Effective with the Open Session on July 31, 2019, for Trade Date August 1, 2019, certain Qualified Eligible Persons (QEPs) will be allowed to execute block transactions on Nasdaq Futures, Inc. (NFX). Under prior NFX rules, only Eligible Contract Participants (ECPs) were allowed to execute block transactions. Exclusively limiting the use of block transactions to ECPs however was unnecessarily restrictive and failed to account for the vast divergence in market sophistication and financial resources that exists between traditional retail market participants and ECPs. NFX will now allow certain market participants that meet the definition of a QEP to execute block transactions. NFX is basing the QEP definition on CFTC Regulation 4.7 with certain changes made to reflect specific circumstances unique to NFX and block transactions. A copy of the rule certification filed with the CFTC may be found here.

For additional information, please contact NFX@Nasdaq.com

Will the amended block trade rules be limited to certain products?
No. All products listed at NFX will be subject to the same block trading rules.

Will the ECP qualification cease to exist as a requirement to enter into block trades?
No, ECP’s will still be allowed to participate in block trades. The amendment however extends block trading eligible participants to certain Qualified Eligible Persons or QEP’s.

What is the definition of a Qualified Eligible Person under NFX block trade rules:

QEP's eligible to execute block trades include:

• Accredited Investors:
  • Any natural person that would qualify as an Accredited Investor under SEC regulation 501(a)(5). Under current SEC regulations this would require an individual’s net worth, or joint net worth with that person’s spouse, to exceed $5,000,000.
  • Any natural person that would qualify as an Accredited Investor under SEC regulation 501(a)(6). Under current SEC regulations this would require an individual’s income to exceed $200,000 in each of the two most recent years, or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

• Corporation or Similar Business:
  • A corporation, similar business trust, or partnership, limited liability company or similar business venture, other than a pool, which has total assets in excess of $5,000,000.

• Non-US persons, as that term is defined in §4.7 of the Commission’s Regulations

What is the definition of a non-US person?

Non-United States person means:

• A natural person who is not a resident of the United States;
• A partnership, corporation or other entity, other than an entity organized principally for passive investment, organized under the laws of a foreign jurisdiction and which has its principal place of business in a foreign jurisdiction;
• An estate or trust, the income of which is not subject to United States income tax regardless of source;
• An entity organized principally for passive investment such as a pool, investment company or other similar entity; Provided, that units of participation in the entity held by persons who do not qualify as Non-United States persons or otherwise as qualified eligible persons represent in the aggregate less than 10% of the beneficial interest in the entity, and that such entity was not formed principally for the purpose of facilitating investment by persons who do not qualify as Non-United States persons in a pool with respect to which the operator is exempt from certain requirements of part 4 of the Commission's regulations by virtue of its participants being Non-United States persons; and
• A pension plan for the employees, officers or principals of an entity organized and with its principal place of business outside the United States.

What portfolio requirements apply to QEPs seeking to execute block trades?

There is a portfolio requirement for US-based Accredited Investors and US-based Corporations only. This does not apply to non-US persons.

Portfolio Requirement:

• Own securities of issuers not affiliated with such person and other investments with an aggregate market value of at least $2,000,000;



• Have had on deposit with a futures commission merchant, for its own account at any time during the six-month period preceding the first block trade, at least $200,000 in exchange-specified initial margin and option premiums, together with required minimum security deposit for retail forex transactions for commodity interest transactions;




Or

• Own a combination of the 2 alternatives listed above so long as the sum of the amounts from each category, expressed as a percentage of the minimum dollar amount specified, equals 100%. An example of a portfolio that would be acceptable under this requirement would consist of $1,000,000 in securities and other property, and $100,000 in exchange-specified initial margin and options premiums.

Is there a portfolio requirement for non-US persons?

No. Non-US persons are not subject to any portfolio requirement to be considered a QEP under NFX rules and thus able to transact via Block Trades without any financial thresholds or other requirements.