Time to get comfortable with SEFs

The CFTC’s 29th meeting on Dodd-Frank rules, held in Washington, D.C. on May 16th, has been widely covered in the financial press. Final SEF (Swap Execution Facility) rules – including the so-called “Made Available to Trade” (MAT) rule – and minimum block sizes for swaps (among other rules) were approved by the Commission. Despite controversy, it’s now clear that electronic trading of swaps will progress. In one example of compromise, the required... Read More

Buy-side steps up

With financial markets focused firmly on risk reduction – a key priority for the G20 – the buy-side is turning its attention to the issue of counterparty risk. This parallels well with the OTC clearing requirements set out in the Dodd-Frank Act. In a reaction to the perceived risk inherent in trading leveraged instruments without adequate safeguards, the regulators stepped in to forcibly mitigate risks that were viewed by the market as the cost of doing business. It’s... Read More

Swap your workflow

We’ve discussed the current course of regulatory change, specifically Dodd-Frank here in the States, and alluded to the “total set of changes the derivatives industry is going to go through”. But one thing is clear, the interrelationships between buy-sides, sell-sides (FCMs and swaps dealers, executing and clearing brokers) and CCPs is going to get increasingly complex. Though superficially the burden appears to fall on the clearing side, the reality is that... Read More

The long arm of the law

The buy-side has traditionally been spared from the burden of most regulatory trade reporting requirements, passing this responsibility on to their brokers who hold the exchange memberships. But this principle looks to have been challenged by BaFin, the German financial regulator, with the introduction of its High Frequency Trading Act. One of the aims of the law is to ensure that algorithmic flow can be better monitored by the regulator. This will require all buy-side (as well... Read More

Keeping to the letter of the law

Earlier this week BaFin, the German regulator, held a workshop on the German HFT Act. Global market participants gathered in Frankfurt to discuss and better understand the implications of the soon to be passed law. Questions around the definition of HFT, registration as an HFT firm when operating from abroad and the identification of algo orders were on everyone’s list. Fortunately BaFin came prepared with some hotly-anticipated answers. Interestingly, though, one participant... Read More

One firm, two guv’nors

Making a living as a market maker is no easy task these days, with low trading volumes and the increasing regulatory burden tending to wipe the smile from many a trader’s face. Market making certainly has some perks, though, with exemptions from the European Short Selling Regulation, UK stamp duty and the Italian Financial Transaction Tax. Then again, where the MiFID II draft is concerned, market making strategies are a burden. If you fall under the definition of an algorithmic... Read More

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