IGDL Common Questions & Answers

Transcription

1 IGDL Common Questions & Answers 1. When is the ICAP Global Derivatives Limited SEF (the IGDL SEF ) launch date? Subject to CFTC approval, the intended go-live date for the IGDL SEF is Monday 12 May This will allow ICAP to make the necessary behind-the-scenes changes over the course of the last weekend prior to the expiration of the CFTC No Action Letter for Packaged Transactions (the Packaged Transactions Relief ) on 15 May Have you received Temporary Registration from the CFTC for the IGDL SEF? Not yet, however we are confident that this will happen prior to May 12 th. 3. What instruments are covered? Initially, the IGDL SEF will focus on G3 Rates (USD, EUR and GBP IRS, OIS, FRAs, IROs and Inflation) only as the MAT determinations create the greatest need for a crossborder solution for many instruments within this product set. All other products and instruments will continue to be serviced on ICAP s existing US SEF, ICAP SEF (US) LLC (the US SEF ). 4. Why are you doing this (part 1)? (a) Cross Border Activity Financial markets are global and ICAP believes that a SEF should seek to strive to reach as many participants across the widest possible number of jurisdictions in order to offer its customers the largest available, single liquidity pool. This should include both electronic and voice broking services as SEF modes of execution. A US entity registered as a SEF, without foreign jurisdictional approvals, has limited extraterritorial reach. Accordingly, to take advantage of the MiFID passport regime, ICAP has made an application with the CFTC to register IGDL, an entity regulated by the UK FCA, as a SEF. ICAP views this as the optimal solution to provide continuous cross border US and EEA liquidity subsequent to the expiry of the Packaged Transaction Relief on 15 May Going forward ICAP intends to apply for regulatory permissions to operate across more jurisdictions including Asia and Latin America. We believe that this is particularly important for the most active cross-border markets, such as USD IRS and, in time, NDFs. (b) What about the QMTF relief (CFTC Letter 14-46)? While this does provide some relief, we are of the view that dealing between US Persons for core US products, such as USD IRS, will be better served by a SEF registered entity. ICAP 2014 IGDL SEF Questions and Answers v3 Page 1

2 5. Why are you doing this (part 2)? MAT Determinations For products subject to the Made Available to Trade determinations ( Required Products ), the CFTC SEF rules require that all trades below Block Trade thresholds be arranged inside the SEF. This is supported by the 15-Second Rule which applies to any orders for Required Products received outside of the SEF entity. Accordingly, once the Packaged Transaction relief expires on 15 May 2014, ICAP considers that liquidity facilitation outside of a SEF registered entity will be considerably disadvantaged by the rules and therefore limited for brokers working as introducing brokers and ICAP will need many of its voice brokers for G3 Rates to operate under CFTC SEF RFQ rules as employees of the IGDL SEF (to be known as Execution Specialists ). This will ensure that, in accordance with the CFTC SEF Rules, the execution specialists in London and the New York can share the same access and insight into market dynamics and facilitate liquidity in the same order book and RFQ sessions. In this way they can provide more value servicing liquidity to more customers and a wider liquidity pool. In this way, IGDL will be able to facilitate SEF transaction-level requirements via its electronic orderbooks as well as its US and London based voice brokers under RFQ rules. 6. What happens to your US operations? Subject to regulatory approval, from May 12 th onwards, ICAP will no longer offer G3 rates (IRS, OIS, FRAs, IROs, Swaptions, Inflation and Exotic Swaps and Options) on the US SEF 1. However, this will not materially change the operational service you currently receive from the US SEF as ICAP will switch its existing infrastructure from one SEF to the other (for example i-swap USD will be operated by IGDL). New York based brokers will remain in the US, London based brokers will remain in the UK, however both will be able to work together as SEF Execution Specialists within IGDL. Except for the G3 Rates products, all other products and instruments will continue to be serviced on ICAP s existing US SEF, ICAP SEF (US) LLC. 7. What are the next products that you will be adding to the IGDL SEF? ICAP will be seeking to add more rates currencies, NDFs and possibly Credit markets. 8. What jurisdictions can the IGDL SEF access directly? Initially the US, UK and the European Economic Area. Additionally we are making applications for the exemptions that allow IGDL to provide direct access to Canadian participants. In time ICAP intends to migrate more products to the IGDL SEF and ICAP will seek permission from local regulators to operate the IGDL SEF in more jurisdictions, such as Asia. 1 With the exception of RESET runs (as per Q14) ICAP 2014 IGDL SEF Questions and Answers v3 Page 2

