Money Market and Debt Exchange Ltd., Australia’s first electronic money market repurchase agreement and interest rate derivative exchange, will invite the country’s biggest banks to take as much as a 50 per cent stake in the company.
Money Market and Debt Exchange are demonstrating their electronic platform to Australian banks and investment banks. It doesn’t want to name any of the banks because of confidentiality agreements.
The board of the nascent exchange, whose chairman is former Potter Warburg chairman Bill Conn, currently own about 80 per cent of the company. Wealthy investors own the remaining 20 per cent.
The software for the trading platform for Money Market and Debt Exchange is based on software running in Europe.
“There is no bottom drawer to hide anything anymore,” says Sean Nunan, chief executive of Money Market and Debt Exchange.
Regulators around the globe have sought to push money market transactions from being settled over the counter to being settled on electronic exchanges.
This is in order to give transparency to the multi-trillion dollar markets in the wake of the 2008 collapse of the subprime mortgage market that caused the global financial crises.
Turnover in the Australian re-purchase market is $7.4 trillion per annum. Turnover in the country’s interest rate derivatives market is $18.8 trillion and in the money market it is $3.7 trillion per annum, says Nunan. The four Australian largest banks have about a 75 per cent market share of the interest rate derivatives market and about a 50 per cent share of the repo market, he says.
The four largest Australian banks are National Australia Bank Ltd., Commonwealth Bank of Australia Ltd., Westpac Banking Corp. and ANZ Banking Group Ltd.