what is a swap execution facility sef 
a swap execution facility sef is an electronic platform provided by a corporate entity that allows participants to buy and sell swaps in a regulated and transparent manner they are required by law as part of the sweeping wall street reforms stemming from the 2010 dodd frank act understanding swap execution facilitya sef is an electronic platform that matches counterparties in a swaps transaction through a mandate in the dodd frank wall street reform and consumer protection act sefs changed the methods previously used to trade derivatives 3the dodd frank act defined a sef 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 4before dodd frank swaps were traded exclusively in over the counter otc markets with little transparency or oversight the sef allows for transparency and provides a complete record and audit trail of trades 5the securities and exchange commission sec and the commodity futures trading commission cftc regulate sefs 6an exchange for swapsa sef is similar to a formal exchange but is a distributed group of approved trading systems the handling of trades is similar to other exchanges also the dodd frank act states if no sef system is available for specific swaps then the previous otc trading method is acceptable proponents argue that a sef is a swaps exchange much like a stock or futures exchange and they are correct to a degree centralized clearing of swaps and other derivatives reduces counterparty risks and increases trust and integrity in the marketplace also a facility that allows for multiple bids and offers provides liquidity to the swap marketplace this liquidity enables traders to close positions ahead of contract maturity becoming a swap execution facilitymany entities may apply to become a sef to qualify they must meet specific thresholds as defined by the sec cftc and the dodd frank act applicants must register with the sec and meet specific requirements requirements include the platform s ability to display all available bids and offers send trade acknowledgments to all involved parties maintain a record of transactions and provide a request for quote rfq system in addition they must meet certain margin and capital guidelines and the ability to segregate the swap exchange finally the applicant must agree to abide by the 14 sec core principles 789an sef can become dormant if it has not carried out a swap execution in more than 12 months 3 a dormant sef must re register to become active again 