Meeting November 19, 2010

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3 UNITED STATES OF AMERICA

4 COMMODITY FUTURES TRADING COMMISSION

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10 PUBLIC MEETING OF ADVISORY COMMITTEE

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18 Washington, D.C.

19 Friday, November 19, 2010

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Meeting November 19, 2010

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1 PARTICIPANTS:

2 Commission Members:

3 GARY GENSLER, Chairman

4 BART CHILTON, Commissioner

5 MICHAEL V. DUNN, Commissioner

6 SCOTT D. O'MALIA, Commissioner

7 JILL E. SOMMERS, Commissioner

8 Staff:

9 ROBERT WASSERMAN

10 Division of Clearing and Intermediary Oversight

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12 JEFFREY BURNS

13 Overview of Swap Data Repositories

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15 DAVID TAYLOR

16 Division of Market Oversight

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18 TOM LEAHY

19 Division of Market Oversight

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

2 (9:40 a.m.)

3 CHAIRMAN GENSLER: Good morning. This

4 meeting will come to order. This is a public meeting of

5 the Commodity Futures Trading Commission to consider

6 issuance of proposed rule with regard to the Dodd-Frank

7 Act.

8 Today, I think will be considering four

9 proposals and one advanced notice proposed rulemaking in

10 the four proposals. We will first hear from the panel

11 with regard to protection of collateral of counterparties

12 of uncleared swaps. These are bilateral swaps that are

13 between counterparties and swap dealers.

14 That panel will also talk about a set of

15 questions called "Advanced Notice of Proposed Rulemaking"

16 with regard to similar protection, but with regard to the

17 cleared swaps between counterparties, futures commission,

18 merchants, and clearing houses.

19 We will then hear on three proposals. I call

20 them the "data triplets" or the "transparency trio." But

21 it will be three proposed rules with regard to one set of

22 rulemaking swap data repositories and one set rulemakings

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1 with regard to the data elements and data that has to be

2 kept by all various registrars, whether swapped dealers

3 or the swap data repositories themselves. And I think

4 last up today will be the proposal for real-time

5 reporting.

6 All three of these are critical. I think

7 it's one of the key features of the Dodd-Frank Act to

8 bring transparency, both to the regulators, which is the

9 swap data repositories, and the data elements, which are

10 so critical so that regulators can have direct access and

11 help ensure the integrity of the markets and help police

12 markets, but also to the public. And one of the key

13 features that bring transparency is real-time reporting

14 or post-trade transparency.

15 We will later take up in December rules

16 around swap execution facilities, and that's another

17 feature bringing transparency in the pre-trade

18 transparency before the transaction.

19 Before we hear from staff, I would like to

20 thank Commissioner Mike Dunn, Commissioner Jill Sommers,

21 Commissioner Bart Chilton, and Scott O'Malia.

22 I think this is our fourth public meeting,

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1 and the team is just working terrific together. We are,

2 I think, consistently sort of watching each other's backs

3 editing documents.

4 And I do apologize to my fellow Commissioners

5 because sometimes those edits are coming in response to

6 other Commissioner's comments, but are coming in really

7 in the last couple of days. And I know we'll probably

8 need to help each other out by getting our edits in

9 earlier. But this set of data rules had a lot of last

10 edits in them.

11 It's really remarkable how hard each of the

12 Commissioner's and their staff and legal assistants --

13 who you usually see sitting back here. I think most are

14 here, a couple aren't -- are just working all the time.

15 I also want to thank staff of the whole

16 Commission with regard to these rules. I think with

17 today, if we do move forward with the proposal today, I

18 think, finally, Commissioner Sommers, we're probably

19 halfway there.

20 I know the arithmetic seemed odd, but with

21 two final rules and 22 proposed rulings, I think if we

22 move forward today, we have four advanced notices of
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1 proposed rulemakings. So if I add that, that's about 28.

2 I think that's probably, at least, halfway, but that's

3 just the proposal stage.

4 As we said in the past, we set out a goal to

5 do this through December. We have three more meetings in

6 December. I think one has been officially calendared to

7 the public December 1st. We are looking for two

8 additional dates. We do know of some matters that will

9 be in January. We have not set a date, one date or two

10 dates in January, yet. And, of course, I welcome the

11 public to the meeting. And all of your comments on these

12 proposals have already helped us tremendously, but will

13 continue to help us in formal context as the rules go

14 out.

15 I think rules are all for 60 days. I think

16 the advanced notice of proposed rulemaking may be 45

17 days, but the public comment will be very important.

18 With that, before we turn to staff, I will

19 turn to Commissioner Dunn.

20 COMMISSIONER DUNN: Thank you, Mr. Chairman.

21 I want to thank everyone for joining us today for this

22 important meeting regarding the implementation of the

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1 Dodd-Frank Act.

2 Today's meeting will address proposed rules

3 regarding real-time reporting, data recordkeeping, swap

4 data repository, segregation bankruptcy rules.

5 As with previous proposed rules, I will

6 support publishing today's rule in the current form, but

7 reserve judgment on the final rules until I carefully

8 review all comments the agency receives from the public,

9 and get final redactions from our staff.

10 This, Mr. Chairman, is our fifth public

11 meeting, not the fourth.

12 CHAIRMAN GENSLER: Thank you. My math is

13 starting to slip. You can see how much I've been reading

14 rule text.

15 COMMISSIONER DUNN: I can understand. I can

16 empathize. This is our fifth public meeting to consider

17 proposed public rules pursuant to Dodd-Frank.

18 And when I have a moment to actually reflect

19 on the magnitude and the speed in which we are moving

20 forward, I am amazed.

21 You've all heard the phrase, "Too big to

22 fail." Just last week Commissioner O'Malia coined the

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1 term "Too costly to clear." My concern is whether we're

2 moving to fast to follow.

3 Our ambition deadlines calls for us to

4 complete almost every rule Dodd-Frank requires by July

5 15, 2011. However, the rest of the world is not working

6 at this pace.

7 At the 2009 Pittsburgh Summit, the G20

8 leaders declared that all standardized OTC derivatives

9 contracts should be cleared through central calendar by

10 the end of 2012.

11 Additionally, all over-the-counter

12 derivatives contracts should be reported to the CRIG

13 repositories at that time. I think there's a fine line

14 between leading the world on financial reform and leaving

15 the world behind.

16 Since we are working at an appropriate pace

17 for circumstances as described by Dodd-Frank, it is

18 imperative that we seek input and advice from our sister

19 regulators around the globe throughout this rule-writing

20 process.

21 It's my understanding the CFTC's rules team

22 has been reaching out to and cooperating internationally

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1 with those proposed rules. It is my hope and expectation

2 that our fellow regulators will continue to participate

3 in the process to promulgate these important rules.

4 It's also my hope that through this public

5 process with international cooperation, we will achieve

6 final rules that ultimately will be in harmony with rules

7 adopted by regulators internationally.

8 I would also like to emphasize how various

9 possible roundtables have been in the process of drafting

10 these proposed rules. Roundtable provides feedback that

11 lead to clear improvements in the rules that we are

12 looking at today.

13 Once again, I feel compelled to point out

14 that expense. That the expense that will be involved in

15 implementing these proposed regulations to effectively

16 implement the proposals. We will require substantial

17 investment in new technology and human resources if we

18 are to achieve the goal of reducing risk of future

19 meltdowns CFTC requires funding at a level that provides

20 technology and staff needed to do the job.

21 I would once again like to thank the staff at

22 the CFTC for all of their hard work in getting us to the
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1 point we are today.

2 CHAIRMAN GENSLER: Thank you, Commissioner

3 Dunn. Commissioner Sommers?

4 COMMISSIONER SOMMERS: Thank you, Mr.

5 Chairman. I want to start by saying how much I

6 appreciate all of the work that the staff has done on

7 these proposals today.

8 I think, as I said last week, as we continue

9 this process, the rules are becoming much more

10 complicated and comprehensive. And so for staff work and

11 all of the teams that are responsible for what's in front

12 of us today, you know, hundreds and hundred of pages of

13 these proposals, I just want to say how much I appreciate

14 everything that you have done up until the very last

15 minute making changes and accepting comments on these

16 proposals.

17 I do have a number of concerns with regard to

18 a couple of items that are on our agenda today. I think

19 that my concerns are both substantive. And also with

20 regard to the process that we're in because of these

21 types of statutory deadlines and trying to get all of

22 this done by the dates that we're required to do it.

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1 As Commissioner Dunn said, that people are

2 having trouble following what we're doing. I might be

3 having trouble following what we're doing. It's a lot to

4 keep up.

5 So I would say that I'm not sure that this

6 process is sustainable through finalizing some of these

7 rules, for putting out proposals we're hoping for public

8 comments, and appreciate everybody who is participating

9 in this process. But as we continue on trying to

10 finalize some of these rules, I think this process may be

11 unsustainable.

12 I want to say thank you to my staff for

13 helping doing an incredible job in helping me keep up

14 with all of this. And also to agree with Mike on the

15 coordination with the SEC and other foreign regulators.

16 I think it's key with the proposals that we're putting

17 out today; considering the SEC is doing some of the exact

18 same issues today to make sure we're consistent with what

19 the SEC is doing, to really talk about deliberating how

20 important that is. Is it important for our rules that we

21 put out today to be almost identical to what the SEC is

22 doing, or do we just need to try to be consist with

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1 regard to the markets that we're each regulating.

2 I guess I will end there and say how grateful

3 again I am to the staff. And I look forward to your

4 presentations today.

5 CHAIRMAN GENSLER: Thank you, Commissioner

6 Sommers. I was just -- as Commissioner Dunn and

7 Commissioner Sommers raised to the coordination for the

8 public to hear because I know and all of the

9 Commissioners know we have been sharing staff-to-staff

10 information with the SEC and Federal Reserve, various

11 bank regulators here, where appropriate, the Treasury

12 Department, and international regulators.

13 And this is primarily in Europe, but also in

14 Asia and Canada. And this includes sharing internal

15 memos, internal terms sheets, since the terms sheets were

16 developed through September, and more recently, actually,

17 proposed rule text.

18 And while the comments come very specifically

19 from our fellow regulators in the U.S., it's actually

20 been very positive, the European Commission, the FSA,

21 which is the London lead regulator, the European Central

22 Bank Committee, who has securities dealers in Europe,

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1 have all commented. And where possible, we've tried to

2 accommodate their comments.

3 But, ultimately, it's the five of us up here

4 that have to have the, you know, the statutory mandate,

5 and the President appointed us to do this.

6 So we take in those comments, but I do think

7 we're trying to be as consistent as possible, but there

8 will be some differences even with the Securities and

9 Exchange Commission.

10 I think somebody is keeping a count of the

11 meetings. But I think we're up over 250 meetings with

12 other regulators. That compares to be probably over 400

13 meetings with the public, so I don't know how to judge

14 that.

15 And I agree with you all that the statutory

16 deadlines are demanding, but I think they also help to

17 lower regulatory uncertainty.

18 These are just proposals, so we do need the

19 public comments to help us. And that's why that probably

20 thousands, maybe tens of thousands of comments we will

21 get in the spring will have to be sorted through very

22 thoughtfully before we go to the final rulings. I agree
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1 with that. Commissioner Chilton?

2 COMMISSIONER CHILTON: I agree. It's

3 difficult, but doable. I was just thinking this week,

4 seeing all of the people, all of the meetings, people

5 running in and out sort of like a beehive here into our

6 offices, groups of some of you moving, and large groups

7 from one place to another. And, you know, it's rule

8 writing on steroids.

