Vol. 78 Tuesday, 

No. 107 June 4, 2013 

Part III 

Commodity Futures Trading Commission 

17 CFR Parts 37 and 38 

Process for a Designated Contract Market or Swap Execution Facility To 

Make a Swap Available to Trade, Swap Transaction Compliance and 

Implementation Schedule, and Trade Execution Requirement Under the 

Commodity Exchange Act; Final Rule 


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33606 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

1For example, section 2(h)(7) of the CEA, as 

amended by section 723 of the Dodd-Frank Act, 

provides an exception to the CEA section 2(h)(1) 

clearing requirement (‘‘the end-user exception’’) if 

one of the counterparties to a swap (i) is not a 

financial entity, (ii) is using swaps to hedge or 

mitigate commercial risk, and (iii) notifies the 

Commission how it generally meets its financial 

obligations associated with entering into noncleared swaps. 7 U.S.C 2(h)(7). Under the authority 

given by section 2(h)(7)(C)(ii) of the CEA, the 

Commission has also adopted regulations to exempt 

certain small banks, saving associations, farm credit 

system institutions, and credit unions from the 

definition of ‘‘financial entity,’’ thus potentially 

allowing the transactions of those entities to qualify 

for an exemption from the clearing requirement. 17 

CFR 50.5(d). The Commission may determine that 

swap transactions exempted from the clearing 

requirement pursuant to other statutory authority 

would also not be subject to the section 2(h)(8) 

trade execution requirement. For example, on April 

11, 2013, the Commission published final rules 

issued under section 4(c) of the CEA to exempt 

swaps between certain affiliated entities (‘‘interaffiliates’’) within a corporate group from the 

clearing requirement. The Commission determines 

that such swaps would not be subject to the trade 

execution requirement. 

2Process for a Designated Contract Market or 

Swap Execution Facility to Make a Swap Available 

to Trade, 76 FR 77728 (Dec. 14, 2011). Sections 

5(d)(1) and 5h(f)(1) of the CEA require DCMs and 

SEFs, respectively, to comply with any requirement 

that the Commission may impose by rule or 

regulation pursuant to section 8a(5) of the CEA, 7 

U.S.C. 12a(5), which authorizes the Commission to 

promulgate such regulations as, in the judgment of 

the Commission, that are reasonably necessary to 

effectuate any of the provisions or to accomplish 

any of the purposes of the CEA. In addition, section 

721(b) of the Dodd-Frank Act provides the 

Commission with authority to adopt rules to define 

‘‘[any] term included in an amendment to the 

Commodity Exchange Act . . . made by [the DoddFrank Act].’’ 15 U.S.C. 8321, as enacted by section 

721 of the Dodd-Frank Act. 

3Meeting summaries are available through the 

Commission’s Web site at http://comments.cftc.gov/ 

PublicComments/CommentList.aspx?id=1125. 

4Swap Transaction Compliance and 

Implementation Schedule: Clearing and Trade 

Execution Requirements under Section 2(h) of the 

CEA, 76 FR 58186 (Sep. 20, 2011). 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 37 and 38 

RIN 3038–AD18 

Process for a Designated Contract 

Market or Swap Execution Facility To 

Make a Swap Available to Trade, Swap 

Transaction Compliance and 

Implementation Schedule, and Trade 

Execution Requirement Under the 

Commodity Exchange Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

adopting regulations that establish a 

process for a designated contract market 

(‘‘DCM’’) or swap execution facility 

(‘‘SEF’’) to make a swap subject to the 

trade execution requirement pursuant to 

the Commodity Exchange Act (‘‘CEA’’). 

The Commission is also adopting 

regulations to establish a schedule to 

phase in compliance with the trade 

execution requirement. The schedule 

will provide additional time for 

compliance with this requirement. 

DATES: The rules will become effective 

August 5, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Nhan Nguyen, Special Counsel, 

Division of Market Oversight (‘‘DMO’’, 

202–418–5932, nnguyen@cftc.gov; Roger 

Smith, Attorney Advisor, DMO, 202– 

418–5344, rsmith@cftc.gov; or David 

Van Wagner, Chief Counsel, DMO, 202– 

418–5119, dvanwagner@cftc.gov; 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Sections 37.10 and 38.12 of the 

Commission’s Regulations—Final Rules 

A. Sections 37.10(a) and 38.12(a)— 

Procedure To Make a Swap Available to 

Trade 

1. Sections 37.10(a)(1) and 38.12(a)(1)— 

Required Submission 

2. Sections 37.10(a)(2) and 38.12(a)(2)— 

Listing Requirement 

3. Submission of a Group, Category, Type 

or Class of Swaps 

4. Consideration of Swaps on Another SEF 

or DCM, or Bilateral Transactions 

B. Sections 37.10(b) and 38.12(b)—Factors 

to Consider To Make a Swap Available 

to Trade 

C. Sections 37.10(c) and 38.12(c)— 

Applicability 

D. Sections 37.10(d) and 38.12(d)— 

Removal 

E. Annual Review 

F. Notice to the Public of Available To 

Trade Determinations 

III. Sections 37.12 and 38.11 of the 

Commission’s Regulations—Trade 

Execution Compliance Schedule 

IV. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

1. Proposed Information Provided by 

Reporting Entities/Persons 

2. Summary of Comments and Commission 

Response 

C. Cost-Benefit Considerations 

1. Available-to-Trade Rule 

a. Part 40 Process and Determination 

Factors 

b. Applicability 

c. Consideration of Section 15(a) Factors— 

Available-to-Trade Rule 

2. Trade Execution Compliance Schedule 

V. List of Commenters 

Text of the Regulations, Guidance and 

Acceptable Practices 

I. Background 

Section 723(a)(3) of the Dodd-Frank 

Act added section 2(h)(8) of the 

Commodity Exchange Act (‘‘CEA’’) to 

require that swap transactions subject to 

the clearing requirement must be traded 

on either a designated contract market 

(‘‘DCM’’) or swap execution facility 

(‘‘SEF’’), unless no DCM or SEF ‘‘makes 

the swap available to trade’’ or the 

transaction is not subject to the clearing 

requirement under section 2(h)(7) (the 

‘‘trade execution requirement’’).1

On December 14, 2011, the 

Commodity Futures Trading 

Commission (‘‘Commission’’) proposed 

regulations to establish a process for a 

DCM or SEF to notify the Commission 

that a swap is ‘‘available to trade’’ for 

purposes of the trade execution 

requirement (‘‘Further Notice of 

Proposed Rulemaking’’ or ‘‘FNPRM’’).2

The proposed regulations would be 

included in part 37 and part 38 of the 

Commission’s regulations to implement 

the available-to-trade provision in 

section 2(h)(8) of the CEA. The 

comment period for the FNPRM ended 

on February 13, 2012. The Commission 

received 32 written comments from 

members of the public and hosted a 

public roundtable on this topic. 

Commission staff also participated in 

several meetings with market 

participants.3 As a result of the written 

comments received and dialogue with 

market participants, the Commission in 

this final rule has revised and/or 

eliminated certain provisions that were 

proposed in the FNPRM. 

On September 20, 2011, the 

Commission also proposed regulations 

to establish a schedule to implement the 

trade execution requirement.4 The 

proposed regulations would be included 

in part 37 and part 38 of the 

Commission’s regulations. The 

comment period for the proposed 

regulations ended on November 4, 2011. 

The Commission received 33 written 

comments from members of the public, 

and after consideration of those 

comments, is adopting the final 

implementation schedule for the trade 

execution requirement as proposed, but 

with certain clarifications. 

The final regulations adopted herein 

will become effective August 5, 2013. 

II. Sections 37.10 and 38.12 of the 

Commission’s Regulations—Final Rules 

As proposed in the FNPRM, §§ 37.10 

and 38.12 established a process for a 

SEF or a DCM, respectively, to make a 

swap available to trade under section 

2(h)(8) of the CEA. 

• Proposed §§ 37.10(a) and 38.12(a) 

set forth the filing procedure that SEFs 


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Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 33607 

5See infra note 90 and accompanying text. 

6See Sections 40.5 and 40.6 and Provisions 

Common to Registered Entities, 76 FR 44776 (Jul. 

27, 2011). The Commission views a DCM or SEF’s 

determination that a swap is available to trade as 

a ‘‘trading protocol’’ that falls under the definition 

of a ‘‘rule’’ under § 40.1 of the Commission’s 

regulations. Section 40.1(i) defines a rule as ‘‘any 

constitutional provision, article of incorporation, 

bylaw, rule, regulation, resolution, interpretation, 

stated policy, advisory, terms and conditions, 

trading protocol, agreement or instrument 

corresponding thereto, including those that 

authorize a response or establish standards for 

responding to a specific emergency, and any 

amendment or addition thereto or repeal thereof, 

made or issued by a registered entity or by the 

governing board thereof or any committee thereof, 

in whatever form adopted.’’ Therefore, SEFs and 

DCMs would be required to submit a determination 

to the Commission for approval or self-certification 

under part 40 of the Commission’s regulations. 

7 17 CFR 40.5(a). 

8 17 CFR 40.5(c) and (d). In determining whether 

to extend the review period, the Commission will 

consider whether the proposed rule raises novel or 

complex issues, the submission is incomplete, or 

the requestor does not respond completely to 

Commission questions in a timely manner. 17 CFR 

40.5(d)(1). 

9 17 CFR 40.5(d)(2). 

10 17 CFR 40.6(b) and (c). In determining whether 

to stay a self-certification, the Commission will 

consider whether the rule presents novel or 

complex issues; is accompanied by inadequate 

explanation; or is potentially inconsistent with the 

CEA. 17 CFR 40.6(c)(1). 

11See 17 CFR 40.5(a)(5), 40.6(a)(7)(v). 

12See infra note 90 and accompanying text for a 

list of the proposed determination factors in the 

FNPRM. 

13See 17 CFR 40.5(e), 40.6(c)(3). 

14See supra note 1. The Commission addresses 

the methods by which swaps that are subject to the 

trade execution requirement must be executed on 

a SEF or DCM. Swaps that are subject to the trade 

execution requirement (and are not block trades as 

defined under § 43.2 of the Commission’s 

regulations) and that are traded on a SEF are 

defined as Required Transactions under part 37 of 

the Commission’s regulations governing SEFs. 

Under § 37.9(a)(2), Required Transactions must be 

executed by either (1) an Order Book, as defined in 

§ 37.3(a)(3); or (2) a Request for Quote System, as 

defined in § 37.9(a)(3), that operates in conjunction 

with an Order Book. See Core Principles and Other 

Requirements for Swap Execution Facilities (May 

17, 2013). Swaps that are subject to the trade 

execution requirement and traded on a DCM must 

be executed pursuant to subpart J of part 38 of the 

Commission’s regulations, which implements 

revised DCM Core Principle 9 under section 5(d)(9) 

of the CEA, as amended by section 735(b) of the 

Dodd-Frank Act. 7 U.S.C. 7(d)(9). 

15MarketAxess Comment Letter at 3; WMBAA 

Comment Letter at 3; AFR Comment Letter at 3; 

SDMA Comment Letter at 3; ODEX Comment Letter 

at 1. 

16MarketAxess Comment Letter at 2; AFR 

Comment Letter at 4; ODEX Comment Letter at 1. 

Section 2(h)(8)(B) of the CEA states that mandatory 

trade execution does not apply ‘‘if no [DCM or SEF] 

makes the swap available to trade’’ (emphasis 

added). 7 U.S.C. 2(h)(8)(B). 

17SDMA Comment Letter at 4–5; WMBAA 

Comment Letter at 3; MarketAxess Comment Letter 

at 3–5; AFR Comment Letter at 4. See infra note 90 

and accompanying text for a description of the 

proposed determination factors. Under 

§ 39.5(a)(3)(ii)(A) of the Commission’s regulations, a 

mandatory clearing submission must include 

information regarding the ‘‘existence of significant 

outstanding notional exposures, trading liquidity, 

and adequate pricing data’’ of a subject swap. 

and DCMs would utilize to demonstrate 

that a swap is available to trade. Under 

the proposal, a SEF or DCM would be 

required to submit an available-to-trade 

determination with the Commission 

under the rule approval and selfcertification procedures in part 40 of the 

Commission’s regulations. 

• Proposed §§ 37.10(b) and 38.12(b) 

set forth eight factors that a DCM or SEF 

may consider, as appropriate, to 

determine that a swap is available to 

trade.5

• Proposed §§ 37.10(c) and 38.12(c) 

required that upon a determination that 

a swap is available to trade by a SEF or 

DCM, all other DCMs and SEFs listing 

or offering that swap or an economically 

equivalent swap for trading must also 

make those swaps available to trade. 

• Proposed §§ 37.10(d) and 38.12(d) 

required DCMs and SEFs to perform an 

annual review and assessment of their 

determinations. 

A. Sections 37.10(a) and 38.12(a)— 

Procedure To Make a Swap Available to 

Trade 

1. Sections 37.10(a)(1) and 38.12(a)(1)— 

Required Submission 

Under proposed §§ 37.10(a) and 

38.12(a), a SEF or DCM would initially 

determine that a swap is available to 

trade and submit that determination to 

the Commission, either for approval or 

self-certification, pursuant to the rule 

filing procedures of part 40 of the 

Commission’s regulations.6

Under § 40.5, a registered entity may 

request Commission approval of a new 

rule prior to its implementation.7 The 

Commission has a 45-day review period 

to review the request and may extend 

the review period for an additional 45 

days in specified circumstances.8 The 

Commission may also extend the review 

period beyond an additional 45 days, 

based on a written agreement with the 

registered entity.9 Under § 40.6, a 

registered entity may submit a new rule 

to the Commission under selfcertification procedures. The 

Commission has 10 business days to 

review the rule before it is deemed 

certified and can be made effective. The 

Commission, however, may stay the 

certification for an additional 90 days, 

during which time it must provide a 30- 

day public comment period.10 Under 

either procedure, the registered entity 

must initially provide an explanation 

and analysis of the rule and its 

compliance with the applicable 

provisions of the CEA, including the 

core principles, and the Commission’s 

regulations thereunder.11

In the case of an available-to-trade 

determination, the accompanying 

explanation and analysis in the 

submission would detail the manner in 

which the SEF or DCM considered the 

factors in proposed § 37.10(b) or 

§ 38.12(b).12 At any time during its 

review under § 40.5 or during the 90- 

day review period under § 40.6, the 

Commission may notify the registered 

entity that it objects to the proposed 

certification because it is inconsistent or 

appears to be inconsistent with the CEA 

or the Commission’s regulations.13

Upon the Commission approving a 

SEF’s or DCM’s available-to-trade 

determination or permitting a SEF’s or 

DCM’s available-to-trade determination 

certification to become effective, the 

swap involved would be deemed 

available to trade. If that swap also is 

subject to the clearing requirement, then 

the swap must be executed on a SEF as 

a Required Transaction (as defined in 

part 37 of the Commission’s regulations) 

or on a DCM in order to satisfy the trade 

execution requirement under section 

2(h)(8) of the CEA. The Commission 

notes that the trade execution 

requirement does not apply to swaps 

that are not subject to the clearing 

requirement under section 2(h)(1) of the 

CEA.14

Summary of Comments 

With respect to the filing procedures 

set forth in proposed §§ 37.10(a) and 

38.12(a), several commenters opposed 

the procedures and recommended that 

all swaps subject to the clearing 

requirement under section 2(h)(1) of the 

CEA should be subject to the trade 

execution requirement because the 

Dodd-Frank Act does not specify a 

separate process to make a swap 

available to trade.15 In this regard, some 

commenters stated that under section 

2(h)(8)(B) of the CEA, swaps subject to 

the clearing requirement are 

automatically subject to mandatory 

trade execution unless a SEF or DCM 

does not list the swap for trading.16

Some commenters viewed the proposed 

procedure as duplicative of the 

mandatory clearing determination 

process and accordingly stated that the 

Commission should rely on the clearing 

determination process to also determine 

whether a swap is available to trade.17

The commenters further stated that 

utilizing the clearing determination as 

the exclusive basis for finding that a 

swap is available to trade would subject 

more swaps to the trade execution 


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18WMBAA Comment Letter at 2; MarketAxess 

Comment Letter at 9. 

19Markit Comment Letter at 2; ICI Comment 

Letter at 3–4; SIFMA AMG Comment Letter at 3; 

CEWG Comment Letter at 2; AIMA Comment Letter 

at 1. 

20Some commenters cited the July 2010 Senate 

floor remarks of U.S. Senator Blanche Lincoln, in 

which she stated that determining whether a swap 

is available to trade should consist of more than 

conducting a listing inquiry. According to Senator 

Lincoln, ‘‘[t]he [Commission] could consider, for 

example, whether there is a minimum amount of 

liquidity such that the swap can actually be traded 

on the facility. The mere ‘listing’ of the swap by a 

[SEF], in and of itself . . . should not be sufficient 

to trigger the Trade Execution Requirement.’’ Markit 

Comment Letter at 2 n.6; Chatham Comment Letter 

at 2–3; ICI Comment Letter at 3–4. 

21Morgan Stanley Comment Letter at 3; 

Bloomberg Comment Letter at 4; Sunguard Kiodex 

Comment Letter at 2; Spring Trading Comment 

Letter at 3 (Jan. 12, 2012); ICI Comment Letter at 

3–4. 

22SIFMA AMG Comment Letter at 3; ICI 

Comment Letter at 3; CEWG Comment Letter at 2. 

23Markit Comment Letter at 2. 

24AIMA Comment Letter at 1. 

25MFA Comment Letter at 3; SIFMA AMG 

Comment Letter at 4; Morgan Stanley Comment 

Letter at 4; AIMA Comment Letter at 1–2; FHLB 

Comment Letter at 4 n.2; ICI Comment Letter at 3– 

4; Markit Comment Letter at 3; FXall Comment 

Letter at 5. 

26SIFMA AMG Comment Letter at 4. 

27AIMA Comment Letter at 1–2; Morgan Stanley 

Comment Letter at 4. 

28Markit Comment Letter at 3; FXall Comment 

Letter at 5. 

29MFA Comment Letter at 3; Markit Comment 

Letter at 2; FXall Comment Letter at 2–3, CEWG 

Comment Letter at 2; JPMorgan Comment Letter at 

2; FHLB Comment Letter at 4 n.2; Morgan Stanley 

Comment Letter at 3; Vanguard Comment Letter at 

4; ICI Comment Letter at 3–4; Chatham Comment 

Letter at 2. 

30 Vanguard Comment Letter at 4; FXall Comment 

Letter at 5; ICI Comment Letter at 4; Morgan Stanley 

Comment Letter at 3–4. 

31Morgan Stanley Comment Letter at 3; FXall 

Comment Letter at 5. 

32 ICI Comment Letter at 4. 

33MFA Comment Letter at 2. See infra discussion 

at note 41. 

34CBOE Comment Letter at 1–2; Spring Trading 

Comment Letter at 2 (Jan. 12, 2012); AIMA 

Comment Letter at 3 (supporting use of the § 40.5 

rule approval process only). 

35CBOE Comment Letter at 1–2. 

36Markit Comment Letter at 5; ISDA Comment 

Letter at 4–5; Bloomberg Comment Letter at 3; 

CEWG Comment Letter at 2–3; Morgan Stanley 

Comment Letter at 5–6; AIMA Comment Letter at 

2–3 (opposing use of § 40.6 certification process). 

37 ISDA Comment Letter at 6. 

38Markit Comment Letter at 5–6; Vanguard 

Comment Letter at 5; Geneva Energy Markets 

Comment Letter at 2; JPMorgan Comment Letter at 

1; CME Comment Letter at 4–5; FHLB Comment 

Letter at 3; FSR Comment Letter at 4; FXall 

Comment Letter at 5–6; Morgan Stanley Comment 

Letter at 5–6; CEWG Comment Letter at 6; ISDA 

Comment Letter at 3–4, 6; Tradeweb Comment 

Letter at 4–5. 

39FHLB Comment Letter at 3–4; ISDA Comment 

Letter at 3; Markit Comment Letter at 5; FXall 

Comment Letter at 6. 

40Bloomberg Comment Letter at 2; CME 

Comment Letter at 4–5; FHLB Comment Letter at 3; 

Markit Comment Letter at 5; CEWG Comment Letter 

at 2; ISDA Comment Letter at 3; Morgan Stanley 

Comment Letter at 5–6; AIMA Comment Letter at 

2; Vanguard Comment Letter at 5; Geneva Energy 

Markets Comment Letter at 2; JPMorgan Comment 

Letter at 2. 

41FXall Comment Letter at 6–7; Bloomberg 

Comment Letter at 2; Tradeweb Comment Letter at 

2–3; FSR Comment Letter at 2; ISDA Comment 

Letter at 3; CME Comment Letter at 4; Morgan 

Stanley Comment Letter at 5–6. 

42UBS Comment Letter at 1; Chatham Comment 

Letter at 3; AIMA Comment Letter at 2; ISDA 

Comment Letter at 3–5; CEWG Comment Letter at 

3; Markit Comment Letter at 5–6; Morgan Stanley 

Comment Letter at 5. 

requirement and further the objectives 

of the Dodd-Frank Act.18

In contrast, some commenters stated 

that the process for determining 

whether a swap is available to trade is 

separate from the process for 

determining whether a swap is subject 

to the clearing requirement. Some of the 

commenters relied on the statutory 

language 19 and legislative history 20 of 

the Dodd-Frank Act to support this 

view, with some commenters arguing 

that ‘‘available for trading’’ should mean 

more than mere listing.21 As statutory 

support, several commenters stated that 

section 2(h)(8) of the CEA specifies two 

distinct prerequisites for subjecting a 

swap to mandatory trade execution: (1) 

The swap must be subject to mandatory 

clearing and (2) the swap must be made 

available to trade.22 Markit also noted 

that the language of the clearing 

requirement under section 2(h)(1)–(2) of 

the CEA, as enacted by the Dodd-Frank 

Act, does not address making a swap 

available to trade.23 Further, AIMA 

noted that the clearing determination 

factors differ from the proposed factors 

in an available-to-trade determination.24

Some commenters also asserted that 

the mandatory clearing determination 

and the proposed available-to-trade 

determination differ from one another in 

practical respects.25 For example, 

SIFMA AMG stated that whether a swap 

should be mandatorily cleared depends 

on whether the swap (1) can be priced 

for a derivatives clearing organization’s 

(‘‘DCO’’) risk management purposes; 

and (2) is standardized; therefore, unlike 

the available-to-trade determination, 

liquidity is not a primary 

consideration.26 AIMA and Morgan 

Stanley similarly commented that stated 

liquidity is considered in a clearing 

determination to make certain that a 

DCO could adequately price the swap to 

calculate margin requirements and 

fulfill risk management requirements. 

They further stated that the minimum 

liquidity needed to clear a swap is lower 

than the minimum liquidity needed to 

support mandatory trade execution on a 

DCM or a SEF.27 Markit and FXall also 

stated that differing tenors of a given 

swap would be clearable if any tenor of 

that swap is cleared, but different tenors 

would have significantly different 

liquidity characteristics.28

Therefore, commenters stated that 

only the more liquid swaps should be 

available to trade 29 to avoid negatively 

affecting swap pricing and liquidity.30

Morgan Stanley and FXall stated that 

subjecting illiquid swaps to the trade 

execution requirement would further 

reduce liquidity in those swaps, as 

market participants would be reluctant 

to reveal their trading interest in low 

volume markets; such premature 

imposition of the trade execution 

requirement upon illiquid swaps would 

likely result in increasing bid-ask 

spreads and trading costs.31 ICI 

commented that the risks of low trading 

volume would drive market participants 

to other markets.32

MFA also commented that separate 

processes, with adequate Commission 

oversight and public comment, would 

mitigate potential ‘‘first-mover 

advantage’’ issues.33

Of the commenters who supported 

separate processes, some commenters 

supported the proposed filing 

procedures.34 CBOE stated that §§ 40.5 

and 40.6 allow for timely Commission 

review and have been successfully 

utilized in other areas.35

Other commenters, however, opposed 

the proposed filing procedures.36 ISDA 

stated that neither § 40.5 nor § 40.6 

should be used because an available-totrade determination is neither a trading 

protocol nor a rule.37 Some opposing 

commenters stated that the Commission, 

not SEFs and DCMs, should determine 

whether a swap is available to trade.38

Some commenters asserted that the 

Commission is more qualified to make 

the determination based on its access to 

market data.39 Several commenters also 

stated that SEFs and DCMs should not 

make the determination because they 

may have a financial incentive-based 

conflict of interest to maximize the 

number of swaps subject to mandatory 

trade execution.40 Commenters 

expressed a related concern that a SEF’s 

or DCM’s determination would be 

influenced by a desire to gain a ‘‘firstmover advantage,’’ (i.e., acquiring 

market share in the trading of a 

particular swap before other venues can 

list and develop trading activity in that 

swap), which would lead to premature 

or ill-advised mandatory trading of 

illiquid swaps on a SEF or DCM.41

Further, several commenters stated that 

neither § 40.5 nor § 40.6 would provide 

the Commission with adequate time to 

review rule filings and to solicit public 

comment, which would allow SEFs and 

DCMs to acquire this advantage 42 and 


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43Markit Comment Letter at 6; ISDA Comment 

Letter at 3; ICI Comment Letter at 5. 

