Tullett Prebon Announces Filing of SEF Application With CFTC

Tullett Prebon Announces Filing of SEF Application With CFTC


Tullett Prebon, one of the world’s leading interdealer brokers, today announces the filing of its Swap Execution Facility (“SEF”) application with the Commodities Futures Trading Commission (“CFTC”).

The SEF, registered as tpSEF Inc. and headquartered in New Jersey, is a wholly owned subsidiary of Tullett Prebon. It has been established to ensure the Company’s compliance with Dodd-Frank legislation, enacted on July 21, 2010.

Shawn Bernardo, Tullett Prebon’s Senior Managing Director of e-broking and member of Tullett Prebon’s North American Executive Committee and Chairman of the Wholesale Markets Brokers’ Association (WMBA), is named Chief Executive Officer of the SEF.

The SEF Board also consists of Public Directors, David Clark, John Spencer, and James Quaille, and Directors, John Abularrage and Christian Pezeu.

John Abularrage, Chief Executive Officer and President the Americas at Tullett Prebon, said: “Tullett Prebon’s SEF forms an important part of the development of our existing businesses as we continue to grow our global market leading offering in those areas regulated by the CFTC and SEC. Tullett Prebon will provide SEF compliant platforms for our customers to access liquidity and meet the demands of the new legislation.”

Shawn Bernardo, Chief Executive Officer of Tullett Prebon’s SEF, said: “Over the past three years we have provided regulators with industry insight into the interdealer broker marketplace and have testified before Congress as the new regulations were being considered. Tullett Prebon looks forward to working with the CFTC to ensure that the Company is able to continue offering its customers swap execution services in accordance with the new regulations.”

State Street Report Takes The Pulse Of Buy-Side Firms Mandated To Clear OTC Derivatives : State Street’s SwapEx Files Registration With The CFTC To Become A Multi-Asset Swap Execution Facility

Buy-side firms are unprepared for new trading mechanisms, costs and increased complexity and should partner with established providers to adapt to an evolved OTC derivatives marketplace, according to research commissioned by State Street Corporation (NYSE: STT).

via Pocket http://www.mondovisione.com/media-and-resources/news/state-street-report-takes-the-pulse-of-buy-side-firms-mandated-to-clear-otc-deri/ July 31, 2013 at 07:13PM

TeraExchange Connects to CME Clearing to Provide Margin Relief to Customers Trading Interest Rate Swaps, Eurodollar and Treasury Futures

SUMMIT, N.J., June 25, 2013 /PRNewswire/ — TeraExchange, an electronic swap execution platform (SEF), today announced that its operations are fully connected to CME Clearing and are ready for trading of cleared interest rate and credit swaps.

via Pocket http://finance.yahoo.com/news/teraexchange-connects-cme-clearing-margin-135400292.html June 27, 2013 at 07:56PM

Javelin OTC Derivatives Establishes Presence in Telx’s Chicago Data Center

Javelin OTC Derivatives Establishes Presence in Telx’s Chicago Data Center


Telx, a leading provider of global interconnectivity, cloud enablement services and datacenter solutions, today announced at SIFMA Tech 2013 that Javelin Capital Markets, an OTC derivatives execution platform, has leveraged Telx’s network & interconnection rich Cloud Connection Center, “CHI1” at 350 East Cermak Road, Chicago, Illinois, providing Javelin with access to Telx’s extensive Financial Services community. As a colocation and interconnection client in Telx’s strategically located data center in downtown Chicago, Javelin can now offer Telx’s financial community high-performance connectivity to derivatives execution platforms for Interest Rate Swaps and Credit Default Swaps. Javelin offers both anonymous electronic and voice-hybrid methodologies for trade execution.

Newly formed Swaps Execution Facilities (SEFs), that have emerged as aspects of Dodd-Frank become implemented, are incorporating their services in secure data center environments. Low-latency connectivity is a critical component for the OTC Derivatives market linking SEFs and Central Counterparty Clearing (CCPs). With CCPs being located in Chicago, the proximity of Telx’s CHI1 facility at 350 East Cermak provides financial customers with high-performance and flexible connectivity to Javelin as well as to other SEF engines from a single location.

