Anish Puaar at the Trade looks at the progress being made by market operators to bring offerings to the market that allows users to trade OTC derivatives, in line with the Dodd-Frank Act.
Under Title VII of the Dodd-Frank Act, OTC derivatives are required to be standardised where possible so they can be traded on newly-created trading platforms known as swap execution facilities (SEFs). Dodd-Frank also requires the central clearing of swaps, where possible, and the reporting of trades to swap data repositories.
The article looks at some of the leading SEFs, focusing on the progress that Bloomberg is making. It points out that other firms – FXall, MarketAxess Tullett Prebon, State Street and TeraExchange – will likely all register as SEFs.
GreySpark summarises how the landscape is looking, point out that the larger, incumbent derivatives venue operators are already taking steps to connect to central counterparties and support reference data protocols like legal entity identifiers. This is in comparison with newer entrants, which are focused on developing value-added services, in a bid to gain market share.
Additionally, GreySpark maintains that futurised swaps will not cause a substantial diversion of the potential liquidity available on SEFs – there are fundamental differences between swaps and swap futures that make each type of instrument appeal to different market participants