Mandatory Exchange-Trading for Swaps

12 December 2013
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  • 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.