Theme: Dodd-Frank and SEFs – last-minute uncertainties

Last minute uncertainties in the swap market as the 2 October Dodd-Frank deadline approaches

As the 2 October ‘go-live’ date of SEFs approaches, European-based inter-dealer brokers are reporting that most of their non-US swap-trading clients would prefer not to trade with US banks who do not have non-guaranteed non-US-based affiliates of their US parent.  This is leading to the creation of US and non-US liquidity pools.

In contrast to most of their peers, two US banks[1] have been slow to demonstrate how they will deal in the non-US pool.  Given the importance of these two banks to the market, this could mean greater volatility and wider spreads.  It could also provide opportunities for non-US swap dealers, including three leading European banks.

[1] Names of all banks are omitted from this, public, version of the report.