Page 1 of2 

secretary 

{!6 -:9. -

{jJ} COMMENT 

• From: icebergq@aol.com 

Sent: Thursday, November 06, 2008 3:03 PM 

To: secretary 

Subject: Re: Proposed Rules for Trading Off the Centralized Market ' ,' ,'' ?~ -. 

(~/ 

: >"l rt1 

' ,._.,.,.... ;~·---t ,.,;,~~'"" 

Re: Proposed Rules for Trading Off the Centralized Market 

To Whom It May Concern: 

~~·--i 

I have been an options market-maker on NYBOTIICE for over two years. I consider myself 

willing and able to adapt 

to changing market conditions. I am not against changes in the rules that allow for a better, 

more efficient 

market. However, the implementation of Block Trading has not been such a change. Since 

arriving on 

the floor, I have witnessed first hand Block Trading in both the cocoa and coffee options pit. I 

understand the sentiment 

for allowing trades to occur off the market; that some trades are too big to be efficiently 

absorbed by the crowd. 

However, this is not at all how Block Trading has been used. The minimum size for a block 

trade has been set so low 

that ordinary trades that could easily be executed at one price in the crowd, without disrupting 

the market, have been 

executed as Block Trades. As a cocoa options trader, I can tell you that the current minimum 

Block Trade size of 100 

is far too low. There are many traders in the pit that will easily trade 250 lots at one price on 

their own. So combined, 

an order of at least 500 lots can be absorbed by the crowd. However, I have witnessed 100 lot 

Block Trades that are 

done at egregious prices where it is clear that one of the customers in being taken advantage 

of. Surely, these customers 

will eventually learn that they are being taken advantage of and take their volume eslewhere. 

Also, I believe that there is some confusion about setting Block Trade limits in options. Just 

because options trades 

are more complicated does not necessarily that the Block Trade size should be smaller. In the 

current rules " USFE seemed 

to imply that the 90% threshold should be lower for options than for futures. USFE noted that 

options transactions, particularly, , 

combination trades, are more complex than futures trades and require more human 

intervention than other trades. The options 

market is therefore more conducive to trading off the centralized market." While the options 

market is more complex, that is 

not a reason to lower the minimum Block Trade size. This is a reason that Block Trading rules 

should be set by the product 

committees. These committees much more attuned to the needs of different markets. These 

11/6/2008 
Page 2 of2 

individual committee members are 

active in their market and need a deep, liquid market to conduct their business. They are not 

beholden only to equity shareholders 

who may wish to sacrifice longer term viability in exchange for a minor gain in short term 

volume, and therefore, profits. These 

committees should be the ones the set rules for Block Trading that benefits the market as a 

whole. Lastly, there need to be "Rules" 

that govern Block Trading, not simply "guidelines" that can be easily manipulated. 

Thank You, 

Jim Hertzberg 

lcebergQ@aol.com 

Instant access to the latest & most popular FREE games while you browse with the Games Toolbar- Download 

Now! 

11/6/2008