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Swap Execution Facility
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<h2 id="regulation">Regulation</h2> <ul><li>The <a href="/facts/U.S._Securities_and_Exchange_Commission/IM9Pl2gK">Securities and Exchange Commission</a> (SEC) is responsible for regulating dealing and trading in security-based swaps, such as many equity swaps and credit default swaps. Proposed rules for security-based Swap Execution Facilities (SB-SEFs) have been pending since 2011.<a class="footnote-ref" id="fnref:10" href="#fn:10"><sup>10</sup></a></li> <li>The <a href="/facts/Commodity_Futures_Trading_Commission/CkMVRt4h">Commodity Futures Trading Commission</a> (CFTC) is responsible for regulating the dealing and trading of a much wider range of over-the-counter derivatives, including interest-rate swaps, <a href="/facts/Commodity_swap/RcNo7K7L">commodity-linked swaps</a> and certain FX, credit default swaps, and equity swaps. CFTC Commissioner <a href="/facts/Bart_Chilton/UPh8XLVT">Bart Chilton</a> suggested that the primary benefits will be greater transparency, improved price formation, and better regulatory compliance. The CFTC's final SEF rules went into effect in August 2013 and the first SEFs began operating in October 2013. Previously operating swap trading platforms with multiple-to-multiple trading capability within the regulatory definition of "swap execution facility" could no longer operate legally without registering with the CFTC.<a class="footnote-ref" id="fnref:11" href="#fn:11"><sup>11</sup></a><a class="footnote-ref" id="fnref:12" href="#fn:12"><sup>12</sup></a> The SEF launch on October 2, 2013, was facilitated by a CFTC guidance letter and several conditional and time-limited grants of relief from enforcement against non-compliance with certain technical elements.<a class="footnote-ref" id="fnref:13" href="#fn:13"><sup>13</sup></a> However, the CFTC in its no-action letters did not grant relief for SEFs from the October 2, 2013 deadline requiring swap trading venues to register. The CFTC regulations further require SEF's to report certain data arising from the execution of a swap to a swap data repository either for real-time public dissemination or confidential regulatory use. Regulations require that if a swap is executed on a SEF, the SEF must provide written confirmation of the terms to each <a href="/facts/Counterparty/Fvl8gRHb">counterparty</a>.<a class="footnote-ref" id="fnref:14" href="#fn:14"><sup>14</sup></a> After the CFTC certified Javelin Capital Markets SEF's Made Available to Trade (MAT) Submission on January 16, 2014, certain swaps were required to trade on SEFs as of February 15, 2014.<a class="footnote-ref" id="fnref:15" href="#fn:15"><sup>15</sup></a></li></ul> <h2 id="entities-in-the-swaps-industry">Entities in the swaps industry</h2> <h3>Established entities</h3> <ul><li><a href="/facts/TrueEX_Group/8shhY5eq">TrueEX Group</a> <a href="https://www.trueex.com">[1]</a></li> <li><a href="/facts/ICAP_(company)/nq3zJ82Q">ICAP (company)</a> <a href="http://www.icap.com/markets/swap-execution-facility.aspx">[2]</a></li> <li>360 Trading Networks <a href="http://www.360t.com/cnt_sitedata/financial_regulation_sef_swap_execution_facility.php">[3]</a></li> <li>AEGIS Markets <a href="https://aegis-markets.com/">[4]</a></li> <li><a href="/facts/Bloomberg_L.P./2NCtubRH">Bloomberg L.P.