Ex-CME director to launch market-maker

Ex-CME director to launch market-maker

A new market-making firm is already looking to expand its product coverage into additional asset classes beyond its initial forward foreign exchange offering, according to its founder, a former director at CME.

Twos Tens will launch on July 1, offering a forward foreign exchange curve, after founder Malcolm Baker said he recognised a gap in the market for a centrally cleared, credit agnostic, transparent, anonymous and liquid FX curve.

Founded by Baker, former CME Group FX and interest rate director, Twos Tens plans to be a market-making firm across over-the-counter and listed interest rates and foreign exchange derivatives.

As of July 1, using CME Europe’s implied pricing model, Twos Tens will be able to replicate what banks do on their single dealer platforms to their clients via Globex, Baker told FOW.

“There is a huge appetite for a forward foreign exchange curve – an exchange could do this but has not due to cost and regulatory changes. This is the opportunity that Twos Tens has identified. It is a new way of trading FX; this is where we are beginning,” Baker told FOW.

Beyond the initial July 1 launch – which will offer access to CME, Tokyo Financial Exchange, Australian Securities Exchange and the Intercontinental Exchange – the second phase will include further asset classes and derivative products, including FX options, interest rate swaps and deliverable swap futures.

“We are particularly interested in being able to participate in the interest rate swap space. The doors may be opening to these products where traditionally a space companies like ours would not be able to play in. We are also interested in building out short term swaps like OIS, Eonias and Sonias,” he added.

Twos Tens believes the forward FX markets and FX options markets are primed for a further transition to become more exchange traded and cleared, and want to be ready for this opportunity.

“Right now a lack of mandate from the US and EU is not kick-starting this transition. However whether you are a major international bank, asset manager, hedge fund or prop house, the regulatory landscape - and most importantly the cost of being competitive in the FX markets - is increasing at alarming rates,” said Baker.

Twos Tens has seen interest ahead of the launch from various areas of the market.

“There has been some small interest from US names so far; European and Asia-based players are far more engaged.”

Baker said that the target is for Twos Tens to provide 24 hour coverage of global trading markets, growing to around 10 traders and risk managers over the coming months.

As first reported by FOW earlier this month, Baker recently left his Singapore-based role as senior director for foreign exchange and interest rate products at CME Group after joining the derivatives marketplace in October 2012, tasked with building out the then in-development, CME Europe exchange.