Division of Clearing 

and Risk 

Stephen Monis 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5430 

Facsimile: (202) 418-5536 

Executive Director and Counsel 

Morgan Stanley 

1221 A venue of the Americas 

New York, NY 10020 

Alternative Compliance Schedule for Regulation 1.74- Timing of Acceptance of Trades for 

Clearing 

Dear Mr. Morris: 

On April 9, 2012, the Commission published rules relating to the timing of acceptance of 

trades for clearing. 1 The Rules are codified in Patt 1 of the Commission's regulations and 

became effective on October 1, 2012. Section 1.74(a) requires a clearing futures commission 

merchant ("FCM") of a registered derivatives clearing organization ("DCO") to accept or reject 

trades for clearing "as quickly as would be technologically practicable if fully automated systems 

were used." 

On September 21 , 2012, in response to requests from the industry, the Division of 

Clearing and Risk ("DCR") set f01th its expectations concerning what length of time would be 

"as quickly as would be technologically practicable if fully automated systems were used." DCR 

stated that statting October 1, 2012, it expected each FCM to accept or reject a trade for clearing 

and submit it to the DCO within 120 seconds. DCR further stated that starting on the date 90 

days following publication in the Federal Register of the final rule for the clearing requirement 

determination, ("T+90")2 DCR expects each FCM to accept or reject a trade for clearing and 

submit it to the DCO within 60 seconds. 

On October 4, 2012, Morgan Stanley sought an alternative compliance schedule for 

Regulation 1.74. Seven other firms also sought alternative schedules. The requested alternative 

schedules range from full compliance by December 31, 2012 to acceptance of the median of all 

trades within 90 seconds by T+90. 

DCR notes that several FCMs stated publicly before October 1, 2012, that they had 

developed systems and procedures enabling them to be in full compliance by that date. DCR 

fmther notes, however, that each of the requesting firms clears a substantial volume of swaps. 

I 77 FR 21 278. 2 Proposed at 77 FR 4 7170. 
DCR has reviewed each of the requests. As noted, three firms expressed an ability to 

achieve compliance by December 31, 2012. One of the firms stated that it currently has over 

70% of the market share for customer trades. DCR believes that if the entity with the most 

volume is able to comply with Regulation 1.74 by that date, then acceptance or rejection within 

the same timeframe is technologically practicable for firms with lesser volume. 

In light of these circumstances, DCR has determined that it is appropriate to establish a 

single alternative compliance schedule for all requesting firms. Accordingly, pursuant to the 

authority delegated by Regulation 1.75, DCR is establishing the following alternative 

compliance schedule: 

• On or before January 1, 20 13, each FCM must accept or reject each trade 

submitted to it for clearing within 120 seconds. 

• On or before T+90, each FCM must accept or reject each trade submitted to it for 

clearing within 60 seconds. 

This extension is granted by DCR in reliance on the representations contained in your 

request, and any different, changed, or omitted material facts or circumstances may require 

termination of the extension and immediate action by the FCMs to facilitate compliance. DCR 

retains the authority to condition further, modify, suspend, or otherwise restrict the extension 

granted herein. 

If you have any questions concerning this correspondence, please contact John C. 

Lawton, Deputy Director, at 202-418-5480, or jlawton@cftc.gov, or Christopher Hower, 

Attorney-Advisor, at 202-418-6703 or chower@cftc.gov. 

Sincerely, 

An an 

Director 

2