PLUS Markets Group, a UK-based market operator, has received approval from the Financial Services Authority to launch PLUS-DX, its new derivatives exchange.
PLUS has not yet set a firm launch date but confirmed on 7 July that the new platform is operationally ready to go live.
PLUS-DX will offer market participants a new way of capturing exposure to the interest rate swap (IRS) market via an exchange-tradable index known as the swap index contract (SIC).
The SIC – which is part of index provider FTSE's Medium Term Interest Rate Swap family of indices – is designed to replicate the profit and loss profiles of the underlying US$ IRS market for a number of tenors between two and 30 years.
Following bilateral negotiations, trading counterparties will report their transactions to PLUS-DX, before they are sent for clearing to Anglo-French central counterparty LCH.Clearnet.
The SIC will be charged at US$5 for every US$1 million of notional traded and will allow market participants to obtain their required exposure to the IRS market without having to buy or sell the physical swaps. PLUS-DX is also engaged in discussions with three unnamed banks to secure liquidity provision deals.
“Most IRS volumes are derived from hedging strategies that are simply trying to capture changes of various yield curves over the short-term. This is a very credit intensive procedure, so we have a solution that consolidates existing processes into a single contract,” Clive Connors, managing director, PLUS Markets Group, told theTRADEnews.com in late June.
PLUS plans to extend the range of SICs to include euro-, sterling- and yen-denominated contracts in the coming months.