MarketAxess SEF and Traiana have completed the first live swap execution facility (SEF) trade with a pre-trade credit check.
Rules on SEF trading from the Commodity Futures Trading Commission (CFTC) mean clearing members are required to carry out credit checks on counterparties before execution.
As a result, several providers are developing platforms to enable rapid credit checking for SEF trades, among them pre- and post-trade specialist Traiana’s CreditLink service.
MarketAxess is the first approved SEF to fully integrate with CreditLink and was able to carry out a live trade on its platform.
An unnamed buy-side institution conducted the credit default swap index trade with JP Morgan acting as the clearing member on the trade.
Nick Solinger, head of product strategy and chief marketing officer at Traiana, said: “This trade represents the significant investment the entire industry has made into ensuring the transition to SEF trading is smooth for clients”.
CFTC rules require trade certainty for swaps, but SEFs are also anonymous trading platforms. As participants do not know which counterparties they are dealing with, pre-trade credit checking is needed to ensure trades can complete successfully.
“A seamless credit checking process is critical in helping participants maintain liquidity in the swap markets,” added Kevin McPherson, head of US sales for MarketAxess. “We have been working hard with all of the participants on our platform and the industry as whole to ensure the necessary infrastructure is in place well ahead of the SEF trading mandate.”
SEF trading is set to begin on 2 October, though market participants will not initially be mandated to trade on SEFs, which will follow later in 2013.