July 2, 2018

CFTC Staff Issues Report Assessing CME Agricultural Block Trades

Washington, DC — The Commodity Futures Trading Commission’s (CFTC) Market Intelligence Branch (MIB) issued a report today that analyzes agricultural block trading in the grains, oilseeds, and livestock markets at the Chicago Mercantile Exchange (CME).

CME launched block trading for the full suite of agricultural futures and option products on January 8, 2018.  The report analyzes industry concerns over the first three months of 2018. Block trades are privately negotiated futures/options transactions permitted to be executed away from the central limit order book and are subsequently submitted to CME Clearing.

This report specifically addresses if block trades are reducing liquidity from the central limit order book and reducing price transparency. 

Key findings from the research:

• Block trades in the agricultural markets are a very small portion of the overall volume, but are somewhat more significant on specific dates and for certain contract months.
• Block trades are primarily occurring in nearby months (futures expirations occurring within the next 90 days).
• Market makers appear to be offsetting much of the block volume into the central limit order book.
• All block trades reviewed appear to be priced within the CME rule for “fair and reasonable” prices.

MIB staff will continue to engage the industry as block trading and other pertinent issues related to the agricultural community develop.  

This is the third in a series of reports from MIB staff, a unit of CFTC’s Division of Market Oversight.  MIB will publish additional reports on issues of current market interest.  Part of MIB’s role at the CFTC is to analyze and communicate current and emerging market issues to CFTC leadership and the public and assist the CFTC in making informed policy.