Javelin Seeks CFTC Permission to List Interest-Rate Swaps on Its Platform

By Katy Burne

 

Javelin Capital Markets LLC, a startup trading platform for swaps, asked U.S. regulators for permission to make interest-rate swaps available on its system, bringing more transparent trading for complex derivatives closer to reality. 

A spokesman for the Commodity Futures Trading Commission said Javelin was the first swaps trading platform to make such a request. 

The electronic submission, which was reviewed by The Wall Street Journal, sought permission to list interest-rate swaps in three currencies--U.S. dollars, euros and sterling---in swaps lasting from one day to 51 years. 

Swaps, which according to the Bank for International Settlements total $633 trillion, are derivatives that corporations and financial firms use to protect against changes in everything from fuel costs to interest rates. 

Javelin's filing is notable because, while a rash of new swaps trading venues had to be provisionally approved by Oct. 2 under the 2010 Dodd-Frank financial-overhaul law, swaps weren't required to trade over them by that deadline. Javelin's request kicks off a phase-in period that, if approved by the CFTC, will mandate that all swaps outlined in the filing be traded on the new, open marketplaces within the first quarter of next year. Currently, swaps are negotiated privately, often over the telephone. 

"Javelin's filing sets the countdown for mandatory swaps trading on transparent execution platforms for the whole market," James Cawley, chief executive of Javelin, said in an interview. 

The rules stemming from Dodd-Frank were intended to make the swaps market, which was lambasted in the financial crisis, safer and more transparent. 

Some investors have been trading swaps on the new so-called "swap execution facilities" voluntarily to test them out, but many are continuing to trade swaps over the telephone until they are required by law to switch over to the open, electronic systems. 

The CFTC now has 90 days to approve or reject Javelin's request, a period that includes a 30-day public comment period on the filing. 

Javelin, whose backers weren't disclosed, was founded in 2009 and registered in September this year.