Agency Adopts New Rules for Swaps Market

WASHINGTON (CN) - The Commodity Future Trading Commission issued new rules for "swap execution facilities" under the Dodd-Frank Act, which the agency says are meant to bring more transparency into the swaps market.

In response to the 2008 financial crisis, the Dodd-Frank Act sought to tackle transparency problems within the swaps market, which previously were not regulated as closely as other futures and securities markets.

Among other things, Title VII of the act requires the government to set up a system where swaps traders must register their facilities and comply with federal regulations.

This week, the CFTC published a regulation on the operations of "swap execution facilities" (SEFs), a new kind of regulated entity.

The regulation adopts many of the proposed regulations that set out guidelines for swap execution facilities, such as which entities must register as SEFs or as designated contract markets.

The CFTC wrote that a person must register if they are "operating a facility that offers a trading system or platform in which more than one market participant has the ability to execute or trade swaps with more than one other market participant on the system or platform."

The CFTC created a temporary registration process that would allow an SEF applicant to operate as a facility while its application is being reviewed.

Among other things, the CFTC also set out a number of factors for facilities to consider when determining if a swap had been made available to trade to the facilities.

Those factors include considering the frequency and size of transactions, the volume of trading, and the number of market participants.

The regulation will go into effect Aug. 5.

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