The SEF-Book- All you need to know about the changing regulatory landscape

For more information, please visit: www.terrapinn.com/SEF

Contents

This eBook will tell you everything you need to know about the changing

regulatory structure around SEFs.

What is a SEF?

Market Impacts

Technological changes

Meet the SEFs

What is the SEF?

A Swap Execution Facility (SEF) by definition, is a facility, trading system or platform in which multiple

participants have the ability to execute or trade swaps by accepting bids and offers made by other participants.

These are open to multiple participants in the facility or system, through any means of interstate commerce

therefore allowing increased transparency and provides the tools for a complete trade audit.

A swap execution facility allows for greater transparency and is a significant shift in the way derivative trading is

made.

What are the Impacts on Derivative Trading?

SEFs were created with the hope that pre- and post-trade transparency will improve, greater competition will be

fostered and documentation of trades will be improved.

This inevitably will lead to a fully transparent market where all OTC derivative trades will be visible and

displayed on a screen for everyone to see.

Okay.. So what?

Formerly, firms are accustomed to trading bilaterally: meaning a buy-side firm would typically trade derivatives

directly with its dealer counterparty.

The terms of the swap agreements were all negotiated by both parties involved.

Now with the implementation of SEF and desire for greater transparency, all trades will now have to go through

a clearing process, where all information is reported to regulators who will cover the entire swap market (The

CFTC and SEC)

Almost all OTC products will now be regulated by one or both of these regulators, known as the central clearing

counterparty. (CCP)

How will this work? As mentioned, multiple regulators will be covering the swap market.

However, in some cases two different regulators may have jurisdiction over the same swap.

Security-based swaps, such as a credit default swap on debt of an individual company, would fall under the SEC,

whereas a total return swap on a broad market index would be regulated by the CFTC. Both may have to jointly

regulate a swap in some case. For example, a total return swap on single security with an embedded foreign

currency hedge would be jointly regulated.

Already burdened with the need to continuously report on the transactions, firms will face an increased reporting

burden for jointly regulated products.

Flexibility in the SEF

The SEF rulemakings offer flexibility to allow participants to use a variety of trading systems and platforms,

including order books and request for quote (RFQ) systems.

Quote models include:

o Platforms in which a market participant transmits a request for a quote to buy or sell to no less than five market participants.

o Platforms in which multiple market participants can view and act upon real-time electronic streaming quotes from multiple potential counterpart and on a centralized electronic screen

Complexity in the work flow As opposed to the previous work flow, the new work flow is much more complex due to all the rule changes and

clearing requirements.

Technological changes

With the SEF landscape rapidly changing, so to is the need for technology in order to keep up with the process:

specifically in order to comply with the new regulations in clearing.

In order to ensure that trades agreed to on a SEF can indeed be accepted for clearing, several solutions have been

proposed and created. Such credit hubs that can be queried as a trade occurs (the ping model), credit limit lists that can be sent out from futures commission merchants (the push model), or direct credit checks with individual dealers (the pull model).

There is not consensus yet on which model will ultimately make the most sense, so we are supporting all three, - Rick McVey, CEO of MarketAxess, which operates one of the 23 approved SEFs.

When will all these rules be in effect?

The SEF rules have become effective on August 5, 2013. Prospective SEFs were given the opportunity to apply

for registration before that date in order to gain temporary registration.

With 25 total SEFs: about 23 currently registered and 2 pending, the date when SEF trading has become

mandatory for certain swaps was effective on February, 2014.

Meeting the SEFs

360 Trading Networks. Inc.

360 Trading Network Inc., registered as Delaware

limited liability company, is a wholly-owned subsidiary

of 360 Treasury Systems AG, headquartered in

Frankfurt, Germany.

It is the leading independent global provider of a multi-

bank, multi-asset trading platform, which is regulated by

the German Federal Financial Supervisory Authority

Its fast growth confirms the companys status as a provider of web-based trading technology for over-the-

counter (OTC) instruments, integration solutions and

related services

BGC Derivatives Markets, L.P.

A leading financial services firm.

Now focused on institutional financial services.

On October 2, 2013 BGCs subsidiary BGC Derivative Markets, L.P. launched operations as a Swap Execution

Facility (SEF), consistent with the derivatives trading

regulations under the Dodd-Frank Act.

BGC offers trading in swaps products subject to

mandatory clearing, as well as swaps classified as

permitted transactions.

Bloomberg SEF LLC

By building upon the core technology of Bloombergs existing derivative trading platforms used by more than 1,000 global institutions Bloombergs SEF will provide all Bloomberg Professional service subscribers access to

multiple execution styles and liquidity across numerous

asset classes including rates, credit, currency and

commodity derivatives

Chicago Mercantile Exchange, Inc.

