Holky’s posted recently about a couple of new ECN/exchange initiatives: Project Boat and LiquidityHub. I was quite heavily involved with FpML back in the late 90s. I was a more distant observer of SwapsWire later on. And I had some standards involvment in other sectors before I got into this game. So I’d like to offer some thoughts on the standards process…

  • Standards efforts are often beset with the most ugly haggling and horse trading. Many participants are vendors looking for business, or banks looking to minimise impact on their existing platform investments. As participants they pay lip service to advancing the declared agenda, but in reality they pursue their semi hidden agendas.
  •  The internal politics of participant organisations can lead to them to delegate personnel who have issues aound interpersonal skills. As Lyndon Johnson said of a cabinet colleague: “I’d rather have him inside the tent pissing out, than outside the tent pissing in.” I saw this happen at FpML and POSC.

The considerations above mean that delivery of an agreed spec by any standards committee is an excrutiating and protracted process that inevitable results in an ugly and compromised result. What happens when a collaborating group attempts an implementation ?  SwapsWire commissioned AVT Technologies to build their system. They had to throw the result away, and then build their own development organisation to deliver a working system. I know Fred Brooks tells us “plan to throw one away, you will anyhow”. But I don’t think that SwapsWire did plan it that way…

So let’s assume that Project Boat and LiqudityHub have overcome all the pitfalls above. If you build it, will they come ?  I know of only one example of liqudity moving to a new exchange: German govt bind futures going from Liffe to Eurex.

So let’s just say that I’m sceptical.