Chicago Exchange to Trade Treasury Securities

The Chicago Board of Trade received government clearance Monday to create a computer network to trade U.S. Treasury securities, opening the government debt market to smaller traders.

The Securities and Exchange Commission approved the 3-year-old proposal for the exchange to offer trading of Treasury bonds, notes and bills on an electronic system through a new subsidiary, Chicago Board Brokerage.

The board of trade, which dominates trading in futures on government securities, also received permission to create Clearing Corp. for Options and Securities, which will clear and guarantee all transactions made through the system.

That in effect eliminates the uncertainty surrounding the credit-worthiness of buyers and sellers, a large barrier to entry to the market, estimated at about $80 billion daily.

“Chicago Board Brokerage represents a new, cost-effective and innovative means of trading cash government securities,” board of trade Chairman Patrick Arbor said. “It will provide our members, member firms and all users of our markets with the ease of execution combined with a significant reduction in counter-party risk.”