UNITED STATES OF AMERICA

 COMMODITY FUTURES TRADING COMMISSION

 SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

 ROUNDTABLE

 Washington, D.C.

 Wednesday, June 6, 2011
 2

 1 PARTICIPANTS:

 2 CFTC Staff:

 3 RICK SHILTS, Director

 Division of Market Oversight

 4

 IRINA LEONOVA

 5 Division of Market Oversight

 6 JON MARC BUFFA

 Division of Enforcement

 7

 JOHN ROGERS

 8 Chief Information Officer

 9 DAVID TAYLOR, Branch Chief

 Market Continuity

 10

 ANDREI KIRILENKO

 11

 BILL NICHOLS

 12 Office of Financial Research

 13 ANNE SCHUBERT

 Division of Market Oversight

 14

 NANCY DOYLE

 15 Assistant General Counsel

 Office of General Counsel

 16

 BRUCE FEKRAT

 17

 ALI HOSSEINI

 18

 REVA SPEAR ADRIANCE

 19

 MAURICE MELERA

 20

 GARY MARTINAITIS

 21

 JEFFREY STEINER

 22
 3

 1 PARTICIPANTS (CONT'D):

 2 TOM LEAHY

 3 GEORGE PULLEN

 4 Panel 1: Discussion about the existing systems of

 swap product classification and identification

 5 currently available:

 6 MICHAEL ATKIN, Managing Director

 Enterprise Data Management Council

 7

 KAREL ENGELEN

 8 Head of FPML International Swaps and

 Derivatives Association

 9

 JIM NORTHEY, Co-Founder

 10 LaSalle Technology Group, LLC

 11 ERIC COHEN

 XBRL International and XBRL U.S.

 12

 ANTHONY COATES

 13 Londata

 14 Panel 2: Coordination among various industry

 product classification and identification

 15 work-streams for the purpose of achieving a

 universal method to describe and classify swap

 16 products:

 17 RICHARD SOLEY

 Object Management Group

 18

 FRANK DEMARIA

 19 International Swaps and Derivatives

 Association

 20

 MATT SIMPSON

 21 CME Clearing

 22 ROBERT GREEN

 DTCC
 4

 1 PARTICIPANTS (CONT'D):

 2 KARLA McKENNA

 ISO

 3

 Panel 3: Implementation of a universal system of

 4 swap product classification and identification for

 the purpose of meeting various CFTC requirements:

 5

 ED DASSO

 6 NFA

 7 SUE COCHRAN

 Cargill

 8

 SIMON WINN

 9 BNP Paribas

 10 BRUCE TUPPER

 ICE Trust

 11

 NEIL CHINAI

 12 Barclays

 13 ROBERT GREEN

 DTCC

 14

 BRIAN OKUPSKI

 15 Markit

 16

 17

 18 * * * * *

 19

 20

 21

 22
 5

 1 P R O C E E D I N G S

 2 (1:02 p.m.)

 3 MR. SHILTS: Good afternoon, everyone.

 4 My name is Rick Shilts and I'm the director of the

 5 CFTC's Division of Market Oversight. I'm pleased

 6 to open this public roundtable to discuss product

 7 identifiers as they relate to our final rules that

 8 will be promulgated under Title 7 of the

 9 Dodd-Frank Act. We have a full agenda today that

 10 is designed to focus the discussion on the issues

 11 related to implementation of the data reporting

 12 rulemakings. The discussion's divided into three

 13 panels with a focus on technical aspects of swap

 14 product classification and identification.

 15 As you probably know, the Dodd-Frank Act

 16 brings over-the-counter derivatives under

 17 comprehensive regulation. Standardized

 18 derivatives will be traded on transparent trading

 19 platforms and cleared by regulated central

 20 counterparties. There will be increased

 21 transparency as information on swaps and

 22 security-based swaps will be available to
 6

 1 regulatory authorities and transaction data will

 2 be available to the public on a real- time basis.

 3 The overarching goal is to reduce risk in our

 4 economy, which will greatly benefit the American

 5 public.

 6 The CFTC completed the proposal phase of

 7 our rule writing to implement the Dodd-Frank Act.

 8 To facilitate comment on the regulatory scheme as

 9 a whole, the CFTC reopened or extended the comment

 10 period for most of our Dodd-Frank proposed rules

 11 for an additional 30 days. That additional

 12 comment period, which ended on June 2nd, gave the

 13 public an additional comment period to review the

 14 whole mosaic of our CFTC proposed rules. In

 15 addition, last month CFTC, along with the SEC,

 16 conducted a series of roundtables to hear the

 17 opinions and advice of persons with respect to the

 18 sequencing of implementation of various aspects of

 19 the legislation.

 20 Today we hope to discuss a number of

 21 issues related to the technical aspects of swap

 22 product classification and identification. We
 7

 1 want to focus the roundtable discussions in three

 2 key areas. The first panel will review the

 3 systems of swap product classification and

 4 identification that are currently available. We

 5 would like to discuss how swap data is currently

 6 represented, whether by asset class type of

 7 participant or something else. What are the

 8 industry work-streams to standardize swap data

 9 representation and whether swap product

 10 classification approaches are different with

 11 respect to standardized versus non-standardized

 12 swaps?

 13 Our second panel will address

 14 coordination among various industry product

 15 classification and identification work-streams for

 16 the purpose of achieving a universal method to

 17 describe and classify swap products. We'd like to

 18 learn about the current status of industry

 19 coordination in developing a standardized swap

 20 data classification and identification system, how

 21 swap data classification and identification

 22 initiatives interact with cash market data
 8

 1 classification and what are the industry

 2 objectives in the area of swap data classification

 3 and identification?

 4 Our final third panel will focus on

 5 implementation of a universal system of swap

 6 product classification and identification for the

 7 purpose of meeting various requirements resulting

 8 from the Dodd-Frank Act. We have a team of

 9 representatives working on regulatory reporting,

 10 real-time reporting, swap execution facilities,

 11 large swap data reports, and position limit

 12 rulemakings to participate in this discussion.

 13 Before we begin, I'd like to thank the

 14 many distinguished panelists who have taken time

 15 out of their busy schedules and have agreed to

 16 participate on these panels to discuss these

 17 subjects. I'd also like to thank the staff of the

 18 CFTC for their work in planning today's

 19 roundtable. We have been diligently reading and

 20 analyzing the numerous comments we have received

 21 in order to develop final rules that are

 22 consistent with the legislation, that take into
 9

 1 account the issues and cost to be born by market

 2 participants to come into compliance. We look

 3 forward to hearing the thoughts of the

 4 participants on the panels today to further this

 5 goal.

 6 For the record, I would like to note

 7 that all statements and opinions that may be

 8 expressed in all questions asked by CFTC staff are

 9 those of the staff and do not necessarily

 10 represent the views of any commissioner or the

 11 Commission collectively. And now for a few

 12 housekeeping items.

 13 Please note that this meeting is being

 14 recorded and a transcript will be made available

 15 to the public. The microphones are in front of

 16 you; press the button and you see the red light.

 17 This means you can talk. Please speak directly

 18 into the mic. When you finish, please press the

 19 button again to turn off the microphone. And

 20 finally, we would ask that you please restrain

 21 from using BlackBerrys or cell phones near the

 22 mics because they have been known to cause
 10

 1 interference with our audio system.

 2 As I've noted, we have scheduled three

 3 panels. The first panel starts now at 1:00 and

 4 ends at 2:00. Our second panel will run from 2:15

 5 to 3:15, and our third panel is scheduled to run

 6 from 3:30 to 5:00. So now I'd like to get started

 7 with the first panel.

 8 Before we begin the discussion, I'd like

 9 to go around the table and have everyone introduce

 10 themselves and identify who they represent, and

 11 I'll start out. Again, I'm Rick Shilts, I'm the

 12 director of the Division of Market Oversight here

 13 at the CFTC.

 14 MR. ROGERS: I'm John Rogers. I'm the

 15 CIO at the CFTC.

 16 MR. TAYLOR: David Taylor, the branch

 17 chief for market continuity at CFTC.

 18 MS. LEONOVA: Irina Leonova, Division of

 19 Market Oversight at CFTC.

 20 MR. NICHOLS: Bill Nichols, Office of

 21 Financial Research, Treasury -- Information

 22 Standards.
 11

 1 MS. SCHUBERT: Ann Schubert, economist

 2 in the Division of Market Oversight.

 3 MS. DOYLE: Nancy Doyle, assistant

 4 general counsel of the Office of General Counsel.

 5 MR. ATKIN: Mike Atkin, managing

 6 director of the Enterprise Data Management

 7 Council.

 8 MR. ENGELEN: Karel Engelen, from ISDA

 9 representing FPML.

 10 MR. NORTHEY: Jim Northey, representing

 11 the Fixed Protocol Limited as America's region

 12 co-chair, and also chair of the U.S. ASC X.9 XD

 13 Committee on Financial Services. Thanks.

 14 MR. COHEN: And my name is Eric Cohen

 15 and I'm here today representing XBRL International

 16 and XBRL U.S.

 17 MR. BUFFA: And I'm Jon Marc Buffa, a

 18 senior trial attorney in the Division of

 19 Enforcement.

 20 MR. SHILTS: Okay. And again, thanks to

 21 all for participating. As I mentioned earlier, in

 22 Panel 1 we'd like to review the existing systems
 12

 1 of swap product classification and identification,

 2 so I guess I'll kick it off with the first

 3 question.

 4 How is our swap data currently being

 5 represented, in terms of different formats and

 6 standards, and how does it vary by asset class or

 7 participant or any other criterion? Anyone want

 8 to start?

 9 MR. ENGELEN: I'm happy to start.

 10 MR. SHILTS: Oh, and Jim, if you would

 11 --

 12 MR. NORTHEY: Yeah. Okay.

 13 MR. ENGELEN: So FPMLs and

 14 institute-driven open market standard that

 15 development started about 10 years ago and it's a

 16 standard that really focuses on OTC derivatives.

 17 So we at FPML, we cover the different asset

 18 classes, rates, credit, commodities, FX, and

 19 equity. And what essentially we're doing is

 20 providing a structured XML representation from the

 21 data, mainly, that you have for OTC derivatives,

 22 if you look at it from a confirmation perspective.
 13

 1 Now, from a confirmation perspective we

 2 extended into other areas, such as pricing and

 3 risk. And a very important area, for example, for

 4 the moment is the work that we're doing on

 5 reporting, representing the regulatory reporting

 6 needs. How can we do that for OTC derivatives?

 7 FPML as a standard, it's obviously a

 8 messaging standard, but important as well because

 9 of the nature of OTC derivatives. A lot of work

 10 has been done to represent the different

 11 individual instruments. And as such, there the

 12 standard describes all these different

 13 instruments, either through the representation in

 14 the FPML schemer or through the different schemes

 15 that we have. And the schemer and the schemes

 16 together, they actually can be used to -- or you

 17 can look at them as a taxonomy and they can be

 18 used to query data around OTC derivatives.

 19 One other very important point is that

 20 in OTC derivatives the underlying legal

 21 documentation is very important because that's

 22 basically what drives the contracts. And the XML
 14

 1 standards, FPML has been developed, really,

 2 starting from those legal definitions. So the way

 3 we work is whenever there are new legal

 4 definitions that get defined, we can develop XML

 5 representation within FPML and parallel, so

 6 there's this very close link between the two.

 7 So, the result of that is that --

 8 certainly for the commonly traded OTC derivatives

 9 -- you have these representations in FPML which

 10 really are a representation of the full products

 11 and, as a standard, it is widely used within the

 12 industry, certainly within the areas of rates and

 13 credits, and particularly confirmations. A lot of

 14 the trades are represented in FPML in central

 15 infrastructures or within the systems internally

 16 of the different players.

 17 MR. ATKIN: We take a little bit of a

 18 different approach. We focus on defining the

 19 common language associated with all financial

 20 instruments. All of their facts about the

 21 instruments and all of the relationships

 22 associated with the instruments, we'll call that
 15

 1 an ontology or semantic structure about the legal

 2 contract itself. So we have -- we start with a

 3 contract, we define all of the instruments that

 4 exist based on that contract, define the facts

 5 about those instruments, the relationships of

 6 those instruments to make sure that there is a

 7 formal and factual representation of the reality

 8 of that derivative. And then from that

 9 elementized structure you can then mix and match

 10 and understand exactly what it is that you're

 11 looking at and how it behaves.

 12 MR. NORTHEY: The fixed protocol,

 13 actually, it's often confused with just a -- it's

 14 more than one thing. It's often confused with

 15 just a messaging protocol and transmission control

 16 protocol. And while the fixed session layer is

 17 very important in terms of reliable communication

 18 and many millions of messages, we tend to focus,

 19 ourselves, on the business processes that sit

 20 above the trading. And the scope of a fix is

 21 actually pre-trade, trade, and post- trade. We

 22 view that we actually deliver the information
 16

 1 within those business processes, so we've modeled

 2 -- primarily listed instruments being equities,

 3 fixed-income FX, and listed derivatives.

 4 And we stopped -- we go up to

 5 pre-settlement. And when we go into settlement,

 6 there we start to move into the peer ISO processes

 7 that are best defined by ISO 15-022, but there's a

 8 larger framework within many of the organizations

 9 up here work and participate in. And that's the

 10 ISO 20-022 initiative, which is both a messaging

 11 model that expands the entire range of financial

 12 services, not just the parts that are covered by

 13 CFTC. It covers payments, it covers trading, and

 14 yet it's very comprehensive. And within ISO

 15 20-022 there's multiple components and layers, if

 16 you will.

 17 There's messaging, yes, but there's an

 18 important business model that continues to evolve

 19 and we've spent the last 15 years evolving and

 20 improving that business model. The main part of

 21 that business model that describes financial

 22 instruments was originally -- the work was
 17

 1 originally started by FISD with the MDDL standard.

 2 That work was then evolved into what was called

 3 the FIBM standard. And the FIBM work was a

 4 separate ISO standard that was moved fully under

 5 ISO 20-022.

 6 Just recently, with version 1.5 of ISO

 7 20-022 we significantly re-factored that model and

 8 I think it's an excellent core and a starting

 9 place for referencing financial instruments. And

 10 there's a parallel effort going on in Europe led

 11 by the ECB called Target 2 Securities, and I think

 12 probably one of the most sophisticated and robust

 13 and complete models that exist now are the one

 14 that the ECB has. And we're hoping that parts of

 15 the ECB model that aren't in there already will

 16 find themselves in ISO 20-022.

 17 We've been going through a reverse

 18 engineering process of making sure all of the

 19 fixed protocols represented in the ISO 20-022

 20 model -- and I have to say, there were some

 21 technology issues that were holding us back from

 22 version 1.0 that are no longer there in version
 18

 1 1.5. I'm very happy to say, working with some key

 2 experts, including experts from the Object

 3 Management Group who participated in ISO 20-022,

 4 we now have that model on a very industry standard

 5 open platform that can be shared and used widely.

 6 I think it's enough to the point that I

 7 can actually work with my friend Karel here to

 8 actually now start to pull in the FPML piece of

 9 this work. Two years ago, prior to version 1.5 of

 10 that standard, I was actively -- FIX gets involved

 11 with firms that trade multi-asset class, including

 12 OTC derivatives. We would have actually

 13 encouraged them not to sort of integrate. But I

 14 think we're now at a point where we'd like to

 15 integrate further the OTC derivatives into the ISO

 16 20-022 model.

 17 And it's important because the

 18 technologies there is stuff that today can start

 19 to actually disseminate and distribute and pull

 20 together information. So, you have to look at

 21 standards more evolutionary, not as an endpoint.

 22 And you have to look at compliances, not a binary
 19

 1 yes or no thing. It's a matter of degrees. And

 2 is it better to have six exchanges agreed to

 3 mostly adopt, with a few differences, say, FIX, or

 4 should we say you have to adopt that exactly right

 5 or not at all? I think you have to look at it

 6 more and I would say in the degree of adoption and

 7 commonalities to reduce the overall cost to the

 8 industry and also promote time to market issues.

 9 And so, you know, FIX has sort of been

 10 the pragmatic non-ideological perspective and as

 11 that we've gained a lot of adoption by being a

 12 little more practical with our approach. But

 13 we've found a lot of benefits and we've invested

 14 quite a bit of member's money in this ISO 20-022

 15 model and I think it's where most of the focus

 16 needs to be going forward.

 17 With that said, the next important piece

 18 of this work, which we weren't prepared to adopt

 19 because the technology wasn't mature enough, when

 20 we looked at doing version 1.5 of the standard, we

 21 spent many, many months debating the use of

 22 semantic modeling versus non-semantic modeling.
 20

 1 And we really were looking for maybe an OWL or an

 2 RDF -- this is technical terms -- looking to adopt

 3 that because we saw that's the ultimate

 4 evolutionary step towards what you do for

 5 definitions.

 6 And right now, as of 2011, and with the

 7 completion of version 1.5, we have a platform.

 8 And there's been a working group called ISO TC-68.

 9 For those of you who don't spend all your time,

 10 like I do, dealing with standards politics

 11 (inaudible), ISO TC-68 is the International

 12 Standards Committee, responsible for all financial

 13 services standards. And it runs the gamut from

 14 just trade invoicing through trading securities,

 15 through all bank payment processes. They're all

 16 covered by ISO TC-68. ISO TC-68 Working Group 5,

 17 which is a startup, is given the mandate of adding

 18 a semantics layer onto the model, and we view that

 19 that's the important next step in our evolutionary

 20 process.

 21 Now, if we were to drop one of these

 22 things -- a completed semantics layer -- onto
 21

 1 practitioners in the industries, exchanges,

 2 clearinghouses, and banks, they would look at you

 3 and they would wonder what they were supposed to

 4 do with it right now. However, that doesn't mean

 5 that we shouldn't positively be building it and

 6 working towards that. And the other thing about

 7 that is the amount of time you spend working on a

 8 single definition, it takes a lot of time. If you

 9 have to put all of that time in front of actually

 10 delivering information and providing transparency

 11 and an inventorying of what instruments are out

 12 there in front of things, I think you're going to

 13 end up losing a considerable length of time.

 14 What we need to do is take existing

 15 mature standards that are already implemented --

 16 the infrastructure's there -- start to capture the

 17 information while we're working on this extremely

 18 important initiative of providing a clear

 19 semantics model. We need to also look for what

 20 artifacts exist now that we can rely on right now

 21 that are also very definitive. One of those, for

 22 instance, is the FPML Dictionary of Terms. It's
 22

 1 well defined and it integrates inter-master

 2 agreements with FPML messaging, which interacts

 3 with the fixed messaging that goes on right now,

 4 and that can serve as a base as we're building

 5 this platform. I think we have to look at what

 6 purpose are we trying to address right now, today,

 7 and look at what technologies are readily

 8 available because right now, you know, there are

 9 more CDS's now, I think, in the marketplace than

 10 there were in 2008. And I think there's a time to

 11 market issue that we have to do and we don't want

 12 to put any important technological innovation in

 13 front of capturing this information, warehousing

 14 it, and starting to analyze it.

 15 Now, when you start to talk about

 16 analyzing, it seems to me that when you look at

 17 large data set analysis, complex systems theory,

 18 almost every academic discipline is now relying on

 19 building up their own ontologies to provide pure

 20 native research. And we need that research done

 21 and we need that ontology built. The question is

 22 -- it's not a matter of if, the question is when?
 23

 1 And then, what are we looking at now? What is the

 2 purpose we're trying to fulfill at this moment in

 3 time?

 4 And so, I think we have to say, what is

 5 your timeframe, what's the goal? And what is the

 6 most efficient way for that industry to get that

 7 information there? And because of its nature, I

 8 just want to make sure -- as we've done with the

 9 CFTC in the past, with large trader reporting and

 10 positions reporting, you know, we stand ready to

 11 work very closely with you to make sure this data

 12 gets delivered so that you can start to summarize

 13 it.

