Tabb research validates Caplin’s position on SDPs providing SEF Aggregation


At Caplin, we have long been saying that SDPs will provide SEF aggregation services (here, here, here , here  and here).

Faced with Dodd Frank mandate for SEF execution of cleared products, bank single dealer platforms (SDPs) would provide SEF aggregation and smart order routing services that enable their buyside clients to access liquidity, whether from the bank, or from SEFs.

So, it’s nice  to see Tabb Group research now confirm our view.

Despite the fact that swaps execution facilities (SEFs) don’t technically exist yet and swaps market liquidity isn’t fragmented today:

Swaps dealers tell TABB Group in a new research report that they intend to spend millions to create, implement and market swaps liquidity aggregation systems to their buy-side client base.

Kevin McPartland, from Tabb has just published a research report on this topic, extract here:

Executive Summary
Swaps liquidity is going to fragment. History tells us that a combination of available technology and catalyzing regulation, both of which now exist in the swaps market, creates an environment in which liquidity fragmentation across multiple electronic trading platforms is nearly inevitable. Regulatory reform will impact how this fragmentation takes place, but they will not prevent its coming.

This fragmentation presents an opportunity for dealers at risk of being disinter mediated by Dodd-Frank-inspired regulations, and technology companies that have had little opportunity in the overly manual swaps market. Aggregating liquidity via smart technology is common in other markets such as equities and FX; providers of such tools hope to make a splash with SEF aggregators using lessons they’ve learned from the past. Their enthusiasm is warranted, but creating SEF aggregators and advanced smart order routers for the swaps market is considerably more complex than it is for those other markets.

Full report on sale here

9 Responses

  1. […] and OTFs and cleared on CCPs. Paul has written extensively about the impact of these regulations on this blog, and discussed how some banks are looking to use their single-dealer platforms to route […]

  2. […] View on SDP routing to SEFs: As we have previously mentioned here, here and here, buyside firms will not want the cost of connecting to many SEFs, and we continue to see […]

  3. […] 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 […]

  4. […] paper Single-Dealer Platforms in a Cleared World,  (2nd paper in the list) recent posts (here, here and […]

  5. […] Platforms continue building SEF aggregation and client routing capabilities for mandated […]

  6. […] on a bilateral basis in standardised swaps, and bank Single-Dealer Platforms will instead provide SEF aggregation and routing capabilities of client orders through to one of the now 17 registered […]

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