A new market for trading interest rate swaps (IRSs) has been approved for launch in the US by derivatives regulator the Commodity Futures Trading Commission (CFTC).
Classified as a designated contract market, trueEX – which is funded by private investors – will start offering trading in the interest rate swaps in Q1 2013, before expanding into other liquid derivatives. trueEX is currently testing with market participants and will begin on-boarding clients in Q4.
trueEX also offers participants a choice of multiple clearing houses, which has not previously been available on any regulated exchange.
The shift of IRSs onto exchange – having typically been traded over the phone with little pre- or post-trade transparency – is a core tenet of OTC derivatives reforms that are being implemented across the globe. In addition to trading swaps on exchange-like platforms, the rules require OTC derivatives to be centrally cleared, where possible, and reported to newly created data repositories.
“The current lack of confidence in global markets – particularly in derivatives markets – has created the impetus for a regulated, transparent and rules-based trading platform,” said founder and CEO Sunil Hirani. “We are bringing transparency for the first time to this opaque, multi-trillion dollar market. Moving the derivatives markets to an exchange-traded and centrally cleared environment will mitigate systemic risk, reduce execution and processing costs, and provide much-needed transparency.”
Meantime, Trad-X a Europe-based IRS platform launched by interdealer broker Tradition and 11 global investment banks, has reported a record month for euro-denominated IRS trading.
Last month, trading in the instrument reached €80 billion. Since its launch 16 months ago, Trad-X has matched almost 7,000 orders amounting to a notional matched of approximately €500 billion.