Dodd-Frank SEF Rule Implementation
With the Dodd-Frank rule for certain swaps to be mandatorily traded on Swap Execution Facilities (SEFs) becoming effective, a new survey finds that the industry remains underprepared to meet the requirements of these new regulations, while individual firms push ahead to make themselves ready. This survey, released today and conducted by IPC Systems, Inc., a leading provider of voice and electronic trading communications solutions to the world’s top financial services firms and global enterprises, highlights the state of the industry’s preparedness for this new SEF model and potential impact on the OTC derivatives markets.
Survey Finds Industry Lagging Behind Market Regulation Deadlines As Sef Trading Begins To Take Off
Survey Methodology and Respondents
The survey was conducted during FIA Chicago, from November 5-7, 2013, and generated responses from hedge funds, investment banks, broker/dealers, exchanges and other financial institutions. Respondents came from the front, middle, and back office and included people involved in both the business and technology sides of trading operations. Key findings include:
Industry Struggles With Regulation Compliance
Struggling to Meet Regulatory Preparedness
- 60 percent of survey respondents said the industry was behind on meeting the deadlines on SEF trading.
- 39 percent of survey respondents said their firms were behind on meeting the deadlines on SEF trading.
SEF Impact
- 77 percent of survey respondents believe that the launch of SEFs will have an impact on trading volumes and sizes.
- 61 percent of survey respondents expect to see a shift to the futures market due to the regulations.
Anticipated OTC Derivatives Market Expansion
Potential OTC Derivatives Market Growth
- 27 percent of survey respondents expect the importance and value of the OTC Derivatives market to grow.
- 42 percent of survey respondents plan to start OTC derivative trading during 2014.
SEF Connectivity
- Nearly all respondents planned or have already connected to multiple SEFs.
- SEFs that the largest percentage of respondents said that they plan to connect to are CMEGroup, TeraExchange, Bloomberg, and Eurex.
Network Connectivity and SEF Onboarding Trends
“Over the last year, we have seen a lot of activity from financial firms that have been looking for additional or new network connectivity to many of the already registered SEFs or OTFs through Connexus, our Financial extranet,” said Ganesh Iyer, Director, Product Marketing, Financial Market Network at IPC. “While the survey results suggest that the industry is underprepared for mandated SEF trading, we see this issue as more of a fear of uncertainty around industry-wide implementation and regulatory governance. Individual firms, SEFs and their equivalent platforms are already planning connectivity, systems and processes to be ready to meet the new trading requirements.”
The full survey report, titled “Market View 2014: OTC Derivatives Regulations and Swap Execution Facilities”, can be downloaded from IPC’s website.
