New entrant swap execution facility (SEF) TeraExchange has entered an agreement with European inter-dealer brokers (IDBs) to provide swap execution certainty for counterparties wishing to meet US regulation.
Under Dodd-Frank Act rules, all swap trades involving US firms including foreign subsidiaries of US firms, whether trading domestically or internationally, must be executed through a Commodity Futures Trading Commission-registered SEF.
In a statement, TeraExchange said two European IDBs had initially begun working with the SEF, OTCex and RP Martin. Under the arrangement, IDBs’ dealers can execute through TeraExchange in addition to conducting pre-trade credit checks, reporting and central clearing.
“We offer a solution that takes away legal uncertainty and provides a clear path for regulatory compliance,” said Christian Martin, CEO of TeraExhange. “Markets and market participants need certainty to thrive - with these agreements in place the path is available for brokers and their dealers alike to move forward.”
Currently, 19 SEFs have received temporary approval from the Commission and trading began for many on 2 October, although crucial ‘made available to trade’ decisions from the regulator, expected in coming months, will intensify competition between the new venues.