The Commodity Futures Trading Commission is reviewing rulebooks from swap-execution facilities as part of its effort to confirm their status as registered derivatives trading platforms. SEF executives are raising concerns about the CFTC's efforts. "Part of it is that the SEF regime is new so it is hard to know exactly what is correct, but another part may be that some firms are more aggressive than others and may very well have pushed the boundaries beyond where the CFTC is comfortable," said Laurent Paulhac, CEO of ICAP's SEF.
Javelin Capital Markets has asked the Commodity Futures Trading Commission for permission to make a broad range of interest-rate swaps available for trading on its swap-execution facility. Agency approval would trigger a CFTC requirement that all swaps of this type would have to be traded on SEFs such as Javelin. "This is a natural next step for a derivatives marketplace," said James Cawley, Javelin's CEO, adding that it "jump-starts trading on SEFs."
Industry participants say recently implemented U.S. rules for swap-execution facilities will lead to regionalization because European players likely will drop U.S. clients, rather than take necessary steps to become an SEF. The situation could have a profound effect, given that more than half of the volume on some European platforms for credit default swaps and interest-rate swaps involves U.S. banks and broker-dealers.