Block Trades and EFRPs: How Large Futures Trades Are Done Away From the Screen Under CME Rules 526 and 538

Block trades and EFRPs are the two main ways CME Group allows a futures trade to be negotiated privately instead of being matched on the public order book. A block trade (CME Rule 526) is a large trade, above a published minimum size, agreed bilaterally and then reported to the exchange within minutes. An exchange for related position, or EFRP (CME Rule 538), swaps a futures position for an equivalent position in the underlying cash market or an over-the-counter derivative, so both legs change hands at once.

In short: both are exceptions to the general rule that futures must trade openly and competitively. Blocks exist so that size can trade without moving the screen price; EFRPs exist so that a futures position can be exchanged for the physical goods, stock basket or swap it is meant to track. In return for leaving the order book, each comes with conditions: blocks must meet size thresholds, be priced “fair and reasonable,” and be reported in 5 or 15 minutes; EFRPs must involve a genuine, roughly equivalent related position with records to prove it. Most enforcement in this area is about trades that fail those tests.

This article describes the rules as set out in CME Group’s Market Regulation Advisory Notices, which CME files with the CFTC. Rules and thresholds change; check the current advisory before relying on any figure here.

A common misconception: “off-exchange means unregulated”

Blocks and EFRPs are negotiated off the order book, but they are still exchange trades. They clear through CME Clearing like any other futures trade, carry the same margin, and are subject to CME’s Market Regulation Department, which can demand the records behind them. Block prices are published, though separately from the regular market. EFRP volumes are published daily.

What does change is price formation. A block price does not compete against the order book, which is why CME requires it to be fair relative to the market at the time, and why block prices “do not elect conditional orders (e.g. stop orders)” and, according to the block trade advisory, “are not included as part of the daily trading range.” How the central order book itself works is covered in how futures exchanges work.

Block trades under Rule 526

The most recent block trade guidance on the CFTC’s filing site at the time of writing is CME Group Market Regulation Advisory Notice RA2606-5, dated June 11, 2026 and effective June 29, 2026, filed with the CFTC on June 10, 2026. Its main requirements:

Who may trade blocks

Each party must be an Eligible Contract Participant (ECP) as defined in Section 1a(18) of the Commodity Exchange Act. The advisory lists exchange members, broker-dealers, government entities, pension funds, commodity pools, corporations, investment companies, insurers, banks and high net worth individuals.
Commodity trading advisors and investment advisers may trade blocks for clients if they have more than $25 million under management and the trade suits their clients. They are the only parties allowed to bunch client orders to reach the minimum size.
A customer order can be executed as a block only if the customer has asked for it.

Minimum sizes

Each block-eligible product has a minimum quantity, published by CME in a product table and changed through Special Executive Reports. Thresholds differ by session. A recent example is CBOT Submission 25-301, filed with the CFTC on August 7, 2025, which cut Treasury block minimums effective trade date September 15, 2025:

Contract	Regular hours, before	Regular hours, after	European hours, after	Asian hours, after
Ultra 10-Year Treasury Note (TN)	3,500 / 7,000*	3,000 / 6,000*	1,500	750
Treasury Bond (ZB)	3,000 / 6,000*	2,000 / 4,000*	1,000	500
Ultra Treasury Bond (UB)	2,000 / 4,000*	1,500 / 3,000*	750	375

*The higher figure is the size at which a block reported during regular hours gets the longer 15-minute reporting window instead of 5 minutes. CBOT said the cuts were meant to “align such levels with other contracts with similar liquidity levels.” Each of these contracts has $100,000 of face value, so the new regular-hours minimum for an Ultra 10-Year block is $300 million of face value.

The point of the threshold is that a block should be a size the order book could not absorb without a meaningful price concession. CME’s Chief Regulatory Officer can allow exceptions, for example when liquidating a portfolio in which some legs fall below the minimum.

Price: “fair and reasonable”

Rule 526.D requires a block price to be fair and reasonable in light of four things: the size of the trade, the prices and sizes of other trades in the same contract at the time, prices in related markets (including the underlying cash market), and “the circumstances of the markets or the parties.” The price must be in valid tick increments. A block can be agreed at any time, including when the order book is closed.

