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Mr. DaviSecretar
United SThree La1155 21s
Washing
R
Dear Mr.
Chatham
U.S. Co
ProposeSwap EDodd-Fr
Act”).
Introdu
Chatham
all businin conne
hedging
reportinmarket,
transpar
venue fo
The Imp
The authcrisis, an
letters a
unnecess
exceptiosmall ba
exemptiand tradi
the proc
increasincould ari
d A. Stawicof the Co
tates Commfayette Cent Street, N
ton, DC 205
e: “Process ake a Swa
Stawick:
Financial
mmodity F
Rulemakinecution Fa
ank Wall St
tion
is a consul
ss sectors ttion with t
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and accouhatham ha
ncy in the
r managing
act on End
ors of thed do not po
nd colloqui
arily burde
from thenks, pensio
n, etc.) willng require
ess for ma
g hedging cse due to th
k mission
odity Futurre
81
for a DesigAvailable
orp. (“Chat
tures Tradi
g (“NPR”) cility To M reet Refor
ting compa
hat employeir day-to-
om structur
ting. Throadvocated
erivatives
risk.
Users
odd-Frank se a system
es that pol
ed by new
Act’s mandfunds, ent
not be ableents will e
ing a swa
osts and adfollowing:
s Trading C
nated Cont o Trade” (
ham”) is pl
ng Commi
ertaining t ke a Swapand Cons
y that wor
over-the-coay busines
ing and ex
ghout thefor effectiv
arket, whil
ct recogniic risk. Ac
icy makers
egulations.
atory cleariities that do
to avail thetend to tho
“availabl
inistrative
ommission
act Market RIN numbe
ased to res
sion (the
the “Proce Availablemer Protec
s with over
nter (“OTes. Chatha
ecuting he
olicy debatregulation
e also ensu
ed that endordingly, t
should str
While man
ng and tradnot fit wit
selves of tusands of e
to trade”
burdens. In
or Swap E3038–AD1
ond to the
Commissio
ss for a De o Trade” i
ion Act (th
one thousa
”) derivatim assists its
ges to pro
over regulthat reduce
ring that th
users did ney have re
ive to ens
y end users
ing requirein the narr
e exceptiond users. I
could nega
creased cos
F
ecution Fa8)
request for
n”) regardi
ignated Cossued unde
e “Dodd-Fr
nd compani
es to manaclients wit
viding on-
ation of thes systemic r
market re
ot contributeatedly em
ure that en
will qualif
ents, otherowly crafte
. Consequf not imple
tively impa
s and admi
ebruary 13,
cility To
comments b
ng its Noti
ntract MarTitle VII
ank Act” or
es from vir
e risks theall facets
oing valua
OTC derivisk and incr
ains an eff
e to the finhasized th
d users ar
for the end
end userscaptive fi
ntly, the cleented care
ct end use
istrative bu
2012
y the
e of
et orf the
“the
ually
facef the
ions,
tiveseases
icient
ncialough
not
user
(e.g.,ance
aringfully,
rs by
rdens
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• o
• E
tr
S
Additionrequirem
SEF/DC
executeIf the sw
not suffian illiqui
For thesthe poten
Liquidit
Some mwould b
suitable
that thefeasible.
subject tcreation43 and P
clearing
We stron
clearing
the essen
sufficienCommitt
IC
d
Cs
f
t
a“
swap subjn a swap e
ay not havake the sw
nd users wil
ade” and co
EF/DCM th
ally, evenents still m
. As an
subsequenap dealer is
iently liquid venue wil
reasons, wtial for unn
y
rket particisubject to t
or trading o
ommissionThe Comm
the clearinof the propoart 45 repor
but not trad
gly support
requirement
tial need fo
tly liquid.ee Chairma
interpretinommission
etermining
ommissionap to be tr
cility, but a
e facility. T
mount of liqlisting” of t
ct to the clecution fac
sufficientp “availabl
l be require
uld also be
at is first to
end usersy be impac
end user ex
t swap in threquired to
d to be tradl be passed
e urge the Ccessary cos
ants anticiphe clearing
n a SEF/DC
’s approachission has c
g requiremesal for a proing require
d on a SEF
the approac
is in fact su
swaps only
his principlLincoln, w
g the phraseshould take
hether a s
should evalded on the
lso whether,
he Commis
uidity suche swap by a
aring requirlity (“SEF”
liquidity onto trade”.
to expend
ubject to th
make a give
that are eted indirectl
ecutes hed
e market totransact th
d on a SEFn to end us
ommissionts due to de
ate that onlequirement
M. While t
acknowledafted nume
nt may be scess to desients put fo
DCM.
h of having
itable for tr
to be desig
has also bho noted:
“makes thea practical r
ap executio
ate not justacility, or i
as a practic
ion could c
hat the swaswap exec
ement may) or design
each of the
resources to
e burden an
n swap “av
empt froy by the re
es with a
lay off their offsettin
DCM, thers and hed
to ensure threased liqui
the most stand would
his is one p
e the possibrous rules w
bject to thenate swaps
rth scenario
a separate t
ding on a S
nated as ava
en emphasi
swap availather than a
n facility “
whether theentifies the
al matter, it
onsider, for
p can actualtion facility
not have suted contrac
swap exec
monitor th
d costs of n
ilable to tra
the manuirement f
wap dealer
isk associatswap on a
ost incurreing will be
e “availablidity and inc
andardizedherefore au
ssible scen
ility that othich sugges
trading reqas “availab
s where a s
st to ensure
EF/DCM.
