SEFs: A Mid-Year Snapshot


Swap execution facilities are holding about steady with regard to order flow, though robust growth remains limited to pockets within the SEF space.

That’s a mid-year snapshot, as reported by the FIA in its latest SEF Tracker.

Average daily notional volume for interest rate, credit default and foreign exchange transactions conducted via SEFs was $434.9 billion in June, according to FIA. That was up 9.1% percent from May, but down 2.4% from June 2014.

In interest rates, volume averaged $370.3 billion per day in June, up 6.9% from May but down 6.1% from June 2014. Trading in interest rate swaps and other non-Forward Rate Agreement products averaged $194.5 billion per day in June, the most since January 2014.

FIA noted strength in interest rate swaps and other non-FRA from SEF operators Bloomberg and Tradeweb, which increased market shares in this area to 20.6% and 17.9% respectively.

Tradeweb President Billy Hult told Markets Media: “The SEF landscape experienced some dramatic change in June, especially for dealer-to-client trading, which increased significantly during another (International Monetary Market) roll month. IRS volume across all SEFs increased by more than 22%, and as one of the leading platforms for the broader asset management community, trading activity on Tradeweb (TW SEF) nearly doubled.”

“Compression and market agreed coupon (MAC) swap trading continues to play an important role for market participants as they manage risk and their cleared positions, with volumes continuing to grow over time,” Hult said. “Tradeweb alone has seen over $2.2 trillion in buy-side compression trading, and more than $770 billion in MAC swap volume since the launch of its SEF.”

Billy Hult, Tradeweb Markets

Billy Hult, Tradeweb Markets

In the credit sector, average daily volume was $27.5 billion in June, up 40.3% from May and 24.7% from June 2014, according to FIA. The increase was concentrated on the Bloomberg, Tradeweb and IntercontinentalExchange SEFs. “The U.S. CDS market witnessed some growth toward the beginning of summer, but with no major shifts in market share between platforms,” Hult said.

In foreign exchange, average daily trading was $37.1 billion in June, up 14.9% from May and  27.4% June 2014. BGC and GFI accounted for a combined 46.9% of FX trading on SEFs.

Launched in October 2013 as a product of new regulation, swap execution facilities have gained general acceptance as viable trading platforms among institutional end users, though concerns regarding trading protocols have hamstrung widespread adoption, at least for the time being.  

Feature image via Spectator/Kozzi

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