44Bloomberg Comment Letter at 3 n.10. 

45 Vanguard Comment Letter at 4; FSR Comment 

Letter at 5; JPMorgan Comment Letter at 2. 

46Markit Comment Letter at 3; Tradeweb 

Comment Letter at 3–4. 

47CME Comment Letter at 3; MarketAxess 

Comment Letter at 7–8. 

48 Id. 

49Bloomberg Comment Letter at 3 n.10. 

50 In response to comments that the Dodd-Frank 

Act does not condition mandatory trade execution 

of a swap on an affirmative Commission 

determination, the Commission further notes that 

section 8a(5) of the CEA authorizes the Commission 

to promulgate such regulations as, in its judgment, 

are reasonably necessary to effectuate any of the 

provisions or to accomplish any of the purposes of 

the CEA. 7 U.S.C. 12a(8). Further, section 721(b) of 

the Dodd-Frank Act provides the Commission with 

authority to adopt rules to define ‘‘[any] term 

included in an amendment to the Commodity 

Exchange Act . . . made by [the Dodd-Frank Act].’’ 

15 U.S.C. 8321, as enacted by section 721 of the 

Dodd-Frank Act. Additionally, sections 5(d)(1) and 

5h(f)(1) of the CEA require DCMs and SEFs, 

respectively, to comply with any requirement that 

the Commission may impose by rule or regulation 

pursuant to section 8a(5) of the CEA. 

51Section 39.5 of the Commission’s regulations 

sets forth a process under which the Commission 

will review swaps to determine whether the swaps 

are required to be cleared. 

52Section 50.25 of the Commission’s regulations 

establishes a schedule to phase in compliance with 

the clearing requirement by category of market 

participant. Category 1 entities, which include a 

swap dealer, a security-based swap dealer, a major 

swap participant, a major security-based swap 

participant, or an active fund, have 90 days to 

comply with the clearing requirement. Category 2 

entities, which include a commodity pool, private 

fund, or person predominantly engaged in activities 

that are in the business of banking or that are 

financial in nature, have 180 days to comply with 

the clearing requirement. Certain third-party 

subaccounts and all other swap transactions receive 

270 days to comply with the clearing requirement. 

See Swap Transaction Compliance and 

Implementation Schedule: Clearing Requirement 

under Section 2(h) of the CEA, 77 FR 44441 (July 

20, 2012). The Commission notes that it will accept 

for review available-to-trade determinations for 

swaps determined to be subject to the clearing 

requirement, prior to the applicable date for 

compliance. 

53To make a clearing determination, the 

Commission must consider five factors: (1) The 

existence of significant outstanding notional 

exposures, trading liquidity, and adequate pricing 

data; (2) the availability of rule framework, 

capacity, operational expertise and resources, and 

credit support infrastructures to clear the contract 

on terms that are consistent with the material terms 

and trading conventions on which the contract is 

then traded; (3) the effect on the mitigation of 

systemic risk, taking into account the size of the 

market for such contract and the resources of the 

DCO available to clear the contract; (4) the effect on 

competition, including appropriate fees and charges 

applied to clearing; and (5) the existence of 

reasonable legal certainty in the event of the 

insolvency of the relevant derivatives clearing 

organization or one or more of its clearing members 

with regard to the treatment of customer and swap 

counterparty positions, funds, and property. 7 

U.S.C. 2(h)(2)(D)(ii)(I)–(IV), as enacted by section 

723 of the Dodd-Frank Act. 

54 77 FR 74285. In the Commission’s clearing 

requirement final rule, certain classes of credit 

default swaps (CDS) and interest rate swaps (IRS) 

would become subject to the clearing requirement, 

i.e., cleared by a registered DCO. Per section 

2(h)(2)(D)(ii) of the CEA, the Commission 

considered the effect of clearing those classes of 

swaps on mitigating systemic risk. With respect to 

the proposed CDS indices, the Commission believes 

that mandatory clearing would (1) mitigate 

counterparty credit risk by allowing a DCO to 

become the buyer to every seller of those indices, 

and vice versa; and (2) collateralize risk exposures 

by allowing a DCO to calculate and collect initial 

margin and guaranty fund contributions. 77 FR 

74297–98. With respect to the IRS proposed to be 

cleared, the Commission believes that the three 

DCOs that have submitted clearing 

determinations—CME, LCH, and IDCH—would (1) 

mitigate counterparty credit risk by establishing 

themselves as a central counterparty to reduce the 

number of open bilateral contracts; and (2) facilitate 

collateral efficiency through a central counterparty 

clearing approach. 77 FR 74312. 

55For example, the Commission has noted that 

higher trading liquidity in swaps would assist DCOs 

in end-of-day settlement procedures, as well as in 

managing the risk of CDS portfolios, particularly in 

mitigating the liquidity risk associated with 

unwinding a portfolio of a defaulting clearing 

member. 77 FR 47176. 

56Specifically, liquidity is viewed by a DCO as 

a function of whether a portfolio of swaps has 

common specifications that are determinative of 

their economic characteristics, such that a DCO can 

price and risk manage the portfolio in a default 

situation. 77 FR 74301. 

57 In response to ISDA’s comment that neither 17 

CFR 40.5 nor § 40.6 should apply because an 

available-to-trade determination is neither a trading 

Continued 

make it hard for the Commission to 

reject a determination.43

Several commenters offered 

alternative approaches to the proposed 

process. Bloomberg recommended a 

separate standalone rule.44 Several 

commenters, however, recommended 

that the Commission establish a ‘‘pilot 

program’’ to phase in the available-totrade process by initially deeming 

certain highly liquid swaps as available 

to trade (and therefore making them 

subject to the trade execution 

requirement) for a fixed time period. 

Commenters stated that this approach 

would provide market participants and 

trading venues with time to adjust to the 

trade execution requirement 45 and 

minimize market disruptions caused 

during implementation.46

MarketAxess and CME recommended 

that only swaps that have been 

determined to be subject to the clearing 

requirement should be subject to an 

available-to-trade determination.47 Both 

commenters argued that determining 

whether a swap is available to trade, for 

purposes of the trade execution 

requirement, would be legally 

insignificant unless a swap is required 

to be cleared first, and thus believe that 

the Commission should first determine 

which swaps will be subject to the 

clearing requirement.48

Bloomberg also noted that the 

Commission has the authority under 

§ 5c(c) of the CEA to deny an availableto-trade determination only if it is 

‘‘inconsistent with’’ the CEA or the 

Commission’s regulations and requested 

clarification on how the Commission 

would interpret this term in this 

context.49

Commission Determination 

The Commission is adopting the 

proposed available-to-trade process, 

subject to modifications discussed 

herein. The Commission agrees with 

commenters who assert that the CEA’s 

statutory language supports an 

available-to-trade determination that is 

separate from a mandatory clearing 

determination.50 In response to 

comments, the Commission has 

determined that at this time, it will only 

review available-to-trade submissions 

for swaps that it has first determined to 

be subject to the clearing requirement 

under § 39.5 of the Commission’s 

regulations.51 The Commission believes 

that adopting a sequenced approach in 

such a manner is consistent with the 

trade execution requirement under 

section 2(h)(8) of the CEA because the 

trade execution mandate only applies if 

a swap is (1) subject to mandatory 

clearing and (2) made available to trade 

by a SEF or DCM.52

The clearing determination process, 

which the Commission notes is not 

initiated by a SEF or DCM, primarily 

focuses on the ability to mitigate risk 

through clearing by a DCO and the five 

statutory factors under section 2(h)(2)(D) 

of the CEA.53 In particular with respect 

to risk management, the Commission 

considers whether imposing the clearing 

requirement would mitigate systemic 

risk through the collateralization of risk 

exposures, which includes counterparty 

credit risk that arises between two 

counterparties to an uncleared swap.54

In this regard, the Commission assesses 

whether a particular class of swaps has 

sufficient liquidity for risk management 

purposes, i.e., pricing and margining of 

the cleared swaps.55 The Commission 

has noted in the context of clearing for 

interest rate swaps, for example, that 

DCOs do not focus on the liquidity of 

specific individual swaps from a risk 

management perspective, but rather on 

a portfolio basis.56 In contrast, the 

available-to-trade determination process 

will be initiated by a SEF or DCM and 

may focus primarily on whether a swap 

has sufficient trading liquidity to be 

subject to mandatory trade execution. 

With respect to the proposed 

procedure to determine that a swap is 

available to trade, the Commission is 

adopting the rule as proposed and 

codifying the proposed rule text to 

§§ 37.10(a)(1) and 38.12(a)(1).57 The part 


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33610 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

protocol nor a rule, the Commission notes that the 

definition of ‘‘rule’’ under 17 CFR 40.1(h) of the 

Commission’s regulations would encompass an 

available-to-trade determination. Section 40.1(h) 

defines ‘‘rule’’ as ‘‘any constitutional provision, 

article of incorporation, bylaw, rule, regulation, 

resolution, interpretation, stated policy, term and 

condition, trading protocol, agreement or 

instrument corresponding thereto, in whatever form 

adopted, and any amendment or addition thereto or 

repeal thereof, made or issued by a registered entity 

. . . .’’ The Commission views an available-to-trade 

determination as a ‘‘trading protocol.’’ 

58Under §§ 40.5(d)(1) and 40.6(c) of the 

Commission’s regulations, the Commission may 

stay the certification of a new rule or rule 

amendment that, among other things, presents 

‘‘novel or complex issues that require additional 

time’’ to review or analyze. 

59Under 17 CFR 40.6(c)(3), a new rule subject to 

a stay would become effective, pursuant to its 

certification, at the expiration of the 90-day review 

period unless the Commission withdraws the stay 

prior to that time, or the Commission notifies the 

registered entity during the 90-day period that it 

objects to the proposed certification on the grounds 

that the proposed rule or rule amendment is 

inconsistent with the CEA or the Commission’s 

regulations. 

60As noted, under 17 CFR 40.5(d)(2), the 

Commission may extend the review period beyond 

an additional 45 days based on written agreement 

with the submitting SEF or DCM. 

61 76 FR 77733. 

62Eaton Vance Management Comment Letter at 3; 

SIFMA AMG Comment Letter at 10; UBS Comment 

Letter at 2; Morgan Stanley Comment Letter at 6 n.6; 

ISDA Comment Letter at 7; Tradeweb Comment 

Letter at 5. 

63SIFMA AMG Comment Letter at 10; Spring 

Trading Comment Letter at 3 (Jan. 12, 2012). 

64 ISDA Comment Letter at 7. ISDA proposed 

eliminating the proposed § 40.6 certification 

process and stated that the Commission should 

establish a minimum 6-month review period for 

determinations submitted by a SEF or DCM. 

65 ISDA Comment Letter at 6. 

66 ISDA Comment Letter at 7; SIFMA AMG 

Comment Letter at 10; Spring Trading Comment 

Letter at 3. 

67Tradeweb Comment Letter at 5; UBS Comment 

Letter at 2; Morgan Stanley Comment Letter at 6 n.6. 

68SDMA Comment Letter at 9. 

69The Commission notes that such swap would 

be certified or approved under § 40.2 or § 40.3 of 

the Commission’s regulations prior to listing the 

swap for trading. 

70Bloomberg requested that a SEF submitting an 

available-to-trade determination for a particular 

swap would be able to incorporate by reference, in 

its submission, information and analysis already 

completed by a DCO and the Commission as part 

of the mandatory clearing determination process 

40 procedures provide a reasonable 

approach by allowing DCMs and SEFs— 

the entities responsible for listing or 

offering the swaps for trading and 

supporting related trading activity—to 

initially determine whether a swap is 

available to trade, and therefore, subject 

to the trade execution requirement. The 

Commission notes that although it will 

have access to market data, SEFs and 

DCMs will have sufficient expertise and 

experience with respect to swaps 

trading to make an initial determination 

and to submit that determination to the 

Commission under the part 40 

procedures. Accordingly, the part 40 

procedures provide SEFs and DCMs 

with the flexibility to make an initial 

available-to-trade determination while 

allowing for appropriate Commission 

review and regulatory oversight, as well 

as an opportunity for public comment. 

The Commission also believes that the 

part 40 procedures should afford 

sufficient time for market participants to 

offer public comment on available-totrade submissions and for the 

Commission to review such submissions 

and any related comments. In this 

regard, for swaps submitted by a SEF or 

DCM under the § 40.5 rule approval 

process or the § 40.6 rule certification 

process, initial available-to-trade 

determinations may present novel and 

complex issues that will warrant 

retention for an additional review.58

Under § 40.6(c)(2) of the Commission’s 

regulations, interested parties would 

have sufficient opportunity to comment 

on the certification during a 30-day 

mandatory public comment period. 

Therefore, swaps self-certified as 

available to trade may initially be 

subject to a review period of up to 100 

days.59 Similarly, for swaps submitted 

under the § 40.5 rule approval process 

that present novel or complex issues, 

the review period for initial rule 

approval submissions may be extended 

for at least additional 45 days for the 

same reason.60 The Commission notes 

that it routinely solicits public 

comments for § 40.5 rule approval 

submissions and anticipates that market 

participants would be similarly able to 

provide the Commission with comments 

on available-to-trade filings. 

The Commission expects that over 

time, available-to-trade filings should 

present fewer novel or complex issues, 

thereby not warranting extensions of the 

applicable review period; SEFs and 

DCMs would likely submit swap 

determinations that are similar to 

previous submissions and the 

Commission would become more 

experienced with the process. The 

Commission, however, will continue to 

consider whether to stay rule 

certifications or rule approval 

submissions on a case-by-case basis. 

In response to Bloomberg’s request for 

clarification, the Commission notes that 

whether a SEF’s or DCM’s initial 

determination is ‘‘inconsistent’’ with the 

CEA and the Commission’s rules and 

regulations would depend upon the 

SEF’s or DCM’s analysis and application 

of the determination factors to the swap 

submitted as available to trade, as 

discussed further below. The 

Commission also notes that a 

determination could also be deemed 

inconsistent if it does not consider one 

or more of the required factors, or the 

swap otherwise does not meet other 

prerequisites established in the 

submission process, discussed further 

below. 

2. Sections 37.10(a)(2) and 38.12(a)(2)— 

Listing Requirement 

The FNPRM requested comment on 

(1) whether the Commission should 

allow a SEF or DCM to submit an 

available-to-trade determination for a 

swap under proposed §§ 37.10(a) and 

38.12(a) if the SEF or DCM making the 

submission does not itself list that swap 

for trading; and (2) if so, whether the 

Commission would allow that SEF or 

DCM to consider the same swap or an 

economically equivalent swap that 

trades on another SEF, DCM, or 

primarily or solely in bilateral 

transactions.61

Summary of Comments 

Several commenters recommended 

that a SEF or DCM must list the swap 

that it submits for an available-to-trade 

determination.62 For example, Spring 

Trading and SIFMA AMG 

recommended that a SEF or DCM must 

list a swap for at least 90 days before 

submitting its determination.63 ISDA 

recommended that a SEF or DCM must 

list the swap during the 6-month period 

that it proposed for Commission review 

of the available-to-trade 

determination.64 ISDA noted that the 

lack of a listing requirement would 

incentivize SEFs and DCMs to try to 

submit as many determinations as 

possible merely to promote centralized 

trading.65 According to some 

commenters, the Commission or the 

trading facility could evaluate the data 

gathered 66 and obtain experience 67

during the listing period to determine 

whether the swap should be made 

available to trade. SDMA, however, 

recommended that a SEF or DCM 

should be allowed to submit a 

determination for a swap that it does not 

list.68

Commission Determination 

The Commission agrees with 

commenters who support a listing 

requirement and is amending the 

proposed rule text to adopt new 

§§ 37.10(a)(2) and 38.12(a)(2), which 

requires a SEF or DCM to certify that it 

is listing the swap for which it submits 

an available-to-trade determination.69

The Commission believes that an initial 

determination that a swap is available to 

trade should be made by a SEF or a 

DCM that offers the swap for trading.70


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with respect to that swap. Bloomberg Comment 

Letter at 4–5. In response to Bloomberg’s request, 

the Commission views the part 40 process as 

flexible and would allow relevant information from 

a clearing determination to be referenced in an 

available-to-trade submission. The Commission, 

however, emphasizes that such information leading 

to an affirmative clearing determination would not 

automatically indicate that a swap is available to 

trade. 

71 76 FR 77733. 

72Spring Trading Comment Letter at 5 (Jan. 12, 

2012); AIMA Comment Letter at 2; SDMA Comment 

Letter at 7; AFR Comment Letter at 2 (inferring that 

mandatory trade execution should be determined 

for a ‘‘class’’ of swaps). 

73AIMA Comment Letter at 2. 

74Markit Comment Letter at 2–3; SIFMA AMG 

Comment Letter at 11; CEWG Comment Letter at 

3–4; ISDA Comment Letter at 10; UBS Comment 

Letter at 2; Morgan Stanley Comment Letter at 9. 

75SIFMA AMG Comment Letter at 11; CEWG 

Comment Letter at 4. With respect to energy 

commodities, CEWG provided Henry Financial LD1 

Fixed Swap, Henry Financial LD4 Fixed Swap, and 

ICE’s Physical Basis LD1, which differ in contract 

size and term, as examples of swaps within a 

potential group or class that each possess different 

liquidity characteristics, thereby warranting 

individual determinations. SIFMA AMG also noted 

that the liquidity of interest rate swaps differs 

significantly depending on time to maturity. 

76Markit Comment letter at 2; ISDA Comment 

Letter at 11. ISDA offered the Federal Reserve Bank 

of New York’s analysis of trade data as a 

demonstration of varying trading volumes for 

different tenors of credit default swaps. 

77Morgan Stanley Comment Letter at 9. 

78Markit Comment Letter at 2. Markit defines 

‘‘buckets’’ as groups of maturities and tenors for a 

given swap that have similar liquidity measures. 

79The Commission notes that for clearing 

determinations under § 39.5, it may define a 

particular group, category, type or class of swaps for 

purposes of a clearing determination based on 

several considerations. 76 FR 44468. To the extent 

that such a determination is informative as to 

whether a proposed group, category, type or class 

of swap that is defined by a SEF or DCM is available 

to trade, the Commission may take those 

considerations into account. For example, a SEF or 

a DCM could define a group, category, type or class 

of interest rate swaps based on characteristics that 

include the nature of the payments streams (e.g., 

fixed-to-floating, floating-to-floating, forward rate 

agreement (FRA), or overnight indexed swap (OIS)); 

currency (e.g., U.S. dollar, euro, British pound, 

Japanese yen); floating rate index referenced (e.g., 

LIBOR, EURIBOR); and stated termination date 

(e.g., 1-year, 2-year, 5-year, 10-year). 

80Where the Commission does not approve or 

deem all of the swaps within a group, category, type 

or class submitted by a SEF or DCM as available to 

trade, DMO would notify the SEF or DCM of such 

an action. 

81 76 FR 77733. 

82MFA Comment Letter at 3; Spring Trading 

Comment Letter at 6 (Jan. 12, 2012); Markit 

Comment Letter at 3 (discussing importance of 

marketwide data); Vanguard Comment Letter at 5; 

SIFMA AMG Comment Letter at 6; AIMA Comment 

Letter at 2; Morgan Stanley Comment Letter at 6 n.6; 

FXall Comment Letter at 6 n.18; CBOE Comment 

Letter at 3. 

83 Vanguard Comment Letter at 5. 

84SIFMA AMG Comment Letter at 6. 

85FXall Comment Letter at 6 n.18. 

86MFA Comment Letter at 3; SIFMA AMG 

Comment Letter at 6; Markit Comment Letter at 3; 

FXall Comment Letter at 6; Vanguard Comment 

Letter at 5; Spring Trading Comment Letter (Jan. 12, 

2012) at 6; CBOE Comment Letter at 3; AIMA 

Comment Letter at 2; Morgan Stanley Comment 

Letter at 6; SDMA Comment Letter at 7. 

87CBOE Comment Letter at 3. 

88SIFMA AMG Comment Letter at 6. 

The Commission, however, is not 

adopting a minimum listing period so as 

to avoid delaying the determination 

process, and hence implementation of 

the trade execution requirement as 

discussed below. The Commission also 

notes, as discussed further below, that a 

SEF or DCM is allowed to consider 

activity in the same swap listed on 

another SEF or DCM as well as the 

amount of off-exchange activity in the 

same swap. 

3. Submission of a Group, Category, 

Type or Class of Swaps 

The FNPRM requested comment on 

(1) whether the Commission should 

allow a SEF or DCM to submit its 

available-to-trade determination for a 

‘‘group, category, type or class of 

swaps’’ based on the factors proposed in 

§§ 37.10(b) and 38.12(b) of the FNPRM; 

and (2) how ‘‘group, category, type or 

class of swaps’’ should be defined.71

Summary of Comments 

Some commenters stated that the 

Commission should allow SEFs and 

DCMs to submit determinations for a 

group, category, type, or class of swap.72

In defining ‘‘group, category, type, or 

class’’ of swap, AIMA stated that the 

Commission should take into account 

specific characteristics of certain swaps 

to avoid subjecting certain illiquid 

swaps to mandatory trade execution.73

Other commenters, however, 

expressed concern about making 

determinations based on group, 

category, type or class of swap.74 SIFMA 

AMG and CEWG commented that swaps 

within a potential ‘‘group’’ may feature 

different liquidity and trading 

patterns,75 while Markit and ISDA 

stated that liquidity may differ 

significantly even among different 

tenors of a given swap.76 ISDA and 

Morgan Stanley also highlighted the 

difficulty at the outset of defining 

‘‘group, category, type or class of 

swap.’’ 77 Markit stated that 

determinations should be allowed for 

individual swaps and then applied to 

‘‘buckets’’ of maturities and tenors.78

Commission Determination 

The Commission is allowing SEFs and 

DCMs to submit determinations for a 

group, category, type or class of swap to 

provide greater efficiency to the 

available-to-trade determination 

process. To address commenters’ 

concerns that swaps within a group, 

category, type or class may have 

different liquidity and trading 

characteristics, a SEF or DCM must 

address, in its submission, the 

applicable determination factor or 

factors apply to all of the swaps within 

that group, category, type or class. 

Further, a SEF and DCM will be allowed 

to define the scope of the group, 

category, type or class of swap that it 

determines is available to trade.79 To the 

extent that a SEF or DCM possesses 

flexibility to define that scope, however, 

the Commission still may approve or 

deem only part or some of the swaps 

within that group, category, type or 

class as available to trade, based on its 

review.80

4. Consideration of Swaps on Another 

SEF or DCM, or Bilateral Transactions 

The FNPRM requested comment on 

whether the Commission should allow a 

SEF or DCM, in evaluating the factors 

under proposed §§ 37.10(b) and 

38.12(b), to consider (1) the same swap 

or an economically equivalent swap on 

another SEF or DCM; and (2) the 

amount of activity in the same swap or 

an economically equivalent swap 

available primarily or solely in bilateral 

transactions.81

Summary of Comments 

Several commenters stated that a SEF 

or DCM should be able to consider 

relevant swap activity on other SEFs 

and DCMs when making an available-totrade determination.82 Vanguard 

commented that determining whether a 

‘‘meaningful’’ portion of trading in the 

swap occurs on a SEF or DCM is 

important in determining that a swap is 

available to trade.83 SIFMA AMG stated 

that the existence of a liquid trading 

environment on SEFs and DCMs could 

indicate that a swap could be made 

available to trade without harm to 

liquidity.84 FXall stated that 

determinations should be based on a 

swap’s marketwide trading patterns, so 

as to avoid unintended effects on 

liquidity.85

Some commenters also stated that a 

SEF or DCM should be able to consider 

swaps executed on a bilateral basis.86

CBOE stated that considering a swap’s 

trading activity only on a SEF or DCM 

would otherwise incentivize market 

participants to minimize centralized 

trading in order to limit the number of 

swaps made available to trade.87 SIFMA 

AMG stated that examining the bilateral 

market could reveal a liquid trading 

environment, but could then raise 

questions as to whether a swap should 

be made available to trade.88 MFA and 

Vanguard recommended that the 

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33612 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

89MFA Comment Letter at 3; Vanguard Comment 

Letter at 5. 

