MARKET REGULATION ADVISORY NOTICE______________________________________________________________________
Exchange

CME, CBOT, NYMEX & COMEX

Subject

Block Trades

Rule References

Rule 526

Advisory Date

June 17, 2024

Advisory Number

CME Group RA2402-5

Effective Date

July 2, 2024

Effective on trade date Tuesday, July 2, 2024, and pending all relevant CFTC regulatory review periods,
this Market Regulation Advisory Notice will supersede CME Group Market Regulation Advisory Notice
RA2303-5 from July 13, 2023. It is being issued to incorporate the following amendments:
•
•
•
•
•

Clarification in Section 1 that block trades are privately and bilaterally negotiated transactions.
Clarification in Section 11.b. that express consent to disclose identity is not required within a firm
where such disclosure is necessary to avoid a rule violation.
Various updates to Section 11.c. with respect to impermissible pre-hedging, including when a party
directly or indirectly charges a fee associated with the execution or clearing of a block trade.
Removal of product specific information from Section 14.
Addition of a Frequently Asked Questions Section 17 to provide additional context and clarifying
guidance with respect to block trades.

This Advisory Notice contains the following Sections:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

Definition
Participation
Different Accounts with Common Beneficial Ownership
Eligible Products
Time and Prices
Minimum Quantities
Block Trade Submission
Recordkeeping
Error Remediation
Dissemination of Block Trade Information
Use of Nonpublic Information
TAS, TAM and TMAC Block Trades
Basis Trade at Index Close (“BTIC”) and Basis Trade at Cash Open (“TACO”) Block Trades
Derived Block Trades
Text of Rule 526
Contact Information
Frequently Asked Questions

All block trades are subject to the conditions set forth in Rule 526 and in this Advisory Notice. Violationsof the Rule or any of the requirements and prohibitions set forth in this Advisory Notice may result in
disciplinary action.
1.

Definition of Block Trades

Block trades are privately and bilaterally negotiated futures, options or combination transactions that meetcertain quantity thresholds which are permitted to be executed apart from the public auction market.

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It is not permissible to facilitate the execution of block trades in Exchange-traded products on a system or
facility accessible to multiple parties that allows for the electronic matching of or the electronic acceptanceof bids and offers. Parties may use communication technologies to bilaterally request block quotes fromone or more participants and to conduct 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 onsuch electronically displayed indicative markets may be transacted only through direct bilateralcommunications involving the broker, where applicable, and the parties to the trade.
Market participants may utilize Directed Request for Quote (“DRFQ”) functionality within CME Direct toprivately negotiate and execute block trades. Additional information concerning DRFQ functionality,
including a description of the workflow and requirements concerning user entitlements, is available atwww.cmegroup.com/drfq. Additionally, a short video describing the DRFQ process is available here. To
learn more about DRFQ, please contact PlatformSolutions@cmegroup.com.
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 advisors who are registered or exempt fromregistration, 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 theorder be executed as a block trade.
3.

Block Trades between Different Accounts with Common Beneficial Ownership

Block trades between different accounts with common beneficial ownership are prohibited unless 1) eachparty’s decision to enter into the block trade is made by an independent decision-maker; 2) each party
has a legal and independent bona fide business purpose for engaging in the block trade; and 3) the blocktrade is executed at a fair and reasonable price. In the absence of satisfying all the aforementioned
requirements, the transaction may constitute an illegal wash trade prohibited by Rule 534 (“Wash Trades
Prohibited”). Common beneficial ownership is defined as not only accounts with the same beneficial
ownership, but also accounts with common beneficial ownership that is less than 100%.
4.

Block Eligible Products

A complete list of block eligible products may be found here:
CME, CBOT, NYMEX & COMEX Block Trade-Eligible Products and Minimum Quantity Thresholds
The marketplace is notified of block trade minimum quantity thresholds and any changes thereto via aSpecial Executive Report issued by Research & Product Development.
Interested market participants may receive these reports via email by visiting the CME Group
Subscription Center located at:
http://www.cmegroup.com/tools-information/subscriptions/advisory-subscribe.html
5.

Time and Prices of Block Trades

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Block trades may be executed at any time, including times during which the public auction market isclosed. Block trades 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” in light of (i) the size of thetransaction, (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 price increment for the market in question.
Additionally, each outright transaction and each leg of any block eligible spread or combination trademust be executed at a single price.
Block trade strategies involving a CME Group Exchange product and the product of any non-CME Groupexchange are considered an outright transaction at the relevant CME Group Exchange, and, as such, will
be reviewed for “fair and reasonable” pricing and timely submission solely as an outright transaction.
Block trade prices do not elect conditional orders (e.g. stop orders) or otherwise affect orders in theregular market.
6.

