| WASHINGTON, Sept 3
WASHINGTON, Sept 3 Britain's ICAP Plc
said on Tuesday it planned to set up a trading platform for
swaps, satisfying a requirement from regulators who are
rewriting the rules for the derivatives that helped cause the
2007-09 credit crisis.
Wall Street banks trade swaps in privately negotiated deals,
largely over the phone, through a handful of brokers such as
ICAP, but regulators want to shed more light on the lucrative
$630 trillion market.
ICAP said it had filed an application for a swap execution
facility, a type of trading platform not unlike an exchange,
with the Commodity Futures Trading Commission, the U.S.
The application had long been expected because of ICAP's
dominant role as a swaps broker. Other such firms include
Tullett Prebon, GFI and Cantor Fitzgerald
and a few smaller ones.
They are called interdealer brokers because they broker
trades between large Wall Street banks, which are also known as
dealer banks, or dealers.
New rules that are part of the 2010 U.S. Dodd-Frank law
meant to overhaul Wall Street after the financial crisis will
put an end to privately negotiated swaps trading.
Deals must now take place through the same type of order
books that stock exchanges use, or by requesting quotes from at
least two market parties, a number that will go up to three
after a phase-in period.
The swaps market is dominated by large banks such as
Citigroup Inc, Bank of America Corp, JPMorgan
Chase & Co and Goldman Sachs Group Inc. Virtually
all trading volume between these banks takes place through the
But the new rules by the CFTC have given the clients of the
banks a chance to trade in the swaps themselves for the first
time, and this has attracted a raft of new firms hoping to break
open the banks' monopoly.
Firms such as Bloomberg LP; TradeWeb, which is
majority-owned by Thomson Reuters ; and MarketAxess have
also all applied to set up a swap execution facility.