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External Meetings: Meeting with CIEBA and American Benefits Council

When:
2/4/2011 3:00 PM
Rulemaking(s):
XVIII. Real Time Reporting

CFTC Staff:
Tom Leahy

Carl Kennedy

Jason Shafer
Visitor(s):
Eric Silva (Winston Strawn)

Rachel Reicher (Skadden Arps)

Jim Harshaw (General Motors (CIEBA))

Kent Mason (Davis & Harman (Outside counsel to ABC))

Lynn Dudley (ABC)

Bella Sanevich (NISA Investment Advisors)

Bob Shepler (Lockheed Martin)
Organization(s):
Committee on Investment of Employee Benefit Assets ("CIEBA")

American Benefits Council ("ABC")

NISA Investment Advisors

Lockheed Martin

Davis & Harman

General Motors

Winston Strawn

Skadden Arps
  • On February 4, 2011, Commission staff met with ABC and CIEBA to discuss issues relating to the real-time reporting notice of proposed rulemaking.~ ~(i) Expressed concern about “front-running” in all swap transactions, but particularly with regard to block (large notional) trades.~(ii) Suggested that price be reported immediately for all trades, but size be reported with a delay and that all trades should be reported using ranges to express notional or principal amount, such as: 0-100, 101-200, 200+ (in notional amounts).~(iii) Expressed concern regarding the definition of “affirmation”.  Suggested that affirmation be defined after all material terms that could affect price are agreed (e.g., hedging disruption events, closeout amount calculation, etc.)~(iv) Suggested that it be made clearer that SDRs must disseminate the data in Appendix A. § 43.4(e) does not make this point entirely clear.~ ~Block Trades~(i) The current categories of swap instrument are not helpful because it is too broad and should be made to be more granular. ~(ii) A 15-minute time delay before public dissemination is too short.  Believes a 24 hour or “close of business” (“COB”) time delay may be appropriate.~(iii) Recommended the distribution test should use a 70% calculation as compared to the proposed rule’s 95% calculation (i.e., Trades which represent a notional or principal amount that is greater than 70% of the notional or principal transaction sizes in a swap instrument during the applicable period of times should be considered a “block trade.”) Additionally, recommended that the block trade threshold should take into account each individual instrument and corresponding tenors.~(iv) For the multiple test, recommended the test should be 2x Mode.~ ~Implementation~(i) Concern that sudden, immediate changes could have an adverse effect on the swap market and end-users.~(ii) Recommend liberal standards for reporting and block trades until the agency analyzes all the data (perhaps after one year).  Then the RTPR standards may be revised to become more rigid.~(iii) In implementing the final rule, recommends the agency use an implementation timetable which requires more liquid markets to begin RTPR first and then slowly integrates other, less liquid, markets.

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