Swap futures venture GMEX and its biggest backer Eurex will launch their new interest rate Constant Maturity Futures (CMF) product on 7 August after a long preparation period.
GMEX has been developing the centrally cleared product as an alternative to trading OTC interest rate products, set to increase significantly in cost as new regulations come into force.
The start-up exchange group has secured financial backing from Deutsche Borse-owned Eurex, along with the use of clearing house. Participants will also trade the products through the German platform.
Buy-side firms Old Mutual Global Investors and Lyxor Asset Management have committed to trading the product, and GMEX CEO, Hirander Misra, told theTRADEnews.com in a recent video that other buy-side firms should be looking at the products as an alternative to OTC products.
“The industry is very capital constrained,” he explained. “If we look at Basel III and the ratios around that, and there is mandatory clearing – which has come into force in the US and now in Europe in 2016 – this means there just isn’t a sufficient amount of capital in terms of collateral and margin to cover interest rate exposure out there. So there is a need for products that are centrally cleared and more transparent on a central limit order book and they are much, much cheaper in terms of trading.”
GMEX has also secured sell-side backing in preparation for launch from the likes of RJ O’Brien, Tradition, Virtu and Newedge – now Societe Generale. Trading Technologies has also connected to the platform.
Eurex launched its own European swap futures contracts earlier this year, and ICE has also begun going live with its suite of the new products. GMEX’s contract differs from the current models offered by Eris Exchange and CME as the CMF tracks the interest rate exposure at each point on the yield curve.
“Offering this highly innovative contract to our market participants further increases the range of interest rate derivatives they can trade and clear,” said Brendan Bradley, chief innovation officer and member of the Eurex Executive Board. “Users will immediately benefit from the capital efficiencies we can offer as our interest rate product suite comprises both listed and OTC instruments covering the entire Euro denominated yield curve.”