The Chicago Board of Trade has announced that Citigroup and Goldman Sachs are to become electronic market makers for the exchange’s interest rate swap futures contracts.
The two firms will join the existing electronic market maker and provide liquidity to all market participants in Chicago Board of Trade (CBOT) five-year and 10-year swap futures beginning in July 2006.
With CBOT five-year and 10-year swap futures, traditional counter-party credit risk is mitigated by the guarantee of the centralized clearinghouse, while real-time dynamic prices, through the e-CBOT electronic trading platform, provide the market with an unbiased, transparent benchmark of swap rates.
Robert Ray, senior vice president of business development at CBOT, said, Both firms will take a leading role in the convergence of cash securities, over-the-counter derivatives and now the listed futures markets. This will, in turn, enable capital to flow freely between the various markets based upon the needs of each customer.
Ken Tremain, head of US interest rates at Citigroup, added,We believe the timing is right for the success of the CBOT Swap futures complex. The increased transparency and centralized clearing function it offers, combined with the committed liquidity of two major dealers, will greatly benefit users and lead to the overall growth of the swap rate markets.