First Fully Electronic €STR Swap Trade Executed Via Bloomberg’s UK MTF

Bloomberg announced that the first electronically negotiated euro short-term rate (€STR) swap transaction was executed on its UK Multilateral Trading Facility (BMTF), operated by Bloomberg Trading Facility Limited. LBBW and JP Morgan successfully executed a 5-year swap trade using the request-for-quote protocol.

Beginning Monday 7th October 2019, BMTF, and Bloomberg’s Netherlands MTF (BTFE) each support trading in outright fixed versus €STR overnight index swaps in all tenors out to 70 years including ECB dates in the short-end. Floating rate basis trading is also available through Bloomberg’s MTFs, allowing participants to manage their €STR versus 3-month EURIBOR and €STR versus EONIA risk.

In line with clearing eligibility go-live dates from major clearinghouses, participants trading on Bloomberg’s MTFs will be able to send €STR trades to LCH on 21st October 2019 and Eurex on 18th November 2019 for new risk and risk traded on NPV and portfolio compression via its BOLT list trading tool. Additionally, the multi-line item list functionality will enable clients to close out and replace EONIA and EURIBOR trades with €STR trades at the portfolio level, and manage their new €STR cleared risk. In order to assist with pre-trade decision making, Bloomberg Terminal users can utilize core portfolio analytics to calculate margin costs and evaluate what-if scenarios, all with seamless integration to the BOLT trading tool.

Tom Prickett, co-Head of EMEA Rates, J.P. Morgan said, “J.P. Morgan is committed to the success of €STR as the new euro risk free rate. Executing the first electronic trade using the new benchmark is an important moment for the rates asset class and highlights our intention to provide and encourage pricing in interest rate derivatives directly referencing €STR, effective immediately.”

“This trade shows once again that LBBW is committed as a market-maker and liquidity provider, as well as being a driver in innovation,” said Dr Thilo Rossberg, Head of FICC, LBBW.

“Being the first to market with €STR swap electronic trading functionality is a clear demonstration of Bloomberg’s commitment to providing access to new Risk Free Rate (RFR) benchmarks for market participants looking to manage their IBOR exposure,” said Nicholas Bean, Head of Electronic Trading Solutions at Bloomberg. “Clients who use Bloomberg will  gain access to broad liquidity, while benefiting from the efficiency that comes with electronic execution.”

The introduction of €STR swap trading follows the launch of SOFR swaps on the Bloomberg SEF (BSEF), BMTF and BTFE in 2018. In addition, clients will soon be able to trade €STR swaps on BSEF on 21st October 2019.

BMTF and BTFE provide eligible participants with request for quote and request for trade functionality for cash bonds, repos, CDS, IRS, ETFs, equity derivatives and FX derivatives. They are built on the core technology behind Bloomberg’s trading platforms, which are used by more than 1,000 global institutions today.

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