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External Meetings: End User and Definitions Call with FTN Financial

10/5/2011 10:00 AM
II. Definitions

XI. End-user Exception

CFTC Staff:
Eileen Donovan

Mark Fajfar

Erik Remmler
Leo Pylypec (FTN Financial)

Mike Waddell (FTN Financial)
FTN Financial, a division of First Tennessee Bank, N.A.
  • The meeting discussed issues raised in FTN Financial's comment letters dated Feb. 22, 2011 on the entity definitions and end-user exception rulemakings.  FTN Financial is concerned that not allowing small banks (i.e., their customers) to use the exception from the clearing mandate would discourage hedging and have a disproportionate, unnecessary impact on small entities.  FTN Financial also believes that small banks hedging risks of loans they make, or macro hedging their risks, should be treated as hedging commercial risk.  On the de minimis exception from the swap dealer definition, FTN Financial is concerned that a low threshold would prevent small entities from engaging in dealing activity because the level of activity below the threshold could not justify the costs of being a dealer.  FTN Financial also believes the exception for swaps entered into in connection with loans should cover swaps between FTN Financial and the smaller bank making a loan, when the smaller bank is using the swap to hedge its risk from the loan.  FTN Financial believes a narrow reading of the IDI exclusion disadvantages small banks that will try to limit their swap activity to remain within the exclusion.  On the ECP definition, FTN Financial believes that the ECP definition should be expanded for swaps with regulated entities, such as banks, that follow suitability procedures.