JP Morgan backs TradeWeb launch of multi-dealer swaps platform

Thomson TradeWeb will launch a multi-dealer interest rate swaps trading platform in Europe at the beginning of 2005, and has received the support of JP Morgan Chase - the bank that dominated Risk ’s inter-dealer swaps rankings in September

Swaps trading platforms have so far either allowed buy-side institutions to access prices from a single dealer, such as Barclays’ Barx product, or have served the inter-dealer market only, for example Swapstream. TradeWeb, which operates as part of the Thomson financial group of businesses, will be the first to allow buy-side investors to obtain price quotes from a range of dealers, the company said.

To date, only JP Morgan Chase has confirmed its participation. But TradeWeb plans to unveil other backers in the coming months.

The platform's aim is to provide enhanced liquidity and transparency to investors, while giving dealers a better distribution network for their products.

Lee Olesky, president of Thomson TradeWeb, said the platform had already gained a strong presence in European government bond, US Treasury and other markets. “We do $125 billion a day with customers around the world, with around 18,000 users. We also have a successful track record with dealer-to-user platforms,” he said.

Olesky is confident TradeWeb's critical mass of dealers and buy-side customers in bond trading will help it establish a liquid multi-dealer rates platform. He says current clients include European central banks, and top asset managers such as pension funds and hedge funds.

The TradeWeb platform operates a request-for-quote (RFQ) model where the client nominates dealers on the platform, requests a real quote based on the indicative levels he sees and receives instant quotes.

“The request-for-quote dealing model is the most appropriate dealing protocol for the interest rate swaps market," said Ashley Bacon, head of European interest rate trading at JP Morgan Chase. "I would expect existing clients may trade more frequently and the client base will grow.” He added that TradeWeb’s advantage lay in its technology being well tested through the bond-dealing platform.

A Swapstream spokesman said his company’s business was currently inter-dealer only. “Our user board consists of market makers and brokers,” he said. However, he conceded that, in theory, there was no technical reason why buy-side institutions could not be added to it.

A September report on electronic swaps trading by Celent, a Boston-based consultancy, said there were still major barriers to dealer-client electronic trading: “Credit, pricing and product specialisation issues continue to impede dealer-to-client trading, and it appears unlikely that client firms will gain access to inter-dealer swap liquidity any time soon.”

TradeWeb plans to roll out its swaps platform at the beginning of 2005.

According to its mid-year 2004 survey, the International Swaps and Dealers Association said outstanding global notional volume traded for interest rate swaps grew 16% in the first six months of 2004 to a total of $164.49 trillion, compared with $5.44 trillion for credit derivatives and $3.79 trillion for equity derivatives.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Chartis RiskTech100® 2024

The latest iteration of the Chartis RiskTech100®, a comprehensive independent study of the world’s major players in risk and compliance technology, is acknowledged as the go-to for clear, accurate analysis of the risk technology marketplace. With its…

T+1: complacency before the storm?

This paper, created by WatersTechnology in association with Gresham Technologies, outlines what the move to T+1 (next-day settlement) of broker/dealer-executed trades in the US and Canadian markets means for buy-side and sell-side firms

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here