The Chicago Mercantile Exchange and brokerage Tullett Liberty are to introduce a service for electronic trade matching and clearing in the OTC interest rate markets.
Scheduled for launch on 30 June 2004, the system is designed to help derivative dealers manage their positions and counterparty exposure more efficiently via execution of daily FRA contracts listed by CME. The new functionality will enable contract matching on a weekly basis, employing a match algorithm designed to facilitate true multilateral spread trading of these FRA contracts.
The FRA contracts, which are essentially Eurodollar futures with flexible daily expiration dates, will be automatically matched and executed on Globex, CME's electronic trading platform, and cleared by the CME Clearing House.
Tullett Group CEO Bruce Collins says roll out of the technology to further currencies and asset classes will follow.
The initiative is one of a series of measures flagged by the CME at the annual Futures Industry Association gathering in Florida. The Chicago exchange has also announced it will launch its new Eurodollar Options on Globex functionality on 26 July, and lined up proprietary trading firm DRW Trading as a lead market maker.
The core technology for the programme - which is being introduced to fend off screen-based competition from London's Liffe - was obtained earlier this year as part of CME's acquisition of Liquidity Direct.
"The launch of this new Globex functionality marks another step forward in the evolution of electronic trading at CME," says CME chief executive Craig Donohue, noting that electronically traded interest rate futures volume has increased over 400 percent in the first quarter of 2004 versus year ago levels.
In another announcement, the CME says the Shanghai Futures Exchange (SHFE) has inked a licensing deal to adopt its Standard Portfolio Analysis of Risk (Span) system. The agreement follows a Memorandum of Understanding (MOU) signed one year ago in which SHFE and CME agreed to pursue joint business development initiatives in derivatives products.