Swap Execution Facilities are game-changers. We knew that.
What we didn’t know is how unprepared the industry feels about the arrival of SEFs and regulation dust-settling. In a recent IPC questionnaire surveying the front-, middle-, and back-office, 62% of participating firms said they were not prepared. A number magnified by 36% who said they didn’t even have a plan in place for when the impending SEF-storm does hit.
What’s more…Only 19% felt the industry is prepared, overall. That’s 81% who have given the broader business of capital markets a vote of “no confidence” in withstanding the upcoming weather.
Despite these uneasy feelings and lack of contingencies, what can the market do at this stage in the game?
Increase connectivity
One of the best ways to gain headway on updating your firm for impending regulatory changes in the OTC derivatives market is to increase connectivity to Swap Execution Facilities. More connections are critical to remaining compliant. And, if your firm is looking for a competitive edge in this brave new world, you’ll need multiple execution venues to capitalize on new opportunities.
62% of the survey participants agree, citing that their firms are, or will be connected to one or more SEFs and 39% plan to connect to more than 10 SEFs.
Other key takeaways from the survey:
- 74% expect trading volume to increase in the next year
- 31% believe regulation will have a net, negative impact
- However, 57% see new regulations to increase market transaction transparency
- And 53% said that this increase is important
- 66% expect trading to shift to the futures market
- 19% expect the importance and value of the OTC derivatives market to grow
