Newedge Joins GMEX

Terry Flanagan

Newedge, the global derivatives prime broker, has become the first firm to publicly become a member of Global Markets Exchange Group Limited, a trading venue due to launch next year.

Newedge UK Financial Limited said in a statement it plans to become a trading and clearing member of a wholly-owned subsidiary of GMEX Group.

Hirander Misra, chief executive and co-founder of GMEX Group, told Markets Media that Newedge’s membership is important as the firm’s clients include asset managers, hedge funds, sell side banks and futures trading firms. Misra expects to have about 30 members when GMEX goes live next year.

The exchange is waiting for approval from the UK Financial Conduct Authority to launch as a multilateral trading facility. GMEX filed an application at the start of March and the regulator has to make a decision within one year.

GMEX is focused on product innovation and will first start trading constant maturity futures contract in four currencies – euro, sterling, US dollar and Japanese yen – in tenors of between two and 30 years. “Everyone else is fighting between VHS and Betamax while we have created a new streaming service,” said Misra.

Unlike the futures on swaps which are already available at rival exchanges, GMEX’s constant maturity futures contracts do not have quarterly expiry dates so it is easier for clients to hedge their swap exposures.

“The quarterly expiry dates on swap futures are the bane of asset managers so our contracts are much more efficient,” Misra added.”Clients will post less collateral that for over-the-counter swaps and our futures will have equal or lower margin requirements than at rival exchanges.”

Andrew Chart, senior director, origination and structuring at Newedge, told Markets Media that the firm joined GMEX as the exchange is providing innovative products that are a perfect bridge between the OTC and exchange worlds.

“The constant maturity futures contract ticks all the boxes for the buy side as it is less heavy on their balance sheet and removes counterparty risk,” said Chart.

GMEX will also launch a constant maturity index based on swaps trading data from sell side dealers and hopefully, the buy side. As more swaps move onto exchanges and swap execution facilities, more trading data will become available.

‘We should have a symbiotic relationship with SEFs,” said Misra. “We could use their swap trading data and they could use our licensed index.”

Chart added: “With the scandals like Libor the buy side community are aware that they are not necessarily playing on a level field and want transparent prices.”

Last month Deutsche Börse acquired a minority stake in GMEX Group for less than £10m. “Deutsche Börse has access to a huge client base of asset managers and hedge funds and we also have synergies in emerging markets with Clearstream and our technology operations,” Misra said.

He added that GMEX would like to attract a diverse investor base alongside the seed money from the founders and Forum Trading Solutions, the exchange’s technology provider. “We could have easily taken venture capital money but wanted investors who are aligned with our industry and add value,” Misra said.

GMEX is working with emerging market exchanges outside Brazil, Russia, India and China to help them develop derivative products across asset classes.

In September Lamon Rutten, former chief executive of the Multi Commodity Exchange (MCX) of India was named as non-executive chairman of GMEX. The exchange group also appointed two non-executive directors – Mark Blundell, former European managing director of CME and Tony Harrop, managing director of Forum Trading Solutions.

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