Swaps have not proved the easiest sector of the market to take electronic. Vast as the market is, the main counterparties are a handful of international banks who know each other well and are used to dealing with each other by phone. But this has not stopped players such as independent trading platform Swapstream attacking the market.

But will they be successful? The danger is that Swapstream wins the war but loses the peace – that is the market converts but not by using a third-party provider.

The evidence for this is that an international bank is currently said to be negotiating to buy, not Swapstream, but Swapstream’s technology to use inhouse. If other banks follow suit Swapstream’s business proposition must be weakened.

Swapstream CEO Marcus Grubb did not return my calls in late February and was said to be in a meeting with all the management – possibly a sign that negotiations are at an advanced stage.

Tough as it is to migrate swaps deal-making electronically, the processing is well taken care of and Swapswire, a bank-owned utility, is hitching up with London Clearing House’s SwapClear to make things even more seamless.

Equity market players should take note as to how easy it all is if everyone co-operates. Brian Caplen

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