ICE Futures on CMC Policy Call

Yesterday on CMC’s member-only policy call, ICE Futures provided an overview of their business and discussed the main regulatory topics they are currently focused on, including position limits; entity and product definitions; core principles of SEFs, DCOs and exchanges; and the MF Global situation.

CFTC swaps trading plan may stifle market-traders

* CFTC wants quote request to reach at least 5 groups

* Signal would move prices, scare off liquidity-banks

* SEC’s model would allow for more discretion-banks

* More time needed to phase in new SEFs rules-NFA
(Updates with additional comments and background on
international regulations)

By Roberta Rampton

WASHINGTON, March 8 (Reuters) – The U.S. futures regulator
risks stifling liquidity in swaps market by requiring traders
to ask for quotes from at least five market participants, major
banks said in a regulatory comment period that ends on

To shine light on the opaque over-the-counter derivatives
market, the Commodity Futures Trading Commission will require
many swaps to trade on new “swap execution facilities,” or
SEFs, one of the most contentious parts of the Dodd-Frank
financial reform law.

The CFTC has specified that “block trades” won’t have to
move through SEFs. But the CFTC sets the bar too high for block
trades, and few will qualify for the exemption, said Dexter
Senft, a managing director at Morgan Stanley (MS.N).

That means many large swaps would have to be executed on a
SEF, broadcast to at least five other traders, and reported
immediately after trading, forcing bid-ask spreads wider to
account for the market risk — or prompting some customers to
avoid the trades altogether, Senft said.

“To the extent that a customer’s intention to execute a
large trade is ‘signaled’ to more than one market participant,
the price of the relevant instrument will likely move adversely
to the customer,” Senft said.

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