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COMMENT 

secretary 

From: Tim Radice [timr20@gmail.com] 

Sent: Friday, November 07, 2008 11 :01 AM 

To: secretary ... '·- ~--'' '-= l .:q 

Subject: Block trading 

To Whom it May Concern, 

One of the largest challenges to a small market is a lack of market liquidity. Recently the largest factor 

in an alarming lack ofliquidity had been the rapid increase in the practice of block trading. While it 

may appear that allowing block trades could be a solution to the liquidity issue the reality is that when 

you allow large (or all to often average) size trades to be taken away from the market makers you 

destroy the liquidity of a market. 

As more and more trades get blocked in a non-competitive manner you end up making it harder and 

harder for a market maker to make a living in a market, as a result you end up with less and less market 

makers and thus less and less liquidity. This downward spiral ofliquidity will often result in it 

becoming extremely difficult for small or medium size orders to be executed at reasonable levels, and 

thus the market is in effect ruined for all except the block traders. 

What is the balance which allows a large customer to execute an extraordinarily large order and yet still 

protect the market place? For an order to be allowed the privilege of being executed in a manner that 

fly's in the face of every rule passed over the last 30 years pertaining to "open and transparent" trading 

there must be stringent requirements pertaining to its size. 

The CFTC's previous recommendations in regard to minimum size make perfect sense in and ideal 

world: 

Calculating a minimum size based on market liquidity and depth is not the only possible way to 

determine what size order should be considered "large. "DCMs (Designated Contract Market) could 

employ other methods to reasonably determine what size order would move the price in the 

centralized market. For instance, along with a review of trade sizes and/or order sizes, DCMs could 

interview experienced floor brokers and floor traders to determine what size order is generally too 

large to fill at a single price. This method might be most appropriate for open-outcry markets because 

DCMs will not have the same type of trade data generated by electronic trading platforms, and will 

not as easily be able to determine, based on electronic data, what size order is "large. " 

The truth is, the world of exchanges has changed significantly since these last guidelines were written. 

In this new world exchanges are a business, most if not all exchanges are now publicly traded and like 

all publicly traded companies the bottom line is what is most important to the share holders. 

Unfortunately as we have seen in the stock market recently when you are paying attention to the bottom 

line first and foremost you often sacrifice long term stability and profit for the short term "easy money". 

In this case exchanges (Who often charge higher fees for block trades) have little to no incentive to 

ensure that only the largest trades are allowed to be blocked. My suggestion would be the same as your 

suggestion four years ago: 

DCMs could interview experienced floor brokers and floor traders to determine what size order is 

generally too large to fill at a single price. 

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There are already committees for each market that are made up of the people have spent their entire 

careers working with these markets, and have the incentive to do what is best for the markets in both the 

short and long term. 

In summary, while I understand the CFTC's desire to have a "loophole" in normal trading rules to allow 

exceptionally large trades to be executed in a manner that would be least disruptive to the marketplace, 

the reality is that this procedure is frequently being abused. All too often average size trades are being 

blocked for no reason except to make a little extra money on commissions and fees. Commodities 

markets are by their nature less liquid then most other markets and this disturbing new trend is greatly 

exacerbating this problem. If nothing is done to regulate this issue soon I fear that these markets will 

become to inefficient for most people to trade. As a result the people who rely on Commodities markets 

for hedging their real world risks will be the ones who end up being hurt the most. 

Thank you for your consideration, 

Timothy Radice 

Available for further discussion at (914) 224-2215 or timr20@gmail.com 

11/7/2008