CME takes emergency action to prepare for Election Day volatility

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CME took emergency action on Monday to allow bigger-than-normal price swings in its interest rate futures on Election Day on Tuesday, as the market operator warned that the U.S. presidential vote could increase volatility.

The owner of the Chicago Board of Trade and Chicago Mercantile Exchange said it will widen price fluctuation limits in interest rate products from 5 p.m. Central (2300 GMT) on Tuesday to 7:20 a.m. Central (1320 GMT) on Wednesday.

The limits for the overnight U.S. trading hours will be replaced with higher limits that are normally in place for daytime trading.

CME "determined that there is a material likelihood that the vote may result in increased price volatility" during the hours when the lower limits are normally in place, the company said in a notice to customers.

"The emergency action is being taken as a precautionary measure and is intended to ensure fair and orderly trading," it said.

The lower limits normally in place for overnight trading are set to apply again starting at 5 p.m. Central on Wednesday (2300 GMT), CME said.