North America’s FX industry is currently experiencing what could be very much described as a dichotomy, whereby the continued exodus of retail business from the region is being strongly counteracted by America’s institutional sector, strengthening its armory and bringing itself in line with the Dodd-Frank Act rulings, to lead the worldwide industry forward.
The most recent paradigm upon which the US financial regulatory authorities are acting, is the approval of the applications made by an array of companies to become registered as Swap Execution Facilities (SEFs).
On Friday, following a week during which several companies obtained their registration for temporary SEF registration, two more companies joined the fold.
ICE Swap Trade
IntercontinentalExchange (ICE) has gone to great lengths to work with the Commodity Futures Trading Commission (CFTC) during the course of this year, in establishing business units which will perform the functions required by the Dodd-Frank Act.
On September 20, the company’s SEF division, ICE Swap Trade, was granted temporary registration as a SEF, in accordance with section 5h of the Commodity Exchange Act. The company’s willingness to work closely with the regulatory bodies, and provide the relevent facilities which are necessary for market reform, has not always been met with such a positive response.
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Earlier this year, the CFTC removed the FX asset class from ICE Trade Vault, the company’s trade repository, just before the final rulings were made on how to report trades under the Dodd-Frank Act.
In contrast to the long-established ICE, and its creation of business units which accommodate Dodd-Frank rulings, trueEx represents a new venue purposely designed for the execution of interest rate swaps, futures and Standard & Poor credit indices, via a SEF and Dodd-Frank compliance, being a central point of the company’s raison d’etre.
trueEX and ICE Swap Trade will be required, as will all future temporarily and fully registered SEFs, to demonstrate continued compliance with all applicable provisions of the Commodity Exchange Act and Commission regulations, including part 37, and any future regulations, amendments, guidance, and interpretations issued by the Commission. As a next step, the Commission will undertake a substantive review of trueEX’s and ICE Swap Trade’s applications for full registration.
The proliferation of companies which have been granted temporary SEF status over the past few weeks, the companies’ willingness to work alongside the authorities, and the restructuring of the method by which trades are executed and reported, whilst the retail sector contracts further, as the very same regulators continue to make such a business model less viable. This serves to further confirm, that the United States is still very much home to a strong institutional FX execution and technology sector, but has its sights firmly set on driving the retail sector from its shores.