Home \ Newsroom \ CFTC Rule to End Anti-Competitive, Anti-Market Post-Trade Name Give-Up Practice Imposed by Wall Street’s Largest Derivatives Dealers is a Good Initial Step

CFTC Rule to End Anti-Competitive, Anti-Market Post-Trade Name Give-Up Practice Imposed by Wall Street’s Largest Derivatives Dealers is a Good Initial Step

FOR IMMEDIATE RELEASE
Thursday, June 25, 2020
Contact: Pamela Russell at 202-618-6433 or prussell@bettermarkets.com
 
Washington, D.C.  –  Joseph R. Cisewski, Senior Derivatives Consultant and Special Counsel with Better Markets, issued the following statement regarding the Commodity Futures Trading Commission’s (CFTC) adoption of a prohibition on post-trade name give-up:
 
“We commend the CFTC for partially heeding our call for an end to the anti-competitive and anti-market trading practice, called post-trade name give-up. This legacy practice serves no legitimate purpose and is merely one of many mechanisms used by Wall Street’s largest derivatives dealers to limit competition and control access to liquidity in the Dodd-Frank Act’s new swaps trading venues, swap execution facilities (SEFs) as we detailed in our comment letter supporting the CFTC’s proposal.  
 
“The CFTC’s elimination of post-trade name give-up is a critical market improvement because more than 87 percent of the reported $201 trillion notional in derivatives within the U.S. banking system continues to be controlled by dealers within just four U.S. bank holding companies. These four banks also facilitate trading in much of the $640 trillion notional in global derivatives markets through affiliated non-U.S. dealers.
 
“These Wall Street dealer-banks have used that market power to extract SEF trading controls, privileges, and advantages denied to other market participants, which is unfair, contrary to the law and market structure reforms in the Dodd-Frank Act, and detrimental to swaps markets liquidity formation. In fact, for years, some SEFs have tried but have been unable to end the practice of post-trade name give-up due to the commercial stranglehold the largest dealers have had on SEFs competing for their liquidity. 
 
“We therefore commend the CFTC for partially standing up to Wall Street and for the public interest and Main Street families. Yet, the victory is indeed ‘partial’ because intense bank lobbying has resulted in the CFTC finalizing an expansive exception from the prohibition for certain so-called ‘package’ transactions. This strategy–to give to the public interest with one hand while taking away with the other–comes as no surprise. The derivatives dealers and allies have used virtually every commercial and non-commercial tactic to kill this necessary reform, which is how the final rule, while a directional victory, ended up with a de facto exemption that deliberately ensures the prohibition remains substantially incomplete. 
 
“We can only hope that the CFTC monitors the scope of the package transactions loophole, fairly assesses the market benefits of the prohibition in the required CFTC staff study next year, and takes corrective action as undoubtedly will be necessary to give proper effect to the prohibition and protect competition in the markets.”
 
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.

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