The Dodd-Frank “Swap Execution Facilities” proposal was released by a 4-1 vote yesterday. Proposal details are here, but the skinny is:

• Centralized, open/transparent limit order book
• Participants are allowed to post “indicative” quotes, so less liquid derivs are afforded some cover (this was the source of the single “no” vote)
• Allows RFQ process, as long as the request is sent to 5 or more market makers
• Provides for transaction tiering:
  1. Tier 1 transactions are not block trades and exhibit material transaction volume;
  2. Tier 2 transactions are not block trades and do not exhibit material transaction volume;
  3. Tier 3 transactions are not subject to clearing and execution requirements, are block trades or are illiquid or bespoke. These swaps could be executed through various methods including voice and limited request for quote systems.

Seems to be received mostly positively. Comm. Sommers didn’t like the “indicative” option, concerned that it would effectively become a requirement, weeding out applicants with RFQ’s that don’t support indicative quoting.

The CFTC proposal is open for a 60-day comment period.