The CFTC’s Division of Market Oversight held a public roundtable on July 15 to discuss the “made available for trade” process for determining which swaps should be subject to the CFTC’s mandatory trading requirements.
The discussion revealed broad agreement among industry participants that the CFTC should play a more active role in determining which products should be subject to mandatory trading, rather than relying on “self-certification” by the SEFs.
Industry participants also urged the CFTC to revise the criteria for MAT determinations. For example, several participants suggested that the criteria should include quantitative thresholds for minimum volume and open interest, a minimum “listing period” during which the swap can be traded on a SEF, and a “resiliency” requirement that the swap be traded on at least two SEFs and supported by at least two liquidity providers.
They also suggested several other revisions to the MAT determination process:
- Provide an opportunity for public comment
- Create a MAT review committee comprised of market participants
- De-link the MAT process from mandatory clearing determinations
- Treat package trades as a separate matter
- Provide a “de-MAT” process for reversing MAT determinations for swaps that no longer meet the MAT criteria
Three asset managers represented on the roundtable— Goldman Sachs Asset Management, Putnam Investments and Russell Investments—strongly emphasized the need for enough time to prepare for mandatory trading. They explained that connecting to a new trading platform and adding a new product to their systems creates a “heavy lift” in terms of operational issues and urged the CFTC to consider market infrastructure readiness before making a mandatory trading determination.
The roundtable also revealed contrasts with the approaches being taken by international regulators. Officials from Japan’s Financial Services Agency and the U.K.’s Financial Conduct Authority said they will be taking more of a “top down” approach, under which determinations are made by the regulators rather than by trading venues. In addition, the FCA official said European regulators are not planning to limit the types of execution methods for swaps that would be subject to mandatory trading, unlike the CFTC’s approach.