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CBOT President and CEO Bernard W. Dan said, " The eRFQ system and our partnership with Liquidity Direct demonstrate our aggressive approach toward product and market innovation which is a core component of the CBOT's business strategy. Implementation of this new tool from Liquidity Direct will make it easier to electronically trade options on CBOT Swap futures while enhancing market efficiency."
CBOT Swap futures contracts already have exhibited robust growth in volume and open interest - the contract traded over 100,000 contracts last month, an increase of more than 150% from the previous month and is currently the most actively traded swaps futures contract in the world. The contract appeals to customers ranging from mortgage industry participants to portfolio managers to bank treasurers. These customers are using the CBOT Swap futures contract because it offers a fully transparent playing field, reduced transaction costs and virtual elimination of credit risk. The eRFQ system will help build liquidity in its corresponding Swap options contracts, which were launched late last year.
Liquidity Direct Managing Partner Neal Brady said, "We are very excited about our partnership with CBOT and the launch of the eRFQ front-end for options on Swap futures. Liquidity Direct's patent pending eRFQ technology combines liquidity, flexibility and integrity with the cost efficiencies and distribution potential of electronic trading. Together with CBOT, we look forward to expanding the functionality of the Liquidity Direct eRFQ front-end."
The eRFQ system works by first displaying the order book available for options on CBOT Swap futures. After scanning the book, customers can click on the eRFQ button to request current market participants to improve the bid and offer. The system technology routes this quote request to the entire electronic marketplace--including but not limited to designated market makers for options on CBOT Swap futures.
The market makers will enter their bid, ask and quantity into the eRFQ order book. Customers will then see the result of this activity and send an order to the market. Once executed, trades proceed in seamless fashion to the customer's back office operating system.
The benefits of the eRFQ system to market participants include anonymity, increased market access and a quick and comprehensive response. Customers' requests will be viewed by various market participants, current subscribers to Liquidity Direct and current subscribers to CBOT's electronic trading platform.
"The new eRFQ system is a remarkable step for the Chicago Board of Trade. eRFQ will provide ABN AMRO and all market participants an unprecedented level of market access and liquidity," said Noah Carey, market-maker in Swaps Futures for ABN AMRO on the floor of the CBOT.
Market participants can easily access the eRFQ system through various means, including subscribing directly to eRFQ; watching the order book for options on CBOT Swap futures on the CBOT electronic trading system; or viewing the eRFQ facility by visiting the CBOT website.
For more information on the new e-cbot electronic RFQ system and to view eRFQ activity, please visit www.cbot.com/erfq.
For more information on Liquidity Direct, please visit www.liquiditydirect.com.
