US issues revised plan for swap trading transparency

THE US derivatives regulator set out a revised position on trading platforms and requirements for swaps yesterday.

The proposals would make trading in the most popular swaps as transparent as stock exchanges, while trying to ensure that requirements for less popular swaps don’t burden them too far.

The Commodity Futures Trading Commission (CFTC) is working to bring the opaque swaps market out of the dark as part of a Wall Street financial overhaul mandated by Congress.

Dozens of firms, such as IntercontinentalExchange, hope to qualify as swap trading venues, called swap execution facilities by regulators.

The proposal would allow SEFs to have electronic trading systems similar to stock market order books, where bids and offers are continuously updated.

But it would not force them to do so, as some feared it would discourage trading in less popular contracts.

CTFC chairman Gary Gensler delayed the plans last week after Republicans and industry bodies argued the rules were too inflexible.

The new plan fixes most of those issues, several swaps trading outfits said. “We applaud the CFTC for proposing these definitions for the trading of derivatives, and believe that they will increase transparency and create more efficient markets for end-users,” said Lee Olesky, chief executive of Tradeweb, which offers electronic buying and selling of swaps.

Republican commissioner Jill Sommers, who criticised the original proposal as too narrow, voted against the plan, voicing concerns that some requirements may limit competition.

A 60-day comment period is now open.