CFTC Hosts First Market Risk Advisory Committee Meeting (with Delta Strategy Summary)

The CFTC held its first Market Risk Advisory Committee ("MRAC") meeting. The committee addressed issues related to the current risk management techniques employed by derivatives clearing organizations ("DCOs") and the evolving structure of the derivatives markets, with particular attention to swap execution facilities ("SEFs").

The meeting was split up into two parts: (i) default management at CCPs and (ii) the market's response to the introduction of SEFs.

As detailed in the Delta Strategy Group summary, the key takeaways were as follows:

• "Clearinghouse panelists said default management drills . . . should encourage buy-side participation in default auctions, but they must be aware of all the obligations that come with participation.

• "Some MRAC members asked for increased communication between central counterparties . . . and clearing members, and increased transparency in the default management process. . . .

• "Buy-side panelists emphasized that post-trade name give-up was the biggest impediment to their participation on SEF central limit order books (CLOBs), as name give-up may reveal trading strategies and positions.

• "Several panelists expressed the need for alternative liquidity providers on SEFs, because dealers (traditional liquidity providers) may pull liquidity away from SEFs when regulatory capital constraints kick in.

• "Many buy-side panelists said access to interdealer SEFs and CLOBs would lead to better pricing information, increased competition, and deeper pools of liquidity."

Click here for a full roundtable summary by Delta Strategy Group.See:Roundtable Agenda.