High-Speed Traders Slow to Break Into Interest-Rate Swaps Market
- Dodd-Frank sets onerous registration process on market makers
- Executives want to see market evolve to exchange trading
This article is for subscribers only.
Some of the biggest computerized-trading firms are facing obstacles as they try to move into interest-rate swaps, a $381 trillion market that has yet to be dominated by automated buying and selling.
Regulations passed after the financial crisis that should make the interest-rate swaps market a more natural fit for electronic market-makers also created barriers to entry. Under the 2010 Dodd-Frank Act, market makers must register as swaps dealers, an onerous and expensive process, or agree to never deal in swaps that aren’t guaranteed by a clearinghouse, something most firms don’t want to do. High-speed firms are also grappling with the pace of trading and the size of transactions in the market.