NDF Traders to Benefit from Advanced Liquidity and Sophsiticated Order Book at SwapEx LLC

Institutional currency traders dealing in non-deliverable forwards should take heed of new functionality on the SwapEx LLC Swap Execution Facility.

state street corpSwapEx, a US-based Swap Execution Facility (SEF), has extended its core functionality for currency traders. The firm, which is an affiliate of leading ECN Currenex, will offer users Executable Streaming Prices (ESP) and limit order book execution. The SEF offers access to swaps and NDFs, as per the Dodd-Frank Act.

In a notification on its website, the firm reported that it had upgraded the functionality available on the trading terminal. The temporarily registered swap execution facility, which received authorization under the CFTC in September 2013, will begin offering users the ability to access NDF liquidity via both an all-to-all order book, as well as via tailored streaming liquidity.

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The firms note states: “(The new capabilities are) powered by the award-winning Currenex ESP technology.”

SEFs came to light during new rules and guidelines issued under the Dodd-Frank Act, a revolutionary law that alters the way certain over-the-counter financial instruments are traded. Under the terms, swaps, NDFs and FX Options are executed on the centrally cleared trading venue.

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The Executable Streaming Prices joins the long list of trading protocols offered by the firm, including request for quote, indication of interest and basket winds. NDFs are gradually gaining traction among buyside and proprietary traders as market movements in instruments such as the Indian rupee and Brazilian real have significant trading opportunities. Furthermore, firms looking to hedge market exposure can use the NDF contracts to manage their risk, having ESPs support the developments of e-trading in the instrument.

Although SwapEx is an independent entity to Currenex, the two firms collaborate to support mutual clients’ needs. The notification adds: “Currenex serves as an independent software vendor to SwapEx, allowing Currenex clients who also subscribe to SwapEx to route NDF transactions entered on Currenex to SwapEx for execution.”

Only institutional firms, such as eligible counterparties can transact on SEFs, furthermore, for firms that want to trade through direct access are required to sign with the firm as a participant. In addition, they need to hold a designated clearing firm to clear trades on certain instruments.

Since SEFs went live in 2012, volumes have been migrating to the venues with several firms signing up before the deadline with the CFTC, including a number of forex providers such as BGC ICAP, Integral, GAIN Capital and Bloomberg.

Currenex also reported in a seperate note that it had enabled the trading of four precious metals instruments via its central counterparty.

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