The Chicago Mercantile Exchange is to offer listed products for trading via an over-the-counter dealing system provided by Blackbird Holding. The two companies say the initiative will offer the first electronic trading of privately negotiated and exchange-traded derivatives on the same screen.
Under the arrangement, the Blackbird system will offer derivatives dealers access to CME-traded products, beginning with the exchange’s flagship Eurodollar futures contract, later this year. Eurodollar trades entered over the Blackbird system will be routed to the CME for execution via an electronic link with the Globex2 platform.
Blackbird currently operates on the North American trading floors of about 40 financial institutions. Following a European launch in December 2000, Blackbird added over 35 financial institutions to its client base across Europe.
Shawn Dorsch, Blackbird Holding’s president and co-founder points out that the OTC and exchange-traded derivatives markets are inextricably linked, with dealers often using exchange-traded contracts to hedge the risks of their privately negotiated derivatives positions and transactions. "Our initiative will enable us to more effectively link these two markets for the dealer community. Dealers will benefit by being able to trade seamlessly through one screen," he says.