Swap Execution Facility - SEF

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Dodd-Frank Wall Street Reform and ...

    A compendium of federal regulations, primarily affecting financial ...
  2. Stock Swap

    The exchange of one asset for another. A stock swap occurs when ...
  3. Spread

    1. The difference between the bid and the ask price of a security ...
  4. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  5. Offer

    1. When one party expresses interest to buy or sell an asset ...
  6. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
RELATED FAQS
  1. What are interest rate swaps on the OTC market?

    Interest rate swaps are agreements where counter parties agree to exchange interest rate cash flows based upon the difference ... Read Full Answer >>
  2. What are the Securities and Exchange Commission regulations regarding swaps?

    The U.S. Securities and Exchange Commission (SEC) was granted the authority to regulate security-based swaps (SBS) by Title ... Read Full Answer >>
  3. What would motivate an entity to enter into a swap agreement?

    The main purpose of swap agreements is to swap cash flows between counterparties for a certain market or asset. Generally, ... Read Full Answer >>
  4. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  5. What is the difference between LIBOR, LIBID and LIMEAN?

    LIBOR, LIBID and LIMEAN are all reference rates used to benchmark short-term interest rates. The London Interbank Offered ... Read Full Answer >>
  6. How do you use a back-to-back loan?

    Back-to-back loans or parallel loans are a financial move used by companies to curb foreign exchange rate risk or currency ... Read Full Answer >>
Related Articles
  1. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  2. Insurance

    Credit Default Swaps: What Happens In A Credit Event?

    The credit crisis of 2008 prompted important changes to the settlement of credit default swaps.
  3. Options & Futures

    Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.
  4. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  5. Professionals

    Investigating The Securities Police

    Learn about the history of FINRA and how this organization protects investors.
  6. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  7. Options & Futures

    The Truth About Naked Short Selling

    The media demonizes naked short selling, but in most cases it occurs in a collapse, rather than causing it.
  8. Personal Finance

    Who's Looking Out For Investors?

    If your account has been mishandled, FINRA and the SEC are among several organizations that can help.
  9. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.
  10. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center