3 9. How does this affect me? Do I need to do anything/make any changes? You need to do very little. You will need to recognize that G3 Rates are being transacted from a different entity and you will need to be on-boarded to the IGDL SEF. ICAP is required to take you through a formal on-boarding process. We are, however, acutely aware that May 12 th is less than 4 weeks away and we are committed to working with you in any way possible to assist with the timely completion of the on-boarding process to ensure that there is no disruption to your access to ICAP SEF liquidity. 10. Will i-swap for USD products be part of the IGDL SEF? Yes, the IGDL SEF will operate i-swap USD as the SEF order book and offer USD Rates. Note: Servicing USD Rates liquidity is the primary driver for ICAP to action the move to IGDL. ICAP has analysed its London transacted USD liquidity and at present 73% of all USD IRS transactions 2 involve a USP or US located Person and would be subject to MAT transaction level requirements subsequent to the expiry of the Packaged Transactions Relief on 15 May Will i-swap for Euro and GBP products be part of the IGDL SEF? Yes, the IGDL SEF will operate new instances of the i-swap platform as the SEF order book and offer Euro and GBP Products. This is in addition to the separate instances of the i Swap platform that will continue to be operated by iswap Euro Ltd as an MTF for non-us Persons for Euro and GBP products. Note: Analysis of our EUR and GBP rates liquidity pool indicates that only a minimal percentage of IRS transactions involve a USP or US located person, therefore it is currently anticipated that the majority of EUR and GBP liquidity will remain on existing venues and will not migrate to the SEF. 12. What about CDS? CDX will remain in ICAP SEF (US) LLC for the near future. 13. Will IGDL include trades from RESET runs? No. RESET will continue to utilise ICAP SEF (US) LLC for the foreseeable future, however it will migrate across to IGDL eventually. 14. Will I be serviced by the same broker as before? Yes. The majority of ICAP USD IRS brokers will be moved into the IGDL SEF as SEF Execution Specialists helping clients to access the order book and perform vrfq. 15. Can I continue to trade on ICAP SEF (US) LLC? Not for G3 Rates products. 2 Measured by # of transactions ICAP 2014 IGDL SEF Questions and Answers v3 Page 3

4 16. Are there any changes to the ICAP SEF rulebook of which I should be aware? Yes. The IGDL Facility Rulebook is based on the Rulebook for the US SEF with changes made to reflect the regulatory rules of the UK and EEA. We ve added to our website at a black line copy showing you the changes if you wish to compare the documents in greater detail. 17. What operational changes should we expect? You should not expect any significant operational changes, however MarkitWire broker codes and the name in which you receive invoices for fees will change. 18. How will we know which entity we have traded with? The LEI for ICAP Global Derivatives Limited is C2MCT5QBE5VW36. You will also need to recognise the IGDL SEF through the use of new MarkitWire codes. 19. Is there a new MarkitWire code? Yes. For direct SEF activity with IGDL, the SEF MW Code will be ICAP_IGDLSEF. There will be further changes to IB broker codes for Introducing Brokers and there is a link to an MW mapping table on the IGDL website for your guidance. 20. Will the fee card change? The fee card will be the same as previously published for ICAP SEF (US) LLC. However, it is worth pointing out that SEF execution fees will change from the bilateral agreements in place with ICAP s introducing brokers on account of the need to satisfy impartial access requirements. 21. Why do we have to fill out on-boarding forms again? This is a legal requirement, however, please note that the IGDL Facility Rulebook and associated Trading Privilege Holder Agreement are not materially different from that of the US SEF and ICAP will work with you to minimise the effort of re-on-boarding. 22. Should I fill out a Trading Privilege Holder Agreement ( TPHA ) or Customer Agreement for ICAP Global Derivatives Limited Facility Transactions (the IB Agreement )? If you would like to access the SEF directly (and are located in a jurisdiction to which the IGDL SEF is permissioned to provide direct access), then please submit a TPHA. If you either (a) also intend to come indirectly to the SEF via one of ICAP s Introducing Broker entities or (b) only intend to use one of ICAP s Introducing Broker entities to execute G3 Rates products on the IGDL SEF, then please also sign and return the IB agreement. A table can be found on the link to the on-boarding documents to help you make this decision. 23. Can you offer the SEF into Canada? Canadian banks contribute a lot towards USD liquidity. We have started the application process for the exemptions that will permit us to offer the SEF into Canada and we hope that these, subject to regulatory approval, will be in place by May 12 th. ICAP 2014 IGDL SEF Questions and Answers v3 Page 4

