Derivatives Move to Electronic Exchanges Amid New Regulation

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Derivatives Move to Electronic Exchanges Amid New Regulation

As part of the far-sweeping and long-reaching regulation that is the Dodd-Frank Act, more and more derivatives trading must be done via central clearing houses. This week another electronic exchange has come online as Javelin Capital Markets opened its Sef platform for trading of U.S. Dollar swaps.

“We are open for business and trading interest rate swaps one day before the mandate starts,” said James Cawley, Javelin chief executive.

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Javelin said that 13 of the 17 dealers doing business in these swaps were available via Sef. Much of the imposed regulation regarding central exchanges has been delayed so that participants can ready themselves. European regulators had also asked the CFTC to postpone some implementation as to not hamper operations of foreign platforms dealing with U.S. banks.

Given the recent troubles of established U.S. electronic markets for stocks, options, and futures, let’s hope these new markets have fewer glitches and do not become the new high frequency trading breeding grounds.