Chicago-based CME Group Inc. plans to launch a second BrokerTec central limit order book (CLOB) for cash U.S. Treasuries during the third quarter, the financial services company said March 20.
The new CLOB will be co-located in Chicago next to CME Group’s deeply liquid U.S. Treasury futures and options markets to support trading between cash and derivatives markets, according to the firm.
“As clients navigate this period of heightened uncertainty and record debt issuance, U.S. Treasury spread trading continues to drive price discovery and liquidity across cash, futures and repo markets,” said Mike Dennis, global head of fixed income at CME Group. “By launching a new trading venue, we will bring the full U.S. Treasury ecosystem closer together, delivering simplicity and efficiency for global market participants.”
BrokerTec’s existing New York-based CLOB will remain its primary venue for price discovery in cash U.S. Treasuries, with February 2025 average daily notional volume (ADNV) of $113 billion.
The second Chicago CLOB, operated by BrokerTec Americas LLC, will complement this offering by focusing on relative value strategies, and CME Group said that clients will be able to trade all seven of BrokerTec’s on-the-run benchmark U.S. Treasuries in smaller notional sizes to align with the futures market, and at tighter price increments of 1/16th of a 32nd, to allow for more precise hedging.
“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,” John Edwards, BrokerTec’s global head, said last week. “Our new CLOB will greatly enhance the client experience for cash versus futures strategies.
By allowing smaller notional sizes and adjusting minimum price increments, Edwards said it also will enable smaller firms “to participate in spread trading, broadening and deepening the liquidity pool and increasing matching opportunities.”
Available on Globex, the new venue will leverage the existing BrokerTec API and can be accessed via clients’ existing CME Group connectivity. It will be available for client testing beginning April 27.