Comment Letter to the CFTC on Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants

February 28, 2011

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Topics: Commodity Futures Trading Commission CFTC, confirmation, portfolio reconciliation, portfolio compression requirements, swap dealers, major swap participants, SDs, MSPs, operational abilities, market participants, post-trade exercises, mandated timeframes, Counterparty, trade execution, SEC, Securities and Exchange Commission, valuation data, bilateral portfolio compression exercise, multilateral portfolio compression exercises, swap markets, pre-trade draft acknowledgement requirement, customized swaps, heavily negotiated swaps, time-sensitive swaps, hedging risk, limiting parties, volatility, bid spreads, offer spreads, over-the-counter derivatives, legal risks, rights, trade acknowledgment, consistent timing, confirmation periods, financial entities, pension plans, private funds, insurance companies, banks, swap portfolio trade confirmation, electronic processing, calendar day, financial entity, trade capture system, electronic matching platforms, electronic matching process, complex swap, life cycle events, timing requirements, novation, modification, partial termination, dividend payment, merger, market disruption, compliance period, clearance, exchange execution, clearing satisfying requirements, Designated Contract Market, DCM, Swap Execution Facility, SEF, derivatives clearing organization, DCO, confirmation requirement, collateral management, counterparty risk, market risk, position level discrepancies, margin disputes, position level portfolio reconciliation, best practices, bilateral portfolio reconciliation exercise, multilateral portfolio reconciliation exercise, Valuation Disputes, valuation discrepancy, nominal value, dollar threshold, broader markets, collateral steering committee of the International Swaps and Derivatives Association Inc., ISDA, market-driven solution, portfolio compression rule, operational risk, risk mitigation benefits, multilateral compression, swaps portfolio, liquidity,
From: MFA, Stuart Kaswell

To:

David Stawick, CFTC
Gary Gensler, Michael Dunn, Bart Chilton, Jill Sommers, Scott O'Malia, (all) CFTC.

MFA submitted a comment letter to the CFTC on its proposal on Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants. In our letter, we ask the CFTC to further consider the implications of its proposed confirmation timing requirements and clarify the requirement to process transactions electronically. Also, we respectfully recommend that the CFTC require position level portfolio reconciliation only for market participants that do not regularly exchange collateral on their derivatives exposure and only upon the occurrence of a material margin dispute. Lastly, we ask the CFTC to reconsider imposition of portfolio compression requirements because we believe they are appropriate only for entities with swap portfolios large enough for a compression exercise to yield meaningful benefits that justify the substantial cost.

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