Multi-dealer platforms (like ECNs) have to register as SEFs — but clients could choose to use other venues and avoid extra legal work.
An interesting article in Risk Magazine provides a good overview of the concerns several of the leading Forex ECNs have as Dodd-Frank SEF rules come into effect this October. Essentially, multi-dealer platform operators fear the legal and compliance work necessary for clients to use an SEF could shift clients to non-regulated platforms.
To trade on an SEF, each participant has to have an agreement with that SEF, different than the agreement they currently have with the same venue in its non-SEF status. According to Charlie Cooper at State Street, that agreement could be hundreds of pages, so there is a big legal and compliance burden that clients will have to face. Even though the SEF rulebooks are non-negotiable, lawyers will still read through the contract and flag different key issues.
We’ve recently reported that Bloomberg was the first to receive SEF status with the CFTC. Others such as Integral have recently submitted their applications, while multi-dealer ECN market leader Thomson Reuters is apparently purposely waiting until the ‘last minute’ in early September to submit its application.
To see the complete Risk Magazine article click here.