This revised Advisory Notice supersedes NYMEX & COMEX Market Regulation Advisory Notice RA1203-4 from September 24, 2012. It is being issued to notify the marketplace that pending all relevant regulatory review periods, effective on trade date October 15, 2012, NYMEX will 1) reduce block trade minimum thresholds in five core energy futures contracts and three core energy options contracts, 2) begin to permit block trading in an additional 494 energy products and 3) revise Rule 526 (“Block Trades”) to require block trades to be price reported to the Exchange within fifteen minutes of execution with respect to the 494 products for which block trade minimum thresholds are being established. Block trades in the existing NYMEX and COMEX block-eligible products will continue to require price reporting to the Exchange within five minutes of execution, inclusive of any block trade spread or combination transactions that include one or more of these products.
NYMEX has also requested that the Commodity Futures Trading Commission approve these changes with an effective date of October 12, 2012. In the event such approval is received, the Market Regulation Department will issue a revised Advisory Notice advising the marketplace of the earlier effective date.
Additionally, effective October 15, 2012, NYMEX will eliminate block-trade eligibility in Gulf Coast Gasoline futures (LR), Gulf Coast Ultra Low Sulfur Diesel futures (LU) and New York Harbor Ultra Low Sulfur Diesel (LH) futures.
Block trades in NYMEX and COMEX products are governed by Rule 526 and the information provided in this Advisory Notice.
A complete list of NYMEX and COMEX products in which block trading is permitted and the relevant quantity thresholds is available on the CME Group website via the following link:
The text of Rule 526 appears in Section 13 of this Advisory Notice.
1. Definition of Block Trades
Block trades are privately negotiated futures, options or combination transactions that meet certain quantity thresholds which are permitted to be executed apart from the public auction market. All block trades are subject to the conditions set forth in NYMEX and COMEX Rule 526 and in this Advisory Notice.
2. Participation in Block Trades
Each party to a block trade must be an Eligible Contract Participant as that term is defined in Section 1a(18) of the Commodity Exchange Act. Eligible Contract Participants generally include exchange members and member firms, broker/dealers, government entities, pension funds, commodity pools, corporations, investment companies, insurance companies, depository institutions and high net-worth individuals. Commodity trading advisors and investment advisers who are registered or exempt from registration, and foreign persons performing a similar role and subject as such to foreign regulation, may participate in block transactions provided they have total assets under management exceeding $25 million and the block trade is suitable for their customers.
A customer order may be executed by means of a block trade only if the customer has specified that the order be executed as a block trade.
Orders may not be bunched to meet the minimum block quantity thresholds.
3. Time and Prices of Block Trades
Block trades may be executed at any time, including times during which the public auction market is closed.
Block trades must be transacted at prices that are “fair and reasonable” in light of (i) the size of the transaction, (ii) the prices and sizes of other transactions in the same contract at the relevant time, (iii) the prices and sizes of transactions in other relevant markets, including, without limitation, the underlying cash market or related futures markets, at the relevant time, and (iv) the circumstances of the markets or the parties to the block trade.
The trade price must be consistent with the minimum tick increment for the market in question. Additionally, each outright transaction and each leg of any block eligible spread or combination trade must be executed at a single price.
Block trade prices are reported independently of transaction prices in the regular market and are not included as part of the daily trading range. Block trade prices do not elect conditional orders (e.g. stop orders) or otherwise affect orders in the regular market.
4. Block Trade Minimum Quantities for Outrights, Spreads and Combinations
The block trade minimum quantity requirements for outright futures and options are set forth in the list of block trade eligible products which is available on the CME Group website via the following link:
a) Intra-Commodity Futures Spreads and Futures Combinations and Intra-Commodity Options Spreads and Options Combinations
These spreads and combination transactions may be executed as block trades provided that the sum of the quantities of the legs of the transaction meets the minimum block quantity threshold.
b) Inter-Commodity Futures Spreads and Futures Combinations and Inter-Commodity Options Spreads and Options Combinations
These spreads and combination transactions may be executed as block trades provided that the sum of the quantities of the legs of the transaction meets the larger of the threshold requirements for the underlying products.
c) Options/Futures Spreads
Options/futures spreads may be executed as block trades provided that the options component of the spread meets the minimum quantity threshold for the outright option or option combination and the quantity of futures executed is consistent with the delta of the options component of the spread.