Block Trade Minimum Quantities for Outrights, Spreads and Combinations

The block trade minimum quantity requirements for outright futures and outright options may be foundusing the link below.
CME, CBOT, NYMEX & COMEX Block Trade-Eligible Products and Minimum Quantity Thresholds
The bunching of block trade orders is not permitted except in the case of eligible CTAs or foreign Persons
performing a similar role.
The Chief Regulatory Officer (“CRO”) or his designee may exercise reasonable discretion and permit anexception to the block trade minimum threshold where, in the opinion of the CRO or his designee, thesituation so requires and such exception is in the best interests of the Exchange, which may include, but
is not limited to, instances involving the liquidation of a portfolio of positions where one or more of the legsof the aggregate transaction do not meet the block trade minimum threshold for the respective
instrument(s).
Information with respect to minimum quantity thresholds for spreads and combinations executed as blocktrades may also be found here.
7.

Block Trade Submission

Block trades in CME, CBOT, NYMEX and COMEX products must be submitted via CME Direct or CME
ClearPort.
a) Submission Time Requirements
After a block trade is consummated it must be submitted to the Exchange via CME Direct or CME
ClearPort within 5 or 15 minutes, depending on the product. Submission via CME Direct or CME
ClearPort will result in a price report to the marketplace and submission to CME Clearing provided bothsides of the trade pass the required credit check and the relevant terms of the respective sides of the
trade match.

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Where it is necessary for parties to agree to the individual leg prices on certain spread and combination
trades to submit the trade, parties must do so as expeditiously as possible after agreeing to engage in theblock trade.
Block trade prices are reported independently of transaction prices in the regular market and are notincluded as part of the daily trading range.
CME, CBOT, NYMEX & COMEX Block Trade-Eligible Products and Reporting Requirementsb) Additional Submission Requirements and Obligations
Since July 17, 2017, all block trades have been required to be submitted directly to CME Clearing via
CME Direct, the CME ClearPort User Interface (UI), or the CME ClearPort API through proprietary or 3 rdparty software. CME Direct connects to the CME ClearPort API.
For the block trade to be price reported to the marketplace and submitted to CME Clearing, both sides of
the trade must pass the required credit check and the relevant terms of the respective sides of the trademust match. If either side does not pass the required credit check or the terms do not match, the blocktrade price will not be reported to the marketplace and the block trade will remain uncleared.
Entry into CME Direct or CME ClearPort may be done by each of the counterparties to the trade (singlesided entry) or via a broker or other authorized representative (dual-sided entry).
For single-sided entry, the buyer and seller of a block trade may agree to separately enter their side of theblock trade into CME Direct or CME ClearPort, indicating each other as the opposite party. In thiscircumstance, both the buyer and seller must enter their respective side of the transaction within therequired time period.
For single-sided entry, one side of a trade (either the buyer or seller) may agree to enter their respectiveside of the trade and allege that trade against the other party. In this circumstance, the other party mustensure the alleged trade is accepted (complete with the correct account information for their side) within
the required time period. Consequently, the first party entering their side of the trade should ensure theinformation being entered is correct and must leave enough time for the second party to accept the trade
within the requisite time period.
For dual-sided entry where a broker or other representative is entering the buy and sell side of the blocktrade on behalf of the counterparties, the broker or other representative is responsible for the entry of theblock trade within the requisite time period.
Block Trades in CME and CBOT Products
Block trades may be entered in CME Direct or CME ClearPort from 5:00 p.m. CT Sunday through5:45 p.m. CT Friday. CME Direct and CME ClearPort do not permit the entry of CME and CBOT
block trades during the maintenance window, from 5:45 p.m. CT to 6:00 p.m. CT Monday throughThursday. CME and CBOT block trades negotiated immediately prior to and during themaintenance window must be entered by 6:05 p.m. CT for products subject to a 5-minute
reporting requirement or by 6:15 p.m. CT for products subject to a 15-minute reporting
requirement.

Block Trades in NYMEX and COMEX Products
Block trades may be entered in CME Direct or CME ClearPort from 5:00 p.m. CT/6:00 p.m.
Eastern Time (“ET”) through 4:00 p.m. CT/5:00 p.m. ET each business day. CME Direct andCME ClearPort do not permit the entry of NYMEX and COMEX block trades between 4:00 p.m.
CT/5:00 p.m. ET and 5:00 p.m. CT/6:00 p.m. ET each business day or at any time on weekends.

