How Does the ‘Reporting Threshold’ for Block Trades Affect Market Transparency?
Block trades are executed privately but must be reported to the exchange after a certain delay if they exceed a specific size threshold. This delay is intended to protect the executing parties from having their position immediately front-run, which would cause slippage.
However, this delay reduces market transparency, as the true size and price of the transaction are not immediately visible to the public, which can lead to temporary mispricing and volatility.
Glossar
Block Trades
Transaction ⎊ Block Trades in the cryptocurrency derivatives space refer to the execution of an exceptionally large, often privately negotiated, transaction for a specified notional amount of futures, options, or perpetual contracts.
Reporting
Disclosure ⎊ Reporting within cryptocurrency, options trading, and financial derivatives fundamentally concerns the systematic conveyance of information regarding positions, transactions, and risk exposures to regulatory bodies, exchanges, and counterparties.
Threshold
Barrier ⎊ A threshold, within cryptocurrency derivatives and options trading, fundamentally represents a price level that must be breached for a contract to become active or trigger a specific outcome.
Block Trade
Transaction ⎊ A block trade is a large-volume transaction involving a significant quantity of a security, derivative, or cryptocurrency that is privately negotiated and executed away from the public order book.