External Meetings: Meeting with Barclays

On January 24, 2011, CFTC staff participated in a meeting with Barclays to discuss issues and questions related to the Real-time Public Reporting rulemaking.  The discussion covered the following areas:
 
Liquidity and Block Trades
Barclays stated that an unintended consequence of transparency is that there will be an increase in the price of liquidity to the producer or end-user, thus resulting in higher energy prices.  Liquidity would actually decrease in instances where large deals become known in the public domain – driving out “productive” liquidity and keeping “non-productive liquidity.  Further, they expressed concerns that there may be some data mining as a result of the increased transparency.   
 
Barclays felt that time delays should be scaled based on liquidity for a particular type of product.  They suggested that time delays for block trades should be based on the average daily trading volume per day based on the total volume for swaps and futures. 
 
Barclays felt that a one-year look-back for SDRs to calculate the appropriate minimum block size was too long and suggested a quarterly or semi-annual look-back period.
 
Barclays suggested that the Commission consider accommodations for certain markets.  They stated that they understand the need for transparency, but it also needs to be balanced with liquidity.
 
Barclays also commented that for the purposes of the multiple test for the block trade calculation, the least of the mean, median and mode is more appropriate than the greatest, since a couple of large trades could really skew the numbers otherwise. 
 
Anonymity
Stated that for some markets, the protections for anonymity in the proposed rule may not help the counterparties from being discovered.  Barclays stated that the mere knowledge of the existence of a product could reveal the parties to the swap.
 
Implementation Timeframe
Barclays suggested a phase-in based on type of market or asset class, beginning with cleared swaps and moving to uncleared swaps.  Phase-in should start with a more mature asset class (credit and interest rates).  In addition, they suggested that the Commission should consider a voluntary testing phase for real-time reporting. 
 
Interconnectivity
In addition, Barclays suggested standardization (national and international), such as the use of FpML. 
 
Other items discussed
Getting the data in the right forms and having those forms be consistent from the start is important.  With regard to price-forming continuation events, novations may have no price impact, as they are strictly involving ownership.  In situations where there are two of the same counterparty (e.g., MSP v. MSP), the Commission should assign the reporting responsibility to either the Buyer or the Seller, unless otherwise agreed, to eliminate confusion.