Research | SEFs % of SEFs 100% Figure 2: Network Connectivity Options for SEFs
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Aggregation: approaches, pitfalls and solutions Part three outlines the impact on business and trading models as a result of the nascent SEF marketplace and presents the pitfalls and solutions to consider for participants faced with increasingly fragmented liquidity. The focus is on the market participants and how their trading models must adapt to cope with fragmented liquidity. For the sellside, building up SEF aggregation capabilities is essential either for their own usage as a liquidity taker or provider, or to allow their clients to access liquidity on their single dealer platforms (SDPs). For traditional buyside participants, who are allowed to trade directly on SEFs under Dodd- Frank, a decision has to be made whether they set up their own market access and clearing infrastructures, or continue to use the services of a broker/dealer to access liquidity and/or clearing services. With regard to liquidity aggregation and execution management, the third report addresses a number of concerns which are particular to this market, including the question of how the
quality of liquidity should be managed when tackling an aggregation and/or order routing project. The paper presents these aggregation concerns from various perspectives, where it shows that the current wave of regulation presents both opportunities and threats for both new and incumbent participants. In summation, Wood says, “In our final report on SEFs we wanted to present a practical assessment of the impact these regulations will have on the business franchises of our clients, both on the buy- and sellside. We believe that aggregating SEF liquidity is going to be a very important requirement in the next year or so, especially for sellside firms seeking to defend their existing swaps businesses. We are confident that this research will be invaluable to those firms who need to undertake such programmes of work.” ■
For further information and to purchase copies of the report, please visit:
http://research.greyspark.com or email:
research.reports@
greyspark.com
GreySpark Partners is a business, management and technology consultancy specialising in the capital markets. The company has a demonstrable track record across the marketplace and a deep understanding of the industry. GreySpark Partners works
with investment banks, hedge funds and asset management firms to deliver solutions that work across all asset classes, with a particular focus on risk management and electronic trading.
www.greyspark.com 70 Best Execution | Autumn 2012
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