New swap-based futures offer firms increased flexibility and reduced risk, says Dan Barnes.
The launch of swap-based future products by CME and
Intercontinental Exchange (ICE) in Q4 2012 has been welcomed
within the buy-side community, although with some hesitancy as
to their breadth of appeal....
"They will take out an element of the counterparty risk so
from that point of view they are pretty useful," said Tony
Whalley, head of trading and derivatives at Scottish Widows
Investment Partnership, an asset manager with £141.76
billion assets under management (AUM). "Would this persuade
someone to use them, if they weren't using swaps before? I'm
not convinced. I think the people who use them will have been
using swaps already, and will find the platform is one where
they get the counterparty risk effectively mitigated to a large
extent. From that point of view it's good, I'm all in
"On paper they're attractive; this is potentially providing
a more liquid and perhaps a lower cost way of getting exposure.
We're continually watching how this product develops in
comparison with the existing swaps and futures options in terms
of liquidity, pricing and what we perceive to be suitability to
our client accounts," says James Wallin, senior vice president
of fixed income at buy-side firm Alliance Bernstein, which has
£271 billion AUM.
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