EXTERNAL MEETINGS: MEETING WITH EVOLUTION MARKETS

On January 19, 2011, CFTC Staff met with representatives from Evolution Markets.  During the meeting, Evolution Markets asked Staff several questions and had several comments related to the SEF NPRM as follows: (i) Swaps made available for trading – Evolution Markets suggested other metrics for SEFs to consider when assessing whether a swap is available for trading, such as size of transactions, volume, and number of participants.  Staff noted these points and requested that Evolution Markets submit a comment letter; (ii) 15 second delay provision in Section 37.9(b)(3) – Evolution Markets believes that 15 seconds could be a lifetime in some markets and it seems more beneficial to the market to show the bid or offer immediately.  Staff requested that Evolution Markets submit a comment letter regarding this topic, including how this delay may affect the market; (iii) RFQ systems – Evolution Markets commented that for some markets it will not be feasible or efficient to transmit a request for quote to 5 market participants.  They noted, for example, that sometimes in the renewable energy credit market there may only be 4 participants.  They believe that this requirement could cause disruption in the marketplace.  Staff noted the concern and requested that Evolution Markets submit a comment letter; (iv) SEFs and smaller markets – Evolution Markets commented that there may be barriers to entry for those entities seeking to register as SEFs who propose to serve smaller markets.  They noted that it may be hard to make a business case for serving these smaller markets because of all the requirements imposed on SEFs.  Staff requested that Evolution Markets submit a comment letter regarding this topic; (v) Application process – Evolution Markets expressed concern that those entrants who seek to register as SEFs and cannot avail themselves of the temporary grandfather relief may be at a timing disadvantage in setting up their operations.  Evolution Markets believes that the application review process may take a long time so these entrants should also receive provisional authority to operate as SEFs or their applications should be reviewed first.