 14 And we've also -- it may be a surprise

 15 to many people because of the wide adoption of FIX

 16 in the (inaudible) classes, but we don't approach

 17 standards as something that sold and we don't have

 18 an expansive perspective on this thing. In fact,

 19 one of the best things that happened to FIX over

 20 the last year is that we had a couple major,

 21 dominant members that were pushing us heavily into

 22 OCC derivatives. And right now you can represent
 24

 1 CDS's, and you can represent IRS's in FIX, but,

 2 you know, our view is that, wait, we would prefer

 3 to work with FPML/ISDA. And we've found ways to

 4 get our messaging to work together so that any FIX

 5 message can carry an FPML payload right now today.

 6 So you could send a stream of trade

 7 reports from, let's say, an exchange into the CFTC

 8 for whatever reporting purposes and some of the

 9 messages could be FIXML for listed derivatives,

 10 very simple, simple basic (inaudible), and it

 11 could also carry FPML payload when it's

 12 appropriate to do that. If we follow the approach

 13 specified by ISDA of having a warehouse and a

 14 standard product identifier then you could do even

 15 more because we can carry that as part of our

 16 business messages that already exist to

 17 disseminate reference data information and also

 18 to, even, report trades. Do all the pre-trade

 19 activity referencing FPML objects, but so --

 20 MS. LEONOVA: Thank you, Jim.

 21 MR. NORTHEY: Thank you.

 22 MS. LEONOVA: I want to make sure we
 25

 1 have time to touch base on XBRL.

 2 MR. NORTHEY: Okay, sure. Okay, right.

 3 MS. LEONOVA: And Eric is falling

 4 asleep, so we need to (inaudible) while he's

 5 awake.

 6 MR. NORTHEY: Sorry. Thank you, Irina.

 7 Okay.

 8 MR. ENGELEN: Thank you. XBRL is best

 9 known as the standard that's been embraced and

 10 adopted by the Security and Exchange Commission,

 11 as well as dozens of other world regulators for

 12 taking financial statements from companies around

 13 the world. It did begin with a much broader

 14 vision and that vision still remains that someday

 15 a piece of business information, once it hits any

 16 computer anywhere, never needs to be retyped as it

 17 moves into an organization through its trading

 18 partners, as it moves within that organization for

 19 operations and management purposes, as it's

 20 prepared for sharing with the outside, and as it

 21 moves outside and is shared, for example, with a

 22 regulator making it public again.
 26

 1 As a market collaborative XBRL has been

 2 developing specifications to integrate and improve

 3 processes and business reporting supply chain

 4 based on XML, base specification. Because it is

 5 from first transaction to end reporting we also

 6 try to know our place. We're not trying to

 7 compete with the transaction and purpose specific

 8 world of transactions. We try to pick up with a

 9 generic and holistic way of representing

 10 information from many different transactional

 11 purposes, express them in one face throughout in

 12 the RFP system and then be able to go to the

 13 purpose specific end reporting taxonomies.

 14 So XBRL is a syntax, a way to represent

 15 the code books that companies are expected to

 16 report against; a way to extend those reporting

 17 concepts, so companies can tell their own story.

 18 It is the marked collaborative with organizations

 19 around the world and it's the code sets that come

 20 together.

 21 As we speak about your question, in

 22 particular, who were some of the standard setters
 27

 1 who are saying what type of information is needed

 2 for swaps and similar information, one of the

 3 parties that has embraced XBRL for that purpose is

 4 the Financial Accounting Standards Board. The

 5 FASB is the developer of the 2011 U.S. GAAP

 6 financial reporting taxonomy. And in that

 7 taxonomy you'll find dozens of individual facts

 8 that work together so that companies and their

 9 financial statements, as they express their

 10 holdings in more summary on the face of the

 11 financials and then in tremendous detail in the

 12 notes, can express that information in a lot of

 13 detail.

 14 The SEC has mandated the use of XBRL for

 15 financial reports. We're in the third year --

 16 starting June 15th -- of the three year roll-out

 17 where the first year -- starting June 15, 2009 --

 18 the largest 500 companies in terms of global float

 19 began reporting the face of their financials in

 20 detail, then notes and summary. The second year

 21 those 500 companies then began to do the exact

 22 kind of data that we're talking about today in
 28

 1 complete detail, every number, every fact that

 2 appears in the notes of the financial statement.

 3 I looked at a tool that's provided by

 4 XBRL U.S. This morning. It's called the C Suite,

 5 available at csuite.xbrlus. I found that of the

 6 1,700 companies that have reported approximately

 7 8,000 filings to date, there are approximately

 8 3,500 classes of facts directly related to swaps

 9 that have been reported in tremendous detail. And

 10 by "classes," I mean some of the attributes that

 11 you're talking about, with the basic line items

 12 and then -- I apologize that I'll use some

 13 technical or pseudo-technical words here -- axis

 14 and domain members to do the different slicing and

 15 dicing that I know that your organization needs

 16 and that the market needs to be able to identify

 17 and classify the information.

 18 Now, the FASB and its rules and the

 19 codification 815 is among the rules that FASB puts

 20 out. In the international world IFRS, IAS 39 is

 21 modified by IFRS 9, is how they do that type of

 22 reporting. They give some broad strokes of how
 29

 1 companies have to report in those 3,500 some odd

 2 facts. You can see where companies have chosen to

 3 tell their own story by providing different types

 4 of attributes, whether it's the dates that

 5 different interest items may come through or the

 6 type of commodity that the swap relates to. So

 7 you'll see both the combination of what's required

 8 from the FASB that the SEC requires in their

 9 reporting and what the companies are choosing

 10 through tools like the C Suite and others, many of

 11 which are freely available. It's very easy to

 12 analyze this information and groups that are

 13 looking to analyze the types of attributes can use

 14 this as a very rich storehouse for the kind of

 15 information that's available.

 16 I just chose one of the companies -- the

 17 very first one on the list -- and one company had

 18 disclosed approximately 550 individual swap items

 19 on one of their detailed financial statements.

 20 So, again, the direct answer is that the financial

 21 regulators are requiring it, the companies are

 22 currently doing it, XBRL is a format that is
 30

 1 currently mandated around the world for this

 2 reporting, and so we're already seeing in this

 3 first of three years that the detail was required

 4 where tremendous amount of swap information is

 5 being made available and can be used to analyze to

 6 come up with further answers for your questions.

 7 MR. ATKIN: Maybe we can take a shot at

 8 unraveling some of this stuff, so that we can

 9 divide it up into its component parts. You,

 10 fundamentally, have two or three challenges. The

 11 first challenge is, can you define this derivative

 12 contract? And you defined it based on the

 13 contract with a common language, so that everybody

 14 understands all of the construction of the

 15 derivative: What's its characteristics, what's

 16 its structure, who's involved, dates, and payment

 17 rates, and schedules, and things of that nature.

 18 And we'll call that the semantic layer.

 19 The second thing you do is you describe

 20 it in a computer-readable format. You know, you

 21 use XML and there are various flavors of XML that

 22 have sprung up independently, all of them sitting
 31

 1 around the table. And then you communicate it to

 2 lots of systems so it can be consumed and fed into

 3 their processes. All of these things are

 4 complementary. Up until now we've all been

 5 working in our silos to build the language, the

 6 schemas, and the protocols as part of one thing.

 7 We are now mature enough that we are separating

 8 these activities so that you can have schemas to

 9 communicate, semantics to define, and, in fact,

 10 all of these things work together.

 11 I think the good news moving forward is

 12 that all of these activities are now working

 13 together. The industry is embracing the

 14 importance of precisely defining the instruments

 15 based on its attributes and then being able to

 16 communicate it in a way that can be processed by

 17 the firms. So I think what you're seeing now is

 18 the same activities that were described now being

 19 separated into its various components that we can

 20 assemble back together, which gives us a lot more

 21 flexibility in what we're doing in terms of

 22 analysis, et cetera.
 32

 1 MS. LEONOVA: When you say industry is

 2 working together on this issue, do you have any

 3 exact examples of this working together?

 4 MR. ATKIN: I was the founder of MDDL.

 5 MDDL was what Jim referred to that FIX was working

 6 with. We're now doing a proof of concept with

 7 ISDA on OTC contracts to make sure that we can

 8 define their contract semantically and deliver it

 9 via FPML schemas. So when I say working together,

 10 all of these standards participants are all

 11 working together and are participating in the same

 12 conversations.

 13 MR. NORTHEY: I can also --

 14 unfortunately, probably the leading advocate of

 15 this approach isn't here because of train

 16 problems, so I'm going to put on another hat and

 17 I'm going to be a proxy for the ISO TC-68 chair,

 18 who works tirelessly to try to integrate and get

 19 everybody working in the same direction, and

 20 that's Karla McKenna from Citibank.

 21 And we, based on some feedback from some

 22 very, very high-level bank executives a few years
 33

 1 back, created something called the Investment

 2 Roadmap. And the Investment Roadmap is a artifact

 3 from an organization that we've demanded not be an

 4 organization. There's something called the

 5 Standards Coordinating Group. Right now the FIX

 6 organization provides the dial-in facility for

 7 that and a web page for it, but we purposely did

 8 not make an organization of it.

 9 And here's what the Standards

 10 Coordinating Group came together to do. The fact

 11 was there was all these competing technologies and

 12 standards, so when you're looking at running a

 13 bank, a trading company, or if you're a regulator

 14 and you're trying to understand, what should I use

 15 (inaudible)? And the term "investment" means

 16 where do I spend my money to promote standards and

 17 how do we work so we don't create duplicate

 18 processes and activities? How can we share

 19 information towards working over the long-term to

 20 converge?

 21 And so the Investment Roadmap is a

 22 public document available off of the FIX or the
 34

 1 ISO 20-022 website and it's a combination of

 2 groups such as XBRL, FPML, Swift -- if I miss

 3 somebody, please let me know -- FISD -- what's

 4 that?

 5 SPEAKER: EDM Council.

 6 MR. NORTHEY: Yeah, not yet. Are you

 7 there yet? So, and what we'd like -- to pull the

 8 EDM Council into this at some point as well. And

 9 our goal is -- we've defined the entire process of

 10 trading from pre-trade all the way through

 11 settlement and reporting. And we said, look,

 12 here's the grid. Here's what you use in this

 13 area, here's what you do. But there's one

 14 overarching place where we're all over time trying

 15 to work towards and that's the ISO 20-022

 16 repository and model. That's where we want all of

 17 that to evolve into. And that's our point of

 18 coordination for things such as code list,

 19 attributes, and that type of thing.

 20 And that's where you'll find the current

 21 industry practice for classification of financial

 22 instruments, but that's also the organization
 35

 1 where you'll find some work where XBRL starts out

 2 where you have to do a filing to do a corporate

 3 action, all right? So you take the tags from

 4 XBRL, you communicate that through ISO 20-022

 5 Swift messages, you know, working with DTCC into

 6 the process. And the goal there is to avoid

 7 transcription services.

 8 What's missing from that is -- and what

 9 the next logical step in that is -- is not that we

 10 have a robust model for financial instruments and

 11 the overall business processes, we need to bring

 12 in the semantics layer, and that work is starting

 13 now. But this was also to talk about identifiers,

 14 this question. I want to bring us back to

 15 identifiers and talk a little bit about

 16 identifiers themselves.

 17 When we read the ISDA FPML proposed

 18 paper -- and, again, we represent the consumers of

 19 this information. Part of the reason we're

 20 involved in X9D is there were some things we were

 21 not happy with in terms of how, as consumers of

 22 identifiers, the whole industry was structured
 36

 1 around -- and using or misusing or disabusing

 2 standards. So when we look at identifiers

 3 themselves, the only comment we'd like to make to

 4 the ISDA paper is we know definitively that if you

 5 want to start working today and you want to

 6 capture information that's going to address risk

 7 or to get an understanding of what's going on, you

 8 have to start with ISDA FPML, their dictionary,

 9 their master agreements, to understand it.

 10 But when you start to talk about

 11 identifying instruments, we prefer that we have an

 12 open standard based on some kind of international

 13 standard, all right?

 14 MR. ATKIN: Gee, Jim, would you agree

 15 that you --

 16 MR. NORTHEY: With that said, there's a

 17 number of issues with standards in general, right?

 18 I mean, so I'd like to point some of those out.

 19 And I'd also like to talk about -- because of the

 20 question that you said is, what's out there today

 21 that you should know about?

 22 Well, there's the ISO 10-962 standard,
 37

 1 called classification of financial instruments,

 2 all right? And I want to state -- talking now

 3 specifically about the FIX protocol organization

 4 and our consumers we represent -- we consider it

 5 to be, you know, a very inferior standard and we

 6 don't see that that standard, as it exists, is

 7 something that we can build upon to address OTC

 8 derivatives. With that said, the ISO TC-68

 9 organization has a thing called the Independent

 10 Study Group on identifiers, SG1. We were the

 11 group that responded very quickly to the legal

 12 entity identifier request and we've had just

 13 incredible adoption.

 14 We now have people from P countries

 15 globally and, you know, the advantage of an

 16 international standard is we're talking -- you

 17 know, I can go into a room now and I can talk to

 18 Japan, Korea, China, Brazil, right?

 19 MS. LEONOVA: Yes, and we are going to

 20 have Karla on the second panel, so I'm sure she

 21 will be happy to expand on that, but I want to

 22 give Karel some airtime.
 38

 1 MR. NORTHEY: Yes, okay. Okay, she'll

 2 talk more. Right, right. Okay, yeah. Okay.

 3 MS. LEONOVA: And I also would like to

 4 follow up on their group of concepts that Michael

 5 mentioned before.

 6 MR. ENGELEN: Sure, I'll address it so

 7 that -- the question was on semantic layering and

 8 what we're doing to work there together.

 9 I mean, generally speaking, the position

 10 that we have is that, definitely it's very

 11 interesting technology and interesting stuff to

 12 look at and we think it's definitely very good

 13 that EDM Council is taking a leading role there.

 14 On the one hand, as Mike mentioned, there's proof

 15 of concept that we're looking at, say, for some of

 16 the OTC derivative contracts, how it could look

 17 like, for us to better understand and to evaluate

 18 what's the semantic proposals we could bring us.

 19 Jim mentioned the work that's ongoing in

 20 ISO. There's a Working Group 5 that will be

 21 formed -- or that has been formed that will look

 22 at it as well, so we'll have some engagement in
 39

 1 that as well. But generally speaking, we see this

 2 as technology with promise, but more for the

 3 long-term. What we see is there is a lot of new

 4 regulation coming out. There's a tremendous

 5 amount of work for the industry and what we want

 6 to do is kind of come out with ways in which we

 7 address all the requirements and use what we have

 8 already. So, again, we're happy to engage to a

 9 certain degree in semantic repositories and see

 10 what the value could be in the long term, but we

 11 have to keep in mind a lot of the stuff that the

 12 industry has to build in the short term and how

 13 can we best leverage existing standards, existing

 14 infrastructure there.

 15 MS. LEONOVA: What do you find to be the

 16 short- term constraints between semantics

 17 implementation into the FPML definitions?

 18 MR. ENGELEN: I don't know if there are

 19 specific short-term constraints. I mean, we have

 20 to see how the proof of concept works out and

 21 we'll learn from that and see how quickly things

 22 can be done. We did learn, though, for example,
 40

 1 from the FPML experience that generally it just

 2 takes a lot of time to get people to agree on

 3 descriptions of instruments, et cetera, et cetera.

 4 So standards move forward, but it just takes time

 5 to kind of cover it all.

 6 MR. NORTHEY: Can I give our concerns?

 7 Our concerns really are the maturity of the tools

 8 and products and the maturity of the industry

 9 practitioners to be able to understand the

 10 (inaudible).

 11 Now, believe me, this in no way am I

 12 recommending that we don't pursue this and we

 13 don't use this little window of time where we can

 14 actually encourage the industry to start

 15 identifying their terms and creating that semantic

 16 layer. I think that's very important, but what we

 17 see right now -- as of today -- are we trying to

 18 solve some problems in near term to the risks that

 19 still sit out there, from my perspective, that

 20 haven't changed that much since 2008 and try to

 21 get it? Or are we looking for a longer term

 22 solution? And right now, the maturity of the
 41

 1 tools, the maturity of people who are

 2 practitioners that know how to be what we call a

 3 working ontologist is just not there.

 4 And I think that we have to keep it in

 5 perspective while Mike and his group do their

 6 important work and build up that layer and while

 7 the ISO organization does it from a global

 8 perspective, you know, pulling in the ECB and

 9 other organizations. But we don't let that get in

 10 the way of what we need to do right now to address

 11 quite a bit of what's in the --

 12 MS. LEONOVA: What do we need to do

 13 right now?

 14 MR. NORTHEY: Well, I think, largely if

 15 you -- there's talking from a definition of OTC

 16 derivatives, the definitive reference from my

 17 perspective, and what we've said as a policy of

 18 the FIX organization, it's the ISDA- FPML

 19 combination of master agreements, the FPML

 20 document structure, and the FISD dictionary terms.

 21 They're well thought out. Everyone agrees upon

 22 them, everybody knows how to use them. We know
 42

 1 how to communicate them. They're already in the

 2 infrastructure. But all of that work that is the

 3 FPML needs to do is move from a silo, where it is

 4 now, into the ISO 20-022 model. We need to bring

 5 in this important semantic layer at the same time.

 6 MS. LEONOVA: Okay. Karel, what is your

 7 opinion about this goal?

 8 MR. ENGELEN: Well, there's a lot that

 9 we need to do now or that we have to work on, but

 10 I think one of the areas of focus is the

 11 requirements around both real-time reporting and

 12 regulatory reporting. So, as an industry, how can

 13 we kind of make that reporting possible and what's

 14 the best way to do that?

 15 The way we look at it is basically, we

 16 see the OTC derivatives industry, broadly

 17 speaking, divided up in three buckets. There is

 18 the more standardized products for which we

 19 propose to have these unique product identifiers

 20 that allow you to position a lot of the trade

 21 information as reference data because the products

 22 are standardized. And so you would use that with
 43

 1 reporting and that would, obviously, be very

 2 useful in public reporting.

 3 The second bucket would be products that

 4 are standardized, but are not necessarily not very

 5 frequently traded. You might not develop unique

 6 product identifiers for them. And for those

 7 products you would have the full FPML

 8 representation, like you have it today, like it's

 9 used in the confirmations that go through DTCC or

 10 to a market wire for credit or trade rates.

 11 The third bucket would be the very

 12 customized, the very (inaudible) products for

 13 which we think there's not necessarily an

 14 electronic representation. These trades might be

 15 one-off trades that really are done on paper.

 16 What we propose is to use a constrict which we

 17 call the generic products that allows you to give

 18 the main characteristics of the trade, such as

 19 notional, buyer/seller maturity dates, and a

 20 couple of other identifying elements. Again, it

 21 allows the regulators to get an understanding of

 22 the trades, to get a view of what the trade
 44

 1 represents. But full details, ultimately, you

 2 would have to go back to the confirmation.

 3 Now, working all this out for all the

 4 OTC derivatives, it's just a tremendous

 5 undertaking and that's one of the focus areas for

 6 us.

 7 MS. LEONOVA: I thank you for bringing

 8 us back to dividing swaps and standardized and not

 9 standardized. We have read with a great interest

 10 the paper on a description of standardized OTC

 11 derivatives, but do we have any game plan for

 12 addressing category 2 and category 3 of non-liquid

 13 products and (inaudible) products at all? And if

 14 we have a game plan, what is the timeline for ISDA

 15 to address it, or any other organizations who are

 16 concerned?

 17 MR. ENGELEN: Well, the game plan for

 18 reporting purposes is indeed to have the generic

 19 product for the very bespoke ones and for the less

 20 liquid, but still standardized products to have

 21 the full FPML representation, and that is

 22 available already. There might be certain
 45

 1 products where we have to expand FPML, but that's

 2 an ongoing exercise. So we have ongoing working

 3 groups that keep on expanding the standard.

 4 As far as the representation for the

 5 standardized products, the way we're tackling that

 6 -- and that goes back to the unique product

 7 identifier -- the way we're tackling that is that

 8 the current focus is on the developing the

 9 taxonomy and looking at different taxonomies that

 10 we have -- the FPML one, the work that the

 11 reporting working group has been doing, and work

 12 that has happened in previous ISDA operations

 13 working groups -- and basically refine that, have

 14 a dialogue with the regulators to make sure that

 15 the taxonomy that we come up with is one that kind

 16 of covers your needs from the point of view

 17 querying trades, et cetera. We think we can do

 18 that in the short-term, meaning by the end of this

 19 month for certain asset classes, such as rates and

 20 credit, we should make a lot of progress.