9 But that process is a tested process.

10 Whether or not it's tested with this many rules at this

11 level, we don't know. But I think it's challenging for a

12 lot of people and a lot of folks that have been coming

13 and visiting us.

14 And challenging may be an understatement.

15 Some people sort of doubt, and some people are scared,

16 and maybe legitimately so. And some of them are sort of

17 panicky because they don't know what's going to happen.

18 Is the government going to help me out of business.

19 And, while I understand that, but when people

20 panic, a lot of times, people head for the door. How do

21 get around this or how do we get out. A lot of people

22 have done that, too. They've talked about how to get out

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1 of this. They've talk about why they are different.

2 Do you remember the church lady on Saturday

3 Night Live? Isn't that special. How convenient. Well,

4 a lot of people are special. And they actually are.

5 Some of them really are special. So it's good they've

6 been coming in and letting us know.

7 And what I've been getting caught up in sort

8 of this beehive activity -- well, we don't want to do any

9 harm. We don't want to mess up things that are going on.

10 Well, but then you have sort of step back and say: Wait

11 a minute. How do we get here? We had the regulatory

12 environment in which we had. We had the economic

13 climate, the regulated futures market has worked very

14 well.

15 I mean, Jim Newsom did a hell of a job. The

16 regulated stuff works well, but that's five trillion

17 dollars of annualized trading. The OTC is six hundred

18 trillion, and a lot of that worked well. A lot of the

19 unregulated stuff worked well, but there's a huge section

20 that has not worked so well. And that's where AIG was.

21 And that's what helped the economy go down.

22 When you talk about doing no harm, there's

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1 already a hell of a lot of harm that's already been done

2 on families and businesses. All of pensions are worth

3 half. Our college funds for kids are with worth less.

4 So there's already a lot of harm done.

5 Now, how do you figure this all out? I was

6 just thinking I needed to start backward. There are all

7 of these meetings. Everybody is freaked out. There's a

8 singularly purpose for us. We've got law to go to. As

9 much as we would like to do this or that, we've got to

10 back to the law.

11 Now, there's some flexibility. Dan Berkovitz

12 and the Chairman talked about it. There's some

13 flexibility. But there's also a lot things that you

14 can't deter, defer, or delay. There are things that are

15 set in stone, and that's where we have to go. Even if we

16 don't like it, that's what we have to do. So that's what

17 I want to do, is do what the law says.

18 Now, my last point is that this is a pretty

19 tough time because there are all these moving pieces that

20 the Commissioner Sommers talked about with the reams of

21 paper. So it's disconcerting because folks don't know

22 what's going to happen. But as we're putting these

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1 pieces -- like we are today -- of the puzzle, people are

2 starting to get a visual of what's going to happen in the

3 future, and they know where they will be.

4 So I think once we get these out, hopefully

5 most of them out in the very near future, people cannot

6 be as freaked out, cannot be as concerned. And

7 hopefully, we'll take all of these comments. And

8 hopefully that people have been here have felt like we

9 have taken their comments in. I know I have. I know

10 some of my fellow Commissioners have been working on this

11 with changes. We're actually learning from folks who are

12 commenting in.

13 So a blanket thank you, like everybody else

14 is, not just to the staff, Chairman, but to everybody

15 that's commented. It's been very helpful. I'm

16 confident. This is difficult. It's changing. But it's

17 imminently doable. Thank you.

18 CHAIRMAN GENSLER: Thank you, Commissioner

19 Chilton. Commissioner O'Malia?

20 COMMISSIONER O'MALIA: Thank you, Mr.

21 Chairman. Again, let me add my voice to the chorus

22 thanking the teams. We have Bob Wasserman and his team.
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1 Susan Nathan and Jeffrey Burns and their teams. Dave

2 Taylor and his team. Tom Leahey and his team for all of

3 their hard work on these prospective rulemakings.

4 Mr. Chairman, I'm well-aware of how

5 passionate you are about real-time reporting and your

6 desire to bring greater transparency to the swaps market.

7 However, the real-time reporting rulemaking reminds me of

8 a comment by President Teddy Roosevelt.

9 He once said, "In any moment of a decision,

10 the best thing you can do is the right thing. The next

11 best thing is the wrong thing. And the worse thing you

12 can do is nothing."

13 While I'm quite confident we are not doing

14 the latter, I'm not quite convinced we're doing the best

15 thing either by mandating a 15-minute reporting on blocks

16 of trades and large notional swaps between dealers and

17 end users, while providing little to no direction on the

18 reporting of all remaining trades.

19 I believe we owe the market some certainty as

20 to what the Commission believes is "technologically

21 practicable." If the Commission does not know, then we

22 should admit as much and attempt to identify an outer

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1 time-reporting boundary that provides a clear, safe

2 harbor for the market to conduct its business.

3 As I noted at the last rulemaking, it's

4 difficult to define the terms and conditions of a

5 post-trading reporting regime without the benefit of the

6 proposal at the mode and manner in which swaps will be

7 executed.

8 I hope this will be presented with a SEF

9 definition proposal that will enable the market to

10 transact on a range of electronic platforms that will not

11 only increase transparency, but will also lead to more

12 standardized swap products, as you have strongly

13 advocated.

14 The second concern I have with the real-time

15 reporting rules is that it fails to take into account the

16 Dodd-Frank Act, the statutory mandate to considerable

17 liquidity in the material impact that reporting may have.

18 Unlike the futures market, the swaps market

19 is comprised of a diverse set of products that trades

20 infrequently and are larger in notional value compared to

21 the futures market. The swaps market clearly has far

22 fewer participants.

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1 Congress clearly recognized that there are

2 key differences between these two markets, and expects us

3 to do our homework and understand the relationship

4 between post-trade reporting and liquidity.

5 I have some concern about a footnote in the

6 rulemaking preamble with regard to this rulemaking that

7 admits there is lack of public information regarding the

8 market liquidity. How market liquidity might be impacted

9 by post-trade reporting.

10 Specifically, footnote number 74 states:

11 "The Commission expects that, as post-trade transparency

12 is implemented in the context of the Dodd-Frank Act, new

13 data will come to light that will inform the discussion

14 and could cause subsequent revision of the proposed

15 regulation."

16 I find the shoot first ask questions later

17 approach to be problematic, and I cannot support this

18 rulemaking.

19 Mr. Chairman, the data and recordkeeping

20 rulemaking and have a far more favorable view, is a very

21 important document. It does not hide from the fact that

22 we don't know how the collection, retention, and

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1 utilization will play out in the swaps market.

2 The rules provides for over 75 requests for

3 comments. I believe this approach is appropriate. And

4 I, too, have numerous questions as to how the

5 Commission's own technological capabilities will be

6 implemented. I'm interested to know if the rulemaking

7 team has given any thought to the necessary

8 infrastructure investments the CFTC will need to make in

9 order to fill the numerous regulatory responsibilities

10 created by this proposed rule.

11 One important element in this rule is the

12 requirement to establish a unique identifier for every

13 swap, swap transaction, and market participate. I'm

14 eager to comment on this provision.

15 While I believe the policy rational

16 underlying requirement is sound, I do recognize the cost

17 burden of an ID is high and it's impact on data storage

18 demand is significant. However, I understand that the

19 domestic and international communities are eager to adopt

20 such a concept, and there is no better time to implement

21 from the beginning.

22 In addition, I believe that the rulemaking is
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1 sufficiently complex, that I would not be opposed to

2 extending a 60-day deadline to enable the comment, for

3 the public to comment on the 75 requests for comments in

4 this rulemaking.

5 The focus on today's discussion on trade

6 reporting storage analysis begs a question as to how the

7 Commission will preparing, is preparing to handle our

8 greatly expanded mission.

9 Mr. Chairman, as you are well-aware of my

10 strong desire to reorganize information and technology

11 services in order to establish an office of market data

12 collection and analysis. This entity will clarify the

13 Commission's technology needs and support the Division

14 surveillance requirements.

15 With regard to the segregation of bankruptcy

16 rule, I have great concerns with this issue. I am

17 pleased the Commission is taking prudent steps to put out

18 an advanced notice of proposed rulemaking on this complex

19 issue. This will benefit certainly for public input.

20 On November 3rd, I sent out a letter to

21 number of end-user groups manufacturing, energy, and

22 agricultural sectors asking for comment on the cost

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1 associated with individual segregation and possible

2 creation of a bifurcated system.

3 I received a range of comments -- all of

4 which will be posted on the website -- from those who

5 support it, to those who strongly oppose it. And it is

6 clear there is not a consensus among those who stand to

7 me significantly impacted by this rulemaking proposal.

8 And we must be cognizant of the diverse opinions that

9 will not be resolved without public input. I'm very

10 interested to learn what other options we are going to

11 consider. I know this is included in the rulemaking.

12 I also have concerns about the impact the

13 different proposals may have on risk management practice

14 futures commission merchants that handle swaps under this

15 new regime. It is my understanding that is has not only

16 been a long-standing industry practice for designated

17 clearing organizations not to treat FCM customer funds

18 held collectively in an omnibus account as the property

19 of particular customers, but also that FCMs and DCOs have

20 long relied on Commission guidance contained in

21 interpretive Statement No. 85-3.

22 As a result, if an FCM customer is unable to

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1 make a margin call and the FCM defaults, regardless of

2 the customer's inability to make margin call resulting in

3 a default, a DCO may recover owed margin from the FCM's

4 collective omnibus customer account.

5 If we propose to move away from our prior

6 guidance and treat segregated customer funds for cleared

7 swaps differently than how we treat futures commission

8 funds have been handled to date, we should fully consider

9 the rational for doing so.

10 I think it's important that the public is

11 aware of the Commission's prior guidance on the issue as

12 they develop their comments. And I ask that a copy of

13 that interpretation be included with the rulemaking

14 proposal that will be published in the Federal Register.

15 I think that will add to the guidance and maybe consider

16 that.

17 Mr. Chairman, in closing, I recognize that we

18 still have a great deal of work ahead of us as we all try

19 to do the best we can to get these proposals right.

20 In the interest of providing the most

21 meaningful debate, let me renew my request to move those

22 entity definitions to the next rulemaking, which I think

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1 you're prepared to do.

2 And with regard to the SEF definition, if we

3 cannot get that on the next meeting, I wouldn't be

4 opposed to extending the deadline for real-time reporting

5 in order to make sure that we have the real-time

6 reporting in the SEF in front of the public so they can

7 compare them side by side and understand how they're

8 going to transact and how they will record.

9 I also renew my request to conduct a

10 staff-led roundtable on capital and margin.

11 Let me finally thank the teams that have

12 worked so hard on these rulemakings. I appreciate that

13 you consider our input at a very late date and the

14 Chairman's, as well.

15 CHAIRMAN GENSLER: Thank you very much,

16 Commissioner O'Malia. And I thank all of the

17 Commissioners for their very thoughtful comments in these

18 opening remarks.

19 I think after we go through --

20 COMMISSIONER DUNN: Mr. Chairman, if I may?

21 CHAIRMAN GENSLER: Sure.

22 COMMISSIONER DUNN: There are a number things
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1 that were brought up here. We are under a difficult

2 timeline, and that's mandated by Congress. We've all

3 sworn to uphold the law. And that's what you're trying

4 to get us to do. It's a little like herding cats. I

5 understand that.

