CME & Tullett to launch matching and clearing system

The Chicago Mercantile Exchange (CME) is to team up with UK-based broker Tullett Liberty to introduce an electronic trade-matching system. It will provide traders with integrated trading and clearing of exchange-listed products with forward rate agreements (FRAs) in over-the-counter interest rate markets.

The CME expect the system to be launched on June 30 this year. It said in a statement the system would allow derivatives dealers to manage positions and counterparty exposure more efficiently via execution of daily FRA contracts - essentially eurodollar futures with flexible daily expiration dates.

The system was designed to mitigate forward interest rate gap exposure while providing cross-margining benefits and straight-through processing. The contracts will be automatically matched and executed on Globex.

“The need for derivatives traders to eliminate mis-matched interest rate exposure is the logical driver of this development,” said Vinayek Singh, senior managing director of capital markets at Tullett Liberty.