The new Wall Street envisioned by the Dodd-Frank reforms in the US no longer has financial institutions swapping hundreds of billions of dollars of interest rate, commodity and credit exposure among themselves, in opaque trades that threaten to pull everyone down together in a crisis.
Swaps dealers will have to register with the Commodity Futures Trading Commission from the end of this year, following a rule change that went live last week. Mandatory clearing for all but the most unusual swaps will kick in shortly after that. New futures-type exchanges and so-called swap execution facilities, or SEFs, are being set up now in the expectation that central clearing will lead to anonymous, electronic trading.
Under its new powers, the CFTC is demanding US swap trades are cleared inside a minute, partly to reduce the risk of having trades in limbo and partly to facilitate electronic trading.
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