GMEX Adds Post-Trade Services
GMEX Group has bought a stake in a post-trade software firm ahead of the April launch of the London-based exchange which aims to introduce innovative derivative contracts.
GMEX has taken a strategic stake in UK-based Avenir Technology Limited, which has developed open source post-trade processing systems across asset classes for exchanges, clearing houses, central securities depositories and share registrars.
Hirander Misra, chief executive of GMEX Group, told Markets Media: “Avenir was an excellent fit as they have an agile process and build technology from the ground up. Development times are much quicker than legacy systems, Avenir is multi-asset and runs on 10% to 15% of the hardware footprint so we are really excited about it.”
Stuart Turner, director and co-founder of Avenir, told Markets Media that the idea for the company came when he was on a trip from South Africa to London and he visited African stock exchanges.
“Legacy systems have involved such a huge investment that they cannot be sold cheaply in Africa,” added Turner. “We do not need massive servers, our system is built on open source components and is built to be efficient. It supports multiple asset classes and languages out of the box.”
As Avenir has been built using open source components, it can be delivered easily to computers, tablets and smartphones.
Turner said: “We provide a dashboard-based system to users which gives them the information they need to their job – it is delivered via Web technologies and it is possible to manage your clearing house or settlement organization just using an iPad or iPhone.”
He continues to see opportunities in Africa, and especially in commodities.
“There are a lot of African equities exchanges but we are also interested in helping set up electronic commodities markets with support for electronic warehouse receipts,” added Turner.
Last year ALTX Africa Group, which aims to set up a pan-African trading network, received its first trading license to start an exchange in Uganda and it will be using GMEX’s front office trading and surveillance technology. ALTX has a five-year plan to launch a number of exchanges across Africa facilitated by a pan-African clearing house.
Misra said: “We have already signed another deal in Africa and we have a strong pipeline. There are two broad opportunities across the continent – soft commodities and equity markets, where volumes are not huge but exchanges are interested in derivatives and index products and need a clearing house.”
Turner added that in Africa there is no CCP north of South Africa.
ALTX Uganda’s primary trading platform will be hosted alongside GMEX in the UK allowing foreign trading firms to connect easily, while East African brokers can link up through the trading hub in Uganda.
GMEX is currently testing with users ahead of its planned launch to trade constant maturity futures for interest rate swaps in April. Orders will be matched on the GMEX exchange platform, with trade confirmation and clearing occurring at Eurex, a unit of Deutsche Börse. The German exchange owns a minority stake in GMEX.
Constant maturity futures contracts do not have quarterly expiry dates and so can provide better hedging unlike the futures on swaps which have been launched by rival exchanges.
Misra added: “GMEX should have some more client announcements this quarter including some big buyside names who will be with us from the outset.
This month electronic market maker Virtu Financial announced it become a liquidity provider on the GMEX Exchange from the launch. Douglas Cifu, chief executive of Virtu Financial, said in a statement: “The GMEX CMF contract offers an innovative lower margin exchange traded alternative to OTC interest rate swaps for hedging”.
Fund managers will also benefit from being able to post less margin on GMEX contracts. GMEX’s margin on products is based on two day value-at-risk rather than up to five days in the case of existing standard swaps and swap futures.
Phase 5 of the uncleared margin rules (UMR) took effect from September 2021.
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Phase 5 of the uncleared margin rules came into effect on 1 September.
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