Public Statements & Remarks

Statement of Commissioner Caroline D. Pham Regarding the TW SEF MAT Determinations of USD SOFR and GBP SONIA Overnight Index Swaps

July 11, 2023

Last Friday’s announcement marks an important step in the transition away from LIBOR as the Commission deems approval of made-available-to-trade (MAT) determinations for certain U.S. Dollar (USD) Secured Overnight Financing Rate (SOFR) overnight index swaps and Pound Sterling (GBP) Sterling Overnight Index Average (SONIA) overnight index swaps.[1]  These SOFR and SONIA overnight index swaps will become subject to the mandatory trade execution requirement under the Commodity Exchange Act on August 5, and market participants must be prepared to comply.

SEFs are one of the success stories of the Dodd-Frank Act.  I support this MAT determination because the staff have determined all criteria have been met and it marks another step in the evolving market structure for swaps.  I appreciate that this MAT determination is consistent with the UK FCA Derivatives Trade Obligation (DTO) and I look forward to future updates to the ESMA DTO.  The CFTC’s MAT determinations promote regulatory cohesion that will mitigate potential market fragmentation and promote deep and liquid global rates markets.  I commend DMO staff for their hard work on this submission, especially Roger Smith, Chris Goodman, and Nora Flood.

The Dodd-Frank Act brought critical transparency to U.S. derivatives markets by requiring swaps subject to mandatory clearing to be traded on designated contract markets (DCMs) and swap execution facilities (SEFs)[2] unless no such entity “makes the swap available to trade.”[3]  On June 4, 2013, the Commission promulgated rules to establish the components of such “made available to trade” or “MAT” determinations.[4]  As a result, SEFs must establish that several key factors are considered before a swap is made available to trade.[5]

The first MAT determinations involved several critical interest rate swaps.  They were submitted in October 2013 and went live in February 2014.[6]  These determinations ushered in a dramatic transformation of U.S. derivatives markets over the next 10 years, including increased electronification and enhancements to trade execution on SEFs while preserving flexibility.  As a result, our markets now benefit from more efficient and effective risk management and price discovery, accompanied by enhanced transparency with every new MAT filing.  I am pleased to have been a part of this reshaping of global market structure, both at the Commission for the go-live of MAT swaps in 2014, and then on a trading floor implementing CFTC requirements for SEF trading and compliance.

Global financial markets are successfully moving past an era of benchmark index manipulation, especially regarding the countless financial products that referenced LIBOR.  In June 2017, the Federal Reserve Bank of New York’s Alternative Reference Rates Committee (ARRC) first recommended that SOFR[7] would replace LIBOR as a critical benchmark for our trusted financial markets.[8]  ARRC noted that this reference rate would “strengthen the financial system” and found it to be consistent with the IOSCO Principles for Financial Benchmarks[9] released in July 2013.  In March 2021, the UK FCA announced full cessation of LIBOR publication by June 30, 2023.[10]

Last August, the Commission amended the clearing requirements for interest rate swaps to reflect the new benchmarks.[11]  As a result of the global transition away from IBORs, SEFs are ready to make available swaps that reflect the new and improved benchmark reference rates.  I am pleased to continue to support the CFTC’s initiatives that promote growth, progress, and access to markets.

[2] This includes any SEFs granted exemption pursuant to CEA section 5h(g).

[3] CEA section 2(h)(8) (the “trade execution requirement”).

[4] Process for a Designated Contract Market or Swap Execution Facility To Make a Swap Available to Trade, 78 F.R. 33606 (June 4, 2013).

[5] Among other things, derivatives exchanges must consider: (1) whether there are ready and willing buyers and sellers; (2) the frequency or size of transactions; (3) the trading volume; (4) the number and types of market participants; (5) the bid/ask spread; or (6) the usual number of resting firm or indicative bids and offers.  Id. at 33613.

[7] Secured Overnight Funding Rate (SOFR).

[8] Press Release, ARRC, The ARRC Selects a Broad Repo Rate as its Preferred Alternative Reference Rate (June 22, 2017),

[11] Clearing Requirement Determination Under Section 2(h) of the Commodity Exchange Act for Interest Rate Swaps To Account for the Transition From LIBOR and Other IBORs to Alternative Reference Rates, 87 F.R. 52192 (Aug. 24, 2022).