The Commodity Futures Trading Commission Staff Announces Trade Execution Mandate for Certain Interest Rate Swaps

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Javelin SEF, LLC’s Available-to-Trade Determinations Are Deemed Certified

Washington, DC — The Commodity Futures Trading Commission (CFTC or Commission) Division of Market Oversight (Division) today announced that Javelin SEF, LLC’s (Javelin) self-certification of available-to-trade determinations (MAT Determinations) for certain interest rate swap contracts, as described below, is deemed certified. Under Commission regulations, the swaps that are subject to these MAT Determinations, whether listed or offered by Javelin or any other designated contract market (DCM) or swap execution facility (SEF), will become subject to the trade execution requirement under section 2(h)(8) of the Commodity Exchange Act 30 days after certification, on February 15, 2014. All transactions involving swaps that are subject to the trade execution requirement, as described below, must be executed through a DCM or a SEF. To the extent that swaps subject to the trade execution requirement are executed on a SEF, they must be executed in accordance with the execution methods prescribed by Commission regulation.

As a result of today’s certification, transactions involving the following swaps will be subject to the trade execution requirement, effective February 15, 2014:

Fixed-to-Floating Interest Rate Swap

Currency

U.S. Dollar (USD)

U.S. Dollar (USD)

Euro (EUR)

Floating Rate Indexes

USD LIBOR

USD LIBOR

EURIBOR

Trade Start Type

Spot Starting (T+2)

IMM Start Date

(next two quarterly IMM start dates)

Spot Starting (T+2)

Optionality

No

No

No

Dual Currencies

No

No

No

Notional

Fixed Notional

Fixed Notional

Fixed Notional

Tenors

2, 3, 5, 7, 10, 12, 15, 20, 30 years

2, 3, 5, 7, 10, 12, 15, 20, 30 years

2, 3, 5, 7, 10, 15, 20, 30 years

Separately, various market participants have submitted to the Commission and the Division comments and requests regarding the implementation of the trade execution requirement with respect to “package transactions,” or transactions involving more than one swap or financial instrument and at least one swap subject to the trade execution requirement. The Division clarifies that the inclusion of a swap subject to the trade execution requirement in a multi-legged transaction would not per se relieve market participants of the obligation to trade such swap through a DCM or SEF.

In order to further consider any operational issues concerning the building of transaction order entry and execution technology to facilitate the trading of such package transactions, consistent with the trade execution requirement, Acting Chairman Mark Wetjen has directed the Division to hold a public roundtable on execution issues related to package transactions. Based upon public input, the Division will consider whether and under what conditions to grant limited relief for package transactions to ensure proper implementation of the execution mandate.

News Source : The Commodity Futures Trading Commission Staff Announces Trade Execution Mandate for Certain Interest Rate Swaps

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