CFTC Grants SEF Relief Until November 1

Terry Flanagan

The Commodity Futures Trading Commission has granted no-action relief for temporarily registered swap execution facilities that are to begin operations on October 2.

The no-action relief, which was granted on September 27 and expires on November 2, applies to the activities of market participants who trade on or through such SEFs. Under the relief, the CFTC will not recommend that the Commission take any action against SEFs that provide temporary access to market participants who do not sign onboarding documentation, including user agreements and consent to jurisdiction agreements.

Several temporarily-registered SEFs have told the CFTC that they are facing several obstacles in achieving compliance with their enforcement obligations under the SEF rules that go into effect on October 2.

According to these SEFs, the process of onboarding participants to their platforms (i.e., securing signed user agreements) presents certain administrative and operational challenges for swaps market participants.

Thomson Reuters, in a September 25 letter to the CFTC, said that market participants have not had an adequate amount of time to review and agree to the particular documents necessary to gain access to a SEF, including the SEF’s rulebook and user agreements.

The Wholesale Market Brokers Association, Americas, said in a September 26 letter that absent time-limited no-action relief, it is highly unlikely that allow of its member firms’ customer will complete the onboarding process by October 2.

As a result, market participants have not had time to establish their own policies and procedures to company with each SEF’s rules, or to analyze and implement the key technological specifications required by each SEF.

The CFTC noted that SEF operators are in the process of transitioning their current customer bases and existing swap trading activity from their current unregistered trading platforms to their fully-registered SEF platforms.

As an approved SEF, Thomson Reuters will allow customers to trade SEF-regulated swaps, FX NDFs and options, electronically through the same system they use for FX spot, forwards and swaps, money markets and precious metals.

Thomson Reuters and FXall customers that have completed the on-boarding process will have access to Thomson Reuters SEF trading capabilities. Thomson Reuters and FXall began the on-boarding process to the Thomson Reuters SEF with clients and liquidity providers in July.

“The implementation of our SEF is an important milestone for Thomson Reuters and our customers as we work with them as their strategic execution partner to meet their workflow and execution requirements,” said Phil Weisberg, global head of FX at Thomson Reuters. “Going forward, as new regulations continue to come into effect around the globe, Thomson Reuters and FXall clients can rest assured that they will be able to continue executing their necessary FX trades in a manner consistent with current workflows and in compliance with all regulatory requirements.”

IntercontinentalExchange’s SEF, ICE Swap Trade, will offer index credit default swap contracts (CDS) on its swap execution facility, and single name CDS across North American and European and Emerging Market corporates and sovereigns. At launch, functionality will include a central limit order book, with request for quote (RFQ) following shortly afterward. “With the approval of ICE Swap Trade, ICE will offer customers the certainty and flexibility they need to adapt to the new market structure and the ability to trade with confidence via their preferred execution methods,” said Thomas Farley, senior vice president of financial markets at ICE.

“Given our existing connectivity to clearing houses, customers, and repositories and our significant advance planning and investment, ICE Swap Trade is prepared to be compliant on CFTC’s effective date and will provide a compliant service offering at launch,” said Christopher McEntee, director of corporate development at ICE.

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