The Chicago Mercantile Exchange's (CME)board of directors issued a letter to its members that sets
limits, but does not ban, dual trading in the S and P 500
futures and options pit.
    The rules prohibit brokers who execute customer orders to 
trade for their own account, or engage in dual trading, from
the top step of the pit -- which the board defines as a
geographically advantageous position in the pit.
    Brokers who engage in dual trading in other areas of the
pit must record to the nearest minute those personal trades.
    The board will also set as yet unspecified percentage
limits on the trades brokers can conduct among "broker groups,"
otherwise known as "trading rings."
    By issuing its own rules, the CME's board rejected a
petition presented in February by some CME members that sought
to prohibit dual trading of any kind in the S and P 500 pits.
    The full CME membership will vote on the petition, since it
was rejected by the board, by April 13. If the members reject
the petition, the board would be free to implement its rules, a
CME spokesman said. However, the members can vote to adopt the
petition and institute a total ban on dual trading.
    The board's rules on dual trading, if implemented, would
prohibit brokers from trading for their own account once they
have executed a customer order from the top step of the pit.
    "It's a step in the right direction," said stock futures
analysts William Marcus of Donaldson, Lufkin, Jenrette Inc.
    "It's very difficult to engage in large broker business
from anywhere but the top step," he said.
    "If there were abuses, (the rules) should act to curb
them," Marcus added.
    The spokesman for the CME said the tenor of the board of
directors' letter to members appears to leave open the
possibility of additional limits on dual trading. In addition,
the limits set forth so far will have to be more closely
defined.
 Reuter
