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Inter-dealers build fierce competition

Electronic trading

Inter-dealer brokers are competing fiercely for market share in electronic credit default swap trading before an inevitable rationalization in the New Year.

Following Creditex's lead, GFI, Prebon Global Credit, and ICAP have all launched electronic CDS trading platforms this year. If others follow suit, half a dozen platforms could be live by early 2005.

“Screens really do encourage people to trade, especially index trades,” says Simon Mayes, a CDS trader at Lehman Brothers in London. “Volumes traded now are significantly larger than nine months ago when we had just voice broking. They encourage trades because you are one click away from pulling a price off the screen. That's an important development. When people know that they haven't always got that last chance to trade a price, it does push them to trade and to pay that extra basis point.”

Perfect timing

In February, Creditex launched its electronic credit derivatives trading platform Creditex RealTime. It combines order entry and management, automatic trade execution, real-time market data, and trade confirmation (although some dealers still re-enter their trades manually). According to research by Boston-based Celent Communications, by July Creditex had captured about 25% of the index trading market.

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