trueEX Certifies Available-to-Trade Determinations for Certain Interest Rate Swaps

The CFTC is requesting public comment on a certification from trueEX, LLC (“trueEX”) to implement available-to-trade determinations for certain interest rate swap contracts.

trueEX submitted its available-to-trade determinations to the CFTC on a self-certified basis pursuant to CFTC Rules 37.10 (“Process for a swap execution facility to make a swap available to trade”) and 40.6 (“Self-certification of rules”).  According to the CFTC, if trueEX’s submission is deemed certified by operation of Rule 40.6, such swap contracts, whether listed or offered by trueEX or any other designated contract market (“DCM”) or swap execution facility (“SEF”), will be subject to the trade execution requirement under CEA Section 2(h)(8) (“Mandatory Clearing Requirement for Swaps – Exceptions”).

All transactions involving swaps that are subject to the trade execution requirement generally must be executed on either a DCM or an SEF, and – when executed on an SEF – must be executed in accordance with the execution methods prescribed by CFTC Rule 37.9(a)(2) (“Methods of execution for required and permitted transactions”).

The Division of Market Oversight has stayed trueEX’s submission to provide the CFTC with additional time to analyze the submission.  The CFTC has 90 days to review the submission, ending on January 20, 2014.  trueEX’s submission will be subject to a 30-day comment period within the stay period, which will close on November 21, 2013. Comments may be submitted electronically here.

Lofchie Comment:  trueEx is the second SEF to certify that swaps should be “made available to trade”; i.e., required to trade on an SEF or futures exchange. 

Any such determination seems premature, given that the markets are still trying to figure out how the term “SEF” is defined, rules governing SEFs are in flux, and market participants seem confused as to the various requirements.

See: CFTC Press Release.
See also: SEF Seeks Determination of Mandatory Exchange Trading of Swaps (certification of Javelin).

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