CME Group Inc. (CME), the world’s largest futures exchange, will allow traders who arrange transactions between banks to buy and sell futures and swaps through one electronic screen.
CME Direct will allow so-called inter-dealer brokers to use one system for trading futures and swaps based on oil, natural gas, gasoline and heating oil, rather than the two systems now in place, the Chicago-based company said in a statement today. CME Group’s Globex electronic trading system is now used for futures while its Clearport system accepts swaps for clearing.
The new system may be a blueprint for how CME Group designs a swap-execution facility, which is required under the Dodd-Frank Act financial reform, though it’s too early to know because those rules aren’t finalized, said Michel Everaert, a managing director in the company’s OTC Solutions unit.
“Having said that, a lot of the elements in the proposals for swap-execution facilities are in CME Direct,” he said.
Intercontinental Exchange Inc. (ICE), owner of Europe’s largest energy market and a CME Group competitor, offers one-screen trading for futures and swaps through its WebICE system.
“It will help our customers trade CME,” Everaert said. “Will it help us compete? Sure.” The integration will eventually apply to all the exchange’s products, including interest rates and currencies, he said.
Inter-dealer brokers Marex Spectron Group Ltd., Compagnie Financiere Tradition SA and Tullett Prebon Plc (TLPR) have received licenses from CME Group to use the new system, the company said in the statement. For the swaps trading part, brokers will be able to buy and sell the contracts using electronic trading or transactions arranged over the phone, what’s known as a hybrid model, CME Group said.
There will be no fee for brokers to use CME Direct, though execution and clearing fees will apply to any trades, Everaert said.