Icap to add trading functions to i-Swap

Faster-than-expected advances in electronic derivatives trading have forced inter-dealer broker Icap to step up plans to launch its own electronic swaps trading platform.

The UK-based broker is to enter the market in September by adding trading capabilities to its i-Swap product - currently a platform for view-only distribution of interest rate swaps data to Icap clients that has also been used by Icap's brokers to electronically book voice-brokered trades to the firm's back office since 2001.

While the launch reflects greater overall market moves toward electronic trading of swaps contracts, it is specifically in response to the success of Barx, Barclays Capital's page of executable swaps data on Bloomberg, which launched last July and has since rolled out a wide coverage of currencies. Icap insiders freely acknowledge that Barx was a wake-up call that forced Icap to show its hand.

The trading launch will offer transaction support for eonia (euro overnight index average) swaps currently offered by electronic brokers ATFox and E-Mid. Initially, i-Swap will offer 25 eonia benchmark runs, comprising 19 spot and six forward runs, and up to 60 other non-benchmark forward runs. The system is currently being used for price discovery by approximately 30 banks. Officials say 20 are interested in trading, and three have agreed to make markets on the platform and provide streaming prices throughout the day.

The system is based on the ASTS trading system, designed for trading exchange-traded equities, from Australian vendor Computershare, though this has "had the guts ripped out of it", said i-Swap director Kieran Nolan. The core engine is written in C, with the front-end—delivered directly to user desktops running Microsoft Windows (or to servers if there are more than 30 users at a client site) via dedicated lines or a SSL VPN—written in C++. At Icap, the system runs on Sun Microsystems servers running the Solaris operating system.

Nolan said current versions of the software already include trading support — Icap merely has to give users permission to trade. Clients will be provided with an API and a real-time data interface for submitting prices and entering orders — either manually or from automated spread matrices.