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NYMEX and COMEX block trades negotiated immediately prior to and during the time that blocktrade entry is not permitted must be entered by 5:05 p.m. CT/6:05 p.m. ET for products subject toa 5-minute reporting requirement or by 5:15 p.m. CT/6:15 p.m. ET for products subject to a 15minute reporting requirement.
Block trades negotiated at any other time during which CME Direct or CME ClearPort are closed must be
submitted no later than 5 or 15 minutes after the time CME Direct or CME ClearPort reopens, dependingon the reporting requirement for the specific product.
Block trades may also be reported to the CME ClearPort Facilitation Desk/Global Command Center via
email at FacDesk@cmegroup.com. Please note that for the Facilitation Desk to submit the trade,the counterparty accounts must be registered with credit limits and product permissions set up in
CME Account Manager.
The Facilitation Desk is closed from 4:30 p.m. CT/5:30 p.m. ET Friday through 5:00 p.m. CT/6:00 p.m. ET
Sunday.
c) Information Required for Reporting Block Trades
When reporting a block trade, the following information is required:
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•
•
•
•
•
•

Contract, contract month and contract year for futures, and, additionally for options, strike priceand put or call designation for standard options, as well as the expiration date and exercise stylefor flex options;
Quantity of the trade or, for spreads and combinations, the quantity of each leg of the trade;Price of the trade or, for certain spreads and combinations, the price of each leg of the trade;
Account numbers for each side of the trade;
Buyer’s clearing firm and seller’s clearing firm;
For block trades reported via email, name and phone number of the party reporting the trade andcounterparty name and contact information for verification purposes; andExecution time (to the nearest minute in Central/Eastern Time) of the trade. The execution timeis the time at which the trade was consummated as described at the end of this section.

A block trade in a block eligible option may be executed up to and including the day on which an option
contract expires for purposes of offsetting an open option position, provided the offsetting block trade issubmitted via CME Direct or CME ClearPort no later than the beginning of the CME ClearPort
maintenance window.
The failure to submit timely, accurate and complete block trade reports may subject the party responsible
for the reporting obligation to disciplinary action. Parties shall not be sanctioned for block reporting
infractions deemed to arise from factors beyond the reporting party’s control (e.g. the block trade fails the
CME ClearPort automated credit check).
Please note that the execution time of a block trade is the time that the trade is consummated,which is the time that the parties agree to the trade in principle. In that regard, spread blocktrades are deemed consummated at the time the parties agree to the differential or combination
price, not the time the leg prices are determined. Market participants must accurately report theexecution time of the block trade. The reporting of inaccurate execution times may result in
disciplinary action.
8.

Block Trade Recordkeeping

Complete order records for block trades must be created and maintained pursuant to Rule 536 and CFTC
Regulations. Additionally, the time of execution of the block trade must also be recorded for all blocktrades.

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9.

Error Remediation

Dual-Sided Entry
For dual-sided entry where a broker or other representative has entered the buy and sell side of the blocktrade on behalf of the counterparties and the trade has cleared, but for which the broker or otherrepresentative has made an error in the terms of the trade, the error may be corrected as follows:
If the error is discovered on the same CME Direct or CME ClearPort trade date on which submission
occurred, the broker or other representative may void the erroneous submission and resubmit the blocktrade with the correct information.
If the error is discovered after the CME Direct or CME ClearPort trade date on which submission
occurred, the broker or other representative may request the Exchange to correct the error within threebusiness days.
Single-Sided Entry
For single-sided entry where the trade has cleared, but where an error has been made in the terms of the
trade, either party may request the Exchange to correct the error within three business days.
All correction requests made to the Exchange must include evidence that the counterparties to the blocktrade agree to the correction request. All correction requests are subject to review and approval by the
Exchange.
To request a correction please contact the CME ClearPort Facilitation Desk/Global Command Center at+1 800 438 8616 in the U.S., +44 20 7623 4747 in Europe, +65 6532 5010 in Asia, or via email at
FacDesk@cmegroup.com.
Error correction requests received after the three-business-day window may not take place without theexpress approval of CME Clearing. Market participants should contact CME Clearing Services at +1 312
207 2525.
10.

Dissemination of Block Trade Information

The date, execution time, contract month, price and quantity of block trades are automatically reported
once they are cleared. Block trade information is reported on the MerQuote system and may beaccessed by entering the code “BLK”. Block trade information is also displayed on the CME Groupwebsite at the following link: http://www.cmegroup.com/tools-information/blocktrades.html. Block trade
information is also displayed on the trading floor.
Block trade prices are published separately from transactions in the regular market.
Block trade volume is also identified in the daily volume reports published by the Exchange.

11.

