A group of eleven banks have signed a letter of intent to form a joint venture to establish a new price data system for the interest rate derivatives market.
According to a MarketWatch report, Banc of America, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, the Royal Bank of Scotland and UBS will each have an equal share in the venture, which is expected to be set up as an independent London-based company.
Working groups have been set up to flesh out the details before going out to tender to a third party software company to build the system.
The system is intended to make the interest rate swap market more transparent by pooling swap prices together in a single place. The price aggregation system will not include a trading platform, but data will be available for use on existing dealing applications.
The platform will start by offering clients access to composite prices before allowing them to receive quotes from specific banks. In the future the system may be extended so live prices stream directly from a bank's internal pricing systems into the platform, says the report.
Gavin Dixon, global business manager for fixed income trading at BNP Paribas, says the system will provide clients with a source of prices and transparency that is not currently available.
Dixon says the system will be open to other dealers so as many banks as possible are providing liquidity, however the founding banks are not yet sure of the terms on which any new banks will be able to join the venture.