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Swaps Trading Between Europe and U.S. Declines

Published July 30, 2014 Markets Media

The International Swaps and Derivatives Association, the trade body for over-the-counter derivatives markets, said European dealers have been choosing not to trade with US dealers since swap execution facilities were introduced in the US.

Electronic trading platforms for swaps that provide access to US persons have been required to register as SEFs with US regulators and comply with new rules since October last year. On February 15 this year the first OTC interest rate swaps and credit index instruments became mandated for trading on SEFs in a process called made available to trade (MAT).

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Liquidity at Heart of MiFID Debate

By Christopher Whittall
Published July 26, 2014 IFR

As a consultation on landmark reforms that will irrevocably change the face of European financial markets draws to a close, a fundamental and deceptively simple question remains at the centre of the regulatory debate: how to define market liquidity.

At stake is the range of products that will be captured by beefed-up pre and post-trade transparency requirements under the EU’s Markets in Financial Instruments Directive and channelled into organised trading facilities – the equivalent of the US’s swap execution facilities.

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ICE’s Swap Execution Facility Head Barsoom to Leave in August

By Matthew Leising
Published July 18, 2014 Bloomberg

Peter Barsoom, president of Intercontinental Exchange Inc. (ICE)’s swap trading service, is leaving the company at the end of August.

For the past four years, Barsoom, 43, has helped Atlanta-based ICE develop futures contracts on credit-default swaps and build the company’s swap execution facility, ICE Swap Trade LLC, one of the venues mandated by the Dodd-Frank Act to increase transparency and competition in derivatives trading.

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CFTC Looks to Standardise SEF Data

By Daniel O'Leary
Published July 16, 2014 Global Capital

The US Commodity Futures Trading Commission has issued a private consultation paper to swap execution facilities that seeks to standardise data the facilities produce on their over-the-counter derivatives trading volumes.

A market official close to the situation noted CFTC proposed standards will only affect data the SEFs give to the regulator and not the public. He said misreporting trades is rife among the SEFs. Some are reporting variance swaps as interest rates for instance, while others have gaps and errors in the data they submit.

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New Dawn as Non-Bank Enters Interdealer Order Book

By Mike Kentz
Published July 12, 2014 IFR

Dodd-Frank’s intention to move over-the-counter swaps into an exchange-like format has taken another step towards reality, as one US firm has become the first non-bank to execute interest rate swaps within an interdealer broker’s anonymous order book platform.

“This could be a slippery slope with the interdealer trading community – you would want to be careful you’re not biting the hand that feeds you,” said Billy Hult, president of Tradeweb Markets, a competing SEF. “It’s tough to tell right now if there is really enough buyside interest to be a first-mover in this respect.”

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FIA Increases SEF Data Security

By Daniel O'Leary
Published July 10, 2014 Global Capital

Data surrounding swap execution facilities is increasingly becoming more accurate regarding the levels of trades executed on platforms, as the Futures Industry Association eliminates duplicate trade data.

A senior official at a major SEF based in New York said the FIA had imposed stricter disciplines on SEFs since it started tracking volumes.

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Bloomberg Sef Success Leads to Fee Criticism

By Peter Madigan
Published June 27, 2014 Risk

Bloomberg's rivals are not buying it. Fellow dealer-to-client incumbent Tradeweb operates a tiered pricing model in which the ticket cost for a buy-side participant can actually drop below $10 per trade if the client trades in sufficient quantity, but market sources say this income is supplemented by membership fees in the region of $1 million a year for dealers quoting prices on the platform. Tradeweb declined to comment on the existence or size of dealer membership fees.

"Bloomberg's business model is to keep adding value to the terminal service to make it indispensable to their clients. Making the terminal the entry point to their Sef, to the swap data repository (SDR) they have established, to their analytics, down to their instant messaging service, all these functions serve to increase client dependency on the terminal," says one interdealer broker.

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Industry Nervy as Esma Faces MiFID Liquidity Challenge

By Tom Osborn
Published June 26, 2014 Risk

Defining liquidity is not easy, but it’s a task the European Securities and Markets Authority (Esma) has a matter of months to complete, as it lays out the boundaries of a new trading and transparency regime for over-the-counter derivatives. There is only one certainty at this point – Esma’s decisions about what is liquid and what is not will slice up the OTC market in Europe, subjecting products and venues to very different pre- and post-trade disclosure requirements.

A May 22 discussion paper on the second Markets in Financial Instruments Directive (Mifid II) and its accompanying regulation (Mifir) has given market participants some insight into the regulator’s early thinking, and is already causing some jitters. There is not enough time to give Esma the data it needs, some say; others argue the three different waivers that can exempt a transaction from pre-trade disclosure, or defer post-trade reports, make the regime too complex; and there are fears that the resulting framework will be different enough from US swap execution facility (Sef) rules that another cross-border tug-of-war will ensue.

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Buy Side Eyes SEFs

Published June 25, 2014 Markets Media

For buy-side firms, swap execution facilities represent a new paradigm for OTC trading, one that they’re not yet fully embracing but which is nevertheless the object of substantial interest.

At several conferences over the past six to nine months, a hot topic of conversation has been electronic trading in general and SEFs in particular, according to John Griffin, senior risk manager at The Hartford Investment Management Co. (Himco).

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SEF Liquidity Vexes the Buy-Side

By Rob Daly
Published June 18, 2014 The Trade

If swap execution facilities (SEFs) want to see more institutional trading volume, they will need to raise their liquidity and improve front-end integration, according to PIMCO's executive vice president and senior operations manager, Cynthia Meyn.

The current 80,000 swap symbols, which trade across the 24 SEFs registered with the US Commodity Futures and Trading Commission (CFTC), shows how thin the liquidity on SEFs are for the buy-side, said Meyn during this week’s SIFMA Tech conference in midtown Manhattan. “There is not enough liquidity to provide the commoditised market for which an electronic request-for quote (RFQ) system would be suited.”

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