5. TAS & TAM Block Trades
Certain block-eligible futures contract months may be executed as block trades and assigned the current day’s settlement price or any valid price increment ten ticks higher or lower than the settlement price (“TAS block trades”). Additionally, certain block-eligible futures contract months may also be executed as block trades and assigned the current day’s marker price or any valid price increment ten ticks higher or lower than the marker price (“TAM block trades”).
Additionally, intra-commodity calendar spreads in the nearby month/second month spread and the second month/third month spread may be executed as TAS or TAM block trades provided that the underlying product is eligible for TAS or TAM trading.
The pricing of the legs of a TAS or TAM calendar spread block trade will be calculated as follows:
- The nearby leg of the spread will always be priced at the settlement or marker price, as applicable, for that contract month.
- The far leg of the spread will priced at the settlement or marker price, as applicable, for that contract minus the allowable TAS or TAM price increment traded (negative 10 through positive 10), except in circumstances where the traded TAS or TAM priced is the actual settlement or marker price of the contract.
TAS block trades, including eligible TAS calendar spread block trades, may not be executed on the last day of trading in an expiring contract.
The products and contract months in which TAS and TAM block trades are permitted are set forth in the list of block trade eligible products which is available on the CME Group website via the following link:
6. Block Trade Reporting Requirements
a) Time Requirements
Block trades in the following list of products must be reported to the exchange by the seller within five minutes of the transaction.
- Brent Crude Oil Penultimate Financial futures (BB)
- Brent Crude Oil Last Day Financial futures (BZ)
- Light Sweet Crude Oil futures and options (CL/LO)
- Gulf Coast Sour Crude Oil futures (MB)
- New York Harbor ULSD Heating Oil futures and options (HO/OH)
- Henry Hub Natural Gas futures and options (NG/ON)
- Henry Hub Natural Gas Look-Alike options (LN)
- RBOB Gasoline futures and options (RB/OB)
- NYMEX Cocoa, Coffee, Cotton and No. 11 Sugar futures (CJ, KT, TT and YO)
- Gold futures and options (GC/OG)
- Silver futures and options (SI/SO)
- Copper futures (HG)
Block trades in all other block-eligible NYMEX energy products must be reported to the exchange by the seller within fifteen minutes of the transaction.
Any block spread or combination transaction that includes one of the products listed above which are subject to the five minute price reporting requirement, must be reported in five minutes, regardless of whether one or more legs of the spread or combination are in a product for which there is a fifteen minute price reporting requirement.
b) Reporting Methods
Block trades must be reported to the exchange via one of the methods described below.
i) CME ClearPort
Block trades may be reported to the CME ClearPort Block Trade Facilitation Desk by calling 1.866.246.9639. Additionally, block trades may be electronically submitted directly to CME Clearing via CME ClearPort. For information on reporting block trades through CME ClearPort, please contact customer service at 1.800.438.8616 or via email at ClearPort@cmegroup.com.
ii) CME Direct
Block Trades may be electronically submitted to CME Clearing via entry on the CME Direct platform. The CME Direct platform is directly connected to CME ClearPort. For information on reporting Block Trades through CME Direct, please contact CME Direct Support at CMEDirectSupport@cmegroup.com.
iii) Trading Floor
Block trades negotiated on the trading floor must be reported to exchange staff at the Master Pulpit.
c) Information Required when Reporting Block Trades
When reporting a block trade, the following information will be required:
- Contract, contract month and contract year for futures, and, additionally for options, strike price and put or call designation;
- Quantity of the trade or, for spreads and combinations, the quantity of each leg of the trade;
- Price of the trade or, for spreads and combinations, the price of each leg of the trade;
- Buyer’s clearing firm and seller’s clearing firm;
- Name and phone number of the representative reporting the trade (for floor reporting only); and
- Execution time (in Eastern Time) of the trade (i.e. the time at which the trade was consummated)
7. Block Trade Submission Requirements to CME Clearing
Block trades reported to the trading floor must be entered by the seller or his designated representative into the CME clearing system within 30 minutes of execution and must contain the material terms of the trade, including the allocation to the correct clearing firm unless the trade will clear at the seller’s qualifying clearing member firm. Within 60 minutes of execution and after entry by the seller, the buyer or his designated representative must enter into the CME clearing system a time of execution for the trade, note any disagreement with any of the terms of the trade entered by the seller, and allocate the trade to the correct clearing firm unless the trade will clear at the buyer’s qualifying clearing member firm. When reporting spread or combination transactions, each leg must be entered individually. Separate submission to the CME clearing system is not required in the event that the block trade is directly entered into CME ClearPort, CME Direct or reported to the CME ClearPort Facilitation Desk.
