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Comment Letter on CFTCs Proposed Rule Related to Requirements for Derivatives Clearing Organizations, Designated Contract Markets, and Swap Execution Facilities Regarding the Mitigation of Conflicts of Interest On November 17, MFA submitted a comment letter on the CFTCs proposed rule related to Requirements for Derivatives Clearing Organizations, Designated Contract Markets, and Swap Execution Facilities Regarding the Mitigation of Conflicts of Interest. In our letter, MFA recommended that the CFTC: (i) impose requirements that affirmatively limit the representation of clearing members on DCO, DCM and SEF Boards and committees to a percentage that is less than what would constitute control under those entities corporate constitutive documents; (ii) make it explicit that all members of the Board of a DCO, DCM or SEF have a fiduciary duty to such registered entity; (iii) require DCOs, DCMs and SEFs to provide to the CFTC detailed minutes of all Board, committee and subcommittee meetings as well as make publicly available all Board and committee charters, procedural rules and similar documents and the identities of Board and committee members subject; and (iv) craft ownership limitations for DCOs and structural governance limitations for DCMs and SEFs to ensure that clearing members or founding owners do not have sole control or an overriding profit sharing motivation to support one DCO, DCM or SEF at the expense of another.
November 17, 2010
Topics: derivatives clearing organizations designated contract markets, Mitigation of Conflicts of Interest, Market Reform, Designated Clearing Organizations, DCOs, Designated Contracts Markets, DCMs, swap execution facilities, SEFs, market integrity, swap contracts, Clearing and Trading, Product Expansion for Cleared Swaps, bilateral settlement, Clearable Swaps, DCO governance, margin requirements, Membership Access, clearing, execution, transparency, competition, Liquidity of Cleared Swaps, conflicts of interest, enumerated entities, Consolidated Assets, Board of Governors of the Federal Reserve System, Public Directors, fiduciary duty, Express Obligation, Risk Management Committee, First Alternative, Voting Equity, Voting Control, Alternative, aggregate limit, Proposed Rule's Waiver Procedure, Clearing Regime, Healthy Competition, inter alia, Anti-Competitive Incentives, Direct Liquidity, Securities and Exchange Commission, SEC, Rulemaking, Coordinate and Reconcile, swaps, security-based swaps, Contract Structure, Principle-to-Principle, close-out, transfer, netting, Third Party Services, Additional Fees, portability, Portability of a Portfolio, Complete Portfolio, straight-through processing, counterparty risk, Executing Dealer, four-way execution, anonymity, Intra-Day Execution, Suitability for Electronic Trading, Barriers to Electronic Trading, Execution Format,
To:
David A. Stawick, CFTCGary Gensler, Michael Dunn, Bart Chilton, Jill Sommers, Scott O'Malia (all CFTC)