April 19, 2013

Standardised OTC swaps (TrueEx) to launch within weeks –

Sunil Hirani who created CreditEx, now part of ICE, has built a new trading market TrueEx, and registered as a Designated Contract Market (DCM) with the CFTC. TruEx will offer trading in rate swaps but using standardised terms:

  • Standard tenors: 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 15, 20, 25, 30 years
  • IMM start dates in March, June, September and December
  • 3M LIBOR rate, quoted the day before each IMM date
  • $5m notional minimum and multiples of, for the on-the-run contract
  • $1m minimum notional for off-the-run

The benefit of these IRS products is netting – keeping the price fixed during each 3 month period means the buy-side can trade in and out, and net at the CCP. Fully flexible IRS move in price every day and make trading out of a position more complex. The approach  differs from the CME deliverable swap futures, in that these aren't 'futures' they're real rate swaps which feed down to CME and LCH for clearing.

And a new acronym to enjoy: Standard Coupon Standard Maturity (SCSM).

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