Futures Exchange Makes Clearing Connection

Terry Flanagan

TeraExchange, an electronic swap execution platform (SEF), has announced that its operations are fully connected to CME Clearing and are ready for trading of cleared interest rate and credit swaps.

The relationship marks a critical step toward TeraExchange’s goal of creating the most technologically advanced independent swaps trading venue, offering customers the utmost in access and transparency through an anonymous, all-to-all central-limit order book.

“Swaps traders are looking for deep liquidity, a seamless onboarding process and fast, reliable execution—all at an effective price point for participants,” said Christian Martin, CEO of TeraExchange. “As we work to complete the process of becoming a SEF, TeraExchange is in a prime position to provide swaps traders with the solution they absolutely need.”

In recent weeks, the Commodity Futures Trading Commission (CFTC) published final rules regarding swap execution facilities, swaps made available for trading (MAT) and block-sized transactions.

Finalization of these rules starts the clock on the mandatory trading of the majority of derivatives on licensed venues like SEFs or designated contract markets (DCMs).

By September 2013, proactive market participants will be connected to trading platforms and familiar with new market structures so that they are ready in the event that the most liquid swaps become mandatory to trade on SEFs or DCMs.

To meet the coming demand for fully compliant, highly liquid venues to trade cleared swaps, TeraExchange has built the an interest rate swap (IRS) and credit derivatives service, with a pre-loaded list of more than 1,200 instruments.

TeraExchange provides a frictionless onboarding process, flexible connectivity options and a complementary front-end trading solution to active market participants as an efficient, low-cost way to get up and running with SEF-based cleared trading.

“Our relationship with CME Clearing underscores TeraExchange’s commitment to bringing our customers efficient swaps execution trading with access to tools to enhance the trading experience,” said Martin.

Through TeraExchange’s cross-asset Execution Management System (EMS), TeraDirect and CME Group’s Portfolio Margining, customers can now trade Interest Rate Swaps, Eurodollar and Treasury Futures simultaneously while minimizing risk and reducing margins.

“We are offering access to trade execution platforms such as TeraExchange as part of our efforts to maximize capital efficiencies for all of our clients and clearing members,” said Kim Taylor, president of CME Clearing. “By providing significant portfolio margining services, we can help more end users take advantage of central clearing, while still passing on the benefits of natural risk offsets and ensuring sound risk management.”

TeraExchange will make available for trading all OTC derivative instruments that have been approved for clearing by connected clearing houses, regardless of underlying reference or tenor.

Initially, those instruments will include interest rate swaps, credit default swaps, cash-settled and non-deliverable FX forwards, energy swaps and agricultural swaps.

TeraExchange has established live connectivity to the CME and will soon be linked to LCH and ICE. SGX and Eurex connections are slated for Q4 2013.

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