PWC, Derivatives: SEFs – Opening bell sounds, Jun 2013, here. .pdf file describing implemention of rules for requiring mandatory cleared swaps to trade on SEFs or designated contract markets.
The buy-side should evaluate arrangements to trade on exchange, as well as to clear.
Tradeweb, Interest Rate Swaps, here. One of the ways this could screwup (or be delayed) is the format of the execution could settle in a way to prevent new market making participation in volume.
Protocols we offer
Tradeweb offers a broad range of trading protocols, calibrated for each marketplace. The evolution of these electronic markets reflects the needs of market participants. In general, the more liquid a marketplace, the more likely it is that it operates in a real-time environment. Less liquid marketplaces tend to rely on positions or orders being posted, or negotiation taking place on trading terms. Our market specialists and a large team of dedicated financial engineers work closely with both buy- and sell-side participants as we develop new electronic marketplaces. The trading protocols we use in our various institutional client-to-dealer markets include:
- Request-for-quote. The multi-dealer RFQ is the grandfather of electronic trading. Pioneered by Tradeweb in 1998, it has been deployed across all our global interest rate markets, including government bonds, mortgages and U.S. agencies. The RFQ is a fully-disclosed trading protocol; both buy-side and sell-side names are known prior to execution. It enables an institutional client to hold a real-time auction with multiple dealers and select the best price.
- Request-for-market. The RFM is a more recent protocol that provides an institutional client with the ability to request a two-sided market from a particular dealer. This mirrors the approach of a client calling a specific trader for a market. The RFM has been used to good effect in some of our newer markets, including credit default swap indices, where it is integrated with the RFQ and click-to-trade protocols on a single trading screen.
- Click-to-trade. The click-to-trade functionality enables a buy-side client to view a set of prices in real-time and click on the price and the dealer with whom they wish to execute. The trader then confirms the trade and the deal is done. This trading style is especially popular with clients that are looking to view a range of executable, real-time prices across dealers.
- Inventory-based. This protocol is most commonly deployed in less liquid markets, such as credit and some money markets. It allows the sell-side to provide a range of bids and offers for particular securities that the client can then look to execute on. These prices are not updated in real-time but provide a good indication of where the client is likely to complete the trade.
- List trading. Used by clients with multiple transactions to complete, the list trade is a highly efficient workflow tool. By executing many trades at once, clients can request prices from multiple dealers to extract the best price, and complete the hedging of the trades at one time, saving on significant manual effort compared to executing on the telephone. List trading is especially popular in the credit markets.