We have long-held the position that under Dodd Frank, the SEF execution mandate (whilst not welcomed by all), will nonetheless create opportunities for Single Dealer Platforms to provide enhanced value to clients through SEF Aggregation, and smart order routing capabilities, as certain products move from a bi-lateral to a cleared model.
A number of leading dealers as well as research reports, support this view including RBS, UBS and Tabb Research. Caplin has also covered this extensively in a recent White paper entitled “Single Dealer Platforms in a Cleared World”.
Paul Hamill, Head of Matched Principal Trading for UBS America’s, in an interview published today in Risk.net states the position very clearly as:
“Our intention is not to be a Sef – it’s to be a liquidity aggregator of Sefs. We think the best value we can bring our customers is in the aggregation space. That would mean, to be clear, that execution does not take place on our platform in the future, and that it is simply the conduit to liquidity, rather than the place liquidity is provided,” Hamill says. here
Indeed, earlier this week, the CFTC Chairman, Gary ‘Sef’ Gensler, made a robust defense of the Dodd Frank ‘SEF execution mandate’, in his speech at ISDAs AGM.
Yet despite all this, on the anniversary of the Dodd Frank Act (DFA), The Streetwise Professor (SWP) in his inimitable way, declares the ‘one size fits all’ SEF model, as mandated is flawed, given the diverse nature of the OTC marketplace:
SEF mandates are still the Worst of Dodd-Frank. And slathering on the systemic risk lipstick won’t make that pig any more attractive.
The SWP is always worth a read here
please see Craig’s comments below