Bloomberg Leads SEF Market Share

Bloomberg has jumped to an early lead in the SEF sweepstakes, capturing an 85% market share across all asset classes for dealer to client swap execution facilities, according to data from Clarus Financial Technology.

“We’ve been pleased with the volumes and participation on Bloomberg’s SEF since the October launch,” said Ben Macdonald, Bloomberg’s head of product and president of Bloomberg SEF LLC. “Nearly 400 global firms, including all the major liquidity providers, have signed on to use our platform. As of mid-January, more than $800 billion in interest rate, credit, foreign exchange and commodity swap volume has been executed on our SEF.”

Bloomberg was the first to file as a SEF and first to receive the CFTC’s approval. Bloomberg’s SEF launched on October 2, offering cross-asset liquidity for interest rate swaps, credit default swaps and FX and commodity derivatives. Market participants can execute using flexible trading protocols including request for quote, request for streaming and order book functionality.

“Any participant can interact with any other participant on Bloomberg’s SEF,” Macdonald said. “Bloomberg has provided clients with derivative trading platforms for over a decade so becoming a SEF was a logical progression for us.”

The Commodity Futures Trading Commission approved Javelin SEF’s self-certification of available-to-trade determinations for interest rate swap contracts. Under Commission regulations, swaps that are subject to these MAT determinations, whether listed or offered by Javelin or any other designated contract market (DCM) or SEF, will become subject to the trade execution requirement on February 15, 2014. All transactions involving swaps that are subject to the trade execution requirement must be executed through a DCM or a SEF.

“The big news last week was the CFTC certification of the Javelin MAT application,” said Tod Skarecky, senior vice president, Americas at Clarus Financial Technology.

Various market participants have submitted to the CFTC comments and requests regarding the implementation of the trade execution requirement with respect to “package transactions,” or transactions involving more than one swap or financial instrument and at least one swap subject to the trade execution requirement.

The CFTC clarifies that the inclusion of a swap subject to the trade execution requirement in a multi-legged transaction would not per se relieve market participants of the obligation to trade such swap through a DCM or SEF. “My interpretation is that packaged trades are included, but that the CFTC wants to discuss it further with participants,” said Skarecky. “The CFTC language was a bit more confusing, stating that if you execute packaged trades, that you would not be relieved from the trade execution requirement.”

Bloomberg’s MAT application, based on historical trading data from its derivative execution platforms and SEF and feedback from its customers, recommended only to MAT the most liquid benchmark interest rate and CDS index swaps. Bloomberg has also filed to become an SDR (swap data repository).

“Market participants complying with Dodd-Frank regulation appreciate the multi-asset class, complete offering Bloomberg’s SEF provides,” Macdonald said. “They can access liquidity from any of the major providers through flexible trading protocols and can seamlessly connect to all the major clearinghouses.”