Single-Dealer Platforms in a Cleared World
A CAPLIN WHITE PAPER
Single-Dealer Platforms in aCAPLIN
Cleared World
BY PAUL
www.caplin.com
APRIL 2012
Far from signaling the end of singledealer platforms, the impending raft of new regulation in the US and Europe will create a new business environment in which the direct online channel is more important than ever for both banks and their clients.
Paul Caplin, CEO of Caplin Systems Ltd. founded the company in 2000
Soon after the publication of the Dodd Frank act in the US, some early commentators suggested that the forthcoming prohibition of bilateral trading of liquid swaps signaled the death knell of single-dealer platforms
(SDPs), the banks’ proprietary online trading offerings.
But, as with Mark Twain, reports of their death were greatly exaggerated. Far from backing away from SDPs, virtually all tierone banks – and many smaller firms – have responded to the imminent shift in market structure by increasing their spending on
SDPs.
2
A CAPLIN WHITE PAPER
According to FX Week, the head of foreign exchange at a top-tier bank recently described this as the “secret weapons program now under development at most banks”. The successful SDP of tomorrow will provide essential customer services in a fragmented multilateral marketplace. It will deliver swap execution facility (SEF) and organized trading facility (OTF) aggregation and smart order routing, integrate this smoothly with OTC trading of illiquid/off-the-run instruments, and link it to the clearing and collateral management
services through banks will actually make most of their money as parts of their business switch from a principal to an agency based model.
Banks that understand and embrace this will establish a secure and profitable position at the centre of their clients’ trading workflow. This paper explains how this will work, and looks at what banks stand to gain from proprietary online channels in the new world order.
RULES AnD REgULATIOnS
A major consequence of the 2008 financial
crisis
Single-Dealer Platforms in aCAPLIN
Cleared World
BY PAUL
www.caplin.com
APRIL 2012
Far from signaling the end of singledealer platforms, the impending raft of new regulation in the US and Europe will create a new business environment in which the direct online channel is more important than ever for both banks and their clients.
Paul Caplin, CEO of Caplin Systems Ltd. founded the company in 2000
Soon after the publication of the Dodd Frank act in the US, some early commentators suggested that the forthcoming prohibition of bilateral trading of liquid swaps signaled the death knell of single-dealer platforms
(SDPs), the banks’ proprietary online trading offerings.
But, as with Mark Twain, reports of their death were greatly exaggerated. Far from backing away from SDPs, virtually all tierone banks – and many smaller firms – have responded to the imminent shift in market structure by increasing their spending on
SDPs.
2
A CAPLIN WHITE PAPER
According to FX Week, the head of foreign exchange at a top-tier bank recently described this as the “secret weapons program now under development at most banks”. The successful SDP of tomorrow will provide essential customer services in a fragmented multilateral marketplace. It will deliver swap execution facility (SEF) and organized trading facility (OTF) aggregation and smart order routing, integrate this smoothly with OTC trading of illiquid/off-the-run instruments, and link it to the clearing and collateral management
services through banks will actually make most of their money as parts of their business switch from a principal to an agency based model.
Banks that understand and embrace this will establish a secure and profitable position at the centre of their clients’ trading workflow. This paper explains how this will work, and looks at what banks stand to gain from proprietary online channels in the new world order.
RULES AnD REgULATIOnS
A major consequence of the 2008 financial
crisis