To:Horne, Stephanie[SHorne@CFTC.gov]Cc:Ritter, Elizabeth L.[eritter@CFTC.gov]From:Doyle, NancySent:Sun 1/20/2013 5:55:47 PMImportance:NormalSensitivity:NoneSubject:Additional ex parte commentReminder Topic:Follow upMAIL_ALTERNATE_RECIPIENT_ALLOWEDTrueMAIL_MESSAGE_CLASSIPM.NoteMAIL_ORIGINATOR_DELIVERY_REPORT_REQUESTEDFalseMAIL_PRIORITY0x00000000MAIL_READ_RECEIPT_REQUESTEDFalseMAIL_RECIPIENT_REASSIGNMENT_PROHIBITEDFalseMAIL_SENT_REPRESENTING_SEARCH_KEY45583A2F4F3D434654432F4F553D57415348494E47544F4E2C2044432F434E3D524543495049454E54532F434E3D4E5041474500MAIL_RECEIVED_BY_ENTRYID00000000DCA740C8C042101AB4B908002B2FE18201000000000000002F4F3D434654432F4F553D45584348414E47452041444D494E4953545241544956452047524F5550202846594449424F484632335350444C54292F434E3D524543495049454E54532F434E3D53484F524E4500MAIL_RECEIVED_BY_NAMEHorne, StephanieMAIL_SENT_REPRESENTING_ENTRYID00000000DCA740C8C042101AB4B908002B2FE18201000000000000002F4F3D434654432F4F553D57415348494E47544F4E2C2044432F434E3D524543495049454E54532F434E3D4E5041474500MAIL_RCVD_REPRESENTING_ENTRYID00000000DCA740C8C042101AB4B908002B2FE18201000000000000002F4F3D434654432F4F553D45584348414E47452041444D494E4953545241544956452047524F5550202846594449424F484632335350444C54292F434E3D524543495049454E54532F434E3D53484F524E4500MAIL_RCVD_REPRESENTING_NAMEHorne, StephanieMAIL_SUBMISSION_ID633D55533B613D203B703D434654433B6C3D414346504D4258342D3133303132303137353534375A2D313632313100MAIL_RECEIVED_BY_SEARCH_KEY45583A2F4F3D434654432F4F553D45584348414E47452041444D494E4953545241544956452047524F5550202846594449424F484632335350444C54292F434E3D524543495049454E54532F434E3D53484F524E4500MAIL_RCVD_REPRESENTING_SEARCH_KEY45583A2F4F3D434654432F4F553D45584348414E47452041444D494E4953545241544956452047524F5550202846594449424F484632335350444C54292F434E3D524543495049454E54532F434E3D53484F524E4500MAIL_CC_MEFalseMAIL_RESPONSE_REQUESTEDTrueMAIL_SENT_REPRESENTING_ADDRTYPEEXMAIL_SENT_REPRESENTING_EMAIL_ADDRESS/O=CFTC/OU=WASHINGTON, DC/CN=RECIPIENTS/CN=NPAGEMAIL_CONVERSATION_TOPICAdditional ex parte commentMAIL_CONVERSATION_INDEX01CDF7370E8E6C41F40AAE6041CD85AB7293569B237DMAIL_RECEIVED_BY_ADDRTYPEEXMAIL_RECEIVED_BY_EMAIL_ADDRESS/O=CFTC/OU=EXCHANGE ADMINISTRATIVE GROUP (FYDIBOHF23SPDLT)/CN=RECIPIENTS/CN=SHORNEMAIL_RCVD_REPRESENTING_ADDRTYPEEXMAIL_RCVD_REPRESENTING_EMAIL_ADDRESS/O=CFTC/OU=EXCHANGE ADMINISTRATIVE GROUP (FYDIBOHF23SPDLT)/CN=RECIPIENTS/CN=SHORNEMAIL_TRANSPORT_MESSAGE_HEADERSReceived: from ACFPMBX4.cftc.gov ([fe80::e934:c503:d2a5:d3e2]) by
ACFPHUB2.cftc.gov ([::1]) with mapi id 14.02.0328.009; Sun, 20 Jan 2013
Content-Type: application/ms-tnef; name="winmail.dat"
From: "Doyle, Nancy" <ndoyle@CFTC.gov>
To: "Horne, Stephanie" <SHorne@CFTC.gov>
CC: "Ritter, Elizabeth L." <eritter@CFTC.gov>
Subject: Additional ex parte comment
Thread-Topic: Additional ex parte comment
Date: Sun, 20 Jan 2013 12:55:47 -0500
MAIL_REPLY_REQUESTEDTrueMAIL_SENDER_ENTRYID00000000DCA740C8C042101AB4B908002B2FE18201000000000000002F4F3D434654432F4F553D57415348494E47544F4E2C2044432F434E3D524543495049454E54532F434E3D4E5041474500MAIL_SENDER_SEARCH_KEY45583A2F4F3D434654432F4F553D57415348494E47544F4E2C2044432F434E3D524543495049454E54532F434E3D4E5041474500MAIL_SENDER_ADDRTYPEEXMAIL_SENDER_EMAIL_ADDRESS/O=CFTC/OU=WASHINGTON, DC/CN=RECIPIENTS/CN=NPAGEMAIL_RECEIVEDSun 1/20/2013 5:55:48 PMMessage Flag:0x00000001Normalized SubjectAdditional ex parte commentMAIL_RTF_IN_SYNCTrueMAIL_INTERNET_ARTICLE_NUMBER0x00015E24MAIL_TRUST_SENDER0x00000001MAIL_INTERNET_MESSAGE_ID<FA4D8A50AC5D5D4CB93A50D894C66C4223951260@ACFPMBX4.cftc.gov>MAIL_CREATION_TIMETue 1/22/2013 6:56:45 PMMAIL_LAST_MODIFICATION_TIMETue 1/22/2013 6:56:45 PMMAIL_SEARCH_KEY78F43F7BC22545468C150ECBA8A2DEB5MAIL_INTERNET_CPID0x00004E9FMAIL_MESSAGE_LOCALE_ID0x00000409MAIL_LAST_MODIFIER_NAMESHorne@CFTC.govMAIL_LAST_MODIFIER_ENTRYID00000000DCA740C8C042101AB4B908002B2FE18201000000000000002F4F3D434654432F4F553D57415348494E47544F4E2C2044432F434E3D524543495049454E54532F434E3D4E5041474500MAIL_MESSAGE_CODEPAGE0x000004E4MAIL_SENDER_FLAGS0x00000000MAIL_SENT_REPRESENTING_FLAGS0x00000000MAIL_RCVD_BY_FLAGS0x00000000MAIL_RCVD_REPRESENTING_FLAGS0x00000000MAIL_INET_MAIL_OVERRIDE_FORMAT0x00160000MAIL_MSG_EDITOR_FORMAT0x00000002Status0x00000000Percent Complete0%Start DateTue 1/22/2013 12:00:00 AMDue DateTue 1/22/2013 12:00:00 AMStephanie, the email that follows below should be added to the SEF comment file, Proposed Rule: 76 FR 1214, Core Principles and Other Requirements for Swap Execution Facilities
