The U.S. Commodity Futures Trading Commission’s deadline for rules governing swap execution facilities to take effect is “too ambitious” and should be delayed at least until January, said the National Futures Association, the industry-funded overseer of futures trading.
Under the CFTC’s proposal, the facilities may contract with the NFA to oversee trading and market practices and investigate potential violations of government regulations. The rule is required by the Dodd-Frank Act by mid-July, and the CFTC proposed that it take effect three months after it is finalized by commissioners.
The NFA will need six months after the rule is adopted to design ways to oversee trading practices, increase the size of its staff and test its surveillance methods, Thomas Sexton, NFA’s senior vice president and general counsel, said in a letter to the CFTC dated today. Scott Schneider, CFTC spokesman, declined to comment.
The CFTC and Securities and Exchange Commission are leading efforts to write new rules for the derivatives market after largely unregulated trades helped fuel the 2008 credit crisis. Dodd-Frank, enacted in July, gives the two agencies authority to define swap-execution facilities as an alternative to exchanges for trading in interest rate, credit and other swaps.
NFA’s letter is one of more than 30 comments from Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), LCH.Clearnet Group Ltd. and others urging changes to the CFTC’s swap-execution facilities proposal.
In December, the CFTC proposed allowing participants in the swap-execution facilities to request price quotes from a minimum of five possible sellers. The SEC on Feb. 2 proposed a rule that would allow buyers to request a quote from a single seller.
The CFTC’s requirement on quote-pricing systems is “unnecessarily detailed and unduly limits execution flexibility,” the International Swaps and Derivatives Association Inc. and Securities Industry and Financial Markets Association said in a letter to the CFTC dated today.
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