Use of Nonpublic Information Regarding Block Tradesa) General
Parties involved in the solicitation or negotiation of a block trade may not disclose the details of thosecommunications to any other party for any purpose other than to facilitate the execution of the blocktrade. Parties privy to nonpublic information regarding a consummated block trade may not disclose suchinformation to any other party prior to the public report of the block trade by the Exchange.
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solely by the terms of Section b) below. Parties solicited to provide a two-sided block market are notdeemed to be in possession of nonpublic information provided side of market interest is not disclosed in
the context of the solicitation.
b) Broker Disclosure of Customer Identity
A broker negotiating a block trade on behalf of a customer may disclose the identity of the customer topotential counterparties, including the counterparty with which the block trade is consummated, only withthe express permission of the customer. Express consent must be obtained in writing (letter, email,instant message, etc.) or on a recorded phone line, and evidence of such consent must be provided toMarket Regulation upon request. Such express consent is not required on a trade-by-trade basis.
Express consent is also not required within a firm where such disclosure is necessary to avoid a ruleviolation.
Except in circumstances where brokers obtain express consent on a trade-by-trade basis, brokers mustreconfirm such consent on no less than an annual basis. For the reconfirmation, negative consent ispermissible. Brokers should retain documentation evidencing the annual reconfirmation and must provide
it to Market Regulation upon request.
With a customer’s consent, the broker may disclose the customer’s identity solely to parties involved in
the block trade negotiation, including the party with whom the block trade is consummated. Disclosure toanyone else is strictly prohibited.
c) Pre-Hedging/Anticipatory Hedging
Parties to a potential block trade may engage in pre-hedging or anticipatory hedging of the position thatthey believe in good faith will result from the consummation of the block trade, except for an intermediarythat takes the opposite side of its own customer order. In such instances, prior to the consummation of
the block trade, the intermediary is prohibited from offsetting the position they anticipate to be establishedby the block trade in any account which is owned or controlled, or in which an ownership interest is held,or for the proprietary account of the employer of such intermediary. The intermediary may enter intotransactions to offset the position only after the block trade has been consummated.
Market Regulation will consider the entirety of the communications pertaining to the negotiation andexecution of a block trade, including pre-existing disclosures, in assessing whether a pre-hedging party is
acting in a principal capacity. A party acting principally in a block trade negotiation that plans on
engaging in pre-hedging activity must ensure it is clear to its counterparty that the party is trading
principally, and, as such, owes no agency duties to the counterparty. Disclosures in the header/footer ofa party’s instant message communications advising that the party is acting principally and owes noagency duties to the counterparty would suffice. Alternatively, such disclosures could be made in otherrecorded communications contemporaneously with the block trade negotiation and prior to the principal
engaging in pre-hedging. Disclosures in account opening agreements or other similar noncontemporaneous communications may be deemed insufficient if the block trade negotiation itself
indicates, implies, or infers that agency duties may be owed to the counterparty. Conflicting inferences
will be viewed by Market Regulation in a light most favorable to the counterparty.
While pre-hedging may be permissible, it is a violation of exchange Rule 532 for a person to engage infront-running conduct, including directly or indirectly trading on the basis of material nonpublic information
when he knows or reasonably should have known the information was obtained or disclosed throughfraud, deception, or in violation of a pre-existing duty.
The Exchange may proceed with an enforcement action when the facts and circumstances of prehedging suggest deceptive or manipulative conduct by any of the involved parties, including when anintermediary handling a customer order violates duties owed to the customer.

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This guidance applies only in the context of pre-hedging of block trades. This guidance does not affectany requirement under the CEA or CFTC Regulations.
12.

TAS,TAM, and TMAC 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”). 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 themarker price (“TAM block trades”). 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 four ticks higher
or lower than the marker price (“TMAC block trades”).
Additionally, intra-commodity calendar spreads may be executed as TAS or TAM block trades provided
the underlying spread is eligible for TAS or TAM trading. Please refer to the most recent Advisory Noticeon TAS and TAM transactions for the list of products, contract months and spreads for which TAS or TAM
pricing is permitted.
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.TAM and TMAC block trades are permitted are set forthin the list of block trade eligible products which is available on the CME Group website via the following
link:
Block Trade-Eligible Products and Minimum Quantity Thresholds
13.

