Swap execution facility (SEF)
Quick definition
A swap execution facility (SEF) is a trading venue that enables the regulated and transparent trading of swaps. SEFs were established as part of the U.S. regulatory framework under the Dodd-Frank Act, implemented in response to the 2008 financial crisis, with the aim of reducing systemic risk in the over-the-counter (OTC) derivatives market.
What is Swap execution facility (SEF)?
SEFs are regulated by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). These entities oversee SEFs to ensure compliance with regulatory standards and promote transparency in swap trading.
In addition to the U.S., other countries and regions have developed similar regulatory frameworks to govern OTC derivatives trading, including swaps. In the European Union, for instance, organized trading facilities (OTFs) and multilateral trading facilities (MTFs) serve as analogous venues, established under the MiFID II and EMIR regulations.
This global approach to regulating swap trading reflects a concerted effort to enhance market stability and protect against systemic risks associated with OTC derivatives.
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