New Swaps-Trading Venue, KerbX, in the Works

A new platform for trading in off-exchange derivatives is preparing for launch, specializing in equity derivatives. KerbX is leaning toward registering as a "swap execution facility," a new type of trading platform for derivatives that was authorized under the 2010 Dodd-Frank financial overhaul law, said Joshua Seitz, one of the New Jersey-based company's founders. But it may register as an exchange or "designated contract market." Under Dodd-Frank, SEFs can be used as an alternative to exchanges for swaps, whereas DCMs will be allowed to cater to trading in futures and swaps. Dodd-Frank will force most over-the-counter derivatives to be routed through clearinghouses and transacted through open platforms like SEFs, instead of allowing trades to be privately negotiated between two parties. So far about 15 companies have said they plan to register as would-be SEFs. Others include Bloomberg, Tradeweb, MarketAxess, Javelin Capital Markets, interdealer brokers such as ICAP and GFI Group, and one that is dedicated to equity derivatives, called eDeriv Technologies. The final set of SEF rule proposals are expected to be voted on by the Commodity Futures Trading Commission in December or January, before being implemented in 2013.