90As noted above, the Commission believes that 

the mere listing or offering for trading of a swap on 

a DCM or SEF does not mean that the swap is 

available to trade. 

91MFA Comment Letter at 2; Markit Comment 

Letter at 3; Tradeweb Comment Letter at 3 

(proposing a pilot program based on the proposed 

factors); Bloomberg Comment Letter at 4; ICI 

Comment Letter at 4–5; Vanguard Comment Letter 

at 4; SIFMA AMG Comment Letter at 5; Geneva 

Energy Markets Comment Letter at 2; Spring 

Trading Comment Letter at 4 (Jan. 12, 2012); AIMA 

Comment Letter at 1; CME Comment Letter at 6; 

FHLB Comment Letter at 4. 

92For example, ISDA recommended that whether 

a SEF lists and supports trading in a swap should 

be a prerequisite. ISDA Comment Letter at 8. FSR 

emphasized that broad market participation must be 

shown. FSR Comment Letter at 7. Some 

commenters requested that SEFs and DCMs be 

required to consider both the size and frequency of 

swap transactions on SEFs, DCMs, and in bilateral 

transactions. AIMA Comment Letter at 2; ICI 

Comment Letter at 5 n.13; SIFMA AMG Comment 

Letter at 6. 

93FSR Comment Letter at 4. 

94 Geneva Energy Markets Comment Letter at 2. 

95SDMA Comment Letter at 7. According to 

SDMA, a market depth test consists of calculating 

the sum of available bids and offers at or near the 

current price for a swap at a particular time, while 

a market breadth test consists of calculating the sum 

of market depth for a particular swap or class of 

swaps. 

96For example, SDMA considered the factors to 

be duplicative of the mandatory clearing 

determination factors set forth in section 2(h)(2)(D) 

of the CEA, and therefore burdensome and costly. 

SDMA Comment Letter at 5. 

97Eaton Vance Management Comment Letter at 2; 

ISDA Comment Letter at 8; ICI Comment Letter at 

5; CEWG Comment Letter at 3. 

98Eaton Vance Management Comment Letter at 2; 

ISDA Comment Letter at 8. 

99 ICI Comment Letter at 5. 

100CEWG Comment Letter at 3. 101FHLB Comment Letter at 3; CEWG Comment 

Letter at 3; Eaton Vance Management Comment 

Letter at 3 (adopting ICI’s recommendation); ICI 

Comment Letter at 2, 5; Vanguard Comment Letter 

at 4; Bloomberg Comment Letter at 4; SIFMA AMG 

Comment Letter at 5; Chatham Comment Letter at 

3; AIMA Comment Letter at 2. Markit stated that 

this approach would grant ‘‘unfettered discretion’’ 

to SEFs and DCMs to disregard a swap’s actual 

liquidity, Markit Comment Letter at 3. MarketAxess 

stated that the Commission would lack any basis to 

reject a determination. MarketAxess Comment 

Letter at 8. 102 Vanguard Comment Letter at 4; SIFMA AMG 

Comment Letter at 5. 103SIFMA AMG Comment Letter at 5. 104CBOE Comment Letter at 2. 105Markit Comment Letter at 3; Spring Trading 

Comment Letter at 4; AIMA Comment Letter at 4; 

Bloomberg Comment Letter at 4; FXall Comment 

Letter at 6; Eaton Vance Management Comment 

Letter at 3; ICI Comment Letter at 5–6; FSR 

Comment Letter at 3, 6–7. Some commenters 

recommended that the swap must (1) trade a 

minimum number of times each day; (2) feature a 

minimum number of market participants trading it; 

and (3) meet an overall notional trading volume 

over a set period of time. Vanguard Comment Letter 

at 5; ISDA Comment Letter at 7; SIFMA AMG 

Comment Letter at 5, 7. Morgan Stanley 

recommended that the swap must (1) have resting 

bids and offers on the applicable SEF or DCM for 

at least half of the relevant trading hours for the 90- 

day period prior to a determination; and (2) have 

been traded an average of at least 5 times per day 

during the same period. Morgan Stanley Comment 

Letter at 4, 6. JPMorgan recommended that the swap 

must show an actual level of liquidity on the 

applicable DCM or SEF during a sample period of 

at least 180 days prior to the submission. JPMorgan 

Comment Letter at 1. 106Morgan Stanley Comment Letter at 4. 107FSR Comment Letter at 3; Morgan Stanley 

Comment Letter at 5; ICI Comment Letter at 6. 108 ICI Comment Letter at 6; Markit Comment 

Letter at 3; SIFMA AMG Comment Letter at 5–6. 

exchange trading to make the availableto-trade process more objective.89

Commission Determination 

The Commission will allow a SEF or 

DCM to consider activity in the same 

swap listed on another SEF or DCM and 

the amount of off-exchange activity in 

the same swap when determining 

whether a swap is available to trade. 

The Commission agrees with 

commenters that since the available-totrade determination applies 

marketwide, a SEF or DCM should be 

able to consider activity on other SEFs 

and DCMs, as well as activity that takes 

place off-exchange, to the extent that 

such information becomes available. 

Information about trading activity in the 

entire swaps marketplace would better 

inform market participants about how 

the swap trades in the overall market 

and provide interested parties with 

additional information and analysis to 

comment upon. More comprehensive 

information would also better inform 

the Commission in its evaluation of the 

available-to-trade submission. The 

Commission also believes that 

consideration of off-exchange trading 

could provide additional data and 

insight about a swap’s trading patterns, 

e.g., trading volume or numbers and 

types of market participants, that would 

help a SEF or a DCM address one or 

more of the determination factors under 

§§ 37.10(b) and 38.12(b). 

B. Sections 37.10(b) and 38.12(b)— 

Factors To Consider To Make a Swap 

Available To Trade 

Proposed §§ 37.10(b) and 38.12(b) 

required a SEF or DCM to consider, as 

appropriate, the following factors with 

respect to a swap that it determines is 

available to trade: (1) Whether there are 

ready and willing buyers and sellers; (2) 

the frequency or size of transactions on 

SEFs, DCMs, or of bilateral transactions; 

(3) the trading volume on SEFs, DCMs, 

or of bilateral transactions; (4) the 

number and types of market 

participants; (5) the bid/ask spread; (6) 

the usual number of resting firm or 

indicative bids and offers; (7) whether a 

SEF’s trading system or platform or a 

DCM’s trading facility will support 

trading in the swap; or (8) any other 

factor that the SEF or DCM may 

consider relevant.90 Under the proposed 

rule, no single factor would be 

dispositive, as the DCM or SEF could 

consider any one factor or any 

combination of factors in its 

determination that a swap is available to 

trade. 

Summary of Comments 

Commenters expressed general 

support for the first seven proposed 

factors.91 Some commenters stated, 

however, that SEFs and DCMs should be 

required to consider specific factors.92

Some commenters also offered 

additional factors to consider, such as 

the ability to establish connectivity with 

new market participants without 

imposing undue burden; 93 the level of 

pre-trade transparency in the existing 

market; 94 and market depth and market 

breadth.95

Other commenters opposed the 

proposed factors.96 In particular, several 

commenters objected to the use of ‘‘any 

other factor’’ in a determination.97 Eaton 

Vance Management and ISDA, for 

example, considered ‘‘any other factor’’ 

to be too broad and subjective and 

thought that it would incentivize SEFs 

and DCMs to make illiquid swaps 

available to trade.98 ICI stated that the 

Commission would effectively delegate 

its authority to establish available-totrade standards by allowing a SEF or 

DCM to use this factor alone.99 CEWG 

similarly stated that use of nonenumerated factors by a SEF or DCM 

would create ‘‘uncertainty and 

variability’’ in the process.100

Some commenters also objected to 

allowing a SEF or DCM to make an 

available-to-trade determination based 

on any one proposed factor and some 

recommended that SEFs and DCMs be 

required to consider all of the factors.101

Vanguard and SIFMA AMG asserted 

that all of the factors are relevant 102 and 

that consideration of all factors would 

be consistent with the mandatory 

clearing determination process.103

CBOE, however, contended that 

required consideration of all the factors 

would frustrate Congress’s intent for 

greater transparency, competition, and 

oversight of the swaps market.104

Several commenters requested that 

the Commission set objective threshold 

criteria for the proposed factors.105

Commenters stated that without 

objective criteria, a SEF or DCM would 

otherwise have unlimited discretion 106

to act in its financial self-interest 107 by 

determining that a swap is available to 

trade. Some commenters, however, 

acknowledged the difficulty of 

developing objective liquidity 

measurements.108


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109SIFMA AMG Comment Letter at 2. 

110CEWG Comment Letter at 3. 

111See supra Section II.A.4—Consideration of 

Swaps on Another SEF or DCM, or Bilateral 

Transactions for the Commission’s discussion. 

112Tradeweb Comment Letter at 5. 

113SDMA Comment Letter at 7. 

114Eaton Vance Management Comment Letter at 

3; CEWG Comment Letter at 5; Chatham Comment 

Letter at 4. 

115FXall Comment Letter at 7; ICI Comment 

Letter at 8; ISDA Comment Letter at 9; Morgan 

Stanley Comment Letter at 8–9; Spring Trading 

Comment Letter at 1 (Feb. 13, 2012); UBS Comment 

Letter at 2; Chatham Comment Letter at 4–5. 

116MFA Comment Letter at 5; ICI Comment Letter 

at 8; AIMA Comment Letter at 3. 

117MFA Comment Letter at 5; FXall Comment 

Letter at 7; ICI Comment Letter at 8; FHLB 

Comment Letter at 3; Morgan Stanley Comment 

Letter at 8; CEWG Comment Letter at 5–6; SIFMA 

AMG Comment Letter at 9; ISDA Comment Letter 

at 9; AIMA Comment Letter at 4; MarketAxess 

Comment Letter at 8–9. 

118CEWG Comment Letter at 5; FXall Comment 

Letter at 7; JPMorgan Comment Letter at 3; Chatham 

Comment Letter at 4. 

Some commenters recommended 

imposing additional requirements on 

SEFs and DCMs with respect to 

considering the proposed factors. For 

example, SIFMA AMG recommended 

that a SEF or DCM must provide 

detailed reasoning and supporting 

evidence for the factors that it has 

considered.109 CEWG recommended 

that a SEF or DCM should provide an 

explanation to the Commission, subject 

to public comment, when it believes 

that certain factors do not apply.110

Commission Determination 

The Commission is adopting the rule 

as proposed under final §§ 37.10(b) and 

38.12(b), subject to two modifications 

and minor technical corrections. The 

Commission acknowledges commenters’ 

concerns regarding the consideration of 

‘‘any other factor’’ and thus is removing 

that factor from the final rule. The 

Commission believes that removing this 

factor will provide market participants 

with a more precise set of factors from 

which a swap may be made available to 

trade, thereby improving clarity, 

lessening uncertainty regarding how a 

determination may be made, and 

promoting a more consistent 

determination process. Further, given 

the adoption of a listing requirement, 

the Commission is removing an 

additional factor—whether a SEF’s or 

DCM’s trading facility or platform will 

support trading in the swap. This factor 

contemplated, among other things, 

whether the SEF or DCM lists the swap 

for trading on its trading facility or 

platform. Therefore, in light of the 

listing requirement, this factor is 

redundant. 

As discussed above, the Commission 

has determined in this final rule that a 

SEF or DCM may consider activity in 

the same swap listed on another SEF or 

DCM and the amount of off-exchange 

activity in the same swap.111 Therefore, 

the Commission is amending the second 

and third determination factors in 

proposed §§ 37.10(b)(2) and (3) and 

38.12(b)(2) and (3) to remove 

duplicative language related to this 

matter. 

The Commission believes that the 

remaining enumerated factors provide a 

sufficient framework from which SEFs, 

DCMs, the Commission and market 

participants may evaluate whether a 

swap is subject to the trade execution 

requirement. While each of the 

enumerated factors is an indicator of 

trading activity and may be relevant in 

a determination, the Commission 

believes that no single factor must 

always be considered, nor must a SEF 

or DCM consider more than one factor 

in a determination. Therefore, the 

Commission believes that satisfying any 

one of the determination factors would 

sufficiently indicate that the contract is 

available to trade. By adopting a more 

flexible approach, SEFs and DCMs will 

be able to accommodate swaps with 

different trading characteristics that can 

be supported in a centralized trading 

environment. The Commission does not 

believe that it is necessary for a SEF or 

DCM to analyze and demonstrate 

compliance with every factor in a 

submission. 

In response to SIFMA AMG’s 

recommendation that a SEF or DCM 

should be required to provide detailed 

reasoning and supporting evidence for 

the factors considered, the Commission 

notes that §§ 40.5(a)(5) and 40.6(a)(7) 

each requires submissions to contain an 

explanation and analysis of the 

determination, including the factors 

considered and its compliance with the 

CEA and Commission regulations. The 

Commission expects such an 

explanation and analysis to be clear and 

informative as to how the factor or 

factors apply to the swap. 

The Commission declines to adopt 

additional factors in the final rule as 

suggested by several commenters. The 

Commission believes that the 

enumerated factors provide a sufficient 

framework to allow: (1) A SEF or DCM 

to consider whether a swap should be 

subject to the trade execution 

requirement; (2) market participants to 

evaluate a determination and provide 

public comment; and (3) the 

Commission to evaluate a SEF’s or 

DCM’s determination that a swap is 

available to trade. Further, the 

Commission believes that the 

enumerated factors are broad in nature 

and incorporate many of the concepts 

recommended by commenters. 

The Commission acknowledges 

commenters’ request for establishing 

objective criteria associated with the 

factors and reiterates the view expressed 

in the FNPRM that as centralized 

trading develops and the Commission 

gains experience in oversight of swap 

markets, the Commission could then 

consider adopting objective criteria in a 

future rulemaking based upon an 

empirical analysis of swap trading data. 

C. Sections 37.10(c) and 38.12(c)— 

Applicability 

Proposed §§ 37.10(c)(1) and 

38.12(c)(1) required that upon the 

Commission deeming that a swap is 

available to trade based on a SEF or 

DCM submission, all other SEFs and 

DCMs listing or offering for trading such 

swap and/or any economically 

equivalent swap must make those swaps 

available to trade for purposes of the 

trade execution requirement under 

section 2(h)(8) of the CEA. The 

Commission defined ‘‘economically 

equivalent swap’’ under proposed 

§§ 37.10(c)(2) and 38.12(c)(2) as a swap 

that the SEF or DCM determines to be 

economically equivalent with another 

swap after consideration of each swap’s 

material pricing terms. The Commission 

also noted that if a DCM or SEF makes 

a swap available to trade, then the 

proposed rule would not require other 

DCMs and SEFs to list or offer that 

swap, or an economically equivalent 

swap, for trading. 

Summary of Comments 

Some commenters expressed general 

support for the economic equivalence 

requirement because it would enforce 

marketwide compliance with the trade 

execution requirement,112 increase 

liquidity, and promote a more efficient 

available-to-trade process by allowing 

SEFs and DCMs to rely on existing 

determinations.113 Many commenters, 

however, viewed the proposed 

definition of ‘‘economically equivalent 

swap’’ as excessively broad 114 and 

vague.115 Some commenters stated that 

the proposed definition would create 

uncertainty about which swaps are 

available to trade.116 Other commenters 

stated that the vagueness of the 

proposed definition would allow SEFs 

and DCMs to subject more swaps to 

mandatory trade execution,117 thereby 

allowing illiquid swaps to be available 

to trade.118 In addition, MarketAxess 

and CEWG commented that the 

proposed requirement is not prescribed 


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119MarketAxess Comment Letter at 9; CEWG 

Comment Letter at 5. 

120Morgan Stanley Comment Letter at 8; AIMA 

Comment Letter at 3 (based on the multitude of 

factors that affect the economic terms of a swap). 

121AIMA Comment Letter at 3; Morgan Stanley 

Comment Letter at 8; ICI Comment Letter at 8; MFA 

Comment Letter at 5; SIFMA AMG Comment Letter 

at 10; ISDA Comment Letter at 9; Sunguard Kiodex 

Comment Letter at 2; FXall Comment Letter at 7. 

122SIFMA AMG Comment Letter at 9. Several 

other commenters, though not all in support of 

eliminating the proposed requirement, also 

acknowledged that two otherwise identical swaps 

would also possess different liquidity 

characteristics if cleared at different clearinghouses. 

FSR Comment Letter at 3; Morgan Stanley Comment 

Letter at 9; Spring Trading Comment Letter at 2 

(Feb. 13, 2012). 

123SIFMA AMG Comment Letter at 10; CEWG 

Comment Letter at 5; ISDA Comment Letter at 9; 

AIMA Comment Letter at 4; Morgan Stanley 

Comment Letter at 9. 

124See supra note 14 for a discussion of the 

methods by which swaps that are subject to the 

trade execution requirement must be executed on 

a SEF or DCM. 

125Section 6(e)(5) of the CEA, as amended by 

section 741(b)(11) of the Dodd-Frank Act, prescribes 

that ‘‘[a]ny swap dealer or major swap participant 

that knowing or recklessly evades or participates in 

or facilitates evasion of the requirements of section 

2(h) [of the CEA] shall be liable . . .’’ (emphasis 

added). 7 U.S.C. 9a. 

126 76 FR 77734. 

127MFA Comment Letter at 4; FXall Comment 

Letter at 7–8; ICI Comment Letter at 7; SIFMA AMG 

Comment Letter at 11–12; Spring Trading Comment 

Letter at 7 (Jan. 12, 2012); ISDA Comment Letter at 

8–9; JPMorgan Comment Letter at 2. 

128 ISDA Comment Letter at 8–9; MFA Comment 

Letter at 4. 

129FXall Comment Letter at 8; MFA Comment 

Letter at 4. 

130 ISDA Comment Letter at 8–9. 

131MFA Comment Letter at 4; ICI Comment Letter 

at 7–8; FXall Comment Letter at 7–8. 

132FXall Comment Letter at 8. 

133FXall Comment Letter at 8; ICI Comment 

Letter at 7; Spring Trading Comment Letter at 7. 

134 ICI Comment Letter at 7. 

135MFA Comment Letter at 5. 

136Spring Trading Comment Letter at 7–8 (Jan. 

12, 2012); SDMA Comment Letter at 10. 

by statute.119 Morgan Stanley and AIMA 

stated that the concept itself is 

inherently ‘‘elusive and subjective.’’ 120

Other commenters thought that the 

process would create uncertainty as to 

which swaps are subject to mandatory 

trade execution.121 SIFMA AMG stated 

that swaps with slightly different 

characteristics, e.g., time to maturity, 

could differ in the requisite liquidity, 

yet both be determined to be available 

to trade based on economic 

equivalence.122

To prevent evasion of the trade 

execution requirement through slight 

modification of a swap’s terms, some 

commenters recommended that the 

Commission should rely on its antievasion authority under section 6(e) of 

the CEA.123

Commission Determination 

At this time, the Commission is 

adopting the rule as proposed with 

certain modifications under a new 

subsection titled, ‘‘Applicability,’’ for 

SEFs or DCMs that list or offer the same 

swap for trading. The Commission, 

however, is not adopting the proposed 

definition of economically equivalent 

swaps. The Commission intended the 

economic equivalence requirement as a 

means to avoid knowing or reckless 

evasion of the trade execution 

requirement, which could potentially 

occur if a SEF or DCM, acting in concert 

with a market participant, lists and 

allows trading of swaps with slightly 

amended terms to a swap previously 

determined to be available to trade. 

Given that the factors that could be 

considered may vary across different 

asset classes and products, the 

Commission recognizes the complexity 

of determining economic equivalence 

between swaps. Further, based on the 

comments received, the Commission 

has determined that it is not feasible, for 

purposes of determining which swaps 

are available to trade, to define 

‘‘economic equivalent’’ with sufficient 

precision and clarity. 

The Commission is also amending the 

rule text to clarify that once a swap is 

determined to be available to trade 

under part 40 of the Commission’s 

regulations (i.e., the Commission 

approves a SEF’s or DCM’s available-totrade submission under § 40.5 or the 

submission is deemed as certified under 

§ 40.6), then all other SEFs and DCMs 

that choose to list or offer the swap for 

trading must do so in accordance with 

the trade execution requirement.124

Subsequent SEFs and DCMs will not be 

required to submit separate available-totrade determinations to the Commission 

for a particular swap after it has been 

determined to be available to trade. 

Importantly, no SEF or DCM is required 

to list or offer a swap for trading even 

if another SEF or DCM has determined 

it is available to trade. Once a swap is 

available for trade for purposes of 

section 2(h)(8), however, that swap may 

only be executed on a SEF or DCM. 

In response to commenters who 

recommended that the Commission rely 

on its existing anti-evasion authority, 

the Commission notes that its antievasion authority as constituted under 

section 6(e) of the CEA would not apply 

to SEFs and DCMs.125 Section 6(e)(5), 

however, would apply to the actions of 

certain market participants—swap 

dealers and major swap participants in 

particular—that are carried out to evade 

the trade execution requirement. 

D. Sections 37.10(d) and 38.12(d)— 

Removal 

The proposed rule requested 

comment on (1) whether the 

Commission should specify a process 

where a swap may be determined to be 

no longer available to trade; and (2) if 

so, whether the part 40 processes should 

be used for this process. The proposed 

rule also requested comment on 

whether such a determination should 

apply only to the SEF or DCM that seeks 

to make the swap no longer available to 

trade.126

Summary of Comments 

Several commenters responded to the 

Commission’s request for comments 

related to whether the Commission 

should specify a process whereby a 

swap that has been determined to be 

available to trade may no longer be 

available to trade. Several commenters 

supported the development of a process 

under which a swap could be 

determined to be no longer available to 

trade for the purposes of the trade 

execution requirement. Commenters 

recommended that the Commission 

retain the authority to make such a 

determination 127 based on the 

Commission’s access to data 

demonstrating a swap’s overall 

liquidity 128 and the desire to prevent a 

SEF or DCM from making conflicting 

determinations with respect to the same 

swap.129 ISDA, however, recommended 

that market participants should be able 

to submit to the Commission that a 

swap is no longer available to trade 

because they would have experience 

and relevant knowledge of market 

trends and changes.130

Some commenters recommended use 

of the same factors as those used when 

making a determination that a swap is 

available to trade, albeit with objective 

thresholds.131 FXall asserted that using 

objective criteria would render the 

removal process ‘‘transparent and 

impartial.’’ 132

Some commenters recommended that 

a determination that a swap is no longer 

available to trade should be subject to 

public notice and comment.133

Accordingly, ICI recommended against 

using the procedures under §§ 40.5 and 

40.6 because they lack adequate 

opportunity for public comment.134

MFA also recommended that the 

Commission provide public notice after 

a swap is determined to be no longer 

available to trade.135

Some commenters stated that a 

determination that a swap is no longer 

available to trade should only apply to 

the petitioning SEF or DCM.136 Spring 

Trading and SDMA stated that to apply 

the determination on a marketwide 


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137 Id. 

138MFA Comment Letter at 4–5; ICI Comment 

Letter at 8. 

139 ICI Comment Letter at 8. 

140 In some instances, a swap that is available to 

trade potentially should no longer be subject to the 

trade execution requirement, but not all SEFs and 

DCMs have de-listed the swap. In such a case, the 

Commission may choose to review the available-totrade status of such a swap, under § 40.2(b) or 

§ 40.3(a)(10) of the Commission’s regulations, 

which authorizes Commission staff to request, on 

an ongoing basis, additional information, evidence, 

or data that meets the requirements of the CEA or 

the Commission’s regulations or policies 

thereunder. Further, market participants may 

request that the Commission, under section 8a(7) of 

the CEA, designate a swap to be no longer available 

to trade. Under section 8a(7), the Commission could 

initiate a proceeding to amend a SEF or DCM’s 

available-to-trade designation of a swap if such a 

change is necessary for . . . the protection of 

traders’’ with respect to ‘‘other trading 

requirements.’’ First, however, the Commission 

must request in writing that the change be made 

and provide for appropriate notice and opportunity 

for hearing. The Commission, however, 

acknowledges that the section 8a(7) process is 

complex and emphasizes that the process should 

only be invoked where a swap clearly should not 

remain available to trade, but a SEF or DCM has 

declined a request to initiate a new assessment. 

