Post-Trade Name Give-Up on Swap Execution Facilities
Summary
SIFMA provided comments to the Commodity Futures Trading Commission relating to post-trade name give-up (“PTNGU”) on swap execution facilities (“SEFs”).
Although the views among our swap dealer members on PTNGU are not uniform, a majority of those who have expressed a view believe that PTNGU is important to the market and that its prohibition may impair participants’ abilities to manage risk and provide liquidity.
We believe that the matters for consideration present significant issues for the market as a whole and any decision should be made only after review of the important issues at play for all market participants.
Excerpt
Mr. Christopher Kirkpatrick
Secretary Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581
Re: Post-Trade Name Give-Up on Swap Execution Facilities; Request for Comment – RIN 3038-AE79, 83 Fed. Reg. 61751 (Nov. 30, 2018)
Dear Mr. Kirkpatrick:
The Securities Industry and Financial Markets Association (“SIFMA”)1 welcomes the opportunity to provide the Commodity Futures Trading Commission (the “Commission”) with comments on the above request for comment (the “Comment Request”) relating to post-trade name give-up (“PTNGU”) on swap execution facilities (“SEFs”). Although the views among our swap dealer members on PTNGU are not uniform, a majority of those who have expressed a view believe that PTNGU is important to the market and that its prohibition may impair participants’ abilities to manage risk and provide liquidity. These members additionally do not believe there is sufficient evidence to support intervention by the Commission to prohibit PTNGU. The views of those members regarding this important topic are set forth below.2 We believe that the matters for consideration present significant issues for the market as a whole and any decision should be made only after review of the important issues at play for all market participants.
INTRODUCTION
PTNGU developed organically in the swaps market as an effective tool to promote liquidity provision. Meanwhile, SEFs can, and multiple SEFs do, offer anonymous trade matching without PTNGU. Market participants are thus free to choose for themselves as to whether it is in their independent interests to transact anonymously with or without PTNGU.
Prohibiting PTNGU would narrow the options available to market participants trading in swaps subject to the trade execution requirement, forcing them to choose between fully anonymous order books and fully disclosed request-for-quote methods of execution. The Dodd-Frank Act does not compel the Commission to engage in this picking and choosing among execution models, nor does it direct the Commission to drive the swaps market toward all-to-all anonymous trading. The Commission accordingly should not prohibit PTNGU nor any other market practice without considering its impact on all market participants—especially considering that available evidence shows that the current market structure has, overall, benefitted market participants through tighter pricing and increasingly deep liquidity.3