CME launches product aimed at simplifying and cutting cost of contentious Treasury bets

By the Editorial Team · Friday, July 10, 2026

CME Group has launched Treasury Link, a new electronic product that simplifies the basis trade by combining the purchase of U.S. Treasury bonds and the shorting of futures contracts into a single transaction. This innovation aims to reduce execution risks, increase market transparency, and attract a wider range of investors, potentially lessening systemic risks tied to the large, concentrated basis trade.

CME Group, one of the world’s largest derivatives exchanges, announced the launch of a new product aimed at streamlining and reducing the cost of the basis trade, a complex and widely used hedge fund strategy involving U.S. Treasury securities. The Chicago-based company introduced Treasury Link, a feature designed to consolidate what is currently a multi-step process—buying a U.S. Treasury bond and shorting the corresponding futures contract—into a single, electronic transaction.

By automating this process, CME intends to lower the risks associated with executing trades in multiple stages and reduce the dependence on brokers. The move is expected to broaden access to the basis trade, allowing a larger and more diverse group of investors to participate.

The basis trade has grown substantially in recent years, with hedge funds leveraging positions at times more than 100 times to exploit small pricing discrepancies between Treasury bonds and futures contracts. As of September 2023, the Federal Reserve estimated that positions tied to this strategy totaled around $830 billion—approximately double the peak seen in 2020.

This growth has raised concerns among regulators, who have warned that the concentrated nature of the trade—dominated by a limited number of large hedge funds—poses systemic risks. A swift unwinding of these positions, as witnessed during the market turmoil in March 2020 linked to the coronavirus pandemic, can exacerbate volatility and strain liquidity in the Treasury market. Agencies such as the Federal Reserve, Securities and Exchange Commission, and the Financial Stability Oversight Council have issued cautionary statements on the potential hazards the basis trade poses to financial stability.

The strategy is also vulnerable to geopolitical developments. For instance, a U.S. tariff announcement last year triggered a sudden unwind in basis trade positions, contributing to a 0.6 percentage point rise in the 10-year Treasury yield over a week.

Despite these risks, CME argues that Treasury Link could mitigate some vulnerabilities by improving market efficiency and transparency. The product’s electronic platform will match buyers and sellers automatically through an algorithm, eliminating some of the opacity associated with the cash Treasury market. By expanding the pool of investors and reducing execution risk, CME expects the basis spread between cash and futures markets to narrow, potentially dampening the risk of disorderly deleveraging during times of stress.

Matt Gierke, global head of BrokerTec, CME’s cash Treasuries trading platform, stated that the development should enhance liquidity and integrity in the Treasury market. He added that Treasury Link might attract new customer segments, including smaller funds that typically manage fewer broker relationships.

Access to Treasury Link requires participation on both BrokerTec and CME’s Treasury futures platform. While BrokerTec remains the largest electronic platform for U.S. Treasury trading, it has lost some market share to competitors Dealerweb and FMX in recent years. The decline has been partly attributed to lower trading costs and finer pricing increments offered by rivals.

CME has yet to disclose the fees associated with trading Treasury Link. However, it has begun enabling smaller trading increments at its new Chicago exchange, a feature expected to extend to this new product, potentially benefiting users seeking more precise trade executions.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.