Exchange can bring a potential error trade to the 

Trade Desk’s attention. The Trade Desk may provide assistance regarding potential 

error trades only to Trading Privilege Holders.

In all cases, if a potential error trade is not brought to the Trade Desk’s attention 

within eight minutes after the relevant trade occurred, such If either or both of the

notification requirements in the preceding paragraph are not satisfied with respect to 

a potential error trade, trade will stand, except as provided in Part B below.

Part A of this Policy and Procedure does not apply to Block Trades and Exchange of 

Contract for Related Position transactions and does not apply with respect to trade 

busts and adjustments under Parts D - M of this Policy and Procedure. 

2. Notice that Trade Under Review

When a potential error trade is brought to the Trade Desk’s attention, the Trade Desk 

will disseminate a notice to the parties to the trade that the trade is under review.

3. Procedure Followed by Trade Desk
6 

The Trade Desk will determine for any potential error trade that is brought to the 

Trade Desk’s attention whether the trade price is in the “no bust range” for the 

relevant Contract, as set forth in the Rules governing such Contract. With respect to 

trades involving a Spread Order, the Trade Desk may also consider the theoretical net 

price of the Spread Order and apply the “no bust range” in relation to that theoretical 

net price (such that if the net trade price of the Spread Order was inside (outside) that 

“no bust range”, all of the trades involving the Spread Order would be treated as 

inside (outside) the “no bust range”). In making a determination regarding the 

theoretical net price of a Spread Order, the Trade Desk may consider all relevant 

factors, including the net of the true market prices of the Contracts that comprise the 

individual legs of the Spread Order (each determined in the manner described above) 

and the net price of other Spread Orders of the same type. 

In determining whether the trade price is within the “no bust range,” the Trade Desk 

will determine what the true market price for the relevant Contract was immediately 

before the potential error trade occurred. In making such determination, the Trade 

Desk may consider all relevant factors, including the last trade price for such 

Contract, a better bid or offer price, a more recent price in a different contract month 

or series, the prices of related contracts trading on the Exchange or other markets and 

the theoretical value of an Option as determined by the Exchange.

References above and in the Rules governing each Contract to consideration of all 

relevant factors in relation to the determination of the theoretical net price of a 

Spread Order and the true market price for a Contract are non-exclusive. Specific 

factors enumerated above and in the Rules governing each Contract in relation to 

those determinations are examples of factors that may be considered by the Trade 

Desk in making those determinations. The Trade Desk may consider other factors as 

well, such as, for example, the market conditions at the time of the trade, and may 

determine which factor or factors are relevant for consideration in each determination 

based upon the facts and circumstances in that particular instance. 

4. Trade Price Inside “No Bust Range”

If the Trade Desk determines that the trade price of a potential error trade was inside 

the “no bust range” for the relevant Contract, such trade will stand and no further 

action will be taken. No such trade can be busted or adjusted by agreement of the 

parties to such trade.

5. Futures Trade Price Outside “No Bust Range”

The Trade Desk is authorized in its sole discretion to bust a Futures error trade that 

was outside the “no bust range” for the relevant Contract.

If the Trade Desk determines that the trade price of a potential Futures error trade 

was outside the “no bust range” for the relevant Contract, the Trade Desk will review 

the circumstances surrounding such trade to determine whether such trade should be 

busted. The factors that may be considered by Trade Desk in this connection include: 

the market conditions immediately before and after such trade occurred; the volatility 

of the market; the prices of related instruments in other markets; whether one or more 

parties to such trade believe that such trade was made at a valid price; and any other 

factors that the Trade Desk may deem relevant. The Trade Desk shall make its 
7 

decision as promptly as practicable. Such decision shall be final.

If a trade is busted, the Trade Desk will cancel such trade.

If a trade is not busted, the parties thereto cannot reverse such trade, except as 

provided in Part B below. The parties to any such trade may also not “trade out” of 

such trade by entering into a pre-arranged offsetting transaction; provided that the 

parties may engage in pre-execution discussions with each other in accordance with 

procedures established by the Exchange from time to time.

