The whole package

The CFTC continues to approve MAT self-certifications, most recently Tradeweb’s. Arguably the certified products are fairly standard, but in certifying Javelin’s MAT submission the Commission left the door open for package transactions to be caught up in the trade execution mandate. The industry (notably the Managed Funds Association in its comments to the Commission) has been arguing forcibly against this.

The Commission acknowledges the need to address this issue, scheduling an open meeting of the Technology Advisory Committee for February 10th. Worryingly, the credit hubs can’t currently accommodate credit checking for package transactions. So a curve spread comprising, say, receiving fix on a 2-year and paying fix on a 5-year, will necessarily have certain offsets in terms of available credit (funding or margin), but if the trade can’t be evaluated as a single economic unit then the trader may struggle to execute it. Imposing mandatory trading seems unwise without the supporting technology. Once again, the industry must evolve quickly in order to accommodate the irrevocable market changes brought about by regulation.

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