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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  6. Foreign Currency Swap

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  1. What would motivate an entity to enter into a swap agreement?

    Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >>
  2. 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 >>
  3. What are some risks a company takes when entering a currency swap?

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  4. How can a company hedge with currency swaps?

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  5. Can individual investors profit from interest rate swaps?

    Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >>
  6. What are the benefits of engaging in a currency swap?

    Read about the benefits of engaging in a currency swap, such as when companies in different countries want to borrow funds ... Read Answer >>
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