As part of FOW's interest rates special Galen Stops examines the future role of SEFs amid delays in rulemaking, stringent margining requirements and innovation elsewhere.
In October 2012, Adam Sussman of
Tabb Group released a report entitled, 'The Death of a SEF: The
Coroner's Report'. For a market concept that had yet to be
born, this was a damning verdict. Swap Execution Facilities
were the US regulators' answer to the G20 mandate to trade OTC
contracts electronically where possible; how is it possible
that such an important pillar in the new world of swaps trading
could be dead on arrival?
In the US it was initially
assumed that SEFs would be the biggest beneficiaries of the new
regulation as the bulk of the massive interest rate swap market
and other OTC asset classes would migrate on to these
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