141Under § 40.6(a) of the Commission’s 

regulations, the Commission would receive notice 

that a SEF or DCM has de-listed a swap through a 

submission, submitted in compliance with 

§§ 40.6(a)(1) and (2) and 40.6(a)(7). 

142Tradeweb Comment Letter at 5; CME 

Comment Letter at 7; Spring Trading Comment 

Letter at 7 (Jan. 12, 2012). 

143Tradeweb Comment Letter at 5. 

144Morgan Stanley Comment Letter at 8; MFA 

Comment Letter at 4–5; ISDA Comment Letter at 8; 

AIMA Comment Letter at 2–3; Eaton Vance 

Management Comment Letter at 4; ICI Comment 

Letter at 7; Markit Comment Letter at 4; Vanguard 

Comment Letter at 6; JPMorgan Comment Letter at 

2; SIFMA AMG Comment Letter at 11; FSR 

Comment Letter at 3–4. 

145Markit Comment Letter at 4; MFA Comment 

Letter at 4; Vanguard Comment Letter at 6; SIFMA 

AMG Comment Letter at 11. CME recommended 

that the Commission conduct the review of all 

existing available-to-trade determinations within 30 

days of December 31 of each year to minimize costs 

and administrative burdens. For determinations 

submitted after June 30 of a given year, the annual 

review would occur within 30 days of December 31 

of the following year. CME Comment Letter at 7. 

146CME Comment Letter at 7. 

147Tradeweb Comment Letter at 5. 

148WMBAA Comment Letter at 4. 

149Sunguard Kiodex Comment Letter at 2. 

150SDMA Comment Letter at 10; WMBAA 

Comment Letter at 4. 

151Spring Trading Comment Letter at 7 (Jan. 12, 

2012); Eaton Vance Management Comment Letter at 

4; Tradeweb Comment Letter at 5; SIFMA AMG 

Comment Letter at 11; MFA Comment Letter at 4; 

Markit Comment Letter at 4. 

basis would otherwise unfairly penalize 

other non-petitioning SEFs or DCMs.137

ICI and MFA, however, stated that the 

determination should apply to all SEFs 

and DCMs that list or offer the swap for 

trading.138 ICI stated that applying the 

determination to only one SEF or DCM 

would be inconsistent with the trade 

execution requirement.139

Commission Determination 

The Commission is not adopting a 

separate process for a SEF or DCM to 

submit a determination that a swap is 

no longer available to trade. Rather, the 

Commission believes that where all 

SEFs and DCMs that had listed a swap 

for trading, including the SEF or DCM 

that submitted the initial available-totrade determination under part 40, no 

longer list that swap for trading on their 

respective facility or platform, (i.e., all 

such SEFs and DCMs have ‘‘de-listed’’ 

the swap),140 then the Commission 

would deem the swap to be no longer 

available to trade. In such a case, trading 

in the swap would no longer be subject 

to the trade execution requirement. The 

Commission believes that this approach 

is consistent with section 2(h)(8) of the 

CEA, which states a swap would 

otherwise not be subject to the trade 

execution requirement if, among other 

things, no SEF or DCM makes it 

available to trade. 

Where all SEFs and DCMs no longer 

list that swap for trading—denoting that 

open interest in that swap does not exist 

on any facility or platform 141—the 

Commission would deem the swap as 

no longer available to trade because that 

swap would no longer meet any of the 

determination factors. The Commission, 

which will maintain and update a list of 

the SEFs and DCMs that list those 

available-to-trade swaps, will have 

access to the information and the ability 

to make the determination, without 

requiring a separate process. In response 

to FXall, the Commission believes that 

this approach would be transparent and 

impartial. In response to MFA’s 

recommendation, the Commission will 

inform the public that a swap is no 

longer available to trade via notice 

pursuant to new §§ 37.10(d) and 

38.12(d) (‘‘Removal’’). The Commission 

is also delegating authority to the 

Director of the Division of Market 

Oversight to issue notice in this 

instance. 

E. Annual Review 

Proposed §§ 37.10(d) and 38.12(d) 

required that a SEF or DCM perform an 

annual review and assessment of each 

swap that it has made available to trade. 

The proposed rule envisioned that an 

annual review would ensure that SEFs 

and DCMs evaluate on a regular basis 

whether swaps previously determined 

to be available to trade should continue 

to be ‘‘available to trade’’ for the 

purposes of the trade execution 

requirement. In the annual review and 

assessment, SEFs and DCMs would be 

required to consider the proposed 

factors in §§ 37.10(b) and 38.12(b), 

respectively. Upon completion of the 

annual review, a SEF or DCM would be 

required to provide the Commission 

with an electronic report of the review 

and assessment, including any 

supporting information or data, no later 

than 30 days after its fiscal year end. 

The proposed rule requested comment 

on whether SEFs and DCMs should 

conduct the review and assessment. 

Summary of Comments 

Several commenters supported the 

proposed annual review requirement.142

Tradeweb, however, requested that the 

Commission clarify the effect of the 

proposed annual review process.143

Some commenters stated that additional 

reviews were necessary because swaps 

could become illiquid between 

scheduled annual reviews, yet still be 

subject to the trade execution 

requirement. Thus, they recommended 

more frequent reviews, such as on a 

quarterly basis.144 Several commenters, 

however, stated that the Commission, 

rather than SEFs, should conduct the 

review and assessment for similar 

reasons as those offered in support of 

allowing the Commission to exclusively 

determine whether a swap is available 

to trade.145 CME, for example, 

recommended that the Commission 

conduct the review by obtaining data 

from SDRs in order to minimize overall 

costs.146

Some commenters further 

recommended that market participants 

have the opportunity to participate in 

the process. Tradeweb recommended 

that reviews and assessments be subject 

to public comment because of their 

market impact.147

Other commenters opposed the 

proposed requirement. WMBAA stated 

that an annual review and assessment 

would be arbitrary, time-consuming, 

and offers insufficient regulatory 

value.148 Sunguard Kiodex asserted that 

periodic reviews would cause swaps’ 

available-to-trade status to fluctuate, 

therefore negating the benefit of an 

initial determination.149 WMBAA and 

SDMA recommended that a SEF or DCM 

be able to rely solely on the clearing 

determination review instead and 

annually renew its self-certification 

without submitting a report.150

With respect to the factors to be 

considered in an annual review, some 

commenters supported use of the 

proposed determination factors in 

§§ 37.10(b) and 38.12(b).151 Eaton Vance 

Management recommended that a SEF 

or DCM must affirmatively report each 

factor that a swap meets to continue to 


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152Eaton Vance Management Comment Letter at 

4. 

153SIFMA AMG Comment Letter at 11; MFA 

Comment Letter at 4; Markit Comment Letter at 4; 

AIMA Comment Letter at 3. 

154 ICI Comment Letter at 7; Eaton Vance 

Management Comment Letter at 2. 

155See supra note 140. Under 17 CFR 40.2(b) and 

40.3(a)(10), when requested by Commission staff, a 

SEF or DCM is required to submit additional 

evidence, information, or data that demonstrates 

that a swap listed for trading meets the CEA’s 

requirements or the Commission’s regulations. 

Under §§ 37.5 and 38.5 of the Commission’s 

regulations, respectively, the Commission may also 

request a SEF or DCM to file information related to 

its business as a SEF or DCM, including trading 

information, in a particular form, manner, and time 

as specified. 

156 ICI Comment Letter at 10; Bloomberg 

Comment Letter at 3 n.9; SIFMA AMG Comment 

Letter at 12–13; AIMA Comment Letter at 4. SIFMA 

AMG and AIMA also recommended that such a 

centralized location could be operated by an 

independent third party. 

157SIFMA AMG Comment Letter at 13. SIFMA 

AMG requested that the Commission establish the 

Web site location prior to designating any swaps as 

available to trade. Id. In response to SIFMA AMG’s 

comment, the Commission anticipates that this Web 

page will be established as soon as technologically 

feasible, and may or may not occur prior to the 

effective date of this rule. CME also requested that 

the Commission publish a list, on its Web site and 

in the Federal Register, of all swaps under current 

assessment. CME Comment Letter at 7. The 

Commission notes that §§ 40.5 and 40.6 filings will 

already be posted on its Web site. 

158The Commission proposed to phase in 

compliance with the clearing requirement, and the 

trade execution requirement thereof, by category of 

market participant. As proposed, Category 1 

entities, which included a swap dealer, a securitybased swap dealer, a major swap participant, a 

major security-based swap participant, or an active 

fund, would have 90 days to comply with the 

clearing requirement. Category 2 entities, which 

include a commodity pool, private fund, employee 

benefit plan, or person predominantly engaged in 

activities that are in the business of banking or are 

financial in nature, would have 180 days to comply 

with the clearing requirement. Certain third-party 

subaccounts and all other swap transactions would 

receive 270 days to comply with the clearing 

requirement. With the exception of removing 

employee benefit plans from Category 2 and 

allowing such plans 270 days to comply with the 

clearing requirement, the Commission adopted this 

compliance schedule generally as proposed. See 

Swap Transaction Compliance and Implementation 

Schedule: Clearing Requirement under Section 2(h) 

of the CEA, 77 FR 44441 (July 20, 2012). 

159See Swap Transaction Compliance and 

Implementation Schedule: Clearing and Trade 

Execution Requirements under Section 2(h) of the 

CEA, 76 FR 58186 (Sep. 20, 2011). In this final rule, 

the Commission is finalizing the compliance and 

implementation schedule for the trade execution 

requirement, and therefore, addresses the relevant 

comments submitted in response to this proposed 

rule. 

160 76 FR 77731 n.38. 

161 76 FR 58192. 

162Chris Barnard Comment Letter at 2 (Sep. 23, 

2011); Tradeweb Comment Letter at 2–4 (Nov. 4, 

2011); Better Markets Comment Letter at 2 (Nov. 4, 

2011). 

163Tradeweb Comment Letter at 4. 

164AIMA Comment Letter at 3 (Nov. 3, 2011); 

MarkitSERV Comment Letter at 5 (Nov. 2011); 

Citadel Comment Letter at 5 (Nov. 4, 2011); MFA 

Comment Letter at 7 (Nov. 4, 2011); Vanguard 

Comment Letter at 5 (Nov. 4, 2011) (recommending 

180-day compliance period between the effective 

date of the clearing requirement and the trade 

execution requirement). 

165MFA Comment Letter at 10–11. 

be available to trade.152 Other 

commenters stated that the Commission 

should establish objective review and 

assessment criteria.153

ICI and Eaton Vance Management 

requested that the electronic reports to 

be submitted to the Commission also be 

made available to the public.154

Commission Determination 

The Commission is not adopting the 

proposed annual review requirement. 

The Commission intended the 

requirement to ensure that a SEF or 

DCM would regularly evaluate trading 

for the swaps that it has determined to 

be available to trade for purposes of the 

trade execution requirement. Based on 

the approach adopted for determining 

that a swap is no longer available to 

trade, however, the Commission 

believes that requiring SEFs and DCMs 

to submit a review or assessment is not 

necessary. A SEF or DCM will likely 

review, on an ongoing basis, whether 

swaps listed or offered for trading on its 

system or platform should continue to 

be listed or offered for trading. Such a 

review would likely consider one or 

more factors that are similar to those 

that can be used to determine if a swap 

is available to trade. Further, if the 

Commission believes that a review of a 

swap’s available-to-trade status is 

warranted, then it may request that SEFs 

and DCMs submit relevant information 

to conduct that review under §§ 40.2(b) 

and 40.3(a)(10) of the Commission’s 

regulations, respectively.155

F. Notice to the Public of Available To 

Trade Determinations 

The Commission noted in the FNPRM 

that §§ 40.5 and 40.6 provide a process 

for notifying the public that a SEF or 

DCM has made an available-to-trade 

determination—SEFs and DCMs are 

required to post a notice and a copy of 

the rule submission on their respective 

Web sites concurrent with their filings 

at the Commission. The Commission 

stated that it would also post the filings 

on its Web site. The Commission also 

stated that it would assess the feasibility 

of posting notices of all swaps that are 

determined to be available to trade on 

an easily accessible page on its Web site. 

Commenters supported the proposal to 

provide notice to market participants 

through a central location on the 

Commission’s Web site.156 SIFMA AMG 

stated that a list would help market 

participants comply with the rules.157

The Commission agrees with 

commenters that a centralized list 

would help market participants, as well 

as SEFs and DCMs, comply with the 

Commission’s rules and regulations 

related to the trade execution 

requirement. Therefore, the Commission 

will post such determinations on its 

Web site where market participants can 

readily ascertain which swaps have 

been determined to be available to trade, 

and therefore subject to the trade 

execution requirement, including the 

SEFs and DCMs that list or offer those 

swaps for trading. 

III. Sections 37.12 and 38.11 of the 

Commission’s Regulations—Trade 

Execution Compliance Schedule 

Proposed §§ 37.12(a) and 38.11(a) 

required market participants to comply 

with the trade execution requirement 

under section 2(h)(8) of the CEA upon 

the later of (1) the applicable deadline 

established under the compliance 

schedule for the clearing requirement 

for a swap,158 or (2) 30 days after the 

swap is first made available to trade on 

either a SEF or DCM.159 In the proposed 

rule, the Commission noted that while 

the available-to-trade determination 

could precede the clearing requirement 

and vice versa, the trade execution 

requirement would not be in effect until 

the clearing requirement takes effect.160

The Commission sought comment as to 

whether 30 days would be sufficient for 

necessary technological linkages to be 

established between (1) DCOs, DCMs, 

and SEFs; and (2) DCMs, SEFs, and 

market participants.161

Summary of Comments 

Some commenters generally 

supported the proposed compliance 

schedule for the trade execution 

requirement,162 but Tradeweb 

commented that a 30-day 

implementation period may not be 

sufficient for a class of swaps that is 

available to trade for the first time and 

recommended that the Commission 

maintain the authority to set an 

appropriate implementation period on a 

case-by-case basis for a class of swaps, 

with input from SEFs, DCMs, and 

market participants.163

Several commenters recommended 

that the trade execution requirement 

should become effective only after the 

clearing requirement is fully 

implemented.164 MFA commented that 

allowing mandatory trade execution to 

become effective simultaneously with 

mandatory clearing would potentially 

dilute market participants’ resources to 

comply with both requirements.165 MFA 

also recommended that all market 

participants be required to comply with 


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Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 33617 

166 Id. at 12. 

167 JPMorgan Comment Letter at 3–4; UBS 

Comment Letter at 2; ICI Comment Letter at 5 (Nov. 

4, 2011); CME Comment Letter at 2 (Nov. 4, 2011); 

Westpac Comment Letter at 3 (Nov. 4, 2011); 

Regional Banks Comment Letter at 7 (Nov. 4, 2011); 

FHLBanks Comment Letter at 5 (Nov. 4, 2011); ICI 

Comment Letter at 9; ISDA Comment Letter at 11; 

AIMA Comment Letter at 2–3; UBS Comment Letter 

at 2; ISDA Comment Letter at 11; ACLI Comment 

Letter at 2. 

168 JPMorgan Comment Letter at 3; UBS Comment 

Letter at 2. Based on proposed §§ 37.12(a) and 

38.11(a), commenters assumed that 30 days after the 

swap is made available to trade falls upon the later 

date than the applicable compliance date for the 

clearing requirement. 

169 JPMorgan Comment Letter at 3–4; ISDA 

Comment Letter at 11; FHLBanks Comment Letter 

at 5 (Nov. 4, 2011); Westpac Comment Letter at 

2–3 (Nov. 4, 2011). 

170FHLBanks Comment Letter at 5 (Nov. 4, 2011). 

171FSR Comment Letter at 4; Bloomberg 

Comment Letter at 5; ICI Comment Letter at 8; ISDA 

Comment Letter at 11; Eaton Vance Management 

Comment Letter at 3; Chatham Comment Letter at 

4; SIFMA AMG Comment Letter at 9; CME 

Comment Letter at 6–7; Westpac Comment Letter at 

3 (Nov. 21, 2011); ICI Comment Letter at 5 (Nov. 

4, 2011). 

172MFA Comment Letter at 4; Vanguard 

Comment Letter at 6; SIFMA AMG Comment Letter 

at 9; AIMA Comment Letter at 3; CME Comment 

Letter at 6–7. 

173CME Comment Letter at 2 (Nov. 4, 2011). 

174 ICI Comment Letter at 5 (Nov. 4, 2011). 

175SIFMA AMG Comment Letter at 9; ICI 

Comment Letter at 9; AIMA Comment Letter at 3; 

CME Comment Letter at 7; ISDA Comment Letter 

at 11; Westpac Comment Letter at 3; FIA/ISDA/ 

SIFMA Comment Letter at 8 (Nov. 4, 2011). 

176Chatham Comment Letter at 4; FXall Comment 

Letter at 7; ICI Comment Letter at 8; SIFMA AMG 

Comment Letter at 9. 

177FXall Comment Letter at 7; ICI Comment 

Letter at 9; CME Comment Letter at 6–7; Vanguard 

Comment Letter at 6; Bloomberg Comment Letter at 

5; Westpac Comment Letter at 3 (Nov. 4, 2011). 

178Chatham Comment Letter at 4; FSR Comment 

Letter at 4. 

179SIFMA AMG Comment Letter at 9. 

180Eaton Vance Management Comment Letter at 

3; ISDA Comment Letter at 11. 

181Westpac Comment Letter at 3 (Nov. 4, 2011); 

FHLBanks Comment Letter at 5 (Nov. 4, 2011). 

182SIFMA AMG Comment Letter at 9; Vanguard 

Comment Letter at 6. 

183See supra note 52. 

184See id. 

185See id. 

the trade execution requirement at the 

same time, rather than through a 

phased-in approach, to avoid 

fragmenting market liquidity.166

Other commenters stated that the 

proposed schedule does not afford 

adequate time for market participants to 

comply with the trade execution 

requirement, particularly with regards 

to the proposed 30-day postdetermination implementation 

period.167 JPMorgan and UBS stated that 

where a SEF or DCM submits a swap as 

available to trade using § 40.6, market 

participants could be required to 

transfer their existing trading in that 

swap onto a SEF or DCM within only 40 

days of the submission.168

Some commenters noted that 

implementing new infrastructure, 

standards, and procedures necessary to 

comply with the trade execution 

requirement would require a longer 

post-determination period.169 For 

example, FHLBanks commented that 

new infrastructure and procedures are 

necessary to ensure that swaps are 

properly submitted to a counterparty’s 

FCM and to a DCO.170 Some 

commenters also cited the need for 

market participants to develop adequate 

connectivity 171 and to obtain trading 

access 172 to a SEF or DCM. CME 

commented that DCOs, DCMs, and SEFs 

would not likely be able to establish the 

requisite technological linkages within 

the proposed 30-day implementation 

period,173 while ICI commented that 

smaller market participants could need 

more than 30 days to connect to a SEF 

or DCM offering an actively traded 

swap.174 Other commenters noted that 

market participants would also need 

time to complete applicable 

documentation and agreements.175

Some commenters further stated that a 

longer implementation period would 

promote greater competition among 

trading venues and mitigate a SEF’s or 

DCM’s attempt to capture market 

share.176

Commenters provided several 

suggestions for a longer postdetermination period. Several 

commenters recommended a 90-day 

period after a swap is made available to 

trade,177 while Chatham and FSR 

recommended at least a 6-month 

period.178 SIFMA AMG recommended 

an implementation period of at least 90 

days after the swap becomes subject to 

the trade execution requirement,179

while some commenters recommended 

a similar period of at least 6 months,180

particularly for market participants who 

are neither swap dealers or major swap 

participants.181 SIFMA AMG and 

Vanguard stated that the period could 

be shortened over time as market 

participants become more experienced 

with centralized trading.182

Commission Determination 

The Commission is adopting 

§§ 37.12(a) and (b) and 38.11(a) and (b) 

as proposed with minor technical 

corrections, but is also amending the 

proposed rule text to clarify that market 

participants must comply with the trade 

execution requirement upon the later of 

(1) the applicable deadline established 

under the compliance schedule for the 

clearing requirement for a swap,183 or 

(2) 30 days after the available-to-trade 

determination for that swap is deemed 

approved under § 40.5 or deemed 

certified under § 40.6 by the 

Commission as available to trade. As 

noted earlier, the Commission 

anticipates that because of the novel 

nature of the available-to-trade 

determinations, the initial 

determinations would likely be subject 

to a stay under § 40.6 for an additional 

90-day review period or an extension of 

the 45-day review period under § 40.5 

for an additional 45 days. Accordingly, 

the Commission’s part 40 rule review 

procedures should provide market 

participants with adequate advance 

notice of the possible application of the 

trade execution requirement to a 

particular swap. The Commission 

believes that this period, along with the 

subsequent 30-day post-determination 

implementation period, is a sufficient 

amount of time for SEFs, DCMs, and 

market participants to become familiar 

and comply with the trade execution 

requirement. Taken in concert with the 

implementation schedule adopted for 

swaps subject to clearing requirement, 

the Commission also believes that this 

time is sufficient with respect to 

mandatory trade execution for an 

individual swap or a group, type, 

category, or class of swaps.184

To the extent that the phased-in 

compliance schedule for the clearing 

requirement previously adopted by the 

Commission may lead to phased-in 

compliance with the trade execution 

requirement, the Commission supports 

this approach. The Commission believes 

that the phased-in schedule for the 

former requirement—which accounts 

for a market participant’s ability to 

comply based on risk profile, 

compliance burden, resources, and 

expertise—also applies with respect to 

compliance with the latter requirement. 

The Commission further notes that the 

concerns about fragmenting market 

liquidity caused by a phased-in 

approach are mitigated by (1) the 

phasing-in of similar entities, who 

transact similar volumes of swaps, 

under similar timelines and (2) the 

relatively compact timeframe in which 

market participants in all three clearing 

implementation and compliance 

categories must comply with the trade 

execution requirement.185

Finally, the Commission notes that a 

trading facility could still clear and list 

a swap for trading after it is determined 

to be subject to the trade execution 

requirement, but prior to the effective 

date. 


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186 5 U.S.C. 601 et seq. 

187 47 FR 18681–31 (Apr. 30, 1982). 

188See 47 FR 18618, 18619 (Apr. 30, 1982) 

discussing DCMs; 66 FR 45604, 45609 (Aug. 29, 

2001) discussing DTEFs; 76 FR 1214, 1235 

discussing SEFs. 

189 76 FR 58193. 

190 44 U.S.C. 3501 et seq. 

191 76 FR 58193. 

192 7 U.S.C. 12(a)(1). 

193 5 U.S.C. 552a. 

194MarketAxess Comment Letter at 7–8; SDMA 

Comment Letter at 4–5. 

195MarketAxess Comment Letter at 6. 

196 Id. at 7. 

197SDMA Comment Letter at 6–7. 

198Sunguard Kiodex Comment Letter at 3. 

199WMBAA Comment Letter at 5; Spring Trading 

Comment Letter at 5 (Jan. 12, 2012). 

200 Id. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires federal agencies, in 

promulgating regulations, to consider 

the impact of those regulations on small 

entities.186 The Commission has 

previously established certain 

definitions of ‘‘small entities’’ to be used 

by the Commission in evaluating the 

impact of its regulations on small 

entities in accordance with the RFA.187

The Commission has previously 

determined that DCMs and SEFs are not 

‘‘small entities’’ for purposes of the 

RFA.188 The subject of this rulemaking 

also provides a compliance schedule for 

a new statutory requirement, section 

2(h)(8) of the CEA, and does not itself 

impose significant new regulatory 

requirements.189 Accordingly, the 

Commission received no comments on 

the Chairman’s certification of the 

impact of the rules contained herein on 

small entities. Therefore, the Chairman, 

on behalf of the Commission, hereby 

certifies pursuant to 5 U.S.C. 605(b) that 

the rule will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 190 imposes certain 

requirements on federal agencies in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. An 

agency may not conduct or sponsor, and 

a registered entity is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number by the Office of 

Management and Budget (‘‘OMB’’). This 

final rule contains new collection of 

information requirements within the 

meaning of the PRA. Accordingly, in 

connection with the FNPRM, the 

Commission submitted an information 

collection requested, titled ‘‘Parts 37 

and 38—Process for a Swap Execution 

Facility or Designated Contract Market 

to Make a Swap Available to Trade’’ and 

supporting documentation to OMB for 

its review and approval in accordance 

with 44 U.S.C. 3507(d) and 5 CFR 

1320.11, and requested that OMB 

approve and assign a new control 

number for the collections of 

information covered by the FNPRM. 

