New London derivatives exchange operator, Global markets Exchange Group (GMEX), has announced it will offer interest rate swap futures contracts.
The multilateral trading facility (MTF), which is being launched by former Chi-X Europe executive Hirander Misra, will offer trading in its Constant Maturity Future (CMF) product.
The futures contract has been designed to address complications that have arisen for the hedging of interest rates, associated with the standard quarterly expiration dates. GMEX said the product will help meet industry objectives to reduce systemic risk by pushing some OTC derivatives contracts into electronic exchange trading venues.
The company said its product is not the first time swap futures providers have attempted to break into the interest rate swap market. GMEX claimed its solution offers significant differences to past attempts as it provides more accurate tracking of the real exposure to changes in the interest rate curve.
As a result, it is able to utilise less margin and be less balance sheet intensive than centrally cleared vanilla swaps.
The CMF will be tied to a proprietary index developed by GMEX subsidiary Global Derivatives Indices. The Constant Maturity index will aim to reflect the underlying interest rate swap market in real-time.
It is calculated using tradable interest rate swap inputs from a range of market participants, including banks, investment funds and electronic market makers.
GMEX will initially launch with the CMF product available across multiple currencies, but plans to expand into other asset classes over time. It will also seek out partnerships with other developing exchanges globally.
GMEX is currently awaiting regulatory approval and has yet to confirm a launch date.