Industry issues

Bank-backed initiative to ease SEF migration

A newly-launched industry initiative to standardise administrative messages on swap execution facilities (SEFs) aims to automate exchanges between dealers and clients across multiple swaps platforms.

The initiative, known as the Trading Enablement Standardization Initiative (TESI), will be facilitated by trading technology consultancy Etrading Software in conjunction with FIX Protocol Limited (FPL) to develop the administrative messages for SEFs.

The initiative is backed by a group of leading banks and aims to avoid errors caused by manual inputs and to simplify the use of SEFs for buy- and sell-side firms by creating an open industry standard protocol for client and trader enablement on SEFs.

"Broker dealers have realised that when SEFs go live the bilateral trading relationships with the buy-side need to migrate to these new platforms, and this will necessitate setting up and activating buy-side firms and their sell-side counterparts on these systems, which is a large-scale undertaking," said Sassan Danesh, managing partner of Etrading Software and co-chair of FPL's global fixed income committee, who will help lead the initiative.

So far, TESI members include BNP Paribas, Commerzbank, Credit Suisse, Goldman Sachs, J.P. Morgan, RBS, Société Générale and UBS and the first goal of the working group will be to ensure the smooth migration of swaps trading onto SEFs.

"TESI was created to standardised this process and the administrative messages that will define the trading relationship between the buy-side and the sell-side," Danesh said.

In later phases, the scope of the initiative may broaden to include other OTC cash and derivative markets, but initially will focus on fast client enablement, increasing operational efficiencies and streamlining straight-through-processing on SEFs.

"There's a lot of experimentation in the industry today because no one knows where this will settle down, but the RFQ model may initially attract more liquidity as it bears such close resemblance to current voice-based swaps broking," he said.

Danesh added that current absence of concrete go-live dates for SEFs means that if the initiative cannot form FIX protocols in time, it may implement a SEF message standard and later have it ratified as a FIX protocol.

Richard Henderson +1 212 217 6916 richard.henderson@information-partners.com