A new market-making firm is already
looking to expand its product coverage into additional asset
classes beyond its initial forward foreign exchange offering,
according to its founder, a former director at CME.
Twos Tens will launch on July 1, offering
a forward foreign exchange curve, after founder Malcolm Baker
said he recognised a gap in the market for a centrally cleared,
credit agnostic, transparent, anonymous and liquid FX
Founded by Baker, former CME Group FX and
interest rate director, Twos Tens plans to be a market-making
firm across over-the-counter and listed interest rates and
foreign exchange derivatives.
As of July 1, using CME
Europe’s implied pricing model, Twos Tens will be
able to replicate what banks do on their single dealer
platforms to their clients via Globex, Baker told FOW.
"There is a huge appetite for a forward
foreign exchange curve – an exchange could do this but
has not due to cost and regulatory changes. This is the
opportunity that Twos Tens has identified. It is a new way of
trading FX; this is where we are beginning," Baker told
Beyond the initial July 1 launch
– which will offer access to CME, Tokyo Financial
Exchange, Australian Securities Exchange and the
Intercontinental Exchange – the second phase will
include further asset classes and derivative products,
including FX options, interest rate swaps and deliverable swap
"We are particularly interested in being
able to participate in the interest rate swap space. The doors
may be opening to these products where traditionally a space
companies like ours would not be able to play in. We are also
interested in building out short term swaps like OIS, Eonias
and Sonias," he added.
Twos Tens believes the forward FX markets
and FX options markets are primed for a further transition to
become more exchange traded and cleared, and want to be ready
for this opportunity.
"Right now a lack of mandate from the US
and EU is not kick-starting this transition. However whether
you are a major international bank, asset manager, hedge fund
or prop house, the regulatory landscape - and most importantly
the cost of being competitive in the FX markets - is increasing
at alarming rates," said Baker.
Twos Tens has seen interest ahead of the
launch from various areas of the market.
"There has been some small interest from
US names so far; European and Asia-based players are far more
Baker said that the target is for Twos
Tens to provide 24 hour coverage of global trading markets,
growing to around 10 traders and risk managers over the coming
As first reported by FOW earlier this
month, Baker recently left his Singapore-based role as
senior director for foreign exchange and interest rate products
at CME Group after joining the derivatives marketplace in
October 2012, tasked with building out the then in-development,
CME Europe exchange.