Tradeweb Markets, a leading global provider of fixed income, derivatives and ETF marketplaces, announced that the first cleared inflation swap transaction using in-competition request-for-quote (RFQ) protocol was executed on its [European] Interest Rate Swap (IRS) platform. The trade was executed by Legal & General Investment Management (LGIM) and cleared by LCH. Tradeweb currently supports cleared zero coupon GBP inflation swaps up to 50 years, and EUR and French inflation swaps up to 30 years, with 8 dealers providing liquidity in inflation swap instruments.
Inflation swap execution has traditionally been conducted by phone or chat, a time-consuming process that carries the inherent risk of the market moving between quotes from different dealers, before the trade is completed. Tradeweb now aggregates inflation swaps liquidity on one single screen, enabling traders to request prices from multiple dealers simultaneously, and complete their transactions more quickly and efficiently, while leveraging full straight through processing (STP) and innovative solutions, such as compression lists.
Clients also benefit from lower margin thanks to Tradeweb’s connectivity to all major clearing houses, allowing market participants to clear their trades with the central counterparty (CCP) of their choice. This removes the need to exchange margin on their bilateral over-the-counter (OTC) derivatives contracts as required by EMIR rules.
By trading on a regulated venue such as Tradeweb, clients are also able to achieve the operational efficiencies of electronic execution even for those instruments that are not yet in scope for the derivatives trading obligation under MiFID II. Furthermore, Tradeweb offers buy-side firms a wide range of solutions to satisfy both on- and off-venue transparency reporting obligations, set to take effect on 3rd January 2018.
“Our market-leading, global offering in interest rate derivatives is now even more comprehensive with the addition of inflation swaps,” said Enrico Bruni, head of Europe and Asia business at Tradeweb. “Buy-side firms look to Tradeweb to conduct their business in all major currency interest rate swaps, benefitting from both flexible and compliant solutions. By executing on our platform, clients can also rest assured that their pre- and post-trade transparency obligations under MiFID II are taken care of, thus avoiding unnecessary costs and implementation burdens.”
“This trade is a significant milestone for the inflation swaps market,” said Philip Hunter, head of rate trading at LGIM. “The STP benefits of electronic execution coupled with the improved price discovery achieved via the RFQ model satisfy the industry’s increasing need to streamline trading desk procedures, while simultaneously enabling buy-side firms to demonstrate best execution.” Mr. Hunter added, “LGIM has spearheaded the move towards cleared trading of OTC derivatives for some time to benefit our clients as regulation drives lower capital intensive trading. As the UK’s leading LDI manager, it was a natural decision for us to partner with Tradeweb, the UK’s leading electronic trading venue, to trade cleared RPI.”
Tradeweb introduced its IRS platform in 2005 to provide swaps traders with flexible, efficient and compliant solutions that help them execute their trading strategies, while navigating the evolving regulatory environment. The platform has seen more than $40 trillion in SEF and non-SEF IRS notional volume executed across more than half a million trades with liquidity provided by 35 market participants, and is a leading market in USD, EUR and GBP IRS instruments. IRS activity on Tradeweb’s swap execution facility (SEF) for institutional trading has surpassed $25 trillion since its launch in October 2013. In Europe, Tradeweb has been regulated by the UK’s FCA since 2000, and has operated a multilateral trading facility (MTF) since 2007.
