The FOA has released guidance on Block Trading and EFRP Negotiation, Execution and Documentation. This document is designed to identify the generic requirements for firms involved in the execution of EFRPs and Block trades and highlights specifically what FOA deems to be good practice for these trade types.
Changes in the regulatory landscape and in market conditions in recent years have seen an increasing demand for cleared transactions, particularly Block trades and Exchange of Futures for (or versus) a Related Position (EFRP). For the purpose of this guidance, an EFRP is reflective of transactions that facilitate the posting of exchange-traded positions versus Cash/Physical, OTC swap or OTC options. It is also used in this document to reflect any other transaction terminology reflective of any exchange transaction versus a trade in a cash or OTC instrument e.g. a, Basis Trade or Against Actual (AA). Both Block trades and EFRPs result in the posting of exchange-traded futures and/or options.
This document is designed to identify the generic requirements for firms involved in the execution of EFRPs and Block trades and highlights specifically what FOA deems to be good practice for these trade types. It must be stated, however, that it remains incumbent on each member firm and/or market participant to independently assess the applicability of relevant rules and the appropriate application of this guidance when measured against its business profile and trading strategy. Exchange rules and guidance may change. This document is subject to specific exchange rules covering this area of activity, but, for the purpose of supporting certain key points in the guidance, we have highlighted references to ICE Futures Europe and CME Group guidance. Note that not all exchanges provide explicit guidance or interpretation of their rules.
