Buy-side firms and end users to stress issues relating to security and liquidity swaps market during the Dodd-Frank

Buy-side firms and end users to stress issues relating to security and liquidity swaps market during the Dodd-Frank

--President Stabenow delivers keynote speech at the forum sponsored by the DTCC, MFA and institutional investors

WASHINGTON--(BUSINESS WIRE)--effects of the Dodd-Frank on safety and liquidity of the swaps markets for end-users and buy-side firms continues to be a subject of hot debate that more than 100 representatives from the communities ' financial and legal areas of concern and possible solutions in a forum today sponsored by () succeeded medium-AssociationMFA), institutional investors and the Depository Trust & Clearing Corporation (DTCC).

-While the Dodd-Frank is intended to protect the economy and the OTC-derivatmarknader and make their hedging set markets more transparent and liquid, there is concern within the industry over the potential unintended consequences of the new rules, says Michael Bodson, DTCC's chief operating officer, opened the Conference. "This forum will identify key issues and describe possible elements of resolutions so that the rule makers and legislators have input and feedback that they need when they go ahead with implementing Dodd-Frank."

"We appreciated the opportunity for market participants and policy-makers to continue the dialogue on the central clearing and openness, which strongly supports both MFA because of their important role in reducing systematic, operational and counterparty risk for hedge funds and institutional investors," said Richard Baker, president and CEO for the managed funds Association.

"Our derivatives markets are playing important roles in helping organizations manage commercial risks, gain access to financing and effectively deploy capital. Discussions that today's help market participants and policy-makers both considers the potential for unintended consequences which we all aspire to have markets that are liquid and safe, providing a level playing field for all participants, and supported by prudent regulation, "said John Gidman of Loomis Sayles & Company and Chairman of the Association of institutional investors.

The Conference's keynote address was given by Senator Debbie Stabenow (D-MI), Chairman of the u.s. Senate Committee on agriculture, nutrition and forestry. The Committee is responsible to verify the implementation of the Dodd-Frank and, in particular, title VII, which renews the framework for the over-the-counter (OTC) derivatives market.

Congressman Jim Himes (D-CT), a member of the House Committee on financial services, including comments delivered during Forum and participated in a Q&A session with the audience.

In addition, the event featured two panel discussions that included representatives from the laws, regulations and administrative staffs in charge of the Dodd-Frank, as well as leading representatives from asset managers, hedge funds, Government sponsored entities and corporate end users from trading, hedging, risk management, legal and compliance and operational areas. The panels focused on how
Before and after trade rules as a result of new trading and clearing rules affect liquidity and risk of inadvertent disclosure. Companies manage changes in security and the default for both centrally cleared and bilateral derivatives.

Openness to mitigate systemic risk

During his initial comments reinforced Bodson that the key to mitigating systemic risk in the swaps market lies in giving regulators open access to extensive market information. He noted the importance of having all underlying position data into a single, central swaps data repository (SDR) to ensure that all corporate positions can be seen from a central point of vantage.

Bodson drew attention to the role of DTCC's Trade Information Warehouse (TUI) played in increasing transparency in the default credit swaps (CDS) market during the economic crisis. The location of centralized database and its users cover all the major OTC derivatives dealers and more than 1,800 companies that buy-side and other market participants in more than 50 countries. It has around 2,3 million contract with a gross notional value of $ 29 trillion.

Bodson also stressed that the objective of transparency across the entire OTC derivatmarknaden will require significant cooperation between stakeholders and regulators. He added that a critical variable in TUI's success was that DTCC is not a traditional commercial entity, but rather an industry-regulated utilities, with buy-side firms, companies that sell-side and self-regulatory bodies which the interested parties.

-It was important for all parties to commercial interests have been removed from which all sides agree is — and should continue to be – mainly a regulatory and supervisory authorities support function, "said Bodson.

About DTCC

DTCC, through its subsidiary, clearance, settlement and information services for equities, corporate and municipal bonds, Government and mortgage-backed securities, money market instruments and over-the-counter derivatives. DTCC is also a leading processor of mutual funds and insurance transactions, funds and carriers with their distribution networks. DTCCS depository provides custody and Asset Servicing for more than 3.6 million securities from the United States and 121 other countries and territories, valued at US $ 36.5 billion. 2010 Fast DTCC almost US $ 1,66 quadrillion in securities transactions. DTCC has operating facilities and data centers in multiple locations in the United States and abroad. For more information, visit www.dtcc.com.

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ISDA: SEF rules should provide greater freedom of choice, access and liquidity of OTC derivative market participants

ISDA: SEF rules should provide greater freedom of choice, access and liquidity of OTC derivatives market ISDAactors®
ISDA – INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
PRESS RELEASES

For immediate release, Tuesday, March 29, 2011
For more Information, please contact:
Deirdre Leahy, ISDA New York, + 1 212-901-6021, dleahy@isda.org
Rebecca O'Neill, ISDA London, + 44 203 088 c(1998) 3586, roneill@isda.org
Donna Chan, ISDA Hong Kong, + 852 2200 5906, dchan@isda.org

ISDA: SEF rules should provide more choice, asset and cash to the OTC derivative market participants

NEW YORK, on Tuesday 29 March 2011 – in an article published today, the International Swaps and Derivatives Association, Inc. (ISDA) describes his view of the role, impact and optimum structure for Swap execution facilities (SEFs *) in the over-the-counter (OTC) derivatives markets worldwide.

