Comment Text:
April 23, 2012
David A. Stawick
Secretary
Commodity Futures Trading Commission
1155 21st Street, NW
Washington, DC 20581
Re: Request from New York Portfolio Clearing, LLC (“NYPC”) for Order Permitting Cross Margining for Market Professionals (Release No. 6216-12)
Dear Mr. Stawick:
GETCO LLC (“GETCO”) appreciates the opportunity to respond to the Commodity Futures Trading Commission’s (“Commission”) request for comment on NYPC’s petition for an order, pursuant to Section 4d(a)(2) of the Commodity Exchange Act, to permit NYPC to expand its existing one-pot cross-margining program to accounts carried for participating “market professionals.” NYPC’s current cross-margining program for proprietary accounts reduces risk exposures for these market participants, allows for more efficient use of capital, and improves transparency of risk across asset classes. GETCO supports NYPC’s request for a Commission order that would expand this unique program to include “market professionals” because it would offer the same benefits to additional market participants and further encourage competition in the futures markets.
I. Introduction
GETCO is a leading electronic trading and technology firm providing liquidity on over 60 markets in North and South America, Europe, and Asia. From offices in Chicago, New York, Palo Alto, London, and Singapore, the firm transacts business in cash and futures products across four asset classes – equities, fixed income, currencies and commodities.
GETCO trades on various U.S. and foreign futures exchanges, including the Chicago Mercantile (“CME”), ELX Futures, ICE Futures US (“ICE”), and NYSE Liffe US. GETCO’s primary trading strategy is market making—posting two sided markets—to help investors efficiently transfer risks. Our trading strategies employ advanced technology, real time information, transparent risk management systems and continuous innovation.
II. Discussion
NYPC requests that the Commission issue an order that would allow the commingling of certain assets in a Market Professional cross-margining account. GETCO believes that NYPC’s request for an order, subject to certain terms and conditions, is consistent with cross-margining programs previously approved by the Commission and that, therefore, the Commission should issue the order.
NYPC’s existing cross-margining of futures cleared by NYPC with related cash instruments cleared by the Fixed Income Clearing Corporation encourages the clearing of more interest rate instruments by offering enhanced capital efficiency to proprietary accounts. This efficiency supports the Dodd-Frank Act goal to centrally clear a greater proportion of financial instruments, thereby reducing overall risk. Allowing market professionals to participate in NYPC’s cross-margining proposal would similarly encourage financial instruments to be cleared.
NYPC employs the Value at Risk methodology for setting margin. In our view, this risk modeling technique has performed well and preserved the stability and soundness of the clearinghouse. In addition, expanding the current cross-margining program would provide additional transparency of risks across asset classes, which would allow the clearinghouses and regulators to better monitor and mitigate risk concentrations.
III. Conclusion
GETCO appreciates the opportunity to submit these comments. Please do not hesitate to contact us at (312) 931-2200 if you have questions regarding any of the comments provided in this letter.
Sincerely,
Elizabeth K. King
Head of Regulatory Affairs
