Presenting to the CFTC on Swaps Liquidity Fragmentation (and Aggregation)

On Tuesday, December 13th I presented to the CFTC Technology Advisory Committee. Chairman Gensler and Commissioners O’Malia and Wetjan were all there. Each panelist, myself included, gave a 15 minute opening and then we participated in an open Q&A with the Chairman, Commissioners and the members of the TAC.

Maybe I’m just optimistic, but it felt like we actually got somewhere. Chairmen Gensler probed me on the number of SEFs, the importance to dealers of building electronic connectivity to clients and the impact smaller order sizes will have on clearing costs. The other big topics of the morning were order interaction rules and the 15 second rule (which no one but the Chairman seems to support).

The biggest policy question I came out of the meeting asking was will the order interaction rules – requiring the RFQ and order book parts of a SEF to interact – be proposed and passed.  I suspect they will still be proposed, but with language that makes using the linkage optional for users.  More on this in the coming weeks.

And on a slightly related note, the CFTC just released its proposal defining “made available for trading.” Defining this turn is a pretty critical part in determining how electronic and liquid the post-DFA swaps market will become.

My opening starts about 24 minutes in. Enjoy.

Watch the video here

Leave a Reply

Your email address will not be published.