EXTERNAL MEETINGS: MEETING WITH TRUMARX DATA PARTNERS

TruMarx asked Staff several questions and had several comments related to the SEF and other NPRMs as follows: (i) Conflicts of Interest – TruMarx stated that the 20% limit on voting could be a barrier to entry for some startup SEFs because of the inability to attract enough investors.  TruMarx suggested that an exemption to this requirement be added to the rules based on the size of the SEF.  Staff responded that the conflicts of interest rulemaking team is aware of the issue and is researching it; (ii) Five participant requirement for request for quotes (RFQs) – TruMarx expressed concern with the requirement that market participants must transmit RFQs to at least 5 market participants.  TruMarx stated that in certain situations, a market participant may want the RFQ to go to only 1 participant.  In these situations, TruMarx stated that it will be difficult to determine the other 4 parties that will get the RFQ.  Staff suggested that TruMarx address this concern in a comment letter.  Staff also clarified that that this requirement only applies to transactions in swaps which are subject to the mandatory clearing requirement, are made available for trading on a SEF or DCM, and are not blocks, bespoke, illiquid, or subject to the end user exception.  Staff also noted that this requirement promotes price competition as well as open and transparent markets; (iii) Registration process – TruMarx inquired about the priority of review of SEF applications.  Staff responded that the Commission has not made any related determinations.  TruMarx commented that, under the registration process, hopefully new entrants seeking registration as SEFs that do not have any customers at the time of application may have their applications reviewed at the same time as all other applications; (iv) Open access regarding clearing – TruMarx asked Staff how open access requirements will be enforced and expressed concern that clearing houses will use access as a competitive advantage to pick winners in the marketplace.  Staff suggested that TruMarx make inquiries with the rulemaking~team(s) associated with matters related to clearing and submit comments accordingly; (v) 15 second rule in Section 37.9(b)(3) – TruMarx expressed concern that the 15 second rule in Section 37.9(b)(3) might present unintended consequences as applied to electronic swap markets.  In such circumstances, TruMarx noted that 15 seconds might be too long to expose an order to the market.