Skepticism Grows across the Swaps Markets about Benefits of SEFs Due to Overly Prescriptive Rules, Says TABB

This is the PR for my latest SEF report, for which the executive summary can be found here.


Dec. 8, 2011, 9:33 a.m. EST

Skepticism Grows across the Swaps Markets about Benefits of SEFs Due to Overly Prescriptive Rules, Says TABB

Over 200 Swaps Market Professionals Rate the Top Firms They Believe Will Succeed as SEFs for Rates, Credit, Equity, Energy and FX Asset Classes

NEW YORK & LONDON, Dec 08, 2011 (BUSINESS WIRE) — Three years after the Lehman bankruptcy and one year since the Dodd-Frank Act was enacted, swaps market industry professionals tell TABB Group that overly prescriptive swap execution facility (SEF) rules, specifically the 15-second rule and the 5 RFQ requirement among others, will have a negative impact on liquidity.

According to new research released publicly today, “SEF Industry Barometer: Fall 2011,” skepticism is rising across the swaps markets concerning the benefit of implementing SEFs, says Kevin McPartland, report author, a TABB principal and director of fixed income research. The report’s analysis is based on responses from over 200 buy-side and sell-side market participants in the US and Europe, including dealers, SEFs, interdealer brokers, asset managers, proprietary traders, hedge funds, commercial end users, G14 and non-G14 global investment banks and agency brokers, futures commission merchants (FCMs), IT providers, exchange/clearinghouses and consultants.

Although the CFTC and SEC expect to begin the implementing SEF trading mandates by the third quarter of 2012, over 80% questioned do not expect implementation until 2013. Asked if they believe that SEF formation will be good for the swaps market, nearly three quarters said yes but this is down from 87% as reported in TABB’s April 2011 report, “Swap Execution Facilities: An Industry Barometer,” also written by McPartland.

“Trade sizes for credit default swaps (CDS) and interest rate swaps (IRS) are expected to see the most dramatic decline during the next five years,” McPartland says. Average trade sizes in every asset class — credit, energy, equity, FX and rates — are expected to decline by at least 25%. “The biggest decline is expected in rates and credit.”

Despite concerns regarding overly prescriptive regulation, McPartland points out that there is no lack of interest in this industry sector. Over 43 firms have expressed an interest in creating a SEF, a list available to TABB Fixed Income Research Alliance subscription-based clients and individual firms purchasing the report. Asked who they believe will be successful ultimately as a SEF in each asset class, the participants named the following firms: Bloomberg, CBOE, CME Clearport , CreditEx, FXAll, ICE OTC Energy , ICAP , MarketAxess and Tradeweb.

The complete list of 52 rankings broken down by asset class can be viewed by TABB clients and firms purchasing the report.

“Although we still see little clarity as to how the swaps market will function going forward,” McPartland explains, “that has not prevented the swaps industry from innovating and creating new business models and technology to ensure liquidity in the swaps market remains, despite the frustrating regulatory uncertainty.”

The SEF report with over 20 detailed exhibits is available for download by TABB Group Fixed Income Research Alliance clients and all pre-qualified media at . For an executive summary or to purchase the report, visit or write to

About TABB Group

TABB Group is the financial industry’s strategic advisory and research firm focused solely on capital markets. Founded in 2003 and based on the proven interview-based research methodology of “first-person knowledge” developed by founder Larry Tabb, TABB analyzes and quantifies the investing value chain from the fiduciary, investment manager and broker, to the exchange and custodian to help senior business leaders gain a truer understanding of financial markets issues. For more information, visit . In January 2010, TABB Group launched TabbFORUM, the online community currently with nearly 10,500 capital markets members, drawn from buy-side and sell-side firms, exchanges, regulatory agencies, academia, consultants, vendors and media, focusing on issues covering current industry-wide topics.


        Martin Rabkin, 914-420-5739

1 thought on “Skepticism Grows across the Swaps Markets about Benefits of SEFs Due to Overly Prescriptive Rules, Says TABB

  1. Pingback: More SEF stuff from Tabb, and my thoughts «

Leave a Reply

Your email address will not be published.