European firms should prepare for different outcomes from Mifid's swaps trading rules
By Enrico Bruni, managing director, head
of Europe and Asia business at Tradeweb
Right around the summer of 2013, just as
the final rules for swap execution facilities (SEFs) were being
entered into the Federal Register, many industry-watchers were
forecasting the impending death of the US swaps market. Critics
warned that the new rules would cause everything from
fragmentation of liquidity and low-latency arbitrage to an
outright exodus of OTC derivatives trading from the US.
In fact, the transition
to mandatory electronic trading of swaps in the US caused none
of this. Quite the opposite. Immediately following the mandate,
August 2013 report from Aite Group showed that US
derivatives market participants absorbed Dodd-Frank trading
requirements in stride, with cleared IRS and CDS trading volume
surging in the weeks following new clearing mandates and the
final SEF rules. Now, over three years after the mandate
was published, Clarus
Financial Technology reports that the total volume of USD
interest rate swaps trading taking place on SEF platforms is
continuing to thrive, with over $1.3 trillion in notional
trading in December 2016 alone.
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