swap execution facility
( 2) listing requirement. a swap execution facility that makes a swap available to trade must demonstrate that it lists or offers that swap for trading on its trading system or platform .
( sec. 733) requires a swaps trading or processing facility to: (1) be registered as either a swap execution facility or as a designated contract market; and (2) maintain a risk analysis and oversight program. prescribes core principles for swap execution facilities .
( d) removal— (1) determination. the commission may issue a determination that a swap is no longer available to trade upon determining that no swap execution facility or designated contract market lists such swap for trading .
docket number: cftc - 2013 - 0055 docket name: process for a designated contract market or swap execution facility to make a swap available to trade, etc. docket rin 3038 - ad18
( b) factors to consider. to make a swap available to trade, for purposes of section 2 (h) (8) of the act, a swap execution facility shall consider, as appropriate, the following factors with respect to such swap :
is 360t registered as a swap execution facility (sef)? yes, 360t was granted full sef registration by the us commodity futures trading commission (cftc) on 22 january 2016 .
( c) applicability. upon a determination that a swap is available to trade on any swap execution facility or designated contract market pursuant to part 40 of this chapter, all other swap execution facilities and designated contract markets shall comply with the requirements of section 2 (h) (8) (a) of the act in listing or offering such swap for trading .
209. see core principles and other requirements for swap execution facilities (may 16, 2013) .
230. see core principles and other requirements for swap execution facilities (may 16, 2013) .
swap dealers and major swap participants may have their own reporting obligations under the cftc regulation .
( c) applicability. (1) upon a determination that a swap is available to trade on any designated contract market or swap execution facility pursuant to part 40 of this chapter, all other designated contract markets and swap execution facilities shall comply with the requirements of section 2 (h) (8) (a) of the act in listing or offering such swap for trading .
sec proposes rules for security - based swap execution facilities; 2011 - 35; feb. 2, 2011
finally, the commission notes that a trading facility could still clear and list a swap for trading after it is determined to be subject to the trade execution requirement, but prior to the effective date .
other commenters asserted that the clearing determination considers a swap' s trading liquidity and therefore already addresses whether the swap should be subject to mandatory trade execution .
specifies general duties for registered security - based swap dealers and major security - based swap participants .
i respectfully dissent from the commission' s approval today of the rule establishing process for a designated contract market or swap execution facility to make a swap available to trade under section 2 (h) (8) of the commodity exchange act (cea) .
prohibits the board from establishing any program or facility without the prior approval of the secretary of the treasury .
grants the sole right to select the clearing agency at which a security - based swap will be cleared to a person that is not a swap dealer, major swap participant, security - based swap dealer, or major security - based swap participant but is counterparty to such a swap that is subject to the mandatory clearing requirement and entered into by a security - based swap dealer or a major security - based swap participant .
the dodd - frank act defines a swap execution facility (sef) .
a facility, trading system or platform in which multiple participants (can) execute or trade swaps by accepting bids and offers made by other participants that are open to multiple participants in the facility or system, through any means of interstate commerce .
in short, there are now several approved platforms under the sef umbrella which allow for multiple bids and offers .
the us commodity futures trading commission (cftc) has granted blockchain startup ledgerx its formal registration as a swap execution facility (sef), making it the second company ever to be granted the ability to trade digital currency derivatives .
definition of a security - based swap execution facility (sb - sef): a system or platform that allows more than one participant to interact with the trading interest of more than one other participant on the system or platform .
at its december 5, 2011 open meeting, the cftc approved a proposed rulemaking that would further define the process by which a swap execution facility or designated contract market shall make a swap
available for trade
under section 2 (h) (8) of the commodity exchange act .
security - based swap repositories: proposed rules regarding the registration and regulation of security - based swap data repositories .
the commodity futures trading commission (“commission”) is adopting regulations that establish a process for a designated contract market (“dcm”) or swap execution facility (“sef”) to make a swap subject to the trade execution requirement pursuant to the commodity exchange act (“cea”). the commission is also adopting regulations to establish a schedule to phase in compliance with the trade execution requirement. the schedule will provide additional time for compliance with this requirement .
security - based swap conflicts: proposed rules intended to mitigate conflicts of interest for security - based swap clearing agencies, security - based swap execution facilities, and national securities exchanges that post security - based swaps or make them available for trading .
on may 16, 2013, the cftc approved a final rule that sets the process by which a designated contract market or swap execution facility shall make a swap
available to trade .
the rule entered the federal register on june 4, 2013; its effective date is august 5, 2013 .
