Trading in derivatives is entering a new phase as regulators and industry participants alike push for greater control and transparency.

This is manifesting itself in cutting-edge technology that is being rolled out by sell-side institutions for creating integrated trade processing platforms for FX and other asset classes.

“Most recently, the ability to drive cost-efficient trading mechanisms into the transaction process is important,” Luke Waddington, deputy global head of electronic markets at BNP Paribas, told Markets Media.

“From a commercial aspect, and specifically to FX derivatives, the ability is to create a more intelligent price, keep this consistent and deliver this quickly to a client across the range of derivatives products.”

Cortex FX, BNP Paribas’s recently launched multi-product FX trading platform, acts as a single point of access to electronic FX products, tools and services.

It enables BNP Paribas’s corporate and financial institution clients to develop FX strategies, access market-leading research and execute, monitor and evaluate their foreign exchange trades.

“BNP Paribas has a deep history in derivatives and can surface this intelligent pricing to clients much quicker and efficiently through Cortex,” said Waddington.

The theme of providing transparency into pricing has been driven home by regulatory reforms relating to over-the-counter derivatives, such as Dodd-Frank and MiFID/MiFIR/EMIR.

“Globally, securities regulators are examining proposals to improve transparency and strengthen oversight in capital markets,” said Sean Hennigar, capital markets practice lead at SWI, a software consulting company. “This is particularly true in the OTC derivatives markets, where regulators are seeking to mandate electronic trading, central clearing and trade reporting.”

The work flows sitting behind Cortex have all been developed to be able to adapt and be quickly employed to any changing scenarios that the regulations will bring.

“For example, our very strong FX options offering can also be used in supplying pricing, risk management and all the functionality of Cortex over a multi-dealer platform venue or SEF,” said Waddington.

Cortex offers a choice of dedicated STP (straight-through processing) across all of the supported products.

“We partner with leading vendors and have proprietary FIX API technology to ensure if a client trades on Cortex, we can automatically feed trades and trade data into their systems,” said Waddington. “We also have some advance blotter functionality where clients can permission views to other teams who need to monitor trade activity. Within these STP solutions Cortex is connected to all of the usual systems which enable it to ‘give up’ trades to a clearer [prime broker].”

Cortex augments the bank’s existing electronic trading offerings, such as OTC eTrader (structured products, interest rates and FX) and Secondary eTrader (secondary market trading across multiple asset classes).

BNP Paribas is continually using shared technologies to underpin these products, said Waddington.

One such example is the development of a separate network outside of the bank’s internal infrastructure to maintain the resilience of its electronic trading systems.

“BNP Paribas has created what is called a ‘bubble’, independent of the bank’s main architecture, with fiber optics and high-speed internet connections with close links to the main exchanges,” said Waddington. “This network technology employed by Cortex is used across all electronic products.”