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November 30, 2018

CFTC proposed amendments to regulations related to the trade execution requirement under the Commodity Exchange Act (CEA) and amendments to the existing regulations on swap execution facilities (SEFs) and designated contract markets (DCMs). Comments must be received by February 13, 2019. Additionally, CFTC is requesting public comment, until January 29, 2019, on the practice of “post-trade name give-up” on SEF markets, where trades are anonymously executed and intended to be cleared.

Proposed Amendments to Regulations on Trade Execution RequirementAmong other amendments, the proposed amendments cover the following:

  • Applying the SEF registration requirement to certain swap-broking entities and aggregators of single-dealer platforms
  • Broaden the scope of the trade execution requirement to include all swaps subject to the clearing requirement under the CEA that a SEF or a DCM lists for trading
  • Allow SEFs to offer flexible execution methods for all swaps that they list for trading
  • Amend straight-through processing requirements
  • Amend the block trade definition

The proposed rules, which also include non-substantive amendments and various conforming changes to other CFTC regulations, reflect CFTC's enhanced knowledge and experience with swap trading characteristics and would further the Dodd-Frank Act's statutory goals for SEFs, that is, promote more SEF trading and pre-trade price transparency in the swaps market. Further, the proposed rules are intended to strengthen the existing swaps regulatory framework by reducing unnecessary complexity, costs, and other burdens that impede SEF development, innovation, and growth.

Proposal on Practice of Post-Trade Name Give-upPost-trade name give-up is a long-standing market practice in many swaps markets and originated as a necessary practice in OTC (over-the-counter)  markets for uncleared swaps. Post-trade name give-up refers to the practice of disclosing the identity of each swap counterparty to the other after a trade has been matched anonymously. In the case of uncleared swaps, post-trade name give-up enables a market participant to perform a credit-check on its counterparty prior to finalizing a trade. For trades that are cleared, however, the rationale for post-trade name give-up is less clear cut. As the swaps market increasingly becomes a cleared market, CFTC believes that it is reasonable to ask whether the post-trade name give-up practice continues to serve a valid industry purpose in facilitating swaps trading. In particular, CFTC requests comment on the following questions:

  • What utility or benefits (for example: commercial, operational, legal, or other) does post-trade name give-up provide in SEF markets where trades are anonymously executed and cleared? Is post-trade name give-up a necessary or appropriate means to achieve such benefits?
  • Does post-trade name give-up result in any restraint of trade or impose any anti-competitive burden on swaps trading or clearing?
  • Should CFTC intervene to prohibit or otherwise set limitations with respect to post-trade name give-up? If so, what regulatory limitations should be set and how should they be set in a manner that is consistent with the CEA? 
  • Should post-trade name give-up be subject to customer choice or SEF choice, given the flexible execution methods in CFTC recent SEF notice of proposed rulemaking?

 

Related Links

Comment Due Date: February 13, 2019 (Trade Execution Requirement) and January 29, 2019 (Post-trade Name Give-up)

Keywords: Americas, US, Banking, Securities, Trade Execution Requirement, Commodity Exchange Act, Post-trade Name Give-up, Swap Execution Facility, Designated Contract Markets, CFTC

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