Swap Execution Facility - SEF

DEFINITION of 'Swap Execution Facility - SEF'

A trading system or platform that enables many participants to execute or trade swaps. A swap execution facility would allow for greater transparency and would be a significant shift in the way derivative trading is made. The Dodd-Frank Act lays the foundation for this change of derivative execution.

BREAKING DOWN 'Swap Execution Facility - SEF'

It is defined by the Dodd-Frank Act 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 other participants that are open to multiple participants in the facility or system, through any means of interstate commerce."


As of May 2011, security-based swaps are traded exclusively in over-the-counter markets with little transparency or oversight. As a result, the expected role of the SEF would allow for transparency and provide the tools for a complete record and audit trail of trades.

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RELATED FAQS
  1. How are swap agreements financed?

    Learn how swap agreements are now cleared by swap execution facilities and require the use of collateral margin to hold, ... Read Answer >>
  2. What are interest rate swaps on the OTC market?

    Learn about interest rate swaps and how they are traded over the counter, and understand the impact of Dodd-Frank on swaps ... Read Answer >>
  3. What is the difference between derivatives and swaps?

    Find out more about derivative securities, swaps, examples of derivatives and swaps, and the main difference between derivative ... Read Answer >>
  4. Who is the counterparty of a derivative?

    Learn about the counterparty to a derivative contract, and how derivative swap agreements traded over the counter have counterparty ... Read Answer >>
  5. How do companies benefit from interest rate and currency swaps?

    An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >>
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    A rollercoaster swap is the name for a swap (the exchange of one security for another) with a notional principal that differs ... Read Answer >>
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