Single-Dealer Platforms and SEFs


This week saw the introduction of mandatory execution on new SEF platforms for certain standardised interest rate swaps. Such swaps will no longer be executed bilaterally between banks and their clients, but rather must be executed anonymously on SEFs.

The move to SEF trading has however been tentative, with many buy-side firms holding back, nonetheless by midweek some 74% of the 372 IRS trades were being executed on SEFs, according to data from Clarus.  Although there are 23 newly registered SEFs , the majority of business so far has tended to flow through to the incumbent inter-dealer platform SEFs.

But what about single-dealer platforms (SDP), how are banks managing the migration to SEF trading? Continue reading

CFTC Approves Javelin’s MAT submissions – whilst O’Malia calls the rules ‘flawed’!


The CFTC has just approved Javelin’s “self certified” list of Made Available to Trade (MAT) interest rate swap contracts. This means that from 15th February, in 30 days time, these products will be mandated to trade on SEFs or DCMs, and nowhere else (see below for full list of swaps).

However, it appears that Commissioner Scott D. O’Malia has concerns about the legality of the determination, as he has just released the following statement on the Made Available-to-Trade Determination. As we say, you really couldn’t make this stuff up!

It is hard to imagine a federal agency regulatory process that is more flawed than the Made Available-to-Trade (“MAT”) determination. The Commission staff has certified all interest rate benchmarks and related packaged transactions for mandatory trading on swap execution facilities (“SEFs”) or designated contract markets (“DCMs”), while at the same time, stated that it will consider some future action for all packaged transactions. And to complicate things further, the Commission has been excluded from a major regulatory decision that significantly reshapes current market infrastructure.

It gets worse, as he then goes on to say that:

Continue reading

Final Volcker Rules on Proprietary Trading


Five US agencies have released the final version of section 619 of the Dodd-Frank Act that governs proprietary trading, otherwise known as the “Volcker Rule”.

The five agencies being: Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Securities and Exchange Commission.

The rules would generally prohibit banks from:

  • Engaging in short term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account
  • Owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as ‘covered funds.’

The rules provide exemptions for certain activities which include; market making, underwriting, hedging, trading in certain government bonds, and organising and offering a hedge fund or private equity fund.

The rules however, limit these exemptions if they involve Continue reading

What next after SEFs?


Just finished listing to an interesting webcast on Global OTC market reforms, and where next after the US and SEFs?

Celent analyst Anshuman Jaswal, gave overview of market, SEF volumes to date, and possible differences in regulatory treatment and approach in Europe and Asia.

Some key points form slide deck and a couple of slides below.

SEF and OTFs are critical components in evolution of the market from OTC non-standardised bilaterally cleared to standardised electronically traded and centrally cleared swaps.

SEF-OTF shift to standardised swaps

Celent slide on shift to standardised swaps

In terms of SEF volumes Continue reading

CFTC issues temporary relief non US based Swap Dealers


The CFTC has issued temporary no action relief until 14 Jan 2014 for Certain Transaction-Level Requirements (see below for full list) for Non-U.S. Swap Dealers.

This relief comes on the back of concerns raised regarding compliance with certain Transaction Level Requirements by overseas based Swaps Dealers (Non-US SD), who enter into swaps with a non-US person, where those swaps are regularly arranged, negotiated, or executed by personnel or agents of the Non-U.S. SD located in the United States.

Prior to the relief, such transactions required Continue reading

Main SEFs in violation of equal access rules


Speaking at SEFCon IV conference in NY this week, Gary Gensler, Chairman of the CFTC said that Bloomberg, TradeWeb and MarketAxess are failing to provide impartial access as required under SEF rules.

The three main platforms, are giving the banks too much control over who their customers buy and sell with, in an attempt to preserve the existing dealer-client structure, and that they need to come inline with the CFTC equal access rules.

“What they are doing right now is a violation of Dodd-Frank and our rules,” he said at an event in New York. “They need to come into compliance,” he said. The limits at Tradeweb, MarketAxess and Bloomberg LP give an advantage to the dealers who created the swaps market in the 1980s, Gensler said. “They’re trying to keep exclusive to the dealers.”

More here on Bloomberg and Risk.Net and of course from Kevinonthestreet

Separately, Continue reading

CME granted Temporary SEF Status


Better late than never! The CFTC has granted the CME temporary SEF registration, bringing to 18 the number of platforms that have been granted temporary SEF registration.

No

SEF

Applied

Granted

SEF Status

1

BGC

04-Sep-13

19-Sep-13

Temp Status

2

Bloomberg

04-Jun-13

30-Jul-13

Temp Status

3

Dealer Web

03-Jul-13

06-Sep-13

Temp Status

4

GFI

22-Jul-13

13-Sep-13

Temp Status

5

Ice Swap Trade

05-Aug-13

20-Sep-13

Temp Status

6

Javelin

02-Aug-13

19-Sep-13

Temp Status

7

MarketAxess

15-Jul-13

16-Sep-13

Temp Status

8

SwapEx

30-Jul-13

13-Sep-13

Temp Status

9

Tradeweb

03-Jul-13

06-Sep-13

Temp Status

10

TrueEX

15-Jul-13

20-Sep-13

Temp Status

11

TeraExchange

30-Jul-13

19-Sep-13

Temp Status

12

360T

28-Aug-13

23-Sep-13

Temp Status

13

Integral

31-Jul-13

24-Sep-13

Temp Status

14

ICAP

03-Sep-13

27-Sep-13

Temp Status

15

Thomson Reuters

09-Sep-13

27-Sep-13

Temp Status

16

Tradition SEF Inc

09-Sep-13

25-Sep-13

Temp Status

17

Tullet-Prebon (tpSEF)

23-Aug-13

25-Sep-13

Temp Status

18

CME

17-Sep-13

04-Nov-13

Temp Status

19

Latam SEF

25-Sep-13

 

Exemption till 19 Nov

20

YieldBroker

27-Sep-13

 

Exemption till
1 Dec

21

GTX SEF LLC

30-Sep-13

 

 

22

SDX Trading LLC

01-Oct-13

 

 

The CFTC site has a section showing status of SEF filing applications.

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