“As aspects of Dodd-Frank become cemented in the financial community, the need to establish SEFs in secure environments is a crucial step for our eventual classification as a Swap Exchange Facility,” said Michael Black, MD of Infrastructure of Javelin. “Telx’s ability to provide us with access in their premier Chicago facility, and their proximity to the clearing venues, swaps execution facilities, and buy-side participants put us in a strong market-leading position to service current and future clients.”

“We are excited to have Javelin join the expanding Telx financial ecosystem in our CHI1 facility. Javelin’s secure exchange platform with a state of the art user interface is well positioned in the rapidly changing OTC Derivatives market,” said Shawn Kaplan, general manager of Financial Services for Telx. “In recent months we have seen an increasing number of trading systems turn to Telx and our CHI1 facility, most recently with the announcement of Sky Road joining Telx’s financial community. Javelin and other industry leading financial institutions at 350 East Cermak benefit by connecting with other financial institutions in the facility, which allows them to offer their full suite of services with flexible connectivity to current and future clients.”

Telx’s CHI1 facility, located in the South Loop of the Chicago Central Business District, provides customers with the financial eco-system at 350 Cermak, one of the leading financial eco-systems in the world. As the operators of the “Meet-Me-Room,” and one of the largest colocation providers at the CHI1 facility at 350 Cermak, Telx provides industry leading data center and connectivity services for the global financial community.

Attendees at SIFMA Tech 2013 in New York City can register to attend Telx’s grand opening event of its new flagship data center, NJR3 in Clifton, New Jersey on June 19, 2013 from 3:00 p.m. to 7:00 p.m. Round-trip transportation will be provided by Telx for all registered guests. The event will feature a keynote address by NFL Legend Phil Simms, along with public remarks Clifton Mayor James Anzaldi, State Senator Nia Gill, and Telx’s Executive Vice President of Engineering and Construction Michael Terlizzi. Cocktails and refreshments will be served, and tours of the new data center will be given.


CFTC’s Division of Market Oversight Provides Time-Limited No-Action Relief to Provide for Transition to SEF Registration

CFTC’s Division of Market Oversight Provides Time-Limited No-Action Relief to Provide for Transition to SEF Registration

Washington, DC – The Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) today announced the issuance of a time-limited no-action letter providing temporary no-action relief to entities that have been operating pre-Dodd Frank trading platforms. The Commission published its final SEF rules in the Federal Register on June 4, 2013.

On December 11, 2012, DMO issued staff No-Action Letter 12-48 (December 2012 Letter) which effectively extended the relief provided by the Commission’s Second Amendment to the July 14, 2011 Order for Swap Regulation to allow swap trading facilities that were unregulated prior to Dodd Frank to continue operating during the pendency of, and transition to compliance with, the SEF final rules. The no-action relief provided by the December 2012 Letter will expire on June 30, 2013, prior to the effective date of the SEF final rulemaking, which is August 5, 2013.

This no-action relief shall commence on July 1, 2013, and shall expire on the compliance date of the SEF final rulemaking, which is October 2, 2013, and shall supersede all terms and conditions of the December 2012 Letter. Under this no-action letter, a swap trading facility that wishes to avoid an interruption in operations on October 2, 2013, must as of that date be granted either temporary registration status as a SEF or be granted full registration status as either a Designated Contract Market or a SEF.

Last Updated: June 17, 2013



The Hidden ‘Gotcha’ in the SEF Rules – special entity’[SE] (as that term is defined in Section 4s(h)(2)(C) of the Act

The Hidden ‘Gotcha’ in the SEF Rules


An overlooked detail in the swap dealer definition rule approved by the CFTC will be a real headache for some market participants.
With all the analysis of the SEF rules that were approved by the CFTC last week, one little “gotcha” appears to have been overlooked. It doesn’t apply to everyone, but it will be a real headache for some market participants.

