My summer’s work was speaking to every major swaps dealer to try and understand what they’re thinking, how they’ll take their business forward and what pending regulation will do to the swaps market. The executive summary of the report that resulted from these conversations can be found here. Today the FT wrote a story to cover my findings.
So although I’m of course happy for the coverage in the FT, the headline they chose (although attention grabbing) I’m not sure is representative of exactly what we found. Yes, dealers do believe liquidity will ultimately improve but with a lot of caveats. Many combinations of RFQ requirements, the 15 second rule, block trade requirements, margin requirements, etc could severely hamper swaps trading and drive the market to futures and cash products. That said, I am optimistic that cooler heads will prevail and we will not have swaps liquidity Armageddon.
The report talks about much more than just liquidity of course, but you’ll have to read it to find out what (are you in suspense yet?).
One last note – I taped a video about this research as well so keep an eye out for that.
Read the study coverage at FT.com.