Basis Trade at Index Close (“BTIC”) and Basis Trade at Cash Open (“TACO”) Block Trades

A BTIC transaction is an Exchange futures transaction that is priced with reference to the applicable cash
Index closing level. For a BTIC block trade executed on a given Trading Day on or before the scheduledclose of the underlying primary securities market, the corresponding futures price shall be made byreference to the Index closing value for the current Trading Day. BTIC block trades are not permitted on
the last day of trading in an expiring contract month.
A TACO transaction is an Exchange futures transaction that is priced with reference to the next following
regularly scheduled special opening quotation (“SOQ”) of such futures contract’s underlying cash Index.
A list of BTIC block eligible products and block minimum thresholds is available on the CME Groupwebsite via the following link:
BTIC Block Trades Table
The futures price assigned to a BTIC block trade will be the current day’s applicable cash Index closing
level adjusted by any valid price increment (the “Basis”) higher or lower than the current day’s cash Index
closing level.
The futures price assigned to a TACO block trade will be the next following regularly scheduled special
opening quotation (“SOQ”) of the applicable cash Index adjusted by any valid Basis higher or lower thanthe SOQ.
The Basis in BTIC and TACO transactions must be stated in full tick increments as set forth in theapplicable product chapter and must be fair and reasonable taking into account financing rates, expected
dividend income and the time remaining until the applicable futures contract expires.

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The futures price of a BTIC block trade will be determined by the Exchange at 3:45 p.m. Central Time andthe Exchange-determined price will be final at that time. In the event of an early scheduled close of the
primary securities market, the futures price of a BTIC block trade will be determined by the Exchange 45
minutes after the early scheduled close time for the primary securities market, and the Exchangedetermined price will be final at that time. In the event of an equity market disruption in the primary
securities market, all BTIC block trades will be cancelled for that trade date.
The futures price of a TACO block trade will be determined by the Exchange shortly after the SOQ isdisseminated by Standard & Poor’s. In the event of a disruption in the primary listing exchange for a given
cash Index such that the administrator of such cash Index is unable to produce a regularly scheduled SOQ,
all TACO block trades which rely on that SOQ will be cancelled.
Except as identified in the list of block eligible products, BTIC and TACO block trades may not be
executed as a spread transaction. Parties wishing to effectuate a block spread transaction will be
required to negotiate the transaction as separate outright BTIC or TACO block trades, with each leg
meeting the applicable block trade minimum threshold.
14.

Derived Block Trades

A derived block trade is a transaction in an eligible contract in which a dealer consummates a block tradewith a client but where the price and quantity of the block trade depends on one or more hedging
transactions by the dealer that take place after the block trade has been consummated, but prior to theblock trade being submitted to the Exchange. Derived block trades are available solely in contracts
identified here, at the existing block trade minimum threshold applicable to those products.
Derived block trades are not permitted in any other products.
The counterparties to a derived block trade must comply with the following requirements and procedures:
General Requirements
•
•
•

•
•

The counterparties must agree that the execution will be done as a derived block trade
A written or electronic record of the terms of the transaction must be created and maintained
pursuant to the requirements of Rule 536.E.
Prior to the execution of any hedging transactions, the dealer and client must consummate theblock trade and determine and agree upon the following:• The quantity of futures or the notional value of the block trade, which must meet or exceed theapplicable block trade minimum quantity threshold;• The execution methodology for the dealer’s hedging transaction(s);• The markets in which the dealer’s hedging transactions will take place; and• The pre-determined basis to be used by the dealer in determining the price of the block trade
after the hedging transactions have been concluded.
The hedging transactions and the consummated block trade must occur and be submitted to the
Exchange on the same Exchange business day by 5:45 p.m. CT,
No spread trades are permitted for derived block trades

Permissible hedging vehicles include stock baskets, other cash market instruments such as Exchange
Traded Funds (ETFs), Exchange Traded Notes (ETNs), and/or equity index futures or options on futurescontracts. At a minimum, the hedging vehicles must evidence a reasonable degree of price correlation to
the equity index futures product underlying the derived block trade.
Permissible execution methodologies governing the execution of the hedges may include volume
weighted average price (“VWAP”), time weighted average price (“TWAP”), percentage of volume (“POV”),
limit price, or other agreed upon hedge types as determined by the dealer and the client at the time theblock trade is consummated, and must be identified when submitting the block trade via CME Direct.

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If the dealer is unable to execute the full quantity of hedges necessary to support the originally agreed
upon quantity of the block trade consummated with the client, the dealer must, at a minimum, submit theblock trade at a quantity that corresponds to the quantity of hedges the dealer executed. Alternatively,
with the client’s consent, the dealer may submit the block trade up to the full quantity originally agreed
upon.
In the event the quantity of hedges does not meet the block trade minimum threshold, the dealer may,with the client’s consent, submit the block trade at any quantity at or in excess of the block trade minimum
threshold. Alternatively, the dealer may notify the client that no block trade was able to be submitted dueto the lack of sufficient hedges to meet the block trade minimum quantity threshold. If no block trade issubmitted, the dealer must keep a record noting that the block trade could not be submitted and produce
the record to Market Regulation upon request.
Submission Requirements
•
•
•

