Last Friday, Javelin one of the 18 newly registered SEFs, become the first SEF to apply to the CFTC for determination of products to be Made Available to Trade.
This mean that the CFTC has up to 90 days to review the application, and make their determination. The application covers GBP, USD and EUR Interest Rate Swaps, and should it be approved, then these products would need to be traded on SEFs by all platforms.
In the 18 page application, Javelin notes that the CFTC recognizes that SEFs have:
“sufficient expertise and experience with respect to swaps trading to make an initial determination and to submit that determination to the Commission under the part 40 procedures.”
The Javelin application further states in their MAT submission summary that:
Javelin determines that at certain IR Swaps, defined below, have 1) been listed by Javelin, 2) have been made available to clear at least one clearing house, and 3) have sufficient liquidity and 4) meet the necessary criteria considered in Part 37 and 38 rules of the Commission. Javelin certifies that these IR Swaps are therefore made available to trade pursuant to 17 CFR 37, and for the purposes of Section 2(h), of the CEA.
Back in May, I commented that the CFTC had devolved perhaps too much market power to the SEFs, by allowing them to self determine when products should move to mandatory trading on SEFs.
My understanding being that once the CFTC has approved a swap product for trading on one SEF, then all SEFs and DCMs who offer that swap for trading, must do so in accordance with the trade execution requirements usually within 30 days. Moreover, the swap will be subject to trading on SEFs and DCMs until such time as no SEF or DCM lists it as available for trading.
Will be interesting to see how this goes, as the market take the next step towards mandatory trading of swaps on SEFs, all MAT Swaps will once approved, be listed here on the CFTC website.
Here is the full Javelin MAD application to CFTC