Trade Associations Say “No SEFs Tonight, Please”

The Asset Management Group “AMG” and SIFMA submitted a request to the CFTC regarding swap execution facility (“SEF”) final rules and the made-available-to-trade (“MAT”) process, most significantly asking for a delay in the date by which SEFs will have to register.

The AMG and SIFMA made three primary requests to the CFTC.  First, they requested that the CFTC provide an extension to the deadline for registration and compliance with the new SEF final rules which would delay the deadline until at least April 1, 2014.  Secondly, they requested that the CFTC change the MAT process so that a cleared swap will not be mandated to trade on a SEF until at least 90 days after the MAT determination submission for such a swap has been approved.  Finally, the AMG and SIFMA also requested that the CFTC provide guidance and clarification on the CFTC’s swap trade execution rules. 

In support of their complaints that the SEF process is being hastily implemented, the trade associations cited the remarks of CFTC Chairman Gensler (at footnote 18 of the trade asociations’ letter).

Among the problems cited by the trade associations are the following:

  • There is no understanding among either SEFs or market participants as to how trades are to be affirmed or executions allocated.
  • The market was taken by surprise by the CFTC’s statement that trading platforms may be required to register as SEFs even if they only execute swaps that are not required to be traded on an SEF.
  • Users have not had sufficient time to review the rules published by SEFs to which they will be required to subject themselves.

Lofchie Comment:  And so it goes, and goes, and goes – a huge amount of money spent, and time wasted, by firms trying to comply with rules that are hastily adopted, ambiguous in their requirements and not fully developed.  And to what end?   Is there anyone who’s knowledgeable on the topic and believes that the economy will be safer because interest rate swaps trade on SEFs?

See: AMG and SIFMA Compliance Letter.
See also: CFTC Technology Advisory Committee Meeting (with Delta Strategy Group Summary) (September 16, 2013)Core Principles and Other Requirements for Swap Execution Facilities (Final Rule; Fed. Reg. Version) (June 4, 2013); CFTC Publishes Text of SEF Rules (May 21, 2013)