CFTC streamlines registration for derivative exchanges so they can open in 2-3 months

By Neil Roland


Washington – More than 15 firms that want to operate as new derivative trading platforms can register under an expedited process to get them up and running by Labor Day weekend and avoid the kind of backlog face by new electronic data warehouses, said Gary Gensler, chairman of the US Commodity Futures Trading Commission. 

The CFTC approved so-called swap execution facility rules Thursday to increase transparency and competition in the $300 trillion US derivative market, triggering a temporary licensing process that will take between two and three months. 

“We’re resource-constrained.” Gensler said at a commission meeting. “This is an appropriate compromise.” 

The new rules are to be published in the Federal Register in 10 to 21 days, and will go into effect 60 days after that. If trading platforms violate CFTC rules, they will be subject to enforcement proceedings. 

Firms including Javelin, TeraExchange and ICAP that win temporary approval and start operating will then have about two years to file for more permanent registration, Gensler said. Between 15 and 20 firms plan to register. 

Some of these firms have complained that they were losing business to futures exchanges while the CFTC deliberated for more than two years. 

Javelin is excited to register and launch,” said James Cawley, president of the New York- and London-based firm. “With the rules today – it’s game on!” 

TeraExchange president Leonard Nuara said the CFTC process “suits us.” 

“We will move quickly to apply,” he said. 

The CFTC reviews seek to avoid the backlog created by the agency’s more substantive examinations of firms seeking to become data warehouses known as swap data repositories. 

Although the SDR rules were approved in September 2011, the CFTS has given permits to the only three repositories, with many more awaiting approval. 

Applicants who have not yet won approval have complained that they are losing business to CME Group, InterContinental Exchange and Depository Trust and Clearing Corporation. 

Commissioner Scott O’Malia, a Republican who has been a critic of the SDR registration process, said the streamlined trading-platform reviews “will not disadvantage those that await later in the queue.” 

Linked Case File (s)

Dodd-Frank regulation – SEF Registration Requirements and Core Principle Rulemaking, Interpretation & Guidance