Swaptimization, which is already being used by market participants in the US and Europe, utilises a proprietary matching algorithm to pair natural positions across market participants to facilitate bilateral security-based total return swaps.
EquiLend launched Swaptimization following an increase in synthetic financing volumes and a call for automation from its existing client base, according to swaps product owner James Palmer.
He said in an exclusive interview: “Where firms are focused on attaching the cost of balance sheet to each trade across financing groups, the synthetics business is treated advantageously and is therefore often a cheaper alternative.”
Using Swaptimization, each total return swaps participant is able to load a list of long inventory and/or short needs into a matching session that, taking into account credit limits, pairs the securities they have loaded with counterparties on the other side of the trade.
A new graphical user interface then makes it easy to communicate and agree matches before producing a comprehensive term sheet once the trade has been finalised. Live trades are then reflected on the screens that support the full trade lifecycle, managing unwinds, substitutions, resets and expiries.
Palmer added: “Our technological solution automates a trade that happens either bilaterally or manually via voice brokers today. By centralising market participants into a single venue, the available pool of liquidity is greater than that available in the broker market.”
“The graphical user interface also makes the agreement of the total return swaps more efficient than existing processes—which, with additional plans to leverage existing connectivity to our client base to automate the trade booking and confirmation, adds scalability to this enhanced market access.”