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Today the CFTC voted on and passed the rules that will govern how OTC derivatives will trade under the new Dodd-Frank regulatory framework.

The key votes were on:

• Block Trade Rule: Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades (Swaps Block Rule) Q&A – passed by 3-2 votes
• available to Trade Rule: Process for a Designated Contract Market or Swap Execution Facility to Make a Swap Available to Trade under Section 2(h)(8) of the Commodity Exchange Act (CEA); Swap Transaction Compliance and Implementation Schedule; Trade Execution Requirement Under Section 2(h) of the CEA Q&A   passed by 3-2 votes
• SEF Core Rules: Core Principles and Other Requirements for Swap Execution Facilities (SEFs) Q&A  passed by 4-1 votes
• Anti-disruptive Practices Authority – Interpretive Guidance and Policy Statement Q&A passed by 5-0 votes

Regarding the SEF core rules, the RFQ5 rule has been watered down to RFQ3 (although this will start with RFQ2, and be phased in to RFQ3 over a 15mth period)

CFTC Chairman Gary Gensler said in an opening statement that:

“Today the CFTC is voting on reforms that will make public transparency in the swaps market a reality. These reforms will make a trade execution requirement come to life. Though many of the 52 rules we have completed before today have brought transparency to the once opaque swaps market, today we take a significant step to open up this market.

I want to underscore that the significance of these three rules together (first three stated above). When light shines on a market, the economy and public benefit.

These three rules taken together will provide the public with information trade by trade that it didn’t have before.

These three rules taken together will provide the public with the price and volume of every transaction in real time – and I mean in real time.

These three rules take together mean that anyone in the market can compete and offer to buy or a sell a swap and communicate that to the rest of the public.

With these three rules today, no longer will this be a closed, dark market.”

Response to CFTC ruling:

SIFMA, CEO Kenneth E. Bentsen, Jr., acting president and CEO, stated:

“While SIFMA will review the CFTC’s new SEF and execution rules in detail with our members, upon first read we strongly disagree with the CFTC’s final rules and believe as drafted they will negatively impact investors and hinder the ability of American businesses to manage risk contrary to intent. Restricting an institution’s ability to manage risk will discourage responsible capital management, limit job creation and dampen economic growth.

Full SIFMA response here

Information on voting and speeches here, and previous post on this here

Filed under: CFTC, Paul Blank, Regulation, SEF, SWAPS |