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MAT Summary: CFTC Swap Exchange-trading Mandates and Effective Dates
Practical Law Legal Update 3-555-9185 (Approx. 12 pages)
MAT Summary: CFTC Swap Exchange-trading Mandates and Effective Dates
by Practical Law Finance
| Published on 30 Jan 2014 • USA (National/Federal) |
The CFTC certified further trade execution mandates under Title VII of the Dodd-Frank Act requiring that certain CDS and additional interest rate swaps be entered into only on a CFTC-registered SEF or DCM beginning in February 2014. This Update provides a detailed summary of all CFTC swaps exchange-trading mandates issued to date under Title VII's made-available-to-trade (MAT) determination process, including a breakdown of effective dates for all swaps that must be exchange traded.
On January 28, 2014, the CFTC and its division of Market Oversight announced its third trade execution mandate under Title VII of the Dodd-Frank Act and Section 2(h)(8) of the Commodity Exchange ACT (CEA) in response to the made-available-to-trade (MAT) determinations for certain credit default swaps (CDS) and interest rate swaps (IRS) submitted by TW SEF LLC’s (Tradeweb). These swaps must be entered into only on a CFTC-registered SEF or DCM as of February 26, 2014 (see CDS MAT Summary and IRS That Must Be Exchange Traded As of February 26, 2014). (On January 30, 2014, the CFTC announced its fourth trade execution mandate, submitted by MarketAxess SEF Corporation, covering the same CDS as the Tradeweb MAT.)
While these are the first CDS trade execution mandates, the Tradeweb MAT determination is the third covering IRS. The Tradeweb MAT determination included certain IRS contracts that had not previously been the subject of a MAT determination, as well as certain IRS contracts that are already subject to the following previously issued CFTC IRS trade execution mandates:
- On January 16, 2014 the CFTC issued its first trade execution mandate in response to a MAT determination submitted by Javelin SEF, LLC (Javelin) for certain IRS that must be executed on a CFTC-registered SEF or DCM as of February 21, 2014 (see IRS That Must Be Exchange Traded As of February 15, 2014 and Legal Update, Mandatory Exchange Trading of Interest Rate Swaps to Begin on February 15, 2014).
- On January 22, 2014, the CFTC issued its second trade execution mandate in response to a MAT determination submitted by trueEX, LLC (trueEX) for certain IRS that must be executed on a CFTC-registered SEF or DCM as of February 21, 2014 (see IRS That Must Be Exchange Traded As of February 21, 2014). The trueEX MAT determination included certain IRS that were included in the above-referenced Javelin MAT.
See IRS MAT Compliance Breakdown for a complete summary of all CFTC IRS trade execution mandates and compliance dates.
How the MAT Rules Operate
The CFTC issued final rules on the MAT process on June 4, 2013. Under these rules and pursuant to CFTC Regulation 40.6, SEFs and DCMs may make an initial determination that certain types of swaps may be made available to trade (MAT) on their exchange or platform. The infrastructure's MAT determination, if not objected to or stayed by the CFTC, self-certifies and becomes effective 10 days after submission. However, under CFTC Regulations 40.6(c) and 40.7(a)(2)(iii), the CFTC has the authority to stay MAT submissions in order to request comment and gain additional time to analyze the submissions, after which, absent CFTC objection, the MAT determination self-certifies. Exchange trading of the swap or swaps described by each MAT determination is required 30 days after self-certification occurs. The Javelin and trueEX MAT determinations had been stayed by the CFTC. The stay expired without the CFTC objecting, so they automatically self-certified, becoming effective 30 days after the expiration of the stay. Determinations are not infrastructure-specific, meaning that if one determination is certified, then all swaps covered by that determination must be exchange traded but are not required to be traded on the infrastructure that sought the determination.
For further information on mandatory swap clearing and exchange trading under Title VII and related rulemaking, see Practice Note, Summary of the Dodd-Frank Act: Swaps and Derivatives: Swap Clearing and Exchange Trading under Title VII.
