October 2007

Sorry, a bit slow on this one, but it isn’t that exciting anyway.

As foretold last month, there will be more dealers joing LiquidityHub. Calyon just happens to be the first…..here.


Thomson Financial has announced that it has entered a partnership with nine large global dealers, which will invest approximately $180 million to purchase a minority stake in the system – Thomson will remain the majority owner. The dealers are: Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, The Royal Bank of Scotland, and UBS. All nine firms have committed to participate in TradeWeb’s interest rate swaps business, as well as joining other TradeWeb markets. Thomson Financial will contribute its equity trading-related assets, including AutEx and the Thomson Order Routing network to TradeWeb.

What does this mean for LiquidityHub? Eight of the 15 dealers are involved, only BarCap missing in terms of the major players, maybe Citi….

At $180m, by my calculations, that means they’ve taken maybe 12% (based on a $1.5bn valuation). I’d heard 40% mentioned, but $180m certainly wouldn’t cover that.

Full story on Finextra.

PS: Word is that the $180m was for 20% with options to buy more later. Also it isn’t as simple as dividing 20% by 9 dealers. Some (GS no doubt)have have a larger share than others.

Having a chat with someone in the industry today when talk turned to TradeWeb and the possibility of the dealers buying it back from Thomson (a.k.a Project Fusion). Now this is in no way verified, however this person said that the figure on the table is USD1.5 billion!

Must say, if true, that would be some return on the Thomson initial investment of (correct me if my memory is hazy) USD500 million.

One reason I’d very much doubt it, is that, to my understanding (and not what I originally thought), Project Fusion is about the part buyback of TradeWeb, not the complete buyback. Perhaps the USD1.5bn is the whole valuation and, say,the dealers want 40% they’d pay USD600m.

Still seems plenty of $$$$$$$$$$.

Swapstream look to be working very hard on adding a “cleared” module to their sPro B2C IRS platform. Essentially leveraging off their parent’s (CME) futures prowess to essentially deliver a Swaps Exchange, in very vanilla products (EUR & USD standard date outrights) to start. This is on top of the existing standard e-OTC model, which also has futures cross, spreads, flies etc.

Basically the lack of an ISDA Master Agreement, Credit Lines etc, etc would be a non-issue. It would be interesting to see what the Market Makers think and, indeed, ISDA.

Personally I think it is a great idea but one that is three, maybe five, years ahead of it’s time. FX MarketSpace (the joint Reuters/CME exchange in FX) is having a slow start and the FX market is miles ahead of IRS in terms of e-Trading. Plus the markets may move quickly in terms of price, valuations and sentiment, but in terms of structural change, it is very much a case of evolution over revolution.

Looks like LiquidityHub went live this week with a small selection of clients.

No word on how it has gone but assume they’re looking at a quiet start given it is new and the markets are still far from normal.