Fixed Income Derivatives

Nordic Fixed Income Derivatives are traded and cleared in a unique market structure. Trades in fixed income derivatives are reached through bilateral negotiations between buyers and sellers, and reported to Nasdaq Derivatives Markets for central counterparty clearing. Nasdaq Derivatives Markets becomes the counterparty to both the buyer and seller, i.e. central counterparty (CCP) clearing. This structure combines the advantages of a cleared market, with the flexibility and the secured liquidity of a market maker driven market.

Designated market makers quote bid-offer prices on request from customers. The presence of multiple designated market makers ensures that a market participant always can find fair and tradable prices. Market makers also quote indicative derivative prices in Nasdaq Genium INET system. These prices are disseminated through information vendors. Derivative contracts are not traded in the Genium INET system but the indicative prices serve as good indicators of the prevailing market price level.

A trade between a market maker and a customer is initially a bi-lateral buy or sell agreement between the two parties. After trade execution the market maker report trade details to Nasdaq, who match the trade and offer CCP services. By acting as a CCP Nasdaq takes on the contract obligations against both the buyer and the seller. There are several advantages with CCP-clearing, such as simplified administration of payments and deliveries, reduced counterparty risk and multilateral netting possibilities.