November 22, 2013

MarketAxess confirmed that its swap execution facility is providing open and impartial access to its platform in compliance with guidance issued by the main derivatives regulator.

MarketAxess is the first SEF to publicly state that it made changes to its SEF following the guidance issued on Nov. 14. All participants on the MarketAxess SEF today have the ability to fully access the platform such that they can both make and respond to executable bids and offers from all other participants on the platforms., according to its release. This means that all participants may choose to act as a liquidity provider or a liquidity taker for all intended -to-be -cleared (ITBC) swaps on the MarketAxess SEF, the platform operator stated.

The new guidance, issued on Nov. 14, came as a surprise to SEF operators with request for quote (RFQ) platforms in which dealers are able to select their trading partners based on their credit relationship. In a speech at the swaps conference on Monday, CFTC Chairman Gary Gensler said that SEFs could no longer be just dealer-to-dealer or dealer-to-customer platforms. He criticized the current practice of dealers preselecting their trading counterparties by using “enablement mechanisms.”

[For more on CFTC Shakes Up the SEFs' View of Impartial Access, see Ivy Schmerken's related story.]

Gensler said that SEFs must provide impartial access to all market participants, including dealers and non-dealers alike, suggesting that buy side firms should be eligible to participate as liquidity providers or liquidity takers. He also advised against prearranged execution agreements, such as breakage agreements as contrary to Dodd Frank and the Commission’s regulations.

This meant that certain SEFs had to change their technology while they are in the midst of refining and tweaking other processes such as pre-trade credit checks between the SEFs, FCMs and clearinghouses.

“The implementation of the SEF rules represents a tremendous change for the swaps industry, “ said Richard McVey, CEO of MarektAxess in the firm’s announcement. “We are focused on ensuring that both we and our clients are in full compliance with all industry regulation. By offering robust and flexible technology solutions we have been able to consistently support our platform participants, as they navigate these new regulatory requirements," added McVey in the statement.

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