Reporting and publication

After a block is agreed it must be submitted through CME Direct or CME ClearPort within 5 or 15 minutes, depending on the product. The execution time is when the parties agree the trade in principle; for spreads it is when they agree the spread price, not the leg prices. Reporting a wrong execution time can itself lead to discipline.
The report must show contract, month, price, quantity, both clearing firms and execution time.
CME publishes the date, time, contract, price and quantity once the trade clears, separately from regular market trades.

Pre-hedging: who may trade ahead of a block

This is the most sensitive part of the rule. RA2606-5 allows parties to a potential block to pre-hedge the position they expect to receive, with one major exception: an intermediary taking the other side of its own customer’s order may not offset the anticipated position for its own or its employer’s account until the block is done.

A firm acting as principal may pre-hedge, but it must make clear to the counterparty, in recorded communications at the time, that it is trading as principal and owes no agency duty. CME says disclosures buried in account-opening documents may be insufficient if the negotiation itself implies an agency role, and that conflicting inferences will be read “in a light most favorable to the counterparty.” Trading on material nonpublic information about the block remains front-running under Rule 532.

Brokers also may not reveal a customer’s identity to potential counterparties without the customer’s express consent, which must be reconfirmed at least annually.

Settlement-based and index-based blocks

Blocks can also be priced off a reference price. TAS blocks trade at the day’s settlement price or up to ten ticks either side of it (the settlement price is explained in the settlement price glossary entry). BTIC blocks in equity index futures are priced at the cash index close plus an agreed basis, which must reflect “financing rates, expected dividend income and the time remaining” to expiry; CME sets the final futures price at 3:45 p.m. Central Time. That basis arithmetic is the same as the EFP pricing below.

EFRPs under Rule 538

The rule text and FAQ quoted here come from advisory RA2503-5 (August 15, 2025), filed with the CFTC on August 14, 2025. CME has since reissued the advisory, most recently as RA2607-5 (dated July 24, 2026, effective August 7, 2026) alongside amendments to Rule 538.K, the foreign exchange provision discussed below, so check the current version for exact wording. The rule defines three types:

EFP (exchange of futures for physical): a futures contract against the physical commodity or a forward contract.
EFR (exchange of futures for risk): a futures contract against an OTC swap or other OTC derivative.
EOO (exchange of option for option): an exchange-listed option against an OTC option.

The tests a genuine EFRP must pass

Opposite sides. One party buys the futures and sells the related position; the other does the reverse. The futures and the related position must be for accounts with the same beneficial owner (538.A).
Independent accounts. The two sides must be independently controlled, even when they belong to related entities, and the trade must have economic substance for each (538.B).
A real related position. It must be the cash commodity, a by-product, a related product or an OTC derivative with “a reasonable degree of price correlation,” and it may not itself be a futures contract or futures option. There must be a “bona fide transfer of ownership” or a legally binding contract (538.C).
Approximately equal size. The related position must be about the same quantity as the futures; hedge ratios can be used (538.E).
Commercially reasonable price. EFRPs may be priced as the parties agree, but “may not be priced to facilitate the transfer of funds between parties” for any purpose other than legitimate commercial activity (538.F). The FAQ lists the forbidden purposes: shifting cash between parties, moving gains and losses between legs, evading taxes, or disguising a firm’s financial condition.
Records on demand. Order tickets, messages and call recordings, cash confirmations, third-party proof of payment, title transfer documents and internal booking records must be produced to Market Regulation on request; the carrying clearing firm is responsible for obtaining them from its client (538.H and FAQ 19-20).
Timely submission. Absent mitigating circumstances, an EFRP must be submitted no later than the end of the business day on which it was agreed (FAQ 23).

Rule 538 sets no minimum size. What it polices is substance: that the related position is real, comparable and carries market risk.

