On Friday, Javelin SEF made the first "Made Available to Trade" submission (an "MAT Submission") to the CFTC for certain interest rate swaps. Javelin's submission, if not objected to by the CFTC, would cause those interest rate swaps come under the trading requirement, and those swaps would then be required to be executed on a swap execution facility ("SEF") or a designated contract market (unless they fall under the end-user exception).
Javelin's MAT Submission would cover USD LIBOR, Sterling LIBOR, & EURIBOR interest rate swaps.
The CFTC determined that Javelin's MAT Submission presented novel or complex issues, providing the CFTC with 90 days to review the MAT Submission. The CFTC also opened the MAT Submission up to public comment. The comment period will end on November 19, 2013.
The SEF rules only became effective on October 2, 2013, and since then 17 SEFs have provisionally registered with the CFTC. However, the CFTC has commented that it has not had enough time to review the SEF registrations, or even to review each SEF's rule book.
The factors to consider if a swap is "available to trade" and should be subject to the trading requirement are:
- Whether there are ready and willing buyers and sellers;
- The frequency or size of transactions;
- The trading volume;
- The number and types of market participants;
- The bid/ask spread; or
- The usual number of resting firm or indicative bids and offers.
Given the extensive number of counterparties that use interest rate swaps, and the very brief operating period for SEFs, many market participants would have to undergo significant changes if this MAT Submission became effective.