11.13.2018

LiquidityEdge to Expand Off-the-Run Footprint

11.13.2018

Fixed-income trading venue LiquidityEdge expects to expand its recently launched off-the-run treasuries trading service to include guaranteed spread streaming prices beginning in the new year.

Nichola Hunter,
LiquidityEdge

“Liquidity providers will stream a guaranteed curve price- on-the-run versus on-the-run, on-the-run versus off-the-run, or the roll, to clients who do not want to take the legging risk with some of the spread instruments,” Nichola Hunter, CEO of LiquidityEdge, told Markets Media. “We are ready with that and are working with liquidity providers on the pricing.”

The startup also plans to support trading in off-the-run EGB instruments by the end of 2019, which will begin with the most liquid sovereign debt from Germany, France, and the U.K.

“I’m classifying them under one bucket as ‘European government bonds’ but will start with the most liquid and active, which most likely is Germany and France,” she said.

LiquidityEdge launched trading in off-the-run Treasuries last year on its venue, which relies on streaming actionable quotes rather than request-for-quote or auction models.

In a legacy RFQ process, all of the liquidity providers that did not have their quotes lifted still know about the trade, according to Hunter.

“However, in the LiquidityEdge model, only the counterparties to the trade know about the trade,” she added. “We are a venue that does not publish market data to a public tape.”

When trading, platform users see an aggregated order book with actionable streaming prices for up to the third to fifth most recent off-the-runs from liquidity providers Barclays, Credit Suisse, and a non-disclose global bank.

Hunter noted that the venue is working with a fourth bank and is writing to its API to add another liquidity provider to its platform and would like to add additional liquidity providers in the future.

One class of liquidity providers, however, she does not expect to participate on the venue are the non-traditional liquidity providers that are actively participating in the on-the-run Treasuries market.

“The reality is that they have a tough time in generating prices due to the lack of market data,” explained Hunter. “Also, in the case of hedging capabilities and repo services, it probably is a long time off before professional trading groups can trade the off-the-runs.”

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