Blackbird Holdings is the builder and operator of the world’s first inter-dealer electronic trading system for privately negotiated, over-the-counter (OTC) derivatives, including interest rate swaps and forward rate agreements. 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. Users of the Blackbird system will be able to enter orders for Eurodollar trades into the system, where they will be routed instantaneously to CME.
Blackbird and CME officials said they envision working together to develop additional innovations based on this unique new link between the swaps and exchange-traded derivatives markets.
"By joining with CME, Blackbird is taking another important step in facilitating the growth in electronic trading for the inter-dealer derivatives community," said Shawn Dorsch, Blackbird Holding’s President and Co-founder. Dorsch noted that the privately negotiated 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.
"This new initiative between CME and Blackbird represents yet another action by CME to open access to and integrate our successful futures and options markets with synergistic cash and over-the-counter derivatives markets," said CME Chairman Scott Gordon. "This interconnection will provide new and expanded trading opportunities to users of our interest rate markets."
"The linkage of our GLOBEX®2 platform with Blackbird’s system enhances our GLOBEX2 distribution and our ability to offer additional choices to an important customer base, the inter-dealer derivatives community," said CME President and Chief Executive Officer Jim McNulty.
Eurodollar futures at CME are the most actively traded futures contract in the United States and the world’s most liquid short-term interest rate product, often used by those trading interest rate swaps to hedge the risk of those positions. At any given time, a market participant can use Eurodollar futures to take a position on three months to 10 years of interest rate risk based on the U.S. dollar yield curve. The three-month instruments reflect the lending of U.S. dollars on deposit in institutions outside the United States.
Open interest in CME’s Eurodollar futures set another record on March 15, 2001, at 4,334,881 positions. Representing the number of contracts outstanding at the close of trading, open interest signifies the use of products for risk management purposes and indicates the liquidity of a contract. CME offers open outcry trading of Eurodollar futures from 7:20 a.m. to 2:00 p.m. Central time, as well as electronic trading of the products virtually around the clock on its GLOBEX2 electronic trading system.
The Blackbird system has been facilitating electronic trading by dealers in privately negotiated derivatives since September 1999. Blackbird currently operates on the North American trading floors of about 40 of the world’s most sophisticated financial institutions. Following its successful European launch in December 2000, Blackbird added over 35 financial institutions to its client base across Europe. Blackbird also expanded its existing suite of U.S. and Canadian dollar interest rate derivative products with Euro and British Pound derivatives.
About the Blackbird System
Blackbird is an interactive trading system for OTC derivatives which offers an efficient, screen-based alternative to the current inter-dealer voice broker services. With smart technology, Blackbird has made electronic trading of derivatives possible by providing pre-screened credit, real-time term negotiation, and on-line broker assistance. Capturing all elements of a trade with precision, Blackbird also allows clients to achieve straight-through-processing. Blackbird gives dealers the flexibility to execute trades using three distinct trading models in whichever method best suits their transaction and trading styles.
About Blackbird Holdings, Inc.
Blackbird Holdings, Inc. (www.blackbird.net), formerly DNI Holdings, Inc., is the builder and operator of Blackbird, the world’s first inter-dealer electronic trading system for a wide range of OTC interest rate derivatives. Founded in 1996 by former derivatives traders, Blackbird is headquartered in Charlotte, NC, and has offices in New York, London and Tokyo. Blackbird’s strategic partners include Garban and Reuters.
About Chicago Mercantile Exchange Inc.
Chicago Mercantile Exchange Inc. (www.cme.com) is an international marketplace bringing together buyers and sellers on its trading floors and GLOBEX2, CME’s around the clock global electronic trading system. CME offers futures contracts and options on futures, primarily in four product areas: interest rates, stock indexes, foreign currencies and agricultural commodities. All over the world, pension funds and investment advisers, portfolio managers, corporate treasurers, commercial and investment banks, broker/dealers and individuals trade on CME as an integral part of the financial management strategy. In 2000, CME set a new annual volume record, trading more than 231 million contracts with an underlying value of $155 trillion. Electronic trading volume on GLOBEX2 rose 114 percent to 34.5 million contracts. The exchange moves about $1 billion per day in settlement payments, manages $30 billion in collateral deposits and administers more than $1 billion of letters of credit.
On November 13, 2000, CME finalized its transformation into a for-profit, shareholder corporation as it became the first U.S. financial exchange to demutualize by converting its membership interests into shares of common stock that can trade separately from exchange trading privileges.