6 I was at the seminar at the Stern School of

7 Business on Wednesday. Rob Ingle was on our joint

8 advisory group. The SEC was there. He asked us how we

9 were doing and how we're proceeding. And they're

10 standing by to help us, but I did have questions very

11 similar to what was raised here by the Commission.

12 One of the things that I'm thoroughly

13 convinced of is that the financial industry would like us

14 to have some legal certainty there. They have spent a

15 couple of years going through the Dodd-Frank Act. And

16 they all went and did their give-and-take on that, and

17 they know what the Act says.

18 And Congress, in their wisdom, allowed the

19 commissions -- SEC, CFTC, Fed, Treasury -- leeway to make

20 some decisions in there. And I think that's important

21 because things change. What we do is we develop these

22 regulations change, and they're going to have impact on

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1 that whole financial industry that we oversee

2 collectively.

3 I would like to remind people that rulemaking

4 is much easier than legislating. And that what Congress

5 did when they developed the Administrative Procedure Act

6 -- and in my opinion was one of the best things that

7 Congress has ever done because it set out a process of

8 how we operate -- but regulations are dynamic, they've

9 not static.

10 And we are going to make mistakes in what we

11 come up with. We can't do anything with this magnitude,

12 but we have the luxury under that Administrative Act for

13 people to petition us to change those regulations if we

14 do get them wrong. I'm not saying we will get it all

15 wrong. I hope we're fine. We're 99 percent there, but

16 getting that legal certainty out there, letting people

17 get on to understand what the rules are so they can

18 continue in their business. And, in my opinion, is

19 extremely important as we go through this uncertainty

20 that has surrounded the financial industry in these last

21 couple of years.

22 And so there are a lot of warps as we go

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1 through the process. But I think at the end of the day,

2 we get to do plastic surgery on those, and we will have

3 an opportunity to get it right. Maybe not this

4 Commission, futures Commissions will get those petitions

5 if something has gone wrong. And it will get corrected.

6 It's an ongoing process there.

7 As we do things, it has impact on that

8 financial service environment. And that in itself will

9 make for changes that have to take place. So at the end

10 of the day, I'm going to get forward with the process.

11 I want to get these proposed rules out to get

12 down to the hard-and-fast situation of making those final

13 rules out there, but even the final rules are not final.

14 You're still going to have an opportunities to make

15 changes. Thank you.

16 CHAIRMAN GENSLER: Thank you, Commissioner

17 Dunn. Again, I'm thanking everybody. I was going to

18 turn to the teams. But after we go through each of these

19 -- and I know we have a large agenda and then a comment

20 period in the next three meetings in what might possibly

21 be in January. So, if I can, Commissioner O'Malia, if I

22 can sort of respond.

29

1 I think we chatted privately. I think we're

2 pretty much aligned, maybe with one exception in there.

3 But if we can do that whole scheduling part at the end

4 after we do everything, if that's all right.

5 I'd like to now begin with a presentation and

6 discussion on a notice of proposed rulemaking and

7 advanced notice proposed rulemaking. And I will leave it

8 to the team here in front of me to how you discuss both.

9 But we will have to have two votes and two motions and

10 things like that.

11 But what's really being discussed here is

12 with regard to the protection of customer funds, whether

13 it's in the customized or bilateral world where you're in

14 a swap dealer holding those funds, or margins that might

15 be posted, and how that's protecting segregation and

16 bankruptcy, or where we're going to be asking further

17 public input in this advanced notice. And hopefully, or

18 at least staff is recommending it going to clear spots.

19 Ananda Radhakishnan runs our Division of

20 Clearing and Intermediary Oversight. Bob Wasserman, the

21 ever present member of the team. But he is the team

22 leader of the segregation and bankruptcy. Martin White,
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30

1 from the Office of General Counsel, who has researched

2 not only 85-3, but all sorts of matters on clearing back

3 to 1938. I've been reading some of your memos, Martin.

4 And then Dan Berkovitz, our general counsel. So I will

5 hand it over to you.

6 MR. WASSERMAN: Thank you, Mr. Chairman. I'm

7 Bob Wasserman of the Division of Clearing and

8 Intermediary Oversight. As mentioned, I'm the lead for

9 the segregation and bankruptcy team.

10 I would like to express my appreciation to

11 all of other members of the team. Martin White, sitting

12 next to the Office of General Counsel. My DCIO

13 colleagues, Nancy, Jennifer Bower, and John DeBorg. And

14 from the Office of Chief Economist, Dave Griffin and Todd

15 Burns.

16 I'm presenting two documents today. A notice

17 of proposed rulemaking concerning protection of

18 collateral of counterparties to unclear swaps, which also

19 addresses a number of housekeeping matters that I will

20 describe later. And then an advanced notice of proposed

21 rulemaking and a request for comment concerning

22 protection of cleared swap customers before and after

31

1 commodity broker bankruptcies with respect to the notice

2 of proposed rulemaking concerning protection of

3 collateral counterparties to uncleared swaps.

4 In Section 724(c) of Dodd-Frank, which is

5 codified as new section 4s(1) of the Commodity Exchange

6 Act, Congress enacted Divisions to require swap dealers

7 and major swap participants to notify their

8 counterparties of what the statute described as a right

9 to require segregation of property margining the

10 obligations of their counterparties.

11 Use of the term "right" to describe what

12 would otherwise be a term for commercial negotiation

13 suggests that Congress thought that segregation of margin

14 is important. However, the terms of the statute make it

15 clear that a counterparty may elect to require

16 segregation, but also may elect not to require

17 segregation.

18 For example, Section 4s(l)(4) deals with

19 reporting requirements where a counterparty does not

20 choose to require segregation. Moreover, I've seen no

21 appendix in a statute to a swap that are offering

22 different terms depending upon whether the counterparty

32

1 elects segregation or not.

2 In order to enhance the likelihood that this

3 important decision will be addressed at an appropriate

4 level, proposed regulation 23.6-01 requires that notice

5 be delivered to the risk officer of a counterparty, or,

6 if there is no such officer, to the CEO, or the highest

7 level decision-maker of the counterparty.

8 And while the statute may be read to require

9 such notification at the beginning of each swap, the Rule

10 provides that notification particular counterparty by a

11 particular swap dealer or MSP need only be made once in

12 the calendar year.

13 The counterparty may change its election at

14 any time upon delivery of written notice. But that

15 change would only be effective with respect to swaps

16 entered into between the parties after the delivery of

17 that notice.

18 Now, the statute says that this right does

19 not apply to variation margin. Accordingly, regulation

20 23.600 defines both variation and initial margin

21 delineated between the two based on time. Variation

22 margin covers current exposure arising from past changes

33

1 in the market value of a position, while an initial

2 margin is based on anticipation exposure to future

3 changes in the value of a swap.

4 Regulation sets forth requirements where the

5 counterparty elect to segregate. Proposed regulation

6 23.602 would require that initial margin be segregated to

7 the custodian that is independent of both the swap dealer

8 or major swap participate and the counterparty; although

9 an affiliate by either party would be eligible under the

10 proposed regulation.

11 The Rules for proposed leave the choice of

12 independent negotiation between the parties, but we

13 explicitly ask for comment on both one party or the other

14 should be granted that choice. If so, what criteria

15 should be applied.

16 Regulation 23.602 also sets forth

17 requirements for the custody agreement. The agreement

18 must be in writing and must include the custodian as a

19 party.

20 The regulation also requires clarity in the

21 agreement concerning when either party may have gained

22 control over the margin in accordance of the agreement
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1 between the parties in order to avoid the expense of a

2 time consuming interpleader proceeding, which is what

3 would happen if the custodian was faced with a situation

4 where there is no clear answer.

5 It also requires that the turnover of control

6 must happen with the statement in writing with an

7 authorized representative of a party seeking such control

8 made under penalty of perjury.

9 Regulation 23.603 governs investment for

10 segregation collateral, limiting such investments to

11 those permitted under regulation 1.25, which is the

12 standard Commission applied to customer funds posted as

13 collateral for exchange of trading futures; I should note

14 that the regulation we're discussing here only governs

15 investments of margin statutes and is posted by a

16 counterparty and does not govern what collateral is

17 eligible to be posted at such margin.

18 As required by the statute, the regulation

19 implies that a swap dealer and counterparty may enter

20 into any commercial arrangement in writing regarding the

21 investment of segregated initial margin, and the related

22 allocation of gains and losses resulting from that

35

1 investment. The proposed effective date for those rules

2 is six months after promulgation of final rules. And we

3 request comment as to whether that period is sufficient.

4 This notice of proposed rulemaking address

5 two housekeeping matters: First, Section 713(c) of

6 Dodd-Frank requires the Commission to exercise its

7 authority to ensure that securities held in a portfolio

8 margin account carried as a futures account are customer

9 property. And that the owners of those accounts are

10 customers for purposes of the commodities brokers

11 revisions of the Bankruptcy Code.

12 This provision is implemented through

13 amendments to Part 190, the Commission's bankruptcy

14 regulations concerning the definition of customer and

15 customer property.

16 Second, and outside of Dodd-Frank, the

17 Statutory Time-Periods Amendments Act of 2009 changed,

18 among other things, one of time period in the commodity

19 broker section of Bankruptcy Code from five business days

20 to seven calendar days. This rulemaking changes the

21 Commission's Part 190 bankruptcy regulations to conform

22 to that change.

36

1 I would now like to turn to the advanced

2 notice of proposed rulemaking and request for comment

3 concerning protection of cleared swaps customers before

4 and after commodity broker bankruptcies.

5 CHAIRMAN GENSLER: I would just ask -- it's

6 up to you, but since we're going to vote on them

7 separately, do you want to take them separately?

8 MR. WASSERMAN: That would be great.

9 CHAIRMAN GENSLER: I think I will entertain a

10 motion on staff redaction on the Notice of Proposed

11 Rulemaking on Segregation and Bankruptcy Matters for

12 Uncleared Swaps.

13 COMMISSIONER DUNN: So moved.

14 COMMISSIONER SOMMERS: Second.

15 CHAIRMAN GENSLER: Having been moved and

16 seconded, we will talk about it a little bit.

17 I support the proposed rulemaking concerning

18 protection of collateral to counterparties to these

19 uncleared swaps.

20 I think the proposal does include important

21 protections for end users when entering into bilateral or

22 what I'll call "customized swaps." The proposal follows

37

1 in congressional directions and allow end users to have a

2 choice, if they so decide to have it segregated, the

3 initial margin is segregated and posted with a

4 third-party custodian.

5 I think these are important protections for

6 users of swaps, whether they be corporations, whether

7 they be pension funds, whether they be asset managers.

8 The proposal includes also the necessary

9 housekeeping details that Bob Wasserman also kindly took

10 us through Section 190 and other parts with regard to

11 that. So I'm just going to say that I support it, but I

12 don't have any questions for you. Commissioner Dunn?

13 COMMISSIONER DUNN: Mr. Chairman, I have no

14 question on this, as well. I just want to point out that

15 both this and the Advanced Notice for Proposed Rulemaking

16 were the subject of roundtable meeting that the staff had

17 at the request of the Commissioners.

18 And I think it vastly improved both pieces

19 of the regulation that we're looking at today. And in

20 that same vein, I would support Commissioner O'Malia's

21 request for a roundtable meeting on other issues.

