External Meetings: Meeting with Pierpont Securities/Pierpont Derivatives LLC

- Interest Rates Swaps Dealer providing perspective of a new market participant. Recommended that in light of new market entrants who will be self-managing risk, Commission should give consideration to a balance between transparency and liquidity that does not disadvantage smaller firms acting as liquidity providers.

- Recommended including additional consideration for the determination of block size for dated and date specific swaps because they will have less liquidity and may need lower block trade sizes than interest rate swaps that are, for example, standard spot 5 or 10 year. Stated that when a specific date is known on a real-time ticker too soon that could encourage other market participants to front-run a liquidity provider seeking to hedge a non-standard risk. Stated that without block delays for swaps dealing with specific risks swap dealers will have no choice but to pass on to those end users who are hedging non-standard risks wider spreads. 

- Stated that the anonymity provisions as provided for interest rate swaps are adequate and that public reporting, as proposed, would not compromise  even the less liquid interest rate swaps participants identities because the underlying are part of larger total asset pools.

- Recommended that the Commission center tenor bands for grouping interest rate swaps on liquidity points like the 2, 5, and 10 year points plus an additional longer dated point for the far end of the curve instead of establishing bands that have too large of a duration differences and cut off at a liquidity point.

- Recommended establishing lower block sizes for Dated, FRA, Asset, and Basis swaps since the liquidity for these instruments is likely to be lower than for the standard spot interest rate swap contracts.
- Recommended giving different block trade sizes to transactions between a SD and a non-SD. The purpose would be so that non-SDs, particularly End-Users, would be protected from wider pricing on bid-ask spreads for non-standard transactions when SDs would be pricing based off of the need to include the costs of immediate transparency for non-standard liquidity. This calculation could be performed by simply halving the sizes for SD to non-SD block trades from whatever the formula produces or could be performed by treating the data as two different data sets and having two separate formulas.

- Recommended starting off the block trade size formula at the 50% instead of the 67% level until more is known about the effects of real-time reporting and the other rules on liquidity in the interest rates market.
XVIII. Real Time Reporting,Block Sizes for Large Notional Off-Facility Swaps,
CFTC Staff
George Pullen

Nhan Nguyen

Aravind Menon

John Dunfee

Gregory Kuserk

Esen Onur
Mark Werner (Pierpont Securities LLC)

Akshay Das (Pierpont Derivatives LLC)

RC Whitehead (Pierpont Securities LLC)
Pierpont Securities LLC

Pierpoint Derivatives LLC