CDS MAT Summary
The following CDS are subject to mandatory exchange trading under Title VII of the Dodd-Frank Act as of February 26, 2014, pursuant to the Tradeweb (TW) and MarketAxess MAT determinations, and may only be entered into on a CFTC-registered SEF or DCM as of that date:
Untranched Credit Default Swap Indices (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | ||
Reference Entities | Corporate | Corporate |
Region | North America | Europe |
Indices | CDX.NA.IG CDX.NA.HY | iTraxx Europe iTraxx Europe Crossover |
Tenor | CDX.NA.IG 5Y CDX.NA.HY 5Y | iTraxx Europe 5Y iTraxx Europe Crossover 5Y |
Applicable Series | At any time, the then-current on-the-run series and the preceding series that was replaced by the current one | |
IRS MAT Compliance Breakdown
IRS That Must Be Exchange Traded As of February 15, 2014
The following IRS are subject to mandatory exchange trading under Title VII of the Dodd-Frank Act as of February 15, 2014, pursuant to the Javelin MAT determination, and may only be entered into on a CFTC registered SEF or DCM as of that date (see Legal Update, Mandatory Exchange Trading of Interest Rate Swaps to Begin on February 15, 2014):
Fixed-to-Floating Interest Rate Swaps (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | |||
Currency | US Dollar (USD) | US Dollar (USD) | Euro (EUR) |
Floating Rate Indexes | USD LIBOR | USD LIBOR | EURIBOR |
Trade Start Type | Spot Starting (T+2) | IMM Start Date (next two quarterly IMM start dates) | Spot Starting (T+2) |
Optionality | No | No | No |
Dual Currencies | No | No | No |
Notional | Fixed Notional | Fixed Notional | Fixed Notional |
Tenors | 2, 3, 5, 7, 10, 12, 15, 20, 30 years | 2, 3, 5, 7, 10, 12, 15, 20, 30 years | 2, 3, 5, 7, 10, 15, 20, 30 years |
IRS That Must Be Exchange Traded As of February 21, 2014
The following IRS are subject to mandatory exchange trading under Title VII of the Dodd-Frank Act as of February 21, 2014, pursuant to the trueEX MAT determination, and may only be entered into on a CFTC registered SEF or DCM as of that date:
Fixed-to-Floating Interest Rate Swaps (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | |
Currency | US Dollar (USD) |
Floating Rate Indexes | USD LIBOR |
Trade Start Type | IMM Start Date (next two IMM dates) |
Optionality | No |
Fixed Leg | |
Payment Frequency | Semi-Annual |
Day Count Convention | 30/360 |
Floating Leg | |
Reset Frequency | Quarterly (3 month) |
Day Count Convention | Actual/360 |
Dual Currencies | No |
Notional | Fixed Notional |
Fixed Rate | Standard Coupon* |
Tenors | 1, 2, 3, 5, 7, 10, 15, 20, 30 years |
*Standard Coupon refers to the then-current fixed coupon rates for Market Agreed Coupon (MAC) contracts (see Legal Update, Standard Market Agreed Coupon (MAC) Interest Rate Swap Confirmation Introduced by ISDA).
IRS That Must Be Exchange Traded As of February 26, 2014
The following IRS are subject to mandatory exchange trading under Title VII of the Dodd-Frank Act as of February 26, 2014, pursuant to the TW MAT determination, and may only be entered into on a CFTC registered SEF or DCM as of that date:
Fixed-to-Floating Interest Rate Swaps (USD) (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | |||
Currency | US Dollar (USD) | US Dollar (USD) | US Dollar (USD) |
Floating Rate Indexes | USD LIBOR | USD LIBOR | USD LIBOR |
Trade Start Type | Spot Starting (T+2) | IMM Start Date (next two IMM dates) | IMM Start Date (next two IMM dates) |
Optionality | No | No | No |
Fixed Leg | |||
Payment Frequency | Semi-Annual, Annual | Semi-Annual, Annual | Semi-Annual |
Day Count Convention | 30/360, Actual/360 | 30/360, Actual/360 | 30/360 |
Floating Leg | |||
Reset Frequency | Quarterly, Semi-Annually | Quarterly, Semi-Annually | Quarterly |
Day Count Convention | Actual/360 | Actual/360 | Actual/360 |
Dual Currencies | No | No | No |
Notional | Fixed Notional | Fixed Notional | Fixed Notional |
Fixed Rate | Par | Par | Standard Coupon* |
Tenors** | 4 and 6 years | 4 and 6 years | 4 years |
*Standard Coupon refers to the then-current fixed coupon rates for Market Agreed Coupon (MAC) contracts (see Legal Update, Standard Market Agreed Coupon (MAC) Interest Rate Swap Confirmation Introduced by ISDA).
**Par coupon swaps with a tenor of 4 or 6 years that are made available to trade are limited to the 3M USD LIBOR floating rate index; Quarterly Reset Frequency; and the following fixed leg conventions: (1) Semi-Annual and 30/360; or (2) Annual and Actual/360.