</a><a href="https://www.bloomberg.com/pressroom/bloomberg-facilitates-execution-clearing-of-cds-irs-e-trades-2/">[5]</a></li> <li><a href="/facts/BGC_Partners/uqot5DSb">BGC Partners</a> <a href="http://www.bgcpartners.com/products-and-services/credit/">[6]</a></li> <li><a href="/facts/CME_Group/bpf00HVj">CME Group</a> <a href="http://www.cmegroup.com/market-data/repository/swap-execution-facility.html">[7]</a></li> <li><a href="/facts/LCH.Clearnet/wxrq8q3I">LCH.Clearnet</a> <a href="http://www.lchclearnet.com/swaps/swapclear_for_clearing_members/">[8]</a></li> <li>Eris Exchange <a href="http://www.erisfutures.com/sites/default/files/pdf/PRESS%20RELEASE%20ERIS%20SWAPBOOK%20LAUNCH%20AND%20OIS%20DISCOUNTING%20MAY%2019%202011.pdf">[9]</a></li> <li><a href="/facts/Eurex/AewsTSTz">Eurex</a> <a href="http://www.eurexclearing.com/clearing-en/cleared-markets/eurex-exchange/">[10]</a></li> <li>FX Alliance Inc. (FXall) (NYSE: FX) <a href="http://www.fxall.com/about/news--press/fxall-clients-trading-china-cnh-spot-forwards-and-swaps">[11]</a> engaged with <a href="/facts/National_Futures_Association/YE92a48h">National Futures Association</a> to perform regulatory services</li> <li><a href="/facts/GFI_Group/IAjkX5mW">GFI Group</a> <a href="https://web.archive.org/web/20100824062008/http://www.gfigroup.com/markets/credit/single-name-credit-default-swaps.aspx">[12]</a> engaged with <a href="/facts/National_Futures_Association/YE92a48h">National Futures Association</a> to perform regulatory services</li> <li>GTX SEF <a href="http://www.gaingtx.com/SEF">[13]</a></li> <li>ICE <a href="/facts/Intercontinental_Exchange/ruHmEYmY">Intercontinental Exchange</a> <a href="https://www.theice.com/productguide/ProductGroupHierarchy.shtml?groupSummary=&group.groupId=3">[14]</a> <a href="https://web.archive.org/web/20100118160638/https://www.theice.com/ice_trust.jhtml">[15]</a> <a href="https://www.theice.com/clear_europe.jhtml">[16]</a> <a href="http://ir.theice.com/releasedetail.cfm?ReleaseID=591734">[17]</a> Creditex <a href="http://ir.theice.com/releasedetail.cfm?ReleaseID=559281">[18]</a></li> <li>IDC International Derivatives Clearinghouse <a href="http://www.idcg.com/">[19]</a></li> <li>Javelin Capital Markets <a href="http://www.thejavelin.com/">[20]</a></li> <li>LatAm SEF <a href="http://latamsef.com/">[21]</a></li> <li>MarketAxess Holdings <a href="http://www.marketaxess.com/trading/cds-reform.php">[22]</a> engaged with <a href="/facts/National_Futures_Association/YE92a48h">National Futures Association</a> to perform regulatory services</li> <li>Nodal Exchange <a href="http://www.nodalexchange.com/products_and_services/overview.php">[23]</a> <a href="http://www.nodalexchange.com/about_nodal/press_room/news_items/Dodd-Frank%20and%20the%20Move%20to%20Clearing.pdf">[24]</a></li> <li>Clear Markets <a href="http://www.clear-markets.com/">[25]</a></li> <li>Parity Energy <a href="http://www.parityenergy.com/node/266">[26]</a></li> <li>SwapEx <a href="/facts/State_Street_Corporation/fRbAPUpN">State Street Corporation</a> <a href="http://www.statestreet.com/wps/wcm/connect/4c167e804a2ce7e495139fed29523c35/SEF+Release+Feb+15+2012.pdf?MOD=AJPERES&CONVERT_TO=url&CACHEID=4c167e804a2ce7e495139fed29523c35">[27]</a></li> <li>TeraExchange <a href="http://teraexchange.com/">[28]</a></li> <li><a href="/facts/Thomson_Reuters/GPIlfqa2">Thomson Reuters</a> <a href="http://thomsonreuters.com/products_services/financial/financial_products/foreign_exchange/spot_fx/">[29]</a></li> <li><a href="/facts/Tradeweb/7eCq1CIG">Tradeweb</a> <a href="/facts/Tradeweb/7eCq1CIG">Tradeweb</a> <a href="/facts/Thomson_Financial/3XqQK5rR">Thomson