London- The London Stock Exchange Group is to launch an interest rate swaps trading platform in a move backed by a group of banks to meet regulators' demands for greater transparency in the once secretive but huge market for such financial derivatives.
The LSE said its MTS Europe bond trading platform will offer institutional investors the ability to trade interest rate swaps from the fourth quarter.
The exchange said that BNP Paribas, Commerzbank, Credit Agricole, HSBC, Lloyds, Societe Generale and UBS have indicated they will support the platform from launch.
“Regulation continues to push the fixed income markets towards more centralised, transparent, electronic market models,” Paul Hamil, managing director fixed income trading at UBS, said in a statement announcing the new venture on Friday.
Interest rate swaps comprise the biggest chunk of the world's $633 trillion off-exchange derivatives market which has traditionally been traded privately among banks.
The financial crisis, where opaque swaps created uncertainties in the market, prompted world leaders in 2009 to call for new rules to push trading onto electronic platforms and for contracts to be cleared by a third party.
Trades on MTS Swaps will be cleared on LCH.Clearnet, one of the world's biggest clearing houses for interest rate swaps and in which the LSE has recently acquired a controlling stake.
Exchanges like CME, ICE, Eurex, NYSE Euronext and Nasdaq are expanding into derivatives in the hope of generating income from the tigher rules on customers and mitigate weaker share trading. - Reuters