Additionally, pursuant to 44 U.S.C. 

3506(c)(2)(B), the Commission, in the 

FNPRM, requested comments from the 

public on the proposed information 

collection requirements in order to, 

among other items, evaluate the 

necessity of the proposed collections of 

information and minimize the burden of 

the information collection requirements 

on respondents. On September 12, 2012, 

OMB assigned control number 3038– 

0099 to this collection of information, 

but withheld final approval pending the 

Commission’s resubmission of the 

information collection, which includes 

a description of the comments received 

on the collection and the Commission’s 

responses thereto. 

With respect to the adoption of 

§§ 37.12(a) and 38.11(a)—the trade 

execution compliance schedule—as 

stated in the prior proposed rule, this 

requirement will not require a new 

collection of information from any 

persons or entities.191

The Commission protects proprietary 

information according to the Freedom of 

Information Act and 17 CFR part 145, 

‘‘Commission Records and 

Information.’’ In addition, section 

8(a)(1) of the CEA strictly prohibits the 

Commission, unless specifically 

authorized by the CEA, from making 

public ‘‘data and information that 

would separately disclose the business 

transactions or market positions of any 

person and trade secrets or names of 

customers.’’ 192 The Commission is also 

required to protect certain information 

contained in a government system of 

records according to the Privacy Act of 

1974.193

1. Proposed Information Provided by 

Reporting Entities/Persons 

In the FNPRM, the Commission 

estimated that 50 registered entities will 

be required to file part 40 rule 

submissions and annual reports. 

Based on the previously estimated 

hours of burden under part 40 and the 

estimated additional time that a SEF or 

DCM would require to review 

applicable factors and data to make a 

determination, the Commission 

estimated that the hourly burden for a 

SEF or DCM under proposed §§ 37.10(a) 

and 38.12(a) to submit an available-totrade determination would be 8 hours 

per submission. The Commission, 

however, did not provide an average 

annual hours of burden for each SEF or 

DCM to submit available-to-trade 

determinations under proposed 

§§ 37.10(a) and 38.12(a) because, as 

stated in the FNPRM, it is not feasible 

to determine the number of part 40 rule 

submission filings, on average, that each 

SEF or DCM would submit, as the 

number of swap contracts to be traded 

on a DCM or SEF and the number of 

those swaps that a SEF or DCM will 

eventually submit as available to trade 

is presently unknown. 

2. Summary of Comments and 

Commission Response 

Sections 37.10(a) and 38.12(a)—Process 

To Make a Swap Available To Trade 

MarketAxess and SDMA 

characterized the proposed approach as 

burdensome and commented that it 

would require SEFs to expend a 

significant amount of time and 

resources.194 MarketAxess 

recommended an alternative 

‘‘recognition and notification’’ process 

in which a SEF or DCM provides notice 

to the Commission that a swap is 

available to trade when it becomes 

subject to the clearing requirement.195

MarketAxess stated that this approach 

would allow SEFs to use their resources 

in a more efficient manner.196 SDMA 

supported the part 40 approach, but 

stated that a SEF should determine if a 

swap is available to trade based on 

whether the swap is required to be 

cleared, not based on the enumerated 

factors.197 Sunguard Kiodex also 

recommended an alternative approach— 

a real-time ‘‘illiquidity’’ test that would 

temporarily permit off-facility trading in 

a swap based on certain market 

observations—that would require less 

time and reduce costs.198 WMBAA and 

Spring Trading commented that the 

Commission’s estimate of the hours of 

burden for a SEF or DCM to make an 

available-to-trade determination are too 

low based on the different types of 

personnel that would be involved in a 

determination.199 Spring Trading 

estimated that each rule filing would 

require at least 15–20 hours.200

The Commission notes that the 

alternative approaches proposed by 

commenters would eliminate a separate 

formal determination process. As stated 

in the preamble, however, the 

Commission believes that determining 

whether a swap is available to trade and 

whether a swap should be mandatorily 

cleared should remain separate 


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Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 33619 

201 76 FR 77734. 

202 Dodd-Frank Act section 701, et seq. 

203See, e.g., Financial Crisis Inquiry Commission, 

‘‘The Financial Crisis Inquiry Report: Final Report 

of the National Commission on the Causes of the 

Financial and Economic Crisis in the United States’’ 

at xxiv (Jan. 2011), available at http://www.gpo.gov/ 

fdsys/pkg/GPO–FCIC/pdf/GPO–FCIC.pdf. (listing 

uncontrolled leverage; lack of transparency, capital 

and collateral requirements; speculation; 

interconnection among firms; and concentrations of 

risk in the market as contributing factors). 

204S. Rep. No. 111–176, at 92 (2010). 

205SEFs are a new type of regulated marketplace 

modeled largely on the existing Commissionregulated DCM structure. Section 1a(50) of the CEA, 

as enacted by section 721 of the Dodd-Frank Act, 

defines a SEF as ‘‘a trading system or platform in 

which multiple participants have the ability to 

execute or trade swaps by accepting bids and offers 

made by multiple participants in the facility or 

system, through any means of interstate commerce, 

including any trading facility, that (A) facilitates the 

execution of swaps between persons; and (B) is not 

a designated contract market.’’ 7 U.S.C. 1a(50). 

Section 5h(a)(1) of the CEA, as amended by the 

section 733 of the Dodd-Frank Act, prohibits any 

person from operating a facility for the trading and 

processing of swaps unless the facility is registered 

as a SEF or a DCM. 7 U.S.C. 7b–3(a)(1). 

206CEA section 2(h)(8), 7 U.S.C. 2(h)(8). 

207 7 U.S.C. 2(h)(7). 

208Asymmetric information exists when one 

counterparty to a transaction has more or better 

information than the other counterparty. In some 

instances, a dealer could have an information 

advantage over a non-dealer, and vice versa. Abuse 

of this advantage is likely to contribute to market 

failure. By definition, bilateral negotiations imply 

lower levels of transparency of orders, quotes, 

trades and transaction prices. In the context of swap 

markets, as dealers are on one side of a large 

fraction of trades, they are privy to better 

information on prevailing market conditions and 

valuations relative to their non-dealer 

counterparties. See ‘‘An Analysis of OTC Interest 

Rate Derivatives Transactions: Implications for 

Public Reporting,’’ Michael Fleming, John Jackson, 

Ada Li, Asani Sarkar, and Patricia Zobel, Federal 

Reserve Bank of New York Staff Reports, no. 557, 

at 6 n.14 (Mar. 2012). Major derivatives dealer 

activity accounts for 89 percent of the total interest 

rate swap activity in notional terms. Id. 

209See Core Principles and Other Requirements 

for Swap Execution Facilities (May 16, 2013). 

210See Procedures to Establish Appropriate 

Minimum Block Sizes for Large Notional OffFacility Swaps and Block Trades (May 16, 2013). 

211CEA section 2(h)(8), 7 U.S.C. 2(h)(8). 

212See supra note 1. 

213The rules establishing SEFs focus on measures 

to promote pre-trade transparency and trade 

execution of swaps. To comply with the trade 

execution requirement, swaps that are traded on a 

SEF must be executed as Required Transactions. 

Under § 37.9(a)(2), Required Transactions must be 

executed by either (1) an Order Book, as defined in 

§ 37.3(a)(3); or (2) a Request for Quote System, as 

defined in § 37.9(a)(3). See Core Principles and 

Other Requirements for Swap Execution Facilities 

(May 16, 2013). Swaps that are subject to the trade 

execution requirement, under section 2(h)(8) of the 

CEA, and traded on a DCM must be executed 

pursuant to subpart J of part 38 of the Commission’s 

regulations, which implements revised DCM Core 

Principle 9 under section 5(d)(9) of the CEA, as 

amended by section 735(b) of the Dodd-Frank Act. 

7 U.S.C. 7(d)(9). 

214See part 37 and subpart J of part 38 of the 

Commission’s regulations. 

processes because each inquiry 

addresses different concerns. Further, 

adopting a real-time ‘‘illiquidity’’ test 

would require objective criteria, which 

the Commission has declined to adopt 

at this time. 

The Commission acknowledges the 

comments from WMBAA and Spring 

Trading regarding the resources 

required to make a determination. 

Therefore, the Commission is revising 

its estimate of the hours of burden to 

reflect the addition of additional 

personnel that would process and 

analyze trading data, for which the 

Commission estimates this hourly 

burden to be 8 hours per submission. 

The Commission is also adopting a 

listing requirement in the final rule 

under new §§ 37.10(a)(2) and 

38.12(a)(2), which requires a SEF or 

DCM to certify that it is listing the swap 

for which it submits an available-totrade determination. The Commission 

notes that the listing process is governed 

by §§ 40.2 and 40.3 of the Commission’s 

regulations, for which it has previously 

estimated the average hourly burden to 

be 2 hours per submission in a previous 

rulemaking.201

Accordingly, the Commission revises 

its estimate of the total hourly burden to 

be 16 hours per submission. 

C. Cost-Benefit Considerations 

Introduction 

Title VII of the Dodd-Frank Act seeks 

to prevent a repeat of the harm caused 

by the 2008 financial crisis by 

establishing a comprehensive new 

regulatory framework for swaps and 

security-based swaps.202 Among other 

things, the legislation seeks to promote 

market integrity, reduce risk, and 

increase transparency within the 

financial system and swaps markets. 

Consistent with the view that several 

weaknesses contributed to the crisis,203

Title VII establishes a multidimensional 

regulatory approach designed to 

‘‘mitigate costs and risks to taxpayers 

and the financial system.’’ 204 Provisions 

designed to move the transaction of 

swaps from primarily opaque, over-thecounter (‘‘OTC’’) markets—which 

traditionally feature bilateral negotiation 

and execution—to registered swap 

execution facilities (‘‘SEFs’’) and 

designated contract markets (‘‘DCMs’’)— 

which provide market participants and 

the public with improved swap market 

transparency—represent an important 

element of this approach. 

In particular, section 733 of the DoddFrank Act amended the CEA to, among 

other things, move swap trading and 

execution to SEFs and DCMs.205 Section 

723(a)(3) of the Dodd-Frank Act added 

a trade execution requirement,206 which 

requires that swap transactions subject 

to the clearing requirement under 

section 2(h)(1) of the CEA be executed 

on a SEF or a DCM, unless no SEF or 

DCM ‘‘makes the swap available to 

trade’’ or the clearing exception under 

section 2(h)(7) of the CEA applies.207

Taken together, these provisions are 

intended to transform the swaps market 

from one in which prices for bilaterallynegotiated contracts are privately 

quoted—typically by dealers who, 

unlike non-dealer market participants 

(typically the ‘‘buy-side’’), enjoy 

asymmetric information advantages—to 

one in which bid/offer prices for swap 

contracts are accessible to multiple 

market participants to compare, assess, 

and accept or reject.208 With this 

release, in conjunction with the 

Commission’s final rulemaking 

establishing SEFs209 and the final 

rulemaking defining appropriate 

minimum block sizes for swaps,210 the 

Commission is implementing the trade 

execution requirement. 

In this release, the Commission is 

adopting final rules (1) specifying the 

process by which a swap is made 

‘‘available to trade,’’ thereby making it 

subject to the trade execution 

requirement under section 2(h)(8) of the 

CEA (‘‘available-to-trade rule’’); and (2) 

establishing the compliance schedule of 

the trade execution requirement, 

following a Commission determination 

that a swap is both required to be 

cleared and is available to trade (‘‘trade 

execution compliance schedule’’).211

More specifically, these rules allow 

SEFs and DCMs to designate swaps that 

they list or offer for trading as ‘‘available 

to trade,’’ 212 thereby requiring market 

participants who transact such swaps 

(and who are subject to the clearing 

requirement under section 2(h)(1)(A) of 

the CEA) to comply with the trade 

execution requirement in carrying out 

these transactions. Swaps that are 

subject to the trade execution 

requirement (and are not block trades as 

defined under § 43.2 of the 

Commission’s regulations) must be 

executed in accordance with other 

separately promulgated rules that 

implement the Dodd-Frank Act’s swap 

exchange trading requirements and are 

intended to provide improved price 

transparency for swap transactions.213

Operating in concert with the 

statutory requirements and other 

rules,214 the rules adopted in this 

rulemaking are designed to provide a 

process that fosters swaps becoming 

available to trade, and therefore subject 

to the trade execution requirement; this, 


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33620 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

215The Commission may determine that swap 

transactions exempted from the section 2(h)(1) 

clearing requirement pursuant to other statutory 

authority would also not be subject to the section 

2(h)(8) trade execution requirement. See supra note 

1. 

216CEA section 15(a), 7 U.S.C. 19(a). 

217The Commission solicited comments to aid its 

consideration of the costs and benefits resulting 

from (1) the proposed available-to-trade rule, 76 FR 

77733, and (2) the proposed trade execution 

compliance schedule. 76 FR 58192. 

218See Report on Management & Professional 

Earnings in the Securities Industry 2010, Securities 

Industry and Financial Markets Association at 4 

(Sept. 2010). The report lists the average total 

annual compensation for a compliance specialist 

(intermediate) as $58,878. The Commission 

estimated the personnel’s hourly cost by assuming 

an 1,800 hour work year and by multiplying by 1.3 

to account for overhead and other benefits. 

219 76 FR 77735. 

220The Commission also noted that certain 

additional factors could affect these estimates, such 

as the complexity of the swap’s terms. Id. 

indirectly will counter information 

asymmetry and in turn, the 

informational advantage enjoyed by 

dealers to the potential detriment of 

other market participants. In this way, 

these rules will promote a competitive 

market environment with improved 

price discovery and characterized by 

narrower spreads and more reliable 

prices. Ultimately, these rules will 

benefit the financial system as a whole 

by creating a more efficient marketplace 

where market participants will be able 

to take into account the price at which 

recent transactions have occurred when 

determining at what price to quote or 

place orders. 

The Commission believes that some of 

the costs related to the application of 

these rules are a consequence of the 

Congressional trade execution 

requirement under section 2(h)(8) of the 

CEA. For example, those market 

participants who are not eligible for the 

end-user exception under section 2(h)(7) 

of the CEA215 will not have the option 

to execute swaps made available to 

trade on a bilateral basis, even if they 

consider it more costly or less 

convenient to execute trades on a SEF 

or a DCM. As described further below, 

the Commission was cognizant of these 

costs in adopting these final rules, and 

has, where appropriate, attempted to 

mitigate the costs while observing CEA 

section 2(h)(8). 

The Statutory Mandate To Consider the 

Costs and Benefits of the Commission’s 

Action: Section 15(a) of the CEA 

Section 15(a) 216 of the CEA requires 

the Commission to consider the costs 

and benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of the 

following five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

section 15(a) factors. 

In this rulemaking to implement the 

trade execution requirement, the 

Commission is exercising its discretion 

to adopt the available-to-trade rule and 

the trade execution compliance 

schedule. The discussion that follows 

considers the section 15(a) factors for 

each set of rules separately. Prior to the 

section 15(a) consideration for each set 

of rules, the Commission discusses the 

costs, benefits, and alternatives to the 

approach adopted in these final rules as 

well as relevant comment letters.217

With respect to the available-to-trade 

rule, costs, benefits, and alternatives are 

further broken out and discussed 

separately for various components of the 

process—Part 40 Process and 

Determination Factors, and 

Applicability. 

Quantifying the costs and benefits to 

SEFs and DCMs is not reasonably 

feasible for many aspects of the 

available-to-trade rule because costs will 

depend, among other things, on the 

future business decisions of SEFs and 

DCMs. The Commission expects that the 

costs and benefits with respect to the 

available-to-trade rule will vary, based 

on the specific circumstances of the 

individual SEFs, DCMs, and market 

participants. Where the Commission is 

unable to quantify the costs and 

benefits, the Commission identifies and 

considers the costs and benefits of these 

rules in qualitative terms. 

Given the novelty of the trade 

execution requirement—the mandatory 

trading of swaps on a new type of entity, 

SEFs, or on DCMs—the Commission is 

inherently limited by a lack of available 

data in attempting to quantify the costs 

and benefits of implementing the trade 

execution compliance schedule. As 

discussed further below, the 

Commission is not aware of any analog 

to another requirement that would 

provide information that is sufficient to 

ascertain such costs and benefits in 

quantitative terms. Accordingly, the 

Commission identifies and considers 

the costs and benefits of the compliance 

schedule in qualitative terms. 

1. Available-to-Trade Rule 

a. Part 40 Process and Determination 

Factors 

Final §§ 37.10 and 38.12 govern the 

process that a SEF or DCM must use to 

determine whether a swap is available 

to trade for purposes of the trade 

execution requirement. For a swap to be 

subject to the trade execution 

requirement under section 2(h)(8) of the 

CEA, a SEF or DCM must have first 

determined that a swap is available to 

trade. The Commission views this 

determination as a trading protocol 

issued by the SEF or DCM (and 

therefore as a ‘‘rule,’’ as defined in 

§ 40.1 of the Commission’s regulations); 

as a rule, the SEF or DCM must submit 

the determination to the Commission in 

accordance with the procedures 

contained in part 40 of the 

Commission’s regulations. Final 

§§ 37.10(a) and 38.12(a) set forth the 

procedure for a SEF or DCM to submit 

the determination under § 40.5 or § 40.6 

of the Commission’s regulations. 

Final §§ 37.10(b) and 38.12(b) require 

a SEF or DCM to consider, as 

appropriate, six factors with respect to 

each swap when determining whether a 

swap is available to trade: (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. No single 

factor must always be considered as to 

whether a swap is available to trade; 

therefore, the SEF or DCM may consider 

any one or more of the factors in its 

initial determination. In its submission 

to the Commission under § 37.10(a) or 

§ 38.12(a), a SEF or DCM must describe 

how it considered the factors that it 

deems appropriate. 

Costs 

Costs to SEFs and DCMs 

In the proposed rule, the Commission 

estimated that conducting the 

assessment and submission process in 

§§ 37.10(a) and (b) and 38.12(a) and (b) 

could be performed internally by one 

compliance personnel of the SEF or 

DCM over approximately eight hours on 

average. The Commission further 

estimated that the cost per hour for one 

compliance personnel to be $43.25 per 

hour; 218 therefore, it would cost each 

SEF and DCM $346 per rule submission 

to comply with the proposed 

requirements.219 The Commission also 

noted that this estimate was general in 

nature and that it would be difficult to 

determine the number of hours involved 

with reasonable precision, given the 

novelty of the process.220 The 


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221 Id. 

222WMBAA Comment Letter at 5; Spring Trading 

Comment Letter at 5 (Jan. 12, 2012). 

223WMBAA Comment Letter at 5. 

224Spring Trading Comment Letter at 5 (Jan. 12, 

2012). The Commission has noted that the costs of 

compliance with DCM Core Principle 3—Contracts 

Not Readily Subject to Manipulation, as codified in 

§ 38.200 of the Commission’s regulations—consist 

of supplying supporting information and 

documentation to justify the contract specifications 

of a new product. That process is governed by the 

product listing submission procedures codified in 

§§ 40.2 and 40.3 of the Commission’s regulations. 

225 Id. 

226MarketAxess Comment Letter at 9. 

227See Report on Management & Professional 

Earnings in the Securities Industry 2011, Securities 

Industry and Financial Markets Association at 4 

(Oct. 2011). The FRPRM calculated the proposed 

estimate for the assessment and submission process 

based on salary information in the 2010 report. See 

supra note 218. The 2011 report lists the average 

total annual compensation for a compliance 

specialist (intermediate) as $58,371. The 

Commission estimated the personnel’s hourly cost 

by assuming an 1,800 hour work year and by 

multiplying by 1.3 to account for overhead and 

other benefits. 

228See Bureau of Labor Statistics, U.S. 

Department of Labor, Occupational Outlook 

Handbook, 2012–13 Edition, Economists, http:// 

www.bls.gov/ooh/life-physical-and-social-science/ 

economists.htm. The report lists the average total 

annual compensation for an economist as $89,450. 

The Commission estimated the personnel’s hourly 

cost by assuming an 1,800 hour work year and by 

multiplying by 1.3 to account for overhead and 

other benefits. 

229For further Commission discussion of the 

costs associated with listing or offering a product 

for trading under §§ 40.2 and 40.3 of the 

Commission’s regulations, see Provisions Common 

to Registered Entities, 76 FR 44776, 44787 (Jul. 27, 

2011). 

230See Core Principles and Other Requirements 

for Swap Execution Facilities (May 16, 2013). 

231 76 FR 44790. 

Commission solicited comments on the 

costs associated with §§ 37.10(a) and (b) 

and 38.12(a) and (b), i.e., assessing 

whether a swap is available to trade and 

submitting a determination pursuant to 

part 40 of the Commission’s 

regulations.221

Some commenters claimed that the 

Commission’s estimate for the number 

of personnel required to carry out the 

process was low.222 For example, 

WMBAA stated that the Commission 

under-estimated the different types of 

personnel that would be required to 

make an available-to-trade 

determination, which include 

information technology professionals, 

operations staff, legal and compliance 

staff, and management.223 Spring 

Trading anticipated that the 

Commission would require large 

amounts of data and analysis from SEFs 

and DCMs to support their 

determinations; therefore, the costs 

required to make a determination and 

submit a filing would be similar to the 

effort required by a DCM to assess 

whether a new futures contract is 

susceptible to manipulation.224

WMBAA also asserted that the initial 

costs of implementing the new 

procedure would be higher than the 

Commission’s proposed projection.225

MarketAxess commented that the 

process would require SEFs to expend 

significant resources, which would pose 

a barrier to entry and lead to fewer 

trading platforms for market 

participants.226

Commenters did not provide 

alternative numerical estimates or 

discuss the magnitude of costs that 

would be imposed by the determination 

process. Based on the qualitative 

comments received from WMBAA and 

Spring Trading, however, the 

Commission is revising its estimated 

cost of conducting the assessment and 

submission process to reflect the 

addition of an economist to the estimate 

of necessary personnel. The 

Commission agrees with Spring Trading 

that SEFs and DCMs may analyze 

trading data in considering the factors 

under §§ 37.10(b) and 38.12(b); the 

compliance personnel would likely be 

assisted by an economist in carrying out 

such an analysis over approximately 

eight hours on average. Further, the 

Commission is also revising its 

estimates based on updated wage rate 

data. The Commission’s updated 

estimate of the cost per hour for one 

compliance personnel is $42.16 per 

hour 227 and $64.60 per hour for one 

economist.228

The Commission is also adopting a 

listing requirement under final 

§§ 37.10(a)(2) and 38.12(a)(2) that 

requires the SEF or DCM to demonstrate 

that they have listed or offered for 

trading the swap for which they are 

submitting an available-to-trade 

determination. A SEF or DCM incurs 

costs to list or offer a swap for trading 

pursuant to § 40.2 and 40.3 of the 

Commission’s regulations, which 

requires a product filing that includes, 

among other things, a ‘‘concise 

explanation and analysis’’ of the 

product, that the Commission has 

acknowledged as de minimis.229

Although a SEF or DCM may decide to 

list a product for trading without a 

desire to submit an available-to-trade 

determination, to the extent that the SEF 

or DCM lists a product exclusively to 

meet the requirements of §§ 37.10(a)(2) 

or 38.12(a)(2), the Commission estimates 

that it would take one compliance 

personnel approximately 2 hours, on 

average, to submit a product filing. 

Therefore, the Commission estimates 

that it would cost a SEF and DCM a 

maximum of $938.40 per rule 

submission filing to comply with final 

§§ 37.10(a) and (b) and 38.12(a) and (b). 

With respect to MarketAxess’s 

comment, the Commission does not 

believe that the costs associated with 

the determination process pose a barrier 

to entry for trading platforms. The rule 

does not affirmatively require a SEF or 

DCM to first submit to the Commission 

that a swap is available to trade via a 

part 40 filing in order to list or offer that 

swap for trading on its platform. If one 

SEF or DCM makes the swap available 

to trade through the part 40 process, 

then other SEFs and DCMs who 

subsequently choose to list or trade the 

swap are only required to do so through 

methods of execution consistent with 

the trade execution requirement. The 

Commission notes that in order to 

register and operate as a SEF, a trading 

platform or facility must already be able 

to demonstrate that they offer certain 

minimum functionality in terms of 

methods of execution (i.e., a central 

limit order book (‘‘CLOB’’) or requestfor-quote (‘‘RFQ’’) system).230

The Commission specifically 

designed the process to mitigate costs by 

allowing SEFs and DCMs to utilize 

existing personnel and infrastructure to 

carry out the determination and 

submission process under part 40 

procedures. Further, the process affords 

SEFs and DCMs the flexibility to 

consider any one or more enumerated 

factors in determining that a swap is 

available to trade. This flexibility will 

allow them to tailor their 

considerations, while also managing 

costs of research and analysis, by 

selecting from a range of factors. 

