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IPC survey: Industry unprepared for SEF regulation deadlines

First Published 9th April 2014

IPC survey finds industry lagging behind market regulation deadlines as SEF trading begins to take off.

Jersey City, NJ - With the Dodd-Frank rule for certain swaps to be mandatorily traded on Swap Execution Facilities (SEFs) becoming effective, a new survey conducted by IPC Systems has concluded that the industry remains underprepared to meet the requirements of these new regulations, while individual firms push ahead to make themselves ready.

The survey which was was conducted during FIA Chicago, from November 5-7, 2013, highlights the state of the industry's preparedness for this new SEF model and potential impact on the OTC derivatives markets. It generated responses from hedge funds, investment banks, broker/dealers, exchanges and other financial institutions. Respondents came from the front, middle, and back office and included people involved in both the business and technology sides of trading operations. Key findings include:

Struggling to Meet Regulatory Preparedness

60 percent of survey respondents said the industry was behind on meeting the deadlines on SEF trading.
39 percent of survey respondents said their firms were behind on meeting the deadlines on SEF trading.

SEF Impact

77 percent of survey respondents believe that the launch of SEFs will have an impact on trading volumes and sizes.
61 percent of survey respondents expect to see a shift to the futures market due to the regulations.

Potential OTC Derivatives Market Growth

27 percent of survey respondents expect the importance and value of the OTC Derivatives market to grow.
42 percent of survey respondents plan to start OTC derivative trading during 2014.

SEF Connectivity

Nearly all respondents planned or have already connected to multiple SEFs.

SEFs that the largest percentage of respondents said that they plan to connect to are CMEGroup, TeraExchange, Bloomberg, and Eurex.

"Over the last year, we have seen a lot of activity from financial firms that have been looking for additional or new network connectivity to many of the already registered SEFs or OTFs through Connexus, our Financial extranet," said Ganesh Iyer, Director, Product Marketing, Financial Market Network at IPC. "While the survey results suggest that the industry is underprepared for mandated SEF trading, we see this issue as more of a fear of uncertainty around industry-wide implementation and regulatory governance. Individual firms, SEFs and their equivalent platforms are already planning connectivity, systems and processes to be ready to meet the new trading requirements."

Click here to read the report.