October 18, 2017 / 1:20 PM / 5 months ago

Swaptions begin electronic shift

LONDON, Oct 18 (IFR) - Interest rate options have started a voluntary shift onto electronic platforms as Garda Capital Partners completed the first fully electronic swaption trade on Tradeweb’s swap execution facility.

The alternative asset manager, which aims to provide uncorrelated fixed income investment strategies, completed the electronic swaptions trade at the end of September.

Eight swap dealers are now live on the platform with another four in the process of joining.

Sean Hu, portfolio manager at Garda Capital Partners, said Tradeweb’s platform delivered valuable two-way price transparency and efficient execution for swaptions trades.

“Electronic trading has increased our operational efficiency with vanilla rates derivatives, and it’s a logical step to benefit from the same advantages with our swaptions business.”

Swaptions allow investors to trade interest rate volatility. They can be traded on the venue using the request-for-quote protocol that puts multiple liquidity providers in competition, or traders can access two-way markets with request-for-market functionality.

“Our electronic workflow for swaptions offers a significant step forward with more efficient and transparent price discovery by utilising TW SEF’s leading technology and network,” said Billy Hult, president of Tradeweb. “Clients who utilise Tradeweb will benefit from a streamlined experience that allows them to access more competitive pricing quickly and easily.”

The latest addition to Tradeweb’s SEF comes as part of a rapid expansion of the interest rate derivatives platform. Last month, Legal & General Investment Management traded the first inflation swaps on the regulated venue.

Swaptions are not yet mandated by the Commodity Futures Trading Commission to trade on regulated venues, but a voluntary shift towards electronic trading is being driven by optimised execution that includes automated audit trail and integration with risk management and other post-trade systems.

Tradeweb is part-owned by Thomson Reuters, IFR’s parent company. (Reporting by Helen Bartholomew)

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