SST Awards 2018: Best Swap Execution Facility—Tradeweb Markets

Mike Roffey and Roz Savage

When it comes to the ultra-competitive world of swap execution facilities (SEFs), volume is king. But before the mandate to trade certain derivatives contracts through SEFs kicked in during early 2014, Tradeweb’s TW SEF didn’t look at first like it would be able to challenge the larger players for a slice of the pie.

Fast forward to 2018, and TW SEF is now the leader in volumes for rates. “Tradeweb’s market share of buy-side US vanilla interest-rate swaps grew from less than 5 percent before the trading mandate in March 2014, to more than 50 percent today,” says Lee Olesky, CEO at Tradeweb. “Initially, clients moved their derivatives trading to SEFs to meet regulatory mandates, but since then, market participants have moved their swaps trading to SEFs as they increasingly realize the benefits of electronic trading.”

The secret to Tradeweb’s success doesn’t just lie in volumes, however. It’s become clear since 2014 that on-SEF execution hasn’t experienced the same boom in made-available-to-trade (MAT) instruments as, say, clearing has—the vast majority of vanilla rates trades now are centrally cleared, whereas a more significant number of trades still take place off-SEF—and as such, SEFs have become differentiated through their other offerings. “Tradeweb also has seen increased demand from clients because of Tradeweb’s buy-side compression tool and its market-agreed coupon (MAC) swap offerings, which have experienced growing adoption among all of our clients,” Olesky continues. “Over $17 trillion in swaps trades has been executed using our compression tool since its launch in November 2013, while MAC swap volumes have reached nearly $2.5 trillion since being introduced to the platform in February 2014.”

In a bolder move than any of its competitors, Tradeweb also introduced automated trading for interest-rate and credit-default swap indices in 2016, through the release of its Automated Intelligent Execution (AiEx) tool. Olesky says that over $775 billion has been executed through AiEX across these indices on TW SEF. “Using AiEX, clients can automate trading from their own order management systems cutting down on execution time and operational risk,” he says. “It allows firms to use rule configurations that can be quickly adapted to support new trading strategies and fine-tune those configurations to intelligently optimize counterparty selection and drive strategic improvements. In addition, clients can codify their own best execution rules into the tool that allows them to monitor best-ex and systematically control trading.”

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