In an open meeting February 23, the CFTC will vote on a rule establishing record keeping and daily trade requirements for swap dealers (“SDs”) and major swap participants (“MSPs”). The Commission’s proposed rule requires SDs and MSPs to establish measures to protect position limits set by the CFTC, exchanges, or a swap execution facility (“SEF”). Under the proposal, SDs and MSPs will be held to certain real-time reporting requirements, including a controversial provision making information searchable by transaction and counter-party.
The CFTC will also vote on a proposal to phase in the appropriate block sizes for swaps in the following five interest classes: interest rate, equity, credit, foreign exchange, and other commodities. Block trades are large deals negotiated off an exchange’s trading facility, often by voice brokering. Goldman Sachs and other swap dealers have argued against the rule, saying they need sufficient time to hedge the price risk of over-the-counter (“OTC”) swaps in futures and other markets before reporting the trade, or risk the market moving against them. The block size will determine the threshold for longer reporting delays.
The CFTC and SEC has yet to define MSPs and SDs.The CFTC’s next rule-making meeting is scheduled for March 9.
Update: the Commission passed both rules by a 3-2 vote.