RiskTech Forum

CFTC Commissioner Will Vote To Make Swaps Clearing Rules Less Stringent

Posted: 5 March 2013  |  Source: CFTC


A U.S. Commodity Futures Trading Commission (CFTC) commissioner who has frequently cast a swing vote recently proposed derivatives regulations that will make swap clearing rules less stringent, according to people familiar with the matter.

This information has been released at a time when many firms are changing all their open swaps positions to futures contracts so they will not have to register with the National Futures Association as swaps dealers, according to Energy Risk.

CFTC Commissioner Mark Wetjen suggested in a confidential document that the government agency back off from its previous plan of requiring institutional investors to ask five different swap execution facilities (SEFs) for transaction prices, people who had seen the memorandum told The Financial Times.

Market participants protested this move on the grounds that requiring this many requests for quotes (RFQs) could undermine liquidity, the media outlet reports. As a result, Wetjen is reportedly going to alter his proposal, requiring that affected parties ask for quotes from at least two SEFs.

Charley Cooper, senior managing director at State Street Global Markets, said that derivatives regulations requiring two RFQs would be the least that could make a difference, as getting a quote from one party would not reduce systemic risk.