TrueEX Group LLC had recently filed its application to offer the interest rate swaps in its exchange platform. This application joins another firm's own application which can lead to the migration of derivatives to the public markets.
This is a step in a number of moves that would result in the movement of trillions of dollars worth of derivatives into government mandated platforms under the Dodd-Frank Act. While swap facilities are under the supervision of the Commodity Futures Trading Commission, the trades made in them are voluntary in nature. After the approval of trueEX's application, many swap users would be required to trade in the new systems.
The 2010 Dodd Frank Act is a law which overhauled the financial regulatory systems. It sought to increase access as well as foster price competition in the swaps market. The new SEFs can trade either on interest rate, credit default and other type of swaps. It was the unregulated swap markets that precipitated the 2008 credit crisis leading to the demise of certian banks such as Lehman Bros.
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