May 8, 2014

LSEG Looking to Compete with CME Deliverable Swap Futures

LSE Group moving into Swap Futures?

A story over at FOW Intelligence suggests that Bill Templar has been hired to boost efforts within LSE Group to bring a product/service to market to allow combining OTC Swaps (in SwapClear) with Exchange Traded Futures in a single margin pot. LSEG owns the platform previously known as Turquoise, now known as LSE Derivatives Market. The story also suggests that Eurex is persuing a similar path, but Eurex already have the ability to offset OTC & ETD products as reported here. Nasdaq NLX are also tipped to be looking at Swap Futures too.

Data on the CME website showing the details of trading in their DSF indicate that in comparison with the OTC market, the DSF open interest is relatively modest – whether three new entrants will increase the overall market appetite for this approach, or chase after mild interest remains to be seen.

Details on any of this are hard to pin down, but it makes sense that the major vertical groups all want to play in the same market spaces and opportunties:

  • CME: DSFs in USD and EUR, out of the US, plus IRS Clearing
  • LSEG: See above
  • Eurex: Have the technical ability to offset OTC and ETD already, just need the DSF contract
  • Nasdaq: See above, own the NLX market in competition with ICE/LIFFE, but no presence in OTC IR Swap clearing
  • ICE: Now own LIFFE, so have big ETD STIR flow

Will we see any partnerships across those verticals to combine ETD and OTC flow? 

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