SEF Volumes Pass $1 Trillion

Terry Flanagan

Markit, a global financial information services company, said that its MarkitSERV subsidiary has handled more than $1 trillion of swaps traded on swap execution facilities (SEFs) in the first ten business days of SEF trading.

The highest volume of SEF trading has been in interest rate derivatives. MarkitSERV was used to report the vast majority of interest rate trades reported to DTCC’s DDR Swap Data Repository since SEF trading started on October 2.

Eight SEFs are using MarkitSERV for some or all of trade routing to clearinghouses, SEF confirmation and regulatory reporting. Market participants trading on SEFs are able to receive real time electronic trade messaging via MarkitSERV using existing interfaces, and can monitor the clearing, reporting and confirmation status of their transactions.

“MarkitSERV has worked with industry participants and SEFs to deliver an integrated and flexible workflow which meets everyone’s needs as new regulatory requirements come into force,” Henry Hunter, global head of derivatives processing at Markit. “Our focus on enhancing our existing connectivity and data formats has meant our customers can minimize their compliance costs and focus on their core business.”

MarkitSERV’s services are available for a wide range of swap products across rates, credit, foreign exchange and equity derivatives.

On its first day of operations, Bloomberg’s multi-asset SEF saw more than 110 trades executed by over 50 firms globally across every asset class Bloomberg’s SEF offers – including interest rate swaps, credit default swaps, foreign exchange swaps and commodity derivatives. Total volume was more than $6 billion with $1.5 billion in interest rate swaps.

To date, Bloomberg has had more than 150 clients use its SEF services, with average trading between $10 billion and $20 billion a day, according to the company.

Volume more than doubled on day two, with more than $13 billion in transactions. For interest rate swaps, Bloomberg reported volumes of $4.1 billion while other SEFs including TradeWeb and Javelin reported volumes of $715 million and $100 million respectively.

SEFs, not least among them Bloomberg, are growing and showing they can provide the liquidity traders need.

“It’s encouraging to see that despite market uncertainty and last minute regulatory changes, more than 50 of our clients are already trading on our SEF,” said Ben Macdonald, Bloomberg’s global head of product and president of Bloomberg SEF LLC, referring to the volumes on the first day of SEF trading. “We see this as a positive start.”

Under the SEF rules created under Dodd-Frank, Bloomberg is required to host an order book for all swaps, and it also has an RFQ system. To date, all activity is RFQ, mainly because FCMs and CCPs are still working toward a clearing certainty solution.

There is currently no requirement for trading on SEFs. Bloomberg had a vibrant derivatives trading business before SEFS, so a large number of clients are migrating to SEF trading. Transactions on SEFs today are Permitted Transactions. Once Made Available to Trade (MAT) determinations are made by SEFs and accepted by the CFTC, they move to a Required Transaction state, and any swap trade below a minimum block size must be traded on a SEF.

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