CFTC to Host Public Roundtable Regarding Trade Execution Requirement and Package Transactions (with Lofchie Comment)

The CFTC Division of Market Oversight announced it will host a public roundtable on February 12, 2014 to discuss the application of the CEA's trade execution requirement to "package transactions."

The roundtable will discuss the following items with respect to transactions involving at least one swap subject to the trade execution requirement:

• the definition of package transactions;
• whether such transactions pose challenges in clearing or execution that are distinct from those applicable to clearing or execution of stand-alone swaps subject to the trade execution requirements; and
• potential solutions for trading package transactions on or pursuant to the rules of a designated contract market ("DCM") or swap execution facility ("SEF").

Lofchie Comment: To date, the CFTC has rejected industry requests to delay making mandatory SEF-execution of package transactions. There seems no obvious logic in rejecting the industry's request. Why not simply go slow and allow market participants to "practice" with the simplest trade types, before forcing more complicated trades onto an exchange? Even if there is, in fact, nothing special about package transactions, there is no great gain in forcing their exchange execution a week earlier, or a month earlier, or several months earlier; SEFs do not increase safety in the market. Given that both the buy-side and the sell-side favor the delay, why force a change that neither side wants and that creates a risk of illiquidity or operational errors?

See: CFTC Press Release. Related news: CFTC Issues Trade Execution Mandate for Certain Credit Default Swaps (January 30, 2014) CFTC Issues Trade Execution Mandate for Additional Interest Rate and Credit Default Swaps (with Lofchie Comment) (January 28, 2014); CFTC Issues Trade Execution Mandate for Additional Interest Rate Swaps (January 23, 2014); CFTC Issues Trade Execution Mandate for Certain Interest Rate Swaps (with Robins Comment and Lofchie Comment) (January 17, 2014).