 21 From there we plan to build the work on

 22 the unique product identifiers, so further
 46

 1 refining of taxonomy and ultimately define these

 2 product identifiers. We are working on an

 3 implementation plan -- again, for the end of this

 4 month -- that will give more views on dates, et

 5 cetera, but we do not have them.

 6 MR. ATKIN: I think that you identify,

 7 describe, and classify derivatives, bespoke

 8 customized contracts based on their attributes.

 9 That really defines what the instrument is. And

 10 in order to do that, you then have a semantic

 11 structure that defines those things, you convert

 12 that to a technical model. The next panel you'll

 13 hear about our relationship with the Object

 14 Management Group to do that, and you communicate

 15 it via an existing protocol, like FPML. So I

 16 think that those things are ready to go now. We

 17 can then define the contracts that are not covered

 18 by standard FPML protocols at the moment and feed

 19 them right into the process. I think that those

 20 are complementary activities.

 21 MR. NORTHEY: But, you know, one of the

 22 things I want to come back to again is that --
 47

 1 wearing more of the U.S. hat -- is, you know, the

 2 issue of what the identifiers are and who assigns

 3 them and (inaudible) is not something that should

 4 be overlooked. And I think that there needs to be

 5 more analysis done by the CFTC on what's the

 6 appropriate identifier mechanism and what's

 7 working in the industry now? Because identifiers

 8 are largely governed by other standards outside of

 9 what we're talking about here in this model

 10 approach.

 11 So I would just encourage you to gain

 12 some understanding of current issues along

 13 identifiers and also to -- and I think that we've

 14 started a classification subgroup within X9D in

 15 the U.S. to feed and drive the -- two things: The

 16 ISO working group responsible for the 10-962,

 17 which is a classification of financial

 18 instruments, and the study group to try to address

 19 and improve this thing.

 20 In a large degree, you know, I think the

 21 financial industry does not hold up to other

 22 industries in terms of their management and
 48

 1 governance over identifiers. You have IPR issues

 2 that continue to plague adoption. You have cost

 3 issues that are imposed. And I think that these

 4 are things that the CFTC has to understand. And

 5 then, also, if you take a silo and create a new

 6 identifier stream independently, then you

 7 potentially start to preclude integration and

 8 cross-asset management across the picture.

 9 An OTC derivative doesn't work in a

 10 (inaudible). Often the underlyings are tied to

 11 listed derivatives or other (inaudible). And

 12 those things are important, so you've got to look

 13 at the (inaudible).

 14 MS. LEONOVA: Thank you, Jim, for

 15 bringing us here. So can we talk about

 16 interaction between XBRL and FPML and what is the

 17 linkage? Is there a technical organization right

 18 now?

 19 MR. COHEN: So I think that separation

 20 between syntax and semantics is a very important

 21 one. As long as we can do some manner of the

 22 lossless transformation of the semantics between
 49

 1 our different syntaxes, I think wonderful things

 2 can happen.

 3 The XBRL's pace tends to be the movement

 4 of information within an ERP business environment

 5 in preparation for external reporting. If the

 6 things that make XBRL unique -- the ability to

 7 associate human readable labels and definitions

 8 with each of the concepts; the interrelationships

 9 of the concepts, which many people can do, but the

 10 particular XBRL tools that are designed in the

 11 reporting world; the association with

 12 authoritative and practical reference and

 13 guidance; the calculations, formulas, rules

 14 versioning, and the things that are necessary in

 15 that environment -- may mean that XBRL is an

 16 important part for some aspect of this. Then, if

 17 we have that agreement on the semantics -- that

 18 same information can be expressed in different

 19 ways, whether it's at the detailed level with

 20 XBRL's internal transactional tool, called XBRL's

 21 Global Ledger, or whether we're drilling down to a

 22 more transactional --
 50

 1 MS. LEONOVA: Do you have this agreement

 2 on the semantics or are you trying to reach

 3 agreement on the semantics while we are standing

 4 here?

 5 MR. ENGELEN: I think it's a very good

 6 question. We haven't really looked at it, mainly

 7 because we think we're addressing two very

 8 different things. XBRL is addressing financial

 9 reporting. We are really looking, and have been

 10 very focused on the post-trade business processing

 11 and everything linked to that, so how do you kind

 12 of communicate this trade information?

 13 Probably it is something to look at and

 14 see to what extent there is an overlap with some

 15 of the XBRL work, but again the focus is very

 16 different. It's financial statements, on the one

 17 hand, where as we are looking at real-time,

 18 regulatory reporting, more from a risk perspective

 19 and a kind of trade position perspective.

 20 MR. ATKIN: Well, they work together.

 21 So the XBRL is really an accounting taxonomy, so

 22 anything you want to do to make sure that you can
 51

 1 understand how to deal with it from accounting

 2 perspective, you would use XBRL. When you're

 3 talking about describing the instruments, you'd be

 4 able to describe so using our repository, which

 5 would be the semantics. And when you want to

 6 communicate information of the transaction, you

 7 would do so via FPML. So they are complimentary.

 8 And, in fact, that's what we are doing with our

 9 proof of concept.

 10 MR. COHEN: If I might provide just the

 11 slightly different viewpoint, is that XBRL is not

 12 limited to financial reporting. It is the lead to

 13 end aggregated reporting of all kinds and a

 14 seamless audit trail from the transaction space to

 15 that.

 16 I fully agree that if what you're

 17 dealing with is real-time reporting of

 18 purpose-specific transactions, that is going to be

 19 before the XBRL space. But if you are then going

 20 to be bringing those transactions together with

 21 transactions of other kinds -- whether it's

 22 leading to financial reporting, statistical
 52

 1 reporting, statutory reporting, tax reporting,

 2 sustainability reporting, any kind of a business

 3 reporting -- if you're dealing with summarized

 4 aggregated information that you need to have a

 5 solid audit trail back to the transactions, that

 6 that's the space of XBRL. But I absolutely agree

 7 that if you're dealing with purpose-specific

 8 transactional reporting in real time, that is the

 9 pre-XBRL space.

 10 MS. LEONOVA: I would like to open the

 11 floor to questions to our panelists, if anybody

 12 has any. I think Anne has a question.

 13 MS. SCHUBERT: Well, a question that I

 14 had been -- Irina and I had been considering, and

 15 other employees of the agency as well, is whether

 16 the product ID can possibly be composed of

 17 different sections and each section may represent

 18 a different level of granularity?

 19 For example, the first section may

 20 represent the highest level of granularity, which

 21 would probably be asset class. And then

 22 subsequent sections would represent higher levels
 53

 1 of specificity, and so then a regulator would be

 2 able to use whatever section or sections it wanted

 3 to for it's own purposes of aggregation. And we

 4 just wanted your feedback on the feasibility of

 5 that?

 6 MR. ENGELEN: Sure, I'm happy to address

 7 that. So, when we developed whitepapers we were

 8 looking at getting feedback from people that have

 9 been looking at these kinds of identifiers and

 10 different other kinds of asset classes, and the

 11 general feedback was that ultimately you were with

 12 a so-called unintelligent identifier for what

 13 you're doing.

 14 And you can use aliases if you want to

 15 make it more descriptive. If you build the

 16 structure that you're looking at into your

 17 identifier, you basically bring your taxonomy into

 18 your identifier, you risk running into

 19 limitations, certainly in an area such as OTC

 20 derivatives, which is still evolving. New

 21 products might be developed. There might be

 22 things you're not thinking of.
 54

 1 So the preference from a technical

 2 perspective was very much to have an unintelligent

 3 identifier to the extent you need to give it

 4 meaning. Unintelligent, but unique identifier to

 5 the extent you need to give it meaning, you use an

 6 alias for that.

 7 I think what you're looking at is

 8 exactly what we're addressing on the level of the

 9 taxonomy. So, you would have a taxonomy that

 10 would give you the different asset classes. With

 11 codes for the asset classes, you would go to the

 12 product level, sub-product level, et cetera. And

 13 the two would be linked, definitely. So if you

 14 look at identifiers, you would also be able to

 15 place them within the taxonomy, but that doesn't

 16 mean you have to build your taxonomy into your

 17 identifier.

 18 It is a question, though, that comes up

 19 a lot and it doesn't mean that because it's a

 20 technical preference to have an unintelligent

 21 identifier, that ultimately we won't end up with

 22 something else.
 55

 1 MR. ATKIN: We 100 percent agree with

 2 unintelligent identifiers, that you -- but if

 3 you're going to have an unintelligent identifier,

 4 it has to be linked to some description. You get

 5 to be able to find what that instrument is based

 6 on its characteristics. So define what it is.

 7 Use what want. So that's the ideal way of looking

 8 at identification.

 9 So the creator -- the person who

 10 originates a derivative submits it to a

 11 repository, describing its characteristics based

 12 on its attributes. Gives it a dumb number and

 13 then, all of a sudden, you can then link the

 14 identification of the instrument back to its

 15 attributes, and that allows you to identify it

 16 uniquely and also to classify it in any way you

 17 like. So you can then classify it by its

 18 characteristics. You can classify it by its

 19 business relationships. You could classify it by

 20 its transactions, you know, holdings. And that

 21 would be the ideal way of approaching it.

 22 MS. LEONOVA: It will be a nice
 56

 1 discussion for upcoming proof of concept that

 2 Karel and Michael work on. Do you want to give us

 3 some details about what we should expect and what

 4 is ultimate goal, and how long you've been working

 5 on it?

 6 MR. ATKIN: So the goal is to deliver to

 7 the regulators and market authorities an example

 8 of what we're talking about because it's a lot

 9 easier to look at it in reality than to talk about

 10 it theoretically. So we are taking interest rate

 11 swaps based on ISDA examples and linked back to

 12 the ISDA master agreement. We are aligning that

 13 agreement with our semantics repositories, so we

 14 can have a consistency of the language used to

 15 describe it.

 16 We are pulling real instance data that

 17 we're getting from various vendors, so you can run

 18 various analytics on it. So, after that, you will

 19 be able to construct the derivative based on its

 20 attributes, to describe it and classify it. You

 21 can then show the participants that are involved

 22 and their hierarchical relationship, ownership
 57

 1 role, et cetera.

 2 You can then link it to its underlying

 3 index for any reset risk that you might be doing

 4 and then you can analyze it based on spread or any

 5 other characteristic. So what we think we'll be

 6 able to do is show the relationship between the

 7 XML schema, which is in FPML, the ontology or

 8 semantics, which is in our repository, and how

 9 those things will work together.

 10 MS. LEONOVA: Karel, is that consistent

 11 with your perception?

 12 MR. ENGELEN: It is consistent,

 13 somewhat, with my perception. I think concern

 14 that we have expressed is around the timeline, to

 15 be able to do this in a very short period of time.

 16 I would add as well that when we had a

 17 conversation, Mike put his job on the line. He

 18 said he would leave the EDM Council if he was not

 19 able to do that. So we'll see where we are at the

 20 end of the month.

 21 MR. ATKIN: I have a footnote for the

 22 record, Karel. I appreciate that.
 58

 1 MR. TAYLOR: I have a follow-up for --

 2 it's really for all of you and it grows right out

 3 of the last -- but out of some earlier things,

 4 too, and it's all about timelines.

 5 You all keep talking about short term

 6 versus long term and, you know, how long it may

 7 take to do various steps. You know, I think I

 8 hear a general agreement: Everyone thinks an

 9 ultimate goal of all of these dreams converging

 10 would be good. The question is the time it would

 11 take. Can you all quantify some of those times?

 12 What do you mean by "short term?" What do you

 13 mean by "long term?" When can you do what?

 14 MS. LEONOVA: And I want to separate it.

 15 How much time is needed for technical agreement

 16 and how much time is needed for political

 17 agreement?

 18 MR. ATKIN: Well, I would ignore

 19 politics for the moment. Our semantics definition

 20 is complete and has been verified by the industry,

 21 so we think we have a definition ready to go. We

 22 have been working with the Object Management Group
 59

 1 -- OMG -- for the last few months to make sure

 2 that our work can be converted to their technical

 3 standard. That's a process that's currently

 4 underway and we expect it to be done shortly, I'm

 5 going to say within months. And, Richard, you'll

 6 explain the timeline there.

 7 So I think that in immediate run --

 8 probably within, let's say, within a year --

 9 you'll be able to define it semantically,

 10 communicate it via RDFL, based on ISDA master

 11 agreements.

 12 MS. LEONOVA: Karel, you look concerned

 13 about this timeframe.

 14 MR. ENGELEN: No, I think if you talk

 15 about timeframes, I mean, it's lucky he can put

 16 timeframes on things and you can talk about short

 17 term or long term. To give an example, if you --

 18 the work I was describing earlier on taxonomy,

 19 then I can say by the end of this month we'll have

 20 something developed for rates and credit which I

 21 think we'll be happy to share. Is that going to

 22 be the ultimate taxonomy? It's not going to
 60

 1 change anymore? Almost certainly not, so there's

 2 going to be ongoing work, ongoing maintenance.

 3 If, on the other hand, you talk about

 4 what Jim talked about before -- the long-term

 5 direction that we have to basically work on with

 6 the ISO 20-022 umbrella -- I can certainly say

 7 that's not going to be finished next year. Not

 8 even the year afterwards. That really is a

 9 long-term effort and we're already working on this

 10 for several years.

 11 If you talk about UPI, I think we could

 12 give you a technical framework to develop that,

 13 but the bigger question is -- and that's where

 14 most of the work is -- what is the amount of

 15 effort? And this goes more towards your political

 16 question, if you want to ask it or put it that

 17 way: What is the amount of effort that we need to

 18 do to really bring the whole industry -- all

 19 players in this industry at the same level? And

 20 just takes time. How much time? I honestly don't

 21 know.

 22 MR. NORTHEY: Can I make a comment real
 61

 1 quick? I don't want to undermine Mike's

 2 enthusiasm and optimism, but those familiar with

 3 the work don't really feel that the model's

 4 complete and it's ready to go. And it's been

 5 vetted widely by key practitioners, even some of

 6 the people who help facilitate starting up that

 7 initiative. Going back a step, when we looked at

 8 revising ISO 20-022, we really knew that

 9 practitioners were not ready to adopt the concepts

 10 of ontologies and yet we still needed to move

 11 forward, so we helped facilitate taking our lead

 12 people and they're working with EDM Council right

 13 now, but I would definitely say I heard -- when I

 14 was asked to be on the panel, you said, what is

 15 available today? What's out there? What should

 16 be considered?

 17 I went out and talked to key

 18 practitioners who have been involved and don't

 19 have vested interests, but they work at banks and

 20 technology spaces, and they don't believe that the

 21 current model as it exists is complete or ready to

 22 go. And then there's also the -- we've got to
 62

 1 have technology diffusion rates out to the

 2 organizations.

 3 So what is ready to go right now, our

 4 view is that from the messaging delivery mechanism

 5 there, I think -- don't underestimate the

 6 difficulty of getting an identifier which can be

 7 readily integrated into business processes. The

 8 identifier problem is much greater in the

 9 financial services industry because of IPR than it

 10 is in any other industry. And there are some

 11 technologies we should look at, such as the

 12 distributed object identifier. We have things

 13 where you have to be able to distribute and

 14 guarantee uniqueness.

 15 And, by the way, you know, we fancy

 16 ourselves as financial technologies and we think

 17 we've got the biggest problems and toughest

 18 problems, but you know what? If you look at this

 19 compared to telecommunications and other

 20 industries, most of these are solved problems.

 21 You know, I think only one time in the

 22 history of Ethernet has a manufacturer ever
 63

 1 generated duplicate Ethernet addresses, you know,

 2 and it was a big controversy. And so I think that

 3 you don't underestimate and don't obscure, you

 4 know, the attraction of a new emerging technology

 5 with the real work of what is the identifier going

 6 to be? Who is going to manage it? Who is going

 7 to own it? And how does it integrate with all

 8 other identifiers? Because I saw in the ISDA

 9 proposal that a CUSIP is going to be used for

 10 underlying instrument.

 11 Well, you know, a CUSIP is encumbered

 12 with IPR and licensing issues. And by the way,

 13 it's not widely adopted outside -- you know, it's

 14 really looked upon negatively outside the U.S.

 15 space, where the ICE is used and adopted. So, you

 16 know, it's unfortunate that you're going to have

 17 to really look at almost the identifier more than

 18 the model. I think you have a basis for the model

 19 now, and we certainly want to promote and support

 20 what Mike's been doing -- and we helped start it

 21 -- but let's look at what we're trying to do now

 22 as opposed to over the long term.
 64

 1 MS. LEONOVA: Okay, Eric? You have the

 2 right of the last word.

 3 MR. COHEN: The CEO of XBRL U.S., a

 4 gentleman named Campbell Pryde -- and in his

 5 former life was at Morgan Stanley and he was

 6 dealing with this exact problem -- he, at the

 7 time, was using some of the technologies you've

 8 heard mentioned today. He tried to use things

 9 with names like OWL and RDF to be able to create

 10 all the different attributes that are necessary.

 11 In that rare moment of agreement amongst this

 12 group, believing that the identifier itself should

 13 just be (inaudible), it should just be a serial

 14 number that links into that system of

 15 identification.

 16 And whether it's using LRDF, whether

 17 it's using XBRL with the various tools that it

 18 provides to be able to create these interoperable

 19 definitions and descriptions and the formulas that

 20 help you identify what piece of this has gone in

 21 the hole, sort of like bills of material or

 22 engineering pieces. There are many different
 65

 1 approaches and a lossless transformation amongst

 2 us would be great.

 3 Neither XBRL International nor XBRL U.S.

 4 want to be the owners of these pieces. It is the

 5 stakeholders involved -- folks like the FASB, the

 6 people developing the taxonomies, or individual

 7 members such as myself -- that have the honor of

 8 working with the esteemed gentlemen at this table

 9 to try and bring these solutions to the market.

 10 In approximately one year and three

 11 months, every U.S. GAAP filer in the United States

 12 is going to be providing detailed swap information

 13 to the SEC. This unique identifier, this

 14 descriptor is so necessary for the market to be

 15 able to really benefit from being able to analyze,

 16 to aggregate the information and work with it. So

 17 many of us absolutely realize the importance here

 18 and want to support it. But in terms of answering

 19 your question when, we're not part of the -- that

 20 we're going to deliver that to you: We're just

 21 one collaborative member sitting at the table

 22 saying we'd like to work with other market
 66

 1 collaborative folks to make this happen.

 2 MS. LEONOVA: Okay, let me thank

 3 Michael, Karel, Jim and Eric for finding time to

 4 join us. We are taking a break until 3:15, right?

 5 No, 2:15. And we are going to talk about

 6 coordination. I'm on all those efforts that we

 7 just talked about.

 8 Thank you again very much.

 9 (Recess)

 10 MS. LEONOVA: Let's start our second

 11 panel.

 12 MR. KIRILENKO: Hello, my name is Andrei

 13 Kirilenko. I'm the chief economist of the CFTC.

 14 I would like to offer some brief introductory

 15 remarks and open this panel.

 16 I -- we're very thankful to the

 17 panelists to be here to talk about coordination

 18 among various industry product classification and

 19 identification work streams for the purpose of

 20 achieving a universal method to describe and

 21 classify swaps. Thank you for contributing to the

 22 public service, for taking your time to talk to us
 67

 1 about this.

 2 I'd like to also take a minute to remind

 3 people that a few weeks ago we came up with a

 4 request for nomination for the sub-committee on

 5 data standardization of the Technology Advisory

 6 Committee of the CFTC. We plan to announce the

 7 composition of the sub-committee by the end of the

 8 week.

 9 The purpose of this sub-committee would

 10 be something along the lines of what your panel

 11 will probably go into discuss, which is to try to

 12 create a public-private partnership to work on a

 13 number of issues, including product ID, entity ID,

 14 storage and retrieval of data, machine readable

 15 formats of legal documents. So, please look for

 16 that announcement.