The transitory EFRP ban

A transitory EFRP is one whose execution is contingent on another EFRP or related-position trade between the same parties, so that the related positions cancel out “without the incurrence of market risk that is material.” In plain terms: two parties swap futures for a cash position and then immediately swap the cash position back, which turns an EFRP into a way to move futures between accounts at a negotiated price without ever holding the cash leg. CME banned transitory EFRPs in all products effective August 4, 2014; they had been allowed before then in CME FX, NYMEX energy and COMEX and NYMEX metals. The one carve-out is the immediately offsetting FX EFP under Rule 538.K, which in the 2025 text was permitted only in foreign currency futures and required confirmations from the bank or FX dealer counterparty. The July 2026 amendment added OTC FX non-deliverable forwards as a permitted related position and renamed the carve-out the immediately offsetting FX EFRP, so check the current advisory for its exact scope.

Rule 538.D separately allows a recognised structure for inventory financing of storable agricultural, energy or metals commodities: the financier buys the commodity and sells futures via an EFP, and grants the counterparty a right (not an obligation) to reverse it later with a second EFP.

For equity index futures, the FAQ allows a stock basket only if it is “highly correlated to the index” and represents at least 50% of the index by weight or includes at least 50% of the index’s stocks, with notional value approximately equal to the futures. Index swaps, OTC index options, ETFs and ETNs are also acceptable. For energy, agriculture and metals, the related position is typically the physical commodity, a forward, a swap or an OTC option. The FAQ also says a swap traded on a designated contract market or a swap execution facility cannot be the related position.

Worked example: pricing an equity EFP

An asset manager holds a $250 million stock basket that tracks the S&P 500 closely. It wants to switch that exposure into futures for a few weeks while it changes managers, without selling $250 million of stock on the open market and then buying futures on the screen. A dealer agrees to take the basket and sell it E-mini S&P 500 futures in a single EFP.

Assumptions (illustrative):

Index level at the reference time: 6,000.00. E-mini multiplier: $50, so one contract controls $300,000. Tick: 0.25 index points, worth $12.50.
Trade date November 10, 2026; December 2026 contract expires December 18, 2026: 38 days.
Financing rate 3.90% (actual/360); dividend yield 1.20% (actual/365).

Contracts: $250,000,000 / $300,000 = 833.3, so 833 contracts ($249.9 million of notional).

Fair basis (the gap between futures and cash that leaves neither side better off):

Financing carry: 6,000 x 3.90% x 38/360 = 24.70 index points.
Dividends expected before expiry: 6,000 x 1.20% x 38/365 = 7.50 points.
Fair basis = 24.70 - 7.50 = 17.20 points, so a fair futures price of about 6,017.20. (Why futures trade above spot by financing less dividends is explained in stock index futures explained.)

The EFP is quoted as a basis in whole ticks. Each quote implies a financing rate:

Agreed EFP basis	Futures leg price	Implied financing rate	Cost to the manager vs fair, 833 lots
16.50	6,016.50	3.79%	-$29,326 (manager gains)
17.25	6,017.25	3.91%	$1,911
18.00	6,018.00	4.03%	$33,149

Read across the bottom row: by agreeing an 18.00 basis, the manager is paying the dealer an implied 4.03% to carry the exposure, about 13 basis points over the assumed 3.90% funding rate. That spread is the dealer’s compensation for taking the basket and its risk. It is “commercially reasonable” because it reflects real financing economics.

Now the abuse case. Suppose the parties priced the futures leg 30 points away from fair, with an offsetting adjustment on the basket. Nothing economic would change for the combined position, but 30 x $50 x 833 = $1,249,500 would move from one party’s futures account to the other’s. That is precisely the kind of pricing Rule 538.F prohibits, and why off-market EFRPs are, in CME’s words, “more likely to be reviewed.”

A commodity EFP in one paragraph

EFPs are oldest in physical markets. A refiner that is long 100 crude oil futures as a hedge agrees to buy 100,000 barrels from a supplier who is short 100 futures as its own hedge. Through an EFP, the refiner sells its 100 futures to the supplier at an agreed price and receives the physical crude, priced at that futures level plus or minus a negotiated differential. Both hedges come off at the same moment the physical changes hands, and neither party carries an unhedged gap between closing futures on the screen and settling the cargo. Trading houses use this constantly (see how commodity trading houses work), and delivery-period EFPs are covered in physical delivery in depth.

