MEETING SUMMARY WITH MORGAN STANLEY 

Meeting Date: Sept. 15, 2010 

Meeting Time: 12:30 pm - 1:30 pm 

CFTC Attendees: Gary Gensler, Stephen Sherrod, John Riley, Dan Berkovitz, Ananda 

Radhakrishnan, John Lawton, Thelma Diaz, Eileen Donovan, Bruce Fekrat, and Andrea 

Musalem. Note, Riva Adriance and Mauricio Melara arrived toward the end of the meeting. 

External Attendees: 

• Stephen O’Connor, Managing Director, Counterparty Portfolio Management, 

Fixed Income Division; 

• James Hill, Managing Director, Structured Credit Products, Fixed Income 

Division; 

• Alan Thomas, Managing Director, Equity Financing Products, Institutional Equity 

Division; 

• William McCoy, Managing Director, Legal and Compliance Division; 

• Richard Ostrander, Managing Director, Legal and Compliance Division; 

• Candice Koederitz, Managing Director 

• Nancy King, Managing Director 

Agenda: 

1. Implementation – Morgan Stanley raised the issue of staggered implementation of the 

rules. The implementation of mandated clearing for swaps, Morgan Stanley stated, 

should be staggered by asset class, and dealer trades should be moved into clearing 

before client trades. Implementation at different times, according to Morgan Stanley, 

would be less disruptive to the markets. There are some markets that are more ready 

and more standardized according to Morgan Stanley. 

With regard to SEFs, Morgan Stanley stated that the more flexibility promulgated 

into the SEF, the less likely that staggering the implementation will be necessary. 

2. Clearing – Morgan Stanley raised three sub-issues regarding DCOs: 

a. Membership. Morgan Stanley is concerned that there will be weak 

counterparties in the clearinghouse if access is not somewhat limited. Access 

to clearing should be available to all, according to Morgan Stanley, but some 

should only have access as a customer, not as a clearing member. 

b. Product Eligibility. Morgan Stanley stated that liquidity providers must 

provide input for product eligibility. 

c. Margin Policy. With respect to the CDS clearinghouse, Morgan Stanley raised 

the issue of concentration limits per dealer and margin multipliers as DCO 

policies. 
3. Execution – Morgan Stanley stated that SEFs should be broadly defined to allow 

RFQs. According to Morgan Stanley, if a SEF becomes an order book, then a lot of 

trades won’t be SEF eligible. Pre-trade transparency is important only for the parties 

involved. If you eliminate RFQs then you will eliminate a lot of trades that won’t go 

through a SEF, according to Morgan Stanley. 

4. Position Limits. 

5. Margin Requirements for Uncleared Transactions – On behalf of a client, Morgan 

Stanley asked whether the Commission has the authority to grandfather existing 

swaps (exempting them from margin requirements), and if the Commission has such 

authority, will it do so. According to Morgan Stanley, 90 percent of existing 

exposures predate the enactment of the legislation. 

Morgan Stanley believes the Commission has the authority and requested that the 

Commission provide an explicit statement as to whether it will or will not grandfather 

existing trades because of the uncertainty in the market.