Meeting Date:
Friday, February 4, 2011
CFTC Staff:
Tom Leahy
Carl Kennedy
Jason Shafer
Organization(s):
Committee on Investment of Employee Benefit Assets ("CIEBA")
American Benefits Council ("ABC")
NISA Investment Advisors
Lockheed Martin
Davis & Harman
General Motors
Winston Strawn
Skadden Arps
External Attendees:
Eric Silva (Winston Strawn)
Rachel Reicher (Skadden Arps)
Jim Harshaw (General Motors (CIEBA))
Kent Mason (Davis & Harman (Outside counsel to ABC))
Lynn Dudley (ABC)
Bella Sanevich (NISA Investment Advisors)
Bob Shepler (Lockheed Martin)
Additional Information:
On February 4, 2011, Commission staff met with ABC and CIEBA to discuss issues relating to the real-time reporting notice of proposed rulemaking.
(i) Expressed concern about “front-running” in all swap transactions, but particularly with regard to block (large notional) trades.
(ii) Suggested that price be reported immediately for all trades, but size be reported with a delay and that all trades should be reported using ranges to express notional or principal amount, such as: 0-100, 101-200, 200+ (in notional amounts).
(iii) Expressed concern regarding the definition of “affirmation”. Suggested that affirmation be defined after all material terms that could affect price are agreed (e.g., hedging disruption events, closeout amount calculation, etc.)
(iv) Suggested that it be made clearer that SDRs must disseminate the data in Appendix A. § 43.4(e) does not make this point entirely clear.
Block Trades
(i) The current categories of swap instrument are not helpful because it is too broad and should be made to be more granular.
(ii) A 15-minute time delay before public dissemination is too short. Believes a 24 hour or “close of business” (“COB”) time delay may be appropriate.
(iii) Recommended the distribution test should use a 70% calculation as compared to the proposed rule’s 95% calculation (i.e., Trades which represent a notional or principal amount that is greater than 70% of the notional or principal transaction sizes in a swap instrument during the applicable period of times should be considered a “block trade.”) Additionally, recommended that the block trade threshold should take into account each individual instrument and corresponding tenors.
(iv) For the multiple test, recommended the test should be 2x Mode.
Implementation
(i) Concern that sudden, immediate changes could have an adverse effect on the swap market and end-users.
(ii) Recommend liberal standards for reporting and block trades until the agency analyzes all the data (perhaps after one year). Then the RTPR standards may be revised to become more rigid.
(iii) In implementing the final rule, recommends the agency use an implementation timetable which requires more liquid markets to begin RTPR first and then slowly integrates other, less liquid, markets.
