Swapstream, the electronic trading platform for interest rate swaps, is poised to launch a new system designed to target hedge fund customers.
The UK-based company, which was bought by the Chicago Mercantile Exchange last year, currently has a platform for dealers only. It will add dollar and sterling swaps to its existing euro and Swiss franc offerings because hedge funds prefer a single platform on which they can execute broad trading strategies.
The move highlights the growing influence of hedge fund traders in markets for all kinds of derivatives.
It is also a sign that exchanges, such as CME, are making efforts to bring their trade processing and technological resources to bear on the huge global market for privately traded, or over-the-counter, derivatives.
“Hedge funds are a very clear target for us,” said Stephane Rio, chief executive of Swapstream and a former head of interest rate swap trading at Commerzbank.
Until now the company’s platform has addressed mainly euro-denominated swaps, which account for about 40 per cent of the global market, according to Mr Rio.
But he said expanding the product range was important to attract hedge funds and other professional traders who, unlike dealers, prefer using the same system for trading in different parts of the market.
Mr Rio added that the new system, known as sPro, was tailored for complex trading methods and would allow for the fully automated execution of trades.
The new platform is expected to be operational next month. It will work alongside Swapstream’s existing inter-dealer system.