The CFTC approved an ICE Futures U.S. ("IFUS") amendment to its Block Trade FAQ that clarifies when market participants (other than intermediaries who take the opposite side of a customer block order) may engage in the pre-hedging of positions that the participants believe "in good faith will result from the consummation of [a] block trade."
The Chicago Mercantile Group ("CME") adopted similar measures in an advisory notice that permits the pre-hedging of block trades by participants, with the exception of intermediaries who take the other side of a customer block trade. Prior to these changes, parties to a block trade were permitted to hedge or offset the risk associated with a block trade only after its execution. Parties now will be permitted to hedge or offset the risk associated with a block trade before its execution.
The new IFUS guidance will become effective on October 31, 2016. The new CME Group guidance will become effective on November 8, 2016.
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