Derivatives: CFTC shutdown, SEFs open

October 2013


Regulation of many-to-many swap trading platforms known as “swap execution facilities” (“SEFs”) started today (October 2, 2013), under rules issued by the Commodity Futures Trading Commission (“CFTC”). Many firms trading on these previously unregulated platforms have been scrambling to acquire trading privileges by evaluating and executing legal agreements and by adapting the connectivity of their technology systems. Others have been deploying trading strategies in order to continue to trade on non-US platforms that do not have to register, as a result of the rules’ now famous footnote 88.

The CFTC recently granted several temporary reprieves from this onboarding and technology scramble. Through a flurry of no-action letters issued between September 27th and September 30th, the CFTC made clear that it will continue to require exchanges to register by October 2nd. However, SEFs and those that trade on these exchanges (“participants”) have been granted more time to sign up and to address technology and other operational trade processing requirements.

The core takeaways for SEFs and participants in light of this no-action relief are:

  • SEF registration deadline holds firm.
  • Firms may trade on SEFs as of October 2nd, even if they have not formally signed participation agreements.
  • SEF trading is not required – yet.
  • Some requirements are delayed due to technology constraints.
  • Trend toward creation of US and non-US swap liquidity pools.

This Financial Services Regulatory Brief provides background pertinent to the CFTC’s latest relief and discusses the key practical implications.

Contact us

Dan Ryan
US Banking and Capital Markets Leader
Tel: +1 (646) 471 8488