SIFMA AMG Submits Comments to CFTC Regarding SEF Regulatory Framework

The Asset Management Group of SIFMA ("SIFMA AMG") submitted comments to the CFTC about the swap execution facility ("SEF") regulatory framework and related rules. The comment letter also responded to CFTC Commissioner Giancarlo's recent white paper on swaps trading rules.

SIFMA AMG applauded Commissioner Giancarlo's "efforts to highlight certain adverse market consequences" of the current SEF regulatory framework. Specifically, SIFMA AMG expressed its support of Commissioner Giancarlo's suggestions, including the following:

• the made-available-to-trade ("MAT") process should be "significantly revamped";
• the CFTC must harmonize SEF regulations and cross-border guidance with global regulators to avoid market fragmentation;
• the CFTC should review its pretrade credit check and void ab initio framework to ensure that "it promotes execution certainty, particularly for block trades, package transactions, and future MAT swaps";
• the CFTC should amend the swap block trade regulatory framework;
• flexible regulation should govern SEF trading protocols; and
• the CFTC should not "overcomplicate" post-trade confirmation protocols.

SIFMA AMG also stated its differences with Commissioner Giancarlo on a number of issues. According to SIFMA AMG:

• Dodd-Frank does not, as Commissioner Giancarlo stated, "require or support the alternation of the present swaps market structure." SIFMA AMG said that precluding membership to an SEF based solely on the type of that market participant "does not produce sound public policy or comply with the spirit of the Dodd-Frank Act," and encouraged the CFTC to ensure that SEFs establish objective eligibility criteria to qualify market participants to become members and gain access to markets.
• Because asset managers are already "bound by a fiduciary duty" to their clients, it would be "inappropriate" to subject them to a new professionalism standard for swap market personnel on top of those in the existing SEF framework.

SIFMA AMG also said that several "related issues" merit "significant evaluation and analysis," including the following:

• extending relief for package transactions and reviewing the associated regulatory framework;
• finalizing the revisions to CFTC Rule 1.35 to reduce recordkeeping burdens;
• the practice of name give-up for swaps that are traded anonymously on an order book and immediately cleared afterward; and
• the "Embargo Rule."

See: SIFMA AMG Letter. Related news: CFTC Commissioner Giancarlo Discusses His White Paper, Falling Oil Prices and CFTC Priorities (Energy Metro Desk) (February 12, 2015); CFTC Commissioner Giancarlo Releases Swaps Trading Rules White Paper (with Patel Comment and Delta Strategy Group Summary) (January 29, 2015).