ilable for tr
zed by then
ble to tradeformal or l
akes the s
swap execswap as a c
is in fact p
example, w
ly be traded, in and of i
fficient liqut market (“
ution facilit
swaps dee
eding to co
de”.
atory clearr swaps to
, the swap
ed with theSEF/DCM
as a resultome more e
to trade” preased oper
and highly ltomatically
rio, we beli
er scenariot that a subs
uirement, hele to trade”.ap would b
that a swap
his approac
ding if thos
Senate Agri
” it is intengalistic app
ap availabl
tion facilitandidate for
ssible to tra
hether there
on the faciltself, witho
idity to be tCM”), and
ies (“SEFs”
ed “availa
nect to the
ing and trbe executed
dealer will
end user’sand that s
of transactixpensive.
rocess miniational burd
iquid swapsbe deemed
eve it prude
are similar
et of swaps
nce the verLikewise,
e subject to
subject to t
h acknowle
e swaps are
culture
ed that theroach. Thus
to trade,” t
permits thetrading on
de the swap
is a minimu
ity. The mert a minimu
2
raded /or it
that
le to
latest
adingon a
often
wap.ap is
g on
izesens.
nt
ly
art
e
dges
, in
he
he
on
m
e
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a
E
To addre
intendedsingle fa
deems re
Consequoutcome
We urge
deemed
relevant.process t
they beli
being codetermin
establishdetermin
appropri
Operati
End user
sign up a
or more
year. Fu
concerneSEF/DC
if the enswap tha
must be
allow forcompeti
process t
requiresend user
1 156 CON2 Page 777sellers; (2) DCMs, or of number of will supportdispositive,
mount of liq
xecution R
ss the need
to ensure stor would
levant - the
ently, as sucthat are av
the Commi
available t
We believhat allow m
ve the tradi
sidered fore if a swap
ed in the evation. This
te for exec
nal and L
s subject to
nd connect
EFs/DCM
rthermore, i
d that end uthat has
user has ct becomes r
ept in chec
competingg SEFs/DC
hat inadvert
nd users cwith no ap
. REC. S 5923 (32 Federal Regihe frequency o bilateral transaesting firm or i trading in the sas the DCM or
uidity to ma
quirement.”
or liquidity
aps are suf e dispositiv
process ma
h the proporse to the b
sion to ens
trade” rath
end usersarket partici
ng require
the tradinghould be m
nt a swap bwould help
tion on a S
gistical Bu
the clearing
with SEFs/
is worth th
SEF/DCM
sers may neade a relev
ntracted witquired to tr
and provid
SEFs/DCMMs, further
ently promo
mply in a sreciable be
aily ed. July 15,ter / Vol. 76, Nr size of transacctions; (4) The dicative bids anwap; or (8) Any EF may conside
ke trading1
on SEFs/D
iciently liqe - and the e
allow for l
ed rule maest interests
re the key l
r just than
ould benefiants to off
ent should
requirementde ‘availab
ecomes unsensure that
F/DCM.
dens
requiremen
CMs. It is
relatively
s can quickl
d to sign unt swap ty
h a particulade on such
e end users
s to ensure tromoting r
tes a SEF/D
ort timefranefit.
2010) (stateme
. 240 The eight ions on SEFs, Dumber and typd offers; (7) Wh
other factor thr any one facto
ossible, sho
Ms, the Co
id to be traighth criteri
ss liquid pr
es it feasiblof end user
iquidity fact
llowing an
t by havingr input – bo
ot apply du
. This shoule to trade”
itable to trwaps that a
will be req
not yet clea
mall numb
y make swa
with multie “availabl
r SEF/DCa venue. T
sufficient ti
hey are ablebust comp
CM to bene
e, risks cre
nt of Senator Blfactors are: “(1CMs, or of bilats of market paether a SEF’s trt the SEF or DC or several fact
uld not be s
mmission p
ed on a SEa is essentia
oducts to be
e that the prs.
ors are alw
other facto
proper checth qualitati
e to the rela
ld be true dand a simila
de on a SEre made “av
uired to co
that the ti
r of swaps
ps “availabl
ple SEFs/Dto trade.”
