17 SEFs now registered whilst enforcement of rules delayed of 1month


The CFTC continues to push through the remaining few SEFs ahead of the 2nd October deadline, the number of SEFs gaining temporary SEF Status has now risen to 17. With the only major application still pending, being that of the CME.

Whilst SEF registration deadline remains at 2nd October, the CFTC has agreed to delay the implementation of certain enforcement rules for participants until 1 November, following requests from a number of SEFs.

The letter states that the Division of Market Oversight (DMO):

“emphasizes that while this letter relieves SEFs from certain enforcement responsibilities with respect to participants in their markets, this letter does not relieve SEFs from their current regulatory responsibility to establish and maintain the rules, systems and procedures necessary to carry out those enforcement responsibilities full letter here

Here is the list of SEFs that have gained temporary registration:

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SEF registration update


The number of firms registering for SEF status ahead of the 2nd October deadline has now reached 18, with 13 being granted temporary SEF status.

Full list is below:

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SEF registrations to date


With less than a month to go till the closing date for SEF registration (2nd October), we have another two platforms, both Inter-Dealer Brokers (IDBs) Tullet-Prebon and ICAP submitting their SEF applications. Update with Tradition applying for SEF status on 9th Sept.

This brings the total to date to 15 platforms which are: Continue reading

SEF Industry Barometer from Tabb Group


An excellent update to Tabb Group’s SEF barometer has just been published, which was based on a survey of over 150 participants (from dealers, buy-side and vendors).

Key findings are:

  • Discontent is high on the final outcome of the swap rules, but consensus is low on the reasons why
  • Exchanges are perceived to benefit the most from the new rules, as product standardization drives the swaps market closer to order book trading and accelerates the migration to swap futures Continue reading

Excess Power of SEFs


Last month I suggested that the CFTC’s final rules had handed too much market power to the SEFs, by allowing them to determine which instruments they would Make Available to Trade (the MAT rule).

My closing comment in the post were:

….That’s a lot of market power being given over to trading venues, and to those individual SEFs/DCMs that are quick off the block to ‘self determine’ products! Full post here

Risk.Net last week published an article that picks up on the same point, and interestingly takes it one stage further, saying that even the SEF’s themselves think that the CFTC has given them too much market power! Continue reading

Has CFTC given too much power to SEFs?


Last week the CFTC passed the key rules that will govern how OTC derivatives will trade under the new Dodd-Frank regulatory framework.

By so doing, the CFTC has in effect devolved/transferred many important decisions regarding ‘where, and when’ swaps will trade over to the new market infrastructure and trading venues themselves, but will this give too much power to new trading venues?

Continue reading

CFTC Passes SEF Rules


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 RuleMinimum 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 RulesCore 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: Continue reading

CFTC to finalise SEF rules this week?


Nearly three years after the introduction of the Dodd-Frank Act (DFA), the CFTC has finally announced that this week (Thursday 16th May) it will vote on how OTC derivatives will trade under the new regulatory framework.

The DFA was designed to bring greater transparency and competition into the OTC derivatives markets, and some of the key rules that will be finalised are:

  • Block Trade Rule: Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades (Swaps Block Rule)
  • 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
  • SEF Core Rules: Core Principles and Other Requirements for Swap Execution Facilities (SEFs)
  • Anti-disruptive Practices Authority – Interpretive Guidance and Policy Statement

Among the more contentious rules is the so-called RFQ5 rule Continue reading

Correction to yesterday’s post on rolling spot exemption


My thanks to Profit -Loss for quickly posting a correction and clarification to the report they carried yesterday stating that the CFTCs ‘No Action’ letter to Prime Brokers granted exemption for rolling spot trades and thereby releasing firms from their obligations under Dodd-Frank. My Sigh of relief from Prime Brokers post yesterday was partly based on their coverage.

According to Profit-Loss, the CFTC has explicitly told Profit & Loss that yesterday’s letter does not refer to the rolling spot question – bank lawyers are also telling their clients the same thing; however, several sources continue to point out that this does not yet mean rolling spot is included – rather that clarification is still needed. CFTC did not return further calls and emails seeking clarification on the question of rolling spot.

Full article from Profit-Loss here

Confused? Join the club!

Sigh of relief from Prime Brokers


It came down to the wire, but sense seems to have prevailed, as the Commodity Futures Trading Commission (CFTC) has issued a time limited ‘No Action’ letter that exempts Prime Brokers and rolling spot trades * from certain aspects of Dodd-Frank rules.

* CORRECTION, CFTC has NOT provided exemption to rolling spot, see clarification here

There had been widespread concern that rolling spot trades (where net open positions are rolled forward) would be classified as swaps, and thus subject to the Dodd-Frank rules, and Prime Brokers who ‘roll the trades’ would be required to comply with additional reporting requirements.

However the CFTC recognises the arguments presented by industry trade bodies, Continue reading