U.S. SEF Rules are Final... Now What?

The final rules for swap execution facilities (SEFs) were entered into the Federal Register on June 4, 2013 and became effective on August 5.  The rules, which were among the most highly-anticipated outcomes from the long list of Dodd-Frank reforms, have shifted a majority of all IRS and CDS index trading for U.S. persons onto centralized, transparent marketplaces.

Now, just over two months since the rules were finalized, a total of eight firms – including Tradeweb – have registered to become SEFs and the industry expects mandatory trading to start as early as November of 2013, but more likely in December.  Now what?

While some critics of the final SEF rules – including FTC Commissioners Jill Sommers and Scott O’Malia – have suggested that the final rules were watered down, and some SEF operators have raised the idea of limits on ‘available to trade’ rules, there has not been much in the way of news on what the real-world of SEF trading will bring come November/December of this year.

So, in the spirit of helping to cut through the rhetoric, we offer the following timeline of key milestones to watch for on the SEF implementation trail:

• June – October 2013: SEF applications may be filed any time between June and October 2013.
• August 5, 2013: SEFs may begin to designate products as ‘made available to trade’ to the CFTC, which has 100-day review period
• September 9, 2013: Mandatory clearing for Category 3 swap transactions, including those involving third-party subaccounts and those not excepted from the mandatory clearing requirement.
• October 2, 2013: Compliance deadline for SEFs
• November/December 2013: Expected mandatory trading on SEFs/designated contract markets
• October 2, 2014: Minimum request for quote (RFQ) requirement increases to 3