( sec. 1109) directs the comptroller general to conduct a one - time audit of, and report to congress on, all financial assistance provided between december 1, 2007, and the date of enactment of this act by either the board or a federal reserve bank under the asset - backed commercial paper money market mutual fund liquidity facility, the term asset - backed securities loan facility, the primary dealer credit facility, the commercial paper funding facility, the term securities lending facility, the term auction facility, maiden lane, maiden lane ii, maiden lane iii, the agency mortgage - backed securities program, foreign currency liquidity swap lines, and certain other programs. requires the board to publish on its website specified information about such assistance and its recipients .
requires: (1) each swap to be reported to a registered swap data repository; and (2) public reporting on a semiannual and annual basis of aggregate swap data .
establish and enforce rules governing, among other things, the terms and conditions of security - based swaps traded on their markets; any limitation on access to the facility; trading, trade processing and participation; and the operation of the facility .
security - based swap reporting: proposed new rules entailing how security - based swap transactions should be reported and publicly disseminated .
( a) (1) required submission. a swap execution facility that makes a swap available to trade in accordance with paragraph (b) of this section, shall submit to the commission its determination with respect to such swap as a rule, as that term is defined by § 40. 1 of this chapter, pursuant to the procedures under part 40 of this chapter .
* the u. s. commodity futures trading commission (cftc) has approved the application of chicago mercantile exchange inc. (cme sef) for temporary registration as a swap execution facility (sef) pursuant to cftc regulation 37. 3 (c) .
a swap execution facility (sef) is a platform that allows participants to buy and sell swaps in a regulated and transparent manner. through a mandate in the dodd - frank wall street reform and consumer protection act, sefs change the methods previously used to trade derivatives .
before dodd - frank, the trading of swaps was traded exclusively in over - the - counter markets with little transparency or oversight. as a result, the expected role of the swap execution facility allows for transparency and provides a complete record and audit trail of trades .
swap execution facilities, or sefs, are electronic trading platforms for over - the - counter (otc) derivatives. sefs were mandated by us
sec proposes rules for security - based swap execution facilities. u. s. securities and exchange commission. retrieved on february 4, 2011 .
the rules governing the execution of swap indices on sefs were finalised on 16 may 16 2013. the key dates relating to these rules are :
swaps execution facilities (sefs) | u. s. commodity futures trading commission
separately, various market participants have submitted to the commission and the division comments and requests regarding the implementation of the trade execution requirement with respect to “package transactions, ” or transactions involving more than one swap or financial instrument and at least one swap subject to the trade execution requirement. the division clarifies that the inclusion of a swap subject to the trade execution requirement in a multi - legged transaction would not per se relieve market participants of the obligation to trade such swap through a dcm or sef .
cftc announces measures to promote trading on swap execution facilities and support an orderly transition to mandatory trading. cftc. retrieved on february 11, 2014 .
i support the final rulemaking to implement a process for swap execution facilities (sefs) and designated contract markets (dcms) to “make a swap available to trade” (mat). today' s rule also finalizes the commission' s separate rule proposal to phase in compliance for the trade execution requirement .
all swaps that have been ‘made available to trade’ (mat) by any swap execution facility (sef) or board of trade designated as a contract market (dcm) must be traded on a sef or dcm. these swaps are a sub - set of those subject to the cftc’s clearing mandate ;
210. see procedures to establish appropriate minimum block sizes for large notional off - facility swaps and block trades (may 16, 2013) .
( sec. 716) prohibits federal assistance to a swaps entity with respect to any swap, security - based swap, or other activity. excludes from the definition of
swaps entity
any major swap participant or major security - based swap participant that is an insured depository institution .
section 723 (a) (3) of the dodd - frank act added section 2 (h) (8) of the commodity exchange act (“cea”) to require that swap transactions subject to the clearing requirement must be traded on either a designated contract market (“dcm”) or swap execution facility (“sef”), unless no dcm or sef “makes the swap available to trade” or the transaction is not subject to the clearing requirement under section 2 (h) (7) (the “trade execution requirement”). [ 1 ]
title xvi: section 1256 contracts - amends the internal revenue code to exclude from the definition of a section 1256 contract any interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement. (thus shields such instruments from treatment as sold for its fair market value [ marked to market ] on the last business day of the taxable year for capital gains or loss taxation purposes) .
defining security - based swap terms: proposed jointly with the commodity futures trading commission new rules that would further define a series of terms related to the security - based swaps market, including
swap dealer ,
security - based swap dealer ,
major swap participant ,
major security - based swap participant
and
eligible contract participant .
as such, dodd - frank requires security - based swap transactions that are required to be cleared through a clearing agency to be executed on an exchange or on a new trading system called a security - based swap execution facility. the dodd - frank act, however, states that the transaction need not be executed on a security - based sef or exchange if no security - based sef or exchange makes the security - based swap
available to trade .
dodd - frank requires any swap subject to the clearing mandate to be traded and executed either on a new type of regulated trading platform called a swap execution facility (sef) or on a regulated trading platform on which futures have traditionally traded (a designated contract market, or dcm). a swap that is not required to be executed on a regulated trading platform could continue to be executed either bilaterally or through voice brokers that are not regulated as sefs .
directs the cftc to adopt data collection and maintenance requirements for swaps cleared by dcos that are comparable to the corresponding requirements for: (1) swaps data reported to swap data repositories; and (2) swaps traded on swap execution facilities .
the trade execution mandate was designed to promote transparency and market liquidity. in contrast to the clearing mandate — and as acting chairman giancarlo noted in his 2015 white paper on sef rules — dodd - frank contemplates no process for, or even issuance of, a determination of which swaps are
made available to trade
( mat). rather, the statute simply provides that a swap that is required to be cleared must be traded and executed on an sef or dcm unless
no board of trade or swap execution facility makes the swap available to trade .
