ASX Eyes Yieldbroker Stake

Sydney-based Yieldbroker found itself becoming a symbol of CFTC extraterritoriality during discussions over swaps regulation.

The Australian Securities Exchange (ASX) has made a binding offer to trading platform Yieldbroker, in which it would acquire a 49 percent stake in the firm.

Yieldbroker will remain independently controlled if the offer is accepted, and ASX would join a host of other investors, including Australian and New Zealand banks, as well as US and EU firms such as JPMorgan and Deutsche Bank.

"Exchange-traded and over-the-counter derivatives markets are experiencing considerable change globally," says Elmer Funke Kupper, CEO of ASX. "This proposed investment provides another way that ASX can improve liquidity and develop infrastructure to provide efficiencies to our customers, who access both OTC and exchange-traded products."

Yieldbroker, based in Australia, inadvertently found itself in the middle of a row between securities regulators over perceived extraterritoriality from the US Commodity Futures Trading Commission (CFTC) earlier this year. Under Footnote 88 in Title VII of the Dodd-Frank Act, platforms allowing certain derivative transactions with US entities must register as swap execution facilities (SEFs), subject to oversight by the CFTC. The Washington, DC-based regulator has, however, issued no-action relief to Yieldbroker, allowing it to operate without registration as a SEF while allowing direct access by US entities.

ASX's acquisition, which would be worth A$65 million ($58.2 million), is in line with broader interest in SEFs and other electronic trading platforms for derivatives from exchange operators. IntercontinentalExchange, owner of the New York Stock Exchange, operates a SEF in the US, as does the Chicago Mercantile Exchange Group. Other SEFs are often owned by interdealer brokers, such as GFI Group and Icap, or by vendors such as Thomson Reuters, which operates FXall as a SEF, and Bloomberg, which has emerged as the dominant platform for certain instruments.

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