On-line Trading Facility Announces Technology Partner and Plans for a New OTC Derivatives Marketplace Cleared By BOTCC
Commodities Management Exchange, Inc. ("CMXchange") and OPT4 Derivatives ("OPT4") announce the launch of "CMXflexclearTM", an electronic marketplace
for the trading and matching of OTC derivative transactions.
CMXflexclearTM will utilize "Opt4" trading technology to allow its members to trade commodity derivative transactions across a secure web based Internet platform or a dedicated connection. Approved participants will be able to privately or anonymously negotiate over-the-counter swaps with agreed terms and parameters. Upon completion, these financially settled trades would be cleared, processed and guaranteed by the Board of Trade Clearing Corporation (the "Clearing Corporation"). Participants can access the matching and clearing function only through accredited BOTCC clearing members.
This venture builds upon and supports the previously announced bilateral agreements between "OPT4", "CMXchange" and the Clearing Corporation that lead to this innovative marketplace coming together. CMXflexclearTM, in combination with CMXchange's existing physical commodity exchange, will now offer a unique and efficient means for producers, consumers and traders to manage their total commodity risks.
The new marketplace will roll out in the 2Q of 2002 and will initially focus
on metal related transactions. Support and demand for CMXflexclearTM comes
from CMXchange's many existing physical metal customers, who include the
major automotive manufacturers, as well as hundreds of other physical metal
fabricators, suppliers and traders in the global metal industry. This is the
reason the initial derivatives will be based on the most common non-ferrous
metals used in the automotive sector.
Participants will have a wide range of choices to select from for settlement
indices, duration, and fixed date or monthly average settlement. This will
provide a high degree of flexibility to the market, and allow for better
facilities to customize trades that meet correlation requirements for hedge
accounting treatment under FAS 133. It is anticipated that other commodities, as well as more derivative products, such as, non-vanilla swaps and options will be added to CMXflexclearTM service in the future.
A core activity of CMXflexclearTM will be the inclusion of large order execution (block trades) and wholesale clearing of members' eligible portfolios. These features will allow clearing member trades, and their customers' trades, to be passed through and cleared by the Clearing Corporation. Clearing members will enjoy the benefits of reduced counterpart risk along with the positive balance sheet enhancements that a centralized clearing party provides.
CMXflexclearTM is the solution to the problems of counterpart credit risk and market illiquidity that is currently causing so much difficulty in the commodity markets. It was created to provide off set and netting benefits for participants in the OTC markets, as well as reduce their bilateral counterpart risk, and increasing overall market liquidity and trade turnover.
Demonstrations of the CMXflexclear system are available Thursday and Friday
from 9 to 5 in the Vidal room in the first floor of the Tower at the Boca Resort.
Demetrius (Tony) Brown, Chairman and CEO of CMXchange, said: "We have talked to our customers and other major enterprises. There will be major commercial accounts participating in CMXflexclearTM for the April block trading and the summer online launch. Our strategic partnerships with The Board of Trade Clearing Corporation and Opt4 Derivatives allows CMXflexclearTM to bring unique, value added solutions to market."
"The CMXchange offering will leverage the Clearing Corporation's clearing member structure and the Clearing Corporation's Straight-Through-Processing capabilities thereby providing the OTC marketplace with the first clearing solution for base metals." said Tom Hammond, Executive Vice President of the Clearing Corporation.
"Opt4 Derivatives is delighted to work with CMXflexclearTM to revolutionize the OTC markets and derivatives trading," said Gordon Rausser, Chairman of the Opt4 Board of Directors. "Industrial Corporations will now have the tools they need to effectively manage risk."