Financial</a> <a href="http://www.tradeweb.com/Blog/The-Role-of-a-Swap-Execution-Facility-%28SEF%29/">[30]</a></li> <li>Tradition <a href="https://www.tradition.com/products/capital-markets/interest-rate-swaps.aspx">[31]</a></li> <li>Trumarx <a href="http://www.trumarx.com/">[32]</a></li> <li><a href="/facts/Tullett_Prebon/lT9aBryD">Tullett Prebon</a> <a href="http://www.tullettprebon.com/swap_execution_facility/index.aspx">[33]</a></li> <li><a href="/facts/SuperDerivatives/wIxCCCpR">SuperDerivatives</a> <a href="https://www.superderivatives.com/SDXTrading.aspx">[34]</a></li></ul> <p>Many of the foregoing entities, directly or through affiliates, have pending or temporarily approved SEF registrations with the CFTC.<a class="footnote-ref" id="fnref:16" href="#fn:16"><sup>16</sup></a> SEFs with temporary registrations may operate for up to two years while the CFTC completes a full review of the SEF's application on Form SEF. </p> <h3>Emerging entities</h3> <p><i>Note: above established entities section is for firms that had significant swaps business ahead of the sweeping regulatory reform. The following list is oriented to newer entrants (emerging after the Dodd-Frank Act), representing less established participants. As such this section will necessarily be more illustrative than fully up to date, and likely somewhat transitory.</i> </p> <ul><li>Broadway Technology <a href="http://www.broadwaytechnology.com/press05162012">[35]</a></li> <li>Cleartrade Exchange <a href="http://www.thecleartrade.com/">[36]</a></li> <li>ClearingandSettlement.com <a href="http://ClearingandSettlement.com/">[37]</a></li> <li>DerivaTrust <a href="http://derivatrust.com/">[38]</a> <a href="http://mpra.ub.uni-muenchen.de/38188/1/MPRA_paper_38188.pdf">[39]</a></li> <li>eDeriv <a href="http://ederiv.com/index.php">[40]</a></li> <li>First Derivatives <a href="http://www.firstderivatives.com/">[41]</a><a href="http://www.firstderivatives.com/downloads/RNS_James_Sanders_Appointment_15.03.13.pdf">[42]</a></li> <li>Integral Development Corp. <a href="https://www.integral.com/">[43]</a><a href="http://www.integral.com/about_integral/news_and_events/press_releases/2013_may_17.htm">[44]</a></li> <li>trueEX LLC <a href="http://www.trueex.com">[45]</a></li> <li>AEGIS Markets <a href="https://aegis-markets.com/">[46]</a><a href="https://aegis-hedging.com/news/cftc-approves-aegis-swap-execution-facility/">[47]</a></li></ul> <h2 id="see-also">See also</h2> <ul><li><a href="/facts/Central_counterparty_clearing/47SkkKwP">Central counterparty clearing</a></li> <li><a href="/facts/Clearing_house_(finance)/JoG7u9lX">Clearing house (finance)</a></li> <li><a href="/facts/Swap_(finance)/koSzDf30">Swap (finance)</a></li> <li><a href="/facts/International_Swaps_and_Derivatives_Association/mNn9fWk3">International Swaps and Derivatives Association</a></li> <li><a href="/facts/Credit_derivatives/x8LVurhx">Credit derivatives</a></li> <li><a href="/facts/Credit_default_swap/PPsAwQhs">Credit default swap</a></li> <li><a href="/facts/Currency_swap/fPa4X43m">Currency swap</a></li> <li><a href="/facts/Forex_swap/jaj0d1QN">Forex swap</a></li> <li><a href="/facts/Interest_rate_swap/cJyud3Jn">Interest rate swap</a></li> <li><a href="/facts/Energy_derivative/ysY3loga">Energy derivative</a></li> <li><a href="/facts/Multilateral_trading_facility/PIwJMhbI">Multilateral trading facility</a></li></ul> <h2 id="external-links">External links</h2> <ul><li><a href="http://chicagofed.org/digital_assets/publications/understanding_derivatives/understanding_derivatives_chapter_3_over_the_counter_derivatives.pdf:">Understanding Derivatives: Markets and Infrastructure - Chapter 3, Over-the-Counter (OTC) Derivatives Federal Reserve Bank of Chicago, Financial Markets Group</a></li> <li><a href="http://www.isda.org/">ISDA - International Swaps and Derivatives Association, Inc.