Emergence of Swap Execution Facilities: A Progress Report, Hearing Before the Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Twelfth Congress, First Session on a Progress Report on the Emergence of Swap Execution Facilities, June 29, 2011 [open pdf - 6MB]
From the statement of Jack Reed: "The financial crisis revealed some significant weaknesses in our financial sector. One of the most problematic was the over-the-counter [OTC] derivatives market. As a result, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 developed new rules for the OTC market to insulate both the U.S. economy and the American taxpayer from any future extraordinary losses in this area. In particular, Dodd-Frank mandated that all cleared trades be executed either on an exchange or on a new trading platform called a swap execution facility, or SEF. The Dodd-Frank Act defined a swap execution facility as ''a facility, trading system, or platform in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by multiple participants in the facility or system through any means of interstate commerce.'' The development of SEFs should transform the current trading marketplace by providing significantly greater pre- and post-trade transparency for regulators and market participants alike. In addition, once a trade has been completed, a counterparty should be able to compare the price it receives on a particular trade with the price of similar trades that buy and force similarly standardized products. This information should also be useful to those analyzing the effectiveness of hedging strategies. Finally, increased transparency in the new trade reporting requirements will give regulators better information and additional tools to monitor the swaps market for possible market manipulation." Statements, letters, and materials submitted for the record include those of the following: Jack Reed, Mike Crapo, Kevin McPartland, Neal B. Brady, Ben Macdonald, James Cawley, William Thum, Stephen Merkel, and Chris Bury.
S. Hrg 112-288; Senate Hearing 112-288
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