Tradeweb Markets has announced that TW SEF LLC has submitted a self-certification determination for interest rate and credit default swaps to be made available to trade (MAT) to the Commodity Futures Trading Commission (CFTC). The list of swaps includes a range of tenors in interest rate derivatives for U.S. dollars, euros and British pounds and certain CDS indices (CDX and iTraxx).
“As an operator of electronic derivatives markets for more than eight years, Tradeweb is uniquely positioned to help determine the right scope and scale of derivatives instruments to be made available to trade on SEFs,” said Lee Olesky, CEO of Tradeweb Markets. “The derivatives we have submitted to be made available to trade constitute approximately 80 percent of overall standardized swaps volumes based on available market data, and we are confident the industry will make a smooth transition onto SEFs as these swaps begin trading more electronically.”
Tradeweb has done over 160,000 transactions totaling more than $9 trillion in interest rate swaps, and over 10,000 transactions totaling over $1 trillion in credit default swaps on the CDX and iTraxx indices since 2005. Virtually all of the IRS and CDS electronic trading activity on its platforms have been in standardized “on-the-run” instruments for which there are ready and willing buyers and sellers, reflecting their suitability for electronic, multiple-to-multiple platform execution.
“Due to the breadth of institutions participating on our platforms and the metrics that we can capture from the activity on our platforms, we have been able to develop a very clear picture of the electronic execution of swaps, which allows us to quantify the treading experience of both liquidity takers and liquidity providers,” according to Tradeweb’s MAT filing with the CFTC.
Tradeweb analyzed years of historical data from the trading activity of more than 350 market participants to develop the right balance of swaps for the MAT submission. The proposed list of swaps effectively addresses six factors identified by the CFTC, including a willing number of diverse market participants, frequent transactions, significant trading volume, relatively consistent bid/ask spreads, and an average number of bids and offers.
Under the Dodd-Frank Act, any swap that is subject to mandatory clearing must be traded on a SEF or designated contract market (DCM), unless no such platform “makes the swap available to trade.” Thus, a category of swap that must be cleared is excluded from the trade execution requirements only if no SEF or DCM makes it available to trade.
A determination that a swap is available to trade therefore has significant implications because it subjects that swap to the mandatory trade execution requirement.
Since launching in 2005, more than $14 trillion in notional volume and over 160,000 trades have been executed on the Tradeweb Markets institutional and inter-dealer derivatives platforms. More than 20 liquidity providers and over 350 institutional customers have traded across Tradeweb derivatives platforms for interest rate and credit default swap indices, accessing liquidity through request-for-quote (RFQ), request-for-market (RFM), click-to-trade (streaming prices) and order book trading protocols.
On October 2, 2013, Tradeweb launched TW SEF LLC with a disclosed, request-based market and order book, and an anonymous central limit order book on DW SEF LLC.