Interdealer broker ICAP is among the swap-execution facilities looking beyond U.S. shores. It has started i-Swap, a platform for interest-rate derivatives that handles deals in the euro, British pound and Australian dollar. However, cross-border regulations and other issues make broadening a SEF's reach difficult.
Industry participants say recently implemented U.S. rules for swap-execution facilities will lead to regionalization because European players likely will drop U.S. clients, rather than take necessary steps to become an SEF. The situation could have a profound effect, given that more than half of the volume on some European platforms for credit default swaps and interest-rate swaps involves U.S. banks and broker-dealers.
MarketAxess and GFI Group have received approval from the Commodity Futures Trading Commission to operate as swap-execution facilities, bringing the number of CFTC-approved SEFs to five. MarketAxess will transact credit default swaps. GFI will execute swaps in commodity, energy, equity, fixed-income, foreign exchange and interest-rate markets.
Tradeweb has become the second firm, after Bloomberg, to apply to the Commodity Futures Trading Commission to operate a swap-execution facility. "Though SEF registration is a major step forward for the industry, the growing adoption of electronic trading of derivatives on Tradeweb has been a natural evolution for us since 2005," said Tradeweb CEO Lee Olesky. Tradeweb plans to use the platform to trade interest-rate and credit default swaps.