The Commodity Future Trading Commission (CFTC) is ready to push interest rate and credit swaps onto trading platforms designed to make prices more transparent and competitive. The approval would follow a three-month review of plans to mandate that certain types of trades be conducted on swap execution facilities, or SEFs. The change, which is required under the Dodd-Frank Act, could take place as soon as next month.
Dodd-Frank seeks to increase access and price competition in the swaps market by having interest rate, credit-default and other types of swaps trade on SEFs. According to a recent report from Bloomberg, the first platform to submit trades for the mandate, Javelin, said in its filling that the CFTC-registered swap dealers, including J.P. Morgan and Goldman Sachs, observed that the agency’s certification will open the market to “greater transparency, competition and certainty.” Since the filings were first submitted in October, buyers and sellers of derivatives have debated which types of trades must occur on the platforms. The revised version would require interest-rate trades, including U.S. dollar transactions lasting 2,3,5,7,10,12,15,20, and 30 years to transact on the SEFs.
Scott O’Malia, a commissioner on the CFTC has scheduled an agency advisory committee meeting on January 21 to oversee the trading decision and gather feedback from the industry. Read more from Bloomberg here.