 17 Some of you who are on the panel or in

 18 the audience have submitted nominations. This

 19 will be sort of follow-up and a standing body to

 20 work on these issues, outside of the panel and

 21 outside of the Dodd-Frank rulemaking.

 22 With that, I'd like to please open it to
 68

 1 the panelists. And --

 2 MS. LEONOVA: And first of all, let's

 3 get introduced. So, Matt. You want to start?

 4 MR. SIMPSON: Yeah, hello. I'm Matt

 5 Simpson with CME.

 6 MS. MCKENNA: Hi, Karla McKenna,

 7 representing ISO, the International Organization

 8 for Standardization. Specifically, Technical

 9 Committee 68 for Financial Services.

 10 MR. DEMARIA: Frank Demaria,

 11 representing the ISDA Data Working Group.

 12 MR. GREEN: I'm Bob Green, I'm with

 13 DTCC.

 14 MR. SOLEY: And I'm Richard Soley with

 15 the Object Management Group.

 16 MS. LEONOVA: Okay. We are following up

 17 from the first panel, now more or less we know

 18 what is out there. And the purpose of the second

 19 panel is to figure out how we can coordinate all

 20 these efforts in order to achieve some type of

 21 universal method to describe and classify swap

 22 products by the standardized or non-standardized.
 69

 1 And the question number one, as it was

 2 distributed in the agenda. What is the current

 3 status of interstate coordination in developing

 4 standardized swap data classification and

 5 identification?

 6 Don't rush all together, please.

 7 MR. SOLEY: I'm always happy to say

 8 something. First of all, I'm going to take issue

 9 with the phrase you just used, universal method.

 10 And that leads me to believe that we're talking

 11 about replacing everything that has come before,

 12 trillions of dollars in IT infrastructure spent by

 13 all of the players in the room with some grand new

 14 scheme. And that is unlikely to help and, in

 15 fact, will never happen.

 16 So that's why we, along with EDM council

 17 and many others, are focused on a solution which

 18 we have shared semantics with different syntaxes.

 19 It's to avoid what I called the N plus 1 problem,

 20 and that is, you try to replace N different

 21 standards with 1 new one, and in fact you go from

 22 N different standards to N plus 1 standards. You
 70

 1 only make the problem slightly worse, but you make

 2 it worse, not better.

 3 OMG has worked in standards areas for

 4 about 22 years, and many of the standards you

 5 heard about in the last panel for representing

 6 semantics -- things like SPDR and for representing

 7 models of business processes like UML and BPMN are

 8 standards, and underlie some of the things like

 9 ISO 20-0-22 standard that you also heard about.

 10 And in every case, what we've done is

 11 not replace what came before but share semantics

 12 with multiple syntaxes so that you have some hope

 13 of getting systems to inter- operate and not

 14 attempt to replace those systems that came before.

 15 We do that as public-private partnerships in about

 16 25 different vertical markets. And many of the

 17 problems that you see in the financial services

 18 industry are found in many, many, many other

 19 markets.

 20 There was a comment on the previous

 21 panel that identification is tougher in financial

 22 services than in other markets. Let me just say,
 71

 1 whoever said that has never worked in healthcare.

 2 Identification in the healthcare industry is so

 3 difficult that it's amusing.

 4 I'll let other panelists get in there.

 5 MS. MCKENNA: So, I heard ISO 20-0-22,

 6 Richard, so I'm going to go next.

 7 I think that over the last several years

 8 that there has been a very, very constant and

 9 increased commitment among standards organizations

 10 and those interested in the development and use of

 11 standards to work together. We've formed a number

 12 of alliances in order to be able to share

 13 information and to figure out how to make

 14 standards interoperate and to collaborate.

 15 Standards are not all out there for the

 16 same purpose. There are different types of

 17 standards. And when they all come together, they

 18 need to be fit together in a solution. ISO

 19 standards are across these types of solutions, are

 20 usually the content standards within the solutions

 21 that we're talking about. So, we have active

 22 relationships with FPL. You heard from the
 72

 1 previous panel, FPML, XBRL. We are talking with

 2 the EDM Council because we have an active project

 3 in order to add a semantic layer to the ISO

 4 20-0-22 standard, and in the area of reference

 5 data where the EDM Council has done the most work

 6 in the semantic area. At this particular point in

 7 time, we're looking for their active

 8 participation.

 9 And also, if you take a look at the work

 10 that the EDM Council and OMG that Richard just

 11 talked about, you see ISO standards as part of the

 12 content as well. ISO 20-0-22 is a very, very good

 13 model-based standard under which all of these

 14 efforts can come together. And it was actually

 15 built that way in order to be able to allow

 16 different standards to be able to collaborate

 17 under one umbrella.

 18 MR. DEMARIA: I'll go next, maybe put a

 19 little different perspective on things. I

 20 represent credit sweeps on the ISDA Data Working

 21 Group, which are really practitioners in users of

 22 this technology and standards.
 73

 1 And to prove that I am a layperson, I

 2 will try to complete my remarks today without

 3 using any acronyms whatsoever.

 4 What is very important to us in the

 5 forming of the ISDA Data Working Group is the

 6 understanding that as we move into this new

 7 marketplace where OTC products are traded on

 8 various platforms -- electronic platforms and

 9 potentially still on voice -- and cleared at

 10 multiple DCOs, where you have dealers acting as

 11 executing broker and clearing broker with market

 12 participants. I did say DCO, didn't I?

 13 SPEAKER: And ISDA.

 14 MR. DEMARIA: All right. Well, maybe

 15 I'm not the layperson.

 16 MR. TAYLOR: You said OTC, too.

 17 MR. DEMARIA: Maybe I'm not the

 18 layperson I thought I was. It is very critically

 19 important that we are speaking the same language,

 20 and that there is no ambiguity in the product that

 21 you traded, the counterparty that you have

 22 transacted with. And that those transactions can
 74

 1 flow seamlessly through your infrastructure in a

 2 very cost- effective manner.

 3 We think there is great hope of

 4 leveraging the work that we've done over the last

 5 number of years as we've taken a paper-based

 6 market and made it much more electronic, bringing

 7 great benefits to the marketplace. We've put

 8 types of repositories in place for different asset

 9 classes, and we want to continue that forward.

 10 And we think all these various groups are critical

 11 to work together to get to that goal.

 12 MR. GREEN: Maybe I'll go next. As one

 13 of the companies that have put together

 14 repositories, we're also encouraged that these

 15 standard bodies are working together. We're also

 16 users, obviously, of the data as opposed to

 17 necessarily those that create it.

 18 One of the things that we're hoping and

 19 encouraged that will occur is that in order to

 20 meet the commission's goals on understanding

 21 systematic risk, as well as other goals in terms

 22 of a reporting to the public, that we're -- that
 75

 1 this creation of a universal product identifiers

 2 is quite key on that. And it's an operational --

 3 as was mentioned in the previous panel, it's

 4 definitely an operational challenge to see that

 5 used uniformly. And so therefore, it's something

 6 that has to be well- considered.

 7 But we'd also like to say that it seems

 8 like the FPML representation is, indeed, been

 9 very, very widely used across the product set from

 10 across the asset classes from the perspective of

 11 defining the contracts themselves. So, while

 12 there needs to be a taxonomy necessary to define

 13 what it is that these UPIs are saying, and a

 14 clearer universal product identifier, it certainly

 15 is -- we're encouraged a lot by the ISDA effort

 16 and the white paper there in terms of using FPML

 17 for that.

 18 MR. SIMPSON: Yeah. CME is also, you

 19 know, an on-the-ground user of standards. I don't

 20 think we're so concerned about ensuring that the

 21 standards are interoperable, although that would

 22 be nice if they were. You know, we're looking
 76

 1 more just the baseline need to start using UPIs

 2 and what that means to our services that we're

 3 providing as a DCO.

 4 You know, we really want to get groups

 5 together to the extent, you know both other

 6 service providers as well as standards providers.

 7 And make sure they agree on what the common

 8 business key is for defining these different types

 9 of instruments.

 10 You know, we have already -- we've been

 11 working with ISDA. We were involved with the

 12 white paper effort. We're on -- you know, we're

 13 on board with that, we'd like to see that continue

 14 moving forward. But you know, we realize there's

 15 going to be practical difficulties around, you

 16 know, much less achieving interoperability with

 17 standards. Just agreeing on how a universal

 18 product identifier is assigned, what it's

 19 comprised of, and how it's going to be generated

 20 at the point of transaction.

 21 But we've -- you know, we've been doing

 22 this kind of thing a long time. We assign over --
 77

 1 you know, we currently track over a million

 2 product identifiers in our own systems for listed

 3 derivatives. And you know, we took on --

 4 initially took on a scheme to start assigning

 5 unique product identifiers -- obviously not

 6 universal in nature -- for some of the new

 7 services that we were offering as well.

 8 And what we saw initially is they mesh

 9 fairly well with what we've been exposed to so far

 10 in terms of what's being proposed by standards

 11 bodies and the CFTC initially.

 12 MS. LEONOVA: Going back to ISDA white

 13 paper about the universal utility that is going to

 14 do assignment of UPIs at a certain level of

 15 taxonomy, what is end user's feedback on this

 16 idea? And how do you envision the corporate

 17 structure for this organization?

 18 MR. DEMARIA: So, in the white paper I

 19 believe we call that the Data Product Registry.

 20 We've spent some -- had some discussions about how

 21 that would operate, what type of model might be

 22 most appropriate. I think as you see in the white
 78

 1 paper, it is critically important that the output

 2 of that -- the product identifiers themselves --

 3 be readily available and publicly available.

 4 Which, you know, we've had a number of debates

 5 about what the right kind of structure would be.

 6 I think it would be some combination of

 7 basic services that would be provided and open to

 8 all market participants -- clearly product

 9 indicators -- and there are various examples that

 10 you could point to are much more effective where

 11 they are readily available to all market

 12 participants.

 13 And then at least my personal view is

 14 there would likely be some value-add service that

 15 would tend to be more profit-driven that would be

 16 complimentary to that. And there are a number of

 17 examples in the cash markets over the years that

 18 have developed along those paths.

 19 MS. LEONOVA: Karla, do you have any

 20 reaction on that?

 21 MS. MCKENNA: I think that we can bring

 22 this all together. I think that David and you and
 79

 1 I have talked before about my first reaction when

 2 I saw the ISDA paper was that it looks very much

 3 like 20-0-22 schema. And it's all coming together

 4 underneath one framework. And I see that that is

 5 the direction in which we can be headed in order

 6 to be able to support the needs of being able to

 7 have machine readability in the products

 8 themselves and in the identifiers.

 9 MR. TAYLOR: Let me ask a follow up

 10 question to all of you. I would have asked this

 11 to the first panel if we hadn't run out of time.

 12 And I'll be honest, I thought I sensed from the

 13 first panel a little hesitancy about the

 14 possibility of all of these different work streams

 15 coming together. But here at least, you know, the

 16 topic is, can we do that?

 17 So, I'd like to ask you a hypothetical.

 18 Assume for a minute that the Commission -- and I

 19 reiterate what Rick said earlier. This is just

 20 one staff member talking to you. It's not the

 21 Commission. But assume for a minute that the

 22 Commission would really like you all to come
 80

 1 together. It would like to not have to pick

 2 winners and losers.

 3 Assume for a minute that regulatory

 4 reporting might need to start either in January of

 5 next year or July of next year. What can actually

 6 be done by those times? What coming together can

 7 happen? What can't happen, and how much more time

 8 would it need? And does that vary by asset class?

 9 By, you know, business process? By whatever you

 10 want to vary it by?

 11 MR. SOLEY: I'll take a first crack at

 12 that. Because since somebody said something about

 13 wanting to get groups to work together. And I

 14 think you're hearing that all of these groups do

 15 work together. And I think the negative part of

 16 that you're hearing is that it tends to be

 17 bilaterals rather than large groups working

 18 together, David. So, I understand the question

 19 that way.

 20 I mean, examples that OMG is involved in

 21 are proof of concept work delivered two years ago

 22 with Swift, and with FIX on message translation.
 81

 1 And the one that Mike Atkin was talking about on

 2 the previous panel, proof of concept.

 3 That particular one focusing on just a

 4 single asset class, interest rate swaps, is going

 5 to be delivered at the end of this month. So,

 6 will you be able to see proof of concept? Proof

 7 that the technology works by the end of the year?

 8 Absolutely. Will there be products that have been

 9 on the market and tested for five years by the end

 10 of the year? I think that reminds me of the Novel

 11 advertisement in 1995 looking for Java programmers

 12 with five years experience.

 13 MR. GREEN: I'll just add one thing to

 14 that, or a couple things. One is that you ask

 15 about product classes and are they asset classes?

 16 And clearly there's a difference there between the

 17 asset classes. The credit asset class has, over

 18 the course of time, through the standardization of

 19 the actual going from very bespoke to a matrix to,

 20 now, standard North American corporates, which

 21 really define an awful lot of things associated

 22 with the trade.
 82

 1 Over the course of time, the definition

 2 of the contracts have, in that marketplace, made

 3 it so it's a narrower set of things that define

 4 the product. That varies, and based on the asset

 5 classes. Certainly there's much more commonality

 6 in some asset classes than there is in others --

 7 in other asset classes. And segments of those

 8 asset classes, they're very unique and they get --

 9 tend toward more bespoke. And it really gets down

 10 to one of the questions that was raised in the

 11 first panel or one of the points that was raised

 12 in the first panel. The further you get toward a

 13 bespoke product where each contract is unique, the

 14 less value, perhaps, there is in a product

 15 identifier because it's really talking about -- at

 16 a really bespoke level, a single contract.

 17 So I think that, you know, focusing in

 18 on that which is more easily identifiable is a

 19 practical way that we might go. That's easier to

 20 implement, I think, than it would be to try to do

 21 all things for all asset classes all at once.

 22 MS. LEONOVA: While we're talking all
 83

 1 the derivatives and different asset classes as one

 2 problem. But is there any industry process of

 3 trying to link OTC derivatives with cash market

 4 standards?

 5 If yes, what is the status? What are

 6 the objectives? And where we are in terms of our

 7 feasibility here?

 8 MR. DEMARIA: I'll take a first shot at

 9 answering that question. Historically, to the

 10 extent that we have OTC products that reference

 11 cash markets and cash products, equity derivatives

 12 using RIC codes to identify underlyings or, for

 13 example, credit derivatives utilizing reference

 14 entity identifiers and reference obligation

 15 identifiers. We've tried to leverage indicators

 16 and identifiers already used in the cash markets

 17 foreign exchange using the ISO standards, as

 18 opposed to creating, you know, OTC-centric

 19 identifiers. So I think that work or efforts

 20 there have been ongoing for a while.

 21 I don't personally know about any cases

 22 where that, to my knowledge, where the OTC markets
 84

 1 have deviated from that cash marketplace to the

 2 extent that those cash instruments are referenced.

 3 MS. MCKENNA: I haven't seen any

 4 specific additional requirements coming out of

 5 this market past what Frank is speaking of.

 6 MS. LEONOVA: Going back to that, is the

 7 white paper and -- I'm sorry to come back to this

 8 paper, but it's the only thing we have right now

 9 tangible. CME, ICE, DTCC are going to be the

 10 ultimate users of those UPIs that are going to be

 11 generated by that utility. How do you envision

 12 your access and participation in a structure like

 13 that? And what would you like to see if that

 14 actually is going to materialize?

 15 MR. SIMPSON: You know, whatever we see

 16 we want it to be simple and straightforward. We

 17 don't want it to be over-engineered. You know, we

 18 don't want there to be obstacles strewn in the

 19 path of competition, innovation, time to market.

 20 You know, I would say that's probably

 21 the most important thing to CME, while at the same

 22 time recognizing the fact that, you know, there
 85

 1 needs to be a common way to identify like OTC

 2 instruments.

 3 You know, we do things now with

 4 standards. We use FPML inside of FIXML. We use

 5 FPML, a new set of FPML messages that were

 6 developed for clearing, also being used by other

 7 clearing service providers now in the industry.

 8 We use FIX and FIXML for our CDS services.

 9 You know, and we've been able to make it

 10 work. And we think we'd be able -- as long as the

 11 way the UPI is implemented is not onerous and

 12 difficult, we think we'd be able to integrate it

 13 in a fairly straightforward way. But, you know,

 14 that is one of the things we're concerned about.

 15 Just for a moment, going back to, you

 16 know, the correlation of the standards. You know,

 17 it seems to me that the first thing that would

 18 need to happen is, you need to know that a

 19 standard can support a certain type of financial

 20 instrument before -- I think before it is even a

 21 candidate for being a UPI -- for carrying a UPI.

 22 So, you know, that's the first criteria, you know.
 86

 1 And I don't know if that's going to make it easier

 2 or not to cut down and focus on which are, you

 3 know, really the prime candidates for this. But,

 4 you know, that's kind of how we look at it.

 5 If you can't describe the financial

 6 instrument in a given vocabulary, then it's

 7 probably not the best vehicle to carry that UPI.

 8 Just some practical views. But, you know, we have

 9 been able to use several standards to describe,

 10 you know, different types of -- take a CDS

 11 instrument, for example. We've been able to

 12 describe that in several different standard

 13 vocabularies. Other types, we can't.

 14 MR. SOLEY: I think that's a really

 15 important point. That several standards -- it's

 16 always true that there are several standards that

 17 can be used to represent information. And that

 18 means that those several standards are likely to

 19 coexist. And what we should be focusing on is

 20 ensuring that they do coexist. So that's the kind

 21 of work -- like the multiple syntax work in ISO

 22 20-0-22, MDMI work at OMG, and what we're just
 87

 1 hearing about from CME is critically important.

 2 The recognition that if we're going to ensure that

 3 standards create our stable baseline for

 4 innovation, that we can represent the same

 5 information in multiple syntaxes.

 6 MR. NICHOLS: I'd like to ask just a

 7 really quick question. If you can expand, tell me

 8 what specifically what you mean by onerous and

 9 difficult.

 10 MR. SIMPSON: Yeah. A synchronous

 11 integration in order to -- you know, at the point

 12 of transaction or shortly afterwards in order to

 13 assign a UPI. You know, we favor something -- we

 14 favor an approach for a UPI assignment that is

 15 decoupled and asynchronous. Not heavy in terms of

 16 taking a technical architecture infrastructure and

 17 integrating it into a registry. You know, we are

 18 proponents of an approach where a standard

 19 algorithm can take a business key and turn it into

 20 a synthetic identifier independent of having to go

 21 to a registry to do that.

 22 MR. NICHOLS: Okay. And then how does
 88

 1 that get shared out?

 2 MR. SIMPSON: How does the UPI? Well,

 3 the details need to be worked out. But, you know,

 4 there would be a periodic synchronization back to

 5 the registry, something like that.

 6 MR. NICHOLS: Okay.

 7 MR. SIMPSON: But if really this

 8 algorithm is standard and works in exactly the

 9 same manner, as long as the same business key is

 10 fed into it it shouldn't matter whether you

 11 synchronize with the registry, you know, once a

 12 day or once a week.

 13 MR. NICHOLS: Okay. So your concerns

 14 about difficulty and cost are based on where in

 15 the business process?

 16 You have to put in the identifier. And

 17 how --

 18 MR. SIMPSON: Right --

 19 MR. NICHOLS: -- complex that process

 20 is.

 21 MR. SIMPSON: That's right.

 22 MR. NICHOLS: Okay.
 89

 1 MR. SIMPSON: Yeah, it could become --

 2 as we've looked at our systems and our business

 3 processes, it could become something that is an

 4 impediment to even the dissemination of

 5 information and -- out to the market as well as

 6 data flows between us and our customers.

 7 MR. NICHOLS: Okay, let me just ask one

 8 little follow up on that, then. We've heard the

 9 term registry tossed around a lot. There are

 10 registries of different types within the industry

 11 for different types of identifiers and

 12 classification systems and this kind of thing.

 13 People are building different ones.

 14 There are a couple of ISO standards and

 15 other -- used in other industries around

 16 registries of registries. And federation of

 17 registration. Are we having those discussions?

