sequence

ICAP's European SEF signals cross-border swaps likely to comply with US laws

Tools

ICAP, the world's largest interdealer broker, has confirmed plans to register its U.K.-based ICAP Global Derivatives Limited (IGDL) electronic trading facility as a swaps execution facility (SEF) with U.S. regulators. The move is in addition to its U.K. regulatory permissions, but signals a willingness to accommodate U.S. cross-border swaps rules. Other players are expected to follow.

By registering as a SEF, the facility will be subject to certain U.S. Commodities Futures Trading Commission rules, and the CFTC will essentially have a partial monitoring role for trades. The U.S. has sought some role in oversight of cross-border trading to control systemic risk that may affect U.S. markets. However, the interest of U.S. regulators in cross-border trades has been controversial and viewed by some in Europe and Asia as a case of the U.S. overstepping its bounds.

"The core of U.S. liquidity is U.S.-based and the popular feedback [from customers] we had is that it ought to be on a SEF," Peter Best, chief operating officer of ICAP's London-based SEF told the Financial Times. "They didn't want two liquidity pools. Given that it was a U.S.-centric market, we decided to go with the SEF."

In further explaining the move on its website, the company says: "ICAP believes this to be the most robust and compliant way to achieve cross-border SEF execution."

IGDL will go live on May 12. The Financial Times calls ICAP the most high-profile inter-dealer broker to take this route but says others are likely to follow.

For more:
- read the Financial Times article
- read the FOW article
- read the explanation on ICAP's site

Related Articles:
ICAP aims to boost etrading for FX
ICAP appoints new CEO for ISDX
ISDA pulls benchmark from ICAP in favor of Thomson Reuters