, and thate SEF/DC
me to comp
to match thtition for th
fit from a fi
ating unnec
lanche Lincoln)) Whether therral transaction
rticipants; (5) Tading system orM may considerrs to make a s
ufficient to
roposed eig
/DCM.2
lly anything
made “avai
ocess may r
ys satisfied
r the SEF/D
ks and balae and quant
tive illiquidi
ring the initr process sh
/DCM afteailable to tr
mit resourc
e and cost t
many end u
e to trade,”
Ms, or chahis may be
EF/DCM dself-certif
ly. Such ti
e product oe benefit of
rst mover ad
essary burd
are ready and s; (3) The tradine bid/ask sprea platform or a D relevant. No siap available to
rigger the T
t criteria
owever sinthe SEF/D
lable to trad
esult in
before a sw
CM deems
ces in theitative – wh
ty of a prod
ial processould be
the initialde” are ind
es to resear
o set up wit
ers execute
e are
se the latestparticularl
es not offeication proc
e may also
ferings of end users.
vantage, or
ns and cost
illing buyers ag volume on SEd; (6) The usual CM’s trading fagle factor woul
trade.” 3
rade
ce noM
e”.
ap is
en
uct
o
ed
h,
one
per
true
ass
s for
d s, cility d be
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With res
required
(includin
first mad
(includinfirst mad
aware, v
self-certia 30 day
From a lmonitor
perhaps
subject t
all mark
span a grannual p
burdensis deeme
able to c
researchand insti
to make
latest SE
Even wit
just to encould be
Econom
The proexecutio
and/or a
economi
hedgingbecause
economiexacerba
3 Pages 674 Page 7775 Page 7776 Page 7777 Page 777
ect to the ti
to trade on
g the 45 da
e available
g the 10 dae available
ice concer
fication propublic com
gistical perhe various
aily or wee
the “avail
t participan
eater time pocess for e
me, wouldd “available
mply with
new SEFs/ ute process
he same sw
F/DCM.
h extended
sure they come unnec
ically Equi
osed rule stfacilities
y economi
equivalen
are not inahey are sim
ally equivte the conc
94 and 67295, 31, Federal Regi33, Federal Regi31, Federal Regi37, Federal Regi
ming and pr
SEF/DCM
review per
o trade5) an
review pero trade). B
s and take s
esses shoulent period
spective, it iebsites of
kly - to see i
ble to trade
ts, one appr
eriod to facid users to c
t least alignto trade” en
he trading r
CMs if nees to compl
ap “availabl
eriods of ti
mply with tssarily bur
alent
ates, “Uponnd designa
cally equiv
y test shou
vertently silar in som
alent provierns related
Federal Registerster/Vol. 76, Noster/Vol. 76, Noster/Vol. 76, Noster/Vol. 76, No
ocess speci
as quickly
iod for the
d as quickly
iod for theth scenario
teps to com
d be subjectin all cases.
s worth notiarious SEF
f a swap th
designatio
ach to ease
litate broadheck which
with otherd users sho
equirement.
ded, negotia. Addition
e to trade”
me, end use
he trading rensome an
a determinted contract
lent swap,
ld be suffi
bject to threspects to
ions wereto liquidit
/Vol. 75, No. 21. 240 . 240 . 240 . 240
ied in Part
s 75 days v
ommission
as 40 days
ommissions would pro
ly. Both th
to at least
ng that thous, DCMs, an
y may need
. While th
this logistic
market awaswaps are “
uarterly orld then hav
This amou
te contractslly, this tim
nd prevent
rs could be
quirementspotentially
tion that amarkets li
shall make
iently gran
SEF/DCMother swap
interpretedand oper
1
0.5 and Par
ia voluntary
and the 30
via the self-
6 and the 30vide little ti
e voluntary
90 day rev
sands of end the Com
to execute
re may be
al burden w
reness. Foravailable to
annual busie 6 to 9 mo
nt of time w
connect, lee period wil
nd users fr
equired to c
. Without acostly for e
wap is avaisting or off
those swap
ular so that
trading wis made avai
too broadltional burd
t 40.63
a sw
submission
day period
certification
day periode for end u
submission
iew by the
users willission on a
o manage ri
ultiple app
ould be to h
example, atrade,” whil
ness procesths to ensur
ould enable
arn how tol permit oth
m needing
ommit signi
dditional tind users.
lable to traering for tr
s available
customize
hout sufficilable on a S
y, it woulens that w
ap could be
by a SEF/
after the sw
process
after the swsers to beco
for approva
ommission
be requiredregular basi
sk will be
roaches to n
ave the pro
uarterly ore still poten
es. Once ae they will
end users t
se the systeer SEFs/DC
to chase the
ficant resou
e, complia
e, all otherading such
to trade.”7
swaps use
ent liquiditEF/DCM.
only serhave iden
4
CM
p is
p isme
l and
with
tos -
otify
ess
ially
swape
mMs
rces
ce
swapswap
The
d for
justIf the
e totified
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above.
broad or
Conclus
Chatham
for makiWe look
the deriv
Sincerel
Ted McManagin
Chatham
e urge th
unclear eco
on
appreciates
g a swap “forward to
atives mark
,
ulloughg Director
Financial
Commissi
omic equiv
the opportu
available toworking wi
t without pl
orp.
n to preve
alency test.
nity to com
trade” becath the Com
acing an un
t such unn
ment on the
se it will aission to h
due burden
cessary bu
proposed r
fect all partelp implem
on end user
rdens associ
le impleme
icipants in tent rules th
or the larg
ated with o
nting the pr
he swaps mt will stren
r economy.
5
verly
ocess
rket.gthen