SingleDealerPlatforms.Org

Yesterday I blogged about how banks should be doing more to ‘future proof’ their single dealer platforms, by providing tools and services that would enable clients to continue dealing on SDPs with greater confidence, whilst complying with the evolving regulatory landscape.

I touched on the idea that bank SDPs should consider providing routing capabilities for client requests through to SEFs for products such as NDFs and FX Options if required:

Route to SEF (for NDF/FX Options): Like with equities or futures, banks should prepare to enable clients to request price quotes for NDFs/FX options, and where those instruments mandated to (and actually are available) on a SEF, then route the request to the SEF, otherwise the bank will continue to quote, but all done from within the SDP.

So, it is interesting to note an article today in FXweek (sorry registration required), talking about FXAll looking at registering as a SEF to boost liquidity!

My thoughts continue to be:

FX Spots, Fwds, and Swaps which are exempt from Dodd Frank will continue to trade on the SDPs, although these instruments may be required to be reported to a trade repository.

NDF and FX Options which do fall under Dodd Frank may continue to trade on the banks SDP unless all the following criteria are fulfilled;
a) It’s a cleared product: meaning that a clearing house actually clears this instrument
b) It’s deemed available for trading on a SEF: meaning that the CFTC has deemed that a SEF does quote this instrument, and that it’s sufficiently liquid to trade on a SEF.
c) It’s in standard size and tenor (to be defined).

So, whilst Multi Dealer Platforms can continue to evolve and register as SEFs, I continue to believe that bank Single Dealer Platforms will also continue to evolve, to retain their position as the dominant relationship channel through clients access liquidity whether directly from the bank or routed to a SEF.

Filed under: Dodd Frank, FX, Regulation, Single-Dealer Platforms | Tagged: Dodd Frank, FX, MDP, NDF, SDP, SEF, single-dealer platform |