UK-based broker Icap has launched its forward rate agreement (FRA) matching system, Fra-Cross, for Australian dollar-denominated instruments. The new service intensifies Icap's pressure on Switchfix, the first matching service, launched out of Singapore by rival broker Tradition.Fra-Cross was set up in January 2002 to allow swaps and FRA traders to align their reset risk. These are vulnerable to future rate fixings.
For example, a trader paying a five-year swap who then receives a five-year swap several days later at a more favourable interest rate still has to deal with the floating legs of the trades. There is a risk that interest rate volatility will cause adverse effects on the profit/loss profile of the portfolio due to rate changes between the two reset dates for the duration of the two swap deals.
Icap said it now has a total of 300 customers from 90 international trading desks representing all the major derivatives trading banks. The broker said 17 major banks have signed up for its Australian dollar service.
More on Foreign Exchange
Target redemption forwards declining in popularity for macro reasons
EC ‘forgets’ to mention sterling in letter defining forex contracts
Target redemption forwards with capped loss structure set for launch
CNT fixing will be a boon for Taiwan’s derivatives market
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.