Parties can report bilaterally negotiated off-exchange Block and EFP Instrument trades to Delta1. Accepted trades are cleared at the OCC. OneChicago Market Surveillance reviews trade reporting activity to ensure that EFP and Block trades are entered at a fair and reasonable price.
To ensure that EFP and Block trades are entered at a fair and reasonable price, trade monitoring systems flag trades in real-time where the price of a Block or the future leg of an EFP trade is 5% percent away from a OneChicago established benchmark. Market Surveillance investigates flagged trades and assesses each trade against the Error Trade Policy. If applicable, the trade is canceled (busted). Please note the OneChicago established benchmark (reference price) reflects the exchange's perspective of the interest rate, different market participants may have a different and valid perspective of the rate.
The Error Trade Policy permits the exchange to adjust trade prices or cancel (bust) trades when such action is necessary to mitigate the possibility of a market disrupting event, or if the exchange determines that the trade has an adverse effect on the integrity of the market. The purpose of this policy is to balance market participants’ expectation of certainty for executed trades against the deleterious effect of publishing inconsistent trade prices.