ICAP started crossing sterling forward-rate agreements Monday and plans to expand the service to euros today and dollar and yen in February. GBP6.8 billion (USD9.7 billion) went through the Web-based system, dubbed fra-CROSS, on its first day, according to Charles Sabel, marketing manager in the electronic broking division in London.
The system was launched to enable traders to hedge the reset dates of their positions more easily. If a firm has a time gap between paying in one swap and receiving in another it could lose out if short-term rates were too spike. At the moment most traders either leave this unhedged or use futures, but Sabel said fra-CROSS will match the risks more accurately than futures and therefore expects traders will opt for this system. 16 firms have already registered, Sabel declined to name the firms.
Fra-CROSS works by crossing trades every other Monday according to a yield curve generated by ICAP. Brokerage costs are half the cost of going through voice-brokers.
