CFTC to hold roundtable on trade execution requirements

The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (Division) will hold a public roundtable on July 15, 2015, from 10:00 a.m. to 2:00 p.m. to discuss the Commodity Exchange Act’s trade execution requirement and the process of making Made Available to Trade (MAT) determinations.

The roundtable will discuss approaches to mandatory exchange trading in various jurisdictions; academic perspectives on, and data-based assessment of, MAT; and industry analysis of the MAT process.

As the Dodd-Frank legislation has begun to have its impact on the financial markets during recent years, a focus to move all swaps trading onto trading platforms such as Swap Execution Facilities (SEFs) and Designated Contract Markets (DCMs) began to take effect early last year.

The implementation of these rules comes in two stages. The first stage, registering the platforms with the Commodity Futures Trading Commission (CFTC) came into effect on the 2nd October 2013. This in itself was relatively uneventful for the market as swaps continue to trade off these regulated platforms.

However, since the SEFs have registered with the CFTC, they now have the right to submit a list of instruments to the CFTC that they want “Made Available to Trade” (MAT). This is the key second stage, which brings with it the real impact of the Dodd-Frank legislation.

Subject to approval, these MAT submissions will force trading of those listed swap instruments onto the SEFs and DCMs. Once a product has received MAT approval from the CFTC, all SEFs and DCMs offering that swap for trading must do so in accordance with that trade execution mandate.

A MAT submission must consider one or more of the following factors with respect to the swap:

1) Whether there are ready and willing buyers and sellers

2) The frequency and size of transactions

3) The trading volume

4) The number and types of market participants

5) The bid/ask spread

6) The usual number of resting firm or indicative bids and offers

Previously, MAT submissions from the SEFs and DCMs have considered these factors to varying degrees; some have submitted only the most liquid contracts, whereas others have submitted a much greater number of contracts, despite some of these instruments being traded a lot less frequently.

Once a MAT proposal has been submitted, the CFTC allow for a 90-day review period, which includes a 30-day comment period, followed by a 30-day implementation period.

The roundtable will be held in the Conference Center at the CFTC’s headquarters at Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. The roundtable discussion will be open to the public with seating on a first-come, first-served basis, with details listed on the CFTC website, which are available by clicking here.

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