U.S. regulators are pushing to move much of the $693 trillion over-the-counter derivatives market to new electronic platforms known as Swap Execution Facilities (SEF), which will increase transparency and help prevent the recurrence of the 2008 crisis. The SEFs started trading on Oct 2.
But dealers estimate only 10 to 20 percent of Asia’s daily market turnover in currency and interest rate derivatives – estimated by derivatives traders in the region at about $20 billion – has moved to the SEFs with the rest being settled in the wider market or bilaterally. The fragmentation of liquidity has made it difficult for investors to hedge portfolio risk, especially for large trades.
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