- 18 Jun 2019
- By CME Group
What are Block Trades?
Block trades are privately negotiated futures, options or combination transactions that are permitted to be executed away from the central limit order book (CLOB) on CME Globex or in the trading pit and are subsequently submitted to CME Clearing via CME ClearPort or CME Direct. The fertilizer suite is comprised of only futures (no options) and is available for execution either via the CLOB or via block trades but is not available in the trading pit. Block trades must be submitted to CME Clearing for price reporting purposes within a prescribed time after execution.
Rule 526 (“Block Trades”) governs block trading in CME, CBOT, NYMEX and COMEX products. Block trades are permitted in specified products, which include the entire Fertilizer futures suite (Urea US Gulf, Urea Egypt, Urea Brazil, Urea Middle East, DAP NOLA, and MAP Brazil), and are subject to minimum transaction size requirements. Block trades must be transacted at prices that are “fair and reasonable” in light of the size of the transactions, and prevailing markets.
Block trades offer commercial firms and institutional traders the convenience of privately negotiating a futures transaction with a select eligible counterparty.
Once executed and cleared, the resulting futures contract is indistinguishable from any other futures transaction recorded in that product. Thus, these transactions may subsequently be liquidated by an offsetting transaction executed as a Block or through the CME Globex electronic trading system or can be cash settled upon expiration.
Only “Eligible Contract Participants” or ECPs are permitted to transact blocks. ECPs may generally be thought of as exchange members and member firms registered as floor brokers and floor traders, commercial firms, pension funds, commodity pools, corporations, investment companies, insurance companies, depository institutions and high-net worth individuals. The qualifications are formally defined in Section 1a(18) of the Commodity Exchange Act (CEA).
All Fertilizer futures products have a minimum block threshold of 2 contracts throughout the trading day, and block trades must be submitted to the Exchange within fifteen (15) minutes of execution.
A block trade may be transacted at any time and at any fair and reasonable price agreed upon by the two counterparties. The two customers transacting a block must have the resulting futures positions subsequently submitted to CME ClearPort.
Typically, a customer establishes a relationship with a broker who brokers the market, i.e., shows a bid and an offer, in Fertilizer blocks. There are a number of firms who may broker markets in blocks. Although the Exchange assumes a neutral posture and does not offer specific broker recommendations, customers can view the Fertilizer Broker Directory for assistance in finding a broker. After the trade is executed, the futures position must be reported to CME Clearing via CME ClearPort or CME Direct. Access to CME ClearPort requires registration. Additional information on access to CME ClearPort is available here: CME ClearPort.
Getting set-up on ClearPort for the Fertilizer contracts
The Fertilizer contracts are trading as Block futures via brokers. A Firm will need to be Registered for CME ClearPort to participate as a counter-party on a Block Trade.
The first stage is to register on ClearPort. To Register a New Firm and User please see the following link for step by step instructions and forms: https://www.cmegroup.com/clearport/registration.html
Once ClearPort registered, contact your Clearing Firm to request a ClearPort Clearing Account:
- Make sure your account is block enabled for the Fertilizer contracts: UFV, UFE, UFB, UME, DFN, and MFC.
- Permission any broker(s) that you approve to enter your block trades (list of brokers: Needed).
Ask your Clearing Firm to set-up a credit-limit for your account
For more information, please contact:
Client Development and Sales
Joe Grider, Director
+1 312 930 1771
Joe.Grider@cmegroup.com
Business Line Management (United States)
Candice Lucas, Director
+1312 930 3365
Candice.Lucas@cmegroup.com
Business Line Management (Europe)
Jeffry Kuijpers, Executive Director
+44 20 3379 3729
Jeffry.Kuijpers@cmegroup.com
Research and Product Development
Alison Coughlin, Director
+1 312 338 7171
Alison.Coughlin@cmegroup.com
About CME Group
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