Interdealer broker ICAP plans to open an electronic interest rate swap (IRS) platform on 6 September 2010.
Designed for Euro swaps, the initiative will combine ICAP's established voice liquidity with an electronic trading capability to create a single liquidity pool.
The new service, will also include market maker support, is intended to increase transparency and reduce systemic risks as well as lowering transaction costs on the OTC market. IRS instruments up to 30 years maturity will be available.
The platform will be open to market makers that have access to a clearing house for interest rate derivatives. Investment banks Barclays Capital, Deutsche Bank and JP Morgan have agreed to support the platform by providing streaming prices.
“OTC dealers have been waiting for an effective electronic interdealer trading system for swaps for some time,” said Michael Spencer, chief executive at ICAP. “This is a major turning point for the largest and most important interest rate market in Europe; bringing greater automation, increased transparency and lower transaction costs. All transactions will be captured and recorded electronically although we expect the most liquid and standardised products to move progressively electronic while the less liquid products remain mostly voice.”
The platform will be regulated as a multilateral trading facility under MiFID.