Interdealer Brokers to Launch SEFs

Terry Flanagan

Interdealer brokers BGC Partners and ICAP have each filed applications with the U.S. Commodity Futures Trading Commission to become a Swap Execution Facility, consistent with the latest derivatives trading regulations under the Dodd-Frank Act, and joining a growing list of companies that have applied for SEF status.

“As a leading price discovery, order management and execution facility that supports the evolution of trading methodologies, we look forward to welcoming in a new wave of derivatives transaction which further utilizes the strength of our leading proprietary technology,” said Shaun Lynn, president of BGC.

BGC intends to provide swap market participants with flexible, tailored approaches to electronic execution and clearing of derivatives trades.

BGC’s technology infrastructure includes fully-compliant execution methodologies such as anonymous Central Limit Order Book (CLOB), name disclosed Request for Quote (RFQ) system, Intra-day Electronic Auctions, Indications of Interest, and Voice Managed Orders for Blocks and Non-Blocks.

The ICAP SEF will operate markets across multiple asset classes, including interest rate swaps (IRS), credit default swaps (CDS), equity derivatives, commodities and NDFs. ICAP will offer trading in cleared and uncleared swaps and intends to operate central limit order books (CLOB) and request for quote (RFQ) systems, as well as offering block trade capabilities, electronic crossing and execution via brokers.

Participants will be able to access the ICAP SEF through ICAP trading applications and the platforms provided by independent software vendors or through the ICAP published application programming interface (API). Additionally, approved Intermediaries will be able to provide their customers with access to the SEF, subject to its rules.

John Nixon, group executive director, Americas at ICAP has been appointed chairman, CEO and president of the ICAP SEF, which will be headquartered in New Jersey.

“The filing of our SEF application is a milestone for our organization, but it is also very much a logical evolution of our longstanding efforts to serve the needs of the OTC derivatives marketplace,” Nixon said. “Since its foundation, ICAP has developed marketplaces designed to provide its customers with effective and efficient means to take and manage risk.”

ICAP has invested heavily in technology that has permitted it to offer customers the ability to execute transactions on a fully electronic basis or with the assistance of a broker. “With our expertise and experience in operating regulated markets, the quality of our technology, and the depth of our customer relationships, we look forward to our SEF serving as a leading facility for the trading of swaps in the new regulated landscape,” said Nixon.

Market participants will be able to utilize BGC’s platform to segregate U.S. person/non-US person transactions on both a graphical user interface (GUI) and application programming interface (API) via instrument choice and contra-counterparty filtering.

“BGC has been consistently rigorous in ensuring that its technology and infrastructure remain fully compliant with the latest regulatory requirements. We are highly regarded for our leading proprietary technology and our robust and successful voice franchise,” said Phil Norton, executive managing Director, e-commerce at BGC. “We believe market participants will benefit from BGC’s technology, which promotes greater access to liquidity, efficiency, and improved transparency for customers trading by electronic, voice or hybrid means under the new Dodd-Frank guidelines.”

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