Discussion of guidance on term US person in further proposed guidance and exemptive order, as it applies to investment managers inside and outside the US

Participants discussed SEF registration and minimum trading functionalities

Newedge had specific questions regarding eligible collateral, capital charges for uncollateralized trades and calculation methods for margin and capital charges for SDs. Newedge expressed special interest in the approval processes for the use of risk models, whether internal, third party, or DCO-linked. Staff informed Newedge that these issues are still undecided, pending coordination efforts with other regulatory bodies.

Representatives of CME, Morgan Stanley, Bank of New York Mellon, and PIMCO discussed alternative segregation arrangements for cleared swaps customer collateral.

Representatives of CME, Morgan Stanley, and PIMCO discussed alternative segregation arrangements for cleared swaps customer collateral.

Representatives of Morgan Stanley came to discuss the application of the provision regarding the residual interest in segregated clear swaps customer accounts.

Bloomberg came and discussed topics relating to the SEF rule that include, broadly, the futurization of swaps.  They emphasized that there should be parity between the swaps markets and the futures markets, including in matters such as margin, aggregation up to $8 billion, and block trading, so that there should not be more expensive transactions for end-users.  Tailored products can be done more cheaply on swaps than with multiple futures, in the abstract, but regulatory rules might make some swaps activity more expensive. 

ICAP came to discuss its January 16, 2013 comment letter, and continuing request for some form of no-action relief.  ICAP intends to register as a SEF operator, but observes that there is a part of its business that, despite the obvious advantage of SEFs, is not a viable means of reducing system-wide basis risk.  It is concerned that in the absence of no-action relief, the SEF rule will disturb if not eliminate an important venue for market participants.

Participants discussed the benefits and drawbacks of differing approaches to harmonizing block trade rules across swaps and futures markets, including an approach based on market liquidity that would be relatively more prescriptive than existing DCM practices under Core Principle 9.  With respect to CME rule 1001, ICE wanted to ensure that any outcome encouraged competition.  ICE also supported the scheduled public meeting on the futurization of swaps.

Meeting to discuss Part 4 Harmonization for registered investment companies