Q. What constitutes a Block Trade?
A. A block trade is a futures transaction executed off the Exchange. In order to be considered a Block Trade, the trade must satisfy the following conditions:

• Minimum size, currently set at 100 lots
• Reported to the Exchange within 5 minutes of execution
• Price is fair and reasonable in light of the size of the block trade and other transactions done in the same contract at the same time
• Orders have not been aggregated
• Order was specified as a "block" by initiating customer in advance Accurate records have been kept by the broker

Q. How do I place a Block Trade order?
A. If the order is for a 100 lots or above, when placing your order with the broker, you need to advise that you wish the trade to be entered as a block trade. Also, as the trade details will be entered into CME ClearPort® Clearing via a broker on behalf of the counterparties, counterparties must also be registered to use CME ClearPort Clearing. Alternatively, the CME ClearPort Market Operations (telephone number +1 212 299 2670) can also submit the trade to CME ClearPort Clearing on the counterparties' behalf. For further details please refer to Rule 6.34 in the DME rulebook.

Q. What is an Exchange for Physical (EFP)?
A. An EFP is a trade type allowed by the exchange to enable market participants to manage their price risk with direct reference to the price of an underlying physical transaction. The EFP trade affords market participants the opportunity to separate pricing from supply by exchanging their physical price exposure for futures price exposure.

An EFP consists of contingent physical and futures transactions where the participants take an equal and opposite futures position to that held in the physical transaction.

For example, two counterparties agree to a physical transaction for 2 million barrels of crude oil for delivery in two weeks time at a fixed price determined today. Clearly in volatile markets such as crude oil there is a risk that the value of the crude oil may change between the time of the transaction and the delivery and subsequent refining dates. However, the buyer wishes to secure the availability of the crude oil so agrees with the seller that the physical transaction will be contingent on an EFP being registered with the DME.

Therefore, at the same time as agreeing the physical transaction the parties agree to register the transaction as an EFP with the DME, which will result in the opening of equal and opposite futures positions in DME Oman futures to that which the participants hold in the physical transaction i.e. the buyer of the crude oil will sell 2000 DME Oman futures contracts and the seller of the crude oil will buy 2000 DME Oman futures contracts. The futures position is opened at the same price as the physical transaction was agreed.

Once the futures positions have been opened the two counterparties are now free to establish their exposure to the eventual price of the crude oil without any further need to transact with each other. They can use their futures positions to determine when they will price the crude. For example, the seller may decide to immediately buy back his futures position in the market and accept the price that has already been agreed for the physical cargo. The buyer meanwhile could hold the futures position until the crude is to be delivered, expecting the price to fall and thereby capturing the difference in price via the futures position held.

Physical Buyer Futures position