ICE Futures U.S. amended its rule related to exchange for related position transactions as of January 1, 2020, to authorize a third party to facilitate as principal the cash or over-the-counter component of an EFRP on behalf of a customer. In such circumstances, the third party must act on behalf of a customer who is a party to the futures leg of the EFRP and the third party must pass through to the customer the related position. Ordinarily, an EFRP may involve only two parties – one party who buys the exchange-traded futures or options positions and sells the related position, and the other party who sells the exchange-traded futures or options position and buys the related position. IFUS's new rule amendment parallels a CME Group exchanges' rule. (Click here to access CME Rule 538.A.)
Separately, IFUS proposed to amend its block trade rule and associated guidance to relieve clearing members of their current obligation to exercise “due diligence” to ensure that a customer entering into a block trade is an eligible contract participant. (Click here for background on ECPs at 7 U.S.C. § 1a(18).) Instead, a clearing member would solely have to take “appropriate action” if it had actual or constructive knowledge that a relevant customer was not an ECP. Additionally, IFUS proposed to clarify that only when a customer has provided “express” consent, could a broker disclose to a potential block trade counterparty the customer’s identity. A broker could not rely on implied or negative consent, or a general disclosure. Also IFUS proposed to authorize brokers to communicate to a potential counterparty involved in the negotiation of a possible block trade that the negotiation has ended; however, a party receiving such information could not trade on or disclose the information to any other person prior to the block trade being publicly posted.