22 CHAIRMAN GENSLER: Although I said I would
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38

1 reserve earlier until later, I think I've told each of

2 you probably privately I support this capital margin

3 roundtable. Commissioner Sommers?

4 COMMISSIONER SOMMERS: I don't have any

5 questions.

6 CHAIRMAN GENSLER: Commissioner Chilton?

7 COMMISSIONER CHILTON: Thank you all for your

8 work. This was a tough one. We got one letter from

9 these comment letters that talks about these tri-party

10 agreements. I'm just going to quote from the letter:

11 "This Commission should seek the views of the

12 bilateral participants on the use tri-party custody

13 arrangement for the judicial of variation margin to

14 mitigate risks in the swaps market and the effect on

15 their participation of the cleared swaps market if

16 they're not permitted to use tri-party custody

17 agreements, as is common in the open counter market."

18 Can you discuss whether or not this rule

19 impacts that, or whether or not this would forestall

20 anything with regard to that in the future?

21 MR. WASSERMAN: It certainly would not

22 forestall anything. Actually, what it does is with

39

1 respect to the initial --

2 COMMISSIONER CHILTON: Different rule?

3 MR. WASSERMAN: I'm sorry?

4 COMMISSIONER CHILTON: It would be in a

5 different rule or a different proposal, perhaps? Would

6 it be in a different proposal?

7 MR. WASSERMAN: No. Actually, what this

8 proposal does with respect to the initial margin is that

9 it provides, as the statute requires, that the customer

10 -- excuse me-- that the counterparty, rather, be given

11 the right to elect whether to require segregation or not.

12 If they elect to require segregation, it

13 requires a tri-party agreement between the counterparty,

14 the swap dealer, and the custodian.

15 Now, the statute was very clear that this

16 right only applies, as a right, applies only to initial

17 margin. And so it does not grant the right for variation

18 margin because that's what Congress decided.

19 Having said that, if the parties decide to

20 also segregate variation margin, they could put that in

21 same account with the initial margin, and the proposed

22 regulation explicitly permits that.

40

1 COMMISSIONER CHILTON: Okay. And there is

2 nothing, if the Commission at some point decided to do

3 something else, we wouldn't be forestalled?

4 There's enough language here to hook it that

5 you wouldn't be coming to us and saying: You know that

6 thing that you asked, it might be a good idea, but we

7 can't do it because of how we wrote the proposal. We

8 retain flexibility in this rule if we want to do

9 something.

10 And I'm not suggesting where we'd come up

11 from where I am, but I want to make sure we're

12 forestalling something.

13 MR. RADHAKISHNAN: Yes, we're not

14 forestalling. We don't allow the use of tri-party

15 custody agreements in clear context because the concern

16 is the FCM must have an unfeathered right to customer

17 margin and it would have a third party involved.

18 The bank can say no. Somebody can slap an

19 order on the bank saying don't release the money. And

20 that's why we're very uncomfortable with tri-party

21 agreements.

22 The concern is anytime the FCM needs to get

41

1 customer margin paid to the clearing house, it should be

2 unfeathered. I think that's what they're talking about.

3 COMMISSIONER CHILTON. Thank you both.

4 CHAIRMAN GENSLER: But your answer was

5 unclear in bilateral --

6 MR. RADHAKISHNAN: Bilateral. That's right.

7 We allow that.

8 CHAIRMAN GENSLER: Thank you, Commissioner

9 Chilton. Not hearing any further questions, I will, I

10 guess, call the voice vote. All those in fair say "Aye."

11 (Chorus of Ayes.)

12 CHAIRMAN GENSLER: Any opposed? None. The

13 ayes appearing to have it. They ayes have it.

14 Bob, if you want to chat about the advanced

15 notice.

16 MR. WASSERMAN: Thank you. Yes. Section

17 724(a) of Dodd-Frank Act requires segregation of swaps

18 customer fund in a clearing environment. And 724(b)

19 addresses the bankruptcy treatment of cleared swaps. To

20 implement these provision, the Commission will ultimately

21 need to propose regulations.

22 What makes this issue tricky is something
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1 that can be described as fellow customer risk.

2 Under the futures model for protection, the

3 futures customer --

4 CHAIRMAN GENSLER: Is that fellow customer

5 risk?

6 MR. WASSERMAN: Yes. Under the futures model

7 of futures customer fund that has been used for decades,

8 customer funds are protected on an omnibus basis.

9 Customer assets are segregated from the FCM's own assets

10 and liabilities, and the creditor cannot attached

11 customer funds.

12 However, FCMs post-collateral to clearing

13 organization on an omnibus basis, that is clearing house

14 will have one account for all an FCMs futures customers,

15 and a clearing house legally has no knowledge of or

16 relationship to any individual futures customer than they

17 act now -- a practical basis have such knowledge for risk

18 mismanagement purposes, but on a legal basis they have no

19 such knowledge.

20 If a customer defaults to the FCM with

21 respect to the losses on futures contracts, it is the

22 responsibility of the FCM to make good of the loss from

43

1 its own capital to avoid permitting the funds of one

2 futures customer being used to margin another customer's

3 contracts. And, in fact, every day it defaults by

4 customer FCMs, which are made good by the FCM.

5 However, if a customer loss exceeds FCM's

6 available capital, then FCM will default for clearing

7 organization. So the clearing house will use all of the

8 collateral posted by the FCM on behalf of its customers,

9 including collateral attributable in fact to

10 non-defaulting customers.

11 In the commodity broker bankruptcy, that

12 would follow all of the FCMs futures customers, not just

13 those who may have been dealing with contracts cleared by

14 that clearing house, but all of those customers would

15 share proportionately in those losses.

16 And, as has been discussed, we've had

17 extensive consultations with a variety of stakeholders on

18 these issues, including customers, futures commission

19 merchants, and derivatives clearing organizations.

20 These consultations took place at bilateral

21 meetings reflected on the Commissioner's website and at

22 the October 22nd staff roundtable.

44

1 Some swaps customer, many of whom are used

2 to successfully negotiating the segregation of collateral

3 they currently post for uncleared swaps as mentioned are

4 concerned then the cleared swaps environment, they will

5 be exposed to those risks posed by their fellow

6 customers. They note they will be required to clear many

7 swaps and ask why they should be exposed to a new risk,

8 which is largely out of their control as part of that

9 move to clearing.

10 Firms in clearing organization express

11 concerns about the costs to protect customers

12 individually. They note that certain models individual

13 customer protection have extremely high administrative

14 cost in terms of day-to-day compliance. And others

15 create significant costs due to changes in the risk

16 environment. And some of those costs and some of those

17 concerns have also been expressed by customers.

18 As to that misenvironmental clearing

19 organization use a variety of resources in addressing

20 potential FCMs arising from a members customer account.

21 These resources, which are frequently referred to as a

22 "waterfall," typically include an order to the property

45

1 of a defaulting member, a margin posted on behalf of all

2 of that members customers, a portion of capital of the

3 derivatives clearing organization, and default fund

4 contributions of other members of the derivatives

5 clearing organization.

6 If the collateral of non-defaulting swaps

7 customers of an FCM is not available as default

8 resources, clearing organization will need to change

9 their models for sizing their default waterfalls and for

10 the size of the components of those default waterfalls.

11 One means to do this would be to increase margin level.

12 And at the roundtable, one clearing

13 organization estimated it might need to increase

14 collateral from a 99 percent confidence level, to 99.99

15 percent confident level, which would cause an increase in

16 required collateral for each customer of approximately 60

17 percent.

18 Those increases and required margin levels

19 would be passed on to customers as a FCM's required

20 collect margin from a customer at a level no less than a

21 margin a clearing house collects from the members.

22 An alternative approach to meeting this
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46

1 challenge would be to increase clearing members default

2 fund contributions. FCM's note, however, if they're

3 required to permit added capital by making these default

4 fund contributions, they would pass those costs on to

5 customers.

6 As I said, come customers have expressed

7 concerns about these costs, as well. We've heard a

8 number of fairly rough estimates of these costs, but have

9 not yet obtained from anyone a really thorough, detailed

10 analysis.

11 The staff is accordingly recommending that

12 the Commission publish an advanced notice of proposed

13 rulemaking to request for comment to obtain information

14 that we in the Commission can use to analyze these very

15 important issues of costs.

16 The proposed notice suggests four models for

17 customer production: Existing futures omnibus model has

18 three alternatives. We ask a detailed set of questions

19 endeavoring to tease out the details of costs of each

20 model relative to that existing omnibus model.

21 The first alternative model we described is

22 full, physical segregation where each customer's property

47

1 would be kept separate and treated separately from every

2 other customer property at each level of the process at

3 the FCM, at the clearing organization, and in each

4 depository.

5 The second alternative model is legal

6 segregation with commingling. In this model, the

7 collateral of all customers can be kept on an omnibus

8 basis, but will be attributed to each customer based on

9 the collateral requirement set by the clearing house for

10 that customer's positions.

11 The staff believes that this model

12 significantly reduces administrative costs, but may well

13 involve risk costs; and I should note while that is the

14 what staff believes, again our hope is go get more

15 detailed comments from the folks out there in the

16 industry to essentially tail the costs.

17 The third alternative can be referred to as

18 moving customers to the back of the waterfall. This

19 model is similar to the second model in that customers

20 are treated individually, but it's different in that

21 clearing organization may continue to rely on remaining

22 collateral of the non-defaulting customers as a default

48

1 resource. However, clearing organizations would be

2 required first to apply its own contribution to default

3 resources and the entire guarantee fund contributions of

4 non-defaulting members. And so the customers would

5 essentially be moved from more of the front-line

6 exposure, to the very much the end-of-the-line exposure.

7 That model would leave the collateral on

8 non-defaulting customers, someone at risk, but only in

9 the most extreme of circumstances that is in a default

10 which consumes the entire guarantee fund. That, however,

11 permitting the contributions of non-defaulting customers

12 to remain as part of the available resources may result

13 in minimizing the risk costs.

14 We then have a detailed set of questions

15 addressed to each SEG holder group seeking comment on the

16 cost of each alternative model compared to the futures

17 omnibus model.

18 First, we asked customers about costs and

19 benefits from their perspective.

20 Next, we asked firms about the differences in

21 their activities that would result from each model, that

22 estimates in initial and analyzed ongoing costs for those

49

1 incremental activities, and about how those estimates

2 could be applied industry-wide.

3 We asked about implemental costs and changes

4 in the risk environment, whether those costs are the same

5 for each member or a function activity level, and how

6 those estimates can be applied industry-wide.

7 Then, we asked clearing organizations about

8 their implemental activities and costs and for their

9 views on how costs would changes for their members. In

10 particular, we asked about changes to their default

11 management structure, and the costs imposed by those

12 changes on the clearing organization and on its members.

13 We asked all commentators for comments on

14 optional models. That is models where customer choose on

15 omnibus collateral protection, or individual collateral

16 protection. How could costs be attributed to and charged

17 to customers locked in. How could those payments be used

18 to address those costs. In particular, how much costs

19 would be avoidable in an optional model. And what

20 changes would we need to make in our bankruptcy approach

21 to accommodate an optional model.

22 We also asked questions about how customers
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1 can under the base model -- this is a suggestion a number

2 of members made -- how can customers risk manage their

3 FCMs. That is provide market discipline by doing

4 business with FCMs that pose less risk. Also, to what

5 extent would each alternative model reach moral hazard

6 concerns. Also, what information would each customer

7 need to effectively manage the risk posed by fellow

8 customers. What is or would be the costs for a customer

9 to conduct this risk management, and how does that costs

10 translate to the industry as a whole.

