Interdealer broker Compagnie Financiere Tradition says its hybrid trading platform for over-the-counter derivatives, Trad-X, has matched ?approximately 1900 orders in euro interest rate swaps with a notional value traded of over €112 billion since its launch on 19 May 2011.?
Tradition has become the latest trading firm to move to profit from regulatory changes by launching an e-broking platform for OTC derivatives.
The company says Trad-X has been developed to be regulatory compliant on a global scale and was designed with the support of a group of international banks. At present 11 banks are providing two-way streaming prices to the platform including BNP Paribas, Citi, Credit Suisse, Goldman Sachs, HSBC, Morgan Stanley, Nomura, Société Générale, the Royal Bank of Scotland and UBS.
Based on proprietary technology, Trad-X is a fully automated multi-asset class trading platform with hybrid functionality that allows traders to combine electronic and voice execution methods. According to Daniel Marcus, Tradition’s managing director of strategy and business development, Trad-X was designed as a logical extension to the broker’s existing voice brokerage business, rather than a platform solely created to provide electronic trading solutions.
“The platform offers both hybrid and fully electronic order entry which allows clients to trade the way they want to, rather than being pushed into a specific way of trading,” he says.
Tradition will be adding more capabilities to the platform over the coming weeks including auction functionality and other currencies “as and when the market desires,” Marcus says.
The platform has been more than two years in the making but development has accelerated in recent months as regulators in the US and Europe have pushed through sweeping changes to OTC derivative markets to reduce risk following the financial crisis. These include rules that force large swathes of the OTC market onto electronic platforms – namely swap execution facilities and multilateral trading facilities – and through central clearinghouses.
Jason Cohen, head of euro swap trading at Citi says: “Trad-X is off to a good start and by including a wide range of wholesale interbank dealers in a single liquidity pool, it has helped increase the efficiency and transparency of the euro swaps market. Under the hybrid model, the market has evolved quickly. Initiatives such as Trad-X are important as the industry moves toward central clearing for OTC derivatives.”
Panos Korantzopoulos, global head of flow rates EUR, CHF and Scandi at Nomura adds, “To have 11 dealers streaming live executable prices is a significant achievement. We hope this will be a model that will satisfy many of the forthcoming regulatory requirements.”
The launch of the platform is another indication that interdealer brokers are keen to prevent exchanges from being the sole beneficiaries of the shift of OTC derivatives on to electronic platforms.
Icap, BGC Partners, Tullett Prebon and GFI Group have also been developing their swap trading platforms in the hope of establishing their platform as the market leader in electronic brokerage when the new regulations finally take effect.