Swap Execution Facilities. A difficult birth but a promising future in FX

Eva Szalay sets out to explore areas of concern that have be expressed by market participants regarding the operational procedures associated with SEFs and how these are being addresses by regulators and the industry.

In the world of derivatives trading, 2013 will likely be remembered as the year of confusion, mad scrambling and anxious waits. Yet, as the end of the year approaches the trading landscape for non-deliverable forwards and options in foreign exchange looks like time has been rolled back several years. The lengthy process of consultation and rule-making finally came to an end in May this year when the Commodities and Futures Trading Commission issued its final rules on trading on Swap Execution Facilities (SEFs) and gave market participants until October to register and comply with the legislation.  The credit and rates industry has been preparing for becoming SEFs for years, as it was clear from the original intention of the G-20 to make those instruments cleared and more transparent.  But currencies were left outside of clearing requirements apart from options and non-deliverable forwards, in which clearing is not expected to start until 2014 and 2016 respectively, making FX options and NDFs...continued

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