Interesting article on Risk.Net around being a SEF vs being a SEF Aggregator.
Ben Macdonald, Global Head of Fixed Income at Bloomberg, argues that the company is building a cross asset class SEF, which will generate revenue by ‘driving terminal sales’, which will offset the high regulatory cost of becoming a SEF.
However, if market participants access liquidity from a number of SEFs, (perhaps via a single dealer platform), using SEF Aggregation rather than directly via the Bloomberg terminal, then Bloomberg’s business model may need to change. Ben argues therefore, that SEF Aggregators should be subject to the same regulatory ‘burden’ or rules as the SEF themselves.
My view: Commercially, SEFs need to set their costs accordingly, and decide how they charge for terminal vs API access, and what is their business model.
But to argue that SEF aggregators should be subject to the same ‘regulatory’ cost burden as SEFs is surely not correct.
We have covered this the topic of SEFs not liking the idea of being aggregated last year here:
Under the SEF rules, clients face the daunting prospect of 20-30 SEFs preparing for launch. How do they ensure they can access the ‘best’ SEF liquidity in such a scenario? Hence the notion of single dealer platforms fighting back against the SEFs, by becoming SEF aggregators.
However, when the tables are turned and SDPs look to become aggregators of SEF liquidity (for the benefit of their clients), it seems that the multi-dealer platforms start objecting to the very same value proposition that they used to attract clients to their platforms, cont: here