On the fourth floor of an office building in Portman Square, 50 people are hunched over computer screens, locked in planning meetings or talking on the phone.
There’s an air of purpose at the headquarters of NetOTC — one that may change the financial world for the better.
Chaired by Bob Wigley, the ex-head of Merrill Lynch in London, and run by co-founders Neeraj Sharma (ex-LGT Capital) and Matthew Durkin (former legal director of Barclays Capital), NetOTC appears to have solved the Lehman problem.
When that bank went down, the liquidators found themselves having to deal with two million derivatives transactions with open positions. Unwinding them took three years to complete.
That was just one bank. What was obvious was that the market was so vast and complex that no bank had an accurate hold on its exposure.
After that, in an effort to inject transparency and reduce risk, the G20 pushed for central clearing for the $600 trillion (£387.32 trillion) global market.
NetOTC has come up with what it says is the solution: a trading platform that will clear 80% of all derivatives deals.
The system calculates the initial margin on any deal, and can then net out all the deals so that banks make single payments to each other, rather than pay separately on thousands of deals. Client testing begins next month but the signs are promising.
NetOTC could be on the cusp of making a fortune. But why not? All credit to its founders for deciding to tackle the issue — it would have been much easier to do nothing and let someone else have a go.
