Friday, June 14, 2013 7:04:28 AM

Bloomberg sole SEF applicant so far

Almost a month after the Commodity Future Trading Commission's (CFTC) publication of its rules for swap execution facilities (SEF), the only applicant is the regime's leading detractor.

As of today, only Bloomberg SEF has submitted an application to the regulator to operate one of the new facilities, according to the CFTC website, which was done in the same week its legal action against the CFTC was thrown out.

The CFTC finalised the rules surrounding SEFs, which are an integral part of provisions in the Dodd-Frank Act to regulate the derivatives market, on 16 May, and registration has been open since 1 June.

The firm has hoped to force the regulator to reconsider its margining requirements, which would mean traders in swaps would need to set aside enough money to cover five days of unwinding their position, compared to one day for futures contracts.

Bloomberg argued the divergent margin requirements would drive business to futures exchanges and away from prospective SEF providers, but the case was thrown out. The court stated Bloomberg lacked evidence and based its legal action on a worst-case scenario assumption.

Despite the lack of formal applications, several prospective SEF operators told they were on track to finalise application paperwork soon.

The anticipated number of SEF providers has changed in the lead up to CFTC publication of the SEF rules.

FXall is one entity currently working through its SEF application, while State Street still plans to apply to become a SEF but could not provide further details.

GFI's SEF plans remain on course, and Market Axess says its application is progressing and it expects to file soon.

The issues surrounding margining brought up by Bloomberg do not seem to be getting in the way of SEFs being set up. It is thought that would-be SEFs will receive their provisional registration by the end of July and SEF execution is due to begin before 9 December.