Derivatives trading venue operator Tradeweb Markets has hedged its bets for its swap execution facility (SEF) offering, opting to run both a central limit order book and request-for-quote models as it seeks regulatory approval.
Tradeweb this week applied to the Commodity Futures Trading Commission (CFTC) to operate the two SEFs. The firm seeks to offer trading in interest rate swap and credit default swap indices on both SEFS, the exchange-like platforms forged in the Dodd-Frank Act to reduce systemic risk in swaps trading.
Speaking to theTRADEnews.com, Douglas Friedman, general counsel for Tradeweb, said the strategic thinking behind applying for both its RFQ platform and its CLOB market to become SEFs was driven by client demand for varied trading strategies.
“We wanted to offer market participants flexibility to trade in the way that matches their trading strategies, so we’re providing two SEF platforms: a request-for-quote disclosed platform and an anonymous central limit order book,” Friedman said.
The firm’s RFQ market also offers request-for-market functionality, and has executed some US$13 trillion in notional volume with over 145,000 trades since launching in 2005.
He added algorithmic trading may also see a general boost on SEF platforms as they develop in coming months.
“Although these instruments haven’t historically lent themselves to algorithmic trading compared to other asset classes, it is possible that the use of trading algorithms and HFT trading may evolve over time in this market,” Friedman said.
Currently, Tradeweb services over 300 institutional clients across its derivatives platforms with over 20 liquidity providers.
The market operator’s application to the CFTC is the second after Bloomberg filed the necessary paperwork last month, when the regulator opened licence applications for the new venue category.