Nov 4 (Reuters) - CME Group Inc received regulatory approval to operate a swap execution facility that will initially focus on commodity swaps, the biggest U.S. futures market operator said on Monday.
Chicago-based CME said it received temporary registration from the Commodity Futures Trading Commission. It will make trading available via its CME Direct platform, which provides access to the exchange operator’s futures and over-the-counter markets in energy and metals.
The swap execution facility or SEF will allow CME customers to execute swaps alongside listed futures, according to the exchange operator. CME will look to offer trading in non-commodity swaps over time, it said.
SEFs are a new type of trading venue that came out of the post-crisis regulatory crackdown on over-the-counter derivatives. Swaps, typically traded in private transactions between banks and hedge funds, derive their value from interest rates, credit, foreign exchange, equities and commodities, and make up an estimated $630 trillion market.
SEFs allow swaps to be bought and sold in a much more transparent way than was usual before the crisis, and regulators hope the venues will help prevent problems from arising unseen in the once-opaque swaps market.
Other firms which either offer SEFs already or are looking to offer them include ICAP, Bloomberg LP; TradeWeb, which is majority-owned by Thomson Reuters ; and MarketAxess.