Robot risk managers excite swap market-makers

Banks hope auto-hedging algorithms will cut costs, boost volumes

Stéphane Malrait, Societe Generale CIB

In the swap market of tomorrow, prices will be made, executed and risk managed by algorithm – a low-cost, high-volume vision of the future that has obvious appeal for a business struggling to hit its return targets. The idea has been held back by a lack of electronic venues with which robot traders can interact, but the arrival of swap execution facilities (Sefs), which are required to offer order-book trading, brings it a big step closer. "Everyone is looking at this right now. I don't

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