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Robot Risk Managers Excite Swap Market-Makers

By Lukas Becker
Published September 1, 2014 Risk.net

In the swap market of tomorrow, prices will be made, executed and risk managed by algorithm – a low-cost, high-volume vision of the future that has obvious appeal for a business struggling to hit its return targets. The idea has been held back by a lack of electronic venues with which robot traders can interact, but the arrival of swap execution facilities (Sefs), which are required to offer order-book trading, brings it a big step closer.

"Everyone is looking at this right now. I don't think there is a bank on the street that isn't exploring automated hedging," says the head of fixed-income e-commerce at one UK bank.

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CDS Notional Continues Decline by 27%

By Beth Shah
Published August 26, 2014 Global Capital

ISDA reported that there was a 33% decrease in the notional cleared for CDS and 41% less executed on swap execution facilities, compared with the previous week. Rates also saw a decrease, with 18% less volume cleared, and 21% less executed on SEFs last week.

The total notional cleared only dropped to 74% in both asset classes, with a 6% drop in CDS, and 5% decline in rates. The total notional executed on SEFs also dropped in CDS and rates; 13% to 56%, and 5% to 47%, respectively.

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CFTC Issues No-Action Relief on Confirmations of Uncleared Swap Transactions

Published August 20, 2014 Hedgeweek

The US Commodity Futures Trading Commission (CFTC) has issued a no-action letter providing swap execution facilities (SEFs) time-limited, conditional relief from certain data reporting and record-keeping requirements in relation to confirmations required for uncleared swap transactions.

The no-action relief provided will expire at midnight (EDT) on 30 September 2015.

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SEFs Receive a 12-Month Documentation Reprieve

By Rob Daly
Published August 19, 2014 The Trade

Swap execution facility (SEF) operators are breathing a little easier as the Commodity Futures Trading Commission (CFTC), the US derivatives regulator, has given SEFs conditional relief from certain recordkeeping requirements relating to confirmations of uncleared swaps.

The CFTC’s Regulation 37.6(b) states that a SEF is to provide each counterparty to a transaction entered into on or pursuant to the rules of the SEF with a written record of all terms of transactions, which supersedes any previous agreement and serves as the confirmation of the transaction.

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CDS Notional Drops by 30%

By Beth Shah
Published August 18, 2014 Global Capital 

ISDA reported that there was a 31% decrease in the notional cleared for CDS and 32% less executed on swap execution facilities, compared with the previous week. Rates saw an increase, with 11% more volume cleared, and 14% more executed on SEFs last week.

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SEFs: Volatility, Please

Published August 5, 2014 Markets Media

Aside from the shifting regulatory playing field and buy-side unfamiliarity with the structure, there is a more fundamental cause behind the slow start of swap execution facilities: low volatility that has dimmed the appeal of trading swaps.

tpSEF ranked second in interest-rate volume through midyear with a notional $8.2 trillion in swaps traded, behind ICAP’s $21.9 trillion, according to Futures Industry Association data. Bloomberg, GFI and Tradeweb led in credit default swaps, while BGC and GFI led in foreign exchange. The SEF business commenced earlier this year via regulatory fiat, and market participants and observers note the numbers reported so far are tiny relative to the market’s potential.

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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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