Javelin Capital Markets LLC may accelerate the Dodd-Frank Act’s migration of U.S. swaps trading onto public markets by seeking permission to list and make interest-rate swaps available on its new trading platform.
The New York-based swap-execution facility, or Sef, was the first venue to seek such a Commodity Futures Trading Commission (CFTC) decision. Agency approval would trigger a requirement that hundreds of trillions of dollars of the same type of swaps be conducted on exchanges and Sefs owned by Javelin and others, the CFTC said after receiving the application yesterday.
The CFTC said it will review and seek public comment on Javelin’s plan, which covers most of the interest-rate swaps market. The review will take as long as 90 days, until Jan. 16, the agency said.
“This is a natural next step for a derivatives marketplace that already enjoys trade reporting and broad central clearing,” Javelin Chief Executive Officer James Cawley said in a telephone interview. The move “jump-starts trading on Sefs,” he said.
The platform’s filing, called a determination, covers interest-rate swaps in U.S. dollars, British sterling, and euros that last between one month and 51 years in duration.
Dodd-Frank, the 2010 financial-regulatory overhaul, seeks to increase access and price competition in the swaps market by having interest-rate, credit-default, and other types of swaps trade on new Sefs. Largely unregulated swaps helped fuel the 2008 credit crisis and the U.S. rescue of American International Group Inc.
Javelin said in its filing that swap dealers registered at the CFTC, which include Goldman Sachs Group Inc. and JPMorgan Chase & Co., already regularly act as buyers and sellers in the interest-rate swap market and would be willing traders on new platforms.
“These products are some of the most widely used in the swaps space,” Kevin McPartland, head of market structure and research at Greenwich Associates, said in a telephone interview yesterday. “Most institutions holding some form of debt use these products to manage interest-rate risk.”
Javelin SEF LLC is a subsidiary of Javelin Capital Markets LLC, a derivatives trading venue founded in 2009. Sefs owned by ICAP Plc., GFI Group Inc., Tradeweb Markets LLC and Bloomberg LP, parent of Bloomberg News, have received CFTC registration.