External Meetings: Remarks to ISDA Board Meeting

The Chairman opened the meeting by giving a description of the rulewriting process and how the Commission has organized itself around 30 teams. He then informed the attendees of the status of the process and what rules were yet to be considered. Following the update, the Chairman asked for questions.~ ~The first question concerned the possibility for a phase-in approach to the imposition of new rules coming out of Dodd-Frank. The potential phase-in would apply in particular to clearing, reporting, and trading rules. With respect to clearing rules, the questioner suggested that the phase-in might be based on the participants in the transaction (dealer to dealer; dealer to MSP; dealer to end-user) or perhaps based on the asset class of the instrument. With respect to reporting rules, the questioner suggested that the phase-in might occur first in cleared and exchange traded products, then in cleared but not exchange traded products and, then finally, in the bilateral products. Finally, the questioner suggested that trading requirements should be phased-in first for the most liquid instruments. The Chairman agreed to take this under advisement.~ ~The second question concerned the prudential regulation of clearinghouses. Specifically, the questioner asked about governance requirements with respect to membership on CCPs' risk committees. In addition, the questioner asked about membership eligibility standards and how that might affect the soundness of the clearinghouse. Finally, the questioner suggested that CCPs should have financial resource requirements that require them to be able to withstand the failure of their two largest members, not just their largest. The questioner endorsed membership criteria that would be scalable in relation to the potential members' capital and financial resources.~ ~The third set of questions concerned reporting requirements. The questioner was, in particular, concerned with how block trades would have to be reported. Specifically, he focused on the delay before reporting, to allow the dealer to hedge the trade, and the specificity of the reporting, so that other market participants would not be able to figure out another's position. The questioner suggested that this issue loomed largest in credit markets.~ ~The last set of questions concerned extra-territoriality. The questioner was interested in the degree to which the Commission would regulate the businesses of foreign entities that registered as swap dealers. He was concerned that conflicts might arise between the Commission and the foreign registrant's home country regulator.