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E-Trading: Single-dealer platforms confront identity crisis

Lobbying intensifies over OTFs; Isda, BBA voice concern

In the race to profit from the regulatory push for transparency in over-the-counter (OTC) derivatives, electronic trading appears to be in the box seat, offering speed, volume and visibility. However, as European regulators prepare rules for the new trading venues, there is rising concern among banks that their solutions might be disregarded.

In the past year, announcements of new single-dealer platforms (SDPs) include Lloyds’ Arena, RBS’s Marketplace and BNP Paribas’ Cortex, all vying to grab order flow from incumbent operators, such as Deutsche Bank’s Autobahn and Barclays’ BarX.

In a post-financial crisis environment, in which regulators are looking to drag OTC trading into the glare of regulated markets, banks have justifiably bet on a bright future for e-commerce.

In response to the G20 mandate that all standardized derivatives are traded on exchanges or electronic trading platforms, some 88% of swaps dealers regard technology build-outs as mission critical, according to research firm Tabb Group, with top-tier firms allocating a minimum of $100 million a year to relevant technology budgets.

Mifid catches out banks

Angela Knight, British Bankers’ Association

However, when the European Commission in October published its proposals for a review of the Markets in Financial Instruments Directive (Mifid), it appeared the banks had been caught wrong-footed.

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