Comment Text:
CFTC Meeting with Better Markets
Wednesday, January 26, 2011
Memo from
David, Teresa
CFTC Staff :
Dan Berkovitz, Mark Fajfar, Ryne Miller, David Taylor, Irina Leonova, Ward Griffin, Steven Seitz, Neal Kumar, and Lee Ann Duffy
External Attendees :
Wallace Turbeville, Dennis Kelleher, and Michael Masters
Additional Information :
Better Markets expressed to the staff that the Derivatives Clearing Organization (“DCO”) process of determining which swaps will be offered for clearing is critical to the clearing mandate in the Dodd-Frank Act. Better Markets also commented on the importance of transparency in the review process of swaps for mandatory clearing. Better Markets suggested that the DCO should be required to seek public comment when the DCO is considering whether to clear a particular type of swap, and if the DCO determines not to clear that type of swap, it should make available the same information about its determination that it would make if it determined to clear the swap.
With respect to end user swaps, Better Markets believes that there must be improved disclosure of the credit costs in end user swaps. Better Markets suggested that when the swap is reported to a swap data repository, the report indicate what portion of the notional amount of the swap is actually an extension of credit, and what portion of the payments made by the end user under the swap are compensation to the dealer for extending credit. Better Markets also discussed how these credit costs affect the swaps market.
Better Markets also expressed concerns about disruptive trading practices and the increased prevalence of high-frequency traders in the trading markets. In the view of Better Markets, high-frequency traders make minimal contributions to overall market efficiency and liquidity and need to be highly regulated. Better Markets further commented on the need for the Commission to ensure that the Dodd-Frank rulemakings ensure fair and equitable markets for all market participants.
