Although the Commodities Futures Trading Commission’s (CFTC) Swap Execution Facility (SEF) regulations went into effect Monday (with a compliance date of Oct. 2, 2013), a survey by the TABB Group found that the workflow for swaps trading will largely remain the same.
As a result of the Dodd-Frank Act, the CFTC ruled that swaps must be traded on registered SEFs, but in a final ruling, the commission allowed voice trading and reduced the request for quote (RFQ) minimum from five market participants to two/three (two during the introductory phase and three after Oct. 2, 2014).
TABB’s research determined that a voice RFQ SEF should emerge out of these regulations, and this type of platform would enable large-scale trading similar to the way trading has occurred in the past.
“A Voice RFQ SEF represents the most familiar trading protocol for many buy-side and sell-side traders who wish to continue transacting in size,” says Will Rhode, TABB’s director of fixed income research. “The new rules favor the pre-existing swaps trade workflow.”
Participants in TABB’s survey expect 24% of the overall swaps market to be traded via voice RFQ by 2015.
Swaps Trading to Remain Similar Despite New Regulations, Says Survey
Although the Commodities Futures Trading Commission’s (CFTC) Swap Execution Facility (SEF) regulations went into effect Monday (with a compliance date of Oct. 2, 2013), a survey by the TABB Group found that the workflow for swaps trading will largely remain the same.
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