( sec. 726) requires the cftc to adopt conflict of interest rules which may include numerical limits on the control of, or the voting rights with respect to, any dco that clears swaps, or swap execution facility or board of trade designated as a contract market that posts swaps or makes swaps available for trading, by a bank holding company with total consolidated assets of $ 50 billion or more, a nonbank financial company supervised by the board, an affiliate of such a bank holding company or nonbank financial company, a swap dealer, major swap participant, or associated person of a swap dealer or major swap participant .
prescribes rules for the conduct of swaps or security - based swap activities by a bank or bank holding company permitted to be or become a swap entity .
title vii: wall street transparency and accountability - wall street transparency and accountability act of 2010 - subtitle a: regulation of over - the - counter swaps markets - part i: regulatory authority - (sec. 712) directs the commodity futures trading commission (cftc) and the sec to consult and coordinate with one another and with the prudential regulators before commencing any rulemaking or issuing an order regarding swaps, swap dealers, major swap participants, swap repositories, persons associated with a swap dealer or major swap participant, eligible contract participants, or swap execution facilities .
swap execution facilities (sefs) were given life by the dodd - frank act, which requires over - the counter (otc) swaps to be cleared and traded on this new type of regulated platform. any swap that is
made available to trade
must trade on designated contract market or a sef. the cftc has been given the responsibility to monitor swap execution facilities; the sec has jurisdiction over security - based sefs .
a swap dealer is an individual who acts as the counterparty in ...
the commission believes that an initial determination that a swap is available to trade should be made by a sef or a dcm that offers the swap for trading .
on january 7, 2011, the cftc offered its proposed rules regarding swap execution facilities. the open period for comment letters ran from from january 7 to march 8, 2011 .
the commodity futures trading commission is correcting a final rule that appeared in the federal register of june 4, 2013 (78 fr 33476). the final rule applies to the registration and operation of a new type of regulated entity named a swap execution facility, and implements provisions of the dodd - frank wall street reform and consumer protection act .
learn about the history of swap agreements, the first swap agreement between ibm and the world bank, and how swaps have evolved... read answer > >
4. swap transaction compliance and implementation schedule: clearing and trade execution requirements under section 2 (h) of the cea, 76 fr 58186 (sep. 20, 2011) .
cme group has received temporary registration as a swap execution facility (sef) in addition to our current exchanges and trading platforms. our sef is governed by the sef rulebook. our offering will provide the greatest operational flexibility possible to meet our customers needs. we will initially launch with commodities and we are currently evaluating additional asset classes based on customer demand .
( sec. 763) amends the securities exchange act of 1934 to prescribe requirements for clearing procedures and execution of security - based swaps, including requirements for: (1) swap execution facilities; (2) segregation of assets held as collateral in security - based swap transactions; and (3) position limits and accountability for security - based swaps and large trader reporting .
have rules and procedures to ensure the financial integrity of security - based swaps entered on or through the facility, including the clearance and settlement of security - based swaps .
on february 10, 2014, the commission issued no - action relief from the mandatory execution requirement for swaps that are part of a
package transaction
- transactions involving more than one swap or financial instrument (often referred to as “component legs”) and at least one swap subject to the trade execution requirement. the letter offers relief until may 15, 2014. view letter .
the cftc made its first determinations on january 16, 2014, making february 15, 2014 the date at which the first swaps will be subject to the execution requirements. subsequent determinations were made on january 26 and 28. for more information on rulemakings related to swap execution facilities, click here .
other commenters thought that the process would create uncertainty as to which swaps are subject to mandatory trade execution .
several commenters recommended that the trade execution requirement should become effective only after the clearing requirement is fully implemented .
mandatory trade execution, would not require the commission, or a sef or dcm to expend any resources .
the commission is not adopting a separate process for a sef or dcm to submit a determination that a swap is no longer available to trade. rather, the commission believes that where all sefs and dcms that had listed a swap for trading, including the sef or dcm that submitted the initial available - to - trade determination under part 40, no longer list that swap for trading on their respective facility or platform, (i. e. , all such sefs and dcms have “de - listed” the swap), [ 140 ] then the commission would deem the swap to be no longer available to trade. in such a case, trading in the swap would no longer be subject to the trade execution requirement. the commission believes that this approach is consistent with section 2 (h) (8) of the cea, which states a swap would otherwise not be subject to the trade execution requirement if, among other things, no sef or dcm makes it available to trade .
