OTC derivatives reform will lead to algo boom, banks predict
Dodd-Frank and Sefs set to encourage growth in algorithmic execution of OTC derivatives, say dealers
Market reforms currently being implemented in the derivatives market will lead to a dramatic rise in the use of algorithms to execute over-the-counter trades, dealers predict.
A requirement in the Dodd-Frank Act for all clearing-eligible contracts to be traded on swap execution facilities (Sefs) means the lion's share of OTC volumes will flow through an array of new electronic trading venues in future. As a result, standardised trades will be more common and the bid/offer spreads will be tighter
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