CFTC Announces Three-Month Delay on Mandatory SEF Trading for Packaged Trades

The CFTC has pushed-back the deadline for mandatory trading of packaged swaps on SEFs by three months to May 15, seeking to promote an “orderly transition to mandatory trading.”  Packaged trades are multi-legged transactions involving the simultaneous execution of a number of trades.  The move was confirmed by acting CFTC chairman Mark Wetjen at a meeting of the commission’s technology advisory committee on February 10.

As Risk reported, the complex transactions would have posed clearing and pre-trade credit-check challenges for market participants:

“The commission published a no-action letter hours later, noting that clearing members may not be able to conduct credit checks for packaged transactions and that central counterparties may also not be able to ‘simultaneously screen and accept all legs of a packaged trade for clearing.’”

Speaking to Bloomberg, Mr. Wetjen said the delay, which should affect between a quarter and a half of the interest rate swaps market, gives the agency more time to figure out what to do with packaged trades.

In a statement, Commissioner Scott D. O’Malia voiced support for the delay, saying: “This relief is proof that it is never too late to do the right thing and take a first step to fix our broken rules.”

To read the full CFTC announcement, click here.