As interdealer brokers continued to push to extend their hybrid capabilities between voice and electronic platforms over the last year, sellsiders singled out ICAP’s efficiency in electronic trading and its role as a liquidity provider globally across all asset classes during heightened periods of volatility. That helped the firm land the 2012 Global Interdealer Broker of the Year award from the editors of Derivatives Week/Derivatives Intelligence.
Despite lower derivative trading volumes in the market during the last year as a result of increased market volatility, ICAP has continued to generate sizeable flow on its BrokerTec platform. In June, the firm reported daily volumes in fixed-income products on the BrokerTec platform for May of USD582.3 billion compared to USD726.3 billion a year earlier, with average daily U.S. Treasury volumes in May 2012 of USD 113.5 billion.
BrokerTec, which was singled out by sellside officials for its reliability and functionality, is ICAP’s fixed-income platform across products including U.S. Treasuries, U.S. credit default swaps and European government bonds. In April, BrokerTec was upgraded with a new trading system for U.S. based products. The new system uses a customized version of the NASDAQ OMX Genium INET platform and has enabled BrokerTec to increase order volume tenfold and decrease order input latency. Following the launch in the U.S., BrokerTec rolled out a new trading system for European fixed-income products.
“It was important for the businesses in both our U.S. and European markets to really deliver a significantly enhanced trading environment...improving through-put, roundtrip times and overall capacity on the system,” said John Edwards, director of fixed income of BrokerTec.
The upgrade allowed BrokerTec to improve its market data distribution, offer co-location in London via its i-Cross application and increase the performance for application programming interface traders. “If you are a trader using tools, say you are using a spreader either one that you have built in house or one that you have bought from a third party provider, you will see that your response is far more accurate, the market data are much faster so you know exactly where the market is when you are executing a strategy,” said Arthur D’Arcy, cio of BrokerTec. “When you come to execute on that price you will get a near instantaneous response.”
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Over the last year, ICAP has also continued to develop its Post Trade Risk Services, launching new products and expanding its senior management. Hires have included Ken Nishimura as head of TriOptima Japan and Michael Verkuijl as global head of sales of Traiana. One post trade service highlighted by sellside officials was ReMATCH, the CDS portfolio rebalancing and market risk mitigation platform, which in September launched a service to reduce its clients’ exposure to quanto CDS risk. The service enables banks to reduce their positions by constructing mid-level curves and generating risk-reducing trades from a portfolio of data from participating banks of ReMATCH. “A number of our clients were concerned about of the lack of liquidity in the quanto market, [asking] ‘Can your service help?’ The service therefore was tailored by us but it was in response to a need,” said Phil Perrott, ceo of ReMATCH. “Our sessions provide a unique moment in time for clients to mitigate their quanto risks across the curve.”
ICAP’s TriOptima service has also developed its offering over the last year with the launch of triBalance. The new post trade facility reduces risk by rebalancing counterparty credit exposure for cleared and uncleared OTC derivatives. This risk emerges when the credit exposure of cross-asset class cleared trades can no longer be netted against cross-asset class bilateral trades that cannot be cleared.
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“We foresaw some problems that would arise with the clearing requirements and with the proliferation of multiple clearing houses, since operational interoperability between multiple clearinghouses would be difficult,” said Mireille Dyrberg, coo of TriOptima. “We saw that there would be problems in the future where you might not be able to control where the exposure develops...so some clients might oblige their banks to clear in a domestic clearinghouse in one jurisdiction, whereas they the banks might have the bulk of the their exposure in another clearinghouse and be unable to offset those exposures.”