Derivatives

Interdealer brokers expand platforms ahead of SEF rules

Interdealer brokers Tradition and ICAP have added US dollar interest rate swaps to their derivatives trading venues as both firms gear up to register as swap execution facilities (SEFs) under the Dodd-Frank Act.

ICAP's i-Swap USD platform will let traders execute through a broker or directly through the platform and is open to banks that are clearing members of recognised central counterparties (CCPs), although non-clearing members can access the platform through ICAP's brokers. Streaming prices are being provided by Barclays, Bank of America Merrill Lynch, Citi, Deutsche Bank and J.P. Morgan.

The launch comes two years after ICAP launched i-Swap for euro IRSs, which has absorbed around 30% of the interdealer broker's internal flow in tenors of up to 30 years, according to its own figures. 

ICAP stated it will seek to register the platform as a SEF when the rules governing the venue type are finalised by the Commodity Futures Trading Commission, expected within the next month. 

ICAP's new platform is the second in the space of a week to announce an expansion to US dollar IRSs after fellow interdealer broker Tradition added the instruments to its Trad-X platform.

Similar to ICAP, the Trad-X platform builds upon an established offering of euro IRS products, however it brings together voice and electronic broking on one platform. Trad-X will also seek SEF registration under the CFTC rules.

This hybrid system provides electronic multi-asset class trading for OTC derivatives and Tradition plans to extend the platform's product suite to include other currencies in the near future.

"This is designed to be as 'SEF-like' as a platform can be ahead of the exact definition. It's an evolutionary process and we were keen to have a system up and running before the rules come out," said Daniel Marcus, global head of strategy and business development at Tradition. "As a hybrid system we want to offer traders who are used to trading by voice a complementary system to tap into further liquidity."