Sefs and ‘Permitted Transactions’


Another interesting development in the adoption of the SEF rules which come into force today.

In addition to listing mandated products (that are mandated to trade on a SEF and be cleared via a CCP), a SEF may list products that are not mandated to trade (or clear). Such transactions would be termed ‘Permitted Transactions’. Which on the face of it doesn’t sound a bad thing.

In order for a multiple-to-multiple platform to trade ‘mandated products’, it must register as a SEF as outlined in the SEF rules. To date eight platforms (Bloomberg, GFI, MarketAxess, Tradeweb , TeraExchange SwapEx,  and just today Integral,) have applied to register as SEFs, and to date only Bloomberg has received temporarily clearance to operate as a SEF.  ICE just announced (6th Aug) that they will launch Ice Swap Trade which will operate as a SEF).

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

However, and here’s the rub, under SEF rules there is a small footnote 88 which states that:

“any multiple-to-multiple trading venue, which lists Permitted Transactions MUST register with the CFTC as a SEF, even if they only trade Permitted Products.” (see DavisPolk page 3)

The end date to register as a SEF being 2nd October 2013, so what does this mean for the multi-bank ‘many-to-many’ platforms trading swaps which have not yet registered as SEFs, and are currently trading ‘permitted products’?

FXWeek covers this topic today, and talks of a frantic scramble by some of these platforms to register as SEFs, and get huge client agreements in-place in order to support the SEF regime.

Should platforms fail to register by that date, the beneficiaries of the ‘permitted products’ rule could well be Single-Bank platforms and good old voice execution!

PWCRegulatory has good summary of rules here

4 Responses

  1. Reblogged this on The OTC Space and commented:
    Chaos in the FX execution space as CFTC rules bite

  2. […] The SEF rules have now entered into force thus starting the countdown to the deadline for mandatory trading via SEFs. For example the last date for SEFs to apply for registration is October 2nd as SDP reports. […]

  3. […] 88 (permitted transactions) drove trading back to the phone – the exact opposite of the desired […]

  4. […] Sefs and ‘Permitted Transactions’ […]

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