MFA Submits Comments on Registration and Regulation of Security-Based SEFs

MFA submitted a letter to the SEC with updated comments and recommendations on the registration and regulation of security-based swap execution facilities ("SB SEFs"). This letter is intended to supplement MFA's comment letter dated April 4, 2011.

MFA's supplemental comment letter offers recommendations based on MFA members' SEF trading experiences to date under the CFTC's SEF regime, which has been implemented in the years since the SEC first issued its proposed SB SEFs rules. In particular, the supplemental comment letter does the following:

• suggests completing a substantive review of the SB SEF rulebooks before specifying the date on which market participants must comply with the SEC's first-trade execution requirement for security-based swaps that have been made available to trade ("MAT");
• recommends that the SEC remove the provision in its proposed rules that would allow an SB SEF to restrict access to eligible contract participants that are not security-based swap dealers, major security-based swap participants or brokers, as this provision would restrict buy-side market participants' access to SB SEFs "in a manner inconsistent with impartial access principles";
• alerts the SEC to implicit and explicit barriers to the buy-side's impartial access to SEFs that the SEC should address in its final SB SEF rules, since these barriers have contributed to the persistence of a "two-tier" swaps market;
• stresses the importance (in MFA's view) of the SEC's adoption of a "straight-through processing" rule to achieve a "competitive, open and transparent market for security-based swaps and harmonization with the CFTC and EU MiFID II STP regimes";
• recommends substantial uniformity between the SEC and CFTC approaches, but expresses support for the SEC's inclination to assume a more active role in the MAT determination process; and
• recommends that the SEC adopt an approach to "package transactions" that facilitates a smooth transition to trading package transactions on SB SEFs by taking a transaction-level approach for MAT determinations of package transactions that include MAT SB swaps.

See: MFA Letter to the SEC.

See also: Registration and Regulation of Security-Based Swap Execution Facilities (76 FR 10948) (February 28, 2011).