6 5. Options Trade Price Outside “No Bust Range”

The Trade Desk is authorized in its sole discretion to adjust a Futures error trade or

an Options error trade that was outside the “no bust range” for the relevant Contract, 

with the following exception.

If the adjustment of an Options error trade involving the execution of a Limit Order 

with a Customer Type Indicator Code of 4 would result in an adjusted trade price for 

the transaction that is greater than the limit price of the Limit Order if it was an Order 

to buy or that is less than the limit price of the Limit Order if it was an Order to sell, 

the Trade Desk will not adjust the trade and instead is authorized in its sole discretion 

to bust the trade.

If the Trade Desk determines that the trade price of a potential Options error trade 

was outside the “no bust range” for the relevant Contract, the Trade Desk will review 

the circumstances surrounding such trade to determine whether such trade should be 

adjusted or whether in the circumstance described in the preceding paragraph such 

trade should be busted. The factors that may be considered by Trade Desk in this 

connection include: the market conditions immediately before and after such trade 

occurred; the volatility of the market; the prices of related instruments in other 

markets; whether one or more parties to such trade believe that such trade was made 

at a valid price; and any other factors that the Trade Desk may deem relevant. The 

Trade Desk shall make its decision as promptly as practicable. Such decision shall be 

final.

If a trade is adjusted under Part A of this Policy and Procedure, the Trade Desk will 

adjust the price of the transaction to a price that is equal to the highest level of the 

“no bust range” if the original trade price was above that level or will adjust the price 

of the transaction to a price that is equal to the lowest level of the “no bust range” if 

the original trade price was below that level. If a trade is busted, the Trade Desk will 

cancel such trade.

If a trade is not adjusted or busted, the parties thereto cannot reverse such trade, 

except as provided in Part B below. The parties to any such trade may also not “trade 

out” of such trade by entering into a pre-arranged offsetting transaction; provided that 

the parties may engage in pre-execution discussions with each other in accordance 

with procedures established by the Exchange from time to time.

7 6. Notice of Final Action

As soon as a decision regarding a potential error trade has been made, the Trade Desk 
8 

will disseminate a notice to the parties to the trade, indicating whether such trade is 

busted, is adjusted or stands and indicating the adjusted transaction price if the trade 

is adjusted. 

B. Policy When Error Trade Not Brought to Trade Desk’s Attention Within Time 

Limit

This Part B applies only to any error trade that cannot be busted or adjusted under Part A above 

because it was not brought to the Trade Desk’s attention within the eight-minute time limit specified 

therein either or both of the notification requirements in the first paragraph of Section 1 of Part A 

were not satisfied with respect to that trade. The procedures described in this Part B cannot be used if 

the trade price of the error trade in question was within the “no bust range” for the relevant Contract 

at the relevant time.

1. Both Parties Agree to Transfer Position

Upon the request of either party to an error trade that cannot be busted or adjusted 

under Part A above, the Exchange may disclose to that party the identity of the other 

party to the trade. If both parties to an error trade agree, they may transfer the 

position resulting from such trade between each other. Any such transfer must be 

made at the original trade price and for the same quantity as the original trade. The 

parties may also, but are not required to, provide for a cash adjustment to compensate 

one side of such error trade. Any such transfer must be reported to the Exchange in a 

form and manner prescribed by the Exchange.

2. Arbitration of Disputes

If the parties to an error trade do not agree to transfer the position resulting from such 

trade, then the party causing such trade may file an arbitration claim against the 

Trading Privilege Holder representing the other side in accordance with the 

arbitration rules incorporated by reference into Chapter 8. Any such arbitration claim 

will be dismissed if the owner of the account on the other side of the error trade is not 

a Trading Privilege Holder or any Person otherwise subject to the jurisdiction of the 

arbitration. If not dismissed, arbitration proceedings will be conducted in accordance 

with the arbitration rules incorporated by reference into Chapter 8.

 C. - M. No changes.

* * * * *