With so much focus on execution methods and block trade rules, little talk has been had about another SEF requirement: surveillance. Keeping your market participants in line is no small task. Here is what Javelin is doing to tackle the surveillance requirements.
I’ve spent the better part of the last year studying what will become the swap execution facility (SEF) market, how it will be regulated, its players, its impact on derivatives trading. More recently I’ve had the pleasure of speaking with a number of the industry’s leaders in the space regarding the plans for their organizations and how they believe the final rules should look once passed by the SEC and the CFTC.
I thought it was worth a post to create a single view of these conversations and provide a resource to anyone else looking to understand the new SEF landscape. So (in no particular order) here they are:
There are several more firms and individuals out there that play an important part in the SEF debate, and I hope to have similar “on-air” conversations with each. Until then, enjoy.
Defining a “block trade” in the swaps market is one of the many jobs of the regulators in the next few months. As this story points out, average trade sizes for swaps change drastically based on product and market conditions making it pretty difficult to set a single number. Maybe more important is the reporting delay allowed for block trades giving dealers a little more flexibility in what they show the world and when:
The block trade reporting exemption could provide some welcome flexibility for dealers, according to Kevin McPartland, senior research analyst at TABB Group. It “creates an environment where trades can still be executed bilaterally as long as they are ultimately reported to a SEF and the SEF reports that trade to the regulators after the decided time delay,” he wrote in a soon-to-be-published research note.