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External Meetings: Meeting with Better Markets

2/24/2011 4:00 PM
XI. End-user Exception

CFTC Staff:
Lee Ann Duffy

Mark Fajfar

Jim Moser

Steven Seitz
Kim Allen (SEC)

Andrew Blake (SEC)

Peter Curley (SEC)

Joe Kamnik (SEC)

Ken Riitho (SEC)

Katelynn Bradley (SEC, student observer)

Dennis Kelleher (Better Markets)

Steven Hall (Better Markets)

Wallace Turbeville (Better Markets)
Better Markets, Inc. (Better Markets)

U.S. Securities and Exchange Commission (SEC)
  • The meeting took place at the offices of the SEC in Washington, D.C.  CFTC staff joined by telephone conference. Attendees discussed matters related to the end-user exception to mandatory clearing including specific issues raised in a comment letter from Cravath, Swaine & Moore dated 2/4/11.  Better Markets argued for enlarging the universe of data collected regarding the ability to meet calls for collateral in the event of a credit trigger. Counterparties should provide Master Agreements and Credit Support Annexes to regulators electronically.  End-users should show evidence of their ability to fund credit liabilities in connection with swaps obligations not just by indicating the type of instrument but by quantifying the amount of the obligation.  In this way, regulators would have the same information that the counterparties have.  Better Markets asserted that regulators must be able to extract more detailed information regarding swaps positions for the data to be meaningful.  Better Markets stated that market participants are already showing this data to rating agencies.  Better Markets outlined ways market participants could use hedging programs nominally established to mitigate commercial risk to cloak speculative activity.  Better Markets argued that regulators need to be sure that market participants invoking the end user exception qualify. Better markets argued that officers should certify that the data provided is accurate and attendees discussed the use of the word notify in the Dodd-Frank statute.