Banks to unite in liquidity venture

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Eleven leading international banks announced on Monday their intention to form a joint venture that will seek to improve liquidity and transparency to interest rate derivative markets.

The venture, which will be open to other banks, aims to pull together liquidity and information from all participating banks.

It will also offer price and other market data to financial intermediaries, distributors of information and trading platforms.

However, unlike earlier electronic initatives in the field launched by Bloomberg and Tradeweb, the venture will not itself be a platform for trading. It will instead aggregate information, from these and other sources.

In a statement to be published on Tuesday, the banks said the venture would encourage efficient growth of electronic interest rate derivative markets.

They said clients “will experience a range of benefits including: expanded trading options; great market transparency; enhanced availability of liquidity and information; and a greater range and quality of services”.

The founding banks are Bank of America, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, Royal Bank of Scotland and UBS.

A banker familiar with the venture, which is subject to regulatory approvals, said it initially expected to cover interest rate swaps in dollars and euros out to a 30-year maturity, with additional currencies likely to be added quite quickly.

Then products such as swaptions may be added, although there was no set timetable.

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