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