•

Derived block trades must be submitted via CME Direct by the dealer facilitating the trade (dualsided entry) no later than 5:45 p.m. CT on the day the trade occurs;
The block trade must be accurately identified within CME Direct by checking the derived blockcheckbox;
The dealer must provide the following additional information concerning the hedging activity whensubmitting the derived block trade via the CME Direct block entry ticket:
o The hedge type (VWAP, TWAP, POV, Limit, or Other);o The hedge description;o The product(s) in which the hedge(s) took place (free form text box);
o The basis used for determining the block trade price (expressed in Index points); andThe time of execution submitted into CME Direct must accurately identify the time that the dealer
and the client consummated the block trade in principle, which must have been prior to thecommencement of any hedging activity; andDerived block trades will be uniquely identifiable when price reported on the CME Group website anddistributed via market data.

15.

Text of 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. Additionally, with respect to block trades in swaps, the minimum size forsuch transactions shall be established at levels at or in excess of those set forth in Appendix F to Part 43 of CFTC
Regulations [this sentence appears solely in CBOT’s rule]. 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 sizesof 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.
Unless otherwise agreed to by the principal counterparties to the block trade, the seller, or, in the case of abrokered transaction, the broker handling the block trade, must ensure that each block trade is reported to theCME Group RA2402-5
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G.
H.
I.

J.

16.

Exchange within the time period and in the manner specified by the Exchange. The report must include thecontract, 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.
Block trades must be reported to the Clearing House in accordance with an approved reporting method.
Clearing members and members involved in the execution of block trades must maintain a record of thetransaction in accordance with Rule 536.
A commodity trading advisor ("CTA") registered or exempt from registration under the Act, including, without
limitation, any investment advisor registered or exempt from registration under the Investment Advisors Act of1940, shall be the applicable entity for purposes of Sections A., B., C., and D., provided such advisors havetotal assets under management exceeding $25 million and the block trade is suitable for the customers of such
advisors.
A foreign Person performing a similar role or function to a CTA or investment advisor as described in Section I,
and subject as such to foreign regulation, shall be the applicable entity for purposes of Sections A., B., C., andD., provided such Persons have total assets under management exceeding $25 million and the block trade issuitable for the customers of such Persons.

Contact Information

Questions regarding this Advisory Notice may be directed to one of the following individuals in Market Regulation:
Urmi Graft, Director, Investigations, 312.341.7639
Cash Kinghorn, Manager, Investigations, 312.930.1873
Tiffany Riviere, Lead Investigator, 312.930.2316
Penelope Beckhardt, Lead Investigator, Investigations, 312.435.3664
Erin Middleton, Director, Rules & Regulatory Outreach, 312.341.3286
Paige Gawrys, Senior Specialist, Rules & Regulatory Outreach, 312.872.5078
For media inquiries concerning this Advisory Notice, please contact CME Group Corporate Communications at 312.930.3434 or
news@cmegroup.com.

17.

Frequently Asked Questions

Q1:

Does a broker or intermediary need to be an ECP to facilitate a block trade between two
eligible parties?

A1:

Only the buyer and seller of a block trade need to meet the participation requirements as codified
in Rule 526.B. and the associated guidance in Section 2 of this Advisory Notice. All parties to a
block trade must be appropriately registered in the industry for the business they are conducting
and have their accounts and access properly permissioned in CME Direct and/or ClearPort prior
to agreeing to or executing a block transaction. Please note that a broker registered in ClearPort
is not necessarily the same as a “Broker” registered in the industry. See definitions in ClearPort
User Guide.

Q2:

Can positions be transferred via block trades?

A2:

Transfers should be executed pursuant to Rule 853. Parties effectuating a transfer via theexecution of a block trade must ensure the execution meets the requirements of Rule 526 andthis Advisory Notice, namely Section 3, which requires independent decision-makers on bothsides of the transaction, independent and bona fide business purposes, and a fair and reasonable
price. Executing a block trade, or multiple block trades, for accounts with common beneficial
ownership in a manner that negates or strictly limits market risk may be deemed a direct orindirect wash trade.

CME Group RA2402-5
June 17, 2024
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Q3:

May a block trade be executed at a price below the minimum price increment?

A3:

No. Each block trade must be negotiated and executed at the minimum price increment. A broker
may not accept an order for a price below the minimum price increment. It is not, however, aviolation if two or more block trades that are each independently negotiated and executed at theminimum price increment achieve an average price that is below the minimum price increment.

Q4:

If a party charges a fee or commission in connection with a block trade, would that party
be prohibited from pre-hedging?

