TrueEX Group LLC filed an application to offer the most-active interest-rate swaps on its exchange platform, joining another firm in an action that may hasten the migration of derivatives to public markets.
The step is part of a process that eventually will move trillions of dollars of derivatives to government-mandated platforms under the Dodd Frank Act. While swap execution facilities were required by the Commodity Futures Trading Commission to be ready for business by Oct. 1, trading on them is voluntary. Once approval is granted for an application such as trueEX’s, swap users will be forced to buy or sell contracts on the new systems.
The filing by trueEX, based in New York, covers contracts denominated in U.S. dollars, lasting for 2, 3, 5, 7, 10, 15, 20 and 30 years, Sunil Hirani, the chief executive officer, said in a telephone interview. An application last week by Javelin Capital Markets LLC covered interest-rate swaps in U.S. dollars, British sterling and euros that last between one month and 51 years in duration.
TrueEX sought through its made-available-to-trade application to offer benchmark maturities of the most commonly traded contracts, Hirani said. It plans to offer swaps denominated in euros next, he said.
“Looking at the data, we found those instruments have the greatest liquidity,” he said.
The 2010 Dodd-Frank Act, the financial-regulatory overhaul, seeks to increase access and price competition in the swaps market by having interest-rate, credit-default and other types of swaps trade on new SEFs. Largely unregulated swaps helped fuel the 2008 credit crisis and the U.S. rescue of American International Group Inc.