Regulations mandate certain trades must be executed on an electronic platform, and also that other OTC products must be cleared. It is essential to correctly route these trades at pre-execution time.
execution routing in the us and eu
Every time you execute a trade, your firm needs to observe the trade routing rules. Our service has the EU and US rules pre-made, to which you can add your own custom rules. Our service can be integrated into your pre-trade workflow such that whoever is trading can be sure they will comply with the many routing rules.
Execution routing in the US
In the US certain trades which are mandated for clearing, are also mandated to be traded on a SEF (Swap Execution Facility) or Designated Contract Market (DCM)
The intention being to bring swap trades onto a transparent electronic market which should provide better price discovery for the buy-side
A research report by ISDA in 2014 showed a sharp drop in EUR swap trading on US platforms after these regulations came into force
The designation of which products are ‘made available to trade’ (MAT) is decided between the SEF operators and the CFTC
Execution routing in the EU
EMIR & ESMA determine which OTC products must be cleared
MiFIR II determined which of those cleared products should be traded on an OTF
An OTF is a new regulated platform introduced in MiFID II and has differences from an MTF
An OTF operator has some additional discretion on how trades are executed
Both the CFTC and ESMA define rules on which OTC trades must be cleared. Their criteria aims to clear the most liquid trades which are suitable for clearing and for default management. Each jurisdiction has its own list of mandated products, which a variety of CCPs around the world can accept for clearing.
During the evolution of these regulations the combination of execution platforms and CCPs caused price differentials between the alternate routes. These effects may have resolved themselves but price differences between routes still exist.
With Cassini you can:
Analyze valid clearing routes & prices
Remain in compliance with the clearing rules
Ensure mandatory clearing is visible pre-trade
Customize the routing rules to suit your firm
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