LONDON, April 21 (IFR) - NEX Group has received CFTC
approval for a new swap execution facility, NEX SEF, which will
offer trading in non-deliverable FX forwards from late May.
NEX SEF will initially offer seven emerging market NDF
currencies, enabling clients to comply with Dodd-Frank
requirements when trading the instruments over EBS, an
electronic FX and fixed income platform that was retained by NEX
following the group’s £1.28bn sale of ICAP's voice and hybrid
broking operations to Tullett.
The initial set of NDF products comprises Brazilian Real,
onshore Chinese renminbi, Philippine peso, Indonesian rupiah,
Taiwan dollar, Indian rupee and Korean Won.
For NEX, the launch is viewed as a starting point for the
SEF, which ultimately has cross-asset ambitions. The group’s
expansion plans will initially focus on broadening the range of
NDF currencies, particularly in the LatAm region.
Further out, NEX SEF is considering the addition of other
derivatives products, such as interest rate swaps, which could
help to optimise trading processes for clients using many of the
risk management businesses that sit in the NEX Optimisation
For example, the Reset business enables banks and dealers to
offset basis risk in their trading portfolios by identifying
packages of derivatives transactions that could reduce or
eliminate underlying risk positions.
By expanding the range of products traded on NEX SEF, those
replacement trades could be executed in a more efficient manner,
linking trading directly to other Dodd-Frank requirements such
as central clearing and trade reporting.
"NEX SEF offers regulatory compliant and technically
efficient trading of NDFs,” said Seth Johnson, CEO of NEX
NEX customers will be able to trade in whatever environment
is most appropriate to them based on their regulatory
requirements or specific needs, Johnson said.
Approval of the platform takes the total number of
CFTC-authorised SEFs to 24 and puts NEX in direct competition
with ICAP US, which the firm sold to Tullett as part of the deal
that closed last December.
The ICAP SEF, one of two that were offloaded in the sale, is
the most active according to FIA data, trading US$124.8trn of
swaps notional since its 2014 launch, including US$5.6trn of FX
products. ICAP Global Derivatives Limited (IGDL), a
London-incorporated entity that covers G3 rates products, was
also sold to Tullett in the deal.
(Reporting by Helen Bartholomew)