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Electronic dealing's last frontier

When e-enthusiasm cooled, swap trading platforms hadn't got far. Now, though, old ideas are being revived and new ones mooted. ? Tom Marshall reports

ELECTRONIC TRADING PLATFORMS have quickly gained market share in bonds, forex, equities and futures. Interest rate derivative trading has proved much harder to move online. Banks and interdealer brokers have held out more successfully in interest rate derivatives than almost any other commoditized financial market against the transparency and smaller margins that would be a likely result of going electronic.

Amid the financial services industry's initial enthusiasm for all things "e", several electronic platforms were launched to handle interdealer swaps trading. They failed, however, to attract liquidity. In the dealer-to-client space, electronic trading has been even less successful. Platforms that were set up in the final stages of the dot com boom to let end users trade swaps directly didn't last long. Examples included CFOWeb, Swaps.com and TreasuryConnect.

Recently, though, old, half-forgotten initiatives are coming once more to the market's attention, and new platforms are being born. In particular, several groups are once again pushing the case for electronic interdealer trading.

Swapstream, a new initiative to create an electronic interest rate derivatives exchange, is due to launch this month. It can handle bilateral trades between banks and brokered deals. Initially, trading will be limited to euros and Swiss francs - reflecting the system's origin as an offshoot of Swiss interdealer broker Gottex - but there are plans to expand into other currencies as soon as possible.

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