The SefCon conference on November 12 will provide an opportunity to assess the impact of regulatory changes that have swept across the OTC swaps world amid the implementation of Dodd-Frank, according to Chris Ferreri, managing director at Icap and chairman of SefCon V.
“CFTC Chairman Massad will be the keynote speaker,” Ferreri said. “Although this is our fifth-annual SefCon conference, and some might think that since SEFs (Swap Execution Facilities) are up and running that there’s less of a need to hold it, we still have cross-border issues being discussed, activity on packaged trade relief, the potential for new MAT (Made Available to Trade) requirements and new clearing requirements in foreign exchange. We’ll be addressing these and many others.”
SefCon was the first conference dedicated exclusively to SEFs. “There are different firms that are promoting conferences to include SEF, but SefCon still is the only conference dedicated just to SEFs,” Ferreri said,
Cross-border is the biggest issue facing the markets, and the Cross Border panel at SefCon will be moderated by Scott O'Malia, former commissioner of the U.S. Commodity Futures Trading Commission.
Summer was a challenge for the markets in general as volumes were depressed. Volatility did return in September and with it came additional trading activity. “It does remain to be seen if this level of activity carries through the next few months, but if it does, we're there to serve our customers,” Ferreri said.
The markets have been operating in a very static interest-rate environment for several years now and dealing with a market hovering near zero interest rates. This, combined with the implementation of various capital requirements and trading restrictions, has had an impact on trading activity in general.
“When you see moves like we saw two weeks ago in the 10-year treasury, violent moves in the marketplace, it reflects the environment and in turn, generates trading activity,” Ferreri said.
During these situations, “a lot of the relationships between swaps, futures and cash get out of whack, and market participants take that opportunity to capture those anomalies and try to profit from them,” he said. “It created volume. It created activity.”
Massad has said the glass is half full when it comes to cross border cooperation. “This is a good sign,” said Ferreri. “It seems to me that we have a CFTC chairman who's really looking for a way to work with foreign regulators and not act unilaterally. “
Gary Gensler, former CFTC chairman, “came to the problem from a very different place,” Ferreri said. “I think he had a job to do which was to get these rules written and he did an incredible job with a small staff compared to other agencies in getting the rules out. “
He added, “Chairman Massad is not going to unwind previous rules. He's publicly said that he thinks certain rules have to be tweaked a bit; they may not be exactly what they wanted them to be yet.”
CFTC Commissioner Chris Giancarlo, the CFTC’s only Republican, has always been a proponent of free markets. “I was reading through some of his previous SefCon remarks when he was chairman of the conference and he repeatedly talked about job growth in America, the roles that derivatives play in creating jobs and increasing job opportunities for Americans,” said Ferreri.