Today’s official TLfast rollout is the result of a distinctive venture designed to enable derivatives dealers to manage their positions and counterparty exposures more efficiently via executions of daily Futures Rate Agreements (FRAs) contracts listed by CME. This unique matching technology mitigates forward interest rate gap exposures for dealers, while providing the additional benefits of cross margining, straight-through processing (STP) and order aggregation in a centralized marketplace which is supported by CME’s Clearing House, the largest futures clearing organization in the world. The result will create substantial matching and capital efficiencies for participants in the fixed income over-the-counter (OTC) derivative markets. The first match session will take place today at 3:00 p.m., Central Time.
“We are very excited to be working closely with our clients to provide them with a new methodology which assists them in more efficient basis risk management,” said Vinayek Singh, Senior Managing Director of Capital Markets at Tullett Liberty. “Close collaboration with our clients and CME has resulted in TLfast’s seamless integration of the OTC market with CME. In fact, 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.”
“We are very pleased to partner with Tullett Liberty to leverage our position as the world’s leading derivatives clearing organization and successfully launch our first over-the-counter clearing initiative,” said CME Chief Executive Officer Craig Donohue. “The strong management teams and superior industry knowledge of both organizations greatly contributes to our ability to fill a need in the marketplace and create additional value for our customers and shareholders. We will continue to aggressively seek new business opportunities such as this that allow us to meet the risk management and investment needs of our customers around the globe.”
Derivative traders and portfolio managers can now for the first time, clear and net a large number of transactions with an automated match process to eliminate LIBOR(London Interbank Offered Rates) settlement risk. TLfast is the electronic portal for bringing efficiency and liquidity to market participants that want to manage LIBOR-based gap positions. TLfast offers an electronic interface to GLOBEX®, CME’s electronic tradingplatform, giving clients seamless order entry, order management, real-time yield curve andstraight-through-processing (STP) for integrated trading and clearing of exchange listed daily 3-month Eurodollar future contracts.
Switch trading of daily 3-month Eurodollar contracts, a proxy for OTC FRAs sharing the same characteristics of active exchange traded Eurodollar futures, will be automatically matched and executed on GLOBEX and cleared by CME’s Clearing House. Orders from TLfast are passed to GLOBEX for the weekly match process that allows for multi-lateral matching and clearing. This multi-lateral matching process exponentially increases the probability of desired trade executions compared to executions submitted via the bi-lateral approach.
To eliminate LIBOR mis-match basis risk, the market place needed a powerful efficient tool that better managed mis-matched interest rate exposure. The traditional bi-lateral over-the-counter (OTC) market place was inefficient, and time and capital consuming when dealing with unwanted LIBOR basis risk. This joint initiative between Tullett Liberty and CME brings together the expertise of the OTC market, coupled with the benefits of an electronic exchange with central clearing, to now provide the best of breed solution to overcome these distinct market challenges.Tullett Liberty and CME plan to expand the scope of this matching process to include:
About TLfast – www.tlfast.com
TLfast, an innovative electronic trade-matching capability from Tullett Liberty offers an electronic interface to GLOBEX®, giving clients seamless, order entry, order management, real-time yield curve, and straight-through-processing (STP) for integrated trading and clearing of exchange listed daily 3-month Eurodollar future contracts.
About Tullett Liberty –www.tullib.com
Established in 1971, Tullett Liberty is one of the world's leading wholesale financial brokers. Represented in all major financial centers, Tullett Liberty has leading positions in Fixed Income Securities, Interest Rate Derivatives, Equities, Energy, Credit Derivatives and FX and Money Markets. Tullett Liberty is the wholesale broking arm of Collins Stewart Tullett plc, a London Stock Exchange listed company (ticker symbol: CSTL). CSTL also owns the UK's largest independent stockbroking group, Collins Stewart.
About the Chicago Mercantile Exchange, Inc. –www.cme.com
The Chicago Mercantile Exchange is the largest futures exchange in the United States. As an international marketplace, CME brings together buyers and sellers on its trading floors and GLOBEX® electronic trading platform. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moved about $1.6 billion per day in settlement payments during the first half of 2004 and managed $39.1 billion in collateral deposits as of June 30,2004. CME is a wholly owned subsidiary of Chicago Mercantile Exchange Holdings Inc. (NYSE: CME), which is part of the Russell 1000® Index.
