The Commodity Futures Trading Commission's proposed rule on swap execution facilities is inconsistent with proposals by the Securities and Exchange Commission and international regulators, said Jill Sommers, a CFTC commissioner.
The Dodd-Frank financial reform law requires more over-the-counter swaps to trade on exchanges or new swap execution facilities, or SEFs, to increase transparency in the formerly opaque market. The CFTC has proposed that new SEFs send requests-for-quotes on trades to at least five swap dealers, while the SEC would allow a request to go to a single dealer, depending on the customer's wishes.
The European Commission is still in the early stages of considering a proposal that would allow for single-dealer platforms, a "fundamentally different" model from the CFTC's proposal. "I support the more flexible approach being considered elsewhere," said Sommers, a Republican commissioner who voted against the proposal when it was first unveiled. The European Commission has proposed giving national regulators in the European Union the option of setting position limits, but may only require the limits for farm products. A plan for ownership restrictions for clearing houses and SEFs also go beyond European proposals, and "may do more harm than good," Sommers said.
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