Javelin Readies Clearing Customers for Swaps Compliance with Dodd Frank Pre Trade Risk Rules

NEW YORK - Javelin Capital Markets, a swaps trading platform, today announced its ‘Proactive Plus One’ initiative for interest rate swap and credit default swap clearing firms seeking to comply with pre trade risk requirements of CFTC Rule 1.73 and its October 1 2012 deadline.

With Javelin’s ‘Proactive Plus One’ program, clearing members are able to directly control and administer customer specific risk limits such as position size, ‘fat finger’ limits, order size and maximum order quantity.  In addition, Javelin will provide participating firms real time ‘kill switches’ on customer trading to better protect participating clearing firms and to promote execution integrity. 

The CFTC passed Rule 1.73 into law earlier this year asserting that effective pre trade risk management and real time post trade clearing acceptance by clearing firms were crucial for the efficient trading of swaps and enhanced market integrity. 

Under Rule 1.73, clearing firms must establish, monitor and enforce certain pre trade market risk based limits on their customers.  All clearing firms must comply by October 1st 2012.

Sanjay Kannambadi, CEO and Global Head of BNY Mellon Clearing said, “Having access to controls at the point of execution is an integral part of the risk management process.   Futures Commission Merchants (FCMs) working with execution venues to set limits allow customers greater trade certainty without compromising risk management.   Our goal is to offer our clients consistent, low latency access to clearing.”

Javelin’s CEO, James Cawley said, “Javelin always seeks to lead from the front when issues of better swap execution and real time trade settlement are at stake.  By offering clearing firms better pre trade visibility and control over their customers, the market overall becomes safer. 

As the market evolves, Javelin plans on offering participating clearing firms real time customer feeds that show all open orders in the system.  “We need to ensure FCMs have forward visibility and can prevent their customers from entering a bad trade” says Cawley.  “This better ensures overall market integrity.”

Recently, Javelin also demonstrated its commitment to another CFTC requirement, Rule 1.74.  Such a rule requires acceptance into clearing of interest rate swaps trades in near real time.  Such a standard, the CFTC asserts shall be in milliseconds or seconds.   In December 2011, Javelin working with several dealers, the buyside and the CME, executed multiple interest rate swap trades totaling $4.1 Billion that all cleared in under two seconds. 

Such trades helped define the CFTC real time settlement standard of what is ‘technologically practical’ for the swaps industry.

About the Firm:

Javelin Capital Markets
Formed in 2009, Javelin Capital Markets, LLC (www.thejavelin.com) is a derivatives execution platform for Interest Rate Swaps and Credit Default Swaps. Javelin offers both anonymous electronic and voice-hybrid methodologies for trade execution. Javelin works with several execution and agency swap partners to ensure optimal liquidity for its diverse customer base. Javelin will register as a SEF, or Swap Execution Facility, under the Dodd Frank Act as soon as the SEF rules are finalized.

CONTACT: Javelin Capital. +1-212-779-2300