State Street to Launch a SEF

SwapEx is a derivatives platform designed to comply with Dodd-Frank and EMiR regulation regarding the new trading of OTC derivatives.

State Street today announced the expansion of its end-to-end derivatives solution to include an execution platform for the trading of derivatives products. The launch of this swap execution facility (SEF), SwapEx, coincides with the 2012 implementation of significant regulatory changes in the United States and Europe. State Street's derivatives solution already includes clearing, servicing, custody and accounting, collateral management, valuation, and risk and analytics.

State Street plans to file its SwapEx registration with the United States Commission Futures Trading Commission (CFTC) when the application window opens later this year. In preparation for the launch, State Street has entered into an agreement with the National Futures Association (NFA) to perform regulatory services for State Street's SEF.

"The derivatives market is in the midst of significant change as it moves away from a bilateral trading model to a centrally traded and cleared environment that offers greater price transparency, liquidity and enhanced risk management," says Clifford Lewis, executive vice president and head of the eExchange business at State Street. "State Street's core competencies as a custodian combined with the advanced technology of our eExchange platforms, including SwapEx, make the expansion of our derivatives solution to include a swap execution facility a natural extension of our business."

Adds Jeff Conway, executive vice president and head of investment manager services at State Street: "Through State Street's comprehensive derivatives solution, buy-side clients will have a centralized means for trading, clearing and processing their swap positions, managing the related collateral demands, allocating, reconciling and accounting for their positions, automating manual processes, and helping to reduce operational risk."

Key functionality of the SwapEx platform will include automated post-trade capabilities, Portfolio compression available through request-for-quote and indication-of-interest execution styles that allow for the ‘tear up' of positions, and multiple execution styles.