afx capital markets

AFX Applies to Become Designated Contract Market (DCM)

AFX Markets - designated contract marketThe electronic exchange for direct lending and borrowing for American financial institutions has filed to become a designated contract market (DCM) with the Commodities Futures Trading Commission (CFTC) under the name AMERIBOR Benchmark Futures Exchange (ABFX).

DCM are futures exchanges that operate under the regulatory oversight of the CFTC. AFX facilitates the determination of AMERIBOR, a transaction-based interest rate benchmark for financial institutions which is calculated as the weighted average daily volume in the AFX overnight unsecured loan market. The rate is denoted as a 360- day annualized percentage rate up to the fifth decimal.

Richard L. Sandor, chairman and CEO of AFX, said: “Becoming a DCM is the next natural step in the development of the AMERIBOR benchmark and AMERIBOR benchmark futures. It is a move in the best interest of our current and future users of AMERIBOR futures. With continued growth in membership and trading volume, the AMERIBOR benchmark rate is now an integral part of the conversation regarding transition to alternative benchmarks.”

American Financial Exchange (AFX) has transacted more than $600 billion cumulatively since it opened in December 2015. Reaching 163 members across the U.S., including 133 banks and approximately 1000 correspondent banks, current active AFX markets are overnight, thirty-day, and three-month unsecured loans; and 7-day secured loans. Membership also includes 30 non-banks comprised of broker-dealers, private equity firms, business development corporations, hedge funds, futures commission merchants, insurance companies, asset managers and finance companies.

Earlier this year, the Commodity Futures Trading Commission (CFTC) approved the application of LedgerX LLC (LedgerX) for designation as a contract market. LedgerX is a US-regulated bitcoin derivatives exchange and clearinghouse.

In 2018, the CFTC proposed a rule into the federal registrar which increases the default level of equity SFP position limits to 25,000 (100-share) contracts, from 13,500 (100-share) contracts. It also modifies the criteria for setting a higher level of position limits and position accountability levels. Rather than setting position limits based upon average trading volume and the number of shares outstanding in the underlying security or securities as provided for in the current rules, a designated contract market (“DCM”) listing an SFP would set a specific position limit level, generally equivalent to no more than 12.5 percent of estimated deliverable supply. In lieu of position limits, a DCM would be able to set position accountability levels when six-month total trading volume in the underlying security exceeds 2.5 billion shares and there are more than 40 million shares of estimated deliverable supply. In addition, the proposed amended position limit regulation would provide discretion to a DCM to apply limits to either a person’s net position or a person’s positions on the same side of the market. Finally, the Commission proposes criteria for setting position limits 2 on an SFP on other than an equity security, generally based on an estimate of deliverable supply.