Bloomberg has today received provisional approval for its swap execution facility (SEF) from US regulator the Commodity Futures Trading Commission (CFTC), weeks after its lawsuit against the regulator was thrown out.
Bloomberg is the first SEF to be granted temporary registration approval from the CFTC to operate a multi-asset class SEF, which will be able to launch trading activity when Dodd-Frank rules governing SEFs come into force later this year.
The new trading venue will support request for quote and order book market models for interest rate swaps, credit default swaps, FX and commodity derivatives trading.
So far, five firms have sought CFTC approval to launch SEFs, with Bloomberg the first to submit their application at the start of June.
In June, Bloomberg began legal action against the CFTC based on apparent anti-competitive rules for swaps compared to swap futures instruments, which are subject to less-stringent margin requirements. The judge overseeing the lawsuit ruled that there was no basis for Bloomberg’s legal action.
“As one of the largest independent swaps trading platforms, operating a SEF for our clients is a logical progression for Bloomberg,” said Ben Macdonald, Bloomberg's global head of product and president of Bloomberg SEF LLC.
“While clients can continue to execute on our traditional derivative platforms until the CFTC's mandatory compliance deadline, receiving approval ensures our readiness to provide them with everything they need to begin SEF trading on October second,” he said.
The creation of SEFs was mandated in the Dodd-Frank Act, which is part of a global initiative launched by G-20 countries to reduce the opacity in the OTC derivatives market, which was a key contributor to the 2008 financial crisis.