SEF and agency make a perfect MATch

From next Tuesday, February 18th, US market participants will be required to trade fixed-floating interest rate swaps denominated in dollars or euros for standard benchmark tenors on a SEF. Long part of Dodd-Frank’s Title VII statute, this trade execution mandate now comes about and follows the CFTC’s certification of Javelin’s MAT submission last month.

During the past week the Commission has tried to ease the momentous transition to this new market structure through its exemptive relief for package transactions and new guidance on the US/EU “Path Forward” rule harmonization, with exemptive relief for US participants transacting on EU MTFs. It remains to be seen how the market will adjust to the new world it finds itself in next week, but some participants are already making news. Bloomberg’s SEF announced on Wednesday that it had completed the first “sponsored access trade” with an investment manager trading on BSEF via its FCM. As the new swaps market structure becomes a reality, participants will be pleased to know that the SEF and agency execution models look set to become a happy couple.

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