Evangelos Benos, Richard Payne, Michalis Vasios, 25 February 2016

Since the Global Crisis, a key ingredient of reforms has been to force over-the-counter contracts to be traded in more transparent exchange-like settings. The aim has been to reduce the cost of trading such instruments and make markets more resilient. This column analyses the impact of the Dodd-Frank Act in the US on the market for vanilla interest rate swaps. The introduction of swap execution facilities trading is associated with a significant improvement in swap market liquidity. This suggests that Europe may see similar benefits from centralising swap trading, though it remains to be seen how these markets will operate in more volatile times.

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