the final rule promotes the trading of swaps on sefs and dcms by establishing a process that specifies when a swap is available to trade; once a swap is deemed available to trade, that swap must be traded on a sef or dcm if it is subject to the clearing requirement. accordingly, the adopted process will promote market efficiency and competitiveness by (1) informing market participants of when the trade execution requirement applies and (2) prescribing the methods by which all market participants may execute a particular swap, depending on whether the trade execution requirement applies .
part ii: regulation of swap markets - (sec. 722) amends the cea with respect to cftc exclusive jurisdiction over accounts, agreements and transactions involving swaps, and contracts of sale executed on a swaps execution facility. states that such cftc jurisdiction limits neither the jurisdiction conferred by this act upon the sec with respect to security - based swap agreements and security - based swaps, nor sec authority with respect to related agreements, contracts, or transactions .
as i explain below, the rule provides illusory comfort that the commission will have a legal authority to review and, if necessary, challenge a mandatory trading determination made by a swap execution facility (sef) or designated contract market (dcm). in fact, the only authority that the commission has is to “rubber stamp” a sef or dcm' s initial determination .
proposed §§ 37. 10 (c) (1) and 38. 12 (c) (1) required that upon the commission deeming that a swap is available to trade based on a sef or dcm submission, all other sefs and dcms listing or offering for trading such swap and / or any economically equivalent swap must make those swaps available to trade for purposes of the trade execution requirement under section 2 (h) (8) of the cea. the commission defined “economically equivalent swap” under proposed §§ 37. 10 (c) (2) and 38. 12 (c) (2) as a swap that the sef or dcm determines to be economically equivalent with another swap after consideration of each swap' s material pricing terms. the commission also noted that if a dcm or sef makes a swap available to trade, then the proposed rule would not require other dcms and sefs to list or offer that swap, or an economically equivalent swap, for trading .
ici stated that applying the determination to only one sef or dcm would be inconsistent with the trade execution requirement .
security - based swap fraud: proposed a new rule to help prevent fraud, manipulation, and deception in connection with the offer, purchase or sale of any security - based swap as well as in connection with ongoing payments and deliveries under a security - based swap .
( sec. 728) requires a person to register with the cftc as a swap data repository regardless of whether the person is also licensed as a bank or registered with the sec as a swap data repository. allows a dco to register as a swap data repository. prescribes requirements and duties for swap data repositories, including designation of a chief compliance officer .
in order to further consider any operational issues concerning the building of transaction order entry and execution technology to facilitate the trading of such package transactions, consistent with the trade execution requirement, acting chairman mark wetjen has directed the division to hold a public roundtable on execution issues related to package transactions. based upon public input, the division will consider whether and under what conditions to grant limited relief for package transactions to ensure proper implementation of the execution mandate .
the process set forth in §§ 37. 10 and 38. 12 will advance the congressional goal of promoting swap execution and developing a centralized trading market that facilitates price discovery in the manner as described below .
a dormant swap execution facility defined in cftc regulation 40. 1 (f), is any sef on which no trading has occurred during a period of twelve consecutive calendar months, preceding the first day of the most recent calendar month. however, no sef shall be considered to be dormant if its initial and original commission order of registration was issued within the preceding 36 consecutive calendar months .
maintain records of activity relating to the facility' s business, including a complete audit, for a period of five years and to report such information to the commission, upon request .
( 2) listing requirement. a designated contract market that makes a swap available to trade must demonstrate that it lists or offers that swap for trading on its trading system or platform .
for reasons discussed below, the cost and benefits associated with requiring mandatory trade execution immediately upon making a swap available to trade and requiring it to be cleared, or after some longer versus shorter period of delay, are not susceptible to meaningful quantification. costs and benefits associated with trade execution are independent of costs and benefits of implementing mandatory trade execution itself and pertain exclusively to the pace of implementation. the commission is not aware of any analog ,
sets forth registration and oversight requirements governing security - based swap execution facilities. allows dual registration with the cftc. permits trading by such facilities only in security - based swaps that are not readily susceptible to manipulation .
a stock swap is the exchange of one equity - based asset for another... .
90. as noted above, the commission believes that the mere listing or offering for trading of a swap on a dcm or sef does not mean that the swap is available to trade .
( sec. 1102). authorizes the comptroller general to conduct audits and onsite examinations, if appropriate, of the federal reserve board, a federal reserve bank, or a credit facility, solely for the purposes of assessing: (1) the operational integrity, accounting, financial reporting, and internal controls governing special federal reserve credit facilities or a covered transaction (any open market transaction or discount window advance); (2) the effectiveness of the security and collateral policies established for the facility or covered transaction in mitigating risk to the federal reserve bank and taxpayers; (3) whether the credit facility or the conduct of a covered transaction inappropriately favors one or more specific participants over other institutions eligible to utilize the facility; and (4) the policies governing the use, selection, or payment of third - party contractors by or for any credit facility or to conduct any covered transaction. requires the comptroller to report to congress on each such audit .
