October 31, 2014

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CME Block Trade Advisories Clarify Nonpublic Information Restrictions

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.

©2014 Katten Muchin Rosenman LLP

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About this Author

Kevin M. Foley, Finance Attorney, Katten Muchin law Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

312-902-5372
Ross Pazzol, Financial Institutions Attorney, Katten Muchin Law firm
Partner

Ross Pazzol’s practice encompasses a broad range of financial services matters. He focuses primarily on the regulation of broker-dealers, futures commission merchants, investment companies and hedge funds, clearinghouses and investment advisers.

312-902-5554
Adam J. Spector, Katten Muchin Law firm, Financial Institutions Attorney
Associate

Adam J. Spector concentrates his practice in the financial services sector, representing hedge funds, commodity pools, proprietary trading firms, private equity funds and investment advisers with respect to their corporate, transactional and regulatory matters.

312-902-5275