The problem began about a year ago, when the CFTC and SEC approved the rule specifying who must register as a swap dealer (SD). That rule identified four trading patterns as a starting point, any of which gets the ball rolling. One pattern is: “Regularly enters into swaps with counterparties as an ordinary course of business for its own account,” which covers a lot of firms.

Next, the rule sets a de minimis threshold for annual trading volume. What most people focused on was the $8 billion of notional volume, going down to $3 billion over time; but the end of that sentence added another threshold: “$25 million with regard to swaps in which the counterparty is a ‘special entity’[SE] (as that term is defined in Section 4s(h)(2)(C) of the Act.”

Of course, this was no problem for firms that have already registered as SDs, but it was a big problem for general market participants. Soon after the dealer definition rule was approved, I pointed this anomaly out to the CFTC staff. They recognized the problem and assured me that it would be dealt with in the forthcoming SEF rules. So last week I went through the final rule, and found no mention of SEs at all, and certainly not of the troubling de minimis language. So I contacted the CFTC and pointed out the problem. Here’s what they said to me:

There may be a few options that you can pursue if you believe that the Commission should take action to address the issue. One option may be to petition DSIO for no-action relief under Commission regulation 140.99. For example, you could request that DSIO provide relief against the $25 million de minimis threshold with special entities for transactions done on SEFs and DCMs. Any no-action request should go to Gary Barnett, who is the Director of DSIO. Another option may be to petition the Commission to amend the swap dealer rule under Commission regulation 13.2. These are only a few options, there may be others.”


It would appear that petitioning the CFTC to amend the swap dealer definition rule is the best alternative. I have done that (see letter to Director Gary Barnett, below), but others who would be affected should as well.

The address is:

Mr. Gary Barnett, Director
Division of Swap Dealer and Intermediary Oversight
Commodity Futures Trading Commission
Three Lafayette Center
1155 21stSt. NW
Washington, DC 20581

Although the CFTC has exempted trades conducted on a SEF or DCM from many of its rules, it neglected to do so in this case. What that meant was that any market participant that satisfied the pattern criterion and happened to do a trade larger than $25 million with a special entity on a SEF would be stuck having to register as a SD. When you consider that asset managers might execute large trades for their ERISA clients on SEFs, and their counterparties wouldn’t know about it until the trades were allocated, you begin to see the dangers. In fact, an ERISA account could wind up being both a SD and a SE at the same time!

Integral announces plans to launch SEF

Integral announces plans to launch SEF

First Published 17th May 2013

Integral reassures customers with SEF plans in light of CFTC deadline. NDFs available now, other services to follow. Seamless user experience promised for both regulated and unregulated products.

Harpal Sandhu, CEO, Integral Development Corp

Harpal Sandhu, CEO, Integral Development Corp

“We foresee a better, fairer market place, and we are working jointly with many broker/dealers to deliver that to our and their customers.”


Palo Alto, California – Integral Development Corp. the provider of FX trading solutions and services, has announced that it is ready to provide its customers with a Swap Execution Facility (SEF) in time to meet stated deadlines by the U.S. Commodity Futures and Trading Commission (CFTC). This announcement follows yesterday’s decision by the CFTC on ‘Final Rulemaking Regarding Core Principles and Other Requirements for SEFs’.

“We have been working diligently in anticipation of this milestone and will continue on this path now that the final rulemaking has occurred,” said Harpal Sandhu, CEO, Integral Development Corp. “Our customers can continue to focus on building their businesses in the knowledge that we as their service provider will be ready with a regulatory compliant solution.”

As every other capability offered through FX Grid, the SEF will be provided as a cloud service. FX Grid is Integral’s inter-institutional connectivity and trading network, linking market making banks to FX market participants. Immediately, FX Inside Professional, Integral’s private FX trading system for spot, outrights, and swaps will also include Non-Deliverable Forwards (NDFs). Other instruments stand to follow as the regulatory framework is being finalized.

