Block Trading Begins on Treasury futures & options and Fed Funds

Quote from TGM:

I have traded fixed income at the cbot since 1995. And this is a new one. Is this block trading ----going on over the phones? Where do we find this market? You would think I could pull up the deck for the blocks being bid and offered.

In the pits, the lot sizes actually had different areas. In other words, a market on a 1000 lot was sometimes different than the market on say a ten lot. That is the way a pit works....different prices and internal markets going on at the same time. One of the advantages of electronic trading is that is did away with all that and created a more level playing field.......UNTIL NOW
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TGM,

Here are some new info about 'privately-negotiated trades':

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CME Clearing360 Trade Reporter

In August, CME Group will launch a new trade capture web-based user interface, and an updated application programming interface (API) that will provide a new and more efficient means to report privately-negotiated trades and get them submitted to CME Clearing. The goal is to make processing easier and more straight-through for traders, brokers and clearing firms.

This new application is called CME Clearing360 Trade Reporter and will be accessible through CME EOS Trader, which is one of the applications using the API. Using the web-based Trade Reporter application, a trader can report a block trade for any block eligible CME Group product.

Clearing360 and the Trade Reporter system will:

* Price all the legs of the strategy
* Verify that the trade conforms with minimum quantity rules
* Eliminate the need for a phone call to the CME Globex Control Center (GCC)
* Submit the trade to clearing
* Enable the trade automatically to be loaded to the two clearing firms, once the trade has either passed a credit check on both sides or been explicitly accepted

Bottom line: your trading will be more efficient

* No need for a call to the GCC to report the trade
* No need for the clearing firm to submit the trade;
o Trade details will automatically flow from the clearing system to the clearing firm.

The following CME Group products are eligible for block trade clearing through Trade Reporter.

Interest Rate Products

* Eurodollars
* 2-Year Treasury Notes
* 5- and 10-Year Treasury Notes
* 30-Year Treasury Bonds
* 30-Day Fed Funds
* 5-, 10- and 30- Year Interest Rate Swaps
* Lehman Brothers U.S. Aggregate Index
* CME Cleared Swaps (as of 9/2/08)

FX Products

* FX Options Block Trades
* FX EFP

Equity Products

* E-mini Russell 2000 (through 9/19)
* Russell 2000 (through 9/19)
* E-mini MSCI EAFE
* E-mini MSCI Emerging Markets
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source: CME Globex Notices: July 28, 2008
 
BOT/SOLD 31357 10YRS @ 113-27

BOT/SOLD 29588 5YRS @ 110-24½

(GOLDMAN BOTH SIDES)


this was a block trade that went through a few weeks ago and is most likely just an account transfer . . .the 75 cent surcharge is not a big deal for these guys because it is much easier to transfer a position from one desk to another or from bank books over to a customer at pre-arranged prices off the exchange than trying to go into the combined Treasury pit and buy and sell 30,000 FIT spreads on a weighted ratio . . . . .. locals want no part of this trade either because they would just get run over both ways . . . . i think this block trade feature is great because then these wash trades can just get done over the counter instead of being shown to the market . .. . . no reason to help pit brokers that already cashed out on $6 million dollar seats and could never cover this trade if their was an error made
 
Quote from mcurto:

BOT/SOLD 31357 10YRS @ 113-27

BOT/SOLD 29588 5YRS @ 110-24½

(GOLDMAN BOTH SIDES)


this was a block trade that went through a few weeks ago and is most likely just an account transfer . . .the 75 cent surcharge is not a big deal for these guys because it is much easier to transfer a position from one desk to another or from bank books over to a customer at pre-arranged prices off the exchange than trying to go into the combined Treasury pit and buy and sell 30,000 FIT spreads on a weighted ratio . . . . .. locals want no part of this trade either because they would just get run over both ways . . . . i think this block trade feature is great because then these wash trades can just get done over the counter instead of being shown to the market . .. . . no reason to help pit brokers that already cashed out on $6 million dollar seats and could never cover this trade if their was an error made
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Guess I don't get this. Doesn't this new rule mean that tape reading for the little guy has been compromised? How can you read prints that aren't there? And those large orders do move prices right?

So how is this good again?
 
they are primarily transferring large curve positions from one account to the other so for the small tape readers in the outrights (which i assume is what you are trading) it doesn't really matter . . . . . only guys this affects are the ones on the floor that used to trade opposite the large curve orders and those are the guys that will take at least 200 or more on some of the big FIT and NOB spreads . . . . they are taking away the execution risk and associated costs with sending an order to the pit/screen and replacing it with the 75 cent surcharge . . . .. if you are a small one product trader in the interest rates these large account transfer orders have never affected you . . . . before they did this they just sent the order to the floor at two different desks and "whispered" that those two brokers should look for each other and make sure they were the other side in the pit
 
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