Today, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) hosted a roundtable discussion dedicated to issues related to swap-execution facilities (SEFs) and security-based swap-execution facilities (SB SEFs). Today’s roundtable followed a similar SEC/CFTC roundtable held yesterday focused upon Swap Data Repositories (SDRs), the mechanics of swap data reporting, models for real-time transparency and public reporting and block trades. At today’s roundtable, SEC and CFTC officials posed questions to various swap market participants aimed at helping both agencies meet the rule-making mandates of the Dodd-Frank Act . CFTC Chairman Gary Gensler commented on the roundtable, stating that “Requiring swaps to be traded on regulated trading platforms will bring transparency and better pricing to the derivatives markets. This will lower risk and costs for businesses.”

 

Following brief opening statements from Robert Cook, Director of the SEC’s Division of Trading and Markets, and Richard Shilts, the Director of the CFTC’s Division of Market Oversight, the roundtable engaged in open discussion with two panels:

 

Panel One: SEFs and SB SEFs

 

  • William De Leon, Global Head of Portfolio Risk Management, PIMCO
  • Yves P. Denizé, Director & Associate General Counsel, TIAA-CREF
  • Andrew Downes, Managing Director, UBS Securities LLC
  • Richard DuFour, Executive Vice President, Chicago Board Options Exchange
  • Julian Harding, Executive Director, Tradition Brokerage, Chairman, Wholesale Markets Brokers Association Americas
  • John J. Jeffers, Senior Vice President and General Counsel, OTC Global Holdings
  • Ben MacDonald, Global Head of Trading, Bloomberg L.P.
  • Lee Olesky, Chief Executive Officer and Co-founder, Tradeweb
  • Stephen Semlitz, Managing Director, HESS
  • Heather Slavkin, Senior Legal Policy Advisor for the Office of Investment, AFL-CIO
  • Jeff Sprecher, Chairman and Chief Executive Officer, IntercontinentalExchange, Inc.
  • S. “Vish” Viswanathan, Professor, Fuqua School of Business, Duke University

 

Panel one focused on the definition of SEFs and SB SEFs and the scope of the exception from mandatory trading requirements. Panel one also discussed issues related to obtaining pre-trade and post-trade price transparency, various models for SEF operation, RFQ models and protocols, block trading and the preservation of market liquidity.

 

Panel Two: Compliance with Core Principles for SEFs and SB SEFs

 

  • Athanassios Diplas, Managing Director and Global Head of Counterparty Management Group, Deutsche Bank
  • William De Leon, Global Head of Portfolio Risk Management, PIMCO
  • Yves P. Denizé, Director & Associate General Counsel, TIAA-CREF
  • Bryan T. Durkin , Chief Operating Officer and Managing Director, Products and Services, CME Group
  • Julian Harding, Executive Director, Tradition Brokerage, Chairman, Wholesale Markets Brokers Association Americas
  • Edward S. Knight, Executive Vice President and General Counsel, The NASDAQ OMX Group, Inc.
  • Michael Masters, President, Masters Capital Management, Americans for Financial Reform
  • Richard McVey, Chief Executive Officer, MarketAxess
  • Stephen Semlitz, Managing Director, HESS
  • S. “Vish” Viswanathan, Professor, Fuqua School of Business, Duke University
  • Philip Weisberg, Chief Executive Officer, FXall
  • Brian S. Yelvington, Director – Strategy, Knight Capital Group, Swap and Derivatives Market Association

 

Panel two focused on block trades, the surveillance, investigation and enforcement of SEF and SB SEF rules and regulations, cross-market issues and the obligation of SEFs and SB SEFs to provide impartial access. Topics touched upon by panel two included possible thresholds for the reporting of block trades, various possible models of enforcement (including the self-regulated organization (SRO) model) of SEF regulations, the possibility of SEF regulations modeled upon securities exchange regulation, the importance of SEF’s being permitted to outsource surveillance and enforcement to independent third party organizations, the general categories of behavior which should be monitored and punished by SEFs, potential enforcement mechanism and penalties for SEF regulations (including suspension of trading privileges), the importance of fair, impartial and publicly available access criteria, and the need for minimum capital standard for both SEFs and participants.