There has been much debate about market readiness for the CFTC’s “package” transactions trade execution requirement and what its impact will be on derivative trading. Package transactions, swaps that have two or more components and are priced as a package, are involved in an estimated 25-50 percent of the entire interest rate swap market, according to the CFTC and Managed Funds Association.
Last week marked the first time some of these instruments were mandated for swap execution facility (SEF) trading. The previously provided no-action relief from the CFTC expired at midnight on Thursday. Bloomberg’s SEF was prepared for the changes and starting early Friday morning, the first package transactions were executed from Asia. Since then, more than $15 billion in package transactions have been traded, representing around 20 percent of Bloomberg SEF’s overall cross-asset volumes.
As future regulatory deadlines approach, Bloomberg’s SEF will continue to provide our 800 global customers the solutions they need to operate without disruption. Bloomberg’s SEF already supports trading for package transactions including interest rate curves and butterflies; credit default swap index rolls and switches; market agreed coupon (MAC) curves, butterflies and rolls; International Monetary Market (IMM) curves, butterflies, rolls; and swap spread packages such as swaps versus Treasuries.
Bloomberg was first to apply and first to receive approval to operate a SEF. Since the passing of Dodd-Frank in 2010, we’ve worked closely with market participants and regulators to ensure we provide our customers solutions to help them comply with the ever-changing regulatory landscape. For more information about Bloomberg’s SEF, click here.