CFTC’s derivatives trading plan would injure market, Freddie Mac says

27 March 2019 9:11pm
Freddie Mac, the government-backed mortgage finance giant, said its costs would be driven up and the derivatives market damaged by a US Commodity Futures Trading Commission proposal to overhaul swap execution facility rules.

The firm called for scrapping a part of the proposal that would limit market participants’ pre-trade negotiations to swap execution facility, or SEF, trading venues alone.

“Freddie Mac could be exposed to substantial execution and price risk,” its recent letter to the CFTC said. “We believe that the proposed changes that would preclude any pre-trade communications are unnecessary for regulatory purposes and would be harmful to the market.”

The firm, which buys mortgages from lenders and holds them in portfolios or packages them into mortgage-backed securities, hedges its interest-rate risks by trading derivatives.