Swap execution facility (SEF) Javelin has reduced the scope of instruments it wants to see mandated for trading in a pending submission to the chief US derivative regulator, bowing to industry pressure.
In a statement, Javelin SEF said it had streamlined its ‘made available to trade’, or MAT, submission to the Commodity Futures Trading Commission (CFTC) to include only benchmark dollar and euro swaps in addition to certain international monetary market (IMM) swaps.
The MAT rule will require swaps for which SEF execution is possible, to be traded on a SEF.
The SEF said the decision was made in response to feedback from a broad group of institutional buy-side firms regarding the scope of the submission. Other SEFs and industry participants have publicly raised similar concerns in recent weeks.
Now, Javelin’s MAT application will include US dollar spot starting benchmark rates and US dollar spot starting benchmark swap spreads with tenors between two and 30 years; euro spot starting benchmark swaps between two and 30 years and certain US dollar IMM swaps.
Previously, Javelin, which will focus on interest rate swaps, had proposed the widest parameters for MAT products, stating those with tenors between one month and up to 50 years could be included. It was the first SEF to submit a MAT application and presently three other SEFs have submitted proposals: trueEX, also focused on rates, and credit-focused MarketAxess and Tradeweb.
“What has become clear is that considerable operational hurdles remain as the market prepares for the swap trading mandate,” said James Cawley, CEO of Javelin Capital Markets, in statement. “Starting with benchmark swaps is the only thing that makes sense right now. We can discuss day two only after we have safely got past day one.”
The MAT rule was developed by the CFTC to hasten the take-up of SEF trading, but the mechanics of its application have caused industry concern over SEFs offering trading in swaps with low liquidity.
Final ruling on MAT applications is expected in February, according to comments made by outgoing CFTC chair Gary Gensler in November, ahead of a thirty day period before implementation begins, likely in March.