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Week in Review: Credit Derivatives Mandated for SEF Trading

March 3, 2014

On Wednesday, February 26, select credit derivative instruments were mandated for the first time to trade on regulated exchange-like platforms, called swap execution facilities (SEFs).

Here are a few credit default swap (CDS)-specific observations from the first days of mandated trading:

  • CDS volumes and trades executed on Bloomberg’s SEF between Wednesday and Friday more than doubled from the same period the week prior
  • Over 160 new firms started trading on Bloomberg’s SEF
  • Trades were executed in every CDS instrument mandated for SEF trading, with the most volume traded in the US and European investment grade CDS indexes

The CDS mandate follows the rates and market agreed coupon swaps (MAC) trading mandates from the week earlier, where despite market uncertainty Bloomberg’s SEF volumes steadily climbed.

Last week, this trend continued with overall volumes increasing nearly twofold from the week prior:

Asset Class Volume Traded
Interest rate swaps $50 billion
Credit default swaps $56 billion
Foreign exchange swaps $1.3 billion
Commodity swaps $45 million
TOTAL $107.75 billion

More than 600 global firms have signed on to Bloomberg’ SEF and all the major liquidity providers are contributing liquidity. Bloomberg was first to register and first to receive CFTC provisional approval to operate a SEF. Bloomberg has been providing clients with derivative trading platforms for over a decade.