January 2008


Same time last year I rambled about how things hadn’t advanced as much as we’d all hoped.

So what was different in 2007?

– LiquidityHub happened (not quite a life changing event)
– Fusion happened (even less so)
– Swaps went “e”……oh, hang on! No they didn’t did they?

So what’s going to happen in 2008 in the world of FI e-trading?

At the risk of sounding a little negative given the current market environment:

– Nothing
– Nothing, and
– Nothing

PLEASE disagree with me, I beg you!

But with banks losing BILLIONS by the Quarter (and more to come despite tonight’s Fed 50bp cut) how are they going to spend what may be required? I mean, according to the Bond King on CNBC tonight, they’re still trying to flog syndicated loans to investors at 95-96c in the dollar…….please!

In 2008 FI e-Trading will be so far down the priority list of ALL banks that any progress is simply impossible. At best more swaps will be traded electronically on 31 December 2008 than were on 1 January 2008…………..see what I did there? 😉

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Like David Bowie and Queen………….the FT reports what many have known for a while; that several European Debt Agencies are looking to have more than just MTS as the e-Trading platform of choice for their bonds.

Belgium have been first to open up their market by adding Brokertec and eSpeed to MTS as the official platforms for Belgian Debt. The Netherlands looks to be next. Indeed at a seminar held by the Securities Institute last week in London, ICAP mentioned that they believed the Dutch DMO would go down the three platform path as well.

What is a concern is the MTS Chairman’s, obviously PR written, response: “MTS has a strong track record of working with the Belgian DMO and Primary Dealers to deliver a premier trading platform offering unparalleled liquidity, transparency and efficiency.”

Kind of begs the question…….so what?

e-Financial News reports:
Rainbow’ threat to exchanges and brokers
Luke Jeffs and Natasha de Terán
28 Jan 2008

A group of the world’s largest derivatives dealers and brokers have started talks about launching a European derivatives exchange, dubbed Project Rainbow. The move will increase competitive pressure on Europe’s futures exchanges and clearers.

No surprises that Goldman Sachs are involved. Suposedly joing them are Credit Suisse, Lehman Bros. and their fellow “not yet on LiquidityHub” members J.P. Morgan and UBS.

It has been some time since I’d seen Autobahn (the stand alone version, not what runs via Bloomberg or Reuters or whatever) in action. And I’ve not really ever had a good look at what they offer in IRS.

Well I can say I’m quite impressed. It is a single-dealer platform sure, but it really is the best thing out there in terms of functionality for the e-Swaps market place (sorry to tell you SwapsStream) and, along with BARX, product coverage. I’m talking Outright, Curve Spreads, Butterflies, 18 currencies, RFQ, Streaming Click and Trade, Limit Orders. And the best of all? Unwinds. You find the deal (whether dealt on the phone or electronically) you wish to unwind and open a ticket to unwind the swap there and then. Add in trading API, STP and even the simplicity of e-mail confirmations.

Being single-dealer, albeit one of Waratah’s Tier-1 FI e-Trading dealers, is a massive problem. Multi-dealer is undoubtedly what clients such as Hedge Funds and Tier-1 Funds want. But Deutsche Bank are hardly going to invite their competitors onboard, are they? 🙂

So what to do? Do the likes of LiquidityHub and TradeWeb (sorry to leave you out SwapsStream) simply copy the functionality? No trade mark on what Autobahn does, it simply replicates phone trading in a more efficient manner…the whole point of e-Trading.

Indeed TradeWeb does offer curve trades and butterflies. But it remains a Request For Quote driven government bond platform running on architecture from the late 90’s/early noughties. Although I hear they’re looking to jump on the Request For Stream (RFS) bandwagon after Fusion went ahead late last year.

LiquidityHub appears to want all functionality to fit into the RFS model, which counts out the vast majority of it’s Price Makers from being able to do broken dates, unwinds and also butterflies etc.

Time will tell, but certainly a multi-dealer platform that offers Autobahn-like functionality and products would go down well.