 18 If we are going to tie all this together from a

 19 systemic risk perspective, we're going to have to

 20 pull all these different pieces of information

 21 together. And we're going to have to make the

 22 registries talk to each other. Are we having
 90

 1 discussions about that yet?

 2 MR. SIMPSON: No, I haven't had any

 3 discussions with regard to what -- whether we'd

 4 use existing registries, you know. We've had

 5 discussions as to whether, you know, they would be

 6 independent and not for profit. But as to the

 7 specific registries, I haven't been involved in

 8 any conversations, no.

 9 MR. GREEN: That question is related to

 10 something else that Matt said, was that basically

 11 where in the food chain does the product ID get

 12 created? And certainly to be considered in that

 13 is that that of real time reporting.

 14 You know, certainly one of the --

 15 amongst the goals of real time reporting are

 16 allowing market participants to see a price and

 17 know exactly what it was that that price gets to

 18 and means. Use that price for valuation purposes

 19 or risk control purposes, et cetera.

 20 So, the further -- no, there can be

 21 technical ways of accomplishing this. But to the

 22 extent that something is price reported, the
 91

 1 identifier should at least in our view be easily

 2 identified as to what it was that was -- what the

 3 price refers to.

 4 Without -- absent that, then there is

 5 some possibility for maybe overestimating what the

 6 liquidity is, or -- having some misinformation in

 7 terms of what the price refers to. So, I think

 8 that that's something that has to be considered as

 9 well in terms of where and whether it's a priority

 10 at the point of time. That's something that's a

 11 consideration as well.

 12 MR. SOLEY: I think it's worth pointing

 13 out that there have been some conversations about

 14 federation of registries. There have been a lot

 15 of conversations about federation of registries in

 16 other industries, to my immediate knowledge. We

 17 have a standard of doing so for healthcare

 18 information registries. There are people in the

 19 audience that know a lot about product information

 20 registries, federation -- internationally. And I

 21 am aware of federation of registries in the

 22 manufacturing space and so forth.
 92

 1 So, it's not new technology. And while

 2 it may be a little bit more complex than having

 3 just a single rolled up registry, it's much more

 4 likely to succeed in the long- term. And that's

 5 essentially what ever other industry does.

 6 MR. NICHOLS: That's my point is, are we

 7 having those conversations in our industry yet?

 8 MR. SOLEY: And I -- there wasn't very

 9 clear. I'll say the answer is yes, but they're

 10 not very mature conversations that I'm aware of

 11 yet.

 12 MS. LEONOVA: On a practical note, based

 13 on what we heard in the first panel and what we're

 14 hearing now, how plausible it is to come up to

 15 some agreement between different standards and

 16 semantic representation as an industry process?

 17 Or, we will be better off as regulators trying to

 18 focus on some type of mechanisms to translate all

 19 those data representations for the purpose of data

 20 aggregation in house?

 21 MS. MCKENNA: I'll take a first reaction

 22 to that. The timetable for the development and
 93

 1 the harmonization under ISO 20-0-22 that I was

 2 referring to before is largely driven by the

 3 availability of the subject matter experts that

 4 need to be able to contribute to the content. So,

 5 the first thing that we need to do is, we need to

 6 get the right people in the room in order to come

 7 up with the right list of attributes for each of

 8 the instruments or processes that we're trying to

 9 define, basically.

 10 And then, to be entirely clear on the

 11 meaning. You point that out in your paper quite a

 12 lot, that that is the crux that everybody needs to

 13 know what is meant by those elements within those

 14 contracts in order not to be able to misrepresent

 15 risk. And to have the calculations be erroneous

 16 in the end.

 17 We have also to bring in the semantics

 18 work. We have the beginning of the work from an

 19 ISO perspective going on with semantics. I don't

 20 have a timeline for you at this particular point

 21 in time when the group thinks that it's going to

 22 be able to complete its work, because they're just
 94

 1 starting their discussions now. We will relay the

 2 aggressiveness and the priority in order to be

 3 able to get that going, because that is a basis of

 4 foundation. So we need to start there with the

 5 meaning. We have to get the data elements right

 6 or the attributes right.

 7 We always focus on or we tend to focus

 8 on -- and I don't want to downplay them -- the

 9 implementation issues. But the implementation

 10 issues are largely syntactical or technical here

 11 at this particular point in time. And that's

 12 actually where we have the most experience in

 13 standards here, on the messaging side. So, we

 14 actually have to do work more on the harmonization

 15 and the top layer of the elements themselves.

 16 MR. DEMARIA: I was just going to kind

 17 of summarize how challenging it is to put any

 18 timeframe on it, because there are three distinct

 19 things that -- variables that impact that

 20 timeline.

 21 One is -- and has been mentioned a

 22 couple of times -- different OTC asset classes are
 95

 1 different stages of their evolution. So, the

 2 starting point for those products is materially

 3 different in many cases. The industry has

 4 published statistics on electronic confirmation.

 5 You know, penetration, in the various asset

 6 classes. And the starting points are very

 7 different. So that impact would impact the

 8 timeline.

 9 Secondly, there is subject matter

 10 expertise limitations. Each of those asset

 11 classes would require not only technical

 12 expertise, but product expertise. That is

 13 challenge now with so many different initiatives

 14 underway. Just not enough hours in the day.

 15 And then the third thing is,

 16 implementation even once standards are agreed.

 17 These are global markets with many different

 18 market participants, large numbers of market

 19 participants for this to work, that cut across --

 20 you know, if you look at the platforms that are

 21 available at Market Serve, right? You know,

 22 50-plus dealers and really well over 1,000
 96

 1 different other, you know, market participants

 2 utilizing these platforms and synchronizing the

 3 implementation. Not only from a messaging

 4 perspective, but from firms' internal systems so

 5 they can consume and process this information.

 6 Those three things, it's very, very

 7 difficult to try and -- from my perspective, to

 8 put a crystal ball on that and pick a timeline

 9 that works.

 10 MR. GREEN: One thing about that as well

 11 is that it depends on what the goal is, too. If

 12 we're -- if we need to have a UPI for every single

 13 trade that ever would be or ever was, that's a

 14 tough -- that's a very tough lift. But if we're

 15 talking about ongoing trades that are, say,

 16 cleared, that's a more tractable lift and more

 17 tractable problem.

 18 The -- one of the difficulties across

 19 semantic representation versus FPMLs -- attribute

 20 representation, et cetera -- is, if you try to do

 21 all things, it gets to be a while before you can

 22 solve those problems because they're big, tough
 97

 1 problems. Perhaps if we stay focused on a subset,

 2 maybe a practical subset of the trading that is

 3 actually occurring, then it might be an easier

 4 task to do. And learn something from that as well

 5 in the process.

 6 MR. SOLEY: Laying aside timing for just

 7 a moment and just answering the core question of

 8 mapping versus going with a single solution? The

 9 nice thing about going with a single solution is

 10 it appears to be easier. You just get to solve

 11 the mapping question the next time you make a

 12 change.

 13 Because of the timing issues, it's quite

 14 likely you're going to have to have a solution

 15 which is a little bit of both. And that is,

 16 single -- at least single reporting syntax. But

 17 if we don't take a start at agreeing on semantics

 18 today, we'll just have to do it tomorrow. You

 19 need a mapping solution as long as there's more

 20 than one protocol, as long as there's more than

 21 one business process. And that's always going to

 22 be true, there's always going to be more than one.
 98

 1 MR. KIRILENKO: I'm sensing also that

 2 you have some reservations on agreeing on sort of

 3 the final date. But maybe you could identify what

 4 -- I'm also sensing that there is a sort of a --

 5 maybe a practice to take baby steps towards a

 6 final goal. And maybe you could identify what, in

 7 your opinion, would be a sequence of these steps?

 8 What do you think would be accomplished step by

 9 step so we could sort of understand better the

 10 process of how you would go about it?

 11 MS. LEONOVA: And I put it in the

 12 background of what we have. We have Dodd-Frank

 13 Title 7, and we have statutory requirements to

 14 address the issues of public reporting.

 15 And we need to decide whether we are

 16 trying to rely on industry consensus, process, and

 17 leverage out of your mutually acceptable decision.

 18 Or, we have to come up with our own decision. And

 19 so far, our understanding was that you don't want

 20 us to come up with our own decision. But at the

 21 same time, it doesn't seem that you give us any

 22 degree of commitment that you're going to agree on
 99

 1 something.

 2 MR. DEMARIA: One approach that we've

 3 taken with the Data Working Group that's been

 4 mentioned a few times today is, taking the credit

 5 and rate asset classes first. Rates was mentioned

 6 in proof of concept. Bob mentioned the fact that

 7 the credit market has certain standardization

 8 features that the market has adopted to date. So

 9 we see that as being a good area to create and

 10 advance some of those conversations in more detail

 11 underneath the white paper. And then use that

 12 agreement to bring the other asset classes in, you

 13 know, pretty much right behind it.

 14 MS. LEONOVA: Can you be a little bit

 15 more specific about what exactly we are going to

 16 achieve with this first step and when we're going

 17 to achieve it?

 18 MR. DEMARIA: There's actually a

 19 two-hour meeting tomorrow morning of many of the

 20 dealer and buy side practitioners in credit and

 21 rates to have that very discussion about how to

 22 move that forward. I think what we've seen happen
 100

 1 -- and we have some precedent over the things that

 2 we've done.

 3 So if you take standard North American

 4 corporates, right? We first had credit

 5 derivatives, you know, identified by 79 variables,

 6 just to pick a number. And then have set

 7 standards on that and have really moved those

 8 products -- to go back to something Carl said,

 9 where you looked at things in like a hierarchy of

 10 three. To move those products very to the north

 11 end of that second hierarchy, I think we just need

 12 to have discussion of how you push that into that

 13 top hierarchy where you would assign a UPI.

 14 But again, it's -- one of the logistical

 15 challenges is finding two, three hours for the

 16 right subject matter expertise to get in and

 17 actually have that discussion. And then being

 18 able to, you know, compile it and disseminate it.

 19 MR. GREEN: You asked questions about

 20 timing. And we have -- as working as an SDR, we

 21 have some concerns about how we will practically

 22 real time report without a UPI. So, to the extent
 101

 1 that we can obtain a UPI on liquid clearable or

 2 exchange-traded as a first step, where what is

 3 being defined with this UPI is well-known. So

 4 that way everyone who's looking at the real time

 5 tape can understand that.

 6 We'd like to say that that's going to

 7 simplify that problem significantly. Especially,

 8 you know, concerned about the fact that if there

 9 are more than one UPI, more than one way of

 10 representing the same thing, that could cause a

 11 lot of fragmentation, confusion.

 12 So, I think that to the extent that

 13 there is a single way of looking at it and a

 14 single UPI, that's something to be considered as

 15 well. And avoiding -- while there might be more

 16 than -- and there will be, as stated on this panel

 17 and the previous one. There will be more than one

 18 way of representing the same thing. But from a

 19 UPI perspective, the universal piece of that is

 20 very important.

 21 MR. NICHOLS: Just -- I want to drive

 22 this home a little bit. Are we having active
 102

 1 discussions about how we defragment the reporting

 2 stream? That's one question.

 3 And the other is, the type of problem

 4 you're talking about in moving to a universal

 5 product code and the fragmentation and stuff,

 6 that's a problem that's been solved in multiple

 7 industries. Are we looking at other solutions

 8 outside of financial services? It will involve a

 9 change in possibly process, procedures, software,

 10 whatever, for people in any industry. But there

 11 are multiple industries that have addressed this

 12 very issue quite successfully for years. And are

 13 we looking outside?

 14 MR. SOLEY: The answer is definitely

 15 yes. I'll also point out that there are

 16 industries that have addressed this very poorly

 17 for many years, also.

 18 And I like your phrase, defragmenting

 19 the stream. That's exactly the right problem.

 20 And that is what you -- we address when we talk

 21 about sharing semantics. If you can share

 22 semantics and translate -- but as Eric Cohen put
 103

 1 it on the previous panel very well, if you have

 2 sufficient shared semantics that you can do

 3 loss-free translation -- which we can do -- then

 4 you can generate a stream and a defragmented

 5 stream. A stream of consistent protocol that's

 6 valuable to regulators and valuable to anyone

 7 else, for that matter. For reading the tape.

 8 And yes, that's exactly what we're

 9 discussing when we're discussing shared semantics.

 10 MS. LEONOVA: Well, I guess we will go

 11 to the final question and how we will manage to

 12 coordinate all these together to get the first

 13 step solution. Is it going to be ISDA process?

 14 Is it going to be OMG process? Or, what is it

 15 going to be? And what is the degree of

 16 coordination that's happening right now in the

 17 industry that can actually generate the consensus?

 18 MR. SIMPSON: I'll say something. You

 19 know, I think if -- it's going to be hard to get

 20 consensus. I think it's going to extend the

 21 process.

 22 I think that an approach is needed which
 104

 1 is one where you have -- you know, we've talked

 2 about short-term and long-term. But in the

 3 short-term, and you have these as parallel

 4 threads, short-term and long-term. But in the

 5 short-term, you go with what you have that's there

 6 in terms of what standards do I have now that are

 7 reasonably well adopted and can support financial

 8 -- these financial instruments that we want to

 9 represent?

 10 And then you determine -- and that

 11 becomes your vocabulary. And the other thing to

 12 keep in mind is -- and this is going to sound

 13 heretical. But you know, you don't necessarily

 14 have to do this with the standard either, right?

 15 With reporting into -- for regulatory reporting.

 16 It depends how quickly you want to get there.

 17 The other thing that needs to happen is

 18 you need to determine where in the process flow

 19 within the business transaction should the

 20 identifier be assigned? You know, I've heard some

 21 people say it should be done at the swap data

 22 repository. You know, or that's where it should
 105

 1 be, you know, held. But you make that decision

 2 fairly quickly, and you make a good decision about

 3 it. And then you move forward with -- as a first

 4 phase with the idea that you'd have a second phase

 5 that other standards will join in as they're

 6 ready. Because that really can be a prolonged

 7 process.

 8 But in terms of -- just in terms of --

 9 you know, there needs to be a process that

 10 started. And there already is one, and we're

 11 certainly willing to participate.

 12 MR. DEMARIA: Yeah, I'll just add that

 13 the goal of the white paper was to move that

 14 forward. And all market participants in these new

 15 markets, as well as service providers around it,

 16 have a very strong motivation to get this done

 17 properly.

 18 Any ambiguity in the process will expose

 19 you to operational loss and operational

 20 inefficiencies, which we really cannot afford

 21 collectively. So, the proper motivation is there

 22 to drive this process forward. It's just -- I'm
 106

 1 pretty confident that this group can work together

 2 and get things done.

 3 MR. SOLEY: I think it's true that we

 4 already do. It's a collection of bilateral

 5 agreements at the moment. And I think what's

 6 going to make it happen faster is clear deadlines

 7 driven by real implementation. That's the

 8 approach that OMG takes in creating standards, and

 9 several other organizations. It doesn't make us

 10 special. Real solutions available from real

 11 vendors are open source that actually drive a

 12 market. And what will make the bilateral

 13 agreements that already exist throughout this

 14 industry work faster is clear deadlines for proofs

 15 of concept.

 16 MS. LEONOVA: I would like to open the

 17 floor for questions to government representatives.

 18 Of course, Jon Marc?

 19 MR. BUFFA: Can I follow up on Andrei's

 20 question earlier? He asked you a question about

 21 the milestones between where we are now and

 22 getting to UPI. And I think we got taken off
 107

 1 track and we never answered that.

 2 Can you identify for us what you see as

 3 the milestones you need to achieve? Because as

 4 David's hypothetical implied, there is a finite

 5 deadline by which either you guys do this or we

 6 have to do it. So we wanted to know what you

 7 believe the milestones are.

 8 MS. LEONOVA: You remember we have Title

 9 7, guys. Sorry.

 10 MS. MEDERO: Well, you know, from the

 11 perspective of -- I mean, it's a difficult thing,

 12 right? Because we're at a -- saying the exact

 13 milestones depends on what the solution is going

 14 to be. And we obviously, that's under discussion.

 15 So I think that it's a little difficult

 16 to say with certainty on that. But you know, the

 17 white paper and the work to date has been along

 18 that line. We're looking there at -- to begin

 19 with -- at credit and interest rates. Those are

 20 easier products because they're more standardized

 21 products. They are cleared products, in some

 22 cases.
 108

 1 So, you know, obviously that's a first

 2 step. And then defining those and moving on from

 3 that. I think that, you know, from that analysis

 4 and from that work -- and as was stated, I mean,

 5 it's ongoing. And it's happening -- tomorrow is

 6 another meeting, right? From that we'll learn

 7 something and have a better answer for you. But

 8 right now, we're still forming the solution. And

 9 I think that makes it tough.

 10 I'm a user of the data. I'm not

 11 actually creating the data or creating the

 12 standards here. But I'm certainly seeing that

 13 happening.

 14 MS. MCKENNA: To go back to a stream

 15 that we were talking about before about what we

 16 need to do first. I am comfortable with the

 17 commitments that we have with FPML and FPL going

 18 forward for ISO 20-0-22. That the more important

 19 driver here is for the agreement on certain kinds

 20 of instruments and what certain kinds of

 21 instruments are going to look like is more

 22 important than, necessarily, waiting for
 109

 1 incorporation into ISO 20-0-22. So I wanted to

 2 clarify that I didn't see that as an impediment in

 3 order to be able to get going, just as long as we

 4 have the commitment to harmonize under the 20-0-22

 5 umbrella going forward.

 6 I think it's a different issue when we

 7 start to talk about the identifier itself. We

 8 need clarity on whether we are going to put

 9 intelligence in it or not, whether it's going to

 10 be concatenated or whether it's going to be

 11 completely done. We also need clarity on the

 12 process that Bill was talking about before,

 13 because that will drive the assignment -- the

 14 process by which it will be assigned. And we're

 15 willing to move those conversations along as

 16 quickly as we need to. But there are certain

 17 aspects that we need to clear up before we can

 18 finalize.

 19 MS. LEONOVA: I would like to thank

 20 Matt, Karla, Frank, Robert, and Richard for coming

 21 over from different parts of the United States.

 22 Thank you very much, we greatly appreciate your
 110

 1 time. And we look forward to continuing to work

 2 with you to come up with private-public solutions

 3 to our small problem.

 4 Thank you very much.

 5 (Recess)

 6 MS. LEONOVA: Okay. First of all, we

 7 have a logistical issue, so we have a lot of

 8 nameless CFTC people who will have to introduce

 9 themselves, and hopefully we will get our name

 10 tags in the process. But first let me open our

 11 third panel discussion that is going to run from

 12 3:30 to 5:00. And we are going to talk about

 13 implementation of universal system of swap product

 14 classification and identification for the purpose

 15 of meeting various CFTC roles.

 16 We have people from our group who have

 17 been reporting, position reporting, and position

 18 limits, so we are well equipped, and I guess we

 19 will get introduced starting from Bruce.

 20 MR. FEKRAT: Hi, my name is Bruce

 21 Fekrat, I work in the Chief Counsel's Office,

 22 Division of Market Oversight, and I'm principally
 111

 1 responsible for drafting the regulations for large

 2 swaps trader reporting.

 3 MS. HOSSEINI: My name is Ali Hosseini,

 4 also in the Chief Counsel's Office, DMO, and

 5 working with Bruce on the large swaps trader

 6 reporting.

 7 MS. ADRIANCE: I'm Reva Adriance, I'm in

 8 the Division of Market Oversight, working in the

 9 Market Review Section, and working on the SEF

 10 rule-making.

 11 MR. MELERA: Hi, my name is Mauricio

 12 Melera, I also work in the Division of Market

 13 Oversight, Market Review, and I work and help out

 14 with the swap execution facility rule-making, as

 15 well.

 16 MR. MARTINAITIS: Gary Martinaitis, I'm

 17 in the Market Information Group of Market

 18 Oversight.

 19 MR. SHILTS: And Rick Shilts, the

 20 Director of our Division of Market Oversight.

 21 MR. STEINER: Jeff Steiner, in the

 22 Market Review Section of the Division of Market
 112

 1 Oversight, working on the real time reporting

 2 rules.

