Comment Text:
I have been involved in trading OTC derivatives for 20 years. I have been on the buy and sell side, helped build trading desks at multiple leading OTC derivative market participants, have appeared before the CFTC to discuss regulatory reform impact to OTC derivative markets and have spoken on numerous panels addressing a wide array of issues ranging from execution to capital optimization.
My takeaway from these proposed rule changes is this: Mr. Giancarlo wants to gift his former industry, and employer GFI, free giveaways. Why on earth would you widen the number of swaps you hope to cover with eliminating the MAT requirement and simultaneously propose to permit execution firms to use "any reasonable means" to execute swaps. While I agree the Order Book and RFQ requirement serve ZERO purpose for what are already the most liquid, institutionally traded instruments in the world, this benefits one and only one market participant, the IDB; while financially harming EVERYONE else.
Multiple IBDs, built a business premised upon side stepping the law. And this is the CFTC's response?!?!?! Dark SEFs were born by IDBs in order to circumvent the Order Book requirement and preserve the integrity of the voice trade. The sole, and I do mean sole beneficiary of this is the human voice brokers at places like GFI, ICAP, Chappy, BGC and other IDBs. The dealer community is hurt by this structure as voice brokers share proprietary confidential trade information, front-run and inflate costs for ALL market participants as EVERYTHING runs downstream while preserving and inflating IDB execution revenue which has absolutely sky-rocketed over the past several years largely due to IDB's intentionally, knowingly and willingly breaking the law under the CFTC's nose - its the worst kept secret in the OTC derivative market.
Some of proposed rule changes will simply make an currently illegal activity legal - is that what the CFTC is now in the business of doing?
