CME Group is launching a second BrokerTec central limit order book (CLOB) for cash US Treasuries in Q3. Client testing begins on 27 April.
The new CLOB aims to support trading between cash and derivatives markets, with BrokerTec’s on-the-run benchmark US Treasuries made available in smaller notional sizes to align with the futures market.
It will be co-located in Chicago, in close proximity to CME Group’s US Treasury futures and options market.
John Edwards, global head of BrokerTec, commented: “Until now, clients have had to manage the intricacies of deploying relative value strategies between New York and Chicago markets, which can lead to legging risk.
“Our new CLOB will enhance the client experience for cash versus futures strategies [and] enable smaller firms to participate in spread trading, broadening and deepening the liquidity pool and increasing matching opportunities.”
The Treasuries will also be offered at tighter price increments, 1/16th of a 32nd, to facilitate hedging precision.
Clients will be able to access the venue through the existing BrokerTec API and connections with CME Group.
Explaining the rationale behind the launch, Mike Dennis, global head of fixed income at CME Group, said: “As clients navigate this period of heightened uncertainty and record debt issuance, US Treasury spread trading continues to drive price discovery and liquidity across cash, futures and repo markets. By launching a new trading venue, we will bring the full US Treasury ecosystem closer together, delivering simplicity and efficiency for global market participants.”
BrokerTec’s New York-based CLOB will remain the primary venue for price discovery in US Treasuries.