 3 MR. LEAHY: Tom Leahy, in the Division

 4 Market Oversight, and working on real time

 5 reporting.

 6 MS. LEONOVA: As I said, we have a

 7 number of representatives from different

 8 rule-making teams, and, Jeff, I guess I will throw

 9 you under the bus and we'll let you take off with

 10 the first questions that you put on the agenda.

 11 MR. STEINER: Thank you very much. I

 12 guess one of the questions is relating to the

 13 UPI's and sort of how we could leverage the UPI's

 14 that are developed to assist in real time

 15 dissemination of data. So the first question

 16 would be, assuming that there may be multiple

 17 disseminators, how will a real time disseminator

 18 sort of decode the UPI's, which I think yields a

 19 question of, at what level are UPI's -- do UPI's

 20 become developed, and then I guess what

 21 information related to the UPI's should actually

 22 be publicly disseminated? We'll start with that.
 113

 1 MR. CHINAI: I can start. I think if

 2 you assume that a UPI is made up of a product

 3 classification and tradable instruments underneath

 4 it and there's some kind of hierarchy, I think --

 5 and you have a DPR as if the paper is kind of

 6 already defined at a high level, then I think the

 7 information you need is kind of the UPI coded back

 8 to the product to the tradable instrument that's

 9 sitting in the repository that you can look up.

 10 But then I think it's important based on

 11 an asset class down to a product level that you

 12 really understand the dissemination to the public

 13 and the rules around that that may affect

 14 liquidity, because I think it's an important issue

 15 in terms of how the marketplace will look at that

 16 information from a public point of view.

 17 Some instruments traded are very liquid,

 18 they're traded very often, you know, 100 or 200

 19 times a day, some are traded once or twice a week.

 20 So it's very important that there's some rules

 21 that sit between the SDR and what is going to be

 22 pushed out to the public, and that's an important
 114

 1 part to consider.

 2 MR. STEINER: I guess a follow-up to

 3 that is -- relates to anonymity, and, you know,

 4 one of the things that Dodd Frank Section 727 says

 5 is that we need to consider that the identities of

 6 the counterparties are protected and publicly

 7 disseminating the information.

 8 So, for example, if we had a UPI that

 9 was rather long, if perhaps, I don't know, and I

 10 guess this gets to the question of where do you

 11 cut it off, and I think this is particular

 12 sensitive in the commodities asset class, I guess

 13 the question then is, how can we create the UPI's

 14 and maybe the UPI itself is different from what's

 15 publicly disseminated, but to ensure that the

 16 identities of the parties are protected?

 17 MR. CHINAI: What I think what you mean

 18 like that, there will be no counterparty of any

 19 kind going out for dissemination, it's figuring it

 20 out from the UPI. For example, it's a very low

 21 liquid instrument, we know that three dealers

 22 actually trade that, and we can kind of figure out
 115

 1 which one it is.

 2 MR. STEINER: Exactly, yeah.

 3 MR. CHINAI: So we will need a way in

 4 what we actually produce that goes out to the

 5 public so that cannot be decoded. And so there's

 6 probably another lair of filtering or rules that

 7 need on top to protect the marketplace.

 8 MR. GREEN: I would add to that is that

 9 there's clearly a difference between the real time

 10 reporting and what the Commission itself can see.

 11 And from that aspect, what's in the real time

 12 reporting should obviously preserve anonymity.

 13 But what's in the SDR itself is the full gamut of

 14 the trade. So there is a balance that has to be

 15 struck between -- on real time reporting between a

 16 very liquid instrument, where you've defined

 17 everything, because the goal is to do that, right,

 18 is to say this is the price of that liquid

 19 instrument versus the desire on an illiquid trade

 20 to preserve who the players were.

 21 And the challenge, and we got a little

 22 bit to this in the previous panel, but one of the
 116

 1 challenges is that if you strike away -- start to

 2 strike away data attributes, pretty soon you've

 3 now gotten to a point where maybe this price

 4 doesn't really mean what it was meant to mean, and

 5 so that's a balance that has to be thought

 6 through. And I think to Neil's point earlier on

 7 is that it does affect liquidity, it does affect

 8 lots. We have to make sure that we understand

 9 that well and not necessarily go at it with full

 10 force.

 11 MR. STEINER: Does anyone have any ideas

 12 for how maybe we can strike that balance?

 13 MR. TUPPER: In regards to the commodity

 14 space, we're familiar with the comment letters

 15 that were submitted, specifically with real time

 16 dissemination of products, and obviously if you do

 17 that with very specific UPI's, you know, the fear

 18 by the trade is that, obviously, their anonymity

 19 is going to be unveiled with those trades.

 20 Without a doubt, you're going to need -- a

 21 repository will need in the industry UPI's that

 22 are specific enough so that people can accurately
 117

 1 report the transactions that they enter into.

 2 I think the balance then becomes when

 3 you're -- if an SDR is also running a real time

 4 reporting or ticker facility, aggregating the data

 5 up in a manner that protects the trading

 6 participants in a particular region, so what we

 7 would recommend that ICE is, you know, especially

 8 in commodities, there's a way that, you know, that

 9 Hubs are kind of categorized in particular

 10 regions, so for probably a real time ticker, you

 11 would roll that back up and then report that

 12 publicly. But obviously for, you know, for the

 13 need of reporting to the Commission, and obviously

 14 tracking continuation data, you would need

 15 specific UPI's so that you could accurately

 16 reflect the underlying positions that were entered

 17 into by counterparties.

 18 MR. CHINAI: I think it's easier to

 19 answer that question if you believe the philosophy

 20 that not everything is uniform, and that things go

 21 into different buckets, and when you're in that

 22 illiquid bucket, you just use a different set of
 118

 1 rules, and you can provide as little as you want

 2 and I think still be in the jurisdiction of the

 3 law.

 4 MR. WINN: I think you shouldn't shy

 5 away from the fact that some of this could be

 6 intuitive, as well. So it's not that we

 7 necessarily need to define it on every single

 8 question that you pose in that example right now

 9 before starting to do some of the reporting.

 10 Let's be cognizant of being able to

 11 provide information that satisfies the

 12 requirements that give you the information, and

 13 that perhaps in that, there's a phase where we go

 14 through a period where, with your feedback, as

 15 well, we consider what information is

 16 appropriately real time disseminable on the back

 17 of that, so that we don't necessarily have to

 18 arrive at a conclusion (inaudible) of knowing the

 19 persuasiveness of having all that information

 20 gathered together already. So I would suggest

 21 that as we can look at the standards that you've

 22 reported in the past, where a vast sway of the
 119

 1 derivative on the fixed income side between credit

 2 and rates is reported currently. There's probably

 3 very little risk to the points that are being

 4 raised by my colleagues in regard to that being

 5 real time -- available in real time.

 6 Other attributes, I think we might be

 7 better served just having imperative reflection,

 8 not that we don't report them, but that the real

 9 time reporting is perhaps something which could be

 10 considered a second phase -- second stage in that

 11 process.

 12 MR. GREEN: We would definitely suggest

 13 that to the extent that real time reporting is

 14 definitely important, obviously, but a period of

 15 time where the Commission and the industry takes a

 16 look at the data just to make sure that these

 17 issues that are very important are considered.

 18 There should be a trial period where reporting has

 19 occurred, but real time reporting is under -- just

 20 making sure that we're not going to leak out data

 21 that is inappropriate for the law.

 22 MS. COCHRAN: I think I would also agree
 120

 1 with what's been said a few times ago, that

 2 Cargill is obviously very interested in how this

 3 will be handled for highly customized trades,

 4 because we're involved in that market for ages.

 5 I think it was said earlier that

 6 possibly the very specific reporting that the CFTC

 7 needs is not the appropriate information to be

 8 released to the public, and there's possibly a

 9 higher level or a different categorization of very

 10 specific products, maybe they go into product

 11 categories or product families that are a higher

 12 level pulled out of that very specific data. I

 13 don't know how that would affect price discovery,

 14 but that's an idea that I was thinking about.

 15 MR. STEINER: I just wanted to kind of

 16 sum up. So for certain, would it be fair to say

 17 that for certain products, it may be appropriate

 18 to publicly disseminate the entire UPI, I guess

 19 depending on where we are, let's say it's

 20 everything that's important to the price of that,

 21 whereas for others where that may be less liquid,

 22 have fewer players in it, it may not be
 121

 1 appropriate.

 2 MR. CHINAI: It depends what you mean by

 3 the UPI. Do you mean the UPI code, the label, you

 4 know? There's a lot I can go into the definition

 5 of the UPI, so I don't want to be --

 6 MR. STEINER: I understand.

 7 MR. CHINAI: -- so specific in saying

 8 that. But I'm sure we could figure out the right

 9 fields that should be put out to disseminate on

 10 the back of the definition of the UPI.

 11 MR. STEINER: Right, I guess what we're

 12 thinking is, how we can leverage off of what's

 13 being done for the UPI to inform what becomes

 14 publicly disseminated.

 15 MR. CHINAI: So then I would just -- I

 16 think you could figure out the X fields that you

 17 need, and as long as the market participants are

 18 comfortable with that dissemination and timing of

 19 that dissemination, which I think is really

 20 important even in a liquid product, if you really

 21 are thinking 15 minutes or less of putting it out,

 22 you know, what is the risk to hedging and
 122

 1 liquidity factors of that particular product and

 2 how it trades.

 3 MR. GREEN: I would -- perhaps also it

 4 doesn't have to be one size fits all. There is

 5 more liquid products, clearable products, let's

 6 say, just for talking purposes. There might be --

 7 the UPI's for those might define a larger set of

 8 attributes, because to -- as was pointed out

 9 earlier, those are more liquid, and so, therefore,

 10 there's less chance of problems with that, whereas

 11 to the commodities example, where the delivery

 12 point is, might very well leak out a lot of

 13 information. So those UPI's that would be used at

 14 a point in time could encompass less data, again,

 15 worrying through the issue that the less data you

 16 have, the more chance that the price that's being

 17 reported on the real time tape can be confused

 18 between two essentially unlike deals with

 19 different prices and perhaps being confused as

 20 that is the price for something.

 21 MR. MELERA: If you don't mind, talking

 22 about the definition of the UPI and a little bit
 123

 1 more and who might get involved in determining

 2 what a UPI -- not only definition, but approached

 3 generating those UPI's, might be from this

 4 representative group or someone else in the

 5 industry.

 6 MR. CHINAI: I mean I guess from a

 7 dealer perspective, I mean we're very supportive

 8 of the work that is done so far around the white

 9 paper, the DPR proposal that's on the table. We

 10 kind of joined the group three months ago because

 11 we wanted to push this as a firm around data

 12 standards. We think that we should just go ahead

 13 and push that further around the taxonomy that

 14 needs to be defined, going to RFP, and starting to

 15 build. And, you know, we think as a firm, then we

 16 look at all the interconnectivity, SEF's, CCP's

 17 and real time reporting that we are probably

 18 aiming for second half of next year to have this

 19 all working in the right way, and we'd like to see

 20 it head in that direction.

 21 I know there's comments about different

 22 standards, but -- and they're always good
 124

 1 conversations, but the reality is, we should pick

 2 a standard, we're comfortable with the FPML, we

 3 use FPML internally, and so we back the approach

 4 so far.

 5 MR. MELERA: And particular reactions

 6 from everybody else on that side of the room, as

 7 well, if you can.

 8 MR. WINN: Listening to the previous

 9 panels and just being cognizant of the

 10 requirements that you have on the point that was

 11 made about needing to achieve something in a

 12 reasonable period of time, otherwise, something

 13 might be achieved for us, I think there's a time

 14 to market reality which we have to consider.

 15 That's not to the extent that we don't have

 16 conversations about arriving at standardization in

 17 terms of formats, alternative formats. There's a

 18 commonality of usage currently in derivatives in

 19 regard to FPML. It provides us with something to

 20 leverage off. It probably provides us with the

 21 capability to deliver something to you in a format

 22 that you can use, quicker than alternative powers
 125

 1 would take us down. It doesn't make that approach

 2 better, it does, though, provide it -- back it up

 3 with something we're familiar with and something

 4 we can achieve for you quicker.

 5 So to Neal's points about use the white

 6 paper and the parameters suggested in there, I

 7 would suggest that that's probably the most

 8 persuasive route we have to facilitate the goal of

 9 giving you data in a format that's normalized that

 10 you can, therefore, use.

 11 Being cognizant of the requirements, our

 12 visibility for transparency, but also systemic

 13 risk litigation, so to give you data that you'll

 14 have to then renormalize potentially later or that

 15 we'll, as an industry, need to go through a second

 16 iteration of is going to be a longer process. I

 17 think that if we had to -- and to try to give you

 18 some comfort about time lines, I know it's very

 19 irrelevant that you have those views, and it's

 20 hard, as you can see from the industry, to

 21 actually give you specifics. And I think everyone

 22 understands the issues that are embedded and why
 126

 1 that's hard. If we leveraged off FPML, leveraging

 2 for you the product asset classes that we've used

 3 to date with success like credit rates, we feel we

 4 could be reporting to you something meaningful

 5 during the first half of next year.

 6 MR. MELERA: Anyone else?

 7 MR. DASSO: What I'll say as NFA as a

 8 third party service provider, we don't necessarily

 9 have a preference on, you know, who would actually

 10 distribute and determine the UPI, but, you know,

 11 what we're hearing with these timelines, what

 12 we're working with SEF's right now is, we're under

 13 the impression that the SEF's are going to have

 14 to, just like DCM's do currently, create their own

 15 unique product codes, you know, assuming that the

 16 SEF's launch before UPI's is actually available,

 17 you know, for the swaps world.

 18 So what we've done historically with our

 19 DCM clients over the last ten years is, in

 20 instances where exchanges have listed like

 21 products, we have mapped on the back end to our

 22 surveillance system, so that's really what we
 127

 1 interpret initially going, you know, day one is

 2 that each of the SEF's will have to determine the

 3 unique product code, and we will -- once the UPI

 4 comes out, map the historical data back to that

 5 and on to the appropriate UPI.

 6 MR. GREEN: From an SDR perspective,

 7 we're obviously going to support what the industry

 8 chooses from the perspective of creating UPI's,

 9 and that's, you know, we don't have a particular

 10 view as to which commercial or non- commercial

 11 venue that should be.

 12 But what we do think is that it's very

 13 important that we have one standard, that a UPI is

 14 a universal product identifier. We think that

 15 helps greatly in terms of reporting, especially in

 16 the real time reporting space, but also to the

 17 Commissions, as well.

 18 To that end, you know, having the

 19 industry initiative through ISDA, having an RFP

 20 process, and then a registry that emerges from

 21 that is likely to get to that process.

 22 MR. CHINAI: I mean I think the reality
 128

 1 is, we clear today -- we electronically trade

 2 interest rate swaps, we clear interest rate swaps,

 3 all the participants in there basically take ten

 4 fields, they look through those ten fields and

 5 they figure out a synthetic product ID, that's

 6 what they do, right. I don't think SEF's actually

 7 will create product ID's on their own, because

 8 they don't actually need to, because they can just

 9 do it the way we do it today, but where it gets

 10 really difficult is when you're trying to report.

 11 So when you're trying to report, you do need a UPI

 12 of some sort, especially if you want to deal with

 13 harmonization and pulling things together

 14 globally.

 15 The reality is, you know, the dealers

 16 and the SEF's can pass you a lot of data. The

 17 problem you're going to find once you get the data

 18 is, what do you do with the data and how do you

 19 answer the questions you need to answer. And so I

 20 think around reporting, the UPI is really

 21 important.

 22 If you have a UPI, then it's easy to see
 129

 1 how you extend it to SEF's and to CCP's. But by

 2 itself, I don't think SEF's need UPI's necessarily

 3 to be able to electronically trade.

 4 MR. OKUPSKI: There's the aspect of, you

 5 know, really that registration authority or that

 6 governance figure, as well. What you need to

 7 avoid is a corporate event of some type. You want

 8 to make sure that your data is normalized and

 9 comes together. And so if you have SEF's taking

 10 an approach, even though they may follow a

 11 particular protocol, that needs to be normalized

 12 at the end of day, at least end of day for next

 13 day trading. So, you know, the importance of a

 14 registration authority, whatever term you want to

 15 use there, essential governance committee, that

 16 determines particular events, and whether that be

 17 ISDA, as occurs today with certain types of

 18 secession events and that type of thing, but there

 19 needs to be that role, that central authority to

 20 resolve disputes and handle exceptions, we need to

 21 keep that in mind.

 22 MR. MELERA: Thank you. And building on
 130

 1 that, going back a little bit to the importance of

 2 liquidity and how liquidity might impact the terms

 3 that may get reported or included in the UPI, is

 4 there any sense of whether or not the process

 5 would be any different when we start to talk about

 6 the kinds of trades that the Commission expects to

 7 have trading mandates attached to them, meaning

 8 that they could only be executed on a SEF or DCM

 9 once a particular liquidity is exhibited with

 10 respect to those kinds of swaps? Is there any

 11 difference in the process or in the way that you

 12 all envision possibly things being handled with

 13 respect to UPI's, if that applies?

 14 MR. GREEN: Well, again, from sort of

 15 the swap data repository perspective, to the

 16 extent there is a UPI, it'll be reported; to the

 17 extent there isn't one that emerges, then we would

 18 have, over the course of time, as envisioned by

 19 the Commission's rules, all of the data. So from

 20 the perspective of systematic risk oversight

 21 available to the Commissions, I think that there

 22 would be a full set of data available.
 131

 1 I think what we've been largely talking

 2 about here is, because that would be reported over

 3 the course of time. I think that -- I think what

 4 there is a -- the issue here I think is really

 5 from the perspective of, you know, it's executed,

 6 then cleared, is there sufficient liquidity there,

 7 and so, therefore, can there be a UPI that

 8 describes that, and then when it hits the tape, do

 9 people understand what that means. I mean to some

 10 extent, that seems like a simpler problem and

 11 perhaps one that could be solved first.

 12 I think the other extreme of that from

 13 the -- to go to the contra example of that is on

 14 the bespoke trades. We talked about that -- Carol

 15 from ISDA talked about that. At one extreme, that

 16 really there's no electronic representation. But

 17 there's a fair chunk of trades in the middle where

 18 there is electronic representation, but it's so

 19 unique in its composition that a single UPI

 20 defines a single trade, and that's where we --

 21 this issue about anonymity, I can't say that,

 22 being anonymous matters quite a bit, as well as
 132

 1 what is the utility of that from the perspective

 2 of looking at the tape and the like. So I think

 3 that there is some, you know, middle ground there

 4 perhaps, and we talked about implementation, well,

 5 there's some middle ground there that -- leading

 6 toward the more liquid, cleared, defined products

 7 makes some sense.

 8 MR. DASSO: You know, I think probably

 9 the best example is, prior to coming back to NFA,

 10 as you know, I was in charge of surveillance for

 11 ICE OTC, and the Commission had deemed 14 of their

 12 swaps to be -- service significant price discovery

 13 function, so part of what went with that

 14 designation was the public reporting of volume

 15 open and trust transactional data.

 16 So there is over, last count before I

 17 left, like 350 cleared swaps, but only 14 were

 18 publicly disseminated with information. And I

 19 think a big part of why ICE cut that internal is

 20 because of the fact that they wanted to keep the

 21 counterparties on those other swaps that were less

 22 liquid, you know, out of the fear -- the fact that
 133

 1 other people would determine who they were on

 2 those transactions. So that might be an approach

 3 to look at as, you know, for liquid swaps, is what

 4 is liquid, what does the Commission deem to be a

 5 liquid swap, and therefore, you know, would

 6 require the UPI.

 7 MR. STEINER: Do you have any thoughts

 8 on what defines a liquid swap?

 9 MR. DASSO: I'm not going to throw out a

 10 number because I know that's what Chuck Weiss did

 11 and that was I think a little too low. But, you

 12 know, it has to be some type of combination of

 13 volume, say open interest within that swap, number

 14 of say participants that are active within that

 15 market could go into the determination of whether

 16 or not there's -- it's deemed to be liquid or not.