Moreover, the Commission believes that 

the costs will decrease for both SEFs 

and DCMs as they become more familiar 

with using the part 40 procedures to 

make a swap available to trade. The 

Commission also believes that the part 

40 process will require fewer resources 

as centralized trading develops and 

SEFs and DCMs become more familiar 

with the types of swaps that can be 

made available to trade. 

The Commission believes that Spring 

Trading’s comparison between the costs 

of the process and the costs to assess 

whether a new futures contract is 

susceptible to manipulation rests on a 

flawed analogy. The costs of the latter 

are based upon the Commission’s 

annual burden hours estimate, in the 

aggregate, for the information collection 

requirements under §§ 40.2 and 40.3 of 

the Commission’s regulations,231

estimated per registered entity to be 200 

hours based on 100 responses and an 

estimated average of 2 hours per 


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232 Id. 

233As discussed above, the Commission estimates 

the assessment and submission process in 

§§ 37.10(a) and (b) and 38.12(a) and (b) for each 

submission will be performed by one compliance 

personnel and one economist over approximately 

eight hours each on average. In addition, the 

Commission estimates that it would take one 

compliance personnel approximately 2 hours, on 

average, to comply with the listing prerequisite 

under §§ 37.10(a)(2) and 38.12(a)(2) by submitting 

a product filing. 

234Chatham Comment Letter at 2. 

235AIMA Comment Letter at 1; CME Comment 

Letter at 6; Morgan Stanley Comment Letter at 3; 

CEWG Comment Letter at 4. 

236Chatham Comment Letter at 2. 

237 ISDA Comment Letter at 4. 

238FSR Comment Letter at 2. 

239 Depending on their individual business needs, 

market participants could also use connectivity 

services provided by independent software vendors 

to trade swaps subject to the trade execution 

requirement. These costs may also be bundled into 

transaction fees. The Commission also notes that it 

is typically the case that for most new contracts, 

DCMs tend to waive execution and other fees 

during the initial six to twelve months after listing, 

and such fee waivers are meant to help mitigate any 

incremental costs for market participants to connect 

to a new platform or trade a new product. 

240The Commission believes that market 

participants can use any or each of the factors to 

demonstrate that active trading is occurring for a 

particular swap. For example, a high frequency of 

transactions, narrow bid/ask spread, or large trading 

volume would indicate execution of transactions for 

that swap. A large number of buyers or sellers, or 

a large number of resting firm or indicative bids and 

offers would also indicate an active market based 

on the presence of market participants seeking to 

execute transactions in that swap. 

response.232 The Commission’s estimate 

of 18 hours to comply with final 

§§ 37.10(a) and (b) and 38.12(a) and (b), 

however, is based upon a single 

submission of an available-to-trade 

determination.233 It is not feasible at 

this time to estimate the average number 

of rule submissions that a SEF or DCM 

will file per year; therefore, the 

Commission believes that the burden 

hours estimate for the information 

collection requirements under §§ 40.2 

and 40.3 is not illustrative here. 

Costs to Market Participants 

Some commenters also stated that the 

process would impose direct costs on 

market participants. For example, 

Chatham stated that end-users would 

have to expend resources to monitor 

whether swaps are subject to the trade 

execution requirement, and if so, 

connect to a SEF or DCM that offers or 

lists that swap for trading.234

Some commenters also expressed 

concern that the available-to-trade 

determination process would impose 

indirect costs on market participants. 

These commenters maintained that 

SEFs and DCMs would be incentivized 

to exploit the process by 

indiscriminately determining that swaps 

are available to trade. Making 

determinations in this manner, they 

claimed, would lead to illiquid swaps 

trading on a SEF or DCM, which could 

result in increasing swap price 

volatility; increased spreads; misleading 

market prices; and front-running 

behavior.235 Chatham commented that 

end-users would encounter higher 

hedging and swap execution costs, 

particularly from swap dealers passing 

on the costs of higher volatility.236 ISDA 

stated that those costs would deter 

market participants from executing 

hedge transactions.237 FSR stated that 

improper determinations by a SEF or 

DCM, such as one primarily driven by 

the desire to capture market share rather 

than on the merits, would compel 

market participants to avail themselves 

of exemptions to the trade execution 

requirement, thus undermining the goal 

of promoting a centralized trading 

market.238

Notwithstanding the fact that 

commenters did not provide data to 

support or monetize their cost concerns, 

the Commission has qualitatively 

considered their comments about the 

direct and indirect costs of the 

available-to-trade determination 

process. First, with respect to the direct 

costs cited by Chatham—that end-users 

would have to follow which swaps are 

subject to mandatory trade execution 

and connect to a SEF or DCM to trade 

that swap—these costs are primarily 

attributable to the statutory trade 

execution requirement and not to the 

Commission’s action in this final rule. 

The costs incurred by market 

participants to connect to a SEF or DCM 

are attendant to complying with the 

trade execution requirement. While the 

number of swaps subject to the trade 

execution requirement will be affected 

by this final rule in conjunction with 

business decisions by SEFs and DCMs, 

market participants (as well as SEFs and 

DCMs) would incur these costs for any 

swap subject to the statutory trade 

execution requirement. While 

commenters did not provide any 

quantitative estimates regarding 

connectivity costs, the Commission 

understands that clearing firms’ 

connectivity services to DCMs can be 

bundled into the clearing services 

provided by clearing firms, and expects 

that this will occur at SEFs as well. 

Hence, the connectivity costs arising 

directly from the trade execution 

requirement are likely to be subsumed 

into the costs of complying with the 

mandatory clearing requirement.239 It is 

also possible that SEFs and DCMs will 

bundle connectivity costs into 

transaction fees. Moreover, SEFs and 

DCMs have an incentive to keep 

connectivity costs low in order to attract 

market participants. 

Further, while there may be some 

attendant search costs, the 

Commission’s approach in this final 

rule greatly minimizes the costs to 

market participants to monitor whether 

a SEF or DCM is subject to the trade 

execution requirement. Under existing 

practice for part 40 rule submissions, 

the Commission will post a notice and 

copy of all available-to-trade 

submissions on its Web site. The 

Commission also intends to establish an 

updated, centralized list of all of the 

swaps that are available to trade. This 

will provide market participants with a 

single reference for knowing whether a 

particular swap has been determined to 

be available to trade. 

With respect to the potential indirect 

costs imposed upon market participants 

if illiquid swaps are made available to 

trade and become subject to the trade 

execution requirement, the Commission 

acknowledges the concerns of 

commenters. The Commission, 

however, believes that the part 40 

process is appropriate and well-suited 

to moderate this possibility and views 

the adopted determination factors as 

probative of whether an actual trading 

market exists.240 Mandating SEFs and 

DCMs to consider these factors prior to 

making a determination will compel 

them at the outset to internally consider 

the benefits versus the costs that will be 

incurred to list and subsequently 

support trading in a particular swap. 

The Commission also believes that the 

transparency of the process (e.g., 

submissions must be posted on the 

submitting SEF or DCM’s Web site and 

will be posted on the Commission’s 

Web site as well), coupled with 

Commission review and potential for 

public comment, provides an important 

backstop to protect the integrity of the 

determinations that are submitted. 

Benefits 

The process set forth in §§ 37.10 and 

38.12 will advance the Congressional 

goal of promoting swap execution and 

developing a centralized trading market 

that facilitates price discovery in the 

manner as described below. 

Most importantly, the adopted 

process in the final rule will provide an 

up-to-date, singular reference for SEFs, 

DCMs, and market participants for 

identifying which swaps are available to 

trade, and therefore subject to the trade 

execution requirement. Sections 

37.10(a) and 38.12(a) prescribe the use 

of the part 40 process for the submission 

of rules for Commission review and 

approval (§ 40.5) or the self-certification 


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241Part 40 of the Commission’s regulations 

governs regulatory obligations of registered entities, 

which include DCMs and SEFs under section 

1(a)(40) of the CEA, with respect to, among other 

things, the certification or approval of new products 

for trading; and the certification or approval of rules 

governing the SEF or DCM. 

242Under rule approval process, the Commission 

may extend the review period of a determination 

submitted if, among other things, the submission is 

incomplete. § 40.5(d)(1). Under the self-certification 

process, the Commission may stay the certification 

if, among other things, the rule submission is 

accompanied by an inadequate explanation. 

§ 40.6(c)(1). 

243Under § 40.6(c)(2) of the Commission’s 

regulations, the Commission will provide a 30-day 

public comment period where the available-to-trade 

determination submitted is subject to a stay 

because, among other things, it presents novel or 

complex issues that require additional time to 

analyze. As discussed in section II.A.1 of the 

preamble to the final rule, the Commission will also 

provide an opportunity to submit public comment 

for determinations submitted to the Commission 

under the § 40.5 rule approval process. See supra 

notes 58–60 and accompanying text. 

244See CEA section 5h(e), as enacted by section 

733 of the Dodd-Frank Act, 7 U.S.C. 7b–3(e) (stating 

that one of the Act’s objectives is ‘‘to promote the 

trading of swaps on swap execution facilities and 

to promote pre-trade price transparency in the 

swaps market’’); CEA section 5(d)(9)(A), as 

amended by section 735(b) of the Dodd-Frank Act, 

7 U.S.C. 7(d)(9) (stating under a DCM core principle 

that ‘‘the board of trade shall provide a competitive, 

open and efficient market and mechanism for 

executing transactions that protects the price 

discovery process of trading in the centralized 

market of the board of trade’’). 

245MarketAxess Comment Letter at 3; WMBAA 

Comment Letter at 3; AFR Comment Letter at 2–3; 

ODEX Comment Letter at 1; SDMA Comment Letter 

at 3–4. 

246SDMA Comment Letter at 4–5; WMBAA 

Comment Letter at 3; MarketAxess Comment Letter 

at 5. AFR claimed that a DCO can only clear a class 

of swaps if a reasonable level of market liquidity 

is demonstrated; otherwise, the DCO could not 

establish the statistically expected loss levels in a 

liquidation of positions so as to set an initial margin 

level. AFR Comment Letter at 4. 

247SDMA Comment Letter at 5–6; WMBAA 

Comment Letter at 3; MarketAxess Comment Letter 

at 7–8. 

of rules (§ 40.6).241 Under these 

processes, SEFs and DCMs must submit 

an initial available-to-trade 

determination to the Commission either 

for rule approval or as a selfcertification; both require Commission 

review. If appropriate, the Commission 

may approve a § 40.5 or § 40.6 rule 

submission within the designated 

timeframes. SEFs and DCMs will be 

familiar with this process; part 40 is 

already used by DCMs for other rule 

filings and similarly will be used by 

SEFs going forward. Part 40 further 

requires SEFs and DCMs to post a copy 

and notice of their submissions on their 

respective Web sites; the Commission 

also posts that information on its own 

Web site. Therefore, the adopted process 

will allow market participants to know 

(1) whether a particular swap has been 

submitted as available to trade; (2) 

whether that swap has been deemed as 

available to trade by the Commission; 

and (3) when the swap was made or will 

be made available to trade. In those 

submissions, SEFs and DCMs must 

consider the six enumerated factors 

under §§ 37.10(b) and 38.12(b) as 

appropriate, which provides other SEFs, 

DCMs, and market participants with 

information about the basis for 

determining that a swap is available to 

trade. 

The process adopted in §§ 37.10 and 

38.12 also increases transparency for 

market participants and the public. 

Under part 40, submissions must 

contain an explanation of how the SEF 

or DCM determined that a swap is 

available to trade, including the 

consideration of one or more of the 

relevant factors listed in §§ 37.10(b) and 

38.12(b), as well as a brief explanation 

of any substantive opposing views. The 

part 40 process allows the Commission 

to go back to the submitting entity in the 

case that an insufficient explanation of 

the determination is provided.242 In 

addition, when warranted (e.g., when a 

submission presents novel or complex 

issues), market participants and the 

public will have the opportunity to 

provide public comment on the merits 

of the SEF or DCM’s submission directly 

through the Commission’s Web site.243

Therefore, part 40 will not only inform 

market participants of the justifications 

for and against an available-to-trade 

determination, but provides an 

opportunity for market participants and 

the public to submit their own views as 

well. 

The adopted process also provides 

SEFs and DCMs with flexibility in 

determining whether a swap is available 

to trade. Under §§ 37.10(b) and 38.12(b), 

a SEF or DCM may consider any one or 

more of the enumerated factors in its 

initial determination, given that the 

Commission believes that no single 

factor must always be considered. 

Accordingly, this approach allows SEFs 

and DCMs to submit swaps with 

different trading characteristics to the 

Commission as available to trade. Rather 

than require SEFs and DCMs to respond 

to a rigid set of determination criteria, 

this flexibility was designed to 

encourage SEFs and DCMs to make a 

broader range of swaps subject to the 

trade execution requirement. 

The Commission anticipates that 

these benefits will produce a more 

efficient process and consistent 

determinations over time. Under the 

part 40 procedures, SEFs and DCMs will 

submit to the Commission, for further 

review with the potential for public 

comment, an initial determination of 

whether a swap is available to trade. 

This approach will (1) benefit market 

participants during the initial stages of 

implementation by providing them, in 

circumstances as described above, with 

an opportunity to comment on 

determinations and (2) help the 

Commission track and maintain a record 

of which swaps are subject to the trade 

execution requirement. 

The transparency and flexibility 

offered under the adopted processes 

will further the development of a 

centralized trading market, consistent 

with the objectives of the Dodd-Frank 

Act.244 By requiring a submission that 

details the analysis and justifications 

behind an available-to-trade 

determination, the part 40 procedures 

provide the Commission with a wellestablished protocol for reviewing 

whether swaps should be subject to the 

trade execution requirement. The 

procedures set forth in the final rule 

provide the building blocks for the 

development of a robust and liquid 

centralized trading market, consisting of 

a diverse array of offered or listed 

swaps, thus inviting market 

participation. Competition between 

SEFs and DCMs is expected to increase 

the number of swaps available for 

trading on SEFs and DCMs, thereby 

encouraging innovation and inviting 

broader market participation. Growth in 

swaps trading on SEFs and DCMs will 

benefit market participants by 

increasing price transparency and 

facilitating price discovery. 

Consideration of Alternatives 

Several commenters recommended 

that swaps subject to the clearing 

requirement should be subject to the 

trade execution requirement without an 

additional available-to-trade 

determination. Some of these 

commenters stated that the CEA does 

not specify a formal process with 

determination factors.245 Other 

commenters asserted that the clearing 

determination considers a swap’s 

trading liquidity and therefore already 

addresses whether the swap should be 

subject to mandatory trade execution.246

Several commenters stated that 

requiring trading facilities to consider 

the enumerated factors in an availableto-trade determination would be 

‘‘inefficient and burdensome’’ and waste 

limited regulatory resources.247

MarketAxess asserted that allowing a 

SEF or DCM to (1) recognize that a swap 

is available to trade based on the 

clearing determination and (2) notify the 

Commission that it is listing the swap, 

thereby making the swap subject to 


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33624 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

248MarketAxess Comment Letter at 7–8. 249Markit Comment Letter at 5–6; Vanguard 

Comment Letter at 5; Geneva Energy Markets 

Comment Letter at 2; JPMorgan Comment Letter at 

1; CME Comment Letter at 4–5; FHLB Comment 

Letter at 3; FSR Comment Letter at 4; FXall 

Comment Letter at 5–6; Morgan Stanley Comment 

Letter at 5–6; CEWG Comment Letter at 6; ISDA 

Comment Letter at 3–4, 6; Tradeweb Comment 

Letter at 4–5. 250Bloomberg Comment Letter at 2; Vanguard 

Comment Letter at 5; Geneva Energy Markets 

Comment Letter at 2; JPMorgan Comment Letter at 

1–2; CME Comment Letter at 4–5; FHLB Comment 

Letter at 3; ISDA Comment Letter at 3–4; Markit 

Comment Letter at 5; CEWG Comment Letter at 2; 

Morgan Stanley Comment Letter at 5–6; AIMA 

Comment Letter at 2; FXall Comment Letter at 6– 

7; Tradeweb Comment Letter at 2–3; FSR Comment 

Letter at 2. 

251CME Comment Letter at 4–5. 

252SDMA Comment Letter at 9. 

253Eaton Vance Management Comment Letter at 

3; SIFMA AMG Comment Letter at 10; UBS 

Comment Letter at 2; Morgan Stanley Comment 

Letter at 6 n.6; ISDA Comment Letter at 7; 

Tradeweb Comment Letter at 5. 

254 ISDA Comment Letter at 6. 

255The Commission notes that it also considers 

swaps as a group, category, type or class in other 

instances, such as for clearing determinations. See 

supra note 79. 

mandatory trade execution, would not 

require the Commission, or a SEF or 

DCM to expend any resources.248

The Commission considered the costs 

and benefits of subjecting swaps to 

mandatory trade execution based on 

whether the swap must be cleared rather 

than through a separate available-totrade determination. While the 

Commission recognizes that adopting a 

distinct determination process may 

impose some additional costs on SEFs 

and DCMs, it believes that these costs 

are warranted by the benefits that 

market participants will realize from the 

process: transparency and knowledge 

that only swaps that are either deemed 

certified or approved by the 

Commission as available to trade are 

subject to the trade execution 

requirement. This process insulates 

against SEFs or DCMs engaging in 

inconsistent or improper determinations 

to subject swaps to the trade execution 

requirement. As previously stated, the 

Commission expects the cost of making 

a determination to decrease over time as 

SEFs, DCMs, and market participants 

become more knowledgeable about the 

process and gain more experience in 

considering the factors to make a swap 

available to trade. 

Several commenters proposed that the 

Commission, not SEFs and DCMs, 

should maintain the exclusive authority 

to determine whether a swap is 

available to trade.249 Commenters 

expressed concern that illiquid swaps 

would become subject to the trade 

execution requirement if SEFs and 

DCMs were allowed to make the 

determination based on their incentives 

to maximize the number of swaps 

traded on a facility or platform.250 CME 

stated a Commission-based review of 

whether a swap is available to trade 

would lead to a more ‘‘logical and 

efficient’’ use of Commission and 

industry resources.251

The Commission believes that 

benefits are maximized under the 

approach adopted, rather than an 

alternative under which the 

Commission would hold sole authority 

to determine whether a swap is 

available to trade. The part 40 approach 

leverages the trading expertise of SEFs 

and DCMs to determine whether a swap 

is available to trade, while the 

Commission’s authority to review these 

determinations under part 40 will help 

ensure that they are appropriate. The 

Commission expects that SEFs and 

DCMs will have an understanding of the 

markets that they list for trading and 

will regularly communicate with market 

participants about liquidity in their 

markets. Accordingly, the Commission 

believes that SEFs and DCMs are best 

positioned to make appropriate 

available-to-trade determinations. 

Relying on SEFs and DCMs, who would 

be incentivized to make swaps available 

to trade, to initiate the determination 

process in consultation with market 

participants will also facilitate 

innovation and promote swaps trading 

in accordance with section 5h(e) of the 

CEA. By allowing SEFs and DCMs to 

make these determinations, the 

Commission will be able to focus on its 

responsibilities in conducting market 

oversight. 

The Commission has also considered 

whether a SEF or DCM should be able 

to submit an available-to-trade 

determination for a swap that it does not 

list or offer for trading. While SDMA 

responded in the affirmative,252 several 

other commenters stated that a SEF or 

DCM should be required to list the swap 

for a period of time prior to submitting 

a determination.253 ISDA stated that the 

lack of such a requirement would 

otherwise incentivize SEFs and DCMs to 

submit as many determinations as 

possible, merely to promote centralized 

trading.254

The Commission has determined that 

a listing requirement supports the 

integrity of the available-to-trade 

determination process. Moreover, the 

Commission expects that a SEF or DCM 

will have no business incentive to 

submit an available-to-trade 

determination for a swap that it has no 

intention of listing for trading. While 

the Commission recognizes that the 

listing SEF or DCM will likely incur 

some cost to submit an available to trade 

determination, the Commission believes 

that those costs would necessarily be 

accompanied by a stream of benefits 

once the swap is subject to the trade 

execution requirement. Accordingly, the 

Commission has adopted a listing 

requirement under new §§ 37.10(a)(2) 

and 38.12(a)(2). As discussed above, the 

Commission believes that a SEF or DCM 

will incur de minimis costs to list or 

offer a swap for trading under the part 

40 procedures for listing a product for 

trading—the Commission estimates that 

it would take one compliance personnel 

approximately 2 hours, on average, to 

submit a product filing. 

The Commission has also considered 

the costs and benefits of, and requested 

comment on, whether or not a SEF or 

DCM should (1) be allowed to submit its 

available-to-trade determination for a 

‘‘group, category, type or class of swap’’; 

and (2) be allowed to consider the 

determination factors under §§ 37.10(b) 

and 38.12(b) for the same swap on 

another SEF or DCM, or activity 

primarily or solely in bilateral 

transactions. Because each of the 

adopted provisions is permissive rather 

than compulsory in nature, neither 

should impose costs upon SEFs and 

DCMs relative to the alternative of not 

providing such allowances. SEFs and 

DCMs will internally analyze the costs 

and benefits before availing themselves 

of either provision, and forego the 

opportunity if not warranted by the 

perceived benefits. Should a SEF or 

DCM choose to submit a ‘‘group, 

category, type or class of swap,’’ the 

adopted approach would impose fewer 

costs than requiring a submission for 

each individual swap. 

The Commission has identified the 

benefits of both provisions relative to 

the alternatives of not providing such 

allowances. First, allowing a SEF or 

DCM to submit a determination for a 

group, category, type or class of swap 

would promote economies of scale and 

streamline the process for SEFs, DCMs, 

and the Commission; rather than submit 

separate determinations for individual 

swaps with similar characteristics, a 

SEF or DCM may elect to include them 

in a single filing.255 Based on its review, 

however, the Commission may approve 

or deem only part or some of the swaps 

within that group, category, type or 

class as available to trade. Second, 

allowing a SEF or DCM to consider 

activity in the same swap that is listed 

on another trading platform or in the 

bilateral market would yield 

information about how that swap trades 

in the overall market and better inform 

market participants and the Commission 


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Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 33625 

256Markit Comment Letter at 3; Spring Trading 

Comment Letter at 4; AIMA Comment Letter at 4; 

Bloomberg Comment Letter at 4; FXall Comment 

Letter at 6; Vanguard Comment Letter at 5; SIFMA 

AMG Comment Letter at 5; JPMorgan Comment 

Letter at 1; ISDA Comment Letter at 7; Eaton Vance 

Management Comment Letter at 3; ICI Comment 

Letter at 6; Morgan Stanley Comment Letter at 6; 

FSR Comment Letter at 6–7. 

257Markit Comment Letter at 3; FSR Comment 

Letter at 3, 6–7. 

258 ICI Comment Letter at 6; Eaton Vance 

Management Comment Letter at 2–3. 

259FHLB Comment Letter at 3; Markit Comment 

Letter at 3; ICI Comment Letter at 5; CEWG 

Comment Letter at 3. 

260Markit Comment Letter at 3; ISDA Comment 

Letter at 7; Morgan Stanley Comment Letter at 4; 

FSR Comment Letter at 3; ICI Comment Letter at 5; 

SIFMA AMG Comment Letter at 7. 

261 Vanguard Comment Letter at 4; SIFMA AMG 

Comment Letter at 5. 

262Bloomberg Comment Letter at 4. 

263FHLB Comment Letter at 4. 

264The Commission notes that a SEF or DCM, if 

it chooses, may consider more than one factor in 

determining if a swap is available to trade. 

265Under §§ 40.5(c)(2)(ii) and 40.6(a)(8), the 

Commission may request that a registered entity to 

supplement the submission with additional 

information. 

266MFA Comment Letter at 4; FXall Comment 

Letter at 7–8; ICI Comment Letter at 7; SIFMA AMG 

Comment Letter at 11–12; Spring Trading Comment 

Letter at 7 (Jan. 12, 2012); ISDA Comment Letter at 

8–9; JPMorgan Comment Letter at 2. 

267MFA Comment Letter at 4; ICI Comment Letter 

at 7–8; FXall Comment Letter at 7–8. 

268Spring Trading Comment Letter at 7–8 (Jan. 

12, 2012); SDMA Comment Letter at 10. 

