Electronic Swaps Trading Surges as Pressure for Increased Oversight of OTC Derivatives Trading Grows
May 12, 2010 (Jersey City, NJ); Tradeweb, a leading global provider of regulated electronic markets, today announced that institutional trading of interest rate swaps on its multi-dealer-to-client marketplace increased by more than 71% in the first four months of the year, compared to the same period in 2009. Average daily trading volume for interest rate swaps now exceeds $4 billion. The continued surge in electronic trading on Tradeweb coincides with ongoing demands from global legislators for trading of OTC derivatives on regulated execution venues and/or Swap Execution Facilities (SEFs), as noted in the proposed U.S. legislation.
"The industry has crossed the threshold and there is now a clear and unambiguous shift towards the electronic trading of OTC derivatives. Electronic trading is here today and is providing the benefits and safeguards that are being sought by global regulators," said Lee Olesky, CEO of Tradeweb. "Legislative reform will undoubtedly accelerate this trend towards greater efficiency and transparency, but the initial vote for change is coming from the market."
Tradeweb provides a competitive multi-dealer-to-client electronic swaps marketplace, which enables institutional investors to receive simultaneous quotes from multiple dealers. The benefits that this "request-for-quote" model provides are aligned with the core principles of a SEF. These benefits include pre- and post-trade price transparency; efficient trade execution and processing; digital records of all trades and trade inquiries; and a permanent audit trail. The core principles for becoming a regulated SEF are set out in pending U.S. legislation. If passed, Tradeweb's U.S. swaps marketplace plans to register as a SEF.
More than 55,000 interest rate swap trades, with an aggregate notional in excess of $5 trillion, have now been executed on Tradeweb's platform since the original launch. Over 1,600 trades took place in April 2010 alone, an increase of 189% over April 2009, and 38% up on March 2010. In total, more than 280 swap dealers and major swap participants have executed interest rate swap trades electronically on Tradeweb since launch.
Total global interest rate swaps volume on Tradeweb since the introduction of the platform in 2005 has grown at a compound annual growth rate of 55%.
In addition to leading the move towards electronic trading of OTC derivatives, Tradeweb recently announced the first electronic interest rate swap trade on a multi-dealer platform to be centrally cleared by an institutional client. This follows the completion of electronic links from Tradeweb to the major derivatives clearing houses. Institutional clients are now able to fully automate their workflow on Tradeweb - from trade execution through clearing, enabling institutions to better manage operational, systemic and market risk.
These links support the legislative focus on central clearing for all standardized swap contracts, and the push for the trading of all cleared swap transactions on regulated execution venues.
Tradeweb is a leading provider of online markets and a pioneer in the development of electronic trading and trade processing. The company provides services in the fixed income, derivative, and equity markets to clients in more than 50 countries. Since 1998, Tradeweb has operated a global fixed income and derivatives trading network, which harnesses the distribution of the major investment banks with over 2,000 institutional clients. Tradeweb Retail provides a trading and sales application to fixed income brokers and traders. With its expansion into the equity markets, Tradeweb is leveraging AutEx, the industry leader for 40 years in providing indications of interests, and Tradeweb Routing Network, a global FIX network with more than 8,000 connections between over 1,000 firms.