Our privacy policy describes how Fidessa uses cookies on our website. If you continue using our website, you are consenting to our use of cookies. OK

A question of life and SEF

There has been a lot of debate around the role of SEFs in the global derivatives market. Some commentators are even claiming that the whole concept is dead and buried before the rules have even been finalised.

But debating the viability or otherwise of SEFs is completely missing the point. The right question is how will standardised and custom derivatives contracts trade and clear in a post Dodd-Frank/EMIR world? What these regulations are doing is removing an artificial barrier that has separated futures and OTC workflows for more than 40 years. This has the potential to upset the whole apple cart as proponents defend their turf and vie for control of the piece they don’t own. This struggle is being played out between venues (SEFs v futurisation), clearers (SwapClear v ICE Clear/CME Clearing) and even within the broker dealer and IDB community. On the receiving end is the buy-side which is faced with a rising cost of participating in derivatives markets, just at a time when it is actually looking for efficiencies instead.

The future role of SEFs is an important (but relatively small) question in the total set of changes the derivatives industry is going to go through. Anyone who isn’t prepared for the totality of these changes (and the aftershocks of unintended consequences) might be in for a nasty surprise.

One Response to “A question of life and SEF”
  1. Mark Brennan says:

    Hi Steve – very salient, and topical, point that cuts through some of the noise that unfortunately clogs up the channels of communication, from the (valid) sentiment that “SEFs are like a ghost”, as one panelist at FIA NY Expo remarked, to the (also no doubt valid) lawsuit Bloomberg has brought against the CFTC for their treatment of swaps vs. futures. Meanwhile, June 10 approaches – the next wave of mandated clearing for IRS and CDS, for the “Category 2” entities, some 2,000 firms by most estimates. This indeed could be a tipping point in how “the totality of these changes” which you speak of begin to get marked to market. Let’s hope the system minimizes any negative VM….

Leave a comment

Copyright © 2019 Fidessa Group Holdings Limited. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Fragulator® is a registered trademark of Fidessa Group Holdings Limited.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.