Merc Approves Plan to Trade S&P; Futures

The Board of Governors of the Chicago Mercantile Exchange said Thursday that it had approved a proposal to allow traders to buy or sell blocks of Standard and Poor’s 500 stock index futures outside the trading pit.

The rule, approved Wednesday at the board’s regular meeting, is comparable to rules on block buying and selling on major U.S. stock exchanges, the board said in a release Thursday.

The rule will help lessen the impact of large trades on the market, said John Geldermann, chairman of the board of governors.

Price Would Not Be Disclosed

The board said the Merc is the first futures exchange to adopt such a plan.

Under the rule, a member firm with a customer order to buy or sell more than 300 S&P; futures contracts could attempt to find a counterparty to the trade outside of the trading pit.

Once a counterparty is found, the firm would notify an exchange official and announce to the trading pit the size and type of order. The intended price would not be disclosed at that point.

Members in the pit would have the opportunity to trade with all or part of the order. The remainder of the order not filled within the open outcry process in the pit would be traded to the counterparty at the agreed-upon price.

The rule will be submitted to the Commodity Futures Trading Commission for approval. If approved, it will be used on a pilot basis for the S&P; futures contract, which is the most heavily traded stock index futures contract in the world, according to the board.