How can an #exchange adapt to #SEF and #OTF requirement?

Lack of regulation in the relatively new over-the-counter (OTC) derivative market in the US was a big blame for the 2008 financial crisis. In response to such public outcry, the main regulatory agency, the U.S. Commodity Futures Trading Commission (CFTC), has been busy putting out checks and rules to bring this wild west of financial markets under control.

As one of the results, Swap Execution Facilities, or SEFs, were given life, which requires OTC swaps to be cleared and traded on this new type of regulated platform. In Europe, its counterpart is called Organised Trading Facilities (OTFs), though with much wider application. Therefore, exchanges must make adjustment to comply with this new requirement and establish new centrally clearing infrastructure, as such requirement inevitably push the OTC derivative market further into the electronic trading era.

Soon after the new regulation came out, IntercontinentalExchange (ICE) announced its intention to become a SEF. Other exchanges are certainly to follow as they continue to operate in this market. But what does it take to upgrade infrastructure to meet full compliance with the new rule? And how can exchanges achieve their goals?

Mr. Hannes Takacs, Managing Partner of CAPMEX, is an expert on exchange project management, and an advisory board member for the Exchange Technology World Chicago 2012 conference. He will be leading an interactive, hands-on workshop at the Trading Show Chicago 2012 to help exchanges face the challenge of transforming to SEFs.