11 We hope the commentators will provide

12 detailed answers to these questions. And I would like to

13 thank you for the opportunity to describe these releases.

14 CHAIRMAN GENSLER: Thank you, Bob. Do I hear

15 a motion to staff recommendation to publish an Advanced

16 Notice of Proposed Rulemaking on Cleared Segregation?

17 COMMISSIONER DUNN: So moved.

18 COMMISSIONER SOMMERS: Second.

19 CHAIRMAN GENSLER: And now I'll be chatting

20 about it, but I think the first thing I was going to do

21 is to ask unanimous consent to take up Commissioner

22 O'Malia's suggestion including 85-3 with a short question

51

1 so it would add a question. I will just roughly read it.

2 But that we'd ask for commentator view on 85-3, how it

3 should inform the rulemaking on this. I don't know what

4 you call this topic, but the rulemaking on swap

5 segregation.

6 COMMISSIONER O'MALIA: I really appreciate

7 you're allowing us to that, and I support it.

8 CHAIRMAN GENSLER: So a unanimous consent.

9 Not hearing any objection, or are there any objections?

10 Not hearing any objection at this time, it is now passed

11 by unanimous consent.

12 I support the advanced notice of proposed

13 rulemaking concerning protection of collateral to have

14 customer funds. I will have a couple of questions, but

15 let me say why I support it.

16 I think there has been much public input on

17 this. And I do thank the public and the staff for

18 holding this really very good roundtable in October. I

19 think it's appropriate to formalized and get this public

20 comment in a file in and a way to solicit input. And I'm

21 hopeful this input comes from broad spectrum.

22 We've heard from a lot of pension funds and

52

1 asset managers, who I think generally, not always, but

2 generally would like more individual protections. We

3 heard from futures commission merchants and clearing

4 houses that generally, not always, have ventured to other

5 side.

6 I think this a very complicated matter. And

7 I'm very pleased we will move forward and have an

8 advanced notice for proposed rulemaking and hearing from

9 the public.

10 I just want to the ask you two questions,

11 though. And I'm glad Commissioner O'Malia suggested

12 85-3. But I have a question probably for general

13 counsel, but anyone at the table.

14 I understand that statutory provisions for

15 swaps clearing are almost the same as in futures

16 clearing, but have a difference. If you could just

17 describe the difference between the statutory provision

18 and the two? And it might be slight, but maybe you can

19 help us out.

20 MR. BERKOVITZ: That's correct, Mr. Chairman.

21 The statutory provision governing the clearing and

22 futures contract which has been in the statute since --

53

1 the original provisions were in the Commodities Exchange

2 Act. But the provision, I will quote, was in the 1968

3 Amendments and 4d(b) of the Commodity Exchange Act, which

4 basically states:

5 "It shall be unlawful for any person,

6 including, but not limited to any clearing organization

7 that has received margin funds that is held in a

8 segregated account to hold, dispose of, or use any such

9 monies, securities, or property as belonging to the

10 depositing futures commission merchant or any person

11 other than the customers of such futures commission

12 merchants."

13 So you can't use the customer money deposited

14 in these accounts belonging to the FCM or any such person

15 other than the customer of such futures.

16 CHAIRMAN GENSLER: So that is what's in our

17 current law that's added by statute in 1968 and that for

18 futures?

19 MR. BERKOVITZ: That's correct.

20 CHAIRMAN GENSLER: What is it for swaps?

21 MR. BERKOVITZ: For swaps, Dodd-Frank added

22 to the Commodities Exchange Act 4d(f)(6), Which is
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1 virtually identical to the futures provision. But the

2 final clause relevant here prohibits the use of those

3 similar, those funds by similar persons, or treating it

4 as belonging to the depositing futures commission

5 merchant or any person other than the swaps customer for

6 the futures commission merchant.

7 So it refers to the swaps customer in the

8 singular, the provision added by Dodd-Frank. But the

9 existing provision in the Commodities Exchange Act refer

10 to swaps customers in plura. The difference between

11 singular and plural the word "customer."

12 CHAIRMAN GENSLER: So largely the same, but

13 in the swaps world, in the futures world in the 1968

14 provision talks about segregation and protection of the

15 customers with an "s," and then swaps customer without an

16 "s"?

17 MR. BERKOVITZ: Correct.

18 CHAIRMAN GENSLER: I'm assuming we will hear

19 some comments through the advanced notice of proposed

20 rulemaking on that.

21 My other question is: As I understand it,

22 maybe way back from the 1930s, funds are not supposed to

55

1 commingled except for convenience. Can you tell me what

2 you think the word "convenience" means? And I promise

3 that's my last question.

4 MR. BERKOVITZ: Generally, the Commission has

5 interpreted the word "convenience" generally to mean for

6 administrative convenience. How to keep track of these

7 funds for accounting administrative convenience.

8 CHAIRMAN GENSLER: Commissioner Dunn?

9 COMMISSIONER DUNN: So it does not mean the

10 convenience of the customer?

11 MR. BERKOVITZ: And the convenience of the

12 FCM.

13 COMMISSIONER DUNN: Just one quick question

14 on the timing of this because this is an ANPR, and you're

15 now four different models, and you're asking for 45 days,

16 folks to comment on those models.

17 What do you envision as staff reviewing those

18 and the timing of coming out with the proposed

19 regulation, if that's what we end up at the end of the

20 day would be?

21 MR. WASSERMAN: I expect that when we get

22 these comments in, we are going to very quickly and

56

1 diligently look at them. And I rather expect we may try

2 to do follow up, depending upon the clarity of the

3 comment, depending upon the question the comments,

4 themselves. Raise.

5 And I would expect within a period of, I will

6 guess a month -- that's probably about as much I will be

7 able to get -- to essentially do follow up. And

8 essentially try to study this issue so that we can

9 essentially move to a recommended proposal.

10 COMMISSIONER DUNN: I'm sorry, I had an angel

11 talking over my shoulder. There was talk about getting

12 some type of a study ongoing through. And this is in

13 lieu of that study, I guess. But you don't envision

14 staff doing any study or doing any peer review or things

15 like that?

16 MR. RADHAKISHNAN: We could do a study, but

17 it would have to be quick because we had to propose a new

18 rule for clearing swaps. Right now there is no rule on

19 clearing swaps, so it would have to be a very aggressive

20 study.

21 COMMISSIONER DUNN: It then occurs to me that

22 for us to get one of the models that makes the most sense

57

1 for all individuals involved, that comments that are

2 jointly submitted then by a number of different entities

3 that have a dog in the fight may go a long way in giving

4 us the direction we might be going to.

5 MR. RADHAKISHNAN: That might be the case.

6 If you look at a roundtable, the firms and DCOs are

7 pretty much on one side. And some of the MFAs were on

8 the side individual SEG.

9 Black Rock is an individual SEG and some of

10 the mutual funds are on the side of the individual SEG.

11 So it's basically you've got a group of people who want

12 an individual SEG. And the industry right now is saying,

13 you know, it's going to be considered costly and so and

14 so.

15 And I guess the issue at the end of day is

16 you cannot do it just for swaps and not do it for

17 futures. You have to change all the systems. It doesn't

18 make any sense. So, practicably if the industry is going

19 to change it, you'll have to change it for both swaps.

20 COMMISSIONER DUNN: My point being, that if

21 those various interest groups could get together during

22 that 45-day period and say here is a solution, a firm
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58

1 solution; although it doesn't give everybody 100 percent

2 what they want, staff would look favorable on that?

3 MR. RADHAKISHNAN: Absolutely. I think if

4 the industry came up with a solution jointly, I think

5 certainly we would look upon that, assuming that it would

6 make sense.

7 The other thing we have to consider in

8 bankruptcy, depending on what they propose, staff may

9 have to propose further amendments to our bankruptcy

10 rule, assuming it doesn't conflict with the Code.

11 Let's assume that, if it does not conflict

12 with the Code, then staff may have to propose changes to

13 our bankruptcy rule. But that should not be.

14 COMMISSIONER DUNN: Thank you.

15 CHAIRMAN GENSLER: Before I turn to

16 Commissioner Sommers, I just have one follow up.

17 On the timing, if we run 45-days, and it does

18 -- I should say for the public and the press -- it takes

19 a little while to get things in the Federal Register. It

20 doesn't happen overnight. We have Thanksgiving. This

21 might not even be in the Federal Register until after

22 Thanksgiving, if I envision how this works, with how the

59

1 folks over at the Federal Register. So this comment

2 period will run well into January.

3 If you take so time to review it, we're

4 probably looking at a proposal in the latter part of

5 February. But I personally believe that we have to sort

6 of give guidance on this if clearing houses are going to

7 be up and running in the next summer and fall, that we

8 have to finalize all of this.

9 So I think the public debate has been

10 helpful. But at some point, the five of us are going to

11 have to decide. It may well be that we end up exactly

12 the way it is in the futures world, currently. Or, we

13 might propose something that moves toward the direction

14 of better SEG. I just think this is important, it's a

15 good process, but at some point, the five of us, with

16 staff's help, we will have to make a recommendation and a

17 proposal. I think that's really critical part to this.

18 I don't know. Ananda, if you wanted to --

19 MR. RADHAKISHNAN: No. That's absolutely

20 correct, Mr. Chairman. I submit the earlier we do that

21 the better. I think then everybody knows what the

22 situation is.

60

1 CHAIRMAN GENSLER: And the other thing,

2 Ananda, while you did express an interesting, helpful

3 perspective, there is a difference in the statute by one

4 "s."

5 MR. RADHAKISHNAN: That is absolutely

6 correct.

7 CHAIRMAN GENSLER: As I can assure the

8 public, the general counsel's office has done research

9 back to the 1930s. It's been very helpful. I'm glad

10 we're putting this 85-3 in. I almost want to put the

11 general counsel's memo on the website.

12 Dan, you can think about that. I mean, it's

13 quite a tour de force on legislative history.

14 Commissioner Sommers?

15 COMMISSIONER SOMMERS: Thank you, Mr.

16 Chairman. I guess I would start by saying, although I'm

17 not opposing the ANPR, it's not my preferred path. I

18 think at least one of the options that we've included in

19 this proposal is somewhat unacceptable at this point.

20 I associate myself with Commissioner Dunn's

21 comments on the study and how important I think it would

22 be for the industry or economists to do a study with

61

1 regard to feasibility of individual segregation.

2 I understand there are questions about it,

3 and part of the industry, it's the way they do business,

4 and that's important for them to protect. But at this

5 point, for us, I just don't know how we can move forward

6 with that particular option. Yet, it's an option in this

7 ANPR.

8 So I look forward to the public's comments.

9 I guess I would suggest that 45 days is probably not

10 enough for the industry to pull together some kind of

11 study that would be timely enough for us to be able to

12 consider before we end up proposed a ruling or finalizing

13 a ruling it this area, but I'm not sure it precludes us

14 from going down that path in the future.

15 If we can find that these are issues that we

16 had not considered with regard to individual segregation,

17 that by proposing the futures style, segregation per

18 swaps doesn't preclude us from in the future choosing

19 another path, whether it's for both futures and swaps or

20 for swaps separately.

21 And I guess I would also be remiss if I

22 didn't say that I think Congress would have been a little
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62

1 more direct in their statutory language if they expected

2 us to treat these two separately.

