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We are alarmed by what appears to be a deliberate effort by some to spread confusion suggesting that clients of commodity trading advisors (“CTAs”) who receive swaps advice must enter into their swap transactions on a type of regulated trading platform called a swap execution facility (“SEF”). Let’s set the record straight.  

CTAs such as Mobius may provide advice to their clients on the use of swaps, whether as part of a hedging strategy or an investment strategy. Incidental to providing that advice, a CTA may assist its clients in executing their swap transactions to implement their strategies, as we do at Mobius.

A CTA is not automatically a SEF because it provides these services. Citing the CFTC Staff Advisory issued last September to suggest otherwise is, in our view, egregiously misleading. CTAs that provide advisory and related execution services for swaps should, of course, carefully evaluate the circumstances of their own operations, as we have at Mobius, to decide if they should register as a SEF. That is the overall message of the Advisory.[1]

More to the point, a person is not obligated to execute its swap transactions on a SEF simply because it receives swaps advice from a CTA. Yes, certain swaps may have to be executed on or subject to the rules of a SEF, but that requirement applies only to certain types of interest rate and credit default swaps. For other swaps, a person is free to choose whether to enter into transactions over a SEF or through some other permissible means, weighing the pros and cons of each choice. At Mobius, we help our clients evaluate their different trading and market choices based on their unique business needs.

For additional information or inquiries please contact:

Paul Smith, Chief Risk Officer,

Phil Thompson, Vice President and Co-Head, Commodities Risk,

[1] If clients have questions about whether their CTA is executing trades in a manner that requires SEF registration, they should talk to the CTA or consult with their counsel, but please don’t jump to conclusions.