$ 300 trillion U.S. privately traded derivatives market may face its 30- year history of the biggest changes , if investors embrace the new electronic trading platform , will reduce the market dominance of large banks .
Among investor optimism has newly discovered rules requiring swaps Electronics will open a new competitive markets , reduce transaction costs , and bring price transparency .
Derivatives market is the world's largest , but they are still a market investor and dealer transactions , rather than allowing investors to trade anonymously each other. Sometimes transaction is rare , usually in a very large scale.
Bank Derivatives Risk, the financial crisis Lehman Brothers (Lehman Brothers) and almost destroyed the main contributor to several other companies . After the financial crisis , peaked in 2008 , a number of exchanges and away from the price of the opaque bank -led model is expected to quickly turn .
That did not happen . Multiple credit derivatives trading platform, ready to launch , but without success. A European antitrust investigations and litigation alleged bank increased killing Citadel Investment Group and the Chicago Mercantile Exchange Group (CME.O), and other similar business plans, to protect them maintain market private equity earn huge revenues.
Banks have long to take action in order to maintain their intermediary role in fixed income and foreign exchange markets , and some are likely to continue to resist trading patterns, improve competitiveness .
That means that many people are likely to benefit based on the request of the platform , known as a request for quotation (RFQ), which is based on the bank's relationships and how to copy the current market , more than order-driven market , so that investors around the middle of their trade providers.
However , the new regulations have diminished banks' balance sheets , and left the weaker dealers could contend with the largest banks . This means that some may support lower income , higher levels of business, such as ordering the book trade , especially if there is more than enough for investors to shift their trading . The new regulatory mandates for electronic transactions provides an additional impetus.
"Sellside to get rid of a very profitable business will be difficult, Cooper said:" Charlie , head of State Street Global Exchange, exchange-traded derivatives clearing the counter , which has a multi-asset trading platform SwapEx orders and RFQ platform .
" Way to do it is to attract a significant amount of cross-border mergers and acquisitions mobility, " he said. "If sellside see their trading activities arising from the decline in trade with each other because of the buyer , the dealer will have to add platform that can use their mobility ."
More standard and liquidity contract, such as credit index trades and some of the interest rate swap is considered the most likely transfer orders . The use of derivatives in order to prevent loss or presumed credit, interest rate and other assets to move.
But progress may be slow . The introduction of multiple trading platforms will fragment mobility. 11 platform has been used in swap transactions, because Commodity Futures Trading Commission (CFTC) last month to finalize the long-awaited trading rules, effective from October , is expected to more platforms . The rule requires that all trading venues , providing an order.
Many investors are accustomed to dealing with banks and smaller users have from clearing and trading rules . It is also easy to modify transactions in order to avoid liquidation and transaction authorization , non- clearing industry for many years did not expect to capital rules .
"The central limit order book , you need a more diverse end- user community to be successful ." Paul said, to do this, you need to have at least a dramatic reduction in the average transaction size of contract size Rowady, Tabou Group's senior analyst .
Inquiry system may need to stay in larger or more customized industry, which is less liquid and benefit from more bargaining power , even to the book trade gains traction .
Electronic trading derivatives reforms threaten banking revenues. JP Morgan Chase (JPM.N: Quote ) , the largest U.S. bank assets , said last year , interest rate swaps and credit transactions of the two highest profit market , resulting in an average of $ 3,500,000 and $ 3,750,000 , respectively, in each quarter revenues.
Around 250,000 30,000 Interest rate swaps $ 000 per trade credit transactions , while banks earned $ 1,500 trade. JP Morgan said comparison, about 10 million shares trading banks in the U.S. cash equities market , income 150 yuan yuan per quarter to 1.5 cents per share .
Extensive control
The emergence of new trading system at the same time when banks face new charges , they foiled the past credit trading business, take advantage of the broad market controls to protect their business.
Large banks and affecting the market has all the key parts of the infrastructure , from the settlement , data, documents, transaction authorization and settlement systems and traffic.
The ? Steyr (Benn Steil), Senior Fellow , Director of International Economics , Council on Foreign Relations , who has consulted trading platform , said that banks used in conjunction with ownership restrictions , trading platform provider's revenue-sharing agreements , remain dominant and regulatory arbitrage .
The difference between the buyer and the seller are out of place in an electronic environment , it no longer makes any sense , "he said ."
Since 2009 , the U.S. Justice Department has been investigating potential unfair competition the credit derivatives market , centralized clearing , trading and information services. Its inquiries, including whether banks use their ownership and sway control flow restricting competition trading platform, said two people familiar with the probe .
The tension between market participants have been several times since the crisis broke out , clearing and transaction details entanglement delay reforms.
Fund managers and other large-scale push reforms , said banks were directly involved in clearing and trading limits , trying to reduce trade anonymity investors , using documents and other instruments and slow to move to the new system required technology .
Banks have at industry conferences and interviews retorted , trading and clearing techniques take time to develop , some files and systems needed to ensure commercial acceptance bills clearinghouse . No one would say that this story record.
Open markets
If the order transaction does not catch up , the market may change dramatically.
Open access platform , investors can set limit orders , standing orders to buy or sell a set price, which the dealer price competition. This can significantly reduce costs , is considered when the stock market from the inquiry into the transaction costs, and ultimately fell as much as 95 % of the orders , including the steering .
"History has clearly demonstrated , as long as you have order books enter you see a market liquidity and transparency , and an immediate increase in lower costs both for the buyer and seller alike, said:" Jamie Cowley , head javelin capital markets , the rate and credit derivatives orders and inquiries .
Will also reduce trade anonymity , advantages banks see the customer's position , many fund managers complained that the request-based system that requires them to disclose trading strategies.
"I do not know the swap market trading large market inquiry , said:" Christian Martin , TeraExchange head , multi-asset orders and inquiries . " Information Disclosure Inquiry participants on the platform is a major problem , a completely anonymous platform, they can be completely avoided ."
Inquire if the transaction model still dominates , while the largest banks may maintain its market share, price transparency may still be limited.
CFTC's a controversial rules require investors to seek two quotations on the inquiry into the trading platform before rising to three a year later finalized in May . This brings a complaint , the rules favor the incumbent banks - because it is likely to meet the investor has provided several banks before the industry 's most liquidity and price transparency limit , which is the key to drawing new entrants .



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