LONDON Nov 5 Brokerage Newedge, a joint venture
between Societe Generale and Credit Agricole's
Corporate and Investment Bank, said on Tuesday it
plans to offer execution and clearing services for start-up
exchange group GMEX.
London-based GMEX (Global Markets Exchange Group
International) aims to launch low-cost electronic exchanges,
taking advantage of regulatory moves to ensure derivatives
traditionally bought and sold through dealers at investment
banks are traded on exchanges.
Exchanges have found it hard in the past to break into the
lucrative market in over-the-counter (OTC) derivatives, but in
2009 G20 countries agreed they should be traded on exchanges,
centrally cleared and recorded, because they had added greatly
to market volatility at the height of the 2007-2009 crisis.
Newedge's market research showed "significant levels of
interest in the GMEX exchange platform, not least because it is
a timely and relevant response to help meet the G20 (20 leading
economies)-led market reforms," its Global Head of Prime
Clearing Services Chris Topple said.
GMEX is waiting for approval from the British regulator to
become a multilateral trading facility, he said.
Existing exchanges including the London Stock Exchange
, ICE, Eurex, NYSE Euronext
and Nasdaq are expanding into derivatives, such as
interest-rate swaps, where banks have dominated.
Newedge will first offer execution and clearing services for
GMEX's "Constant Maturity Future", a product designed to shake
up the $600 trillion interest-rate swap market.
The contract allows investors to hedge interest rate
exposure across the entire maturity curve without a constant
need to re-adjust the hedge or being locked into the hedge for
the life of a swap, according to GMEX founder Hirander Misra.
Topple said it will enable institutions to reduce balance
sheet costs and achieve margining efficiencies.
Deutsche Boerse said last month it had made a
single digit million pound investment in GMEX.