Tullett Prebon Launches Swap Execution Facility

Terry Flanagan

Tullett Prebon, an interdealer broker, has filed a Swap Execution Facility application with the Commodities Futures Trading Commission.

The SEF, registered as tpSEF Inc. and headquartered in New Jersey, is a wholly owned subsidiary of Tullett Prebon. It has been established to ensure the Company’s compliance with Dodd-Frank legislation, enacted on July 21, 2010.

Shawn Bernardo, Tullett Prebon’s senior managing director of e-broking and member of Tullett Prebon’s North American Executive Committee and Chairman of the Wholesale Markets Brokers’ Association (WMBA), was named Chief Executive Officer of the SEF.

Shawn Bernardo, Tullett Prebon

Shawn Bernardo, Tullett Prebon

“Tullett Prebon’s SEF forms an important part of the development of our existing businesses as we continue to grow our global market leading offering in those areas regulated by the CFTC and SEC,” said John Abularrage, CEO and president of the Americas at Tullett Prebon. “Tullett Prebon will provide SEF compliant platforms for our customers to access liquidity and meet the demands of the new legislation.”

Tullett Prebon joins a growing list of companies that have filed for SEFs and/or futures exchanges, such as Bloomberg, ICE, GFI, Javelin, MarketAxess, TeraExchange and Tradeweb.

“Over the past three years we have provided regulators with industry insight into the interdealer broker marketplace and have testified before Congress as the new regulations were being considered,” said Shawn Bernardo, CEO of Tullett Prebon’s SEF. “Tullett Prebon looks forward to working with the CFTC to ensure that the Company is able to continue offering its customers swap execution services in accordance with the new regulations.”

Tullett Prebon operates voice, hybrid, electronic, volume matching, algorithmic matching and risk mitigation platforms, to accommodate the needs of its clients, and to satisfy the regulatory driven evolution of the marketplace.

It is one of the world’s largest interdealer brokers and operates as an intermediary in wholesale financial markets facilitating the trading activities of its clients in seven major product groups: Rates, Volatility, Treasury, Non Banking, Energy & Commodities, Credit and Equities.

The CFTC has finalized rules relating to swap execution facilities (SEFs). Standardized swaps that are subject to the clearing requirement and made available for trading will be subject to a trade execution requirement staring by early next year. It has also finalized rules on central clearing, and oversight of swap dealers and other intermediaries.

In July, the CFTC and the European Union announced a “path forward” regarding joint understandings for the regulation of cross-border derivatives.

The CFTC over the next five months will be reviewing submissions from six jurisdictions (Australia, Canada, European Union, Hong Kong, Japan and Switzerland) to assess their regulatory regimes with regard to possible substituted compliance determinations.

Many of the core provisions of the Dodd-Frank Act that seek to reduce systemic risks are within the sole jurisdiction of the federal banking regulators, but some are within the SEC’s jurisdiction, such as establishing a regime for OTC derivatives, enhanced oversight for systemically-important financial market utilities, such as clearing agencies, and prohibiting banks from engaging in proprietary trading, hedge funds, or private equity.

The SEC has implemented the provision of the Dodd-Frank Act to establish reporting requirements for private funds via Form PF. To date, 2,300 investment advisers managing over $7 trillion in fund assets have filed 4,000 reports of Form PF covering 6,700 hedge funds, 66 liquidity funds and 5,900 private equity funds.

The SEC has proposed or adopted rules for over 80 percent of the more than 90 Dodd-Frank provisions that require SEC rulemaking. Completing this rulemaking, as well as the rulemaking required under the JOBS Act, remains a top and immediate priority for the SEC.

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