To execute a block trade, the futures contract you want to use must be block-eligible and meet the applicable minimum quantity threshold.
The block threshold varies from product to product. A full list of block-eligible products and minimum thresholds can be found on the CME Group website.
Orders for different counterparties may not be bunched to meet the minimum block quantity thresholds, except by CTAs, and others performing a similar role, and meeting the required assets under management minimum of $25 million U.S. dollars.
The marketplace is notified of block trade minimum quantity thresholds and any changes thereto via a Special Executive Report issued by Research & Product Development. Interested market participants may receive these reports via email by visiting the CME Group Subscription Center.
Times and Prices
Block trades may be executed at any time, including times during which the public auction market is closed. However, they may not be executed after the expiration of the underlying futures or options on futures contract month.
Block trades must be transacted at prices that are fair and reasonable. There are four factors used by Market Regulation to determine whether a block trade price meets the fair and reasonable test:
- Size of the transaction
- Prices and sizes of other transactions in the same contract at the relevant time
- Prices and sizes of transactions in other relevant markets, including, without limitation, the underlying cash market or related futures markets, at the relevant time
- Circumstances of the markets or the parties to the block trade
Additionally, the trade price must be consistent with the minimum tick increment for the market in question. For example, COMEX Gold futures have a minimum price fluctuation of 10 cents. It would be impermissible, therefore, to price a block trade at $1200.05, because the block price would have a finer tick increment than the contract allows.
This is part of a course on block trades. For official regulatory guidance on block trades, reference the applicable Market Regulation Advisory Notice.
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