Block trades are privately negotiated futures, options or combination transactions that meet certain quantity thresholds and are permitted to be executed apart from the public auction market. Block trades are governed by Rule 526.
In the context for block trades, private negotiation includes trades consummated directly between the counterparties or via a broker. However, a block trade would not be considered to be privately negotiated if it was transacted on a system or facility that functioned like a trading venue or central limit order book.
Parties may use communication technologies to bilaterally request block quotes from one or more participants and to conduct subsequent privately negotiated block trades. Parties may also utilize technologies supported by third parties which allow for the electronic posting of indicative block markets displayed to multiple market participants. However, block trades executed between parties based on such electronically displayed indicative markets must be transacted only through direct bilateral communications involving the broker, where applicable, or the parties to the trade.
This is part of a course on block trades. For official regulatory guidance on block trades, reference the applicable Market Regulation Advisory Notice.
Test your knowledge
In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.