Commissioners Outline Differing Approaches To CFTC SEF Rules

At the ISDA DerivCon 2019 conference, three CFTC commissioners addressed recently proposed changes to rules relating to transacting on swap execution facilities ("SEFs"). (See previous coverage of the proposal here.)

CFTC Chair J. Christopher Giancarlo said that the existing framework creates systemic risks as, during a period of diminished liquidity, participants may withdraw from the swaps markets if they find the prescribed trading methods to be overly rigid. He criticized the existing SEF regulatory requirement as being "highly subjective" and overly reliant on a series of no-action letters and other staff interpretations. Nonetheless, he conceded that the proposals for change had been met with a good deal of justified criticism. In particular, Mr. Giancarlo indicated his willingness to reconsider aspects of the proposal relating to (i) the process for making a swap "available to trade" and (ii) requiring pre-trade communications to occur on SEFs. Mr.