CME is an American financial and

commodity derivative exchange based

in Chicago

Also known as The Merc, it trades several types of financial instruments: interest

rates, equities, currencies, and commodities.

It also offers trading in alternative investments,

such as weather and real estate derivatives, and

has the largest options and futures contracts open

interest (number of contracts outstanding) of any

futures exchange in the world.

EOX Exchange LLC

EOX Holdings LLC is a futures broker registered with

the Commodity Futures Trading Commission (CFTC) and is a Member of National Futures Association

(NFA)

EOX also offers market data services and introducing

broker (IB) services

DW SEF LLC

DW SEF is the Swap Execution Facility of Tradeweb

Markets LLC

Tradeweb provides a range of market data and post-

trade processing services

It also offers specialist execution services across a

number of key finance markets including U.S.

Treasuries, fixed income, derivatives and the money

market

Clear Markets North Market, inc

The U.S. Commodity Futures Trading Commission

(CFTC) recently approved the application of Clear

Markets North America, Inc. (CMSEF) for temporary

registration as a swap execution facility (SEF).

This application went through on May of 2014.

GFI Swaps Exchange LLC

GFI is a leading marketplace for over-the-counter (OTC)

derivatives.

It received temporary registration approval from the

Commodity Futures Trading Commission (CFTC) to

become a multi-asset swap execution facility (SEF) under

the CFTC's SEF rules issued pursuant to the Dodd-Frank Act

GFIs SEF operates markets for both required and permitted transactions via GFI's award-winning venues for

trading derivatives in:

o Credit

o Interest Rates

o FX

o Equities

o Energy and Commodities

GTX SEF LLC

GTX offers a pool of forex liquidity from anonymous

and disclosed liquidity providers via an extensive

network of wholesale forex trading partners

GTX is a Swap Execution Facility owned and operated

by GAIN Capital, a global provider of online trading

services and solutions.

ICAP Global Derivatives Limited

ICAP provides a wide range of electronic execution, broking, risk

mitigation, messaging, and information services to wholesale market

participants.

The company has served OTC and exchange traded

derivatives customers for many years by offering fair, liquid and

robust markets

ICAP SEF

The Swap Exchange Facility of ICAP

Derivatives.

The regulatory framework that has been created

in the US by the Dodd-Frank Act provides ICAP

with the opportunity to leverage their expertise in

operating these markets and expand their

services to create a SEF surrounded by a broad

set of asset classes and currencies.

ICE Swap Trade LLC

ICE Swap Trade is a Delaware limited liability

company and is a wholly-owned subsidiary of

IntercontinentalExchange, Inc., a Delaware

corporation.

ICE serves customers around the world by

building the markets and tools

required to manage risk in a dynamic economic

and regulatory environment.

INFX SEF

INFX SEF is a fully-owned subsidiary of Integral

Development Corp.

ISEF (Integral's swap execution facility) allows

customers to trade FX NDFs on a multiple-to-

multiple platform, enabling customers to source

liquidity from bank providers as well as resting

orders from other market participants.

Javelin SEF

The Swap Execution Facility of Javelin Capital

Markets LLC.

Javelin offers low cost, real time trade execution

for Interest Rate Swaps

LatAm SEF

LatAm SEF is a U.S.-based multi-asset marketplace for swaps.

It is currently operating under Temporary Registration as a Swap Execution Facility as granted by the CFTC.

LatAm SEF provides a U.S. regulations-compliant trade workflow, addressing regulatory requirements at pre-trade, execution, and post-trade stages of the trade lifecycle.

MarketAxess SEF

Specializes in e-trading

MarketAxess is one of the most liquid U.S credit markets.

After being granted temporary registration approval from the CFTC, MarketAxess has been operating as a SEF since October 2, 2013. As a pioneer in credit e-trading, MarketAxess has enhanced its CDS functionality to enable credit market participants to trade both Permitted Transactions and, from February 26, 2014, Required Transactions, for U.S. indices (CDX), European indices (iTraxx), and CDS options while meeting the CFTCs SEF requirements. MarketAxess' CDS Platform also supports trading of CDS single-names using a broad range of trading protocols.

SDX Trading LLC

SDX is the Swap Execution Facility of

SuperDerivatives.

For over a decade SuperDerivatives has been providing

OTC derivatives market participants with the

technology and expertise to improve transparency and

set best practice in their trading and hedging operations

Working closely with regulators, SDX Trading will

provide its customers with a fully compliant electronic

execution platform for a wide range of swaps products

and asset classes, starting with FX and commodities.