</a></li> <li><a href="http://contracts.onecle.com/type/213.shtml">Sample ISDA Master Agreements</a></li> <li><a href="http://www.isda.org/cgi-bin/_isdadocsdownload/download.asp?DownloadID=84">Sample ISDA Credit Derivatives Template</a></li> <li><a href="http://www.riskfocus.com/role-of-swap-execution-facilities-sef-in-derivatives-trade-execution-clearing-reporting-part-1/">Role of Swap Execution Facilities (SEFs) in Derivatives Trade Execution, Clearing and Reporting</a></li></ul> <h2 id="references">References</h2> <ol> <li id="fn:1"><p>"MORGAN STANLEY & CO. LLC FIRM-SPECIFIC DISCLOSURE DOCUMENTS PURSUANT TO CFTC RULE 1.55" (PDF). www.morganstanley.com. Morgan Stanley. Retrieved September 28, 2015. <a href="http://www.morganstanley.com/institutional/sales/pdf/msco/MSCO_2014_FCM_Firm_Disclosures.pdf" target="_blank">http://www.morganstanley.com/institutional/sales/pdf/msco/MSCO_2014_FCM_Firm_Disclosures.pdf</a> <a href="#fnref:1" class="footnote-back-ref">↩</a></p></li> <li id="fn:2"><p>"Derivatives: SEFs - Opening Bell Sounds" (PDF). www.pwc.com.PwC Financial Services Regulatory Practice, June, 2013 <a href="http://www.pwc.com/en_US/us/financial-services/regulatory-services/publications/assets/fs-reg-brief-derivatives-sefs-opening-bell-sounds.pdf" target="_blank">http://www.pwc.com/en_US/us/financial-services/regulatory-services/publications/assets/fs-reg-brief-derivatives-sefs-opening-bell-sounds.pdf</a> <a href="#fnref:2" class="footnote-back-ref">↩</a></p></li> <li id="fn:3"><p>H.R. 4173, § 733 <a href="https://www.congress.gov/bill/111th-congress/house-bill/4173" target="_blank">https://www.congress.gov/bill/111th-congress/house-bill/4173</a> <a href="#fnref:3" class="footnote-back-ref">↩</a></p></li> <li id="fn:4"><p>Tett, Gillian (May 12, 2009). Fool's Gold. New York: Simon & Schuster. p. 25. ISBN 9781439100752. <a href="9781439100752" target="_blank">9781439100752</a> <a href="#fnref:4" class="footnote-back-ref">↩</a></p></li> <li id="fn:5"><p>"Over-the-Counter (OTC) Derivatives" (PDF). chicagofed.org. <a href="http://chicagofed.org/digital_assets/publications/understanding_derivatives/understanding_derivatives_chapter_3_over_the_counter_derivatives.pdf" target="_blank">http://chicagofed.org/digital_assets/publications/understanding_derivatives/understanding_derivatives_chapter_3_over_the_counter_derivatives.pdf</a> <a href="#fnref:5" class="footnote-back-ref">↩</a></p></li> <li id="fn:6"><p>"The path forward for EU-US derivatives regulation". Robert J. Dilworth, James E. Schwartz and Marissa N. Golden, International Financial Law Review, September 2013 (Euromoney Publications). <a href="http://www.iflr.com/Article/3247985/The-path-forward-for-EU-US-derivatives-regulation.html" target="_blank">http://www.iflr.com/Article/3247985/The-path-forward-for-EU-US-derivatives-regulation.html</a> <a href="#fnref:6" class="footnote-back-ref">↩</a></p></li> <li id="fn:7"><p>McPartland, Kevin (Spring 2011). "Different strokes". markit magazine. p. 24. <a href="https://content.markitcdn.com/corporate/Company/Files/MagazineEntireIssue?CMSID=77f9b13ddf924f86826bf6c47fe724a0" target="_blank">https://content.markitcdn.com/corporate/Company/Files/MagazineEntireIssue?CMSID=77f9b13ddf924f86826bf6c47fe724a0</a> <a