Central Clearing…for Bonds!?

This news item in Finextra, clearly the product of a press release from NYSE Euronext, has got me all hot under the collar and forced me out of hiding.

I know other systems are working on this, EuroTLX for example, tie up with Borsa Italiana from memory. Naturally the other two Cassiopeia Bond Exchanges (Galaxy, MTS Credit) must also be working away on this. I understand why all 3 are, less so EuroTLX, because without it how do you differentiate yourselves?

The merits of the Cassiopeia project could take up another post – personally I think it is doomed to fail, or at best one may survive, I mean how will these exchanges function in a crisis like 2008-09? Which is what they are supposedly designed for! But lets look at the specifics of this “news” items and specifically the reasons why a CCP for cash bonds is so important.

1. Mitigation of counterparty risk – eh? Ever heard of DVP (delivery versus payment) and T+3 or sooner, the number of counterparts is far, far more diverse than in IRS or CDS…is this really a problem?
2. Benefit from STP – what? this doesn’t existing on platforms such as Broketec, Tradeweb etc? Of course it does! It exists today!
3. Regulator demands to bring clearing to OTC products – yes…OTS DERIVATIVES! Not cash bonds! This point is, in my view, misleading at best.

Intuitively you can see some benfits of CCP in cash bonds, maybe it opens the market place to more participants who are unable to particpate due to credit issues (again is this really a big problem?). However bonds are already expensive enough to settle, adding a CCP including initial and variation margins plus all the work required in terms of IT resource…given how cost conscious most Banks are at the moment…

Anyway, my 2cents worth, feel free to disagree, but make sure you say why!


From the BBC, a blog on a Wired article.

Based on my activity here, the answer is yes!


MTS coming under more pressure in their Western European stronghold. Even their push into Emerging Markets will not make up for these loses.

(LONDON, UK) Xtrakter, the fixed income market utility, launched today a league table of
execution venues for the market. The league table outlines both the top 10 venues of
execution for the Fixed Income and Equities markets.

OTC was also the largest method of execution for fixed income securities processed by
representing 88.01% of the total share. Tradeweb (Europe) Ltd held 1.93% and MTS SPA
held 1.87% of the total share processed by Xtrakter. Below is a breakdown of the top 10
venues of execution for the Fixed Income market.
TOP 10 Venues of Execution for the Fixed Income market*:
Venue of Execution: % of Xtrakter share
Over The Counter 88.01%
Tradeweb (Europe) Ltd 1.93%
MTS SPA 1.87%
ICAP Electronic (Europe) 1.23%
Euro Global MTS 0.75%
Bondvision 0.65%
London Stock Exchange 0.47%
Euro MTS 0.38%
ICAP Electronic (USA) 0.32%
GFI Credit Match 0.24%
Other venues 4.17%

MTS no. 1 in terms of e-trading with 3.65% (adding all their businesses mentioned above).

Is Bloomberg part of this? Is it in “Other Venues”? Is this on number of trades or volume? Over what period of time?

So many questions……

Sorry, this is about a week old but have been busy:

MTS Group, the pan-European electronic trading platform for government bonds, is pleased to announce an agreement with the Brazilian Ministry of Finance for the creation of an electronic market dedicated to the trading of local currency sovereign securities issued by the Federative Republic of Brazil.

I guess this is acknowledgment that their model has run its course in Europe and it is time to move further afield (already in Israel). Obrigado!


Article on eFinancial where Celent are stating that Brokers will cut tech spend by 7%.

If you take into account that short-term tech spend will be up on risk management and various regulatory issues, where does this leave e-Trading and specifically FI e-Trading? At SIFMA the banks said the spend will be level…….hmmmm, it wasn’t convincing then and is less so now.