A controversial rule proposed as part of the CFTC’s efforts to implement regulations mandated by the Dodd-Frank Act is being subjected to renewed criticism by industry groups that fear it will hurt markets.
The so-called 85% rule was originally proposed in December 2010 as part of a larger set of regulations. While those regulations were finalized last month, a vote on the 85% was postponed until after the CFTC finalizes rules governing swap execution facilities (SEFs) later this summer.
The rule would require any exchange-traded contract to trade at least 85% of its total volume on exchange or face being delisted. Echoing the criticism that forced the rule’s original postponement, industry representatives at yesterday’s CFTC roundtable on the rule stated that it would drive trading off-exchange and damage competition.
“Our greatest anxiety around this proposed rule is that it would have a very chilling effect on the ability of new exchanges to compete and upon new contracts to succeed,” said Thomas Callahan, chief executive of NYSE Liffe U.S.
Roundtable participants proposed that the rule’s goal could be better reached by offering incentives such as discounts for centralized trading,