Year of the Dealer

Various CTFC commissioners have stated publicly that they intend to have the final Dodd–Frank rules in place by mid-February, with dealer-to-dealer SEF-based trading operating 90 days after that, and dealer-to-client trading under way after 180 days.

The only way the regulator will be able to adhere to this schedule is by adopting the "damn the torpedoes, full speed ahead" mantra attributed to US Civil War naval officer David Farragut—keeping in mind that in Farragut’s time, torpedoes were actually passive tethered mines. So he was not ordering his fleet to outrun torpedoes as we know them today; he wanted them to steam through the marine equivalent of a minefield.

The rules that the CFTC has yet to write are not minor ones, either. Given the amount of time it has taken to get to this point, I doubt the requirements will be completed within the next few weeks. If I were a betting man, I would put my money on the rules coming out sometime in the fourth quarter, which is closer to the Group of Twenty’s (G20's) agreed-upon deadline for centrally cleared trading of over-the-counter (OTC) instruments.

In the meantime, dealers are left to continue business as usual, which gives them additional time to decide which SEFs they will invest in to mirror their existing clearinghouse investments.