In response, to the CFTC extending the comment period for rules related to Swap Execution Facilities (SEFs) under the Dodd-Frank Act, MarketAxess has submitted a letter to the CFTC with further comment on the Core Principles and other requirements for SEFs.
MarketAxess raised a number of key points, including how the same regulatory standards should apply for all CDS.
“We urge the CFTC and SEC to adopt regulatory standards for SEFs and SB SEFs (Security-Based Swap Execution Facilities) that are identical, or as close to identical as possible,” says the letter. “To an overwhelming extent, market participants that trade single-name CDS will also trade broad-based index CDS and vice versa. Both kinds of products operate under the same operational requirements and trading procedures.”
The group also says that the SEF regulations should be among the first to be finalized (with an adequate lead-time for implementation).
“As evidenced at the CFTCs recent SEF showcase, SEFs are ready, willing and able to facilitate the execution of swaps,” says the letter. “It has been suggested that the CFTC should first focus upon clearing, however not only does this view fail to credit SEFs for their state of readiness to operate in accordance with Dodd-Frank, but it ignores the contribution of trading to achieving the benefits of central clearing.”
Among other points, the group says that effective temporary SEF registration is essential to moving swaps onto regulated markets as soon as possible and a platform that only operates a request-for-quote system should be allowed to register and operate as a SEF.
MarketAxess also says that SEF regulations must promote fair and open competitionwhile the CFTC should consider the SECs cost estimates, subject to adjustments.
(LB)