TradeWeb executes a SEF compliant CDS trade


Following yesterday’s post which looked at what a SEF compliant platform for IRS would look like, today we hear from TradeWeb (who are registering as a SEF) that Blackrock completed a ‘SEF like trade’ for an index credit derivative referencing the US High Grade CDX index.

The trade used reference data (the CDX index) supplied by Markit, with Goldman acting as the clearing agent of the trade, which was then routed through to the CME , acting as central counterparty (CCP) to both sides of the trade.

Until realtime mandatory trade reporting becomes law, details of the size of the trade remain hidden. Although, it’s worth mentioning that even under SEF reporting rules, the identity of participants of SEF trades, will always remain hidden.

full story here

Quick look at what a SEF compliant IRS platform look like.


Whilst we wait, and wait for final SEF rulings, it’s interesting to take a quick look at what’s being developed as exchanges and SEF compliant platform for interest rate swaps.

Although we heard talk of between 30-40 SEFs platforms being registered, in reality the market would only support (by which I mean going to the expense of connecting to, and post liquidity to) a very limited number (by which I think we are talking in the region of 3-5 max/per asset class) of SEFs.

Dealer to Client: SEF compliant platforms are being built by the likes of Bloomberg, MarketAxess, TradeWeb, Javelin and ODEX, and others.

Dealer to Dealer: The Inter dealer brokers (IDBs) are all developing offerings: GFI, ICAP, Creditex, plus a number of exchange offerings including ERIS.

Below is a quick peek at a regulated exchange (ERIS) and a SEF complient Platform ODEX

ERIS Exchange: Trading of centrally cleared (via CME) IRS on exchange.(Business presentation) and demo of IRS swaps platform. The demo some functionality available, including one click, with DOB, standard ‘futures style’ order ladders, as well as unwinds of swaps. The platform uses the Swapbook functionality developed by Currenex.

ODEX (Open Derivatives Exchange) Is a new OTC derivatives matching engine/platform, which hopes to become a Swap Execution Facility (SEF) for OTC derivatives (business presentation). Trades will initially be cleared through IDCG . Providing both a central limit order book (CLOB) as well as standard RFQs. It’s interesting to note that ODEX is planning to offer unwinds, more complex trade types and non standard swaps, none of which of course are mandated to trade on a SEF.

Eris is based on technology from Currenex, so whilst i’m sure it’s functional, in terms of UX, it’s very dated.

Looks aren’t everything, but…

I know which one I prefer.

Then again, maybe clients won’t need to use either of them directly. Since Eris provides a suite of Fix based APIs that will enable banks to build order routing functionality for client orders and RFQs through to the exchange from within the Single Dealer platform for SEF mandated cleared products, as we have said before, SDPs are fighting back against SEFs.

ODEX Swap Execution Facility (SEF)

ERIS Futures Exchange for Swaps

Celent report on Technology Systems in the Global FX Market: May 2011


Celent research report on Technology Systems in the Global FX Market

Extract from the report…

Single-dealer platforms (SDPs) are gaining popularity, and this is mainly related to banks’ technology investments. SDPs are providing greater speed and reliability of trade execution, because they create fewer hops from execution and low-latency technology. In addition to research and analytics, SDP clients are also benefiting from superior post-trade processing capabilities and STP solutions that the banks are offering.

iPhone and HTML5: paranoia over


Back in March I commented on accusations that Apple was attempting to hinder the success of HTML5 by making Web apps run slowly when “installed” on an i-thing home screen. The argument was that they wanted to push people towards native apps and the appstore. (See my original article for more details).

I thought that this was probably nonsense, and suggested that the slightly poorer performance in iOS of installed HTML5 versus browser-based HTML5 was much more likely to be a cock-up than a conspiracy.

Independent tests of the recent beta release of iOS 5 now confirm that the home-screen performance is back up to scratch. It was all something to do with an inefficient security architecture.

See? Cock-up.

Thinking Strategy: Retooling for the Post-Crisis World (from Finextra)


This is a great post on Finextra by Thomson Reuters’ CTO for Risk (Alex Hernandez) who mentions single-dealer platforms as an example of add-on services instituations are implementing in order to aid client retention and to attract clients to higher-margin products.

Here’s a great quote from the post regarding single-dealer platforms:

They are in fact supposed to “open up” the bank and exhibit to customers a number of functionalities that only traders have traditionally have direct access to, such as position keeping, risk management, trade lifecycle management, financing workflows, etc. This “self-service” model is of course a contributor to cost reduction, since it means less customer-facing staff, and could be thought of as analogous to what happened to bank tellers 30 years ago when ATMs became ubiquitous. But it is more than a pure cost-efficiency play: more fundamentally, it is a strategic move to differentiate from competitors and save customers’ time by providing in a single easy-to-use portal all the financial information and workflows that customers need.

Click here for the full story on Finextra.

Greece, how it got into this mess (great story worth reading)


As Greece implodes under the weight of its debt and the austerity measures being imposed, I was reminded by my colleague of a great essay by Michael Lewis (of Liar’s Poker fame) published in Vanity Fair, which talks about how Greece got itself into this mess.

A fascinating read (a real greek tragedy), which looks at what happened nationally in Greece, as a result of the cheap credit that washed through the world. As he puts it…

The credit wasn’t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, “The lights are out, you can do whatever you want to do and no one will ever know.” What they wanted to do with money in the dark varied …. read on

Making Swap Execution Facilities (SEFs) successful (CFTC roundtable)


I know it’s a bit late, but back in March the CFTC (Scott O’Malia) held public meetings to explore the ‘attributes necessary to make swap execution facilities (SEFs) successful’.

The round table discussions were fascinating to watch, as market participants attempted to explain to the CFTC the subtle (and very often inverse) relationships (read trade-off) between (forced) transparency and (true) liquidity, worth watching here.

Tabb group also provided a report on the technology implications and costs of Dodd Frank on Financial Markets., showing that they estimated that the largest dealers (top 15 firms) would spend some $1.8bln on restructuring their businesses for Dodd Frank, of which some $560mln would be spent on e-commerce and low touch distribution.

The SEF showcase was followed up by a number of presentations from market participants and potential SEF providers, highlighting issues and value propositions. This one from BlackRock, is worth going throughDodd-Frank Derivatives Regulation Interconnectivity

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