June 2007

………..or does it?

The Q3 launch of LiquidityHub, via Bloomberg and Reuters, is only a few months away, late August to early September is my mail. In saying that, it is more a two-thirds launch as US Treasuries will only come in Phase 2, later in the year.

So concentrating on the EUR and USD IRS products, surveys state vanilla Swaps account for 70%+ of the turnover in the market and that swaps denominated in euros and dollars account for 80%+ of the market. The conclusion to draw from this is that initially LiquidityHub will cover the bulk of the trading required in swaps.

The only thing is that, just as with ice-cream, there are different variants of vanilla. LiquidityHub will offer EUR Swap vs. 3 and 6-month Euribor and USD Swap Semi and Annual vs. 3-month Libor – admittedly in a competitive environment. Now that’s as plain vanilla as you can get, no vanilla bean in that one. So for Hedge Funds and Funds there will be no non-standard dates, no forward start swaps, curve trades etc. Which is what these guys have asked for, these products, plus the most vanilla, in a competitive environment.

Regarding US Treasuries, they will be offering streaming two-way prices (let’s hope the spreads aren’t “drive a truck through it” wide) but you can’t do switches as yet.

Now I don’t want to sound too down on LiquidityHub as I think, as a start, it is good and God knows the difficulty experienced, and to be experienced, in getting 15 Banks to come together on something. However I think, to start, it will not quench the thirst for e-Trading of Swaps (especially for the Buyside)…..it will only make people more thirsty.


Looks like BNP Paribas are the latest in the single-dealer FI trading system renaissance.


Not too much detail on what specific products will be offered, however they will be using Caplin Trader, which was launched last month, as the front-end.

Can only assume they’ll look to use this to augment the vanilla offering, on the likes of TradeWeb and soon LiquidityHub, with more sophisticated products and functionality (executable trade ideas, executable axes etc).

I understand Citi are working on something (may have launched?) but the last brochure I saw on it had a Fixed Income title but then described their FX system!!!! Likewise UBS and HSBC are supposed to be working away and are Banks that have tended to confound me with their previous lack of impact in FI e-Trading. Morgan Stanley are meant to be working on something quite cutting edge.

Definitely the way to go for differentiating yourself, but one can’t help but feel these banks have a long way to go to catch up with the BARX and DB Autobahn offering and, most importantly, perception.

I’ve just had a quick look at this piece on Finextra:


Essentially it is US regulators suggesting a tighter monitoring of electronic communications i.e. e-mail, IM, notice boards, blogs, podcasts, Bloomberg messaging etc. I’d have thought most Banks/Brokers etc have a decent IT policy covering most of this?

Look out Big Brother…………..and I don’t mean the C4 version!

Most people agree the future of FI/Derivative e-trading is bright. Certainly myself included.

However, is it really at the cutting edge? Relative to both e-trading in other products and indeed the Bond/Derivative markets themselves.

Quite simply the answer is no.

See my post from January calling for a “breakthrough idea” to truly make FI e-trading a major part of the markets.

This segment remains behind FX and Equities (without really catching up over the first half of the year), there is a serious risk that there will be, soon enough, only two serious competitors in the ECN space and they are data vendors where FI e-trading is a small, but hopefullyimportant, part of their overall business.

The Banks are wrestling control back with the likes of LiquidityHub and Project Fusion. As it stands, LiquidityHub will be a rather simple, fee paying system. Or maybe that’s a bit harsh?

Even so, you can count the Banks leading the charge on one hand.

Meanwhile financial innovation in the markets is at unprecedented levels and the only “e” products are those that are very mature (government bonds, retail credit and now swaps).

Talk of FI exchange models, the blurring of buyside/sellside, no more dealers/traders all driven by e-trading; has been distracting in my view. Are the players thinking about the tryline and not the hard yards that need to be put in to get there?

So where is the bottleneck?

Buyside protecting jobs or having a “if it ain’t broke attitude”?

Sellside using resource to chase near-term $ in strutured products etc (BTW, if I held shares in a bank that didn’t, I sell ’em!) and traders/sales also following the buyside line of thought?

Or, as Holky may agree, a lack of innovative courage from vendors (ECN’s, OMS, EMS etc)?

All of the above? Yup.

A site I’ve always loved, until you had to pay for it, is Yield Curve.

Full of great and practical articles/research pieces on the bond and derivatives markets. Well worth a look.

And the good news is that it is now FREE again! 🙂

The bad news is that it is unlikely to have much new content added…. 😦

Latest on Project Boat, the consortium of banks looking to handle equities post-trade reporting:


I guess all projects (LiquidityHub, Boat, Turquoise etc) are trying to get out and about prior to the summer holidays activity slump.