The arcane business of derivatives took a step into the future yesterday when six of the world's biggest dealers announced plans to set up an electronic system for trading.

The system, to be known as SwapsWire, will allow interest rate derivatives to be traded by computers, eventually eradicating the current method of doing business over the telephone.

Interest rate derivatives, among the most complicated in the financial world, are used by major corporations to protect themselves against major movements in interest rates.

SwapsWire is being set up by the six biggest players in the interest rate derivatives market: Chase Manhattan, Citigroup, Deutsche Bank, JP Morgan, Morgan Stanley Dean Witter and Warburg Dillon Read. It is named for one of the leading derivative products, known as a swap.

The new system, which will be jointly-owned by the six institutions, is not intended to act as an exchange in setting prices at which the trades are done. But it is intended to allow the majors to communicate with each other. Eventually, members may pay access or fees per trade.

The average outstanding value of swaps worldwide was estimated at $52 trillion in 1999, up from $37 trillion the year before, a 41 percent increase.

To support this growing volume of business, each of the big banks involved employs hundreds of staff. For example, one of the SwapsWire founders, JP Morgan, employs 300 in the back office of its derivatives operation in London.

The SwapsWire system is expected to be tested towards the end of this year and be more widely available in the early part of next. The six founders say they intend to encourage their rivals to participate in the network.