GFI Group, the US interdealer broker, has applied to regulators to become a futures exchange amid concern that incoming regulation overhauling derivatives markets could damage its business.
GFI’s move reflects growing unease among interdealer brokers that they could lose out from the global overhaul of derivatives markets in the wake of the financial crisis.
G20 policy makers want to move more of the off-exchange swaps market, where GFI and rivals traditionally operate, on to electronic trading platforms to safeguard markets against systemic risk. They also want more standardised swaps processed through clearing houses.
Cleared swaps are likely to require more margin, or insurance for trading, than listed products, which are automatically sent through clearing houses. The CFTC have proposed that the minimum block size thresholds for swaps be far higher than for futures. Futures exchanges like CME Group, Intercontinental Exchange and Eris Exchange are eyeing the overhaul as an opportunity to grab a slice of the $640 trillion OTC derivatives market. “The difference between the regulatory treatment of futures and swaps is unclear, and we want to be prepared to serve our clients’ needs across all markets”, GFI said in a statement.
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