The top US derivatives regulator said on Monday swap execution facilities (SEFs) must provide open access to asset managers alongside swap dealers and other buy-side participants in line with original Dodd-Frank aims.
Speaking at the SEFCON conference in New York, Gary Gensler, chair of the Commodity Futures Trading Commission (CFTC), reiterated the agency’s guidance issued on Thursday calling for SEFs to provide access to all ‘eligible contract participants’, allaying fears dealer-dominated platforms would limit buy-side use.
“SEFs are required to provide dealers and non-dealers alike the ability to view, place or respond to all indicative or firm bids and offers, as well as to place, receive, and respond to [requests for quotes],” he said. “All market participants should feel confident that their bids or offers are being communicated to the rest of the market.”
He said any discriminatory treatment for swaps intended to be cleared such as mechanisms that prevent participants from viewing bids or offers on a SEF; pre-execution agreements; and requiring a participant to be a swap dealer or clearing member to respond to an RFQ were all inconsistent with the Dodd-Frank Act.
“This does mean a paradigm shift from the business models of the past,” he said. “Bringing access to the entire marketplace means platforms will no longer be just dealer to dealer or dealer to customer.
One SEF executive told theTRADEnews.com last week’s guidance, upon which Gensler’s open access comments were based, had given SEF operators and the dealer community a shock. Speaking anonymously, he said this would pose the greatest challenge to the inter-dealer broker community, who will have to open their platforms up to a wider range of participants.
Gensler announced this month he would step down as the CFTC chair. Tim Massad, an assistant secretary at the US Treasury department, will replace him.