Swap futures exchange GMEX will launch tomorrow after securing more big-name backing just before it goes live.
Bank of America Merrill Lynch (BAML) connected to GMEX yesterday, the Eurex-backed platform.
BAML will provide client execution, clearing and settlement services for interest rate swap constant maturity future (IRS CMF) contract, via its general clearing membership with Eurex.
“The contract provides additional choice to clients that are looking for alternatives to standardised exchange-traded derivatives and OTC products,” says Brooks Stevens, European head of futures and options, OTC Clearing and FX prime brokerage, BAML.
Swap futures have emerged as viable alternatives to OTC interest rate swaps which have become increasingly costly to trade due to global central clearing mandates.
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 earlier this year. “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.”