October 6, 2023

Mr. Vince McGonagle
Division of Market Oversight
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

Re: Request for a delay to the compliance date for new Block Thresholds and Cap Sizes

Dear Mr. Kirkpatrick:

The Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMAAMG” or “AMG”)1 is writing to request that the Division of Market Oversight (“DMO”) of the U.S. Commodity Futures Trading Commission (“CFTC” or “Commission”) issue time-limited noaction relief that would postpone the effective date of new block thresholds, cap sizes, and reporting delays from December 4, 2023, to December 4, 2024.

As a full year of swap data under the revised swap data reporting rules will be available from December 2023, we commit to work with the Commission to efficiently evaluate the data in an effort to right-size the block and cap sizes to best balance transparency and liquidity given the Commission’s aim to make block trades transparent to the market within 15 minutes of trading. We believe this analysis could be completed within six months of the data’s availability and recommend the market have another six months to arrange compliance ahead of the postponed go-live date of December 4, 2024.

A. Background.

When the Current SEF Rules were finalized in 2013, the Commission sought to implement a two-period, phased-in approach (initial and post-initial) for determining block sizes. With respect to the initial phase, the Commission adopted a 50-percent notional amount calculation (meaning the larger 50 percent of swaps (by notional amount) would not be subject to RFQ to three and immediate reporting). As for the post-initial phase, which is planned for implementation on December 4, 2023, the Commission has approved an increase the notional amount calculation from 50-percent to 67-percent. The CFTC moved to implement the 67-percent calculation, however no data was provided by the Commission to confirm that a change in the block size was justified, or, if justified, what percentage change was justified.

On April 19, 2023, the Commission published the Revised Post-Initial Appropriate Minimum Block Sizes and Post-Initial Cap Sizes for Publicly Reportable Swap Transactions on the CFTC’s website where it declared the effective date of the new thresholds and sizes to be December 4, 2023 (“Revised Block Thresholds”). The Revised Block Thresholds would change the reporting requirements for swap 1 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. data repositories (“SDRs”), derivatives clearing organizations (“DCOs”), swap execution facilities (“SEFs”), designated contract markets (“DCMs”), swap dealers (“SDs”), major swap participants (“MSPs”), and swap counterparties that are neither SDs nor MSPs.

In its Proposed Rule2, the Commission noted that its goals with regard to real-time reporting relate to “liquidity, transparency, and price discovery.” SIFMA AMG agrees that flexible block trading is an essential component of liquid swap markets and that correctly determining block size thresholds and dissemination delays is necessary to assure the continued viability of block trading in the swap market.

In our letter dated May 22, 2020,3 we commented that it is critical to note that before proposing any changes to time delays or block sizes generally, the Commission should consider the interdependency between liquidity and transparency and time delays and block sizes. Further, any changes to time delays or block sizes should only be done after a data-driven analysis by the Commission.

1 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.

2 CFTC, Real-Time Public Reporting Requirements, 85 FR 21516 (April 17, 2020) available at:
https://www.cftc.gov/sites/default/files/2020/04/2020-04405a.pdf

3 Letter to Mr. Christopher Kirkpatrick, Proposed Amendments to the Commission’s Regulations Related to the Real-time Public Reporting Requirements (RIN 3038-AE60) dated May, 22, 2020, from Jason Silverstein, Managing Director and Associate General Counsel, available at: https://www.sifma.org/wp-content/uploads/2020/11/2020-05-22-Letter-from-SIFMA-AMG-re-Proposed-Amendments-to-the-Real-Time-Public-Reporting-Requirements-RIN-3038-AE60-vF1.pdf