How many SEFs will the market support?


There is a great post by Amir Khwaja of Clarus Financial over on Tabb Forum. Amir looks at the current SEF volumes and asks some questions about how many SEFs can the market support.

Amir’s post starts by asking the following question:

…. But is there enough volume to support all the swap execution facilities? Probably not.

He then looks at weekly volumes and then drills into market shares for IRSs (see below), and ends by asking the question:

Is there enough business for 10 SEFs in USD IRS? Definitely not.
Is there enough business for 7? Probably not.
Is there enough business for 5? Probably.
Is there enough business for 3? Most definitely.

As he says, we live in interesting times.

Interestingly, back in Jun 2011 I wrote:

…. we heard talk of between 30-40 SEFs platforms being registered, in reality the market would only support (by which I mean going to the expense of connecting to, and post liquidity to) a very limited number (by which I think we are talking in the region of 3-5 max/per asset class) of SEFs.

Extract below is from Amir’s Tabb Forum article

The article then goes on to show market share of SEF volumes:

  • There are 10 SEFs reporting some volume in USD IRS.
  • Of these, 3 currently are each <1% – Javelin, TrueEx, GFI – which leaves 7 with decent volumes.
  • Tullet leads with 22%.
  • Bloomberg and Tradition follow with 19.9% each.
  • Then ICAP and BGC, with 13.5% and 13.3%, respectively.
  • Then TW with 8.4%.
  • There are some changes in share over the 3-week period, with BBG, TW, DW and Tullet gaining over the other

Full post on Tabb Forum (free but password required) here

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