Trade Marker at Close (TMAC) transactions are a game-changer for option traders, offering a precise way to execute trades into the near-month Equity Index futures at a price determined during the daily settlement window. This 30-second volume-weighted price (VWAP) ending at 4:00 p.m. ET is crucial because it is used for daily futures margin settlement and for determining the moneyness of options on futures at expiration. In 2024, TMAC transactions totaled 77,342 contracts, aligning perfectly with the settlement window, which, despite representing only 0.036% of the E-mini S&P 500's 23-hour trading day, accounts for nearly 3% of a day's volume. This outsized volume underscores the window's importance for all futures traders.
Executive summary:
TMAC offers traders the ability to reduce execution slippage during the most liquid point of the trading day, the futures settlement window.
Reducing execution costs can be important for traders across the buy-side, index arbitrage, quantitative, systematic, passive replicators and options on futures users.
E-mini S&P 500 futures (ES) trading during the 30-second fixing window in 2024 averaged $11.5 billion or 2.93% of the full-day average traded volume ($394.1 billion).
E-mini S&P 500 futures’ (ES) 10-day annualized volatility during the fixing window settlement TMAC window realized 16.8 or 38.6% higher than full-day 10-day annualized volatility (12.1).
Introduction:
Trade Marker at Close (TMAC) transactions allow for precise execution into the near-month Equity Index futures at a price determined during the daily settlement window: The 30-second VWAP ending at 4:00 p.m. ET, described here. In 2024, TMAC transactions totaled 77,342 contracts at par to the settlement window. The settlement window is important because this is the level used for daily futures margin settlement as well as determining moneyness on options on futures expiration. Additionally, while the 30-second settlement window represents .036% of the E-mini S&P 500 23-hour trading day, E-mini S&P 500 settlement volume realizes nearly 3% of a day’s volume trading within the window. This outsized volume metric highlights the importance of the window for all futures traders.
For in-the-money expiring Equity options on futures, TMAC offers the opportunity to seamlessly transition from physical delivery to cash or vice versa, as both TMAC and the price used for options on a futures’ moneyness are identical. Whereas Equity futures settle to the nearest tick during that window highlighted in the contract min tick column in Table 1, TMAC settles to a more granular 1c increment. This makes TMAC an extremely important benchmark for all E-mini traders.
Given the scale of trading volume and the fixing price importance, TMAC can be valuable for buy-side futures traders, index arbitrage traders, quantitative traders, systematic traders, passive index replication and options for futures users.
Figure 1 displays CME Direct markets on a typical day. Buying the TMAC on E-mini S&P 500 futures (ESX below) will deliver the E-mini S&P 500 futures based on that day’s VWAP price from the 30-second settlement window rounded to the 1c increment. Daily settlement will round to the nearest tick as defined in Table. The daily settlement values can differ from the TMAC price due to rounding.
Figure 1: TMAC markets on CME Direct
Chart
On January 27, the VWAP on E-mini S&P 500 futures (ES) from 15:59:30 ET to 16:00:00 ET was 6,046.64 and E-mini S&P 500 settled to the nearest tick of 6,046.75. If in the above example, the trader paid 10c, the price delivered would be 6,045.74 rather than the settlement price of 6,046.75. If the trader traded mid-market, they could transact at 6,046.64, reducing execution slippage to zero and outperforming settlement by 11c. With over 90% of TMAC trades consummated at zero, competitive levels are obtainable in either block or through bidding or offering on screens. Access block reporting rules, which are also summarized on the Block Trade Cheat Sheet.
Execution savings
The strongest value proposition for TMAC is reduced execution risk. In 2024, E-mini S&P 500 futures realized a standard deviation of 1.07 index points during the settlement fixing window fixing price, referred to as “ESF”.
The settlement window market microstructure is showcased in Table 2 and Chart 2. Of the $394.1 billion E-mini S&P 500 futures average daily value traded (ADVT) in 2024, roughly 2.9%, or $11.5 billion is traded during the settlement window. This is a significant amount of liquidity concentrated in an extremely small window. Notably, the notional traded during this window in 2024 has also grown +28% year-on-year, in line with the E-mini S&P 500 option suite given the importance of the benchmark to options traders.
Chart 3 and Table 2 highlight that annualized realized ES price volatility is also notably higher during this 30s settlement window than the full-day volatility. During 2024 alone, despite growing liquidity, annualized volatility during the ESF fixing was 38.6% higher than full trading sessions for the E-mini S&P 500 futures.
Chart 3: E-mini S&P 500 annualized realized volatility – full day vs. settlement window
Source: CME Group
TMAC also reduces trading slippage on E-mini Nasdaq-100 futures, E-mini DJIA futures and E-mini Russell 2000 futures. Table 2 shows 2024 volume metrics and realized 10-day volatility. One interesting difference, possibly due to higher relative volatility, the 2024 realized annualized volatility during the settlement window was lower than full-day realized for E-mini Nasdaq-100 and E-mini Russell 2000 futures.
Table 2: E-mini annualized volatility, volume and deviation
2024 Annualized Volatility
2024 Volume ($, Billion)
One Standard Deviation from Fixing
E-mini S&P 500 Futures
12.1
16.8
394.1
11.5
1.98
1.07
E-mini Nasdaq-100 Futures
17.2
16.5
217.8
2.4
1.95
3.72
E-mini DJIA Futures
11.1
13.9
25.4
0.4
1.64
6.60
E-mini Russell 2000 Futures
20.4
17.5
20.0
0.8
2.06
0.44
Source: CME Group
Lastly, Table 2 also highlights savings can be substantial. Given a 32% probability of a greater than one standard deviation move from the mean, in 2024 traders could have reduced slippage by ~2bps on average using TMAC versus trading outright during the fixing window.
TMAC differences to BTIC
It is also important to highlight the differences between our TMAC and the Basis Trade at Index Close (BTIC). BTIC enables market participants to execute a basis trade relative to the official close for the underlying index. Whereas the TMAC calculation references futures trades only, not the underlying index. Due to the use of different inputs, transactions based on TMAC and BTIC can differ substantially. The below table highlights 2024 slippage between BTIC and TMAC for end-of-day settlement trading.
Table 3: Historic E-mini TMAC and BTIC comparison
2024 Average
E-mini S&P 500 Futures
5,458.48
5,458.94
0.47
E-mini Nasdag-100 Futures
19.218.04
19,218.30
0.25
E-mini DJIA Futures
40,425.65
40,452.09
26.44
E-mini Russell 2000 Futures
2,139.15
2,139.59
0.44
Source: CME Group
The power of TMAC
The Equity futures settlement window is a crucial and liquid part of the trading day, and TMAC helps minimize trading slippage. This advantage is valuable for a wide range of traders, from buy-side futures traders to options users. Enhance your trading precision and efficiency by leveraging TMAC. Remember key benefits when using TMAC
The Equity futures settlement window is an impressively liquid portion of the day.
TMAC as an order type enables settlement trading with reduced trading slippage.
These benefits extend to anyone trading risk during the end-of-day settlement, including futures traders, index arbitrage traders, quantitative traders, systematic counterparties, passive index replication and options users – anyone trading risk to the end-of-day settlement.
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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
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