Supporting Statement of Commissioner Brian Quintenz Regarding Proposed Rule: Post-Trade Name Give-Up on Swap Execution Facilities

December 18, 2019

I will vote in favor of today’s proposal to prohibit post-trade name give-up practices for swaps that are anonymously executed on a swap execution facility (“SEF”) and cleared (“Proposal”) in order for the Commission to receive further comment on the Proposal’s potential market structure impact. 

In November 2018, the Commission issued a request for public comment regarding the practice of post-trade name give-up.[1] The overwhelming majority of comment letters to that release opposed post-trade name give-up and requested that the Commission explicitly prohibit the practice. The Proposal before us today was heavily informed by those commenters’ perspectives.   

The Proposal rightly notes that for anonymously executed and cleared trades, the need for market participants to know the identity of their counterparties for credit risk, legal, or operational purposes was obviated by the central clearing of swaps. However, I have concerns about the government banning an established trading practice that supports liquidity in the dealer-to-dealer swaps market. Post-trade name give-up serves an important market function in enhancing swap dealers’ own risk management needs resulting from their client exposures. The Commission should understand how banning post-trade name give-up could impact dealers’ ability to hedge efficiently.  

The Proposal assumes, without the benefit of a fulsome analysis of CFTC swap data, that banning post-trade name give-up would promote greater participation, liquidity, and fair competition on SEFs. Hoping to confirm if these assumptions are correct, the Proposal asks a series of basic questions about the differences between SEFs that are predominantly dealer-to-client platforms versus inter-dealer SEFs, including differences regarding liquidity providers, types of products actively traded, and pricing. Mandating changes to market structure in the hopes of increasing competition and liquidity, but without a full understanding of how these changes may implicate fundamental market dynamics, is a path that gives me great pause.

I encourage all interested parties to provide written comments and data wherever possible in order to further the Commission’s understanding of how banning this trading practice may positively or negatively impact the liquidity on these two historically different types of trading platforms and on the dealer-driven liquidity provision of swaps trading generally. I also encourage commenters to consider if there are alternatives to a government-imposed ban that could achieve the same regulatory objectives.    

I would like to thank staff of the Division of Market Oversight for including several additional questions at my request designed to solicit targeted feedback on the potential effects of this Proposal.