2 Min Read
LONDON, Nov 5 (Reuters) - 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.