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SEF Available to Trade Rules


Peter Madigan,, Too much power: Sefs warn on ‘available to trade’ rules, here.

The Dodd-Frank Act states that an over-the-counter swap must be executed on a Sef or an exchange when it has been made available to trade (MAT) by one of the new platforms – making it illegal to execute bilaterally from that point on. Each platform will be allowed to list products as it sees fit, submitting them to the Commodity Futures Trading Commission (CFTC) for review – but under the fast-track version of this procedure, the platform itself would be responsible for assessing the suitability of a product for Sef trading, subject to a 10-day review period by the regulator. If no objections are raised by the CFTC, the product would be certified at the end of this period. Thirty days later, it would become a legal requirement for market participants to execute the product on a Sef. That has triggered sharp criticism from buy-side firms and dealers – and some Sefs share their fears.

James Rundle, Waters Technology, SEFs at the Starting Gate, Technologists Prep for Challenges, here.

With the legislative and political battles over, the focus is now on the technology that SEFs and other market participants will need to put in place in order to ensure compliance on the enactment date of August 5, 2013. Around 20 SEFs have declared their intentions to register, and they all take a different approach to their build-out. For newer SEFs, such as First Derivatives, which is offering trading in foreign exchange (FX) instruments, the technology is entirely proprietary. For the more established players, a hybrid approach has been taken due to the length of time that they’ve already been operating electronic fixed-income trading platforms.

Matt Levine, DealBreaker, Brokerage Tried To Tell The World It Was Ripping Off Customers But No One Listened, here. That’s also known as 499 bps markup is not excessive in the Corp Bond world. Nice bid ask spreads huh?

Similarly you’re not supposed to charge “excessive markups” but who’s to say what’s excessive? Here is FINRA’s policy on the matter, which can be summed up as:

  • determining whether or not a markup is excessive is a complex question to which “No definitive answer can be given” and in answering which one should holistically take into account a variety of factors including but certainly not limited to market availability, transaction size, your reasonable expenses, disclosures to the customer, and so forth; but

  • probably 5%.


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