09.06.2011
By Terry Flanagan

Options SEF Goes Live

Deal-X enables OTC options to be executed electronically and centrally cleared.

Impending OTC regulations requiring organized trading have boosted demand to automate this complex corner of the trading market.  As a consequence, technology providers are rolling out new products and services.

SuperDerivatives has launched a swap execution facility (SEF) for options. Called Deal-X, the system was developed in conjunction with FXCM.

“In this solution, SD has developed the underlying technology infrastructure and capability to allow for the negotiations of complex instruments with multiple market makers, dealers and price takers,” Sean Carnahan, global director of commodities and energy at SuperDerivatives, told Markets Media. FXCM is to be the clearing member and represents the regulated entity, he said.

Deployed either as a sales/trading desk integrated into a bank’s own trading system or as a corporate client to the bank’s dealing floor, Deal-X creates a SEF facility connecting to CCPs, and in the future, to SEFs for interest-rate swaps and other asset types, Carnahan said.

“If you are executing with a top tier bank, such as a JP Morgan or Deutsche Bank, or even if you don’t have a swap execution facility, Deal-X has created the technology to connect you to a SEF and multi-asset swap negotiation capabilities,” he said.  “This technology provides the ability to expeditiously deploy a multi-bank electronic trading platform for options that connects buy-side market takers with liquidity providers on a single global platform.”

In contrast to other platforms that only support typical exchange-traded products, the Deal-X platform allows bespoke FX options to be traded electronically, following OTC market conventions.

“It’s an intuitive web-based platform that supports price discovery, negotiation and execution, all the way to option expiration, powered by the industry benchmark SD options pricing model,” said Carnahan.

Deal-X is currently available for a variety of FX Option instruments and is being continually developed across all asset classes from FX, to interest rates and other liquidity pools, he said.

“As of July, there were already three liquidity pools signed up and we expect to have over nine by end of the year,” said Carnahan. “Currently over 80 institutions have signed up and taking advantage of this solution in light of pending regulations.”

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