3 CHAIRMAN GENSLER: Thank you, Commissioner

4 Sommers. Commissioner Chilton?

5 COMMISSIONER CHILTON: I agree. Some more

6 information would be helpful so when people tell us about

7 the cost, I'd like not just to know they think it's going

8 to mean "X," but how they got there. It's not too

9 helpful. We've already got a lot of that. It's not

10 going to cost a lot, or it's going to cost a whole bunch.

11 It doesn't help us much if we just get a number.

12 CHAIRMAN GENSLER: Do you want to comment on

13 that?

14 MR. WASSERMAN: Yes. We asked a lot of very

15 detailed questions to tease out not just simply what is

16 the total cost going be, but what are the things you will

17 need to differentiate how much that is going to cost for

18 you. How is it that one extends that to the entire

19 industry.

20 And we're asking that really for each of the

21 alternative models compared to the base, and looking at

22 that separately compared to the administrative policy

63

1 versus the risk costs.

2 COMMISSIONER CHILTON: Just one other. Which

3 is on the operational commingle, but the separate system.

4 How would that harmonize or not with the international

5 regulatory systems?

6 MR. WASSERMAN: I think my understanding is

7 that the European union is currently working to develop

8 some approaches to this. One of the approaches that has

9 have been described to me by some of the European

10 regulators as aspirational is more of an individual

11 customer protection approach.

12 Part of it is, I think this sort of customer

13 protection needs to follow the bankruptcy codes in each

14 jurisdiction. And so our bankruptcy codes provide

15 certain opportunities and certain approaches.

16 The UK is different and France and Germany,

17 they're all different. And so to get precisely in

18 harmonized approach might be difficult unless we can, at

19 the bankruptcy code level, also get harmonization.

20 CHAIRMAN GENSLER: Thank you, Commissioner

21 Chilton. Commissioner O'Malia? And then I will have a

22 follow-up question after Commissioner O'Malia.

64

1 COMMISSIONER O'MALIA: You know how hard it

2 is to ask questions when everybody else has gone before

3 you because Bart just took one of mine, so.

4 But part 2 of international question is: I

5 understand the LCH has a system that's similar to the

6 individual SEG. Is that accurate, and does that square

7 with our individual SEG proposal we have? Maybe you can

8 explain any differences or similarities.

9 MR. WASSERMAN: LCH has been working on what

10 they call their "FCM model." And they have been looking

11 at for customers, essentially for customer swaps.

12 Right now they're not yet doing customer

13 swaps. I believe they are rather just clearing on

14 between members. They have been working towards

15 individual customer protections themselves.

16 One of the difficulties in doing that one for

17 clearing house would be the way we currently do it in the

18 futures model. Essentially, you don't identify customers

19 by clearing house, rather. Essentially, the customers

20 have their claims based on their positions across

21 whatever clearing house they are trading with.

22 Whatever money comes back, you look at total

65

1 of claims of each customer, and that's divided pro rata

2 without regard to which clearing house.

3 So if we tried to do that, we need to come to

4 you with a way to say: Okay. That is for LCH customer.

5 This is for the CME customers. And if you're both, then

6 we have to figure out how it is we'll allocate your

7 collateral between your LCH claim and your CME claim.

8 And so I guess my answer is it might be

9 difficult to do this in a way that says we're going treat

10 customers of one clearing house different than customers

11 who are treating it as a separate one, especially

12 because, in many cases, the same customers will be

13 involved.

14 COMMISSIONER O'MALIA: Mr. Chairman, I do

15 appreciate you adding 85-3. This is single-spaced, 405

16 pages. I guess for the benefit of everybody, Dan or

17 Martin, if somebody wants to take a stab at kind of

18 summarizing at what this actually says and why it is

19 relevant to this today.

20 CHAIRMAN GENSLER: If I could add. Anything

21 you want to do on that tour de force legislation history,

22 keep it to, you know, so the public can understand it.
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1 MR. BERKOVITZ: 85-3 addressed the basic

2 questions that Bob mentioned in his statement and that

3 we've have been talking about: Can derivatives clearing

4 organization clearing agency use all the funds in the

5 segregated account in the event of an FCM default, not

6 just the customer that may have precipitated the default,

7 but all of the customers that were not in default, 85-3

8 concluded that they could.

9 And it basically said that the property and

10 that the statute, that statute protects the property of

11 the customers collectively, not singularly. And

12 therefore, the individual customers did not have that

13 individual protection that basically protected customers

14 collectively.

15 And it relied upon the fact that the --

16 typically, these funds were held collectively rather than

17 singularly. That it had been the long-standing industry

18 practice. And so it interpreted the statute to support

19 that practice.

20 COMMISSIONER O'MALIA: Okay.

21 MR. WASSERMAN: I think I would note a couple

22 of things in the division. As I mentioned before,

67

1 clearing houses today and certainly back in 1985 looked

2 at customer collateral on a omnibus basis.

3 And one of the things is that, I think back

4 in 1985, both legally and actually, clearing houses did

5 not know the positions of individual customers. And it

6 would have, I think given the technology available now

7 than then, it would have been rather difficult to

8 identify even a daily basis, this is the property of

9 customer 1, customer 2, customer 3.

10 And, so one of the interesting questions

11 is: Here we are in 2010 with different technology, is it

12 practicable for clearing houses to know customers

13 positions at an individual level?

14 And I think particularly with swaps area, it

15 is not only practicable, but is, in fact, happening today

16 and now.

17 And now -- and that might change some of the

18 underpinnings there -- as I think what is mentioned in

19 the memo, there is that "s" which might suggest -- and

20 it's difficult. And you're right, Commissioner Sommers.

21 One would hope that Congress, if they're going to speak,

22 that would speak a bit more clearly.

68

1 On the other hand, there is case law that

2 says if Congress says one thing in one place and a

3 different thing in a different place, we do not assume

4 that they just slipped, but we have to assume they meant

5 different things.

6 And in this case, the "s" is really what

7 we're all here about. Essentially, it's do you treat

8 customers as a group, or customer individual.

9 And so that missing "s' bears the special

10 residence of -- gosh, I don't want to take this too far

11 -- but it bears a special residence in connection with

12 the issue that we're discussion here legally.

13 But, on the other hand, I think, very

14 importantly, in addition to those legal issues, the cost

15 is very important. And I'm very hopeful that, as the

16 industry looks at each of these alternatives -- and I

17 certainly guess one of them I think will be very

18 expensive indeed -- but I wanted to, it seems to me, get

19 the full spectrum of alternatives.

20 I think some of other alternatives would cost

21 a lot less. And indeed, one of them, I think, I think --

22 but it's up to the industry to tell us -- would not add

69

1 to the total industry cost very much at all, but rather

2 just simply be a risk shift between customers and firms.

3 And then hopefully will be a policy decision, both in

4 terms of looking at the law and looking at the policy, is

5 that risk shift a good way to go.

6 CHAIRMAN GENSLER: Go ahead.

7 MR. BERKOVITZ: I will just add to what Bob

8 just said. In terms of statutory interpretation, in one

9 of the opinions that we reviewed in terms of another

10 statute when there was a very small difference, Justice

11 O'Connor stated:

12 "One must presume that the Congress crafts

13 its statutes as carefully as we craft our judicial

14 opinions."

15 MR. WASSERMAN: One other thing I should

16 mention. Back immediately after, later in 1985, the

17 Commission realized that actually we didn't have an "s"

18 in our Rule 120 bid. And the Commission specifically

19 changed it to add that "s" because they felt that without

20 that "s" there was a danger that the clearing house would

21 be looked as having different views.

22 And so arguably there is Commission precedent
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70

1 that the presence or the absence of little "s" does make

2 that kind of a difference.

3 COMMISSIONER O'MALIA: I think we've done

4 this "s" thing. I want to move on to moral hazard.

5 You mentioned that you've asked the questions

6 in the your advanced notice of proposed rulemaking. Of

7 the four proposals that you've outlined, which of those

8 offers, at least, avoid any moral hazard, therefore the

9 reduction the risk at the FCM level?

10 Clearly, Dodd-Frank was clear about

11 increasing our oversight management risk. And I wondered

12 of the four proposals you have, which raise the risk

13 management standards at the FCM level?

14 MR. WASSERMAN: I would say that you can look

15 at this two ways because I think arguably from one

16 perspective, none of them changes our duty, as you

17 mentioned, to look at FCMs who are our registrants.

18 One could argue, that to the extent one

19 reduces customer risk, that customers are less likely to

20 apply market discipline by themselves in choosing FCMs.

21 One of the things that I tried to do is ask some

22 questions saying: Okay. What's the cost of examining

71

1 that?

2 I would note also that right now, today,

3 clearing houses risk manage their member FCMs because,

4 essentially, it is a requirement under our core

5 principles. And it's in the commercial self-interest of

6 a DCO to risk manage its members because a member default

7 would hurt the DCO.

8 I would suggest, in my personal opinion,

9 that the clearing houses who are already doing this, are

10 structurally much better placed to do risk management.

11 For instance, if a customer goes and asks

12 questions about his fellow customers, he's likely to be

13 told, very politely, there's little information we will

14 give you because we will only tell you about you. Your

15 fellow customers are, among other things, they have

16 privacy interests.

17 When the clearing house, which has a

18 supervisory relationship to its members, goes in and asks

19 questions about their risk management and about the risk

20 posed by fellow customers, a clearing house has the

21 authority to demand that information. And, indeed, the

22 answer they would get: Let me get that information

72

1 together.

2 The clearing houses who are fewer in number,

3 they have been in the business of risk management, they

4 have professional, you know, very excellent staffs. And

5 so, essentially, I would argue they are the best place to

6 do this.

7 And to extent that a number of these

8 alternatives would increase the risks, would put the

9 clearing house own money closer to the front line, that

10 would only incentivize the clearing houses to do an even

11 better job than they are already doing in terms of risk

12 management.

13 MR. RADHAKISHNAN: I guess the issue is who

14 will do risk management, the clearing house or the FCM.

15 COMMISSIONER O'MALIA: Well, shouldn't they

16 all be doing it?

17 MR. RADHAKISHNAN: They should. The question

18 is there going to be a shift. Because one of arguments

19 that we heard, if you have individual say, then the

20 clearing house takes on a bigger responsibility to manage

21 the risk of the customer itself, as opposed to leaving it

22 to the FCM.

73

1 So I don't know whether it's true or not, but

2 that's one of the arguments made. I think the firms made

3 an argument, if you have individual SEG and a DCO, then

4 you remove, you remove the incentive for the FCM to do a

5 good job. And there is some truth to that, so.

6 COMMISSIONER O'MALIA: Bob, you mentioned --

7 CHAIRMAN GENSLER: As long as Bob keeps his

8 answers a little shorter.

9 COMMISSIONER O'MALIA: Bob, you mentioned the

10 customer relationship to the FCM and their desire to seek

11 better risk management or asked about that or what we can

12 ask of them.

13 If we kept the omnibus account structure, how

14 could the FCM swap customer evaluate fellow customers, or

15 at least have a better understanding of where the risk

16 resides at the FCM level?

17 Are there different recording structures that

18 we could see transparency measures that we could impose

19 that would improve, just the overall understanding of how

20 diversive clearing or a FCM might be or what risk

21 management procedures are using that might give customers

22 greater confidence?
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74

1 MR. RADHAKISHNAN: I think it's very

2 difficult for a customer to truly evaluate the risk that

3 other customers pose. Because as Bob pointed out, no FCM

4 will disclose information with other customers.

