MFA Backs CFTC Proposal to End SEF Order Book Mandate for Certain Swaps
The Managed Funds Association ("MFA") supported a CFTC proposal to stop requiring swap execution facilities ("SEFs") to offer order books for swaps not subject to the trade execution requirement, urging the Commission to leave the rules for mandated swaps alone.
The proposal would amend CFTC Rule 37.3 ("Requirements and procedures for registration") so the order book mandate covers only swaps subject to the trade execution requirement. SEFs could still offer order books for other swaps. It would also codify CFTC Letter 25-24, a 2025 staff no-action letter that already lets SEFs skip order books for those swaps.
In a comment letter, MFA said the mandate produced little discernible benefit while imposing potentially meaningful costs. The association said these swaps may trade infrequently, reflect customized risk-transfer needs, or otherwise lack the continuous two-sided interest that active order book trading requires. MFA added that codification would give SEFs more certainty than staff relief, which can be modified or withdrawn. It asked the CFTC to state in the adopting release that SEFs may reinstate order books if demand develops.
The association also said the CFTC should not use this rulemaking to revisit requirements for mandated swaps. The proposal asks whether to eliminate the order book requirement for those swaps, though it does not propose to do so. MFA said the question lacked supporting data, proposed text, or cost-benefit analysis, and a final rule on it would not be a logical outgrowth of the proposal.
MFA further asked the CFTC to keep the requirement that SEFs send a request for quote to at least three unaffiliated market participants for mandated swaps. It said the requirement increased price competition and pre-trade transparency, lowering buy-side transaction costs. MFA said any reconsideration should occur through a separate rulemaking that evaluates the effects on competition, liquidity, transaction costs, and price discovery.