CFTC Seeks Public Comment on Certification from MarketAxess SEF Corporation to Implement Available-to-Trade (with Lofchie Comment)

The CFTC is requesting public comment on a certification from MarketAxess SEF Corporation to implement available-to-trade determinations for certain interest rate and credit default swaps. MarketAxess 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 MarketAxess' submission is deemed certified by operation of CFTC Rule 40.6, such swap contracts, whether listed or offered by MarketAxess or any other designated contract market ("DCM") or swap execution facility ("SEF"), will be subject to the trade execution requirement under Commodity Exchange Act Section 2(h)(8). All transactions involving swaps that are subject to the trade execution requirement generally 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").

Comments Due: December 2, 2013.

Lofchie Comment: At least three SEFs (including TW SEF) have now submitted "made available to trade" determinations on interest rate and/or CDS products. With SEF rules still being written, and the CFTC not having reviewed the applications of any of the SEFs, it seems somewhat imprudent to force all of this swap trading onto exchanges in the near future. While the regulators may claim any such transition as a great victory, it is unlikely that exchange-trading of interest rate swaps and CDS will do anything to improve the safety of the markets. Certainly if any private entity were to move forward with changes of such magnitude and based on such little preparation, it would likely be subject to sanction for recklessness were anything to go wrong. Link to YouTube.

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 Seeks Public Comment on Certification from TW SEF LLC to Implement Available-to-Trade Determinations for CDS (with Lofchie Comment)" (October 29, 2013); "CFTC Issues Notice of Temporary Registration as SEFs to SwapEx, LLC, GFI Swaps Exchange LLC, and MarketAxess SEF Corp." (September 13, 2013).