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Appendix 2 – Analysis of New Responsibilities and Authorities on 2013 Budgetary Requirements (continued)

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Analysis of Swap Execution Facilities

In FY 2013, the Commission will enforce rules and requirements that standardized OTC derivatives contracts be executed on regulated trading platforms. The new requirements are intended to facilitate a transparent, liquid, and competitive marketplace with trades occurring on regulated exchanges or swap execution facilities. In implementing the new requirements, the CFTC will be required to:

There are many new activities related to the oversight of swaps trading activity.  These include implementing procedures for the review and oversight of an entirely new regulated market category, SEFs.

Staff in the Market and Product Review and Market Compliance units must establish and implement procedures for the review of new SEF applications and for the annual examination of the operations of SEFs.  Staff in the Surveillance units must establish and carry out surveillance for new SEFs.

Based on industry comments, there could be at least 20-30 entities will apply to become SEFs.  This estimate is based on the number of exempt commercial markets (ECMs), exempt boards of trade (EBOTs), interdealer brokers, information service providers and swap dealers who have formally or informally expressed an interest in registering as SEFs.  Furthermore, some DCMs that in the past only listed futures will start listing swaps.

Each SEF must be thoroughly evaluated by staff before making determinations whether they should be approved.  Those that are approved also must be regularly examined for ongoing compliance.

The CFTC expects that a number of Exempt Commercial Markets and Exempt Boards of Trade would apply to Be SEFs. Transactions by eligible contract participants in selected commodities may be conducted on an EBOT as set forth under the CEA and the Commission’s regulations. EBOTs are subject only to the CEA’s anti-fraud and anti-manipulation provisions. An EBOT is prohibited from claiming that the facility is registered with, or recognized, designated, licensed, or approved by the Commission. Also, if it is performing a price discovery function, the EBOT must provide certain pricing information to the public. To date, 20 EBOTs filed notices with the Commission.  In FY 2011, 21 EBOTs were in business for at least part of the year; one however, withdrew its EBOT notification during the fiscal year.

Potential SEF Registrants from Exempt Commercial Markets (ECMs)
  1. CME ECM Inc.
  2. Chicago Climate Exchange, Inc.
  4. EOX Holdings, LLC
  5. FCRM Electronic Markets LLC
  6. GFI Group Inc., EnergyMatch
  7. Houston Mercantile Exchange, LLC
  8. HoustonStreet Exchange, Inc.
  9. ICAP Commodity and Commodity Derivatives Trading System
  10. ICAP Electronic Trading Community
  11. ICAP Shipping Trading System
  12. ICAP Truequote Multilateral Trading Facility
  13. IntercontinentalExchange, Inc.
  14. Liquidity Partners, LP
  15. Natural Gas Exchange, Inc.
  16. Nodal Exchange, LLC
  17. OILX
  18. Parity Energy, Inc.
  19. TradeSpark, LP
  21. TraditionCoal.Com

Potential SEF Registrants from Exempt Boards of Trade (EBOTs)
  1. CME Alternative Marketplace, Inc.
  2. Concredex
  3. Currenex
  4. Derivatives Bridge, LLC
  5. ERIS Exchange, LLC
  7. FX Alliance
  8. FX Connect
  9. GFI Group, Inc. – ForexMatch
  10. Intrade Board of Trade
  11. IRESE, Inc.
  12. Longitude, LLC
  13. M2 Trading Partners, LLC
  14. MarketAxess
  15. ODEX
  16. SurfaceExchange
  17. Swapstream Operating Services, Ltd.
  18. Tera EBOT
  19. The American Civics Exchange
  20. trueBOT

Inventory and Status of New Rules Impacting Projected Registrants
Rules Under Development Status
Agricultural Swaps (ANPR) Still Under Commission Consideration
Governance & Possible Limits - Section 726 Still Under Commission Consideration
Position reports for physical commodity swaps Still under Commission consideration
Anti-Manipulation (ENF)
Disruptive Trading Practices (ANPR) (ENF)
Rule Certification Completed
Swap Data Recordkeeping and Reporting Completed
Real Time Reporting Still under Commission consideration
SEF Registration and Rules Still under Commission consideration
Position Limits for Exempt and Agricultural Commodities Still under Commission consideration
Disruptive Trading Practices Interp. Order (ENF)
Conforming Rules – Revising Part 1 Comment period still open
Product Definitions (Joint with SEC) (OGC)
Testing and Supervision (DRT and algorithms) (ENF)
Governance & Possible Limits – Core Principles Implementation – Final Rule Still under Commission consideration

Technology for SEFs

IT Category

IT Requirement1
New Mission Authorities Swaps Position & Transaction Standards/Data Loading
Swaps Position & Transaction Surveillance
Position Limit Monitoring Online Participant Portal
Electronic Forms (102, 40, etc.)
Dodd-Frank Participant Registration (SEF, SDR, etc.)
Enterprise Case Management (Market Surveillance & Enforcement)
Order Message Standards and Loading
Current Mission Authorities Large Trader Reporting, Trade Practice Compliance, Filings & Actions
New Alerts and Alerts Using Intraday Data
Data Standardization, Data Loading, Data Analysis - e.g., Order Data, Large Trader, Time & Sales
Automate Secure File Transfer Sign-Up
Reporting Usability Enhancements
Swaps Transparency Reporting

1 The listing of technology requirements is not limited to registrants but support other activities Commission-wide. (back to text)


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