( sec. 765) directs the sec to adopt conflict of interest rules with respect to security - based swaps clearing agencies, security - based swap execution facilities, national securities exchanges that post or make security - based swaps available for trading, bank holding companies with total consolidated assets of $ 50 billion or more, nonbank financial companies supervised by the federal reserve board, and affiliates of such a bank holding company or nonbank financial company, a security - based swap dealer, major security - based swap participant, or person associated with a security - based swap dealer or major security - based swap participant .
69. the commission notes that such swap would be certified or approved under § 40. 2 or § 40. 3 of the commission' s regulations prior to listing the swap for trading .
washington, dc — the commodity futures trading commission (cftc or commission) division of market oversight (division) today announced that javelin sef, llc’s (javelin) self - certification of available - to - trade determinations (mat determinations) for certain interest rate swap contracts, as described below, is deemed certified. under commission regulations, the swaps that are subject to these mat determinations, whether listed or offered by javelin or any other designated contract market (dcm) or swap execution facility (sef), will become subject to the trade execution requirement under section 2 (h) (8) of the commodity exchange act 30 days after certification, on february 15, 2014. all transactions involving swaps that are subject to the trade execution requirement, as described below, must be executed through a dcm or a sef. to the extent that swaps subject to the trade execution requirement are executed on a sef, they must be executed in accordance with the execution methods prescribed by commission regulation .
block trade thresholds for swaps vary by instrument and are based on the tenor and spread of the swap. block trades are exempt from the minimum execution methods of required transactions but must be processed on a sef or dcm .
subtitle b: regulation of security - based swap markets - (sec. 762) amends the gramm - leach - bliley act to repeal the prohibition against regulation of a security - based swap agreement .
with respect to marketaxess' s comment, the commission does not believe that the costs associated with the determination process pose a barrier to entry for trading platforms. the rule does not affirmatively require a sef or dcm to first submit to the commission that a swap is available to trade via a part 40 filing in order to list or offer that swap for trading on its platform. if one sef or dcm makes the swap available to trade through the part 40 process, then other sefs and dcms who subsequently choose to list or trade the swap are only required to do so through methods of execution consistent with the trade execution requirement. the commission notes that in order to register and operate as a sef, a trading platform or facility must already be able to demonstrate that they offer certain minimum functionality in terms of methods of execution (i. e. , a central limit order book (“clob”) or request - for - quote (“rfq”) system). [ 230 ]
final §§ 37. 12 and 38. 11 establishes a compliance schedule following a determination that a swap is subject to the trade execution requirement under section 2 (h) (8) of the cea. market participants are required to comply with the trade execution requirement upon the later of (1) the applicable deadline established under the compliance and implementation schedule for the clearing requirement for a swap under section 2 (h) (1) of the cea; [ 282 ] or (2) 30 days after the swap is first made available to trade on either a sef or dcm. absent this final rule, market participants would have been required to comply with the trade execution requirement immediately after a swap is determined to be available to trade and required to be cleared. to provide further flexibility to registrants and market participants, the commission is exercising its discretion to stagger implementation of the trade execution requirement .
the cftc has proposed, and in many cases finalized, new rules, guidance and acceptable practices to implement the new section 5h to the commodity exchange act (cea) concerning the registration and operation of sefs, as well as new section 2 (h) (8) to the cea concerning the listing, trading and execution of swaps on sefs. these regulations will require, among other things, that swaps subject to the clearing requirement of section 2 (h) (1) be executed on either designated contract market (dcm) or a swap execution facility, unless no dcm or sef
made the swap available for trading .
[ 3 ]
the commodity futures trading commission staff announces trade execution mandate for certain interest rate swaps | u. s. commodity futures trading commission
the trade execution requirement at the same time, rather than through a phased - in approach, to avoid fragmenting market liquidity .
proposed §§ 37. 10 (c) and 38. 12 (c) required that upon a determination that a swap is available to trade by a sef or dcm, all other dcms and sefs listing or offering that swap or an economically equivalent swap for trading must also make those swaps available to trade .
the legal action came after many in the swaps industry had raised concerns that the cftc was pushing the trading of otc derivatives towards exchanges, rather than the swap execution facilities (sefs) created as a result of dodd - frank .
required transactions are certain ‘made available to trade’ (mat) cds transactions not subject to a block trade exemption that comply with the trade execution mandate under dodd frank. these swaps must be executed on a sef or dcm using one of the minimum execution methods .
( such as a mat swap vs. a single name cds or cash bond on the secondary market )
on feb. 2, 2011, the securities and exchange commission voted unanimously to propose rules defining security - based swap execution facilities (sefs) and establishing their registration requirements, as well as their duties and core principles. [ 5 ]
to prevent evasion of the trade execution requirement through slight modification of a swap' s terms, some commenters recommended that the commission should rely on its anti - evasion authority under section 6 (e) of the cea. [ 123 ]
287. similarly, where a swap first becomes subject to the clearing requirement before being made available to trade, the clearing determination would alert market participants to the fact that specific classes of swaps may become subject to the trade execution requirement .
could mandatory electronic execution of over - the - counter (otc) derivatives, stemming from the 2009 g20 pittsburgh summit, act as the catalyst in spawning new business models? jim myers, kimon mikroulis and paul gibson discuss the impact of mandatory electronic execution for certain otc products under the most advanced of these electronic mandates, dodd - frankís swap execution facilities (sef). as the otc markets are entering a phase of rapid evolution, concepts that were originally created in the exchange - traded world, such as sponsored access, agency execution and general price aggregation, are emerging as critical issues to be addressed by otc market participants .
