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.

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.

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 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. Mutual Funds & ETFs

    UCO Vs. UWTI: Two Different Leveraged Oil ETFs

    Find out more about the ProShares Ultra Bloomberg Crude Oil ETF and VelocityShares 3x Long Crude Oil ETN, and the mechanics and differences of these funds.
  10. Mutual Funds & ETFs

    UGAZ Vs. GASL: Two Different Leveraged Gas ETFs

    Find out more about the VelocityShares 3X Long Natural Gas ETN and the Direxion Daily Natural Gas Related Bull 3X ETF and the differences between these ETFs.
RELATED FAQS
  1. What is the Federal Reserve Board's market risk capital rule?

    The Federal Reserve Board’s market risk capital rule, or MRR, sets forth the capital requirements for banking organizations ... Read Full Answer >>
  2. How are swap agreements financed?

    Since swap agreements involve the exchange of future cash flows and are initially set at zero, there is no real financing ... Read Full Answer >>
  3. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  4. Should you calculate Value at Risk (VaR) for counterparty credit risk?

    Value at risk (VaR) calculations may be helpful for risk management when trading credit default swaps and other derivatives ... Read Full Answer >>
  5. For what financial instruments is a modified duration relevant?

    The modified duration is a formula used to calculate the percent change in the price of a financial instrument when there ... Read Full Answer >>
  6. What is the difference between derivatives and swaps?

    Derivatives are securities with prices dependent on one or multiple underlying assets. Common derivatives include forward ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!