5 As with now, the FCM -- the customer is only

6 left with finding out from the FCM what its risk

7 management practices are.

8 I don't know of a way in which we can make it

9 easier short of the FCM saying: Well, this is risk

10 profile without giving specific information on its other

11 customers, saying that is the risk profile that I have,

12 and this is risk management technique that I have. But,

13 short of that, I don't see how we can enforce it.

14 COMMISSIONER O'MALIA: Can you elaborate what

15 can be done in this rulemaking to improve the

16 transparency of FCM management, if anything?

17 MR. RADHAKISHNAN: The advanced notice, no.

18 CHAIRMAN GENSLER: I did say I have a

19 question I'm going to ask Ananda. In the futures world,

20 what does somebody do, a pension fund, asset manager,

21 maybe hedge fund do if they're concerned about this

22 fellows customer risk? And does that sometimes include

75

1 becoming a clear method, themselves, directly?

2 MR. RADHAKISHNAN: That's certainly possible.

3 That's one option. The challenge then would be to one,

4 assemble an infracture to be able to clear.

5 CHAIRMAN GENSLER: Do some large hedge funds

6 or assets manager self clear in futures world?

7 MR. RADHAKISHNAN: No. They may describe

8 themselves as a clearing member.

9 CHAIRMAN GENSLER: As a clearing member?

10 MR. RADHAKISHNAN: Not as a clearing member.

11 CHAIRMAN GENSLER: As a clearing member?

12 MR. RADHAKISHNAN: I may be wrong. There are

13 some hedge funds which are a clearing member. I'm not

14 sure if they directly clear. They may go through

15 somebody else to directly clear. I'm not sure. I need

16 to check on that. There may be one or two. That is

17 certainly one option.

18 CHAIRMAN GENSLER: It just strikes me -- and

19 then I'll be done -- it strikes me that another important

20 component of this in the rules we will take up in mid

21 December on the risk management in clearing houses, which

22 will include rules -- John Lawton, I see there will be

76

1 helping in writing them -- on participate eligibility.

2 It strikes me in the futures world, it's very

3 inclusive, all 120 or so futures commission merchants

4 participate. And I think that that gives them the buy

5 side more opportunity to sort of -- you know, they can

6 pick amongst 120 futures commission merchants.

7 The swaps world today has been more

8 concentrated, fewer members. So I think there's a

9 related issue here when we take up those proposed rules.

10 MR. RADHAKISHNAN: Not all FCMs are clearing

11 members. But you're right, there 60-70 clearing FCMs, so

12 customer have the opportunity to decide where they want

13 to go.

14 The other thing is the Commission publishes a

15 monthly report on the capital FCMs, both the requirement

16 and how much they have, and how much fund that have in

17 segregation. So people have an opportunity to look at

18 that report, as well.

19 CHAIRMAN GENSLER: Part of the reason I

20 raised this, I'm trying to speak to those who really want

21 segregation there's other ways that they might be able to

22 seek those protection. I think we have to think through

77

1 that participant eligibility because that may be that way

2 to get more competition and broaden the participation of

3 clearing houses on the swap side. I think the futures

4 side has benefited from that.

5 COMMISSIONER O'MALIA: Let me just note you

6 did raise the issue that we do publish monthly a table in

7 which --

8 MR. RADHAKISHNAN: Yes.

9 COMMISSIONER O'MALIA: But it doesn't make

10 sense. It doesn't give customers the granular that they

11 are looking for in terms of where risk management

12 resides. You and I have talked a little about it. It's

13 a difficult thing.

14 CHAIRMAN GENSLER: Another thing on the

15 to-do list, Ananda.

16 MR. RADHAKISHNAN: Yes. The issue is how

17 much information you can disclose.

18 CHAIRMAN GENSLER: Why don't we just say

19 another after thing to do on the to-do list.

20 Not hearing any further questions, I thought

21 I would call a vote. All those in favor, please say

22 "Aye".
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78

1 (Chorus of ayes.)

2 CHAIRMAN GENSLER: All those opposed say

3 "No." The ayes appear to have it. They ayes have it.

4 Thank you very much for your position it these.

5 I think next we will have -- is Jeff going

6 to come up? This must be --

7 MR. BURNS: Swap data repositories.

8 CHAIRMAN GENSLER: -- swap data repositories.

9 Susan, you're going to come up, too, I hope.

10 Jeff Burns and Susan Nathan. Susan is in the

11 Division of Marketing Oversight. Jeff Burns is the

12 Office of General Counsel. I've been -- if I'm allowed

13 to say -- co-leading this. And they will be presenting

14 rules on swap data repositories.

15 Jeff, you've got a colleague from the Office

16 of General Counsel.

17 MR. BURNS: A colleague from the Office of

18 General Counsel. This is Bill Bagwell from the office of

19 General Counsel. He's been my deputy team lead

20 throughout this rulemaking.

21 CHAIRMAN GENSLER: All right. Susan, Jeff,

22 Bill, the floor is yours.

79

1 MR. BURNS: Thank you, Mr. Chairman and

2 Commissioners. Before I begin, I would like to thank my

3 deputy team lead, Bill Bagwell. As well as Susan Nathan

4 and the rest of the team members who worked tirelessly in

5 their efforts to get the rulemaking done for today.

6 Today the staff is recommending that the

7 Commission approve a notice of proposed rulemaking to

8 implement new regulations set forth in proposed Part 49

9 of the Commission's regulations regarding the

10 registration, end regulation of swap data repositories,

11 or SDRs for short. SDRs are entities that collect and

12 maintain swap data.

13 The core function of SDRs is to ensure the

14 storage accurate data in order to facilitate the

15 transparency of reporting in a swaps market.

16 The staff, in connection with the proposal,

17 has consulted and coordinated with staff from various

18 agencies, such as the SEC, the Federal Reserve, the Bank

19 of New York, the Office of the Comptroller Currency, the

20 FDIC, Department of Treasury, the European Commission,

21 and the Committee of European Securities

22 Regulators. We have attempted to incorporate input from

80

1 all parties to the extent possible within our statutory

2 framework.

3 Proposed Part 49 is consistent with various

4 international standards that have been published for

5 trade repositories.

6 In particular, we have sought to conform our

7 regulations with guidelines identified in the

8 Consultative Report entitled "Considerations for Trade

9 Repositories in the OTC Derivatives Market." We believe

10 proposed 49 is consistent with the goals of this report.

11 We would also note that Part 49 is consistent

12 with the European Commission's recent proposal related to

13 trade repositories.

14 To enhance transparency, promote

15 standardization, and reduce systemic risk, Section 728 of

16 the Dodd-Frank Wall Street Reform and Consumer Protection

17 Act establishes SDRs to collect and maintain data and

18 income related to swap transactions, and to make such

19 data and information available to a variety of

20 regulators.

21 All swap data, whether cleared or uncleared

22 will not be respected to an SDR.

81

1 The proposal sets forth, or our proposal

2 specifies a number of requirements.

3 First, is the registration requirement and

4 the adoption of new Form SDR.

5 The second -- I'll call it "bucket" is the

6 statutory duties set forth in new Section 21c of the

7 Commodity Exchange Act, as well as the core principles

8 applicable to SDRs outline Second 21f of the Commodities

9 Exchange Act.

10 Additional duties are also permitted by

11 Section 21f(4) of the Commodities Exchange Act. As well

12 as we also provide, which is provided in Dodd-Frank,

13 designation of a chief compliance officer, as well as,

14 lastly, real-time public reporting obligations. I will

15 briefly describe each of these requirements.

16 First, is registration. Applicants are

17 required under the proposal to file electronically the

18 registration on new Form SDR, which consists of

19 instructions, general questions, and a list of exhibits

20 necessary for determination by the Commission of whether

21 or not an applicant is able to demonstrate compliance

22 with core principles statutory duties, as well as other
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1 requirements in proposed Part 49. There will be a

2 180-day review period that may be extended by the

3 Commission for good cause.

4 Upon request by an applicant, the Commission

5 may grant a provisional registration to an SDR applicant

6 as an interim implementation provision.

7 Part 49 Rules also prescribe procedures for

8 revocation of an SDR registration, and for the

9 registration of the successor entities.

10 But, particularly now, I think also are those

11 SDRs located outside of the United States, for those

12 SDRs, they will be required to certify on the Form SDR

13 and provide an opinion of counsel that the SDR is able,

14 as a matter of law, to provide the Commission with prompt

15 access to its books and records. And can submit to an

16 onsite inspection and examination by the Commission.

17 Turning next to the statutory duties

18 requirement SDR. These are minimum duties in order to

19 become registered and to maintain registration.

20 They include -- and these are all listed and

21 set forth in Dodd-Frank itself. And we're just providing

22 a little more flavor and implementing into the propose

83

1 Part 49.

2 First, is the acceptance of data. As a

3 result of the statute duty, if an SDR accepts the swap

4 data of a particular asset class, it will be required to

5 accept the data for all swaps of that asset class. So,

6 in other words, you couldn't pick or choose your swaps

7 that you will accept.

8 As part of this requirement, as well, an SDR

9 will not are permitted to alter, modify, or otherwise

10 amend an executed, fully executed swap agreement.

11 The second duty is confirmation with both

12 counterparties to a swap of the accuracy of the data.

13 This requires a registered SDR to establish policies and

14 procedures to ensure the accuracy of the data and other

15 regulatory information required be reported.

16 We've been in compliance with this

17 requirement through either electronic matching or

18 confirmation or by actual direction communication with

19 counterparties.

20 Going on to recordkeeping. The SDR is

21 required to keep books and records for the life of the

22 swap, plus five years in a readily, accessible manner.

84

1 Thereafter, the swap data is thereon to be archived. We

2 have not determined the length of time yet regarding the

3 archived data, but we put it out for comment on how long

4 that should be.

5 Also, an SDR that accepts and disseminates

6 swap data for real-time reporting purposes would also

7 need to meet the real-time public recording recordkeeping

8 requirements that are going to be proposed under Part 43.

9 The next duty, which I think is one of the

10 most essential ones, is providing Commission direct

11 access to the data maintained by the SDR.

12 This will consist of real-time access via

13 web-based protocol, as well as information pushed out to

14 the Commission at specified intervals.

15 Next, also is that the SDR will also be

16 required to establish automated systems for monitoring,

17 screening, and analyzing of swap data. This would

18 include via user exception, as well.

19 And, as part of this regulation, the SDR is

20 required to maintain sufficient IT staff, other staff and

21 resources so that it is able to fill these requirements.

22 The sixth of what I'll call "statutory duty"

85

1 is the maintenance of privacy or confidentiality of swap

2 data that the SDR receives.

3 Each SDR will be required to adopt policies

4 and procedures that would keep the data private. Since

5 the SDR is actually holding the data, they have to be

6 reasonably adopted to protect the confidentially of all

7 data except for that data that is subject to real-time

8 reporting.

9 The way I think we even agreed to this

10 working is there are two, like two pipes: The real-time

11 pipe, as well as the statutory reporting pipe; obviously,

12 since the real-time reporting could not be subject to

13 privacy.

14 Another of what I think is a very important

15 regulation is the SDR access for other regulators to both

16 domestically, as well as foreign regulators, the

17 requirement really attracts Dodd-Frank.