href="#fnref:7" class="footnote-back-ref">↩</a></p></li> <li id="fn:8"><p>Mackenzie, Michael (September 16, 2014). "Swaps traders resist moves to increase use of platforms". Financial Times. <a href="https://www.ft.com/intl/cms/s/0/6b43d7fa-215e-11e4-a958-00144feabdc0.html#axzz3n2aiUnSQ" target="_blank">https://www.ft.com/intl/cms/s/0/6b43d7fa-215e-11e4-a958-00144feabdc0.html#axzz3n2aiUnSQ</a> <a href="#fnref:8" class="footnote-back-ref">↩</a></p></li> <li id="fn:9"><p>"CFTC Seeks Public Comment on Certification from Javelin SEF, LLC to Implement Available-to-Trade Determinations for Certain Interest Rate Swaps". CFTC. <a href="https://www.cftc.gov/PressRoom/PressReleases/pr6742-13" target="_blank">https://www.cftc.gov/PressRoom/PressReleases/pr6742-13</a> <a href="#fnref:9" class="footnote-back-ref">↩</a></p></li> <li id="fn:10"><p>"SEC Proposes Rules for Security-Based Swap Execution Facilities". United States Securities and Exchange Commission. <a href="https://www.sec.gov/news/press/2011/2011-35.htm" target="_blank">https://www.sec.gov/news/press/2011/2011-35.htm</a> <a href="#fnref:10" class="footnote-back-ref">↩</a></p></li> <li id="fn:11"><p>"SEF Registration Requirements and Core Principle Rulemaking, Interpretation & Guidance". United States Commodity Futures Trading Commission. <a href="https://www.cftc.gov/LawRegulation/DoddFrankAct/Rulemakings/DF_13_SEFRules/index.htm" target="_blank">https://www.cftc.gov/LawRegulation/DoddFrankAct/Rulemakings/DF_13_SEFRules/index.htm</a> <a href="#fnref:11" class="footnote-back-ref">↩</a></p></li> <li id="fn:12"><p>Swapping Opinions, FIXGlobal, September 2011 <a href="http://fixglobal.com/content/swapping-opinions" target="_blank">http://fixglobal.com/content/swapping-opinions</a> <a href="#fnref:12" class="footnote-back-ref">↩</a></p></li> <li id="fn:13"><p>"CFTC Issues Guidance, Exemptions In Advance of SEF Rule Compliance Date". Peter Y. Malyshev et al., Latham & Watkins LLP Derivatives Practice, October 17, 2013. <a href="http://www.lw.com/thoughtLeadership/SEF-no-action-letters" target="_blank">http://www.lw.com/thoughtLeadership/SEF-no-action-letters</a> <a href="#fnref:13" class="footnote-back-ref">↩</a></p></li> <li id="fn:14"><p>"Derivatives: CFTC Shutdown, SEFs Open" (PDF). www.pwc.com. PwC Financial Services Regulatory Practice, October, 2013. <a href="http://www.pwc.com/en_US/us/financial-services/regulatory-services/publications/assets/fs-reg-brief-sefs.pdf" target="_blank">http://www.pwc.com/en_US/us/financial-services/regulatory-services/publications/assets/fs-reg-brief-sefs.pdf</a> <a href="#fnref:14" class="footnote-back-ref">↩</a></p></li> <li id="fn:15"><p>"The Commodity Futures Trading Commission Staff Announces Trade Execution Mandate for Certain Interest Rate Swaps". www.cftc.gov.The Commodity Futures Trading Commission, January, 2014 <a href="https://www.cftc.gov/PressRoom/PressReleases/pr6831-14" target="_blank">https://www.cftc.gov/PressRoom/PressReleases/pr6831-14</a> <a href="#fnref:15" class="footnote-back-ref">↩</a></p></li> <li id="fn:16"><p>"Industry Submissions - Trading Organizations - Swap Execution Facilities (SEF)". CFTC. <a href="https://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=SwapExecutionFacilities" target="_blank">https://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=SwapExecutionFacilities</a> <a href="#fnref:16" class="footnote-back-ref">↩</a></p></li> </ol>