 17 MR. CHINAI: Also number of trades given

 18 our -- a week, a day, whichever way you want to

 19 look at it.

 20 MR. WINN: I mean you've got a

 21 reasonable amount of history to look at that can

 22 help in answering that question. The industry
 134

 1 itself lacks efficiency, as well, and a support

 2 perspective. I mean if you look at the

 3 standardization and the electronic confirmation

 4 for signatures across rates and credits, I think

 5 we have about 98 percent of the eligible CDS's or

 6 electronically confirmed, and I think the rates

 7 number is getting considerably high, so I stand

 8 corrected, that's a market save obviously. The

 9 point being, there is some track history to look

 10 at to give you a clue as to what's liquid. The

 11 market tends to figure out what's liquid because

 12 it becomes an overhead to support it if we don't

 13 have efficient work flows to support it, so we

 14 start to develop electronic processes and we start

 15 to -- as the industry move towards, yes, this is

 16 our next priority to put onto execution platform

 17 or to have for clearing what you have for

 18 confirmation.

 19 So I think across a large number of

 20 asset classes I think commodities is a bit harder

 21 to do that, you have a good history to look at to

 22 determine what is going to fall into something
 135

 1 that you might call liquid versus illiquid.

 2 MS. ADRIANCE: Maybe I'm

 3 misunderstanding, and I obviously was not here for

 4 the earlier panel, so I'm sorry if I'm asking

 5 something that overlaps. But just as kind of a

 6 follow-up for what was just being said, my

 7 impression is that there is a view that there's a

 8 certain point in whether it's liquidity or this

 9 certain development in the swap where it's -- it

 10 needs to have a UPI, that it is ready to have

 11 that, that's important, and then there's the other

 12 extreme, where there seems -- where you seem to be

 13 saying that, you know, if you would have a UPI, it

 14 would almost be enough to say, well, this is just

 15 this one trade, as was mentioned, and so those are

 16 two -- the two edges, you know, they're the two

 17 extremes you could say, and one of the questions

 18 that we have to deal with is in the middle, you

 19 know, not just when it's enough that you could

 20 say, okay, this one is -- whatever standards they

 21 use, this one -- you need to be UPI, we can

 22 develop it, it could get developed, there's
 136

 1 something in the middle.

 2 Sometimes at this point, certainly this

 3 world is developing execution models, you may have

 4 SEF's that not only lift very liquid swaps, but

 5 also lift swaps that are not liquid or are

 6 illiquid, and they may be done, you know, which

 7 may not have a lot of trading, but may actually be

 8 done on a SEF. And so from our perspective, we're

 9 still going to have to deal with what happens

 10 there and how does that get reported.

 11 And if there's anybody that can address

 12 in a sense what, you know, aside from these two

 13 extremes, and I realize extremes are easier to

 14 address, do you have any suggestions when you're

 15 at the point where you have something less liquid,

 16 it's solved, but it's on a SEF, it's on -- or a

 17 DCM for that matter, and we have to deal with this

 18 issue, do you have any suggestions?

 19 MR. CHINAI: Well, I think when we're

 20 describing the spectrum, I think if you could

 21 actually trade it on a SEF in an electronic mode,

 22 then I don't think there's a problem with the UPI
 137

 1 at all. I mean I think we're talking about things

 2 that are actually very bespoke, very customized,

 3 and would be very hard to put on a SEF, and don't

 4 trade a lot, are very illiquid. And that's not to

 5 say the UPI -- I mean the UPI would be okay.

 6 I mean you may set up a product family

 7 of bespoke trades that are going to have certain

 8 types of trade instruments that all roll up to

 9 these very bespoke types of transactions, but for

 10 the most part, when we're talking about UPI, we're

 11 talking about the highly liquid to mid liquid to

 12 heading to the low liquid, but not the complete

 13 illiquid, right, situation, the UPI and still make

 14 sense, you know, it's just -- it's not being built

 15 for the bespoke trades is I think our point, I

 16 think that's your point, as well.

 17 MR. GREEN: Yeah, I might give two

 18 examples toward what you're saying. In the credit

 19 default swap market, a standard North American

 20 corporate, there are those that are cleared, so

 21 they're, by definition, pretty liquid, there's a

 22 lot of depth in those. But standard North
 138

 1 American corporate type of swaps are really --

 2 much of those things that you can negotiate in a

 3 bilateral perspective have been defined in the

 4 contract law itself, in the contract itself by the

 5 definition of what a standard North American

 6 corporate is.

 7 But then the rest of the -- so the

 8 taxonomy, I mean we talked a lot about that in

 9 these other -- so the taxonomy, whether using FPML

 10 or a different way, you've defined a big portion

 11 of what those attributes would be. There's a few

 12 left over that are per trade. Those that are

 13 liquid and cleared are there; those that are

 14 illiquid, you could still define them, as well.

 15 And so from that perspective, just

 16 because the product itself is very developed

 17 toward standardization, the UPI is easier to

 18 define for that. If you use an alternative

 19 example, say in equity derivatives, where you've

 20 got a basket of instruments that you're trying to

 21 put off the risk on, you can define that, that can

 22 be defined electronically. It's not likely to be
 139

 1 electronically executed because it's very

 2 difficult to -- you can define it electronically,

 3 but it's difficult to define. So in that case,

 4 the difficulty of defining it is going to make a

 5 challenge in terms of actually putting together a

 6 UPI that is useful. I think one of the things

 7 that we haven't talked about here too much to

 8 date, but I'd like to bring this up, is that

 9 whether it's a significant or insignificant UPI,

 10 it's really important that market participants are

 11 able to say, when they use that UPI, that here is

 12 the list of things that that means.

 13 And if we go down -- we have to balance

 14 the -- between -- everything has a UPI, including

 15 all of these varying, you know, one off type

 16 trades, versus here are things that UPI's which

 17 really mean something and are known in the

 18 industry, you know, that's a balancing act.

 19 You know, we certainly I think on this

 20 panel have talked about the fact that, you know,

 21 the ISDA approach toward that TR1 makes some

 22 sense.
 140

 1 MR. STEINER: Sort of following up on

 2 that, one of the things in the real time proposal,

 3 we gave a couple of examples of how we saw, you

 4 know, possibly a ticker evolving and maybe a way

 5 that we saw symbols going, and I think the ISDA

 6 white paper, the April 14th paper cited to that,

 7 as well. And what we had said in our proposal was

 8 something that sort of combined -- it distilled it

 9 down into a pretty useable type form that people

 10 would use. Would you envision that -- like let's

 11 take interest rate swaps, for example, like let's

 12 say one interest rate swap has a different day

 13 count fraction than another interest rate swap,

 14 all their terms being the same, the price is going

 15 to be slightly different for one compared to the

 16 other.

 17 Maybe there's the -- whatever the UPI

 18 is, whether it's a number or something, there's a

 19 -- are you saying that there should be a place

 20 where the public can go, they can look quickly and

 21 see that these trades are substantially similar,

 22 but the prices are different, there should be a
 141

 1 place where they should be able to go to see the

 2 full list of terms and say, aha, well, this price

 3 is different than that one because the day count

 4 fraction is different, something like that, I

 5 don't know. I don't know if that's what you were

 6 saying or if I'm sort of reading into it a bit.

 7 MR. GREEN: Well, that is essentially

 8 what occurs in the cash markets. So there are

 9 market participants when you look at either a RIK,

 10 or a CUSIP, or an ISON can generally find through

 11 some process what is being meant there. A UPI

 12 that I make up for myself to be used for me

 13 doesn't have too awful much use, right, to anybody

 14 else. The idea of a universal, therefore, meaning

 15 everybody uses the same thing, product identifier

 16 is a really important process. And to the extent

 17 that the UPI helps the, you know, the UPI will

 18 definitely help you folks and definitely help on

 19 the tape, as well, but, you know, the other thing

 20 that could be -- that should be important here is,

 21 the UPI can help from an operational efficiency

 22 perspective in the market participants.
 142

 1 And to the extent that we can meet all

 2 three of those goals, we've done a very good

 3 thing. Obviously, we have -- it's most important,

 4 obviously, to meet the regulations because that's

 5 the law.

 6 MR. CHINAI: Well, I think you also want

 7 the UPI to be flexible enough so, you know,

 8 ultimately you're going to have a string, like a

 9 five year interest rate, US, LIBOR, you know, kind

 10 of string, maybe a couple of other things you want

 11 in there, OIS or what have you, that's in the

 12 string, and you want to be flexible enough, so

 13 when we send it to you and you try and roll up and

 14 report on it, it actually has some meaning to it.

 15 My guess is, there will be an internal

 16 representation of -- just in terms of sequencing

 17 or whatever it is in it, and then there will be

 18 some kind of string that allows you, us, everybody

 19 to identify that trade in a proper way, you know,

 20 that's a sensible way.

 21 MR. GREEN: Yeah, and I said this

 22 earlier, and I just want to reiterate it, there is
 143

 1 a difference, though, between the needs of the

 2 Commission to receive data, and so, therefore, the

 3 SDR to prevent, you know, provide you data in the

 4 mechanisms that you choose.

 5 First it's the public reporting. I want

 6 to make a bright line between that. The

 7 regulations suggest that an awful lot of data be

 8 submitted to the SDR, so, therefore, by its

 9 definition available to the Commission. The UPI

 10 is a useful mechanism, obviously, to the

 11 Commission for saying here is classifications, but

 12 the data does exist. It's not that the data

 13 doesn't exist, the data does exist in the SDR.

 14 I think the bright line distinction that

 15 I tried to make earlier is that from a public

 16 perspective, it's very important that we -- that

 17 all users, public users of this data that is being

 18 publicly reported know what it is that was being

 19 reported, and that, to me, is a bright line.

 20 MR. DEMARIA: You also have to remember,

 21 whatever you send out to the public is likely

 22 being sucked into other programs that are trying
 144

 1 to do something with it, right. And so I

 2 completely agree with what Bob said, is that the

 3 differential of what you give on the public side

 4 is important. So maybe you just say interest

 5 rates swap instead of giving the details. Or

 6 maybe in commodities, you don't tell if it's oil

 7 or what have you because it gives away things.

 8 You have to really look at making sure that the

 9 market does not destable by the information you're

 10 putting out, or people are using the information

 11 in what ways.

 12 MR. PULLEN: Just to summarize real

 13 quick, I have a question to follow up with that.

 14 So what I've heard is that there will likely be

 15 UPI's being created for swaps training on SEF's,

 16 other electronic trading platforms, and those that

 17 are cleared, not for one offs though, but would

 18 you -- I mean we were here a few months ago, we

 19 all were able to see some live screens, and on

 20 those live screens we saw that the vast majority

 21 of these markets are not active, in fact, they

 22 don't even have a trade sometimes in any given day
 145

 1 of a sample.

 2 That being the case, since they're

 3 already on their electronic platform, though,

 4 based on what you've said previously, you'd

 5 assumed they already had a UPI associated with

 6 them because they are out there and they may be

 7 traded tomorrow, even though they're not traded

 8 today. With that being the case, since it's

 9 already in that electronic format, would you then

 10 anticipate that being the same format that's

 11 disseminated to the public in a real time manner,

 12 since it's already going to be disseminated to the

 13 other participants in that market in that same

 14 manner when that trade occurs?

 15 MR. DEMARIA: I just think that when you

 16 look at what goes to the public, there's a set of

 17 rules that gets added on top of what goes to the

 18 SDR, you know.

 19 MR. PULLEN: I understand the two data

 20 streams, I'm not saying that they would have

 21 clearing information and things of that nature,

 22 but I'm saying as far as the trade level, the
 146

 1 electronic term data for any electronically traded

 2 instrument or cleared instrument, it seems like

 3 there would be a UPI, that UPI would have

 4 uniqueness about it, it would already be a

 5 contract that some exchange is listed, and,

 6 therefore, it would have an easy one to one

 7 association with a real time tape; is that a fair

 8 --

 9 MR. DEMARIA: Without getting into

 10 specifics of things that may violate that rule, as

 11 a general rule, yes, as a general rule. I'm

 12 talking more of the more liquid side of the

 13 equation here.

 14 MR. PULLEN: But even for a product that

 15 only trades once a month, let's say, or once a

 16 week, if it's available on an electronic platform

 17 and every participant's electronic platform can

 18 see that trade go through and know that trade is

 19 gone -- either gone -- but has reached

 20 confirmation, what would be the harm in then

 21 showing that on a real time tape, since it's

 22 already being shown to all the market participants
 147

 1 in that given SEF or DCM?

 2 MR. DEMARIA: The way I think about it

 3 is, when you do a trade, and say you do it once a

 4 month, how long does it take you to hedge that

 5 trade, right, what's involved on the risk side,

 6 and all those factors combined then determines how

 7 quickly you put it out to the public. If it's a

 8 product you trade once a month and you can hedge

 9 it immediately, right, and there's no risk, or it

 10 doesn't put the market at any disadvantage, then

 11 it's fine.

 12 MR. PULLEN: But for the other market

 13 participants, they're going to have an

 14 informational advantage because they're a member

 15 of that set that trades occurred that the rest of

 16 the people watching the real time tape would not

 17 have. And by having the real time tape, the idea

 18 is to eliminate that veil and have more

 19 transparency, is it not?

 20 MR. DEMARIA: It depends what you mean.

 21 If you're trading -- again, it's kind of hard

 22 because a product that doesn't trade often
 148

 1 wouldn't be in a central or a limit book

 2 typically, right, so yeah, so you're probably

 3 talking an RFQ5 of some sort, and so not everybody

 4 would see it in that mode, right.

 5 So the problem with the question,

 6 unfortunately, is, you can answer it both ways, so

 7 I think in some cases, yes, but again, without

 8 specifics, it's hard for us to tell you 100

 9 percent. The one thing you did say is, in SEF's

 10 and what have you, there are UPI's, there are no

 11 UPI's today electronically, because people --

 12 people just basically use five to ten fields to

 13 figure out what it is they're trying to trade. So

 14 I just wanted to -- in case that wasn't clear.

 15 MR. PULLEN: If they took those ten

 16 fields and create a UPI out of those ten fields,

 17 then that could be the -- well, by the same

 18 representation of the --

 19 MR. DEMARIA: Yeah, that's what we have

 20 to do, right. When we trade an interest rate swap

 21 electronically today on Trade Web, and then we

 22 send it to Market Wire, and Market Wire sends it
 149

 1 to someone else, we've all got this code that sits

 2 in there, and it denotes these ten fields and

 3 says, ah, that's an interest -- five year interest

 4 rate swap -- swap great, and the Market Wire does

 5 the same, then it -- we all have a code that does

 6 it effectively today.

 7 MR. OKUPSKI: I mean you do have the

 8 example, credit default swaps where you have

 9 market red which acts that --

 10 MR. DEMARIA: That's right.

 11 MR. OKUPSKI: -- in the CBS space.

 12 MR. DEMARIA: That's true, yeah.

 13 MS. LEONOVA: Brian, actually I was

 14 going to pick on you, given that you have

 15 experience, what kind of relevance do you see with

 16 this underlying cash instrument identification for

 17 our problem?

 18 MR. OKUPSKI: I mean the relevance to

 19 cash instrument and RED, you know, the RED concept

 20 does go into cash markets to some degree because

 21 RED is just not an identifier to represent the

 22 reference entity that's trading. RED also has an
 150

 1 extension into the actual underlying obligation,

 2 so the cash bond, which the market participants

 3 will be using for their analysis, they're trading

 4 their risk. So, you know, if you look at RED, RED

 5 has done this in a space, or CDS, and RED has

 6 extended into cash markets to some degree and the

 7 information there. So you can look at it as

 8 something that works today for a particular

 9 market, it's a prototype to look at, and how it's

 10 been achieved. I think part of the success of RED

 11 is the fact that the industry works with market,

 12 we work with ISDA, right, that central governance

 13 committee, we work with market participants to

 14 make sure that it reflects their requirements and

 15 what they're trying to achieve in the marketplace

 16 today.

 17 I think, you know, what you have with

 18 RED is obviously -- it's not mandated by any

 19 central government or agency, it's become a

 20 standard because it achieves something for our

 21 customers today, but, you know, as far as the cash

 22 market implication, it can be extended, we've had
 151

 1 discussions like that, we have interest in having

 2 more discussions, but it's to be determined as far

 3 as how far we'll be allowed to go with that.

 4 MS. LEONOVA: Okay. Bruce, it's your

 5 turn. So given your experience in ICE and energy

 6 product identification specification (inaudible)

 7 whatever you're doing with it, how realistic do

 8 you think for us to achieve some degree of

 9 classification in the commodity (inaudible)

 10 especially in energy products?

 11 MR. TUPPER: If you look at the various

 12 venues of execution and also the clearinghouses, I

 13 would say that each of them has a fairly well

 14 defined set of, you know, product ID's. So

 15 basically if -- it was mentioned earlier, if any

 16 of these products are liquid enough to be, you

 17 know, listed on a trading venue and cleared, then

 18 obviously there's a, you know, a product guide or

 19 a definition that each of the exchanges are going

 20 to list, and those unique identifiers are I would

 21 say within the commodity space, you know, they're

 22 well defined, people know what they are, and their
 152

 1 internal systems have mapped to those.

 2 I don't know if there's -- there isn't

 3 just one overriding one that encompasses all of

 4 them and tries to pull it together, but I would

 5 say people call things pretty similar by

 6 instrument, you know, common instruments that may

 7 be traded in one or two venues. It's the same

 8 kind of nomenclature. I wouldn't say it's so

 9 unique that the ID numbers at each of those that

 10 various venues give to it to say, no, but people

 11 know what they are.

 12 MS. LEONOVA: Sue, I would like to ask

 13 you the same question in the agricultural space,

 14 how much standardization is there and how much

 15 agreement between different place on how it was

 16 agricultural swaps.

 17 MS. COCHRAN: Well, as I mentioned

 18 earlier, I can't speak for the entire agricultural

 19 market, but in Cargill's case, the products we do

 20 are highly customized, so no standardization

 21 really. And I don't know, maybe others could

 22 comment on what they see in the rest of the
 153

 1 market. But, for us, they're not standardized.

 2 MS. LEONOVA: Can you expand on how you

 3 actually did a presentation of your products given

 4 this bilateral nature of those instruments, how it

 5 classifies them in your systems. Do you do it

 6 item by item in some type of (inaudible) what is

 7 done?

 8 MS. COCHRAN: We do it item by item, so

 9 probably at the level of detail that the CFTC

 10 would want for its reporting, so you could see all

 11 the terms of the transaction. Does that answer

 12 your question?

 13 MS. LEONOVA: (Nodding)

 14 MR. OKUPSKI: There's a bit of a cottage

 15 industry that's come about because of the fact

 16 that the symbologies don't talk to each other. So

 17 if you take Thompson Reuters, or you take

 18 Bloomberg, or you take a direct exchange feed,

 19 they don't talk to each other, and there's no

 20 mapping there. And some of those proprietary,

 21 some of those have been opened up now to become

 22 more of open symbology initiatives, but, you know,
 154

 1 I know from my experience, end customers, end

 2 users do look for that normalization between the

 3 exchanges and data providers and other platforms,

 4 and it is an industry issue and it has been for a

 5 long period of time.

 6 MR. GREEN: Yeah, it's an interesting

 7 thing. I mean the early portion of the panel

 8 discussions talked about the plethora of

 9 standards, and that's about syntax and taxonomy.

 10 And when you get down to practical terms, to the

 11 extent that there is the equivalent of a UPI,

 12 there's often more than one, meaning the same

 13 thing or very similar types of things, and that's

 14 something that I think that, at least from the

 15 idea of a registry, it doesn't really matter that

 16 you have multiple UPI's as long as they can all be

 17 translated back and forth to each other if they

 18 mean the same thing, but it would sure be nice if,

 19 from the reporting perspective, the public

 20 reporting perspective, that there was a single UPI

 21 that was used.

 22 And I think that that's, you know, to
 155

 1 the extent that there is a registry that emerges,

 2 that will probably do two things, one is, it will,

 3 over the course of time, get the same products to

 4 be called the same things, and hopefully from the

 5 public reporting perspective, a single

 6 nomenclature is used, again, avoiding potential

 7 views toward more liquidity than there is or less

 8 liquidity than there is, et cetera.