269MFA Comment Letter at 4–5; ICI Comment 

Letter at 8. 

270The Commission acknowledges the concern 

that the de-listing of swaps by one or more SEFs 

or DCMs may affect the liquidity in the market for 

such swaps, or could be a reflection of reduced 

liquidity in such markets, and that such reduced 

liquidity could affect the costs of executing such 

swaps on a SEF or DCM. In such circumstances 

where swaps are de-listed by SEFs or DCMs, 

however, the Commission may review the availableto-trade status of such a swap under part 40 of the 

Commission’s regulations; additionally, section 

8a(7) of the CEA affords market participants an 

avenue to request the Commission to designate a 

swap as no longer available to trade. See supra note 

140. 

271 76 FR 77735. 

272Morgan Stanley Comment Letter at 8; MFA 

Comment Letter at 4–5; ISDA Comment Letter at 8; 

AIMA Comment Letter at 2–3; Eaton Vance 

Management Comment Letter at 4; ICI Comment 

Letter at 7; Markit Comment Letter at 4; Vanguard 

Comment Letter at 6; JPMorgan Comment Letter at 

Continued 

about how the swap may trade in a 

centralized environment. 

A number of commenters 

recommended that the Commission 

pursue an alternative approach that 

would establish objective threshold 

criteria for the determination factors.256

For example, Markit and FSR 

commented that without objective 

thresholds, SEFs and DCMs would not 

be able to determine that a swap is 

available to trade with regards to its 

liquidity.257 ICI and Eaton Vance 

Management stated that buy-side market 

participants would indirectly incur 

higher trading costs in the event that a 

swap with limited liquidity were to 

trade on a SEF or DCM.258

The Commission does not deem the 

risk of limited liquidity swaps becoming 

available to trade as significant relative 

to the benefits of the final rule’s flexible 

approach. As such, the Commission 

does not believe that establishing 

objective threshold criteria would 

provide a sufficient benefit to warrant 

imposing additional administrative 

burdens—the Commission would first 

be required to determine which swaps 

(among a wide variety) may potentially 

be available to trade, and establish and 

update criteria for those swaps. Market 

participants would then have to fulfill 

the burden of processing and analyzing 

trade data to demonstrate that those 

criteria are met for swaps that they 

submit. The rule, as adopted, allows the 

Commission to consider data and other 

objective factors submitted by SEFs and 

DCMs, or the comments from other 

market participants during the 

determination process. The Commission 

will review and assess each available-totrade submission to ensure that it is 

consistent with the CEA and the 

Commission’s regulations. Further, the 

Commission believes that the adopted 

approach promotes greater swaps 

trading on SEFs and DCMs, in 

accordance with the statutory objectives 

of the CEA, by providing the flexibility 

to make swaps with different trading 

characteristics available to trade, rather 

than imposing rigid threshold criteria. 

Several commenters recommended 

that SEFs and DCMs must consider and 

demonstrate that a swap is available to 

trade based on more than one factor.259

Many of these commenters stated that 

SEFs and DCMs should be required to 

consider all of the enumerated 

factors; 260 Vanguard and SIFMA AMG, 

for example, supported this approach 

because they believed that all of the 

factors are relevant in determining if a 

swap is available to trade.261 Bloomberg 

commented that the factors are all 

important indicators of an actual trading 

market and recommended mandatory 

consideration of all of them, given the 

implications of making a swap available 

to trade and potential conflicts of 

interest.262 FHLB commented that a 

determination should be based on 

multiple factors.263

The Commission has considered the 

range of alternatives suggested by some 

commenters with respect to more 

specific or mandatory consideration of 

the determination factors, but believes 

that requiring consideration of every 

factor or a specific set of factors would 

require additional effort on the part of 

the SEFs or DCMs without significant 

added benefit.264 In the event that a 

SEF’s or DCM’s submission does not 

adequately support an available-to-trade 

determination, the Commission, under 

part 40, may request additional 

information in order to complete its 

review 265 or extend the review period. 

The adopted approach achieves the goal 

of making swaps available for 

centralized trading, while allowing SEFs 

and DCMs the flexibility to subject 

swaps with different trading 

characteristics to the trade execution 

requirement. 

Several commenters supported 

incorporating a process for determining 

whether a swap is no longer available to 

trade; 266 some recommended using the 

same factors as those used to determine 

whether a swap is available to trade, 

albeit with objective thresholds.267

Commenters were split on the issue of 

applicability; some expressed that a 

determination that a swap is no longer 

available to trade should apply only to 

individual SEFs or DCMs,268 while 

others recommended that such a 

determination should apply on a 

marketwide basis, consistent with how 

the trade execution requirement is 

applied.269

The Commission believes that 

inclusion at this time of a separate 

process for determining that a swap is 

no longer available to trade is 

unnecessary and unwarranted by the 

limited, if any, benefit that would be 

afforded. In this circumstance, to 

impose a requirement for the last SEF or 

DCM that ceases to list a swap for 

trading to submit an official 

determination that the swap is no longer 

available to trade would be 

unnecessary.270

The Commission proposed, and 

several commenters supported, a 

requirement that each SEF or DCM (1) 

conduct an annual review and 

assessment of each swap it has made 

available to trade to determine whether 

or not each of these swaps should 

continue to be available to trade; and (2) 

submit an electronic copy of the review 

and assessment, including any 

supporting information or data, to the 

Commission no later than 30 days after 

its fiscal year end. The Commission 

estimated that it would cost each DCM 

an additional $1,730 per review to 

comply with the proposed 

requirement.271 Some commenters 

recommended more frequent reviews in 

order to identify illiquid swaps on a 

timelier basis.272


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33626 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

2; SIFMA AMG Comment Letter at 11; FSR 

Comment Letter at 3–4. 

273MarketAxess Comment Letter at 9. 

274WMBAA Comment Letter at 5. 

275Sunguard Kiodex Comment Letter at 2. 

276SDMA Comment Letter at 10; WMBAA 

Comment Letter at 4. 

277See supra note 155 and accompanying text. 

278See supra note 14. 

279WMBAA Comment Letter at 5. 

280S. Rep. No. 111–176, at 34 (2010) (quoting 

International Risk Analytics co-founder Christopher 

Whalen, ‘‘[t]he absence of an exchange trading 

mandate provides ‘supra-normal returns paid to the 

dealers in the closed OTC derivatives market [and] 

are effectively a tax on other market participants, 

especially investors who trade on open, public 

exchanges’’’). 

Other commenters, however, opposed 

the requirement. MarketAxess 

commented that conducting annual 

assessments would require SEFs and 

DCMs to allocate substantial 

resources.273 WMBAA stated that the 

proposed requirement is arbitrary, timeconsuming, and offered insufficient 

regulatory value, and that the costs and 

burdens of an annual review would be 

higher than the Commission’s 

projections.274 Sunguard Kiodex 

asserted that periodic reviews would 

cause swaps’ statuses to fluctuate, 

therefore negating the benefit of an 

initial determination.275 WMBAA and 

SDMA alternatively recommended that 

a SEF or DCM annually renew its selfcertification based on the clearing 

determination review.276

In line with its reasoning for not 

adopting a separate process for 

determining that a swap is no longer 

available to trade, the Commission is 

also not adopting an annual review and 

assessment requirement. A swap will no 

longer be available to trade when all 

relevant SEFs and DCMs have de-listed 

the swap; in the ordinary course of 

business, the Commission believes that 

a SEF or DCM will already assess 

whether it should continue to list or 

offer a swap for trading. Such an 

assessment would likely consider 

similar factors, such as trading volume, 

to those used to determine that a swap 

is available to trade. Therefore, the 

Commission believes that imposing a 

separate review and assessment 

requirement would necessitate 

duplicative and costly effort with 

limited, if any, additional benefit. In 

response to commenters who support 

more frequent reviews to identify 

illiquid swaps that should no longer be 

available to trade, the Commission notes 

that market participants themselves may 

request that a SEF or DCM review and 

assess an available-to-trade 

determination. The Commission may 

also request relevant information from 

SEFs and DCMs to conduct a review and 

assessment.277

b. Applicability 

Sections 37.10(c) and 38.12(c) of the 

final rule require that once a swap is 

deemed to be available to trade, then all 

other SEFs and DCMs listing or offering 

the same swap must do so in accordance 

with the trade execution requirement 

under section 2(h)(8) of the CEA.278 The 

Commission did not identify 

alternatives to this requirement. Further, 

the Commission also requested, but did 

not receive, comments on alternatives to 

the proposed requirement. 

Costs 

The Commission anticipates that final 

§§ 37.10(c) and 38.12(c) will impose 

some minimal costs for SEFs and DCMs 

related to monitoring and identifying 

swaps to discern whether a swap is 

available to trade on another SEF or 

DCM, and therefore would be subject to 

the trade execution requirement. The 

Commission has almost entirely 

eliminated these costs by assuming the 

responsibility for maintaining a public 

record of all of the swaps that are 

subject to the trade execution 

requirement in an accessible, central 

location on its Web site. 

The Commission solicited comments 

on the costs associated with §§ 37.10(c) 

and 38.10(c) and received one comment. 

WMBAA stated that the ongoing 

surveillance necessary to determine 

which swaps have been made available 

to trade would impose excessive costs 

on SEFs and DCMs.279 WMBAA, 

however, did not provide an estimate of 

such costs or further substantiate its 

claim. Therefore, the Commission does 

not deem WMBAA’s comment sufficient 

to alter its belief that these costs will be 

minimal, given that the Commission 

will maintain on its Web site a 

centralized list of all swaps that are 

available to trade. 

Benefits 

Sections 37.10(c) and 38.12(c) 

promote trading on SEFs and DCMs, 

consistent with the trade execution 

requirement under section 2(h)(8) of the 

CEA. Specifically, swaps traded on a 

SEF will be executed as Required 

Transactions under § 37.9 of the 

Commission’s regulations, which means 

that they will be executed via an Order 

Book or RFQ. Swaps that are subject to 

the trade execution requirement and 

traded on a DCM must be executed 

pursuant to subpart J of part 38 of the 

Commission’s regulations, which 

implements revised DCM Core Principle 

9, as amended by section 735(b) of the 

Dodd-Frank Act. Core Principle 9 

requires DCMs to ‘‘provide a 

competitive, open, and efficient market 

and mechanism for executing 

transactions that protects the price 

discovery process of trading in the 

centralized market of the board of 

trade.’’ Accordingly, market participants 

in these swaps will benefit from the pretrade transparency and price discovery 

associated with trading on DCMs and 

SEFs as well as the application of other 

DCM and SEF core principles. The 

Commission also anticipates that greater 

competition among SEFs and DCMs will 

lower bid-ask spreads and transaction 

costs for some market participants.280

c. Consideration of Section 15(a) 

Factors—Available-to-Trade Rule 

Protection of Market Participants and 

the Public 

In crafting the final rule to provide a 

method for determining that a swap is 

subject to the trade execution 

requirement under section 2(h)(8) of the 

CEA, the Commission has endeavored to 

create a regime that foremost will 

protect market participants and the 

public. Under the final rule, a SEF or 

DCM must consider certain factors 

specified by the Commission under 

§ 37.10(b) or § 38.12(b), respectively, in 

determining that a swap is available to 

trade. A SEF or DCM must also submit 

such determinations to the Commission, 

either for approval or under selfcertification procedures, pursuant to 

part 40 of the Commission’s regulations. 

Part 40 also requires SEFs and DCMs to 

post a notice and a copy of rule 

submissions on their Web site 

concurrent with the filing of the 

submissions with the Commission. The 

Commission, consistent with current 

practice, will also post SEF and DCM 

rule submission filings on its Web site. 

Therefore, under the final rule, SEFs, 

DCMs, and market participants will 

have full information about the factors 

that a SEF or DCM considered in 

determining that a swap is available to 

trade, the procedure for a SEF or DCM 

to submit a swap as available to trade, 

the swaps that are presently available to 

trade, and the progress of swaps under 

review. Accordingly, the final rule 

promotes the protection of market 

participants by ensuring transparency in 

the available-to-trade process. 

The final rule will also promote the 

protection of market participants and 

the public by providing for Commission 

review and encouraging public 

comment in appropriate circumstances. 

Under the final rule, the Commission 

will review the SEF’s or DCM’s 

available-to-trade determination. To 

facilitate this review, part 40 requires 


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281 7 U.S.C. 7(d)(9); subpart J of part 38 of the 

Commission’s regulations, which implements 

revised DCM Core Principle 9, as amended by 

section 735(b) of the Dodd-Frank Act. 

282The Commission has adopted the final 

compliance and implementation schedule for the 

clearing requirement under section 50.25(b). Swap 

Transaction Compliance and Implementation 

Schedule: Clearing Requirement Under Section 2(h) 

of the CEA, 77 FR 44441 (July 20, 2012). See supra 

note 158. 

SEFs and DCMs to provide the 

Commission with, and to post on their 

Web sites, a brief explanation of any 

substantive opposing views in rule 

filings, and allow for a public comment 

period when warranted. 

The final rule also will promote the 

protection of market participants and 

the public by ensuring that transactions 

in swaps that are available to trade and 

subject to the trade execution 

requirement are executed on regulated 

SEFs and DCMs in accordance with 

section 2(h)(8) of the CEA, rather than 

the bilateral OTC market. Therefore, 

these swaps will be transacted with the 

pre-trade and post-trade transparency 

that swap execution on SEFs and DCMs 

provide, reducing search costs relative 

to the bilateral OTC market, and 

potentially lowering bid-ask spreads. 

At the same time, the final rule will 

further promote the protection of market 

participants and the public by providing 

for a Commission review of the 

available-to-trade process. SEFs and 

DCMs will have considerable discretion 

on the application and consideration of 

the factors to make swaps available to 

trade, which may vary depending on the 

nature of the relevant swap market. This 

approach will enable SEFs and DCMs to 

utilize their expertise in the markets in 

which they list swaps for trading to 

determine which swaps should be 

available to trade, subject to 

Commission review of these 

determinations to ensure that they are 

consistent with the CEA and the 

Commission’s regulations, and therefore 

for market participants and the public. 

Efficiency, Competitiveness, and 

Financial Integrity of the Markets 

The final rule promotes the trading of 

swaps on SEFs and DCMs by 

establishing a process that specifies 

when a swap is available to trade; once 

a swap is deemed available to trade, that 

swap must be traded on a SEF or DCM 

if it is subject to the clearing 

requirement. Accordingly, the adopted 

process will promote market efficiency 

and competitiveness by (1) informing 

market participants of when the trade 

execution requirement applies and (2) 

prescribing the methods by which all 

market participants may execute a 

particular swap, depending on whether 

the trade execution requirement applies. 

The final rule further promotes 

market efficiency by tasking SEFs and 

DCMs with the primary responsibility 

and discretion to consider any one or 

several factors in determining whether a 

swap is available to trade. This 

approach reflects the Commission’s 

view that SEFs and DCMs have (or will 

have) the expertise and ability to form 

reasonable conclusions about which 

swaps should be subject to the trade 

execution requirement and which swaps 

should not be traded pursuant to 

mandatory trade execution. By assigning 

primary responsibility to SEFs and 

DCMs in this manner—subject to 

Commission review to assure 

consistency with the CEA and the 

Commission’s regulations—the 

Commission believes that the final rule 

further promotes both market efficiency 

and integrity. Further, by assuming the 

responsibility for maintaining an up-todate list of swaps made available to 

trade, the Commission is also mitigating 

the search costs for market participants 

to identify whether a swap is available 

to trade on SEF or a DCM, thereby 

promoting the overall efficiency of the 

swaps markets for SEFs, DCMs and 

market participants. 

Price Discovery 

As stated above, the final regulations 

are expected to promote the trading of 

swaps on SEFs and DCMs. Swaps that 

are subject to the clearing requirement 

must be executed on a SEF or DCM, in 

a manner consistent with the trade 

execution requirement, if made 

available to trade on a SEF or DCM. By 

providing the procedural mechanism to 

establish when a swap is available to 

trade—an issue on which the statute is 

silent—the rule operationalizes the 

trade execution requirement. 

Accordingly, the rule reinforces price 

discovery promoted through mandatory 

trade execution. For example, swaps 

traded on DCMs that are made available 

to trade would be subject to DCM Core 

Principle 9, which requires DCMs to 

‘‘provide a competitive, open, and 

efficient market and mechanism for 

executing transactions that protects the 

price discovery process of trading in the 

centralized market of the board of 

trade.’’ 281 Under § 37.9 of the 

Commission’s regulations, SEFs will be 

required to provide an order book or an 

RFQ method of trade execution that 

offers pre-trade price transparency for 

swaps listed or offered for trading that 

are available to trade. This pre-trade 

transparency promotes price discovery 

for swaps. 

Sound Risk Management Practices 

The enhanced pre-trade and posttrade transparency and price discovery 

in contracts that have been made 

available to trade, and thus subject to 

the trade execution requirement, under 

the procedures set out in this rule will 

promote sound risk management 

practices by ensuring that market 

participants and clearing organizations 

are able to base their risk management 

decisions on publicly available prices 

discovered on the competitive and 

efficient markets offered by SEFs and 

DCMs. As trading on SEFs and DCMs is 

not relationship-based, as is typical of 

trading in the OTC market, market 

participants will have access to a 

broader range of risk management 

options in the form of swaps that are 

available to trade. 

Other Public Interest Considerations 

The final regulations are not expected 

to affect public interest considerations 

other than those identified above. 

2. Trade Execution Compliance 

Schedule 

Final §§ 37.12 and 38.11 establishes a 

compliance schedule following a 

determination that a swap is subject to 

the trade execution requirement under 

section 2(h)(8) of the CEA. Market 

participants are required to comply with 

the trade execution requirement upon 

the later of (1) the applicable deadline 

established under the compliance and 

implementation schedule for the 

clearing requirement for a swap under 

section 2(h)(1) of the CEA; 282 or (2) 30 

days after the swap is first made 

available to trade on either a SEF or 

DCM. Absent this final rule, market 

participants would have been required 

to comply with the trade execution 

requirement immediately after a swap is 

determined to be available to trade and 

required to be cleared. To provide 

further flexibility to registrants and 

market participants, the Commission is 

exercising its discretion to stagger 

implementation of the trade execution 

requirement. 

For reasons discussed below, the cost 

and benefits associated with requiring 

mandatory trade execution immediately 

upon making a swap available to trade 

and requiring it to be cleared, or after 

some longer versus shorter period of 

delay, are not susceptible to meaningful 

quantification. Costs and benefits 

associated with trade execution are 

independent of costs and benefits of 

implementing mandatory trade 

execution itself and pertain exclusively 

to the pace of implementation. The 

Commission is not aware of any analog, 


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33628 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

283 JPMorgan Comment Letter at 3–4; UBS 

Comment Letter at 2; ICI Comment Letter at 5 (Nov. 

4, 2011); CME Comment Letter at 2 (Nov. 4, 2011); 

Westpac Comment Letter at 3 (Nov. 4, 2011); 

Regional Banks Comment Letter at 7 (Nov. 4, 2011); 

FHLBanks Comment Letter at 5 (Nov. 4, 2011); ICI 

Comment Letter at 9; ISDA Comment Letter at 11; 

AIMA Comment Letter at 2–3; ACLI Comment 

Letter at 2. 

284 ISDA Comment Letter at 11; AIMA Comment 

Letter at 2–3. 

285CME Comment Letter at 2 (Nov. 4, 2011). 

286MFA Comment Letter at 10–11. 

287Similarly, where a swap first becomes subject 

to the clearing requirement before being made 

available to trade, the clearing determination would 

alert market participants to the fact that specific 

classes of swaps may become subject to the trade 

execution requirement. 

288Under the §§ 37.10(a)(2) and 38.12(a)(2) of the 

final rule, a SEF or DCM that submits a swap as 

available to trade must certify that it is listing it for 

trading on its own trading system or platform. This 

requirement will ensure that a minimum level of 

connectivity is present between a SEF or DCM and 

market participants prior to determining whether it 

is available to trade. 

289The Commission believes that DCMs will be 

prepared to comply with the trade execution 

requirement to a certain extent because they may 

have the infrastructure in place to facilitate the 

trading of swaps. DCMs may require fewer 

technology, legal arrangements, and changes to 

operational patterns. As the Commission noted in 

the proposed rule, however, they may still have to 

update their internal policies and procedures. 76 FR 

58190. 

290Tradeweb Comment Letter at 4. 

to either an immediate or delayed 

requirement, to comply with the trade 

execution requirement that would 

produce data useful in estimating the 

difference in costs and benefits between 

the two approaches. Notwithstanding 

these limitations, the Commission 

identifies and considers the costs and 

benefits of this rule in qualitative terms. 

Costs 

The Commission solicited comments 

regarding costs associated with §§ 37.12 

and 38.11, including the costs and 

benefits of any alternative compliance 

schedule proposed. Although the 

Commission requested quantification of 

those costs discussed, commenters did 

not provide specific estimates in dollar 

terms. 

The Commission recognizes that the 

compliance schedule entails certain 

initial costs to the market and public— 

in particular, a delay in obtaining the 

benefits of pre-trade price transparency 

and price discovery. The Commission 

believes, however, that such costs are 

warranted because incurring them at the 

outset facilitates the ability to more fully 

realize the intended pre-trade price 

transparency and price discovery 

benefits upon the compliance date and 

thereafter. As discussed below in 

connection with the benefits of this rule, 

this compliance schedule provides 

market participants with sufficient time 

to transition trading from the OTC 

markets to SEFs and DCMs. Absent this 

window for transition, market 

participants would likely encounter an 

impaired ability to manage their risks 

and adequately hedge their positions. 

Further, the inability of market 

participants to execute swaps on SEFs 

and DCMs as they engage in necessary 

transaction activities would likely 

reduce liquidity in certain swaps and 

increase transaction costs for other 

market participants. 

In response to requests for comment 

on the compliance schedule, some 

commenters stated that 30 days would 

be insufficient for market participants to 

comply with the trade execution 

requirement.283 For example, ISDA and 

AIMA expressed concern that such a 

compressed schedule would preclude 

market participants from hedging their 

exposures,284 while CME commented 

that DCOs, DCMs, and SEFs would not 

be able to establish technological 

linkages within 30 days.285 MFA stated 

that the Commission’s compliance 

schedule could require simultaneous 

compliance with the trade execution 

requirement and the clearing 

requirement, which would require 

devoting resources to both efforts and 

create a significant burden.286

Given that the final rule does not 

impose a fixed 30-day requirement, the 

Commission disagrees that the schedule 

is overly costly or onerous. In response 

to commenters concerned that 30 days 

would be insufficient to achieve 

compliance, the Commission notes that 

the implementation period for the trade 

execution requirement may vary 

depending on the timing of the 

available-to-trade determination and the 

clearing determination. In some, if not 

many, instances, market participants 

will have more than 30 days after a 

swap is made available to trade to 

comply. For example, depending upon 

when a swap is deemed as available to 

trade and the amount of time a 

particular market participant is afforded 

to comply with the clearing requirement 

under the Commission’s final schedule 

(90 days, 180 days, or 270 days), the 

30th day after a swap is deemed as 

available to trade pursuant to the part 40 

procedures may occur prior to the date 

in which the market participant must 

comply with the clearing requirement. 

Further, part 40 review procedures will 

provide market participants advance 

awareness that a swap may potentially 

be deemed as available to trade, during 

which time market participants logically 

should undertake initial transition 

planning in the event that the swap is 

ultimately deemed as available to 

trade.287 Moreover, certain prerequisite 

activities, such as establishing SEF or 

DCM connectivity, will be carried out 

infrequently or on a one-time basis, 

such that a longer implementation 

period would not be necessary when 

preparing to comply with the trade 

execution requirement for future swap 

trading.288

Benefits 

The compliance schedule set forth in 

final §§ 37.12 and 38.11 will allow 

market participants to comply with the 

trade execution requirement in an 

organized and timely manner, while 

mitigating potential disruptions to 

trading during the transition. The 

schedule will afford market participants 

the opportunity to resolve logistical 

issues prior to trading swaps on a SEF 

or DCM,289 such as establishing 

connectivity to a registered trading 

facility or platform; notifying customers 

and completing or amending any 

applicable legal documentation; and 

revising internal standards and 

procedures. The additional time will 

facilitate a greater number of potential 

swap counterparties who are prepared 

to participate in centralized trading, 

thereby increasing competition, pretrade price transparency, and price 

discovery. Increasing the number of 

potential market participants will also 

promote market liquidity and reduce the 

costs of using swaps to manage risk. 

