Swaps volumes on the increase……

Interesting update from Kevin McPartland at Tabb Group.

He reports that IRS & CDS number of trades and volume traded on both Bloomberg & Tradeweb have drastically improved. See the attached chart from his report.

My conclusion? The fundamental benefits of electronic trading in pre-trade, execution and post-trade will drive these markets. This growth is NOT due to the regulatory changes. I look forward to the ways the regulators will ensure efficient pre-trade price discovery by making the SEFs interact with each other!

Kevin’s article is here (login required). The Bloomberg press release is here and Tradeweb here.

New bill may restore sanity to SEF regulations

Just noticed this announcement:

Chairman of Financial Services Subcommittee on Capital Markets Scott Garrett, is introducing a bill (H.R. 2586) “the Swap Execution Facility Clarification Act”, which will require the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to finalize swap execution facilities (SEFs) rules that allow the swaps market to naturally evolve towards Continue reading

Single-dealer platforms and TCA

While the notion of Transaction Cost Analysis has been broadly adopted by the equity markets, it doesn’t have similar adoption in the OTC world. Why is this so? I will attempt to explain the various factors that are driving this extremely important topic.

TCA adoption in the equities world

As the equity markets became more fragmented (chiefly as a desire from the politicians/regulators to encourage more competition amongst exchanges), investment managers (IM) demanded more information from the execution brokers as to how & where the brokers chose to execute trades done on behalf of the IM.

Provision of a metric or series of metrics allowed the IMs to calculate their broker’s execution performance. Originally this was via factors such as VWAP or implementation shortfall.

As execution algorithms became widely adopted, other factors were added to measure the algo performance across lit, dark & internal execution venues. In addition, the regulatory focus on best execution meant that TCA could provide an important measure of best ex. You cannot control a cost unless you can measure it.


In the meantime, the FI & FX markets were developing their own transaction models such as ESP, RFS & RFQ.

Continue reading

European lawmakers delay OTC regulation

From the FT:


“Everyone has realised this legislation – along with Dodd-Frank in the US – is much more complex than was originally given credit for,” said David Clark, chairman of the Wholesale Markets Brokers’ Association

ISDA comments on SDP role in the new regulated world

ISDA have released a response to the FSB progress report published on April 15. While the response covers regulatory arbitrage, execution, clearing and reporting, the most interesting statement is their view of how SDPs can and should function within the new regulations.

In the section “Organised trading of derivatives”, the following comment is made: Continue reading

Dodd-Frank: Where have we got to so far?

As part of our review & assessment of Dodd-Frank, I thought it would be useful to summarise progress to date & try to draw some conclusions about the speed & direction of the implementation.
Continue reading

EuroMoney 2011 FX Poll – some thoughts

SDP volumes continue to outstrip MDP volumes:

An interesting comment caught my eye in the EuroMoney 2011 FX poll that customers preferences are changing, and that whilst single dealer platform (SDP) volumes still exceeds multi dealer platform (MDP) volume, the gap is closing, and clients are starting to migrate to MDPs.

Still seems a decent gap to me! Continue reading

Conclusions from the Profit & Loss Conference in Singapore

Last week I attended the Profit & Loss Conference in Singapore. No matter how frequent my visits, there always are new buildings in the downtown area. The latest BIS survey shows that Singapore has grown to be the fourth biggest FX trading centre globally and my guess is it will become even bigger.

The agenda had a few sessions on the forthcoming regulation changes in the US & Europe, so no surprise there. The keynote address on the first day from the Chairman of the Singapore FX Market Committee was interesting, not least because of his comment that whilst aware of the changes happening elsewhere, the local authorities would ensure that any regulatory changes here would be for the benefit of Singapore as a financial centre. I wonder whether this implies that the goals of Dodd Frank & MiFID II will be muted when applied to the local markets, in spite of the original G20 recommendations.

Also had a pleasant time discussing the role of social media in FX with Jon Vollemaere. I think “growing” is the verb to use. Continue reading