Sell-Side Technology Awards 2019: Best Swap Execution Facility (SEF)—Tradeweb Markets

For the average person on the street, the first time they would likely have heard of Tradeweb was during its blockbuster April IPO. That listing, the second-largest of the year to date, raised $1.1 billion for the New York-headquartered firm, valuing it at around $6 billion.

Followers of the Sell-Side Technology Awards, however, will be intimately familiar with the fixed-income specialist, particularly its swap execution facility (SEF), TW SEF. The derivatives trading platform has, after all, won the best SEF gong at theses awards every year that this category has been a part of the program.

TW SEF, which facilitates trading in both rates and credit swaps on a dealer-to-client basis, has handled more than $54 trillion worth of trades in the former—$18.5 trillion of which flowed through the SEF’s pipes in 2018 alone. Indeed, TW SEF is the largest such venue for the trading of vanilla rate swaps, with a 38% market share in the highly competitive field, according to data from Clarus FT. Average daily volumes in 2018 hit $90 billion for rates and $5.7 billion for credit.

Outside of rates, the SEF is also one of the leaders for trading in credit default swap indices, with a combined market share for CDX and iTraxx of 14% in 2018. The firm has expanded the platform’s reach with connections into the Intercontinental Exchange’s clearinghouse and LCH for US indices.

While SEFs generally handle instruments that are made available to trade, per US regulations, TW SEF has also gone one step beyond that by offering products that are not explicitly mandated to trade electronically. Around $40 billion in swaptions were executed on TW SEF in 2018, for instance, following their launch in October 2017.

It’s developments like this that continue to set TW SEF apart from other market players, particularly outside of pure trading where the SEF sees enhanced efficiencies in netting, thanks to direct connectivity with Eurex Clearing and LCH ClearConnect. While SEFs may have had a slow start after their introduction and may face an uncertain future—outgoing US Commodity Futures Trading Commission chair J Christopher Giancarlo, for instance, has long been a vocal proponent of reforming rules that govern SEF operation, among other areas, which his successor may take on—Tradeweb’s success has demonstrated at least one benefit: Workflows designed from the start with electronic trading in mind, as one Tradeweb insider says, show that the frustrations and complications arising from regulation can be offset by efficiencies gained from properly designed workflows.