THETRADETECHFX DAILY news
Citadel goes live on LCH ’ s ForexClear
THE HEDGE FUND EXECUTED ITS FIRST TRADE ON THE FX CLEARING SERVICE WITH CITI ACTING AS THE CLEARING BROKER .
US-based hedge fund Citadel has begun clearing FX non-deliverable forwards ( NDFs ) on LCH ’ s FX clearing service Forex-
Clear . Citi is acting as a clearing broker for the firm on the ForexClear service which provides clearing across FX NDFs , options , spot , swaps and forward outrights .
“ ForexClear is an important first step in the evolution of FX markets toward central clearing , which will increase transparency , reduce counterparty risk and strengthen liquidity ,” said John Niccolai , chief operating officer for global fixed income , Citadel .
“ We are pleased to be using the service and look forward to engaging with LCH and other market participants to drive broad adoption of clearing across all currency pairs and FX products .”
NDF AND SPOT MATCHING TO BE LAUNCHED BY LSEG IN RESPONSE TO GROWING DEMAND IN ASIA AND THE INCREASING ELECTRONIFICATION OF FX TRADING GLOBALLY .
Major fixed income execution platforms Bloomberg , Tradeweb and MarketAxess have confirmed they will be collaborating on how to push through plans for a consolidated tape for fixed income in Europe .
The three entities have set out plans to apply to become the consolidated tape provider through the public procurement process organised by ESMA . As part of this process , Tradeweb , Bloomberg and MarketAxess are now preparing a competitive request for information process to begin reviewing independent third-party partners that have the potential to offer the consolidated tape service .
“ With our collective expertise in fixed income markets and in operating regulatory reporting entities – notably Approved Publication Arrangements ( APAs ) for Mifir reporting – we
The addition follows an expansion of Forex- Clear ’ s presence in Asia with the addition of its first Taiwan client CTBC Bank in September .
According to LCH , client clearing has continued to see growth throughout this year with a record quarterly volume of $ 90 billion on notional in the first quarter , up by almost half on the same period last year .
“ This builds on the strong growth at the service , which has historically been driven by a focus on margin efficiencies that will only increase with Phase 6 of the uncleared margin rules in September 2022 ,” said James Pearson , head of ForexClear at LCH .
“ There has now been a realisation that FX clearing can also bring significant capital savings , providing further benefits and helping the industry to respond to SA-CCR .”
LSEG launches in Singapore with NDF Matching venue
are in a unique position to deliver a reliable , efficient and cost-effective consolidated tape service that meets the needs of market participants and the objectives of the regulators ,” the three said in their statement .
“ The consolidated tape service is expected to be provided – subject to the relevant regulatory approvals – via a joint-venture company established and operated independently from our respective businesses . If successful in winning the mandate , the company would be authorised and supervised by ESMA to provide transparency in fixed income markets pursuant to MiFID II .”
CME Group sees FX EFRP ’ s and blocks volumes jump on the back of UMR catalyst
CME Group ’ s listed FX products have seen trading activity in blocks and exchange for related positions ( EFRPs ) up more than 280 % for the year-to-date compared to the same period last year .
The activity has been a significant contributor to the total average daily volume ( ADV ) of $ 110.9 billion during March , which also saw FX options volumes in contract terms increasing to 21.7 % in 2022 compared to March 2021 .
Speaking to The TRADE about the reasons behind the growth Paul Houston , CME Group ’ s global head of FX , explained that the Uncleared Margin Rules ( UMR ) have been a major catalyst .
“ We see this method of execution – blocks and EFPs – as a way to minimise the impact of UMR for some participants . Listed FX Futures blocks or EFPs are an adequate proxy for OTC FX Forwards or FX swaps for many counterparties , and they do not count towards the $ 8 billion threshold ( associated with Phase 6 of the UMR ).
“ Meanwhile , other participants who are subject to the UMR , or already exceed the threshold , can trade products such as listed FX options which can be more capital efficient at the CME – by virtue of facing a CCP – than they are on the OTC basis .”
Alongside UMR , the standardised approach for counterparty credit risk ( SA-CCR ), which reforms how banks calculate their capital requirements for counterparty credit risk , is also a key contributor to the growth of usage of blocks and EFRPs .
CME Group said that blocks and EFRPs allow its clients to lean on OTC liquidity and trade on a disclosed , relationship basis against chosen liquidity providers to access clearing for FX forwards , NDFs and FX options .
Benefits around margin , capital and freeing up of bilateral credit lines are also attractive to liquidity providers .
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