A4:

If a party or party’s employing firm charges their block counterparty a brokerage or commissionfee, Market Regulation will infer that agency duties were owed to the counterparty. The party
charging the brokerage or commission would therefore be prohibited from pre-hedging the blocktrade. This prohibition does not apply to scenarios where the pre-hedging party’s employing firm
charges fees to the counterparty that are typically part of servicing of the counterparty’s account,such as give-up or clearing fees, regulatory fees, block reporting fees, etc., so long as the fees do
not represent a commission or charge that indicates or implies that the block was intermediated,or broker assisted. Market Regulation may evaluate if the negotiated price of the block trade
includes an add-on commission from which agency duties could be inferred, including forexample if a pre-hedging party shares profits with the party’s agency desk for a specific blocktrade.

Q5:

What factors will Market Regulation consider in assessing whether communications
during a block negotiation indicate, imply or infer that agency duties may be owed to thecounterparty?

A5:

Market Regulation will consider the entirety of the communications pertaining to the block trade,including prior disclosures. Representations by a party that they will "work an order" on behalf ofa counterparty implies that they are engaging in activity on behalf of and in the best interest of thecounterparty. Agency duties may be inferred from that communication and pre-hedging would beprohibited. To avoid conflicting inferences from common trade parlance, such as “working anorder,” parties intending on pre-hedging should ensure through recorded communications that thecounterparty is aware that the party is acting in a principal capacity and owes no duties to thecounterparty.

Q6:

What is the time of execution of the block trade?

A6:

Block trades are executed at the time the parties agree to the trade in principle and all material
terms are known or reasonably determinable. For outright transactions, this means when theparties agree to the terms deemed material to the agreement, including, but not limited to: aspecific or reasonably determinable and reportable price (e.g. the daily settlement price) and thequantity of the transaction. For spreads that are only comprised of CME Group products, the timeof execution is the time that the parties agree to the price differential. For strategies that arecomprised of CME Group products and non-CME Group futures and options on futures products,
the time of execution is when the parties agree to the price of the CME Group leg.
Example: At 1:00pm CT, a customer placed an order with an intermediary to purchase 50
contracts in a futures contract at a differential (+0.50) to the underlying index, which is to be
published at 9:00pm CT. At 2:00pm, the intermediary found a seller and both parties indicatedinterest in consummating a transaction once the underlying index price is published at 9:00pm
CT. At 9:00pm CT, the relevant index was circulated, which provided for an index price of 600.00.
At such point, in order to consummate the transaction and meet the Exchange’s private
negotiation standard, the intermediary must receive from each of the counterparties to thetransaction confirmation of the final price of the transaction (600.50). At 9:10pm CT, both parties
agreed to the price, quantity, market, and all other material terms of the transaction. The details of
the block trade must then be submitted to the Exchange within 5 or 15 minutes depending on theCME Group RA2402-5
June 17, 2024
Page 13 of 15
product, noting the execution time of the transaction as the time the counterparties agreed to thefinal price of the transaction (9:10pm CT).
Q7:

What does it mean for a trade to have independent decision-makers?

A7:

In the context of block trades between accounts with common beneficial ownership, independent
decision-makers are parties who each manage separate accounts with separate businesspurposes and reporting structures. Where parties cannot demonstrate independence in decision
making, the transaction may constitute an illegal wash trade prohibited by Rule 534 (“Wash
Trades Prohibited”). Common beneficial ownership is defined as not only accounts with the same
beneficial ownership, but also accounts with common beneficial ownership that is less than
100%.

Q8:

How should a market participant handle simultaneously received buy and sell blockorders?

A8:

Market participants, including account executives, brokers, or other intermediaries, who accept
simultaneous buy and sell orders for execution have an independent “duty to inquire” about the
propriety of such orders. In the absence of such inquiry, the market participant accepting theorders may be found to have aided and abetted wash trades if the execution of the orders
produces a wash result. Market participants receiving simultaneous buy and sell orders for block
execution must inquire to ascertain whether the orders are for accounts with common beneficial
ownership.
If the buy and sell orders are for accounts with common beneficial owners, the broker mustensure the block transaction satisfies this Advisory Notice and Rule 526, including that the
opposing orders were placed by independent decision-makers, each having bona fide businesspurposes for the transaction. Further, block trades require private and bilateral negotiation. The
market participant receiving the simultaneous buy and sell orders for common beneficial owners
may not simply match the orders opposite one another and submit the transaction to the
Exchange as a block trade. There must be a private negotiation between the buyer and seller,even if it is through an intermediary.
To the extent the market participant solicits another to act as the counterparty to both the buy andsell block orders, each buy and sell must be separately negotiated and not made contingent on
the other.
Executing both buy and sell orders opposite a single counterparty in a manner that negates orstrictly limits market risk may produce a wash result for the buyer, seller, and counterparty whobought and sold. In the event a wash result occurs, the facilitating market participant may beliable as an aider and abettor pursuant to Rule.432.X.

