Futurization advances in interest rate products

The NYSE Liffe is moving to adapt their futures products to grab more business away from the OTC swaps market. It announced changes yesterday to enable large block trading in 3 of its products–three month Euribor futures, three month sterling futures and long gilt futures. The block trades will be handled on its Bclear system. The service is scheduled to be available starting December 10.

The FT’s coverage is here. It will be interesting to see how the new service does and how it affects the overall flow of trade in those futures contracts.

This looks to me like another example of the futures marketplace easily being expanded to offer a service in standardized derivatives formerly performed OTC. There was never any special economic rationale for this business in standardized derivatives being handled OTC. This move exposes, once again, the fallacy that the OTC swaps market was dominated by customized products that are ill-suited to standardized markets like futures exchanges.

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