North American institutional electronic trading firm Tradeweb Markets has today filed an application with the Commodity Futures Trading Commission (CFTC) in order to apply for swap execution facility (SEF) credentials in anticipation of the forthcoming requirements detailed in the Dodd-Frank Act aimed at ensuring greater transparency regarding the way in which firms offering OTC products report trades.
Distinction Between Platforms
Subsequent to gaining SEF status, Tradeweb Markets intends to offer a disclosed-request operating model with an order book on one SEF, and an anonymous central limit order book on the other, effectively representing two separate platforms.
This adaptation of existing technology goes some way to answering an often vaunted industry viewpoint that it is more of a challenge for existing firms (Tradeweb has been in existence since 2005) to adapt their offering than it is for new entrants to arrive on the scene with an already compliant solution, a point made during a panel discussion held in London last week comprising a forum of senior executives from within the institutional sector.
Lee Olesky, CEO of Tradeweb Markets explained on behalf of the firm: ““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.”
“We continue to see strong growth across our derivatives platforms, and Tradeweb remains committed to improving transparency and access to liquidity through flexible trading architecture and more efficient workflows” he stated.
Rulings To Be Met, Diversity Equally Important
“By registering SEFs for separate request-based trading and an anonymous central limit order book, our marketplaces can support different customers’ unique strategies and liquidity needs,” said Billy Hult, President of Tradeweb Markets.”
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As more market participants begin clearing and executing derivatives trades electronically under Dodd-Frank, Tradeweb customers will continue to benefit from increased efficiency across flexible, electronic markets” concluded Mr. Hult.
Tradeweb Markets is the latest in a series of US-based firms to apply for SEF status since the CFTC’s public meeting on May 20 this year during which it was discussed that a designated contract market or SEF should make a swap available to trade under section 2(h)(8) of the Commodity Exchange Act, and are set out by Title VII in the 2010 Dodd-Frank Act.
The alignment with this proposed ruling was spearheaded by Integral Development Corporation just days later, in its provision of SEF compliant technology solutions just days after the meeting took place. Traiana pre-empted the regulators, with the firm’s trade repository going live in April this year.
On the institutional side, it is most critical that firms align themselves with this, as it is currently only mandatory for institutional firms and as yet the retail sector has not been ruled to fall under this ruling. Tradeweb therefore requires completion of this procedure as it is a provider of a range of institutional offerings including rates, derivatives, money markets and exchange-traded funds, as well as liquidity provision.
Tradeweb Waves Goodbye To FX Options Operations
Tradeweb appears to be concentrating on its institutional, provisioning and ETF products, a dynamic further reinforced by the firm’s offloading of its FX options arm to Thomson Reuters yesterday, as part of a larger push by Thomson Reuters to expands its presence in foreign exchange.
Tradeweb’s FX options clients will eventually migrate to FXall, which Thomson Reuters purchased last year for $625 million, and will have access to more liquidity and products.
Currently there are approximately 20 liquidity providers and over 300 institutional clients participating across Tradeweb derivatives platforms for interest rate and credit default swap indices, accessing liquidity through request-for-quote, request-for-market, click-to-trade (streaming prices) and order book trading protocols.
A full detailed report on the Dodd-Frank Act and its progress during this year so far is available in this year’s Forex Magnates Industry Report for Q3 of 2013