Consideration of Alternatives 

Tradeweb commented that 30 days 

may not be sufficient to achieve 

compliance for a class of swaps that is 

being made available to trade for the 

first time, and recommended that the 

Commission set an appropriate 

implementation period on a case-bycase basis, with input from SEFs, DCMs, 

and market participants.290

The Commission, however, believes 

that a case-by-case approach is neither 

feasible nor necessary to establish an 

appropriate implementation period for 

different classes of swaps. The data 

needed to precisely determine the 

optimal time period—accommodating a 

reasonable transition while not unduly 

delaying the benefits of trade 

execution—does not yet exist; such data 

would be obtained from the transition 

process itself. Further, the adopted 

approach will allow the Commission to 

accommodate a large number of 

submissions for different classes of 

swaps through the transition process. 

Accordingly, the Commission believes 

that it is more appropriate to opt for an 

approach that is flexible and provides 

market participants with notice and 


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291See supra note 158. 292FXall Comment Letter at 7; ICI Comment 

Letter at 9; CME Comment Letter at 6–7; Vanguard 

Comment Letter at 6; Bloomberg Comment Letter at 

5; Westpac Comment Letter at 3 (Nov. 4, 2011); 

Chatham Comment Letter at 4; FSR Comment Letter 

at 4. 

293SIFMA AMG Comment Letter at 9; Eaton 

Vance Management Comment Letter at 3; ISDA 

Comment Letter at 11; Westpac Comment Letter at 

3 (Nov. 4, 2011); FHLBanks Comment Letter at 5 

(Nov. 4, 2011). 

294AIMA Comment Letter at 3 (Nov. 3, 2011); 

MarkitSERV Comment Letter at 5 (Nov. 4, 2011); 

Citadel Comment Letter at 5 (Nov. 4, 2011); MFA 

Comment Letter at 7 (Nov. 4, 2011); Vanguard 

Comment Letter at 5 (Nov. 4, 2011). 

295 JPMorgan Comment Letter at 3–4; ISDA 

Comment Letter at 11; FHLBanks Comment Letter 

at 5 (Nov. 4, 2011); Westpac Comment Letter at 2– 

3 (Nov. 4, 2011). 

296FSR Comment Letter at 4; Bloomberg 

Comment Letter at 5; ICI Comment Letter at 8; ISDA 

Comment Letter at 11; Eaton Vance Management 

Comment Letter at 3; Chatham Comment Letter at 

4; SIFMA AMG Comment Letter at 9; CME 

Comment Letter at 6–7; Westpac Comment Letter at 

3 (Nov. 21, 2011); ICI Comment Letter at 5 (Nov. 

4, 2011). 

297MFA Comment Letter at 4; Vanguard 

Comment Letter at 6; SIFMA AMG Comment Letter 

at 9; AIMA Comment Letter at 3; CME Comment 

Letter at 6–7. 

298SIFMA AMG Comment Letter at 9; ICI 

Comment Letter at 9; AIMA Comment Letter at 3; 

CME Comment Letter at 7; ISDA Comment Letter 

at 11; Westpac Comment Letter at 3; FIA/ISDA/ 

SIFMA Comment Letter at 8 (Nov. 4, 2011). 

299Tradeweb Comment Letter at 4 (Nov. 4, 2011). 

certainty, rather than one that attempts 

to assign a definite time period for 

swaps on a case-by-case basis. 

The Commission views the ideal 

implementation period for a class of 

swaps to depend on, among other 

factors, how the class of swaps is 

defined, and the number and 

complexity of those swaps within that 

class. This amount of time also depends 

on the nature, experience, and resources 

of the market participant to whom the 

requirement applies. The Commission’s 

adopted approach accounts for the latter 

consideration by incorporating the 

implementation periods for the clearing 

requirement—90, 180, and 270 days— 

that are based on the type of market 

participant.291 Where a swap first 

becomes subject to the clearing 

requirement before being made available 

to trade, the clearing determination 

would alert market participants to the 

fact that specific classes of swaps may 

become subject to the trade execution 

requirement. Therefore, the rule as 

adopted addresses Tradeweb’s concern 

by providing sufficient flexibility to 

accommodate different classes of swaps, 

without the added complexity of 

instituting an compliance schedule that 

applies on a case-by-case basis. In 

contrast, a case-by-case approach would 

likely increase the administrative 

burden by requiring an additional 

review and determination process, 

thereby further delaying the benefits of 

the trade execution requirement. 

Several commenters recommended a 

longer implementation period, i.e., more 

than 30 days after a swap is made 

available to trade, ranging from 90 to 

180 days after a swap is made available 

to trade.292 Some commenters also 

recommended establishing the 

implementation period after the swap 

becomes subject to the trade execution 

requirement.293 Other commenters 

recommended that the trade execution 

requirement should not apply until full 

implementation of the clearing 

requirement.294 Commenters generally 

stated that lengthening the 

implementation period would provide 

market participants with adequate time 

to establish new infrastructure, 

standards, and procedures;295 develop 

adequate connectivity 296 and obtain 

trading access;297 and complete 

documentation and agreements.298

Tradeweb, however, stated that 30 days 

would be adequate to comply with the 

trade execution requirement for 

individual swaps.299

The Commission believes that the 

adopted approach appropriately 

balances the benefits of attaining 

mandatory trade execution as 

expeditiously as possible with the need 

for sufficient preparation time for 

compliance. As noted above, 30 days 

represents a minimum duration of time 

provided for compliance. Depending on 

when a swap is submitted and deemed 

available to trade, market participants 

may also utilize the time afforded under 

the clearing implementation schedule to 

complete the requisite activities 

necessary to trade on a SEF or DCM. 

The Commission also notes that the 

final rule requires that a SEF or DCM 

submitting a swap as available to trade 

must already list it for trading. This 

requirement will ensure that a 

minimum level of connectivity is 

present between a SEF or DCM and 

market participants prior to determining 

whether it is available to trade. 

Consideration of Section 15(a) Factors— 

Trade Execution Compliance Schedule 

Protection of Market Participants and 

the Public 

An extended implementation period 

will help facilitate an orderly transition 

of swaps trading to a centralized market 

structure. The inability of SEFs and 

DCMs to comply with the trade 

execution requirement by any particular 

designated date risks excluding market 

participants from transacting swaps that 

are subject to mandatory trade 

execution; this would reduce overall 

liquidity and increase the costs of 

executing those swaps for other market 

participants. Thus, absent a reasonable 

implementation schedule, market 

participants could potentially be 

exposed to higher market risk due to 

increased costs of hedging their 

positions or the inability to hedge their 

positions. The implementation period 

allows for timely compliance and 

protects market participants by 

mitigating the potential disruptions to 

the transition to trading on a SEF or 

DCM. 

Efficiency, Competitiveness, and 

Financial Integrity of the Markets 

The implementation period promotes 

efficiency in the markets by providing 

additional time for market participants 

to identify and resolve technical or 

logistical issues related to trading on a 

SEF or DCM in a manner consistent 

with the trade execution requirement. 

By enabling a broader group of market 

participants to comply with the trade 

execution requirement in a timely 

manner, the implementation period will 

facilitate competition in the centralized 

market, which in turn will promote 

greater pre-trade price transparency and 

price integrity in the market. 

Price Discovery 

By providing adequate time to prepare 

for such trading, the implementation 

period will facilitate an orderly 

transition to centralized trading and 

mitigate instances in which some 

market participants would not be 

prepared to enter the market by the 

given compliance date. In doing so, the 

Commission is affording the 

opportunity for the maximum number 

of potential swap counterparties to 

participate, thereby enhancing the price 

discovery process. 

Sound Risk Management Practices 

The implementation period reflected 

in the final rule should ensure that 

market participants have adequate time 

to comply with the trade execution 

requirement and will be prepared to 

transact swaps on a SEF or DCM. As a 

result, market participants should be 

able to maintain hedges that have been 

executed through swap transactions, 

thereby mitigating market and 

counterparty risks. Moreover, a 

compliance schedule that facilitates SEF 

and DCM swap execution by the greatest 

number of potential market participants, 

as does the final rule, indirectly 

promotes market liquidity, thereby 

reducing the overall costs of utilizing 

swaps for risk management purposes. 


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33630 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

Other Public Interest Considerations 

The final regulations are not expected 

to affect public interest considerations 

other than those identified above. 

V. List of Commenters 

1. Alternative Investment Management 

Association (‘‘AIMA’’) 

2. Americans for Financial Reform 

(‘‘AFR’’) 

3. American Council of Life Insurers 

(‘‘ACLI’’) 

4. Asset Management Group, Securities 

Industry and Financial Markets 

Association (‘‘SIFMA AMG’’) 

5. Bloomberg 

6. CBOE Futures Exchange (‘‘CBOE’’) 

7. Chatham Financial (‘‘Chatham’’) 

8. Chris Barnard 

9. Citadel 

10. CME Group (‘‘CME’’) 

11. Commercial Energy Working Group 

(‘‘CEWG’’) 

12. Eaton Vance Management 

13. Federal Home Loan Banks (‘‘FHLB’’) 

14. Fifth Third Bank, PNC Bank, 

Regions Bank, U.S. Bank National 

Association (‘‘Regional Banks’’) 

15. Financial Services Roundtable 

(‘‘FSR’’) 

16. Futures Industry Association 

(‘‘FIA’’) 

17. FX Alliance (‘‘FXall’’) 

18. Geneva Energy Markets, LLC 

19. ICAP 

20. International Swaps and Derivatives 

Association (‘‘ISDA’’) 

21. Investment Company Institute 

(‘‘ICI’’) 

22. Javelin Capital Markets 

23. JP Morgan 

24. Managed Funds Association 

(‘‘MFA’’) 

25. MarketAxess Holdings, Inc. 

(‘‘MarketAxess’’) 

26. Markit 

27. MarkitSERV 

28. Morgan Stanley 

29. ODEX Group, Inc. (‘‘ODEX’’) 

30. Spring Trading, LLC (‘‘Spring 

Trading’’) 

31. Swaps & Derivatives Market 

Association (‘‘SDMA’’) 

32. Sunguard Kiodex LLC (‘‘Sunguard 

Kiodex’’) 

33. Tradeweb Markets LLC 

(‘‘Tradeweb’’) 

34. UBS Securities LLC (‘‘UBS’’) 

35. Vanguard 

36. Westpac Banking Corporation 

(‘‘Westpac’’) 

37. Wholesale Markets Brokers’ 

Association, Americas (‘‘WMBAA’’) 

List of Subjects 

17 CFR Part 37 

Registered entities, Reporting and 

recordkeeping requirements, Swap 

execution facilities, Swaps. 

17 CFR Part 38 

Designated contract markets, 

Registered entities, Reporting and 

recordkeeping requirements, Swaps. 

For the reasons stated in the 

preamble, the Commission amends 17 

CFR part 37 and part 38 as follows: 

PART 37—SWAP EXECUTION 

FACILITIES 

■ 1. The authority citation for part 37 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a2, 7b-3 and 12a, as amended by Titles VII and 

VIII of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, Pub. L. 111– 

203, 124 Stat. 1376 (2010). 

■ 2. Subpart A, as amended elsewhere 

in this issue of the Federal Register, is 

further amended by adding §§ 37.10 

through 37.12 to read as follows: 

Subpart A—General Provisions 

Sec. 

* * * * * 

37.10 Process for a swap execution facility 

to make a swap available to trade. 

37.11 [Reserved]. 

37.12 Trade execution compliance 

schedule. 

§ 37.10 Process for a swap execution 

facility to make a swap available to trade. 

(a)(1) Required submission. A swap 

execution facility that makes a swap 

available to trade in accordance with 

paragraph (b) of this section, shall 

submit to the Commission its 

determination with respect to such 

swap as a rule, as that term is defined 

by § 40.1 of this chapter, pursuant to the 

procedures under part 40 of this 

chapter. 

(2) Listing requirement. A swap 

execution facility that makes a swap 

available to trade must demonstrate that 

it lists or offers that swap for trading on 

its trading system or platform. 

(b) Factors to consider. To make a 

swap available to trade, for purposes of 

section 2(h)(8) of the Act, a swap 

execution facility shall consider, as 

appropriate, the following factors with 

respect to such swap: 

(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. 

(c) Applicability. Upon a 

determination that a swap is available to 

trade on any swap execution facility or 

designated contract market pursuant to 

part 40 of this chapter, all other swap 

execution facilities and designated 

contract markets shall comply with the 

requirements of section 2(h)(8)(A) of the 

Act in listing or offering such swap for 

trading. 

(d) Removal—(1) Determination. The 

Commission may issue a determination 

that a swap is no longer available to 

trade upon determining that no swap 

execution facility or designated contract 

market lists such swap for trading. 

(2) Delegation of Authority. (i) The 

Commission hereby delegates, until it 

orders otherwise, to the Director of the 

Division of Market Oversight or such 

other employee or employees as the 

Director may designate from time to 

time, the authority to issue a 

determination that a swap is no longer 

available to trade. 

(ii) The Director may submit to the 

Commission for its consideration any 

matter that has been delegated in this 

section. Nothing in this section 

prohibits the Commission, at its 

election, from exercising the authority 

delegated in this section. 

§ 37.11 [Reserved]. 

§ 37.12 Trade execution compliance 

schedule. 

(a) A swap transaction shall be subject 

to the requirements of section 2(h)(8) of 

the Act upon the later of: 

(1) The applicable deadline 

established under the compliance 

schedule provided under § 50.25(b) of 

this chapter; or 

(2) Thirty days after the available-totrade determination submission or 

certification for that swap is, 

respectively, deemed approved under 

§ 40.5 of this chapter or deemed 

certified under § 40.6 of this chapter. 

(b) Nothing in this section shall 

prohibit any counterparty from 

complying voluntarily with the 

requirements of section 2(h)(8) of the 

Act sooner than as provided in 

paragraph (a) of this section. 

PART 38—DESIGNATED CONTRACT 

MARKETS 

■ 3. The authority citation for part 38 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6c, 6d, 6e, 

6f, 6g, 6i, 6j, 6k, 6l, 6m, 6n, 7, 7a-2, 7b, 7b1, 7b-3, 8, 9, 15, and 21, as amended by the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 

124 Stat. 1376. 

Subpart A—General Provisions 

■ 4. Add § 38.11 to subpart A to read as 

follows: 


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Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 33631 

300 January 30, 2012. 

§ 38.11 Trade execution compliance 

schedule. 

(a) A swap transaction shall be subject 

to the requirements of section 2(h)(8) of 

the Act upon the later of: 

(1) The applicable deadline 

established under the compliance 

schedule provided under § 50.25(b) of 

this chapter; or 

(2) Thirty days after the available-totrade determination submission or 

certification for that swap is, 

respectively, deemed approved under 

§ 40.5 of this chapter or deemed 

certified under § 40.6 of this chapter. 

(b) Nothing in this section shall 

prohibit any counterparty from 

complying voluntarily with the 

requirements of section 2(h)(8) of the 

Act sooner than as provided in 

paragraph (a) of this section. 

■ 5. Add § 38.12 to subpart A to read as 

follows: 

§ 38.12 Process for a designated contract 

market to make a swap available to trade. 

(a)(1) Required submission. A 

designated contract market that makes a 

swap available to trade in accordance 

with paragraph (b) of this section, shall 

submit to the Commission its 

determination with respect to such 

swap as a rule, as that term is defined 

by § 40.1 of this chapter, pursuant to the 

procedures under part 40 of this 

chapter. 

(2) Listing requirement. A designated 

contract market that makes a swap 

available to trade must demonstrate that 

it lists or offers that swap for trading on 

its trading system or platform. 

(b) Factors to consider. To make a 

swap available to trade, for purposes of 

section 2(h)(8) of the Act, a designated 

contract market shall consider, as 

appropriate, the following factors with 

respect to such swap: 

(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. 

(c) Applicability. (1) Upon a 

determination that a swap is available to 

trade on any designated contract market 

or swap execution facility pursuant to 

part 40 of this chapter, all other 

designated contract markets and swap 

execution facilities shall comply with 

the requirements of section 2(h)(8)(A) of 

the Act in listing or offering such swap 

for trading. 

(d) Removal—(1) Determination. The 

Commission may issue a determination 

that a swap is no longer available to 

trade upon determining that no swap 

execution facility or designated contract 

market lists such swap for trading. 

(2) Delegation of Authority. (i) The 

Commission hereby delegates, until it 

orders otherwise, to the Director of the 

Division of Market Oversight or such 

other employee or employees as the 

Director may designate from time to 

time, the authority to issue a 

determination that a swap is no longer 

available to trade. 

(ii) The Director may submit to the 

Commission for its consideration any 

matter that has been delegated in this 

section. Nothing in this section 

prohibits the Commission, at its 

election, from exercising the authority 

delegated in this section. 

Issued in Washington, DC, on May 17, 

2013, by the Commission. 

Christopher J. Kirkpatrick, 

Deputy Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices To Process for a Designated 

Contract Market or Swap Execution 

Facility to Make a Swap Available to 

Trade, Swap Transaction Compliance 

and Implementation Schedule, and 

Trade Execution Requirement Under 

the Commodity Exchange Act— 

Commission Voting Summary and 

Statements of Commissioners 

Appendix 1—Commission Voting Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton and Wetjen voted in 

the affirmative; Commissioners Sommers and 

O’Malia voted in the negative. 

Appendix 2—Statement of Chairman Gary 

Gensler 

I support the final rulemaking to 

implement a process for swap execution 

facilities (SEFs) and designated contract 

markets (DCMs) to ‘‘make a swap available to 

trade’’ (MAT). Today’s rule also finalizes the 

Commission’s separate rule proposal to phase 

in compliance for the trade execution 

requirement. 

Completion of these two rules facilitates 

the congressionally mandated critical reform 

promoting pre-trade transparency in the 

swaps market. 

The trade execution provision of the DoddFrank Wall Street Reform and Consumer 

Protection Act requires that swaps be traded 

on SEFs or DCMs if they are (1) subject to 

mandatory clearing, and (2) made available to 

trade. Such platforms allow multiple 

participants the ability to trade swaps by 

accepting bids and offers made by multiple 

participants with all participants given 

impartial access to the market. 

The MAT rule establishes a flexible 

process for a SEF or DCM to make a swap 

available to trade. The SEFs and DCMs first 

will determine which swaps they wish to 

make available to be traded on their 

platforms. Then these determinations will be 

submitted to the Commission either as selfcertified by the trading platform or for 

approval under the Commission’s Part 40 

rules. 

The phase-in rule would provide market 

participants with 30 days after the SEF’s or 

DCM’s self-certification or submission is 

deemed approved prior to such swaps being 

subject to the trade execution mandate. 

Those swaps that are made available to 

trade and thus subject to the trade execution 

requirement will be publicly posted on the 

Commission’s Web site. 

Appendix 3—Dissenting Statement of 

Commissioner Scott D. O’Malia—May 16, 

2013 

I respectfully dissent from the 

Commission’s approval today of the rule 

establishing Process for a Designated 

Contract Market or Swap Execution Facility 

to Make a Swap Available to Trade under 

Section 2(h)(8) of the Commodity Exchange 

Act (CEA). 

I supported the proposed rule because I 

wanted to solicit public comment and engage 

market participants in an open discussion on 

how the Commission should implement the 

available-to-trade provision in section 2(h)(8) 

of the CEA. 

During the comment period, the 

Commission received 33 comment letters and 

held a roundtable 300 to solicit public views 

on this matter. The commenters provided 

various recommendations but in general 

virtually all of them rejected the proposal; 

the Commission would be hard pressed to 

point to one comment letter that supported 

the Commission’s approach. Unfortunately, 

despite this strong feedback from the public, 

the Commission has chosen to follow its 

original proposal. 

I recognize the challenge that the 

Commission is facing in interpreting the 

‘‘make available to trade’’ provision. 

Unfortunately, Congress did not provide the 

Commission with any guidance as to how 

and under what conditions the trade 

execution mandate must be triggered. 

Nevertheless, a lack of direction from 

Congress should not be an excuse for the 

Commission to come up with an unworkable 

rule. 

As I explain below, the rule provides 

illusory comfort that the Commission will 

have a legal authority to review and, if 

necessary, challenge a mandatory trading 

determination made by a Swap Execution 

Facility (SEF) or Designated Contract Market 

(DCM). In fact, the only authority that the 

Commission has is to ‘‘rubber stamp’’ a SEF 

or DCM’s initial determination. 

Sections 40.5 and 40.6 of the Commission’s 

Regulations Do Not Provide an Appropriate 

Avenue for a Made Available-to-Trade 

Determination 

I have deep reservations about the process 

that the Commission is proposing for 

‘‘making a swap available to trade.’’ 

First, the Commission’s determination 

under the rule approval process (§ 40.5) or 

the rule certification process (§ 40.6) is 


sroberts on DSK5SPTVN1PROD with RULES
33632 Federal Register / Vol. 78, No. 107 / Tuesday, June 4, 2013 / Rules and Regulations 

301Commission Regulation § 40.5(b) 

302Commission Regulation § 40.6(c)(3). 

303Commission Regulations § 37.10(b) and 

38.12(b). 304Tradeweb Markets Comment Letter at 3–5 

(Feb. 13, 2012); ISDA/SIFMA Comment Letter at 8– 

9 (March 8, 2011). 

305Commission Regulations §§ 37.10(c), 37.10(d), 

38.12(c), 38.12(d). 

intended to apply to only one particular DCM 

or SEF that requested such rule approval or 

submitted such rule certification. However, 

under this rule, an available-to-trade 

determination has a far reaching effect. It 

binds not only the requesting SEF or DCM 

but the entire market, thus forcing all SEFs 

and all DCMs to trade a particular swap by 

using more restrictive methods of execution. 

Second, the Part 40 process does not give 

the Commission any legal authority to object 

to a SEF or DCM’s made available-to-trade 

determination. Under the rule approval 

procedures, the Commission must approve a 

rule unless such rule is inconsistent with the 

CEA or the Commission’s regulations.301

Similarly, a new rule subject to stay will 

become effective, pursuant to its certification, 

unless the rule is inconsistent with the CEA 

or the Commission’s regulations.302

How will the Commission be able to point 

to a provision in the CEA or in the 

regulations that is inconsistent with one or 

all subjective factors? 

The Commission’s Determinations Must Be 

Based on Objective Criteria 

In essence, the rule allows a SEF or a DCM 

to make a made available-to-trade 

determination based solely on factors it 

deems relevant, while ignoring other 

considerations that may be of vital 

importance to the trading liquidity of a 

particular contract. The Commission needs to 

require more than a simple ‘‘consideration’’ 

of these factors.303

The lack of specific objective criteria for 

determining trading liquidity introduces 

uncertainty into the market and makes it 

unfeasible for the Commission to have any 

meaningful regulatory oversight over the 

made available-to-trade determination 

process. 

The Commission’s Factors Are Not 

Supported by Data 

I agree with the commenters who requested 

that the Commission implement a pilot 

program or perform an in-depth study of 

various classes of swaps to determine the 

appropriate criteria for a made available-totrade determination.304 A better approach 

would be for the Commission to review 

trading data currently submitted to the 

Commission pursuant to the Swap Data 

Repository (SDR) rules and after thorough 

analysis, come up with objective criteria that 

would define trading liquidity. Instead, the 

Commission chose to implement a flawed 

process that does not lead to any substantive 

analysis of trading liquidity. 

The Commission Failed to Establish a 

Process for Removing Made Available-toTrade Determinations 

Without providing any reasoning, the 

Commission has decided that only after all 

SEFs and all DCMs have de-listed a 

particular swap, will such swap be deemed 

by the Commission to be no longer availableto-trade.305 This process lacks any logical or 

legal basis and is the exact opposite of what 

is required to make the initial available-totrade determination. The initial made 

available-to-trade determination provides 

that, if one SEF or DCM determines a swap 

to be made available to trade, then such swap 

is deemed to be made available-to-trade on 

all SEFs or DCMs. 

Again, the Commission neglects to analyze 

swap transaction data that it receives from 

SDRs. In my view, if a swap does not have 

sufficient trading liquidity to be traded in a 

more restrictive manner on a SEF or DCM, as 

determined by the Commission’s broader 

view of market trading data, then such 

product must be determined by the 

Commission to be no longer available-totrade. 

Conclusion 

Due to the above concerns, I respectfully 

dissent from the decision of the Commission 

to approve this final rule for publication in 

the Federal Register. 

[FR Doc. 2013–12250 Filed 6–3–13; 8:45 am] 

BILLING CODE 6351–01–P 


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