Comment Text:
Teleconference with Markit
Thursday, January 13, 2011
Memo from
Steiner, Jeffrey L.
CFTC Staff :
Jeff Steiner
Tom Leahy
George Pullen
Jeff Burns
Carl Kennedy
Laurie Gussow
Adedayo Banwo
David Taylor
Irina Leonova
External Attendees :
Marcus Schuler (Markit)
Peter Malyshev (Winston & Strawn)
Adam Glass (SEC)
Laura Serban (SEC)
Cecilia Caglio (SEC)
Matt Carruth (SEC)
Mark Donohue (SEC)
Sanjay Lamba (SEC)
James Brigagliano (SEC)
Michael Gaw (SEC)
Angie Le (SEC)
David Michehl (SEC)
Tom Eady (SEC)
Natasha Cowen (SEC)
Yvonne Fraticelli (SEC)
Brian Trackman (SEC)
Miles Treakle (SEC)
Yue Ding (SEC)
Kathleen Gray (SEC)
Additional Information :
On January 13, 2011, CFTC staff participated via teleconference in a meeting with Markit and the SEC. Markit shared some preliminary views on the data related rulemakings for both agencies, including Real-time Public Reporting, Swap Data Repositories (SDRs) and Data and Recordkeeping.
I.
Real-time Public Reporting
Markit discussed the anticipated impact of the Real-time Public Reporting rules on the industry and the differences between the CFTC’s and the SEC’s approaches to real-time public reporting. Specifically, Markit raised the concerns and comments below:
Fragmentation and consolidation of data
Markit believes that the SEC’s proposal requiring the SDRs to disseminate swap transaction and pricing data to the public in real-time is preferable to the CFTC’s approach since more fragmentation would occur with the CFTC’s approach. Markit mentioned that it may be preferable to designate an entity capable of putting information together from multiple SDRs.
Time Delay
Markit addressed that the 15 minute outer-boundary for real-time reporting in the SEC’s rule may need to be phased-in to achieve short-term goals.
Reporting responsibilities
Markit stated that the CFTC’s proposed rules for who is responsible for reporting are more prescriptive than the SEC’s proposed rules and questioned the ability of reporting parties to delegate their reporting responsibilities.
Markit asked generally about reporting when an international counterparty is involved.
Issues when two legs of trades fall into different regulatory regimes
Markit pointed out that the differences in the CFTC’s and SEC’s rule proposals could create an arbitrage opportunity for market participants when one leg of a transaction falls under the SEC’s jurisdiction and another under the CFTC’s jurisdiction (e.g., single name CDS and CDX).
Normalization of Pricing
Markit observed that there may be special factors that have an effect on the price of a swap that may mislead market participants. Markit also mentioned that they have looked at a counterparty value adjustment and that everyone has different approaches which may make compliance with some of the data fields difficult.
Fees
Markit asked generally about fees and costs for providing the real-time data.
II.
Swap Data Repositories
General
Markit is concerned that the proposed rulemakings relating to SDRs and security-based SDRs could lead to a proliferation of SDRs in the marketplace. Markit believes that a data aggregator will be necessary in order to provide useful real-time reporting as well as an overall appropriate view of the marketplace for regulators.
Reporting
Based on the proposed rulemakings, Markit believes that the reporting of data to SDRs and security-based SDRs will occur through two different streams of data. The first stream is the reporting and dissemination of real-time swap data with the second stream consisting of the full swap data record or regulatory data.
Commercial Use of Data
Markit believes that SDRs may use the data reported to it for commercial purposes if agreed to by the users or counterparties of the swap transaction. Markit stated that they would receive a license or other similar agreement to use the data.
Ancillary Services
Markit suggested that SDRs are well positioned to provide various transaction related services such as matching, confirmation and portfolio valuation for the benefit of the industry. Markit further indicated that these services would be in addition and separate from the “core” regulatory services provided for in the proposed rulemakings.
