March 2008


Just hearing rumours that the Bank Consortium are looking to close LH at c.o.b today!

Not heard why but can only guess a lack of take up and the fact that these markets have lead to the priority of the banks to move away from e-Trading in swaps. I had heard that the support of most banks on LH was tepid at best during it’s 6-month life.

UPDATE: defo happening today. Hard to say if temporary or permanent as they’re citing “market conditions” but you’ve got to think it is all over for LH.

An article in eFinancial News asking why e-Swaps have yet to take off:

Electronic swaps trading struggles to gain traction

Main points and my view:

– 5-10% of IRS traded electronically (I’d lean towards 5% given these markets) but JPM claim 5-30% for them, depending on market conditions
– Huge gap between the best e-Swaps houses (Barx, DB, RBS and JPM) and the rest (Indeed, far more so than Govt Bonds)
– Price transparency (lack of) and market conditions have hindered multi-dealer vs. single-dealer, as has the above dealer “quality gap” (Multi-dealer plarforms need more price transparency if they truly want to take off, but there are tier-1 dealers and tier-10 dealers, and not much in between)
– Multi-dealer (TradeWeb and LiquidityHub) will overtake single-dealer in time (not in these markets) says Goldman Sachs (what are they up to? 😉 ) and e-Swaps will account for 50% of trades in 18-months time according to Quod Financial (based on what? As they’d say in The Castle “tell ‘im he’s dreamin’!!!”)
– TradeWeb does $7bn in swaps a day (bet EONIA covers a good chunk of that) and have 9 fusion banks PLUS another 6 joing for USD IRS (although those 6 are 6 of the Fusion 9)
– SwapsWire adds value to e-Trading (does it? to the big boys making markets it does. Most tier-2 banks don’t use it or don’t even know what it is!)

Speaking of LiquidityHub, not much news of late, however I was chatting with “a source close to” / “a friend of” the system and they tell me that the number of trades have picked up. The most surprising part is that the bulk of them seem to be coming via Reuters rather than Bloomberg! Seems Reuters have a better GUI, so a client was telling me.

What a week and a half in the markets, huh? Only good thing was I was in Milan yesterday and it was 22C and sunny (shame about the 2-hour delay coming back due to the backpack idiot at Heathrow). Well I’ve been busy so here are a few pieces from recent weeks, and my view.

Some TradeWeb.

If I were TW I’d be more worried about Bear Stearns, especially, and a few of the other less than brilliant Banks they have as Price Makers. Wachovia has it’s issues and Dresdner and Credit Suisse are not exactly the greatest e-trading houses going around!

Some CME/Swapstream news

This quote from the article says it all about the offering “CME has no sellside support to boast of and that is critical to its success”. If you are in LiquidityHub and/or TradeWeb as a bank, why would you support an exchange that takes your clients away from you, will charge you for the pleasure of doing that and already charges you an enormous amout of money to trade and clear futures?

Also heard a rumour about Bloomberg trying to resurect SwapsHouse. My view? Similar to that about Swapstream.

ICAP (IAP.L), the world’s premier interdealer broker, announced on Wednesday that average daily electronic broking volumes in fixed-income products reached record levels in February. Fixed-income volumes traded on ICAP’s BrokerTec platform -including U.S. Treasury products, EU repo and U.S. repo – increased 23 percent year on year in February to US $692.8 billion (February 2007: $562.1 bn), the highest level ever. Average daily electronic broking volumes for all four categories (US Treasury products, EU repo, U.S. repo and spot FX) reached $910 billion, its second highest level after August 2007.

Average daily electronic broking volumes in U.S. Treasury products increased 38 percent year on year to $187.7 billion in February, and 32 percent for the 12 months ending 29 February 2008. Average daily electronic broking volumes of U.S. and EU repo products reached $505.1 billion in February, an increase of 19 percent on February 2007.

No great surprise as UST and Bunds are about the only bonds seeing any turnover in the cash markets.