Block Positioner

What Is Block Positioner?

A block positioner is a dealer who, to work with a customer's large purchase or sale that could disturb the market, takes positions for their own account in the expectations that they could ultimately make money.

Grasping Block Positioner

Customarily, prime brokers play filled the role of block positioner, consenting to commit capital to their clients, (for example, hedge funds) to work with block trades for them, albeit a couple other broker-dealers have likewise cut out a niche in executing block trades.

Block trades, likewise called block orders, are large orders in the underlying bond or stock that a client looks to execute completely. In light of their large size, these trades may misleadingly move the market. Traders who find out about the block order might try to front-run the sale — a conceivably unlawful and untrustworthy move that would hurt the firm taking care of the block trade.

Block trades on the open market demand alert with respect to traders. They are normally led through an intermediary, for example, a block positioner instead of a hedge fund or investment bank.

Types of Block Positioners

Sometimes, the block positioner can be a inter-dealer broker (IDB). This broker takes on a agency job and attempts to cobble together a group of counterparties, every one of which will participate in some portion of the trade without committing capital. This is much of the time the case in options markets, where a trader might try to buy or sell huge number of contracts.

Different times, the block positioner is a client's prime broker which will consent to take the whole trade immediately. These trades may likewise be executed through dark pools or electronic communication network (ECN) matching systems. This forestalls the disruption of ordinary market activity that would occur by introducing a large trade.

Sometimes, a prime broker will ask a particular block positioner arranged on the floor of a stock exchange — known as a wholesale broker — to "cross" a large number of shares of stock at a pre-decided price, which might be not quite the same as the current market price. Frequently, these wholesale brokers will operate on "away exchanges, for example, the Philadelphia Stock Exchange.

Regulations Governing Block Positioners

Block positioners face impressive risk challenges exchange for the profits they look for. Any firm engaged with block positioning must:

• Register as a broker or dealer with the Securities and Exchange Commission (SEC) and furthermore with the New York Stock Exchange (NYSE) on the off chance that it is a member firm.
• Consent to Rule 15c3-1 for market makers and have a base accessible capital of $1 million.
• Participate in buying, or selling short, from or to a customer a block of stock with a current market value of $200,000, or more, to work with a sale or purchase by that customer.
• Try to sell the shares containing the block as fast as could really be expected and meet other regulatory conditions prior to the sale of that block.

The dealer faces the risk challenges the securities to assist with clearing the trade for the seller. Block positioners aim to empty the position rapidly, and commonly use hedging strategies, for example, arbitrage methods or options, to reduce the risk associated with positions.

Features

• Beside forestalling potential market disruption, block positioners look to profit from their activities.
• Generally, prime brokers play filled the role of block positioner, consenting to commit capital to their clients, (for example, hedge funds) to work with block trades for them.
• A block positioner is a dealer who, to work with a customer's large purchase or sale, takes positions for their own account
• Block positioners aim to empty the position rapidly, and regularly use hedging strategies — like arbitrage procedures or options — to reduce the risk associated with positions.