CME Group Inc. (CME) took steps Thursday to direct big traders in its derivatives markets toward using the exchange operator's set of electronic risk controls, making the use of one tool mandatory starting in late June.

The move comes as CME seeks to defend customers against potential fallout if a major participant in its futures markets makes an erroneous trade or builds up too much risk, as algorithm-driven investing strategies make up a bigger portion of trading activity at CME.

Beginning June 25, CME will require clearing members to implement the exchange operator's Globex Credit Control tool across executing firms that trade on CME's electronic Globex platform, which facilitates trading across the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange.

The aim is to "provide clearing firms with an additional, backstop risk management tool that allows for flexible administration of limits on the accumulation of daily exposure on CME Globex," exchange staff wrote in a Thursday notice to customers.

Use of the credit control tool has been voluntary since its introduction in May 2009, but CME is pushing its use as firms employing high-speed trading strategies have taken a lead role in providing liquidity in CME's futures and options markets.

CME, the world's largest futures exchange, has figured that about 40% of contract volume is driven by proprietary trading shops running high-frequency trading systems, ranging from market making to statistical arbitrage.

Such traders have drawn attention from financial regulators, who are seeking to better understand their various approaches to investing and get a handle on their activity in U.S. markets.

The Securities and Exchange Commission on Wednesday proposed a new rule that would affix unique identifiers to traders transacting large volume in stocks on a daily basis, and require them to report next-day transaction data to the agency.

CME said in the Thursday note that the credit control function should not be seen as replacing other risk management tools or procedures.

"It is simply intended to act as a backstop system outside the clearing firm's systems that can limit the risk exposure an execution firm can accumulate in the course of one day," exchange officials wrote.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com
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