Bloomberg has developed a service to enable buy-side investors to continue to perform bunched swap trades on its swap execution facility (SEF).
In order to be compliant with Commodity Future Trading Commission (CFTC) rules on pre-trade clearing, swap trades need credit certainty.
Bloomberg SEF has developed technology to enable bunched trades - where investors group a number of different trades into a single order and allocate them across multiple accounts later - to be credit checked and cleared.
The system has been designed to be integrated into traders’ existing workflow without significant disruption. Bloomberg said that previously these kinds of trades could not be transacted on SEFs.
Ben Macdonald, global head of product at Bloomberg and president of Bloomberg SEF, said: “Providing this new functionality enables clients to seamlessly execute and clear bunched swap trades in today's regulatory environment. Buy-side investors often combine multiple smaller trade orders on behalf of several accounts to help achieve best execution and lower transaction costs.”
The trade was executed by MKP Capital Management, a US buy-side firm, through Credit Suisse, its futures commission merchant with clearing provided by CME Clearing.
CFTC rules on trade certainty will come into effect on 1 November and will require parties to ensure that a given trade will clear before going ahead. In order to meet demand for trade certainty, a number of post-trade services providers have developed systems to rapidly credit check counterparties to ensure trades will complete.
Bloomberg SEF has transacted US$160 billion of credit default swaps, interest rate swaps, foreign exchange and commodity derivatives since launching on 2 October.