Swaps Trading Platform Launched in Canada

Terry Flanagan

Canada is making the transition for its over-the-counter markets from the traditional bilateral model to a centrally executed, cleared and reported model with the launch of the first electronic multi-dealer-to-customer marketplace for Canadian dollar interest rate swaps by CanDeal, in collaboration with Tradeweb Markets.

The platform provides a more efficient means for market participants to meet G20 mandates and adhere to pending swap execution facility (SEF) rules.

“With the move of interest rate swaps to centralized execution and the requirement to settle through CCPs [central counterparties], we’ve worked in conjunction with Tradeweb [a provider of electronic trading platforms] to deliver post-trade messaging to middleware providers as well as CCPs,” said Jayson Horner, chief executive of CanDeal, an electronic marketplace for Canadian dollar fixed income securities and derivatives. “The Dodd-Frank Act also contains reporting requirements, which we also deliver to both the buy and sell sides.”

While CanDeal has been a provider of electronic markets for Canadian bonds and money market trading for over a decade, this is its first move into derivatives. To date, nine banks and dealers are providing liquidity on the new platform.

“Increased transparency and efficiency are hallmarks of pending global swaps regulation, which electronic markets such as this are set up to deliver,” Horner said. “We look forward to providing these benefits to our global client base in the same way they have become accustomed to in the broader Canadian fixed income markets.”

CanDeal was formed in order to provide liquidity for the Canadian fixed income markets as those markets increasingly were becoming electronic. It created an alternative trading system by which the buy side could gain access to pools of liquidity.

“We were seeing the development of fixed income platforms in the early 2000s with Tradeweb and MarketAxess,” Horner said. “Our feeling was that it was a necessity for Canada to participate in the evolution of bond markets from a telephone-based to an electronic environment.”

In 2012, the platform had replaced 650,000 telephone calls that would have been required to transact an equivalent level of bond trading, Horner said.

“CanDeal stands for improved transparency and liquidity—that is something we support,” said George Karkas, vice-president of fixed income trading at Maple Securities, a financial organization, in a statement. “We look forward to the trading opportunities their new Canadian dollar swap product will bring.”

The multi-dealer-to-client marketplace is powered by Tradeweb technology and supports trading for both Canadian dollar and U.S. dollar interest rate swaps as part of a North American product package on CanDeal.

CanDeal clients are also able to access Tradeweb markets for euro, yen, sterling, Swiss Franc, Danish krone, Norwegian krone, Swedish krona, Australian dollar and New Zealand dollar interest rate swaps.

Multiple trading models are available depending on the currency, and the platform provides access to clearing houses, market affirmation vendors and data repositories.

“The partnership with Tradeweb is cross-border in nature,” said Horner at CanDeal. “Our objective is to provide a solution for the buy and sell sides in Canada, the U.S. and Europe, by which we can flow swaps trades directly to an affirmation vendor or CCP.”

Tradeweb, an electronic multi-dealer-to-customer marketplace for U.S. and European derivatives, now offers 11 currencies for interest rate swap trading with the addition of Canadian dollar swaps. Tradeweb launched its U.S. dollar and euro interest rate swaps platforms in 2005 and has seen more than $12 trillion in notional volume traded over 125,000 swap trades.

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