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Mandatory Exchange-Trading for Swaps
12 December 2013
Beginning early next year, market participants may be required to execute certain interest rate swaps and credit default swaps on a designated contract market (DCM) or swap execution facility (SEF), rather than entering into such swaps over the counter. This trade execution requirement does not apply to a swap entered into by a non-financial entity end-user for hedging or other risk mitigation purposes.
While only members of a SEF may transmit swap orders and execute swaps on the SEF, a non-member may appoint a member to act as its agent in executing swaps on its behalf on the SEF. Both the SEF member and the non-member entering into a swap through the member-broker will be bound by the rules of the SEF and will be subject to its jurisdiction with respect to such trading.
SEF members will be required to pay certain dues, assessments and/or fees to the SEF and may be subject to inquiries, investigations, disciplinary proceedings, fines, suspensions and other summary actions by the SEF for any violation of the SEF rules.
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