Integral’s SEF will be branded INFX SEF and will be a wholly-owned subsidiary of Integral Development Corp.

“Contrary to how it is sometimes portrayed in public, SEFs are not about the displacement of broker/dealers,” added Sandhu. “We foresee a better, fairer market place, and we are working jointly with many broker/dealers to deliver that to our and their customers. I encourage everyone to talk to their dealer or to us to find out how to take advantage of this upcoming change.”

The final rulemaking implements Section 733 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), which added Section 5h of the Commodity Exchange Act (CEA) governing the registration and operation of swap execution facilities (SEFs).

SEFs Control Their Own Fate – from the TABB GROUP

SEFs Control Their Own Fate
The SEF mandate threatens to reduce IDB swaps execution revenues by as much as 71%. But the fate of Swap Execution Facilities does not rest with the CFTC; those firms that can adapt their business models to the changing environment will emerge as heroes.
Despite the agonizing over the delayed rules, the fate of Swap Execution Facilities (SEFs) in fact does not rest with the CFTC; rather, it rests with the SEFs themselves.

TABB Group believes that the cost of interest rate swaps (IRSs) execution will dramatically decline as a result of the SEF mandate. In less positive terms, revenue associated with the execution of IRSs is going to collapse.

Interdealer-brokers have responded to the SEF mandate by lobbying to defend the industry status quo, in particular the “by any means of interstate commerce” trade provision. But with so many forces working collectively against the status quo – from regulation to technology – it is hard to see how the industry’s profitability can be maintained as a whole. TABB Group projects that IDB swaps execution revenues could decline anywhere between 43% and 71%, depending on the outcome of the voice-trading provision.

The reality is that declines won’t be as severe for those that learn to adapt their business models to the changing environment. The question is: Which of the SEFs will rise to the occasion and emerge heroic and victorious?

With the SEF mandate will come a range of impacts on the swaps market. These include:

Swaps market compression resulting from the cost of clearing
Bid/ask spread compression
Commission compression
Turnover velocity
Trade size reduction
Standardized terms for swaps
Changes to commission structure
Migration to futures

Together, these influences make up the writing on the wall: Transparent trading will lead to reduced execution costs. We have tried to imagine scenarios in which the opposite may be the case: Could an interdealer-broker expect to make more money as a SEF than it does today? The answer is, only if margins increase. And we find this hard to consider.

What if the swaps market expands so dramatically that volume offsets any negative compression in spreads? Indeed, this will have to be extremely dramatic. Both dealers and interdealer-brokers today enjoy such high margins from swaps trading that there would have to be a huge increase in turnover to balance the equation.

With the transparent trading mandate comes a push toward standardization. This will make electronic execution easier, eroding the ability of voice trading to compete. Also, with standardization, swaps start to look more like futures. This will accelerate the migration away from swaps and further reduce the overall swaps market size. As execution becomes less about relationships and the ability to show depth of market, and more about speed and price, SEFs will look less like brokers and more like technology companies.

Intuitively, we understand that predicting the demise of IDBs is a fool’s errand. They have proved to be resilient businesses in other challenging environments. Ultimately, however, we are going to see firms going at it alone in a strategic bid to win market share in the new trading world of SEFs. Visionaries that embrace the change will not only preserve swaps’ appeal against the futurization trend, they will gain market share in a broader liquidity pool. Given the right pricing model and the right combination of trade protocols, they are destined to win, even as others lose. These efficiencies may come in the form of lower commissions, sponsored-access models, maker-taker pricing, or all-you-can-eat caps on execution fees.

E-Trading Finally Takes Over Fixed Income

Five years ago, while electronic trading was already the norm in the equities market, old-fashioned phone and voice trading still dominated the fixed income space.

via Pocket http://www.wallstreetandtech.com/regulatory-compliance/e-trading-finally-takes-over-fixed-incom/240154189 May 08, 2013 at 07:55PM

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