SEF fundamentals
ISDA think SEFs can play a positive role in the OTC derivatives market by strengthening their infrastructure, helping prevent insider trading and other market abuses, and increasing transparency and access for smaller participants. To achieve this potential and become an effective marketplace, need to offer derivatives SEFs users general election in the trade of at very low cost. SEFs to structure, including:

Offer maximum choices in trade execution for market players. Provide pre-and post-trade transparency while liquidity. Have reasonable, tailor-made and product specific trade group exception which reflects the risk of a transaction instead of a "one size fits all" approach.Grant access to a wide range of qualified entrants. Access rules should be objective and applied impartially. Be flexible enough to allow business models evolve over time. Product needed to be sold in the SEFs should be limited to liquid, mature products. Rules should not only be imported from other, completely different markets but should take into account liquidity, average trade size and average trade frequency of derivatives and the relative sophistication of the market players.

It is also important that individuals are not discriminated against by central SEFs Clearing organizations in terms of access and pricing.

* SEFs is a type of trading system, as defined in the United States by Dodd-Frank Act (DFA). The law requires derivatives subject to mandatory Purge trade on them, provided that such derivatives are made available for trading by the SEF.

Financial market structures and trade
In the paper noted the ISDA also the significant differences between the various segments of financial markets and how trade has developed in these. Traded futures markets are characterised by a broad spectrum of trade customers (including retail) margin requirements for a small number of highly standardized contracts in relatively small quantities. As a result, the liquidity situation of listed equities markets relatively continuous nature.

The number of potential buyers and sellers of over-the-counter derivatives markets, however, is relatively small. Active participants are sophisticated institutions that expand very competitive prices from multiple resellers. Trade consists of a wide range of less standardised products. Lines are usually much larger and less frequent. Liquidity is highly variable and depends very much on a distributor that prices for clients.

Various structures have also arisen in other market segments. This includes the trading of US Treasuries, undoubtedly one of the most liquid financial instruments. A large part of the trade in so-called "on-the-run treasuries, the most recent and most liquid, carried out on electronic trading platforms. Much of the beings in the older "off-the-run Treasuries are still being made via wholesale brokers and directly between dealers. There is no requirement that all trade entirely on electronic platforms.

Review of current regulatory proposals
ISDA believes that regulatory proposals in SEFs for mandatory use of derivative trading should be based on the core principles in the paper and the structure of OTC derivatives. The Association proposes in his paper, several areas for improvement:

To determine if a product which derivatives are available for trading by an SEF: The CFTC proposes to delegate this task to the SEF, and further suggest that if a SEF has made such an assessment, all would be required to treat the SEFs swap made available for trading.

The proposed rule does not specify, but no specific criteria for determining if a product which the derivatives liquidity for trading. CFTC should be specified that a contract subject to mandatory clearing does not automatically make it available to the trade and that the agreement must also meet the minimum liquidity requirements and standardisation.

The proposed rule also creates a misalignment of interest in this SEFs will have all the incentive to declare a product available for emissions trading to capture market share. In addition, if a product trade very rarely and each trade is conducted is known to the entire market as a result of the SEF, the participants to be very careful with positions. The result will be less liquidity and inferior prices for users. To eliminate this conflict and its negative consequences, should the CFTC do "available to trade" determination-public notice and comment.

Requires the SEFS either books or request for quote (RFQ) facility. ISDAS paper argues that this requirement is an unnecessarily narrow interpretation of the DFA. It is difficult to see the advantage of requiring only two types of holdings to qualify as SEFs when other types of plants can be easy to achieve the objectives of the DFA.

CFTC further States that a participant who uses an RFQ must send the request to a minimum of five participants. This seems to be another example where the CFTC is more precise and restrictive than it need be. DFA States that players must only have the ability to accept multiple bids or offers-not that they are obliged to request them.

Call for bids or offers from five dealers can make retailers reluctant to aggressively price entry which at least four other market actors are aware of their winning position. There may be other swaps that represent breeds for confidential transactions and should not be presented to five dealers. The requirement of five retailers limit how participants working in markets where it is not clear purposes. The requirement is bound to reduce liquidity.

About ISDA
ISDA, representing the participants in the privately negotiated derivatives, is one of the world's largest global financial organizations as measured by the number of member companies. ISDA was chartered in 1985 and currently has over 800 member institutions from 55 countries on six continents. These members include most of the world's major institutions such as the private negotiated derivatives, like many businesses, governmental entities and other end-users based on OTC derivatives to manage efficiently financial market risks with their economic core activities. Information about the ISDA and its activities, visit the Association's website: www.isda.org.

ISDA ® is a registered trademark of the international swaps and Derivatives Association, Inc.

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