Japan Advances E-Trading for Swaps With First JSCC-Cleared IRS

Bank of Tokyo-Mitsubishi UFJ has completed Japan’s first locally cleared, electronically traded yen swap transaction, by executing an interest rate swap with Deutsche Bank on Tradeweb.
By Jake Safane(2147484770)
Bank of Tokyo-Mitsubishi UFJ has completed Japan’s first locally cleared, electronically traded yen swap transaction, by executing an interest rate swap with Deutsche Bank on Tradeweb.

Mitsubishi UFJ used Tradeweb’s intention-to-clear facility to send the trade for clearing, which in this case went to Japan Securities Clearing Corporation (JSCC) for the first time. In the past, Tradeweb has cleared yen swap transactions through international clearinghouses LCH and CME.

“This trade in Japan marks another milestone in the evolution to a more transparent and efficient derivatives market,” says Andrew Bernard, managing director and head of Asia at Tradeweb. “Our focus continues to be on providing innovative tools so that our clients can efficiently trade swaps while benefiting from seamless trade processing and clearing connectivity.”

Tradeweb recently added connectivity to JSCC in order to provide participants with greater ability to clear yen swaps in accordance with local regulations. Japanese clearing regulations require domestic entities to submit certain yen-denominated interest rate swaps to a licensed clearinghouse, of which JSCC is the only one currently licensed for domestic clearing. And while Japan is not expected to require electronic trading of yen swaps until September 2015, Mitsubishi UFJ’s transaction is an example of market participants preparing in advance for the implementation of these rules.

“Although the final trading mandate rules have not been made public yet, Tradeweb will ensure that its clients continue to meet their regulatory requirements once the rules are determined,” says Bernard. He adds that Tradeweb is trying to stay ahead of any regulatory developments, but while regulators across Asia are focused on developing rules around clearing, reporting and trading, Japan is the only nation in the region so far to specifically announce the timing for an electronic swap trading mandate.

And as Japan moves toward this deadline, Hideo Nagamori, chief manager of Mitsubishi UFJ’s global markets trading division, says: “In the current environment, where increased market transparency and safety is a major global objective, we feel it is desirable that a fair and reliable trading structure is established through the use of electronic trading platforms, as this will enhance market efficiency and increase market participation.”

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