An excellent update to Tabb Group’s SEF barometer has just been published, which was based on a survey of over 150 participants (from dealers, buy-side and vendors).
Key findings are:
- Discontent is high on the final outcome of the swap rules, but consensus is low on the reasons why
- Exchanges are perceived to benefit the most from the new rules, as product standardization drives the swaps market closer to order book trading and accelerates the migration to swap futures
- With only five SEF applications filed so far with the CFTC (Bloomberg, GFI, MarketAxess, Tradeweb & TrueEx) liquidity is expected to concentrate as the industry backs the perceived winners. (**)
- 65% believe SEF trading will have started by the end of the year, with 46% expecting an active order book in rates to emerge within the first half of 2014
- Average trade sizes in every asset class are expected to decline by at least 25%, with the biggest declines expected in rates and credit instruments
- Prospects for single-dealer platforms have brightened as the rules exempt them from registration while simultaneously opening the door for them to trade permitted swaps
My comment, (**)= State Street registered their SEF SwapEx yesterday, so that brings the total to six firms having registered SEFs.
In response to what will be the role of Single-Bank Platforms (SDPs) under the SEF rules, an interesting change is seen, with SDPs viewed as not only co-existing with SEFs, but playing a more important role as a channel through which clients access swap liquidity, through a variety of trade protocols. Much as we have been saying in previous posts here, and in Caplin’s white paper SDPs in a cleared world.
Full report available from TABB here
I only have a brief contributor copy, but I have just seen a larger (possibly full version) seems to have been posted by someone here