The Chicago Mercantile Exchange (CME) and wholesale brokerage Tullett Liberty will today conduct the first commercial matching sessions on TLfast, their jointly-developed electronic trade clearing tool for 3-month Eurodollar futures contracts.
TLfast is designed to help derivative dealers manage positions and counterparty exposure more efficiently via execution of daily FRA contracts listed by CME.
The tool connects to CME's electronic trading platform Globex, providing users with order entry and management, real-time yield curve and straight-through-processing (STP) for the trading and clearing of 3-month Eurodollar future contracts.
Tullett says the matching technology mitigates forward interest rate gap exposures for dealers in the OTC markets, while providing cross margining, STP and order aggregation. The FRA contracts will be automatically matched and executed on Globex and cleared by the CME's Clearing House.
Vinayek Singh, senior managing director, capital markets, Tullett Liberty, says: "We currently have 20 leading interest rate derivatives dealers who have already participated in three successful beta tests of the new multi-lateral matching process."
He says derivative traders and portfolio managers can now clear and net a large number of transactions with an automated match process to eliminate London Interbank Offered Rates (LIBOR) settlement risk. CME and Tullett claim to have received expressions of interest from 40 market participants in the US and Europe.
The two organisations plan to expand the matching process to include additional LIBOR frequency instruments - one month and six month LIBOR contracts - FRA contracts listed out to 120 business days (approx. six months) and other LIBOR based currency products.