 9 MR. DEMARIA: I'd also add the

 10 harmonization aspect. If you're trading a euro

 11 swap or a U.S. dollar swap or a euro CDS or a U.S.

 12 based reference, we really need to think about

 13 pulling together globally or I think it would miss

 14 the part of the objective, so harmonization is

 15 really important.

 16 MS. LEONOVA: Are you pulling in

 17 globally?

 18 MR. DEMARIA: Yes, I mean inside of our

 19 systems, we pull it together globally.

 20 MR. WINN: I think as you see with all

 21 these identifiers that have developed in the past,

 22 they become used by different market players, and
 156

 1 there's an obvious connectivity that will occur in

 2 the future between the SEF's, the CCP's, and the

 3 SDR's, and I think our view from the dealer side

 4 is that aspects around the trade level

 5 identification and attributes that are going to

 6 become important to you such as the security ID,

 7 such as the counterparty code under the LEI, these

 8 are all a very class of deliveries that are going

 9 to form a very fundamental basis for us to very

 10 efficiently connect the front to back architecture

 11 together, not just internally, but for the

 12 industry. And you can certainly expect that the

 13 clearinghouses and eventually the execution

 14 platforms, although there is some debate about --

 15 start using these as identifiers, but it's a

 16 fairly reasonable need to consider how a UPI is

 17 going to become used and more than simply the --

 18 not that it's narrow, but the current parameter in

 19 terms of the objectives that we're talking about

 20 here.

 21 So I think for us it's very key to

 22 resolve these issues quite urgently, to consider
 157

 1 this almost one of the foundation blocks of the

 2 future framework that we deliver as a mechanism to

 3 be able to talk to each other, to talk to other

 4 vendors, to talk to other parts of the work flow,

 5 and to talk to you. So we actually think this is

 6 very important to get right quite quickly.

 7 And to that point, it's clearly only

 8 going to be better to have single repositories

 9 where these are disseminated from, and the

 10 uniqueness in regard to the ID's, and to Neal's

 11 point, a uniqueness globally.

 12 MR. TUPPER: We view the SDR's as kind

 13 of a provider of the UPI's. I think, you know,

 14 especially in energies, was a very diverse --

 15 customers or participants, not all of their

 16 systems are going to be able to, you know, accept

 17 or change to conform to one UPI. But obviously if

 18 they're able to, you know, send ID's, you know,

 19 what they commonly trade to, you know, an SDR,

 20 that then can translate that for them, really the

 21 end game here is to get all the data in one

 22 repository and then be able to, you know, create
 158

 1 reports for the Commission and public

 2 dissemination with uniform ID's, and review the

 3 SDR's as providing a lot of that, you know, that

 4 service in the industry.

 5 MS. LEONOVA: I would like to bring as

 6 back -- particular -- about -- right now, what is

 7 your feeling your particular organization, if it's

 8 going to establish our rules, be able to meet

 9 those rules with respect to further identification

 10 -- we going to come up with a new product --

 11 consensus -- solution or regulate a solution or --

 12 rely on your internal systems, what is the

 13 feeling, can you do it, can you not?

 14 MR. WINN: Internally you can map

 15 anything. Most of our IT systems are pretty

 16 sophisticated to be able to translate data at a

 17 trade level to some level of mapping. I don't

 18 believe the significant body of the work is around

 19 taking an agreed mapping particle and associating

 20 an ID against it and delivering that out. I think

 21 the challenge that we are faced is the arrival at

 22 the consensus or who provides that information.
 159

 1 The taxonomy in regard to the product and trade

 2 level, I don't think the huge challenge is in

 3 there either, it's in the set of deliverables that

 4 are working through which is the particle, is it

 5 FPML, is it something else, our starting point

 6 being what we know.

 7 So, if I may, the question is almost

 8 pushed back, it's -- we have something we can

 9 utilize, and we suspect if we utilize that, we can

 10 deliver something to you quite quickly. The

 11 internal route to deliver it doesn't feel heavy,

 12 that's in its pure complexity rather than times of

 13 delivery cognizant of all the other adherences

 14 that we'll need to respect, as well.

 15 I don't think the heaviness is in

 16 developing the architectures of deliberate, it's

 17 agreeing on the foundation for the framework.

 18 MR. GREEN: You asked for comments on

 19 that. From an SDR perspective, which is the role

 20 that we will play, we expect that the UPI's that

 21 emerge, unless we have to due to your guidance,

 22 create the UPI's, we think that it's much better
 160

 1 for the industry to emerge and consolidate on

 2 those UPI's. It's harder to understand from sort

 3 of an abstract perspective of receiving a lot of

 4 data perspective, what should be -- should have a

 5 UPI, which I understand that there may be a

 6 difference of opinion on that on the panel.

 7 I think, though, that from the

 8 perspective of once we have a UPI, that is easy

 9 for us to use. We'll code into that. We can, you

 10 know, the UPI will define a set of parameters,

 11 perhaps all, perhaps a series of them, and from

 12 that perspective, it's the same as Simon said, our

 13 systems can translate back and forth fairly easy.

 14 The tricky part is defining what it is we do want

 15 to have UPI's on and when do we want to use them,

 16 and I think that's -- that we need some guidance,

 17 as well.

 18 MR. DASSO: As I mentioned earlier, NFA

 19 as the service provider potentially for SEF's, we

 20 are anticipating, you know, of course, I would

 21 prefer to have UPI day one, it makes my job much

 22 easier, but we're working under the assumption
 161

 1 that there won't be UPI's in place day one for

 2 trading.

 3 So one of our next steps, or what we've

 4 actually started to do is, we've worked through

 5 our data elements that we have, 170 unique data

 6 elements, or actually more than that, but that

 7 we've sat down with potential clients and gone

 8 through, one of which is the UPI field. But

 9 absent that, our next step is to sit down with the

 10 SEF's, with the DCO's, with the SDR's and work

 11 through the data flow, because one of the most

 12 important things for us as a service provider is

 13 to track the life cycle of an order through, you

 14 know, through placement, through transaction,

 15 through clearing, and any other life cycle events

 16 that could affect that swap, and that's where

 17 ultimately the UPI will definitely help us do

 18 surveillance and to track position limits. But

 19 day one, we fully anticipate that we'll have to

 20 map through the entire process.

 21 MR. TUPPER: I don't believe the

 22 challenge is going to be for the people on this
 162

 1 panel to adopt, you know, a UPI. I think once we

 2 determine what's the right framework or what

 3 methodology we're going to use, I don't think

 4 that's, like you said earlier, a very heavy lift.

 5 I do believe the challenge will be with

 6 more the buy side or the customer side of the

 7 business. Many of them rely on vendor systems,

 8 and they don't have at their disposal the control

 9 to actually make those changes to those systems.

 10 So I do see the SDR's or potentially, you know,

 11 vendor solutions in between the customers and

 12 reporting to be able to adopt this -- whatever

 13 taxonomy we choose to be the one by asset class.

 14 I think that's going to be probably the heavier

 15 lift to the industry.

 16 MR. DEMARIA: I mean I think as a firm,

 17 we would probably, around this issue, we would say

 18 start with credit and rates, start with cleared

 19 SEF's, cleared SEF's SDR's as a starting point. I

 20 think you can get around the problem you just said

 21 by mandating that anybody that wants to be a SEF

 22 has to use a UPI and then that problem will kind
 163

 1 of go away. But focus on those areas first and

 2 get those right.

 3 We would like to see the ISDA DPR

 4 proposal go forward, and, you know, certainly push

 5 that as hard as we can. I think, as a firm, we

 6 would say commodities is more difficult for the --

 7 actually the reasons that Bruce was pretty

 8 articulate in terms of how you get to the UPI, but

 9 I think we can make a lot of progress around the

 10 asset classes and the strategy I just said.

 11 We're also fully aware that, you know,

 12 when the rules get defined, you may turn around

 13 and say, well, listen, it's still taking too long,

 14 we need to give you some data, and so we can give

 15 you data if that's what people need in the short

 16 term. I would suggest that you should think about

 17 taking that data in a very tactical way, because

 18 all of this is pretty expensive for everybody

 19 that's involved, let them focus on the strategic

 20 solution of getting it integrated correctly, but,

 21 you know, all of us have data, can produce data,

 22 and if need be in the shorter term, can give it to
 164

 1 you.

 2 MS. COCHRAN: From Cargill, I would say

 3 the same thing is true. We've always been, I

 4 won't say ready to deliver whatever data you need,

 5 but have known that we'll have to believe that we

 6 will be able to deliver it. We don't have a

 7 vendor system, however, we have our own in- house

 8 system that we can manipulate probably to provide

 9 whatever is needed.

 10 MR. OKUPSKI: Just to I guess talk about

 11 the opposite view, which may be that if each SEF

 12 is creating their own UPI, it may not be as easy

 13 as we're describing here, so we need that decoder

 14 key, right, across SEF's, so that those firms who

 15 are processing those trades are able to decode

 16 that properly.

 17 Without that, we need to have more of a

 18 central authority or governance to understand who

 19 is the final authority, who issues that UPI. So

 20 one or the other, because, you know, at Market

 21 Serve, we're designing systems with UPI's, we're

 22 designing systems with LEI's, but there's some
 165

 1 assumptions there that there's going to be a

 2 single UPI, or if there's not a single UPI, then

 3 that decoder process that needs to take place. So

 4 that needs to be flushed out before I think the

 5 industry as a whole can say, you know, this is how

 6 we determine we want to do it, or an industry gets

 7 together and says this is our recommendation back

 8 to you. I see the looks over there, so I'll

 9 change that up.

 10 MR. DEMARIA: Well, I would kind of

 11 dispute what you just said, I don't think any of

 12 that counts. Just because market (inaudible) or

 13 anybody has a particular UPI, the whole idea of

 14 bringing the industry together and agreeing on a

 15 standard and agreeing on a process, starting with

 16 the ISDA white paper which you have right now, is,

 17 everybody would have to conform to it or it's

 18 going to be almost impossible at that point,

 19 because if everybody goes off and creates their

 20 own UPI's, then you're going to need the mapper of

 21 all mappers to map all the UPI's together, right.

 22 MS. LEONOVA: So what is your action
 166

 1 plan?

 2 MR. DEMARIA: As I started, I think it's

 3 just put a white paper out. We think we need to

 4 involve the DPR further and get it -- get the

 5 taxonomy done, and then get an RP out, and decide

 6 by asset class who's going to generate the UPI's

 7 through the DPR technology. I think that's --

 8 that's the strategic solution at the moment. I

 9 don't know if somebody has another -- something

 10 else they can put on the table quite quickly.

 11 MS. LEONOVA: So they're going back to

 12 the discussion of timelines and the level of

 13 commitments that industries will willing to give

 14 us so we can rely on industry solution rather than

 15 going ahead and trying to come up with our own

 16 solution, and we still cannot get any credit --

 17 and how, just to give it to you, so all the cards

 18 are on the table.

 19 MR. DEMARIA: Well, I mean I think

 20 you're asking the right questions. I think the

 21 answer the industry needs to come back to you on

 22 is, when can we agree the DPR is the right
 167

 1 solution and what is that timeline so we can come

 2 back to, and there should be an action on that

 3 particular question.

 4 MS. LEONOVA: I would like to open a Q

 5 and A session for ISO team members. Bruce.

 6 MR. FEKRAT: I don't know if you're

 7 familiar with the large trader reporting system

 8 that we want to set up for swaps. I think many of

 9 you are because I see the names and I know some of

 10 you, as well. But an aspect for -- particularly

 11 for uncleared swap transactions, we're collecting

 12 or requesting that commodity reference prices be

 13 submitted to us. And the process that we're

 14 thinking, so we have a standard code that is

 15 submitted to us for a commodity reference price,

 16 is that they are -- we get a code in that meets

 17 whatever parameters we set for it, but we don't

 18 recognize it.

 19 So we have to contact the entity that

 20 submitted that report and ask them, how are you

 21 pricing this particular oil swap, or Palladium

 22 swap. And once we get that, we can assign a code
 168

 1 to it, describe what it is, put it on our web

 2 site, and every entity from then on would be

 3 required to submit a like swap that's priced in

 4 the same way with the same commodity reference

 5 price, the same -- using the same code. So I

 6 wanted to get your thoughts on that and --

 7 MR. TUPPER: I'm happy to entertain this

 8 question, I think it relates. The commodity --

 9 just a little background on those commodity price

 10 definitions, they're pretty widely used within the

 11 commodity markets. ISDA has done a very nice job

 12 with the creation of those. We support them. A

 13 number of the large dealers and energy companies

 14 use them, as well. I think, though, that not

 15 everyone uses them. You know, not to keep coming

 16 back on this theme, but I think that for your

 17 need, you know, the SDR is probably going to have

 18 the responsibility to make sure all that data is

 19 translated into that industry standard.

 20 You know, not everyone follows those

 21 nomenclatures. They have a very specific way of

 22 how they mean delivery locations and index
 169

 1 providers. The other little shortfall with the

 2 commodity definitions is that they're not probably

 3 updated as regularly or there's changes in the

 4 market that really, you know, is difficult for

 5 those updates to happen as quickly as they need to

 6 be.

 7 So what most industry participants will

 8 do is, we'll rename it in the same format under

 9 fundamental change in the hub or delivery location

 10 and then wait for the next update.

 11 In summary, though, I don't think that

 12 participants' ability to send you that data in

 13 that specific naming, or that reference price,

 14 should keep you from receiving what you need. You

 15 know, from your perspective, you're not in -- how

 16 can I say this the right way, the idea that the

 17 data has to be always translated and sent to you

 18 in a perfect, you know, package, so to speak, or a

 19 standard is probably going to be very difficult

 20 for commodities as a whole. It's not a very

 21 difficult assignment for a repository to do for

 22 you, if that helps.
 170

 1 MR. DEMARIA: I would agree, I would

 2 agree with that strongly in a sense they're kind

 3 of going around the idea of a repository by doing

 4 that.

 5 MS. HOSSEINI: Just to follow up on

 6 that, though, one is -- first just a quick

 7 question. When you said it's not updated that

 8 often, how or what's the timing on --

 9 MR. TUPPER: I think right now we're

 10 working off of 2005, you know, so -- but I don't

 11 want to -- look, I mean ISDA has taken on a lot of

 12 work and there's a lot of things they're doing,

 13 and I know commodity price references are probably

 14 very important to a certain market, but, you know,

 15 it's just taking on a lot of challenges.

 16 I mean updating those things, I would

 17 say in fairness to ISDA, they could probably

 18 update it annually, but things are going to

 19 happen, right, that, you know, they're not going

 20 to be able to update that as quickly as you need.

 21 Like mentioned earlier, you know, a repository is

 22 probably well positioned to do that, and then
 171

 1 around the annual date, when they start collecting

 2 the updates and the deletions, you know, that

 3 process can be published. And then the whole

 4 visit, over time, is reporting -- is mandated that

 5 I would say -- the dealers and the large energy

 6 companies are very good at adopting it because

 7 they can control it, it's trying to get the vendor

 8 community on board with adhering to public

 9 standards. And I think once those mandates do

 10 that, I think you'll see a high level of adoption

 11 of these standards.

 12 MS. HOSSEINI: I hear you saying that

 13 it'll become more and more standardized with SDR's

 14 coming on board, but I mean this rule, one of the

 15 main issues with this rule is that it's somewhat

 16 of a transitional tool before SDR's are up, so

 17 before those are up, do you think that it would be

 18 a problem for these smaller entities to adopt the

 19 system?

 20 MR. TUPPER: It'll be a challenge, I

 21 just don't think that you should have the adoption

 22 of these standards; it's going to be a challenge,
 172

 1 just to be honest, yes. So asking all

 2 participants to do that is not easy. But I do

 3 believe that SDR's will be able to fill that role

 4 for you. I know it's coming on board and

 5 reporting is, you know, likely to be here soon. I

 6 just don't believe -- it's going to be difficult

 7 to get all the data in the same exact formats, as

 8 you mentioned, like the commodity price

 9 references.

 10 MS. LEONOVA: Anymore questions?

 11 MR. SHILTS: There was a, you know,

 12 comments earlier about, in terms of sequencing and

 13 looking at commodities maybe later, but should we

 14 be thinking about commodities broadly or should we

 15 be thinking about them maybe subclasses, you know,

 16 whether it be energy versus agriculture, metals or

 17 anything else?

 18 MR. TUPPER: I'm sorry, I don't mean to

 19 -- I think a phased approach is probably one that

 20 most dealers will tell you is the best approach.

 21 You know, with -- there's certain -- within

 22 energies and commodities markets, there's certain
 173

 1 specific, you know, markets within that broad

 2 asset class that has larger dealer participation,

 3 and I think those are really the ones that are --

 4 lend themselves very well to be the first ones to

 5 report.

 6 You know, one comes to mind is the

 7 global oil market, it's -- the trading is

 8 primarily among large dealers and large energy

 9 companies and majors, and they're well positioned

 10 to report than maybe some smaller agricultural

 11 markets.

 12 MS. LEONOVA: Okay. Before we complete,

 13 do any panelists have any burning issues or

 14 desires that they want to express before the

 15 close? No burning issues? Everybody is happy?

 16 MR. WINN: I wouldn't classify it as a

 17 burning issue, but I think that the thing which

 18 we're cognizant of is, we're trying to achieve a

 19 great deal, and we can achieve quite a lot quite

 20 quickly, and therefore, I would urge that we

 21 consider the bifurcation of the framework that

 22 reports the data that provides you with the
 174

 1 capability to look at the systemic risk components

 2 of your obligations versus the component that the

 3 price transparency through real time reporting. I

 4 think there's a -- a gentleman, I think Bob said,

 5 there's a bright line between the two could be

 6 drawn.

 7 There's a step that we can -- there are

 8 steps that we can take here, and, for me, it's one

 9 of the most burning issues. Let's look at this in

 10 sequence, it'll give us the capability to give you

 11 stuff that's useful for you to use now rather than

 12 too much that has to be paused yourself, that's my

 13 burning issue.

 14 MR. DEMARIA: I'd only add that

 15 something that we think about quite a bit is,

 16 there's obviously pressure to get something done;

 17 on the other side, just picking up on what Simon

 18 said, a year from now we should be sitting here

 19 saying we built an industrial strength solution

 20 that kind of scales and is a footprint to where we

 21 can go forward. So I think finding that balance,

 22 and there's a tremendous amount of work to be
 175

 1 done, obviously, is kind of the key thing. It's

 2 easy to kind of get, we want to get the standard

 3 right, but then there's obviously the pressure of

 4 when data has to start being reported to the CFTC,

 5 and that balance is probably the trek for

 6 everybody, where we're trying to go.

 7 MS. LEONOVA: So we finished 15 minutes

 8 early. Brian, Bruce, Ed, Neal, Simon, thank you

 9 very much for coming over and spending your time

 10 with us, we greatly appreciate it, and we take you

 11 at your word that you're going to come up with a

 12 solution soon. Thank you very much.

 13 (Whereupon, at 4:49 p.m., the

 14 PROCEEDINGS were adjourned.)

 15 * * * * *

 16

 17

 18

 19

 20

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 176

 1 CERTIFICATE OF NOTARY PUBLIC

 2 DISTRICT OF COLUMBIA

 3 I, Stephen K. Garland, notary public in

 4 and for the District of Columbia, do hereby certify

 5 that the forgoing PROCEEDING was duly recorded and

 6 thereafter reduced to print under my direction;

 7 that the witnesses were sworn to tell the truth

 8 under penalty of perjury; that said transcript is a

 9 true record of the testimony given by witnesses;

 10 that I am neither counsel for, related to, nor

 11 employed by any of the parties to the action in

 12 which this proceeding was called; and, furthermore,

 13 that I am not a relative or employee of any

 14 attorney or counsel employed by the parties hereto,

 15 nor financially or otherwise interested in the

 16 outcome of this action.

 17

 18

 19 -----------------------------------

 20 Notary Public, in and for the District of Columbia

 21 My Commission Expires: May 31, 2014

 22