In two recent market regulation advisory notices (RA1303-3 and RA1307-4), CME Group clarified its rules regarding the disclosure and use of nonpublic information based upon a solicitation to participate in a block trade. The advisories make clear that, while the counterparties to a block trade are permitted to initiate trades to hedge or offset the risk associated with the trade preceding the public report of the block trade by the exchange, they may do so only after the consummation of the block trade. Thus, pre-hedging or anticipatory hedging of any portion of a block trade in the same product or a closely related product based upon a solicitation to participate in a block trade is not permitted. The advisories further provide that parties who have been solicited to participate in a block trade may continue to transact in the marketplace in the context of their normal business, but may not use actionable nonpublic information regarding an imminent block trade or report of a block trade to their advantage.
Advisory notice RA1303-3 is available here.
Advisory notice RA 1307-4 is available here.