European electronic fixed income platform MTS and fintech Wematch.live have successfully trialled the first session of the risk netting Service for interest rate swaps (IRS) on Euronext.
The 3-month vs 6-month EURIBOR (3m/6m) basis session executed trades across several participants and tenors on 20 June 2023.
Steve Schiff, head of risk netting services at Wematch.live, said the session enhances liquidity in the IRS market and manages risk in bulk across portfolios, boosting efficiency and mitigating profit and loss (P&L) volatility. Schiff added that further collaboration with MTS is anticipated as the firm builds out new liquidity pools for the rates market.
The MTS Swaps Risk Netting Service (RNS) is a session-based trading functionality targeted at the interdealer market. As the sell-side regularly accumulates various positions across their swap portfolios, they have to spend time managing individual positions one-by-one in the market rather than on value-added activities.
The RNS allows Euronext to concentrate and create unique liquidity during RNS sessions, thereby allowing swap dealers to manage these positions in a time- and cost-effective manner.
Euronext said the RNS only takes a couple of minutes to run a session, with trades booked automatically in MarkitWire and sent to the CCPs immediately after the session.
Euronext also has built in controls for the swap dealers in terms of trading constraints, P&L controls and contingencies, allowing for speed of execution while at the same time ensuring positions are only offloaded when their constraints are satisfied.
The RNS sits on the MTS Swaps trading platform, which means that in the same place swap dealers have the flexibility to both continuously manage IRS positions during the trading day in the order book and during RNS sessions.
MTS also plans to launch a dealer-to-client request for quote (RFQ) trading functionality for IRS, BondVision Swaps, in early 2024.
©Markets Media Europe 2023
