The IRS market has seen a rise in interest in electronic trading in recent months.
The post-trade services market value in the interest rate swaps (IRS) space is expected to skyrocket from US$200 million in 2009 to US$500 million in 2012, according to a new report from Celent.
The interest rate swaps (IRS) market is the largest by notional outstanding among the over-the-counter (OTC) markets. Over the period of 2006-2009, more than 75% of the OTC market consisted of IRS, the report's author, Anshuman Jaswal, said in a release.
The leading interdealer brokers are preparing for increases in levels of electronic trading. Also, single-dealer platforms have increased their sophistication; an example is the launch of Morgan Stanley's Matrix. Along with other platforms such as Deutsche Bank's Autobahn and Barclays Live, it promises to make IRS research and trading services much more interactive and user-friendly, Celent said in its report.
A major factor in the rise in expectations of electronic trading volumes has been the recent drive to encourage higher levels of counterparty clearing and exchange-based trading. It is believed that 2010 is going to be a crucial year for electronic trading as the need to reduce systemic and counterparty risk will induce market players to make use of electronic trading and provide the critical mass necessary to make it an essential component of the IRS market.
Also, the rapid growth in post-trade processing is expected to continue, and the regulatory pressures and efficiency gains will provide further incentive for the service providers to improve and innovate, Celent said.