In preparation for the Chicago Board of Trade's planned transition from its incumbent Project A trading platform to Eurex's trading engine, The Board of Trade Clearing Corp. (BOTCC) is rewriting the software it uses to import trades. Separately, the BOTCC has decided to pass on a potential cross-margining alliance with the clearing unit of Eurex.
Eurex and the CBOT, of course, last June formed a technology partnership that calls for the Board of Trade to replace Project A with Eurex's trading engine and application programming interface. That alliance is moving along and the partners expect to meet their projected summer 2000 date for the introduction of Eurex technology at the CBOT.
But in the meantime, the BOTCC--an independent entity that provides clearing and settlement services for the Board of Trade--is tweaking its internal system to account for differences in the way Project A and Eurex present trades. Bill Floersch, chairman of the BOTCC, says that the Eurex engine--unlike Project A--is going to require the BOTCC to perform more calculations and figure out who the counter-party is in each trade.
"Project A's trading engine provides us data that tells us the buyer and the seller and the quantity and the price. The Eurex trading engine, today, provides trade information that is a little different. The trades come in net positions," he explains. "So you have to re-arrange that data and back into it and say 'well, if a firm was long 10 and now it's long 15, that means it must have bought 5.' And then you back into the trading data and see who sold 5 and you calculate what the change is."
Dennis Dutterer, president and CEO of BOTCC, says the firm's software modification is going to be written and ready for testing by April. After the re-write is finished, he says,
BOTCC will "create" some trades to test the new platform, and follow those trials with beta tests of trades imported from the actual Eurex trading engine. Thus far, Dutterer adds, the BOTCC has spent nearly $1 million on the re-write.
That said, while it is spending cash on the CBOT's anticipated trading engine conversion, the BOTCC has no intention at this time of forming an alliance of its own with Eurex's clearing unit. Dutterer says that the BOTCC has investigated--and rejected--the possibility of cross-margining Eurex's German Bund with products listed at the CBOT.
"From our point of view, we have looked for a long period of time about whether there is possibility for cross-margining between our product," he says. "Interestingly enough, there's not that close a correlation between them." However, while asserting that the BOTCC sees no potential for a cross-margining link with Eurex at this time, Dutterer says that the firm is continuously talking to its German counterpart and remains open to the idea.