What next after SEFs?


Just finished listing to an interesting webcast on Global OTC market reforms, and where next after the US and SEFs?

Celent analyst Anshuman Jaswal, gave overview of market, SEF volumes to date, and possible differences in regulatory treatment and approach in Europe and Asia.

Some key points form slide deck and a couple of slides below.

SEF and OTFs are critical components in evolution of the market from OTC non-standardised bilaterally cleared to standardised electronically traded and centrally cleared swaps.

SEF-OTF shift to standardised swaps

Celent slide on shift to standardised swaps

In terms of SEF volumes over the first 7 weeks, the wholesale interdealer brokers (IDBs) have tended to dominate SEF volumes in interest rate swaps (IRS) and FX (NDFs), and Bloomberg dominates in Credits.

SEF market shares

Celent slide on SEF volumes

Regarding possible differences in regulatory treatment in Europe between Organised Trading Facilities (OTFs) and US SEFs, some points noted were:

  • Key aspects of ESMA rules make it difficult to obtain equivalence determinations for firms operating in both US and Europe
  • Waivers already exist in Europe, and will continue, leading to concerns that ESMA rules may not meet the G-20 commitments to trade execution and transparency
  • If European execution rules are deemed non-equivalent, European platforms may have to meet Dodd-Frank rules for transactions involving US persons, whilst complying with European rules simultaneously
  • Key liquidity venues will need to offer multilateral trading facility (MTF) and an SEF alongside one another

SEF equivalence in Asia is uncertain

  • Absence of execution mandate in most of Asia provides little incentive for firms to trade on SEF equivalents
  • Many Asian participants (and regulators) don’t see SEFs as being substantially different from traditional broker model, hence off-SEF trading is expected to continue
  • Japan to enforce execution mandate from 2015, but currently little incentive for Japanese firms to trade on SEF
  • Likely to see bilateral execution with central clearing and reporting in Asia

2 Responses

  1. […] Just finished listing to an interesting webcast on Global OTC market reforms, and where next after the US and SEFs? Single Dealer Platforms: What next after SEFs? […]

  2. […] Just finished listing to an interesting webcast on Global OTC market reforms, and where next after the US and SEFs? Single Dealer Platforms: What Next After SEFs? […]

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