Standardised OTC swaps (TrueEx) to launch within weeks – Risk.net
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.
- The full research is here at Risk: Standardised OTC swaps to launch within weeks – Risk.net.
- Product specs start at page 101: http://www.trueex.com/2013-02-interest-rate-swap-certificaiton.pdf
And a new acronym to enjoy: Standard Coupon Standard Maturity (SCSM).