Swapstream, an electronic trading platform for medium and long term interest rate swaps, is increasing its quote size to EUR800M on bid and offer, and without widening spreads.
The firm claims the improved liquidity confirms a market shift towards e-trading of IRS. It says the shift is recognised by the International Swaps & Derivatives Association (ISDA), which is taking measures to encourage the full automation of major OTC derivatives products by 2005.
“This exciting rise in liquidity reflects increasing demand and interest in Swapstream and electronic trading by traders,” says Andre Keijsers, director of Swapstream. “For Swapstream, already market leader in terms of functionality, the increased liquidity represents the next stage in our evolution to be the leading multilateral platform to trade interest rate swaps. As IRS trading follows the success of FX, equity and bonds platforms, Swapstream’s market makers have increased liquidity to ensure our trading community will have access to the most competitive spreads.”
Swapstream’s market makers currently provide continuous prices in straight swaps and swap spreads from 1 to 50 years. The company says its status as an independent service provider allows it to act as a facilitator without competing with banks or brokers.
“When developing our IRS e-trading strategies, we looked for an advanced solution that would offer significant liquidity and the most competitive spreads in the marketplace,” says Marc Campbell, European Head of Interest Rate Swaps at Commerzbank Securities. “We saw in Swapstream the highest potential of IRS electronic trading: its neutral nature, multi dealer liquidity, and trading functionality demonstrated to us that the resources were in place for the most effective electronic trading. We can now trade through a secure system with increasing liquidity and tight bid-offer spreads with multiple counterparties. By completing the e-cycle from execution to deal capturing, matching and confirmation, and potential clearing we are aiming to reduce our operational risk and cost.”