Electronic Trading Newsflashes: MarketAxess Is Developing Electronic Platform for Credit Default Swaps Index Trading, and more

MarketAxess Is Developing Electronic Platform for Credit Default Swap Index Trading.

MarketAxess is working with eleven global dealers and the Depository Trust and Clearing Corporation (DTCC) to develop a client-to-dealer electronic trading platform for credit default swap indices (CDS), the company announced Wednesday.

The new CDS index trading will be offered in conjunction with cash trading on Market Axess'existing European and U.S. high-grade corporate and emerging markets bond platform.

The eleven global dealers include: ABN AMRO, Banc of America Securities, Bear Stearns, BNP Paribas, Credit Suisse First Boston, Dresdner Kleinwort Wasserstein, Goldman Sachs, JPMorgan, Merrill Lynch, The Royal Bank of Scotland and UBS.

The move falls on the heels of last week's announcement that MarketAxess' chief rival, Thomson TradeWeb, is teaming up with three major liquidity providers -- JPMorgan, Goldman Sachs and Morgan Stanley -- to launch global credit default swap (CDS) indices trading on its multidealer platform. MarketAxess expects to launch the CDS index trading system in the second half of 2005. TradeWeb says it anticipates a launch date in Europe and the U.S. in the second half of 2005, according to the release.

Both online platforms say they move seamlessly from trade execution to electronic processing. TradeWeb's users can tap into its straight-through processing (STP) network, TradeXpress, which the company says will contribute to reducing operational risk and processing costs for CDS participants.

In addition, MarketAxess is working with DTCC's wholly owned subsidiary, Deriv/SERV, a full-service provider of automated trade processing solutions for the over-the-counter (OTC) derivatives market. MarketAxess plans to integrate its front-end trading system with Deriv/SERV to facilitate an end-to-end electronic trading process that eliminates trade discrepancies and expedites the confirmation process.

On Wednesday, Thomson TradeWeb announced it will launch a dealer-to-customer electronic trading platform for U.S. dollar-denominated interest-rate swaps (IRS) during the third quarter of 2005 to provide institutional investors with multidealer auctions and fully automated post-trade processing, complete with ISDA (International Securities Dealers Association)-compliant confirmations. The initial members of TradeWeb IRS are JPMorgan, Merrill Lynch, Barclays, ABN AMRO, Dresdner Kleinwort Wasserstein, HSBC and Wachovia.

Reuters Connects With South Africa's Peresys for Cross-Border Equity Trading

Reuters signed an agreement with Peresys, a South African-based equities trading solutions provider, to link the two parties' electronic order routing networks to enable cross-border trading into and out of South Africa. Reuters has linked its Reuters Order Routing network (ROR) to the Peressys Network, which includes a hosted Financial Information Exchange (FIX) hub and spoke solution in Johannesburg, as well as points of presence in London and New York.

This enables bi-directional order routing and direct-market access for the South African trading community. The Peresys solution accommodates all widely used versions of the FIX protocol, spanning equities, fixed income and derivative instruments, according to the release.

As a result of the linkage to Peresys network, ROR users now have access to the South African market, while ROR brings Peresys users access to Reuters global network of around 200 brokers and 500 buy-side institutions.

According to Reuters, several new clients already have signed up, with the first South African client being African Harvest Fund Managers, an asset management house. ABN AMRO is one of the first major clients to join the service to give them direct market-access into South Africa.

Black-Box Trading Strains Market Data Infrastructure

Current technology necessary to support the exploding volumes and data flow resulting from black-box trading strategies is under stress, contends a new report from The Tabb Group, the Westborough, Mass.-based research and advisory firm

The report, "Data: The Life Blood of the New Electronic Marketplace," estimates that black-box trading strategies comprise less than 10 percent of current order flow, but are projected to approach 60 to 70 percent in the next few years. The report contends the related tick data count could increase as much as ten times.

The author, Robert Iati, partner at The Tabb Group, warns that systems have become "stressed," especially with regard to reference data.

One key point is that with algorithmic trading, models need to be changed, tested using historical data, implemented, and executed using real-time data -- all within minutes. This places tremendous stress on the reference data, as the speed with which this all must come together demands an optimal infrastructure.

Although The Tabb Group estimates that the global securities industry spends less than $4 billion on real-time market data, spending on reference data often falls victim to the "cost center syndrome." Today, budgets have been reduced when the need to enhance performance is great, says the report.

The report is available through Vhayu Technologies, https://www. vhayu.com/briefTABB.html.

Imagine Software Adds NYMEX and COMEX Real-Time Data to Derivatives.com

Imagine Software entered into agreements with the New York Mercantile Exchange to provide real-time energy and precious metals market data to users of Derivatives.com, a full-service hosted derivatives trading, portfolio and risk management system.

Customers of Derivatives.com will be able to capture NYMEX and COMEX (Commodity Exchange) transactions and analyze computation-intensive market risks across major asset classes, thereby eliminating the need for disparate system vendors, says the company.

The system also enables traders to calculate real-time market-to-market and P&L (profit and loss) analyses of portfolios containing NYMEX and COMEX-traded instruments.

"As a result, Derivatives.com now provides our customers with real-time pricing and risk management across all major asset types, instruments and markets," stated Steven Harrison, president of Imagine Software, in the release.