Software tools can help firms track order flow rerouted by US derivatives rules, but the shifting patterns will make investment a risky proposition for the moment, writes Dan Barnes.
Dodd-Frank is unpicking established trading patterns and
threading together new webs of liquidity. Pulling together the
different strands is an opportunity for cunning
Firstly, the fragmentation of trading across swap execution
facilities, the electronic platforms that began operating on
October 2, will need to be aggregated into a single view for
traders to effectively route orders.
Secondly, European firms trying to avoid US regulation are
moving business into their home markets, creating smaller ponds
of regional liquidity in which local banks with the right tools
can fight for a greater market share than was possible in the
Firms will only be able to cut in on the new capital routes
if they can work out when changes will happen and for how long.
For example, on the first day of trading on Sefs, only 12% of
buy-side firms used them for live trading, according to
research from analyst firm Tabb Group.
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