©2017 marketaxess holdings inc. (the “company”). marketaxess, trade on and the marketaxess logo are trademarks of the company. marketaxess corporation, member of finra and sipc. marketaxess sef corporation is temporarily registered as a swap execution facility with the cftc. marketaxess europe limited and xtrakter limited are each authorised and regulated by the uk financial conduct authority. trax is a trading name of xtrakter limited, and the trax logo is a trademark of xtrakter limited .
several commenters proposed that the commission, not sefs and dcms, should maintain the exclusive authority to determine whether a swap is available to trade. [ 249 ] commenters expressed concern that illiquid swaps would become subject to the trade execution requirement if sefs and dcms were allowed to make the determination based on their incentives to maximize the number of swaps traded on a facility or platform. [ 250 ] cme stated a commission - based review of whether a swap is available to trade would lead to a more “logical and efficient” use of commission and industry resources. [ 251 ]
159. see swap transaction compliance and implementation schedule: clearing and trade execution requirements under section 2 (h) of the cea, 76 fr 58186 (sep. 20, 2011). in this final rule, the commission is finalizing the compliance and implementation schedule for the trade execution requirement, and therefore, addresses the relevant comments submitted in response to this proposed rule .
washington, dc – the commodity futures trading commission (cftc or commission) is requesting public comment on a certification from javelin sef, llc (javelin) to implement available - to - trade determinations for certain interest rate swap contracts. javelin submitted its available - to - trade determinations to the commission on a self - certified basis pursuant to commission regulations 37. 10 and 40. 6. if javelin’s submission is deemed certified by operation of commission regulation 40. 6, such swap contracts, whether listed or offered by javelin or any other designated contract market (dcm) or swap execution facility (sef), will be subject to the trade execution requirement under section 2 (h) (8) of the commodity exchange act (cea). all transactions involving swaps that are subject to the trade execution requirement generally must be executed on either a dcm or a sef. in addition, to the extent that such transactions are executed on a sef, they must be executed in accordance with the execution methods prescribed by commission regulation 37. 9 (a) (2) .
prohibits the use of taxpayer funds or resources: (1) to prevent the receivership of any swap entity resulting from its swap or security - based swap activity; or (2) for the orderly liquidation of any swaps entities that are non - fdic insured, non - systemically significant institutions not subject to heightened prudential supervision .
the fnprm requested comment on whether the commission should allow a sef or dcm, in evaluating the factors under proposed §§ 37. 10 (b) and 38. 12 (b), to consider (1) the same swap or an economically equivalent swap on another sef or dcm; and (2) the amount of activity in the same swap or an economically equivalent swap available primarily or solely in bilateral transactions. [ 81 ]
makes liable for certain double civil money penalties any dco, swap dealer, or major swap participant that knowingly or recklessly evades, or participates in or facilitates an evasion of, specified requirements for certain transactions in exempt commodities .
authorizes the cftc, the sec, and the prudential regulators to agree to information - sharing arrangements necessary or appropriate in the public interest or for the protection of investors, swap counterparties, and security - based swap counterparties .
authorizes such a counterparty to any security - based swap that is not subject to the mandatory clearing requirement to elect to require clearing of the swap. grants such a counterparty also the sole right to select the clearing agency .
i have deep reservations about the process that the commission is proposing for “making a swap available to trade. ”
by michael beth, vice president, equity & derivative trading, wallachbeth capital. regulatory changes have created the need for increased execution transparency .
the retail platform is a go - to source for advisors and traders who need fast, reliable execution for their fixed income trading needs .
205. sefs are a new type of regulated marketplace modeled largely on the existing commission - regulated dcm structure. section 1a (50) of the cea, as enacted by section 721 of the dodd - frank act, defines a sef as “a trading system or platform in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by multiple participants in the facility or system, through any means of interstate commerce, including any trading facility, that (a) facilitates the execution of swaps between persons; and (b) is not a designated contract market. ” 7 u. s. c. 1 a (50). section 5h (a) (1) of the cea, as amended by the section 733 of the dodd - frank act, prohibits any person from operating a facility for the trading and processing of swaps unless the facility is registered as a sef or a dcm. 7 u. s. c. 7 b - 3 (a) (1) .
part two looks at the changes to the overall market structure brought about by new regulation. though the swap execution facility is a new entity as defined by dodd - frank, an ecosystem of platforms and processes for the trading otc derivatives has been in place for decades. the introduction of new requirements for quoting, clearing and data transmission significantly altered the competitive landscape among inter - dealer brokerage firms (idbs) and dealer - to - client platforms. click to view part ii
( sec. 734) amends the cea to repeal requirements for derivatives transaction execution facilities and an election for registration by exempt boards of trade .
mfa commented that allowing mandatory trade execution to become effective simultaneously with mandatory clearing would potentially dilute market participants' resources to comply with both requirements .