How CME enforces these rules

CME’s published disciplinary notices show a consistent pattern. Most EFRP cases are about related positions that were not genuine or were contingent on an offsetting trade, and most block cases are about late or inaccurate reporting. Penalties are usually five-figure fines, occasionally six, agreed in settlements in which firms neither admit nor deny the violations.

NYMEX 19-1161 (2020). A NYMEX Business Conduct Committee panel found that Vitol Inc. executed two non-bona fide EFRPs in NY Harbor ULSD futures on May 1, 2019, in violation of Rule 538.C, and fined it $20,000 after a hearing on August 13, 2020. In the companion notice against Koch Supply & Trading, the panel described the trades as contingent upon each other and executed “in a manner designed to avoid any material market risk” on the related positions. A further notice in the same file fined Merrill Lynch Commodities $50,000 for multiple non-bona fide EFRPs in ULSD and crude oil futures in May and June 2019.
NYMEX 23-1661 (2024). On June 4, 2024 a panel found that Schonfeld Strategic Management executed a non-bona fide EFRP on October 12, 2022, negotiated together with a cash-market options straddle with its counterparty, which was arranged to offset the physical component because its clearing firm would not let it make or take delivery. The trade was in January 2023 platinum futures. Schonfeld was fined $20,000 under Rule 538.C, and its counterparty, BNP Paribas, the same amount for the same trade.
CBOT cases (2019). In CBOT 18-0939, Nomura was fined $30,000 for two November 2017 EFPs in 2-Year Treasury Note futures that exchanged futures without any cash position, between accounts with common beneficial ownership (Rules 538.C and 534, the wash trade rule). In CBOT 19-1109, Goldman Sachs was fined $15,000 for a July 2018 EFR and EOO package in 10-Year Treasury Note futures and options whose related positions lacked a reasonable price correlation or were not reasonably equivalent; its counterparty, Capstone Investment Advisors, was fined the same.
Block reporting (2025). In CME 24-1735 (March 2025) and NYMEX 23-1679 (April 2025), TFS Derivatives entities were fined $60,000 and $125,000 for submitting block trades with inaccurate execution times, reporting them late (Rule 526.F) and failing to supervise staff (Rule 432.W).

Sources: CME Group notices of disciplinary action for the file numbers shown.

The fines are small next to the dollar size of the trades, but the findings matter more than the money. A non-bona fide EFRP is in substance a futures trade done off the order book without meeting the conditions for being allowed there.

What can go wrong

Information leakage. Soliciting a block tells the market someone large wants to trade. The pre-hedging and confidentiality rules exist because counterparties can trade ahead of the client.
Price fairness disputes. A block price far from the screen, without a clear size or market reason, invites review under Rule 526.D.
Reporting failures. Missing the 5- or 15-minute window, or reporting the wrong execution time, is the most common block violation.
Fake or circular related positions. An EFRP whose cash leg is unwound immediately, never settles, or cannot be documented fails Rule 538.C.
Wash trades. Blocks or EFRPs between accounts with common ownership need independent decision-makers and a real business purpose, or they may be treated as wash trades under Rule 534.
Rule drift. CME reissues these advisories often. Thresholds, reporting windows and FAQs change; old guidance can be wrong.

The short version

Block trades let eligible participants trade large size privately, provided the trade meets a published minimum, is priced fairly against the market, and is reported within 5 or 15 minutes. EFRPs let a futures position be swapped for the physical goods, stock basket or OTC derivative it tracks, provided the related position is genuine, roughly equivalent, at a commercially reasonable price and fully documented. In our example, an 18-point EFP basis on 833 E-mini contracts implied a 4.03% financing rate, while a 30-point off-market price would have shifted $1.25 million between the parties. CME’s disciplinary record shows that the cases it brings are mostly about EFRPs whose cash legs were circular or contingent, and blocks reported late.