Interest Rate Swaps 2006: New Participants, New Challenges

August 3, 2006


New York, NY, USA August 3, 2006

Electronic trading of interest rate swaps will reach 42% of dealer-to-client trades and 22% of interdealer trades by 2009.

New players and regulatory pressures will strengthen electronic trading痴 foothold in the interest rate swaps market, according to the new Celent report, . The report examines the growth of electronic trading in this market and profiles several trading platforms.

Although the number of single-dealer platforms has increased exponentially in the past two years, growth will slow as buy side firms begin migrating in greater numbers to multidealer platforms. The market has room for both single dealer and multidealer systems -- for now. However, the increasingly harsh regulatory environments in the US and Europe mean that "best execution" is no longer a goal but rather a legal requirement.

Under these conditions, firms will eventually abandon single dealer platforms and move to multidealer systems such as TradeWeb and SwapTrader, where they can receive quotes from multiple dealers within seconds. RFQs and pricing are at least as good as they are on single-dealer platforms. Celent expects rapid growth in the multidealer market, as dealers move aggressively to provide liquidity and regain a measure of control of electronic client order flows. Electronic trading in the dealer-to-client trades will grow from approximately 9% to 42% by 2009.

Exchanges, which have long looked at the OTC markets as fertile ground for expansion, will continue to make strides in both execution and clearing of interest rate swaps, according to the report. New initiatives are increasing dealers' support for listed swaps, bringing listed futures to interdealer platforms, and allowing exchanges to leverage the strength of their clearing operations to provide value-added services to a market still constrained by operational inefficiencies and credit issues.

This report examines several trading and post-trade services including: Bloomberg SwapTrader, Thomson TradeWeb, i-Swap (ICAP), e-Mider, Swapstream, Bloomberg's 20 single-dealer platforms, the Chicago Board of Trade, the Chicago Mercantile Exchange, Euronext.liffe, DTCC Deriv/Serv, and TriOptima.

The 55-page report contains 23 figures and 11 tables. A table of contents is available online.


Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

New York, NY, USA August 3, 2006

Executive Summary 3
Market Overview 5
STP Initiatives 8
Electronic Trading 16
Market Shakeout 22
Trading Platforms: Single-Dealer 24
Trading Platforms: Multidealer 25
Trading Platforms: Interdealer 34
Exchanges 45
Future Trends 48
Conclusion 53
Objectivity and Methodology 54

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