Second SEF relief period expires, confusion sets in


FX traders expressed their doubts about the ability of SEFs to handle CFTC’s procedures properly

In an extensive piece today titled ‘SEFs battle with confirmations after CFTC relief expiry’ Risk Magazine is analyzing extensively the market conditions surrounding the exemption period for SEF confirmation issuing, which expired on November 29th. It turns out that at present time forex traders are not sure whether Swap Execution Facilities (SEFs) are acting according to the requirement.

Before the SEFs were set up following the implementation of the Dodd-Frank Act in order to clear OTC transactions only the two parties involved were supposed to issue trade confirmations. Following the expirations of the November 29th deadline the SEFs are supposed to take on that responsibility.

While officials from the Global Financial Markets Association have expressed their discontent with the lack of clarity in the CFTC’s requirements and verbally challenged its legal framework the regulator has not extended its exemption period.

A recent article by Reuters has outlined the impact on trading of derivatives on Asian markets as confusion ensued following the announcement that multi-dealer platforms had to register with US regulators as SEFs even if the products traded are not specified by US rules as ones that have to be traded on SEFs.

The CFTC is mandating that all trading with American counterparties amounting to more than $8 billion per year has to go through an SEF. Consequently Asian derivatives traders have limited their dealings with US counterparties which inevitably is leading to liquidity shortages.

Companies granted SEF licenses include Thomson Reuters, ICAP, 360T, trueEX, BGC Partners, State Street, and Tradeweb. Leaprate will keep a close eye on future developments and keep our readers updated in relation to the latest SEF implementation practices.

For the full articles cited above visit the websites of Risk.net and Reuters.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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Second SEF relief period expires, confusion sets in

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