The new rules in the US Dodd-Frank Act require privately-negotiated derivatives trades to be transacted on electronic platforms and sent to clearing houses. Up to now, trading platforms for over-the-counter derivatives, known as swap execution facilities(SEF), have largely focused on credit and interest-rate derivatives, e.g. MarketAxess, TradeWeb, etc. Not surprisingly as, according to BIS, interest-rate and credit derivatives comprised over $514 trillion of the $632 trillion derivatives market at the end of last year, while FX derivatives made up $67.35 trillion.

Now the platforms are turning their attention to FX derivatives. Bloomberg received approval for its FX SEF facility last week, and State Street has signalled that they intend to add FX to their SEF platform. Late last week Integral Development, the California-based trading solution provider, filed an application with the US derivatives regulator to launch such an FX SEF service. So far, Integral is the only platform that will have a sole focus on FX derivatives.

The rules governing SEFs came into effect on 5 August, when the platforms were allowed to start trading and registered platforms were also able to notify The Commodity Futures Trading Commission about which products they want to trade. Mandatory trading of swaps on SEFs will start from October 2.

 

Integral Development's service
Its platform will offer request-for-quote functionality, which allows investors to request prices for the specific products they want to trade before executing. The platform will initially offer trading in non-deliverable forwards, cash-settled contracts that typically offer exposure to emerging-market currencies.

 

Pending approval, Integral will be offering a regulatory-compliant FX trading platform. This will include all necessary connections to liquidity providers, clearing houses, SDRs, etc. Integral's cloud services require no up-front investments. Customers benefit from the pay-as-you-go business model.

 

Integral's SEF will support request for quote (RFQ) and an integrated order book. Customers will enjoy a seamless transition between regulated and non-regulated instruments. For their liquidity providers, Integral offers easy access to a large institutional market while taking care of all the integration issues. For buy-side firms, Integral provides on-boarding and workflow solutions that are tailored to their interests while easing the transition to regulated markets.