Inter-dealer brokers warn of 'monopolistic' risks in new swap clearing rules

Inter-dealer brokers warn of 'monopolistic' risks in new swap clearing rules

US inter-dealer brokers have called on regulators to ensure fair access to newly-created Swap Execution Facilities as the Securities and Exchange Commission and Commodity Futures Trading Commission meet to discuss governance and conflicts of interest in the clearing and listing of swaps.

The regulatory agencies are hosting a public roundtable Friday to help shape new rules on swap clearing in line with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Dodd-Frank law requires all swaps that are standardised enough for central clearing to be traded on a designated contract market, registered securities exchange or a new breed of 'swap-execution facility' (SEF).

The creation of the new entities has attracted interest from a host of firms who plan to file for designation as an SEF, including InterContinentalExchange, Tradeweb, MarketAxess, and Bloomberg.

In an open letter to the SEC and the CFTC the Wholesale Markets Brokers' Association, Americas (WMBAA) has called on the regulators to ensure "open and non-discriminatory access to swap clearing organisations".

Julian Harding, executive director at Tradition and chairman of the WMBAA, comments: "Direct or indirect impediments created to enhance a clearing organisation's affiliated trading platform would frustrate Congressional intent. Competition in execution, with its attendant benefits to all participants, is inherently encouraged in the legislation but would be stifled as a result of such monopolistic tendencies."

The inter-dealer brokers would like to see the establishment of an unaffiliated self-regulatory organisation to enforce rules and police the markets operated by swap-execution facilities and root out abuses.

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