E-Bond Trading Platforms Grow Volume in 2005
The Bond Market Association (TBMA) reports that electronic trading in fixed-income is well established in both the U.S. and Europe, according to its ninth annual Review of Electronic Transaction Systems, released on Wednesday. The association estimates that this year trading platforms handled average daily trading volume of $750 billion covering both the U.S. and Europe.
More than three quarters of the platforms surveyed reported trading volume increased in 2005 as compared to 2004. More than a quarter said volume rose more than 20 percent; just 13 platforms said volume fell.
In addition, the association says the continued development of electronic trading in fixed-income is helping to promote price transparency as a growing number of such platforms allow users to view transaction prices and compare multiple quotes. Of the 54 platforms surveyed, 50 provide the users with some form of pricing information before execution.
The review also indicates that the average trade size ranges from $25,000 to $15 million with a wide range in the numbers of users as well. Seventeen platforms say they serve 100 or more institutional users, while one platform reports 7,650 investor firms as users as well.
On the operations front, the review also finds that automation of trade processing is on the rise, with 29 of 54 respondents now providing users with direct access to trade clearance and settlement systems. The platforms offer links to global clearing organizations such as DTCC, GSCC, Euroclear, Clearstream and Bloomberg, among others.
“In larger numbers, platforms are looking for ways they can add value. Automating clearance and settlement is obviously important, but we are also seeing analytical services and compliance services offered on a more frequent basis,” states Michael Decker, the association’s SVP for policy and research.
Going forward, respondents said they expect to see electronic trading platforms continue to incorporate trading of OTC derivatives, particularly credit default swaps. A number of respondents said they would continue to focus on development of straight-through processing and connections to clearance and settlement facilities as a way to automate back-office functions, again with a particular emphasis on derivatives.
NYSE Members Vote Yes on Proposed Archipelago Merger
New York Stock Exchange (NYSE) members on Tuesday overwhelmingly approved its proposed merger with Archipelago Holdings, which operates the rival Archipelago Exchange electronic equity-trading platform.
According to certified results announced on Wednesday, a total of 1,307 members, or 96 percent of the eligible members, cast votes. Of that total, 1,247, or 95.4 percent, voted in favor of the transaction. Meanwhile, there were 59 votes, or 4.5 percent, against the merger and one (0.1 percent) abstention. The inspector of elections, IVS Associates, certified the vote.
While there are 1,366 NYSE members, a total of 1,365 were eligible to vote, including 938 members who lease seats. Of the total number of regular members, approximately 600 are affiliated with member firms, said the release.
New IDB Launches Hybrid Platform in Credit Derivatives Swaps
IDX Capital, a new interdealer broker (IDB) in the credit derivatives swaps, opened its operations in New York. The firm, which operates in the over-the-counter CDS market, says it has trading arrangements in place with some of the largest dealers including JP Morgan Chase, Deutsche Bank, Morgan Stanley and Credit Suisse.
Unlike other IDBs that only operate on a voice-brokered basis, IDX is offering both Internet- and voice-based transactions. The broker claims it’s the first IDB to offer the dealer community live, electronic trading of credit derivatives together with aggressor-only commissions via its hybrid trading platform, IDX Live. The aggressor-only model requires that the party that initiates the trade pay the broker’s fee — as opposed to both sides paying the commission, which is currently the norm in credit derivatives transactions.
According to IDX Capital, the aggressor-only model has gained acceptance in other market sectors, particularly in the areas of equities, asset-backed securities and fixed-income instruments. By offering this model, IDX clients will save at least 50 percent of their current brokerage bills, according to the firm.
Wall Street veteran CEO Jeffrey Hunter will lead the new company. Hunter was formerly with Donaldson Lufkin and Jenrette and the Olsen Group, where he led the deployment, design and funding of FXTrade, an online foreign-exchange market maker.
ABN AMRO Licenses STPlatform for Electronic FX Trading
ABN AMRO signed a license agreement with TraderTools LLC to use STPlatform at all of the bank’s foreign exchange (FX) trading and sales sites. This represents more than 25 separate locations around the world, according to TraderTools, a global supplier of white label software solutions for electronic FX trading.
“ABN AMRO demanded a platform with proven STP and order API (application programming interface) capabilities, which we knew we had,” states Mark Mayerfeld, EVP, international sales at TraderTools.
Though the time-intensive and geographically diverse rollout schedule was challenging, stated Mayerfeld in the release, “At the end of the day, however, we delivered,” he added. “We look forward to helping ABN AMRO grow their FX business through electronic automation.”
The company’s STPlatform enables the streaming of executable rates from multiple sources, allowing any bank, broker or financial institution to become an electronic liquidity provider. The open platform provides APIs for rates, orders, deals and other data for integration into an institution’s existing technology infrastructure.