Broadway, the front-office system provider, has upgraded its Duration Trader algorithm in an effort to meet customer and market needs during an ongoing period of volatile European interest rates. Broadway clients should now be bale to use Duration Trader to unwind risk, eliminate inefficient manual hedging processes and reduce market leakage.
European rates trading has been characterised by extreme volatility and higher interest rate risks as spreads on certain European bonds continue to increase. The lack of country-associated risk hedging makes it expensive and inefficient for traders who hedge their portfolio’s interest rates exposure with only bond futures, and manual hedging processes and inefficient tools can create information leakage and increase hedging costs as the market reacts.
Duration Trader was designed to trade a basket of bonds that have different durations and efficiently hedge their risk. It allows traders to create ad-hoc baskets of government bonds and futures, identify the least expensive hedging allocation available and execute multiple orders at once to hedge their risk across all instruments. That in turn helps users potentially keep pace with rapid market movements, reduce trading costs and minimise information leakage.
“As volatility in the European interest rate market continues, it’s critical that traders have an automated, efficient and cost-effective method to manage country spread and hedge against risk in seconds, before the market can react,” said Brad Small, head of product at Broadway. “Broadway has worked closely with our European clients to enhance our Duration Trader algorithm and deliver the improved scalability, flexibility and performance needed to help these clients unwind risk, reduce hedging costs mitigate leakage.”