Commissioner Scott O'Malia said the US Commodity Futures Trading Commission's final rules governing swap execution facilities (SEFs) would be released by mid-February.
Speaking to an industry conference in New York yesterday, O'Malia said the commission's intention was to create a "level playing field between swaps and futures to allow market participants to make decisions based on their trading interests".
The commissioner added that initial feedback from the industry to draft rules had called on the regulator to increase flexibility. In particular, the new rules would permit voice trading. "At a minimum, SEF rules must allow phone and electronic platforms to work together," he said. O'Malia also pointed out that a wide range of models proposed by would-be SEFs made one-size-fits-all registration "all but impossible". "We must develop a consistent registration process with clear written guidance before the process begins," he told a conference on fixed income trading organised by research analyst firm TABB Group.
The CFTC has held a number of roundtables on the various attributes a SEF should have. Although initial proposals would require SEF members using request-for-quote functionality to source quotes from at least five dealers, this is likely to be reduced as part of the final rules.
O'Malia also said the CTFC is preparing a consultation document on high-frequency trading (HFT) that will look at where existing market controls may fall short. The document will seek to define HFT and identify gaps in existing controls at the exchange and broker level, with a view to deciding whether additional federal action is required. It will also attempt to quantify the risks HFT poses to overall market stability and other market participants.
O'Malia confirmed to theTRADEnews.com after his speech that the advanced concept release was currently being redrafted for circulation in March and discussion at the next meeting of the CFTC's technology advisory committee on 30 April. He also suggested that the document would seek to distinguish between high frequency and other forms of automated trading.
"HFT provides enormous liquidity to organised markets. But we need to understand it better, by defining, studying and measuring," he said.