CFTC Seeks Public Comment on Certification from TW SEF LLC to Implement Available-to-Trade Determinations for CDS (with Lofchie Comment)

The CFTC is requesting public comment on a certification from TW SEF LLC ("TW SEF") to implement available-to-trade determinations for certain interest rate and credit default swap contracts.

TW SEF submitted its available-to-trade determinations to the CFTC on a self-certified basis, pursuant to CFTC Rule 37.10 ("Process for a swap execution facility to make a swap available to trade") and Rule 40.6 ("Self-certification of rules"). If TW SEF's submission is deemed certified by operation of CFTC Rule 40.6, such swap contracts, whether listed or offered by TW SEF or any other DCM or SEF, will be subject to the trade execution requirement under Commodity Exchange Act Section 2(h)(8). All transactions involving swaps that are generally subject to the trade execution requirement must be executed on either a DCM or SEF, and those transactions executed on an SEF must be executed in accordance with the methods prescribed in CFTC Rule 37.9(a)(2) ("Methods of execution for required and permitted transactions").

The comment period will close on November 29, 2013.

Lofchie Comment: The low bar for the mandatory trading of swaps on SEFs makes it difficult to say what one could comment on. There are now 19 SEFs of which we are aware, and all of their rules are in flux, yet vast amounts of trading may be forced onto these newly created markets by government fiat in a very short period of time.

See: CFTC Press Release; Online Comment Filing Form. Related news: SEF Seeks Determination of Mandatory Exchange Trading of Swaps (with Lofchie Comment) (October 18, 2013). CFTC Issues Notices of Temporary Registration to TW SEF LLC and DW SEF LLC as Swap Execution Facilities (September 9, 2013).