5 24. Can you offer the SEF into Germany? Yes. The IGDL SEF, being an FCA regulated company exercising its MiFID passport, will be able to operate across the EEA and German located persons will at last be able to access ICAP s SEF liquidity directly. 25. Who should I contact if I want to discuss this further? Please start by responding to SEFOn-boarding@icap.com and the team will answer your questions or escalate as appropriate. 26. What happens if I haven t signed and returned the On-boarding documentation by 12 May 2014? Please be aware that on or after May 12 th if you have not submitted completed on-boarding forms and you either (i) satisfy the definition of a US Person (as defined by the CFTC) that transacts G3 Rates products or (ii) you transact G3 Rates products with a US Person, each via ICAP, you will be deemed to have accepted the applicable TPHA and/or IB Agreement and to have made the representations set forth in the On-boarding Requirements, set out below. Onboarding Requirements From May 12 th, in order to transact on the IGDL SEF directly or through an ICAP introducing broker who arranges trades for introduction to the IGDL SEF for execution, your firm will need to (1) agree to all the terms and conditions of the Trading Privilege Holder Agreement [available at which are applicable to your method of access and trading on the IGDL SEF, including making all representations and warranties, and accepting all of the agreements and understandings, set forth therein, (2) agree to the terms and conditions for SEF intermediation as may be required by the ICAP introducing broker(s) your firm transacts through, (3) represent that each of your firm and your Customers, if any, whose transactions your firm introduces to the IGDL SEF, is an eligible contract participant and an Eligible Counterparty and has consented to the jurisdiction of the IGDL SEF and has agreed to be bound by the IGDL Facility Rulebook, and (4) If your organization does not self-clear, and your firm s clearing firm for cleared Contracts is not a SEF Trading Privilege Holder, then you must obtain a Clearing Firm Representation from your Clearing Firm in respect of Cleared Products, in the form of Attachment D to the Trading Privilege Holder Agreement before we can accept participation in these instruments. 27. If I am presently on-boarded to ICAP Global Derivatives Limited as an MTF operating entity, what will happen if I do not want to participate in SEF liquidity? Existing users of IGDL will be considered off-boarded subsequent to May 12 th, unless (i) they have returned either the TPHA and/or IB Agreement or (ii) they continue to actively seek to execute on-sef (as set out in the question above). 28. Will we need to retest with Traiana Limithub for Client Clearing? You should not need to retest, as none of the processes or staff have changed, however we will work with individual FCMs to confirm on a case by case basis. ICAP 2014 IGDL SEF Questions and Answers v3 Page 5

6 29. What happens if the package transaction relief is extended again? At this stage it is likely that we will continue to follow a similar path taken in February and retain Permitted Products in ICAP s introducing broker entities for negotiation and send them to the SEF for execution. For G3 Rates products, the SEF will be the IGDL SEF. If you transact in those products, it is important that you are on-boarded to the IGDL SEF. 30. How does the execution of Required/MAT instruments occur via voice brokers within the IGDL SEF? All executions within the IGDL SEF will follow the IGDL Facility Rulebook procedures for Order Book and RFQ, which are consistent with the procedures set out in the US SEF Rulebook. ICAP will host webinars around the period of go-live for users, in order that they understand how voice broking will work under the IGDL SEF RFQ rules. 31. Will trading on IGDL add to the De Minimis Threshold count for Swap Dealer registration? In practice, no. Trading on SEF in itself does not count towards the De Minimis threshold. Further, ICAP s SEF order book and primary form of RFQ (non-disclosed RFQ) will be pretrade anonymous, therefore not adding the threshold count. The only exception would be if a participant were to be involved in a disclosed RFQ session, which at this stage we only expect to occur infrequently (if at all). ICAP 2014 IGDL SEF Questions and Answers v3 Page 6