Comment Letter to the CFTC on its Proposed Rules on Risk Management Requirements for Derivatives Clearing Organizations

March 21, 2011

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Topics: $50 million upper limit antitrust considerations, Bank of America-Merrill Lynch, bilateral trades, capital requirements, CFTC, Chicago Board of Trade, cleared trade volumes, clearing member, clearinghouses, Columbia University, committee on payment and settlement systems and technical committee of the International Organization of Securities Commissions, Commodity Futures Trading Commission, competition, connectivity, counterparty credit assessment practices, CPSS-IOSCO standards, credit risk, creditworthiness, cross product margin, customer initial margin, DCM, DCO, DCO concentration risk, DCO margin methodologies, default management framework, derivatives clearing organizations, Designated Contract Market, differentiated margining, direct clearing members, direct clearing members' initial margin, diversity of market participants, effective date, electronic execution, eligibility standards, excess margin, executing counterparty, fair and open access, federal register, Federal Reserve Bank of New York, five-day liquidation horizon, futures, global banking crisis, greater market concentration, guaranty fund scaling methodologies, hedge fund industry, highly liquid instruments, initial margin, initial margin requirements, investment banks, ISDA, leverage ratio, mandatory central clearing, margin, margin calculation utility, margin calls, margin methodology, margin requirements, mark-to-market variations, market liquidity, market volatility, minimum capital requirements, net capital obligation, non-hedge positions, obligations, on-the-run 10 year interest rate swaps, participant eligibility, phase-in period, portfolio margining, product eligibility, product portfolio, risk exposure, risk management, Risk Management Requirements, risk-based methodologies, scaling requirements, SEC, Securities and Exchange Commission, SEF, standard two-way protocols, stress and default scenarios, Swap Execution Facility, swap portfolio, swap portfolio size, swaps, systemic risk mitigation, The Turner Review, threshold guaranty fund contribution, tiers, transaction volume, volatility,
From: MFA, Stuart Kaswell


David Stawick, CFTC.
Gary Gensler, Michael Dunn, Bart Chilton, Jill Sommers, Scott O'Malia, (all) CTFC.
Mary Schapiro, Kathleen Casey, Elisse Walter, Luis Aguilar, Troy Paredes, (all SEC)

MFA submitted a comment letter to the CFTC on its proposed rules on Risk Management Requirements for Derivatives Clearing Organizations. In our letter, with respect to the proposed Core Principle C rules, MFA supported the CFTCs mandate that DCO participation requirements be objective, risk-based, publicly disclosed and permit fair and open access. We requested that the CFTC require DCOs to provide highly standardized mechanisms for establishing connectivity with SEFs and any other permitted trading venues and mandate that the DCO keep the clearing acceptance process anonymous. With respect to the proposed Core Principle D rules, we urged the CFTC to retain flexibility with regard to the specific margin criteria. We also recommend that the CFTCs final rules mirror margin practices in other cleared markets where each DCO sets initial margin requirements for all cleared transactions and each clearing member determines additional margin necessary for individual customers.