on swap execution facilities (SEFs) may be depressed, but the market is
optimistically looking towards the next 18 months.
week, it was announced that James Cawley, CEO of Javelin, was stepping down
from his role at the helm of the SEF. Although he will continue to serve on the
company’s board, the move highlighted SEFs’ struggle to attract volume.
across the board have been underwhelming for any of the SEFs and I think it’s
going to be another 12 to 18 months minimum before we get traction. It’s still
anyone’s game,” Cawley told theTRADEnews.com.
“One has to remember that SEF rules only took effect on the
back of Javelin’s made available to trade (MAT) application in February, so the market has
only been open for business for 10 weeks. Yet the market isn’t really open
because we still have all sorts of exemptions.”
will be replaced by Wally Sullivan, a co-founder of Pulse Trading, which was
bought by State Street in 2011.
rules cover both interest rates swaps (IRS) and credit derivatives, and are
part of sweeping new rules to bring light to the opaque OTC derivatives market
under the Dodd-Frank Act.
MAT rules are the de facto mandatory trading requirement for SEFs and require
platforms to submit to the Commodity Futures Trading Commission (CFTC) a list
of products to be traded on their SEF.
latest SwapInfo data in the week ending 2 May shows trading on SEFs went up by
7% when compared to the previous week, with an increase from 6,166 to 7,309
comparing IRS trades that were cleared (9,868) with those that are trading on
SEFs (7,309), SwapInfo shows about 74% of cleared trades go through SEFs.
the numbers have been fluctuating. In the week ending 25 April, IRS trading on
SEFs dropped by 16% and the week ending 18 April, it fell by 8%.
Swaps Info uses data from swap data repository the Depository Trust and
SEFs, including Tradeweb, have been vocal about the lack of buy-side
participation in SEFs. Packaged
trades on SEFs – trades that include groups of products, for instance a number
of swaps, or a swap and a bond – have been seen as a solution to get the buy-side
CEO, Lee Olesky, said the market would see incremental increases in SEF volume
as a greater portion of the swaps market is mandated to trade with each new
comprise a significant amount of the trading that the broader asset management
community uses to invest in derivatives, and we expect an uptick in trading as
they start to streamline this type of trading on electronic platforms like
Tradeweb,” Olesky said.
transition to electronic trading of derivatives has always been an evolution.
We’ve been supporting swaps trading on our platforms since 2005, and we never
expected a wholesale change overnight.”
CFTC last week officially announced the phase in of packaged trades. From May
15, all packaged transactions in which all components are swaps that have been
MAT will have to be executed on a SEF. From then on, other components will be
phased in until 15 November.
Owens, director of fixed Income at Woodbine Associates, said the CFTC’s phased
approach was reasonable and would eventually lead to more volume being traded
is going to change but given the phase in, it hasn’t been enough to spark
widespread market change yet. As more trades and more types of swaps are
migrated on to SEFs, I think most people expect to see the market evolve,” he