SwapEx LLC

SwapEx is the Swap Execution Facility of State Street

Corporation (NYSE: STT), one of the worlds leading providers of financial services to institutional investors.

SwapEx provides the first step in a global end-to-end

solution that reduces operational risk through the

automation of the many stages of derivatives processing,

including execution, clearing, collateral management,

cash and securities flows between the middle and back

offices, transaction cost and risk reporting, valuations,

and the reconciliation of positions.

TeraExhange LLC

TeraExchange is the industry's first and only multi-asset

class central limit order book with an all-to-all platform

across interest rate, credit and foreign exchange (FX)

derivatives for all clearable swaps contracts.

It also incorporates "Directed Orders" within the order

book, request-for-quote (RFQ) and request-for-market

(RFM) trading protocols.

Thomson Reuters (SEF)

The Thomson Reuters Swap Execution Facility (SEF)

allows customers to trade FX non-deliverable forwards

(NDFs) and FX options electronically through

multibank request-for-stream (RFS) liquidity and an

anonymous Order Book.

tpSEF Inc

tpSEF filed an application in September 2013 to

be registered as a Swap Execution Facility.

tpSEF will provide execution services for swap

transactions, including interest rate swaps, credit

swaps, foreign exchange swaps, commodity

swaps and equity swaps.

Tradition SEF, Inc

TraditionSEF is operated by Tradition, one of the

world's largest interdealer brokers in over-the-

counter financial and commodity related

products.

TraditionSEF will operate markets for Interest

Rates Swaps, Credit Swaps, Equity Derivatives,

Commodity Derivatives, Foreign Exchange

options and NDFs, in cleared and uncleared

swaps as markets determine.

trueEX LLC

trueEX is an electronic, CFTC-regulated, exchange for

interest rate swaps.

trueEX offers market participants the dual benefits of

automated execution and clearing in an electronic,

CFTC-regulated, DCM (Designated Contract Market)

exchange.

TW SEF LLC

A Swap Exchange Facility of Tradeweb.

The TW SEF provides market participants with the

greatest flexibility to trade interest rate swaps and credit

default swap indices in a disclosed, request-based

market with an order book - a single integrated platform

with tools to help ensure compliant trading and seamless

connections to clearing houses, SDRs, middleware

vendors, and order management systems.

Who can provide for these SEFs?

There are many providers that offer pre and post - trade services for buyside and sellside firms in order to comply with the new regulations yet also optimize workflow efficiency.

A few of these providers include:

o Traiana - support trading platforms, global banks, broker/dealers and buyside firms

o Markit provide processing solutions for cross-asset class OTC derivatives

o Omgeo post trade efficiency and solutions

October 8 New York City Tribeca 360

Some featured speakers include:

Daniel Conte, CEO & COO, 360 Trading Networks

Michael Koegler, Managing Director, Javelin Capital Markets

Scott Fitzpatrick, CEO, Tradition SEF

Some featured topics include:

How to ensure data security is sufficient to support and protect operating SEFs

How can we measure and understand if firms' technology infrastructure produce the

results needed to satisfy new data reporting

requirements

How to ensure pre-trade certainty of clearing Can regulators collect, manage, and

understand this data to gain consistent

oversight of the global over-the-counter

(OTC) derivatives sector?

For more information, please visit: www.terrapinn.com/SEF

October 8th New York City Tribeca 360

In addition to the SEF community, The Trading Show New York brings together HFTs, Prop Firms, Hedge/Quant Funds, Brokers, Banks and leading providers servicing these profiles.

A few of our high profile speakers will include:

Brian Peller, Chief Operating Officer, Market Making, KCG

Keyvan Azami, Director, Head of Electronic Trading and Algorithmic Technology, Barclays Capital

Michael Azzopardi, IT, Infrastructure Architecture & Strategy, Credit Suisse Group AG

Mike Beller, Chief Technology Officer, Tradeworx

Sanjay Sharma, Chief Risk Officer, Global Arbitrage and Trading, RBC Capital Markets

For more information, please visit: www.terrapinn.com/SEF

Post-SEF Effects

So what does all this mean? How has the Dodd-Frank Act and CFTC

regulations impacted the way these SEFs operate?

Come find out everything you need to know at SEF New York on October

8th!

For more information please contact Steven Reichard on + 1 (646) 619 1777 or email steven.reichard@terrapinn.com

Part of:

For more information, please visit: www.terrapinn.com/SEF