Key facts
- CME Group has introduced a new service called Treasury Link.
- The service is designed to address 'legging risk' in US Treasury versus futures basis trades.
- This risk arises from slight delays in executing each leg of a trade, potentially leading to different execution levels than expected.
- Treasury Link aims to eliminate this execution risk for banks and asset managers.
CME Group has launched its Treasury Link service, a new offering aimed at mitigating 'legging risk' for fixed income relative-value traders. This risk, a long-standing challenge in the industry, occurs when each component of a trade, such as a US Treasury versus futures basis trade, is processed with a slight delay. This delay can result in the legs being executed at different levels than initially anticipated, impacting the overall trade outcome.
The primary goal of the Treasury Link service is to eliminate this execution risk for banks and asset managers, thereby leveling the playing field in a strategy often dominated by high-speed trading players. By streamlining the execution process, CME aims to provide a more consistent and predictable trading environment for these complex strategies.