Swap Execution Facilities & End Users

SEF Survey end users

Swap Execution Facilities & End Users

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Issues & Trends in the End-User Community

ISDA’s new Survey of Issues & Trends in the End User Community offers interesting insights into Swap Execution Facilities and End Users. Respondents point to fragmentation along geographical lines due to regulatory ambiguities in cross-border transactions.

The survey’s respondents were asset managers and non-financial corporate, with a total of 125 respondents. 89% of those respondents are located in North America and Western Europe.

The respondents use derivatives for a variety of reasons, equally split among managing exposures to hedging risks in international markets and new business activities. 86% of respondents place derivatives as important or very important to their businesses.

On the Swap Execution Facilities Front

65% of respondents have no user agreements with SEFs and only 9.6% plan to enter into a user agreement to execute via SEF. Further, 50% of respondents with user agreements execute less than 10% of their derivatives transactions using an SEF.

FIA SEF Survey

A quick glance at the FIA SEF Survey for August shows less than robust growth in volume with no clear leader amongst SEF providers. Also of note, 52% of IRS volume are Forward Rate Agreements. Swapsinfo.org confirms these numbers and shows SEFs executed 36% of all USD IRS on September 10, 2014. While August volume was light, these figures speak to SEFs being used by dealers but not end users yet.

One aspect of the report that is troubling is related to regulation:

55% of respondents agree the market is fragmenting along geographical lines as a result of variations in regulatory framework in key jurisdictions.


Unless or until regulation takes on a more global view, the derivatives markets will continue to fragment. Fragmentation typically means increased costs. But with all the other monies spent on implementing Dodd-Frank, this added cost may be the least of it.

The US trade groups will hopefully become more closely aligned with others around the world and find confluence in regulating the global derivatives markets.

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