8. Block Trade Recordkeeping
Complete order records for block trades must be created and maintained, just as with any other transaction. However, as noted above, the time of execution of the block trade must also be recorded.
9. Dissemination of Block Trade Information
The date, execution time, contract month, price and quantity of block trades are displayed on the CME Group website at the following link: Block Trades.
Block trade prices are published separately from transactions in the regular market.
Block trade volume is also included with other privately negotiated transactions in the daily volume reports published by the exchange.
10. Pre-Execution Communications
The prohibition on prearranged trading and the requirements related to pre-execution communications with respect to certain Globex trades set forth in Rule 539 do not apply to block trades.
11. Block Trades Between Affiliated Parties
Block trades between the accounts of affiliated parties are permitted provided that 1) the block trade is executed at a fair and reasonable price; 2) each party has a legal and independent bona fide business purpose for engaging in the trade; and 3) each party’s decision to enter into the block trade is made by an independent decision-maker. In the absence of satisfying the requirements above, the transaction may constitute an illegal wash trade prohibited by Rule 534 (“Wash Trades Prohibited”).
12. Contact Information
Questions regarding this Advisory Notice may be directed to the following individuals:
Market Regulation: Russell Cloughen, Director 212.299.2880
Robert Sniegowski, Senior Director 312.341.5991
CME Clearing: CME Clearing Support 312.207.2525
For media inquiries concerning this Advisory Notice, please contact CME Group Corporate Communications at 312.930.3434 or firstname.lastname@example.org.
13. Text of NYMEX & COMEX Rule 526
Rule 526 BLOCK TRADES
The Exchange shall designate the products in which block trades shall be permitted and determine the minimum quantity thresholds for such transactions. The following shall govern block trades:
A. A block trade must be for a quantity that is at or in excess of the applicable minimum threshold. Orders may not be aggregated in order to achieve the minimum transaction size, except by those entities described in Sections I. and J.
B. Each party to a block trade must be an Eligible Contract Participant as that term is defined in Section 1a(18) of the Commodity Exchange Act.
C. A member shall not execute any order by means of a block trade for a customer unless such customer has specified that the order be executed as a block trade.
D. The price at which a block trade is executed must be fair and reasonable in light of (i) the size of the block trade, (ii) the prices and sizes of other transactions in the same contract at the relevant time, (iii) the prices and sizes of transactions in other relevant markets, including without limitation the underlying cash market or related futures markets, at the relevant time, and (iv) the circumstances of the markets or the parties to the block trade.
E. Block trades shall not set off conditional orders (e.g., Stop Orders and MIT Orders) or otherwise affect orders in the regular market.
F. The seller must ensure that each block trade is reported to the Exchange within five minutes of the time of execution in the following products: Brent Crude Oil Penultimate Financial futures, Brent Crude Oil Last Day Financial futures, Light Sweet Crude Oil futures and options, Gulf Coast Sour Crude Oil futures, New York Harbor ULSD Heating Oil futures and options, Henry Hub Natural Gas futures and options, Henry Hub Natural Gas Look-Alike options, RBOB Gasoline futures and options, Cocoa futures, Coffee futures, Cotton futures, No. 11 Sugar futures, Gold futures and options, Silver futures and options and Copper futures. In all other block-eligible products, the seller must ensure that each block trade is reported to the Exchange within fifteen minutes of the time of execution. The report must include the contract, contract month, price, quantity of the transaction, the respective clearing members, the time of execution, and, for options, strike price, put or call and expiration month. The Exchange shall promptly publish such information separately from the reports of transactions in the regular market.
G. Block trades must be reported to the Clearing House in accordance with an approved reporting method.
H. Clearing members and members involved in the execution of block trades must maintain a record of the transaction in accordance with Rule 536.
I. A commodity trading advisor ("CTA") registered or exempt from registration under the Act, including, without limitation, any investment adviser registered or exempt from registration under the Investment Advisers Act of 1940, shall be the applicable entity for purposes of Sections A., B., C., and D., provided such advisors have total assets under management exceeding $25 million and the block trade is suitable for the customers of such advisors.
J. A foreign Person performing a similar role or function to a CTA or investment adviser as described in Section I, and subject as such to foreign regulation, shall be the applicable entity for purposes of Sections A., B., C., and D., provided such Persons have total assets under management exceeding $25 million and the block trade is suitable for the customers of such Persons.