The Chicago Mercantile Exchange, Inc. CBOT, NYMEX and COMEX (the "Exchanges") updated the Market Regulation Advisory Notice (the "Notice") on block trading. The updated Notice replaces the CME Group Market Regulation Advisory Notice from May 17, 2019. The updated Notice will go into effect October 1, 2019. The updated Notice will:
- "codify" that all block trade strategies involving a CME Group Exchange product are considered a transaction on the CME exchange;
- "codify" circumstances in which the Chief Regulatory Officer can allow block trades to be carried out at less than the block trade minimum threshold;
- clarify that block trades can be reported to the CME ClearPort Facilitation Desk/Global Command Center via email;
- emphasize that a block trade must be executed when the trade is consummated; and
- provide further guidance for (i) broker-dealers receiving permission to disclose their customers' identities and (ii) parties that engage in pre-hedging.
Commentary Bob Zwirb
In general, "block trades" are privately negotiated transactions that meet certain quantity thresholds that are permitted to be executed apart from the public auction market. Such trades must be transacted only between parties that are Eligible Contract Participants at prices that are "fair and reasonable." Block trades executed between parties based on electronically displayed indicative markets may be transacted only through direct bilateral communications involving the broker, where applicable, and the parties to the trade. Commodity trading advisors and investment advisors who are registered or exempt from registration, may participate in block transactions provided they have total assets under management exceeding $25 million and the block trade is suitable for their customers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