‘permitted transactions’ (see below) may trade via any means of execution as long as the sef offers an order book as a minimum functionality .
washington, d. c. , feb. 2, 2011 — the securities and exchange commission today voted unanimously to propose rules defining security - based swap execution facilities (sefs) and establishing their registration requirements, as well as their duties and core principles .
some commenters stated that the commission should allow sefs and dcms to submit determinations for a group, category, type, or class of swap. [ 72 ] in defining “group, category, type, or class” of swap, aima stated that the commission should take into account specific characteristics of certain swaps to avoid subjecting certain illiquid swaps to mandatory trade execution. [ 73 ]
( sec. 714) authorizes the cftc and the sec to collect information concerning the markets for any types of swap or security - based swap and report on those detrimental to the stability of a financial market or of its participants .
requires recovery of all funds expended on the termination or transfer of the swap or security - based swap activity of a swaps entity from the disposition of the entity' s assets or through assessments, including assessments on the financial sector .
deems a swap cleared by or through a dco to be a commodity contract with regard to all money, securities, and property of any swaps customer received by a futures commission merchant or a dco to margin, guarantee, or secure the swap (including money, securities, or property accruing to the customer as the result of the swap) .
a gypsy swap allows a company to raise capital without issuing debt or holding a secondary offering. read answer > >
cftc swap - trading rules may limit market entrants, moody’s says. bloomberg. retrieved on february 3, 2011 .
acquiring market share in the trading of a particular swap before other venues can list and develop trading activity in that swap), which would lead to premature or ill - advised mandatory trading of illiquid swaps on a sef or dcm .
many entities may apply to become a swap execution facility. to qualify, they must meet specific thresholds as defined by the sec, cftc, and the dodd - frank act. applicants must register with the sec and meet specific requirements. requirements include the platform' s ability to display all available bids and offers, send trade acknowledgments to all involved parties, maintain a record of transactions, and provide a request for quote system. further, they must meet certain margin and capital guidelines and the ability to segregate the swap exchange. finally, the applicant must agree to abide by the 14 sec core principles .
in this regard, some commenters stated that under section 2 (h) (8) (b) of the cea, swaps subject to the clearing requirement are automatically subject to mandatory trade execution unless a sef or dcm does not list the swap for trading .
20. some commenters cited the july 2010 senate floor remarks of u. s. senator blanche lincoln, in which she stated that determining whether a swap is available to trade should consist of more than conducting a listing inquiry. according to senator lincoln, “ [ t ] he [ commission ] could consider, for example, whether there is a minimum amount of liquidity such that the swap can actually be traded on the facility. the mere 'listing' of the swap by a [ sef ], in and of itself... should not be sufficient to trigger the trade execution requirement. ” markit comment letter at 2 n. 6; chatham comment letter at 2 - 3; ici comment letter at 3 - 4 .
in november 2014, the cftc updated its compliance dates for a number of package transactions. at issue are three requirements related to the execution rules :
those swaps that are made available to trade and thus subject to the trade execution requirement will be publicly posted on the commission' s web site .
215. the commission may determine that swap transactions exempted from the section 2 (h) (1) clearing requirement pursuant to other statutory authority would also not be subject to the section 2 (h) (8) trade execution requirement. see supra note 1 .
240. the commission believes that market participants can use any or each of the factors to demonstrate that active trading is occurring for a particular swap. for example, a high frequency of transactions, narrow bid / ask spread, or large trading volume would indicate execution of transactions for that swap. a large number of buyers or sellers, or a large number of resting firm or indicative bids and offers would also indicate an active market based on the presence of market participants seeking to execute transactions in that swap .
some opposing commenters stated that the commission, not sefs and dcms, should determine whether a swap is available to trade .
assessing whether a swap is available to trade and submitting a determination pursuant to part 40 of the commission' s regulations .
any many - to - many platform allowing for trading in swap indices must be registered as a sef by this date .
permitted transactions are not subject to the trade execution mandate under dodd frank though they may be executed on a sef or dcm, if the market participant chooses. these transactions are illiquid or bespoke in nature. permitted transactions may trade via any method of execution as long as the sef offers an order book .
prescribes clearing requirements for swaps. makes it unlawful for any person to engage in a swap without submitting it for clearing to a dco that is either registered under this act or exempt from such registration, if the swap is required to be cleared .