Q9:

When is information about a block trade considered public?

A9:

Information about a block trade is considered public when the Exchange disseminates to themarketplace details concerning the block trade. Parties may rely on a complete, accurate andconfirmed report of the block trade to the Exchange as immediately disseminated and therefore
public.

Q10:

When is a market participant considered in possession of nonpublic information andtherefore prohibited from sharing, or trading based on, that information?

A10:

Parties who have been solicited to engage in a block trade where the price or side of market of a
block order or potentially forthcoming block order has been disclosed are considered inpossession of nonpublic information and may not use or disclose such information pursuant to theCME Group RA2402-5
June 17, 2024
Page 14 of 15
guidance in this Advisory Notice and Rule 532. Parties who discuss general market color orprovide/solicit two-sided markets are not considered in possession of nonpublic information.
Parties to an executed block trade are also in possession of nonpublic information until the public
report of the block trade by the Exchange. Such parties are, however, permitted to hedge the risk
associated with their block trade after consummation but before the public report of the blocktrade. Additionally, principals to a block trade as described in Section 11.c. may engage in prehedging or anticipatory hedging of the position that they believe in good faith will result from theconsummation of the block trade.
Q11:

Can the price of a block trade be changed after execution?

A11:

The price of the block trade that is submitted to the Exchange must match the price that wasagreed to by the parties in the negotiation and reflected in records, communications, or otheraudit trail. Errors in reporting block trade details to the Exchange may be corrected as outlined inRule 808.H. or described in the Error Remediation section of this Advisory Notice.

Q12:

Is it permissible to execute a block trade at the settlement price in a product that is not
TAS eligible?

A12:

To the extent a product is not TAS-eligible as a block trade, parties are not permitted to execute a
block trade at the settlement price until the settlement price has been published by the Exchange.
Parties may have discussions of interest in engaging in a block trade to be priced at thesettlement price for a non-TAS-eligible product prior to the settlement price being known. Oncethe settlement price is known, the parties may agree to such price and execute the block trade.

Q13:

A party wishes to trade an option block trade without a delta hedge. How can a liquidity
provider pre-hedge the delta risk that they expect to result from the future consummationof the option block trade in compliance with Rule 526 and this Advisory Notice?

A13:

In this scenario, the material terms of the option block transaction may not be reasonably
determinable or agreed to until the liquidity provider is able to ascertain market pricing based on
the liquidity provider’s pre-hedging activity. Typically, a party solicits a liquidity provider, who isacting in a principal capacity, for an indication of interest in executing an option block trade where
the negotiated price of the block trade is dependent on the hedging that the liquidity provider isable to achieve in the underlying futures product. After receiving the solicitation, the liquidity
provider pre-hedges the position that they believe in good faith will result from the future
consummation of the option block trade. The liquidity provider subsequently shows a firm price tothe counterparty. If the counterparty agrees to the trade, the option block trade is considered
executed, and the parties must submit the transaction within the required timeframe for the
product. If, however, the counterparty and liquidity provider do not come to an agreement for the
option block trade, the pre-hedging will still be deemed to have been done in good faith.
Please note that the price of the option block trade must be fair and reasonable in light of (i) thesize of the transaction, (ii) the prices and sizes of other transactions in the same contract at therelevant 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. In ascertaining the reasonablenessof the options block trade price, Market Regulation may consider the time required for the liquidity
provider to reasonably pre-hedge the position they believed would result from the future
consummation of the options block trade.

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Page 15 of 15
Q14:

What is the reporting time requirement for block strategies involving a CME Group
Exchange product and a futures or options on futures product of a non-CME Groupexchange?

A14:

In assessing the timeliness of a block trade report to the Exchange, Market Regulation willconsider whether the block trade was a component of a strategy involving a CME Group
Exchange product and a block trade of a product of a non-CME Group exchange futures or
options on futures. If parties indicate at the time of submission that the CME Group exchange
component was part of a strategy involving a non-CME Group exchange, Market Regulation willconsider the block trade to have been timely reported if the transaction information was submitted
to the Exchange within 15 minutes of execution. Parties can indicate a block trade was acomponent of a block trade incorporating a non-CME Group product through the self-reporting
tool in the Firm Regulatory Portal or by utilizing the Cross Exchange Spread Indicator on CME
Direct or ClearPort. In reviewing these transactions, Market Regulation may require parties toprovide transaction details concerning the non-CME Group exchange block transaction.