SEF trading in the doldrums, ISDA data show

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The evolution of electronic derivative trading continued its stuttering progress in recent months, with swap execution facility (SEF) volumes barely growing, according to data from Isda.

Some 51.2% of average daily interest rate derivative trading activity was executed on SEFs in the second quarter, compared with 50% in the same period in 2014. Trade sizes were 19.5% lower than a year earlier on average.

Concerns over trading protocols, the mandating process and cross-border issues have contributed to lukewarm demand for trading on platforms mandated by the G20 to inject greater transparency into the US$630trn derivatives markets.

Overall, SEF volumes remain close to the same level as when compulsory trading for some classes of interest rates swaps was launched in February 2014, with non-FRA daily volume in a range between US$130bn and US$180bn. Dollar-denominated trades dominated in the second quarter, accounted for around 54%, Isda data showed.

“We are still seeing a fair amount of fragmentation of the market, with a lot of euro business executed on a bilateral basis in Europe, and there are still issues with the mandating process and with the relative lack of execution options on SEF,” said Radi Khasawneh, an analyst at TABB Group.

SEF trading in doldrums