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By a unanimous vote, the CFTC adopted a rule prohibiting "post-trade name give-up" at swap execution facilities ("SEFs").
The final rule, which is substantially similar to the proposed rule, would add sub-paragraph (d) to Regulation 37.9 to prohibit "post-trade name give-up" practices for swaps that are anonymously executed on a SEF that are intended to be cleared ("ITBC"). Specifically, new Regulation 37.9(d) will prohibit a SEF from "directly or indirectly disclosing the identity of a counterparty to any such swap, and requires a SEF to establish and enforce rules that prohibit any person from doing so" (p. 4). The CFTC noted that the final rule includes an exception to the prohibition for package transactions with a component transaction that is something other than an ITBC swap.
The new rule will be implemented on a phased basis (p. 29): (i) for swaps subject to the trade execution requirement under Section 2(h)(8) of the Commodity Exchange Act, the compliance date is November 1, 2020; and (ii) for all other swaps, the compliance date is July 5, 2021.
Commissioner Statements
As they did with respect to the proposal, CFTC Chair Heath P. Tarbert and Commissioners Rostin Behnam and Dan M. Berkovitz issued a joint statement in support of the rulemaking. Commissioner Brian Quintenz expressed concern about the government banning "an established trading practice that has evolved from natural market forces ...." and suggested that (i) the rule could have an adverse effect on dealer ability to hedge on inter-dealer platforms, and (ii) new participants to the "wholesale" market might not provide any meaningful liquidity to the client market.
Commentary
It would be good for the CFTC to take Mr. Quintenz's comments to heart, and re-examine this rulemaking again a year or two after it becomes effective. The debate over post-trade name give-up has developed over nearly a decade of fairly passionate arguments, generally between "dealer" and "non-dealer" communities, and it's not obvious to this humble country lawyer which group is more likely to be proven correct.
Primary Sources
- CFTC Final Rule: Post-Trade name Give-Up on Swap Execution Facilities
- Federal Register: Post-Trade Name Give-up on Swap Execution Facilities (84 FR 72262)
- CFTC Joint Statement: Chairman Heath P. Tarbert, Commissioner Rostin Behnam, and Commissioner Dan M. Berkovitz in Support of Final Rule Restricting Post-Trade Name Give-Up
- CFTC Statement, Brian Quintenz: Supporting Statement of Commissioner Brian Quintenz Regarding the Prohibition of Post-Trade Name Give-Up on Swap Execution Facilities
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