in this release, the commission is adopting final rules (1) specifying the process by which a swap is made “available to trade, ” thereby making it subject to the trade execution requirement under section 2 (h) (8) of the cea (“available - to - trade rule”); and (2) establishing the compliance schedule of the trade execution requirement, following a commission determination that a swap is both required to be cleared and is available to trade (“trade execution compliance schedule”). [ 211 ] more specifically, these rules allow sefs and dcms to designate swaps that they list or offer for trading as “available to trade, ” [ 212 ] thereby requiring market participants who transact such swaps (and who are subject to the clearing requirement under section 2 (h) (1) (a) of the cea) to comply with the trade execution requirement in carrying out these transactions. swaps that are subject to the trade execution requirement (and are not block trades as defined under § 43. 2 of the commission' s regulations) must be executed in accordance with other separately promulgated rules that implement the dodd - frank act' s swap exchange trading requirements and are intended to provide improved price transparency for swap transactions. [ 213 ]
( sec. 773) subjects a clearing agency and security - based swap dealer or major security - based swap participant to a civil money penalty in twice the amount otherwise available for knowing or reckless evasion, participation in, or facilitation of specified violations .
the commission, however, is not adopting a minimum listing period so as to avoid delaying the determination process, and hence implementation of the trade execution requirement as discussed below. the commission also notes, as discussed further below, that a sef or dcm is allowed to consider activity in the same swap listed on another sef or dcm as well as the amount of off - exchange activity in the same swap .
the implementation period reflected in the final rule should ensure that market participants have adequate time to comply with the trade execution requirement and will be prepared to transact swaps on a sef or dcm. as a result, market participants should be able to maintain hedges that have been executed through swap transactions, thereby mitigating market and counterparty risks. moreover, a compliance schedule that facilitates sef and dcm swap execution by the greatest number of potential market participants, as does the final rule, indirectly promotes market liquidity, thereby reducing the overall costs of utilizing swaps for risk management purposes.
a swap execution facility ( sef ) ( sometimes swaps execution facility ) is a platform for financial swap trading that provides pre-trade information ( i.e. bid and offer prices ) and a mechanism for executing swap transactions among eligible participants . swap execution facilities are regulated by the securities and exchange commission and the commodity futures trading commission . the regulated trading of certain swaps is a result of requirements in the united states by the dodd – frank wall street reform and consumer protection act ( in particular title vii ) . financial swaps have traditionally been traded in over-the-counter ( otc ) markets . however , regulatory changes have driven reporting , clearing , and settlement functions to sefs , which are much more tightly regulated . the sef-execution mandate responds to one of the four derivatives-related european union , have proposed similar changes in swap market structure but none have yet been adopted . as of october 2 , 2013 , any swap listed by a sef may be traded by the parties on the sef , but may also be traded off-sef in any other lawful manner . the swaps that must be traded on sefs are both subject to a cftc-centralized clearing mandate and have been determined to be " made available to trade " ( mat ) by at least one sef . four categories of interest rate swaps and two categories of credit default swaps are currently subject to clearing mandates . 
a swap execution facility (sef) (sometimes swaps execution facility) is a platform for financial swap trading that provides pre-trade information (i.e. bid and offer prices) and a mechanism for executing swap transactions among eligible participants. swap execution facilities are regulated by the securities and exchange commission and the commodity futures trading commission. the regulated trading of certain swaps is a result of requirements in the united states by the dodd – frank wall street reform and consumer protection act (in particular title vii). financial swaps have traditionally been traded in over-the-counter (otc) markets. however, regulatory changes have driven reporting, clearing, and settlement functions to sefs, which are much more tightly regulated. the sef-execution mandate responds to one of the four derivatives-related european union, have proposed similar changes in swap market structure but none have yet been adopted. as of october 2, 2013, any swap listed by a sef may be traded by the parties on the sef, but may also be traded off-sef in any other lawful manner. the swaps that must be traded on sefs are both subject to a cftc-centralized clearing mandate and have been determined to be " made available to trade " (mat) by at least one sef. four categories of interest rate swaps and two categories of credit default swaps are currently subject to clearing mandates.
a swap execution facility (sef) (sometimes swaps execution facility) is a platform for financial swap trading that provides pre-trade information (i.e. bid and offer prices) and a mechanism for executing swap transactions among eligible participants. swap execution facilities are regulated by the securities and exchange commission and the commodity futures trading commission. the regulated trading of certain swaps is a result of requirements in the united states by the dodd – frank wall street reform and consumer protection act (in particular title vii). financial swaps have traditionally been traded in over-the-counter (otc) markets. however, regulatory changes have driven reporting, clearing, and settlement functions to sefs, which are much more tightly regulated. the sef-execution mandate responds to one of the four derivatives-related european union, have proposed similar changes in swap market structure but none have yet been adopted. as of october 2, 2013, any swap listed by a sef may be traded by the parties on the sef, but may also be traded off-sef in any other lawful manner. the swaps that must be traded on sefs are both subject to a cftc-centralized clearing mandate and have been determined to be " made available to trade " (mat) by at least one sef. four categories of interest rate swaps and two categories of credit default swaps are currently subject to clearing mandates.