Begin forwarded message:
From: John Nixon <John.Nixon@us.icap.com>
Date: January 19, 2013, 2:34:44 PM EST
To: "'email@example.com'" <firstname.lastname@example.org>, "'email@example.com'" <firstname.lastname@example.org>, "'email@example.com'" <firstname.lastname@example.org>, "'email@example.com'" <firstname.lastname@example.org>
Cc: Patrick Mccarty <Patrick.Mccarty@us.icap.com>, Mark Beeston <Mark.Beeston@icap.com>
Subject: Our risk mitigation meeting
I am sorry we weren't able to meet up while I was visiting the CFTC. I do want to thank your staff, Nancy, Salman and Clay, who all kindly spent time with us.
I would really appreciate your help and support on the issues we potential face around our bulk risk mitigation services Reset and Rematch.
While I understand the issue that the resulting byproduct of a multilateral risk reduction "process" is in fact a number of smaller bilateral trades that can only done as part of a larger set of interconnect transactions all executed for risk reduction purposes, it seems totally at odds with the primary tenant of DF to do away a service that actually reduces systemic risk because we can't find an acceptable solution for a partial exemption from mandatory execution on a CLOB in this unique circumstance. Our Reset and ReMatch businesses, which have eliminated hundreds of trillions in basis risk and could be regulated out of existence in the final SEF Rule if a compromise is not reached. I appreciate how supportive and vocal you have been that DF was not intended to eliminate businesses that have for many years clearly added an important value to the financial services marketplace.
If these Reset and Rematch trades are subject to mandatory execution through a SEF or DCM Central Limit Order Book then basis risk reduction trades produced through the multilateral processes simply won’t be done and the resulting risk will then remain in SD swap portfolios instead of being neutralized. While the Reset and ReMatch processes do result in new trades being entered into by market participants those trades are a byproduct of the multilateral compression “processes” and do not constitute the outright “trading” of risk taking swaps by almost all definitions proposed by the CFTC.
We would support and assist in the reporting of swaps trades coming out of the Reset and ReMatch processes to an SDR and submitting the resulting trades to a DCO for clearing and so will be aligned with many of goals of DF.
We have suggested 3 solutions to the problem: an exemption, a 12 month review period or “block trade like” rule for SEF's and DCM's processing basis risk reduction transactions which are subject to narrow criteria such as being part of a multilateral process, the fact that the trades are non price forming, none of the parties to a trade post bids or offers, all resulting trades are executed on an all or nothing basis and are not subject to any kind of counter party acceptance.
We believe that while any of our three suggestions will allow bulk risk reductions services to survive perhaps by looking at the aggregate notional volume of the trades associated with any particular processing run the CFTC could allow the individual trades, which cannot be done unless all trades are executed together, to fall under a block trade provision.
Icap is committed to finding a way to work with the CFTC while still allowing a valuable service to service of risk mitigation to survive. To allow these risk mitigation services to disappear is simply not what we believe was intended by Congress.
Thank you for your help.
I look forward to speaking again soon.
212 815 9015
203 550 3901
This communication and all or some of the information contained therein may be confidential and is subject to our Terms and Conditions. If you have received this communication in error, please destroy all electronic and paper copies and notify the sender immediately. Unless specifically indicated, this communication is not a confirmation, an offer to sell or solicitation of any offer to buy any financial product, or an official statement of ICAP or its affiliates. Non-Transactable Pricing Terms and Conditions apply to any non-transactable pricing provided. All terms and conditions referenced herein available at www.icapterms.com. Please notify us by reply message if this link does not work.