CFTC Considering Lower Price Quote Requirement for Dodd-Frank Swap Rule

CFTC Considering Lower Price Quote Requirement for Dodd-Frank Swap Rule

The Commodity Futures Trading Commission (CFTC) is reportedly contemplating lowering the number of price quotes a buyer is required to request before trading swaps.

According to Bloomberg News, three people briefed on the matter, who requested anonymity because the rule is still under consideration, confirmed the CFTC is looking to cut the number of quotes considered sufficient for interest rate, credit and other trades through swap–execution facilities.

Last year the five commissioners of the CFTC, led by chairman Gary Gensler, tried to implement a plan to require five quotes under Dodd-Frank Act regulations, which are intended to boost transparency. However swap dealers, such as Deutsche Bank AG and JPMorgan Chase & Co. lobbied against the proposed five-quote minimum, arguing that the requirement is unnecessary and will raise trading costs while lowering liquidity on facilities that use request-for-quote-systems.

Yesterday, Tim Cameron, managing director and head of the asset management group at the Securities Industry and Financial Markets Association, said in a statement, “Requiring portfolio managers to widely broadcast their trading position could negatively impact the prevailing price of their trades, making it more expensive and difficult to hedge their clients’ risk.”

The new plan that the CFTC is considering will have buyers request two quotes in the first year and three quotes in the following year.

The quotes requirement has been a major source of debate since the Dodd-Frank requirements were enacted.

While swap dealers would welcome a lowering of price quote requirements, there are those who think the rules should stay the same. One group in particular is the Americans for Financial Reform, a coalition that includes the AFL-CIP labor federation, as well as other unions and consumer groups.

The coalition sent a letter to the CFTC on February 27, saying, “Reducing Sef requirements so that they could be fulfilled by an essentially bilateral transaction, which could involve just one or two RFQ counterparties, would nullify most of the intended benefits of the Dodd-Frank Act provisions on derivatives market execution.”

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About The Author


Elan Mendel

Elan Mendel

Elan Mendel is an associate with Shipkevich PLLC, and has done registration, compliance, and enforcement defense work for commodities, futures and forex firms registered with the CFTC and NFA as FCMs, RFEDs, and others. Elan also specializes in domestic and cross-border insolvency issues.

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