Futures shock for block-trade resisters
CBOT, which bars futures block trading, remains its strongest opponent – most recently complaining about a rival’s reporting-time rules. Is this an objection to deals that make the market less transparent or a backstop defence of CBOT’s pit traders? And can it hold out against a strategy widely regarded as vital to modern markets?
The controversy over block-trading regulations in the futures market has been reignited by the condemnation of BrokerTec Futures Exchange's (BTEX) block-trading rules by chairman of the Chicago Board of Trade (CBOT) Nickolas Neubauer.
BTEX is a two-year-old electronic futures exchange that trades US treasury futures whose rules allow a relatively long time period before block trades are reported to the market.
Block trading allows market participants to negotiate and execute large trades privately off-exchange for a single price without immediately revealing the details to the exchange. By handling the trade privately, the parties are not forced to unbundle the transaction and execute it piecemeal over time, a practice that risks prices changing before the trade is complete.