NEW YORK - Javelin Capital Markets, a swaps trading platform, and the CME, a swaps clearing house, today announced that they had executed and cleared over $4.1 Billion of interest rates swap trades in an average time of under 2 seconds—a market first.
Working with several dealers and the buyside, Javelin executed 21 trades across multiple points of the swap curve using Javelin's anonymous execution platform late last week.
The average trade size was $195 Million in notional.
From the point of trade execution to the point the counterparties were notified of trade acceptance into clearing at the CME, the average round trip time was 1.932 seconds. CME accepted 90% of the trades in under 2 seconds, with the fastest being 1.32 seconds.
Recently proposed CFTC rules require that swap trades be accepted into clearing as quickly as "technologically practicable" where the standard is within "milliseconds or seconds or, at most, a few minutes."
"Dealers, buyside firms, clearing firms, and Javelin wanted to put a time stamp on what 'technologically practicable' meant. This now means in under 2 seconds - A new industry standard has now been set," said Javelin CEO, James Cawley.
CME's market leading clearing engine processed the swaps in real-time by utilizing preset credit limits that were allocated to the customers by their clearing members.
"CME is excited that our investment in a robust clearing infrastructure has helped make real-time clearing a reality for the IRS marketplace," said Kim Taylor, President of CME Clearing. "Our customers value the ability to immediately clear their trades post execution, as this allows them to focus on managing their portfolios instead of worrying about operational and credit risk."
Market participants executed the following swap notionals for the production trades: $747MM (2YR), $1,000MM (3YR), $985MM (5YR), 1,000MM (7YR) and $377MM (10YR).
"Counterparty and execution risk have now been dramatically reduced by combining central clearing with real time acceptance," said ING Financial Markets Rates Trading Head, Brad Small.
Jeff Gore, Head of OTC Clearing at Wells Fargo Securities said, "Wells Fargo welcomed the opportunity to directly address our evolving customer needs by offering a complete clearing solution using existing functionality at Javelin and the CME."
Bob Burke, Global Head of OTC Clearing at BofA Merrill Lynch, said that "we remain committed to reducing and eliminating the uncertainty of clearing derivative trades post execution. By engaging with both Javelin and CME, we were able to facilitate the clearing of trades executed through Javelin's electronic platform."
"We were pleased to exercise the Javelin platform in a demanding production context. We are confident that the roundtrip time of 1.32 seconds will compress further in the coming months as the market complies with real-time trade acceptance requirements," said Javelin CIO, Chris Augustin.
About the Firms:
Javelin Capital Markets
Formed in 2009, Javelin Capital Markets, LLC (www.thejavelin.com) is a derivatives execution platform for Interest Rate Swaps and Credit Default Swaps. Javelin offers both anonymous electronic and voice-hybrid methodologies for trade execution. Javelin works with several execution and agency swap partners to ensure optimal liquidity for its diverse customer base. Javelin will register as a SEF, or Swap Execution Facility, under the Dodd Frank Act as soon as the SEF rules are finalized.
CME Group is the world's leading and most diverse derivatives marketplace. CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.
CONTACT: Javelin Capital , +1-212-779-2300