Supplementary Letter to the SEC in Response to its Proposed Antifraud Rule with Respect to Security-Based Swaps

March 29, 2011

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Topics: Securities and Exchange Commission SEC, Fraud, Manipulation, Deception, security-based swaps, anti-fraud rule, security based swaps market, cost-benefit analysis, honest markets, legitimate market activity, US OTC derivatives market, derivatives market, swaps market, legitimate market participation, purchase, sale, definitions, statutory authorization, security based swap anti-fraud rule, Securities Industry and Financial Markets Association, International Swaps and Derivatives Association Inc, The Loan Syndications and Trading Association, maturity date, context, bilateral contracts, novations, unwinds, assignments, execution, termination, assignment, exchange, transfer of rights/obligations, conveyance of rights/obligations, extinguishment of rights/obligations, total return swaps, credit default swaps, transferor, credit events, corporate actions, underlying shares, disruption events, termination events, collateral, systemic risk, interim payments, premium payments, spread payments, material non-public information, ISDA master agreement, clearing agreement, counterparty defaults, bankruptcy proceedings, Bankruptcy Code, automatic stay provisions, price discovery process, fair dealing, competition, capital formation, Financial Crisis Inquiry Commission, single name credit default swaps, non-index multi-name credit default swaps, equity linked forwards, equity-linked swaps, unallocated swaps, Bank of International Settlements, BIS, price discovery, primary participant, secondary participant, credit exposure, equity exposure, institutional leveraged loans, investment grade bonds, Financial Stability Board, primary debt issuance, investment grade loans, leveraged loans, LBO-related loans, corporate loans, high yield bonds, Loan market Review, Reuters, SEC v. Rotech, FCIC, CDS market, swap market, financial crisis, price efficiency, investor confidence, material dislocation,
From:

To:

Elizabeth Murphy, SEC
Mary Schapiro, Kathleen Casey, Elisse Walter, Luis Aguilar, Troy Paredes, Robert Cook, James Brigagliano, Brian Bussey (all SEC)

MFA submitted a letter to supplement our December 23, 2010 letter to the SEC in response to its proposed antifraud rule with respect to security-based swaps. We are supportive of an antifraud rule that achieves Congresss goal in enacting Section 763(g) of the Dodd-Frank Act and is appropriate to the needs of the security-based swaps market. We are concerned that the SECs proposed rule could disrupt and curtail major segments of the OTC derivatives markets and would interfere unduly with legitimate market activity. MFA offers recommendations on an antifraud rule with respect to security-based swaps that is consistent with the authorizing legislation and the way swaps are actually traded on the market in practice.

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