It seemed that with their acquisition by ICE, Yellow Jacket had gone very quiet, almost dormant, other than their weather derivatives business. However, this morning, they’ve issued a new press release detailing a new product, YJ Block, which they describe as “an automated block-trade function that supports broker execution and submission of cleared over-the-counter (OTC) natural gas and power trades, as well as ICE WTI and ICE Brent Crude Oil futures blocks.”

According to the press release…

“YJ Block leverages YellowJacket’s instant messaging and real-time data platform already relied upon by more than 150 commercial trading and brokerage firms. This new patent-pending feature helps automate broker negotiation of complex trade strategies by removing the need to enter, verify and submit multiple trade tickets for one transaction.
“YJ Block is specifically designed to create efficiencies for natural gas, power and oil brokers in the options market,” said Jacob Pechenik, Chief Executive Officer of YellowJacket. “The ability to submit customer trades for clearing automatically to back-office systems with a single click allows brokers to spend more time on transactions rather than manual processing.”
YJ Block is currently used by three OTC brokers following a successful beta test. During the initial rollout, YJ Block reduced costly errors by approximately 75% while reducing entry time three-fold. Additional benefits include:
– One-click submission to ICE’s block trade facility, ICEBlock, for all off-exchange negotiated deals, regardless of the number of legs. Typical off-exchange block trades require the submission of each individual leg for clearing;
– Model-driven delta suggestion and leg premium allocation, leading to fewer deals broken while in delta negotiation;
– In addition to more accurate calculation of premium, YJ Block enables faster deal submission and less paperwork for brokers and the back office;
– Straight-through processing of executed trades directly to broker and customer back-offices, replacing previously manual trade processing;
– Fewer costly errors and trade busts; and,
– Real-time risk management for traders, compared to delayed or end-of-day trade entry, reducing operational costs and multiple ticket entry for brokers and traders.
YJ Block features free real-time front month Henry Hub and ICE WTI Crude futures prices. ICE is offering additional broker rebates on natural gas trades submitted for clearing via YJ Block. More products and enhancements will be added to YJ Block in 2009.”

It’s encouraging to see that ICE is pushing ahead with Yellow Jacket’s technology. However, I still hope to see YJ expand their IM-based trading tools into the wider peer-to-peer physical OTC natural gas and power markets, allowing physical traders to automate and integrate IM-based trades between their industry trading partners. Unfortunately, given that doing so may pull some trades off the ICE platform, I don’t think it’s going to be a priority.

Still for broker executed and cleared options trades, it looks like YJ’s technology is being put to good use.

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