Trading firms are getting connected to SEFS

Trading firms are still struggling with the Dodd-Frank requirement for certain swaps to be traded on registered Swap Execution Facilities.

According to a survey conducted by trading communications vendor IPC Systems, 60% of survey respondents said the industry as a whole was behind on meeting the deadlines on SEF trading, though only 39% said their own firms were behind.

Nearly all respondents planned or have already connected to multiple SEFs, with CME Group (53%), TeraExchange (50%), Bloomberg (44%), Eurex (34%) and ICE (32%) cited most frequently.

Some 42% of survey participants said they plan to start OTC derivative trading during 2014, though only 27% expect the importance and value of the OTC Derivatives market to grow. The majority – 77% – think that the introduction on SEF trading will have an impact on trading volumes and sizes, while 61% of expect to see a shift to the futures market due to the regulations.

Ganesh Iyer, director, product marketing, Financial Market Network at IPC, said that the company had seen demand from customers looking for additional or new network connectivity to registered SEFS through the IPC Connexus extranet over the past year.

“While the survey results suggest that the industry is underprepared for mandated SEF trading, we see this issue as more of a fear of uncertainty around industry-wide implementation and regulatory governance. Individual firms, SEFs and their equivalent platforms are already planning connectivity, systems and processes to be ready to meet the new trading requirements,” Iyer said.

The survey was conducted during FIA Chicago in November last year and generated responses from hedge funds, investment banks, broker/dealers, exchanges and other financial institutions. Respondents came from the front, middle, and back office and included people involved in both the business and technology sides of trading operations.