An Australian company, MMADX (Money Market and Debt eXchange Pty Ltd), plans this year to open the first electronic trading system in the Asia Pacific for money market securities and repurchase agreements.
While the equities, futures, foreign exchange and bond markets have all embraced the benefits of automation, money market securities and repurchase agreements are still traded over the telephone, as they were 40 years ago. MMADX is establishing an exchange for banks and institutional asset managers to trade in real time via sophisticated trade matching software. This will revolutionise the $11 trillion dollar a year market, which is more than five times larger than the turnover in Australian listed equities and options.
MMADX will commence trading money market securities and repurchase agreements once it has received and the appropriate licenses, and expects to launch a full-service electronic debt market in Australia in H2 2012.
CEO Sean Nunan said MMADX would mark a turning point in the evolution of our debt markets and offer significant savings to local institutions.
“Automating the market will result in significant savings for market participants, improve risk management as well as increasing the transparency of debt trading in Australia,” he said.
MMADX Chairman, Bill Conn, says institutions and stakeholders have been extremely supportive of MMADX. “We’ve been very well received,” he said. “The need for a platform such as MMADX is widely accepted, and will be an important plank in Australia’s bid to be an Asian financial services hub.”
No electronic exchange presently exists for money market securities or repurchase agreements in Australia – they are traded over the phone, as equities were decades ago. MMADX makes trading money market securities more efficient by automating a manual process, and improves risk management by ensuring accurate capture and reporting of transactions.
Mr Nunan said that MMADX will also help meet changing regulatory requirements.
“Since the global financial crisis, regulators in Australia and around the world have called for debt securities and interest rate derivatives to trade on electronic trading platforms,” he said. “In the United States, the Dodd–Frank Wall Street Reform and Consumer Protection Act will require financial institutions to trade swaps on Swap Execution Facilities. Once the legislative requirements are finalised, MMADX intends to meet this definition and be Australia’s primary place to trade interest rate derivatives.”
MMADX is partnering with LIST for its exchange technology. LIST provides the software that backs e-Mid, the European electronic money market where interbank deposits and overnight index swaps are traded by 250 member banks across 29 countries. Its technology also underpins European electronic bond exchanges.