SEF volumes according to Kevin


Over at Kevinonthestreet, Kevin McPartland has a very good post on why SEFs volumes really don’t matter at this stage.

Some key points from his post are:

  • Little incentive from largest buy and sell side market participants to change trading habits, despite 18 approved SEFs
  • No Made Available to Trade (MAD) applications have been made, and mandatory trading is months away
  • SEFs want SEFs, major market participants don’t want SEFs, and it’s just not clear what the CFTC wants
  • Footnote 88 (permitted transactions) drove trading back to the phone – the exact opposite of the desired result
  • Prior to October 2 clients traded 25% of index credit volume electronically, a

     proportion that took years to achieve.

    But after October 2, one large dealer-to-client SEF reported that electronic trading of index CDS on their platform was down 95% week-over-week (source Greenwich Associates Data)

  • Regulatory uncertainty left many clients concerned they might unknowingly violate rules, so they decided to take the safe route of staying away from SEFs altogether
  • Onerous SEF documentation and rulebooks
  • Pre-Credit credit checking for execution certainty via Limit Hubs not fully connected to platforms
  • Void Rules for trades that fail at clearing

CDS index electronic Trading

Full Post here

One Response

  1. […] Friday, Javelin one of the 18 newly registered SEFs, become the first SEF to apply to the CFTC for determination of products to be Made Available to […]

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