Fixed-to-Floating Interest Rate Swaps (Non-USD) (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | ||
Currency | Euro (EUR) | Sterling (GBP) |
Floating Rate Indexes | EURIBOR | GBP LIBOR |
Trade Start Type | Spot Starting (T+2) | Spot Starting (T+2) |
Optionality | No | No |
Fixed Leg | ||
Payment Frequency | Semi-Annual, Annual | Quarterly, Semi-Annual |
Day Count Convention | 30/360, Actual/360 | Actual/365F |
Floating Leg | ||
Reset Frequency | Quarterly, Semi-Annually | Quarterly, Semi-Annual |
Day Count Convention | Actual/360 | Actual/360F |
Dual Currencies | No | No |
Notional | Fixed Notional | Fixed Notional |
Fixed Rate | Par | Par |
Tenors*** | 4 and 6 years | 2, 3, 4, 5, 6, 7, 10, 15, 20, 30 years |
***Euro (EUR)-denominated, par coupon swaps with a tenor of 4 or 6 years that are made available to trade are limited to the following fixed leg conventions: Annual and 30/360
Composite IRS MAT Summary
The following tables summarize all IRS MATs that have been deemed certified to date by the CFTC and which must be executed on a CFTC-registered SEF or DCM no later than February 26, 2014. Certain of the IRS listed in the table below must be exchange traded as of February 15, 2014 or February 21, 2014 (see IRS MAT Compliance Breakdown). These tables are a composite of all of the IRS MAT tables listed above under IRS MAT Compliance Breakdown.
Fixed-to-Floating Interest Rate Swaps (USD) (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | |||
Currency | US Dollar (USD) | US Dollar (USD) | US Dollar (USD) |
Floating Rate Indexes | USD LIBOR | USD LIBOR | USD LIBOR |
Trade Start Type | Spot Starting (T+2) | IMM Start Date (next two IMM dates) | IMM Start Date (next two IMM dates) |
Optionality | No | No | No |
Fixed Leg | |||
Payment Frequency | Semi-Annual, Annual | Semi-Annual, Annual | Semi-Annual |
Day Count Convention | 30/360, Actual/360 | 30/360, Actual/360 | 30/360 |
Floating Leg | |||
Reset Frequency | Quarterly, Semi-Annually | Quarterly, Semi-Annually | Quarterly |
Day Count Convention | Actual/360 | Actual/360 | Actual/360 |
Dual Currencies | No | No | No |
Notional | Fixed Notional | Fixed Notional | Fixed Notional |
Fixed Rate | Par | Par | Standard Coupon* |
Tenors** | 2, 3, 4, 5, 6, 7, 10, 12, 15, 20, 30 years | 2, 3, 4, 5, 6, 7, 10, 12, 15, 20, 30 years | 1, 2, 3, 4, 5, 7, 10, 15, 20, 30 years |
*Standard Coupon refers to the then-current fixed coupon rates for Market Agreed Coupon (MAC) contracts (see Legal Update, Standard Market Agreed Coupon (MAC) Interest Rate Swap Confirmation Introduced by ISDA).
**Par coupon swaps with a tenor of 4 or 6 years that are made available to trade are limited to the 3M USD LIBOR floating rate index; Quarterly Reset Frequency; and the following fixed leg conventions: (1) Semi-Annual and 30/360; or (2) Annual and Actual/360.
Fixed-to-Floating Interest Rate Swaps (Non-USD) (this excludes certain "packaged" swaps which must be exchange traded as of May 16, 2014 (see CFTC No-action Letter 14-12)) | ||
Currency | Euro (EUR) | Sterling (GBP) |
Floating Rate Indexes | EURIBOR | GBP LIBOR |
Trade Start Type | Spot Starting (T+2) | Spot Starting (T+2) |
Optionality | No | No |
Fixed Leg | ||
Payment Frequency | Semi-Annual, Annual | Quarterly, Semi-Annual |
Day Count Convention | 30/360, Actual/360 | Actual/365F |
Floating Leg | ||
Reset Frequency | Quarterly, Semi-Annual | Quarterly, Semi-Annual |
Day Count Convention | Actual/360 | Actual/365F |
Dual Currencies | No | No |
Notional | Fixed Notional | Fixed Notional |
Fixed Rate | Par | Par |
Tenors*** | 2, 3, 4, 5, 6, 7, 10, 15, 20, 30 years | 2, 3, 4, 5, 6, 7, 10, 15, 20, 30 years |
***Euro (EUR)-denominated, par coupon swaps with a tenor of 4 or 6 years that are made available to trade are limited to the following fixed leg conventions: Annual and 30/360