BarCap to expand equity derivatives platform to Japan in Q4

After launching its equity derivatives pricing and execution platform for private banks in Hong Kong and Singapore in September, Barclays Capital will roll out the Asia-designed system in Europe in July, and Japan is planned for the fourth quarter.

The UK bank followed in the footsteps of equities powerhouse UBS in building and launching such a system in Asia first. This makes sense, given that private-banking clients in the region tend to do more short-term trading than their European or US counterparts. There are several firms that have a similar platform internally, but most have not provided it to external counterparties.

Comet -- part of Barclays Capital's Barx e-commerce platform designed for institutional clients -- enables direct pricing and execution of flow equity derivatives structures, thus speeding up the process of price discovery and trading. The system offers pricing on a range of products, including equity-linked notes, accumulators, decumulators, OTC options and range accruals.

"The technology is easily exportable it to the rest of Asia and to Europe," says Nicolas Cohen-Addad, Asia global head of e-trading for equity and funds structured markets, based in Hong Kong. India and South Korea will also be considered for the expansion, he adds. The bank is also likely to use Comet as a case study and could offer other asset classes in future, with rates and currencies the next step.

Comet was designed and built in Asia, where "there is a well defined number of payoffs that clients will be willing to trade on, and there's the volume of trades as well", Cohen-Addad says. "In an environment where clients want 600-700 prices a day, you need to have a system that can take that kind of level of demand, and can process without needing extra resources."

He notes that equity trading flow in Europe is not as intensive as in Asia, although price discovery remains crucial.

Twenty private banks are using the system for pricing at present, while Barclays Wealth and one other private bank are using it for both pricing and execution, and a few other firms are looking at doing so, says Cohen-Addad.

There are two ways of using the pricing system: one is sending requests via email, to which Comet replies automatically with tradable prices; the other is the online interface, which is integrated into Barx and well known to institutional customers and intermediaries.

Clients realise that doing price discovery using an automated email system rather than using the phone means they can obtain prices a lot quicker, he adds. The next stage is online price discovery, before clients then might decide they want Barclays Capital to execute on their behalf. However, it takes time for them to get used to that idea, says Cohen-Addad.