18 But one of the things that is required under

19 the SDR is that upon request, they would have to notify

20 the Commission of the access. But before they could

21 provide access, they would have to have an executed

22 confidentiality and indemnification agreement with the
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1 SDR for any litigation expenses that might occur due to

2 the accessing of the data.

3 Lastly, in terms of statutory duties concerns

4 emergency procedures. The SDR would have to have

5 procedures so that we would have contact information or

6 actual staff contact at the SDR, as well as the standard

7 for declaring emergency. And all these statutory duties

8 are set forth in proposed regulations in 49.9 through

9 49.18.

10 Turning next to the core principles. There

11 were three core principles versus antitrust

12 considerations. Our proposed regulation 49.19 implements

13 core principle-related antitrust. And it requires the

14 SDR to avoid rules that provide unreasonable train of

15 trade or proposing any material anti-competitive burden.

16 Next is governance arrangements. Proposed

17 regulation 49.20 provides for transparent governance

18 arrangements to fulfill public interest requirements and

19 to support the objectives of the federal government owner

20 and participates.

21 Governance rules also impose certain minimum

22 standards for the transparency of SDR governance

87

1 arrangements. These include a statement in the Charter

2 regarding transparency of the governance arrangements,

3 making certain information available to the public such

4 as mission statement, Charter, nomination process,

5 ensuring available information is accurate, and summaries

6 of significant governance decisions.

7 The governance rules also requires --

8 CHAIRMAN GENSLER: I keep seeing lots of

9 pages.

10 MR. BURNS: No, not too much. Two more,

11 actually, but they're big. I will speed it up.

12 The governance rules require policy to ensure

13 that the Board adequately considers perspectives

14 independent of competitive, commercial, or industry in

15 its deliberations. And also sets forth expertise

16 requirements, removal procedures, and rules and

17 responsibilities and guidelines for directors.

18 Moving to conflicts of interest. Proposed

19 regulation 49.21 requires that SDRs to establish and

20 enforce rules in its decision-making process. And to

21 establish a process for resolving these conflicts. These

22 include, but are not limited to discrimination, certain

88

1 reporting entities, or unfair or anticompetitive

2 disclosure by a controlled group.

3 Core principle 4, which provides the

4 Commission with the authority to adopt additional duties.

5 We've listed 4 additional duties.

6 The first one is disaster recovery and

7 business continuity plan; the second is for SDR to

8 maintain sufficient financial resources; third, is to

9 provide disclosure document setting forth the risks and

10 costs associated with the using the services of the SDR;

11 and lastly, the SDR would be required to provide fair and

12 open access in fees that are equitable and

13 nondiscriminatory.

14 The proposal, as Mr. Chairman indicated,

15 will be out for 60 days. During that time, we are

16 requesting comment, specifically on whether there should

17 be an implementation of phase-in period under the

18 proposal. And that ends my remarks. I'm happy take any

19 questions.

20 CHAIRMAN GENSLER: Thank you, Jeff and the

21 team. Do I hear a motion on the staff recommendation on

22 swap data repositories and proposed rules?

89

1 COMMISSIONER DUNN: So moved.

2 COMMISSIONER SOMMERS: Second.

3 CHAIRMAN GENSLER: I support the proposed

4 rulemaking. I think that the proposal does implement

5 Congress mandate that swaps data repositories be

6 regulated, that we write rules for them.

7 I think it importantly includes provisions

8 for the maintaining of that data, but also that we, as

9 regulators, get direct access to that data that is so

10 critical. And also has provisions such that in another

11 set of this statute, it talks about commercial end users

12 being exempted from the clearing requirement. And there

13 is a notice provision there. I believe the role includes

14 that this swap data repositories as Congress has

15 provided.

16 MR. BURNS: It does.

17 CHAIRMAN GENSLER: And I have received those

18 notices. And that the swap data repositories will play a

19 role in the real-time reporting, as well as collecting

20 data and maintaining data over the whole life cycle of

21 the swap. I think this is critical to enhance the

22 transparency.
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1 I do have a couple of questions. It

2 relates to the relationship between this rule and the

3 real-time rule. But I just want to make sure I

4 understand how they relate to each other. And I might be

5 asking for a question to be added because I'm just a

6 little confused about one thing.

7 In real-time reporting rule which were just

8 discussed, there is some provision that the swap data

9 repositories will facilitate real-time reporting. And I

10 think you have that here, as well; is that correct, Jeff?

11 MR. BURNS: That's correct. We have included

12 that in the proposal.

13 CHAIRMAN GENSLER: What, I'm less certain

14 about is a third-party data providers. I think the

15 real-time reporting requirement also provide that maybe

16 there would be third-party data aggregators as well; is

17 that right?

18 MR. BURNS: That's my understanding, yes.

19 CHAIRMAN GENSLER: So my question is: Under

20 the statute, 728 of the statute, might it no be those

21 third-party data providers should also register a swap

22 data repositories? And, if so, shouldn't we at least in

91

1 this role ask that question of the public so that if we

2 think that they should also register swap data

3 repositories?

4 MR. BURNS: I think that's a very good

5 question to put in the proposal and ask for public

6 comment.

7 COMMISSIONER O'MALIA: Mr. Chairman?

8 CHAIRMAN GENSLER: Sure. Please.

9 COMMISSIONER O'MALIA: Who are these

10 third-party aggregators we're talking about?

11 MR. BURNS: They are market data vendors,

12 primarily.

13 COMMISSIONER O'MALIA: Like Bloomberg?

14 MR. BURNS: Like Bloomberg.

15 COMMISSIONER O'MALIA: Make Bloomberg

16 register as a SEF, is that what that question is?

17 MR. BURNS: No.

18 CHAIRMAN GENSLER: I don't think it does

19 require it right now as it's written.

20 MR. BURNS: As it's written right now, it

21 does not require it.

22 CHAIRMAN GENSLER: But I had the question of

92

1 asking the public should they have to be required to

2 register.

3 COMMISSIONER O'MALIA: I just want to make

4 sure we are talking about the same people.

5 CHAIRMAN GENSLER: I think it would be a data

6 aggregator like the company that you mentioned.

7 COMMISSIONER O'MALIA: Okay.

8 CHAIRMAN GENSLER: It's basically the

9 intersection -- swap data repositories are going to be

10 having regulatory data, a lot of data that's going to

11 regulators. And then they have this stream real-time

12 data.

13 And what if somebody is only in the second

14 pipe? If they're only in the real-time pipe, don't they

15 have to register as a swap data repository? Shouldn't we

16 at least ask the public that question so there's a final

17 rule that could address that?

18 MR. BURNS: I think that makes a lot of sense

19 to put that in the proposal and ask that question.

20 CHAIRMAN GENSLER: Maybe I will ask unanimous

21 consent to include such a question? Not hearing an

22 objection. No objection. That was my main question.

93

1 Commissioner Dunn?

2 COMMISSIONER DUNN: Thank you, Mr. Chairman.

3 I have a great deal of concern about the resources that

4 we have implemented. And 180 days for us to review

5 requests, do we have sufficient staff?

6 First of all, how many do we anticipate

7 receiving? And do we have sufficient staff to do that

8 review within that 180-day time period?

9 MR. BURNS: I think we believe we will have

10 15 or so, maybe, applicants.

11 COMMISSIONER DUNN: Before the ones the

12 Chairman just added?

13 MR. BURNS: Well, the world could get a lot

14 larger. But that's what we're expecting, somewhere

15 around 15 or so.

16 MR. SHILTS: In terms of staff, we have not

17 got the staff at the moment to do this.

18 But as part of the request, the budget

19 request to implement Dodd-Frank, we estimated that, with

20 respect to the initial number of the SDRs in the ongoing

21 oversight, that it would take about maybe five to 10

22 people, depending on what the final rule looks like in
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1 the overall scope of our oversight. But that's something

2 that was built into the budget request so that we could

3 accomplish that.

4 COMMISSIONER DUNN: I would imagine that we

5 will probably receive requests for more repositories and

6 a single asset class than one in some occasions. And

7 we're requesting them to do a certain amount of the

8 analysis and overview of what they have.

9 Where we have repositories that have more

10 than one asset class, then is it going to fall back on

11 the Commission to be able to get that information and do

12 the types of analysis that we've got? And do we have the

13 technical ability to do that at this time?

14 MR. SHILTS: Well, John Rogers will do the

15 next rulemaking for the actual SDR data requirements. I

16 think he might be able to address that.

17 But I think ultimately now it's something

18 that we in this Division, as well as out IT folks are

19 looking at. It's not that we have the capability at the

20 moment. It's something that would be part of the budget

21 request to upgrade or IT resources and staff to actually

22 carry out these to be able to get the data analyzed and

95

1 incorporate it into our budget responsibilities looking

2 at the exchange trade market.

3 CHAIRMAN GENSLER: Commissioner Dunn raises a

4 very good point. I think the President's budget for 2011

5 included 45 million dollars for implementation, of which

6 18 million was for technology.

7 When we look at 2012, we think that even

8 grows. But that 18 million dollars is very important to

9 be able to basically have the pipes.

10 We need direct feeds into these swap data

11 repositories. We need to be able to do all of the things

12 Commissioner O'Malia has been suggesting. And all of

13 those good things out of this technical advisory

14 committee and so forth. Commissioner Sommers?

15 COMMISSIONER SOMMERS: Thank you, Mr.

16 Chairman. I have a number different concerns and

17 questions with this release. I will start with the

18 provisional registration, which I raised questions on a

19 previous release on this exact same issue.

20 If you could walk through for me what benefit

21 there is in us provisionally registering these SDRs that

22 are already up and running right now without having gone

96

1 through the due diligence of actually registering as an

2 SDR. So if somebody could walk me through that.

3 MR. BURNS: I believe this really has to deal

4 with -- Rick had mentioned staffing issues going forward,

5 initially. There is provision on the provisional

6 application one-year period.

7 But I think initially we get 15 maybe more

8 applicants in terms of the staff able to review and then

9 approve the applicants in time. This would give us the

10 ability to provisionally approve the applicant who is

11 already operating as a trade repository and who we

12 believe is in substantial compliance. But we just have

13 not had the time to go ahead and get into a full review.

14 COMMISSIONER SOMMERS: So are we required by

15 to statute to have these people register, so that's why

16 we're doing this provisionally? And how do we decide if

17 they are substantially compliant if we have not even

18 looked at them?

19 MR. BURNS: Well, in terms of timing, we

20 wouldn't be able to have an entity to accept any of the

21 swap data unless an SDR is registered. So we would have

22 this vast data that has not been reported anywhere.

97

1 COMMISSIONER SOMMERS: These people are

2 already reporting these places, right?

3 MR. BURNS: There are interest rates, CDS,

4 credit.

5 COMMISSIONER SOMMERS: I guess what I'm

6 trying to get at is what we envision as entities eligible

7 for provisional registration, are these same entities

8 that are already up and running and already accepting all

9 of this data, right?

10 MR. SHILTS: I would think that, presumably,

11 that would be true. But it could be possibly a existing

12 clearing house or someone that some capability to perform

13 his duties.

14 But I think the goal is to try to get

15 something up and running. If we don't have the ability

16 to immediately review and process all of these

17 applications, it's a away to not create more legal

18 uncertainty for the industry, to get something up and

19 going, and then come back a due a full due diligence

20 review and presumably set out some criteria.

21 COMMISSIONER SOMMERS: Criteria for

22 substantial compliance?
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1 MR. SHILTS: Correct.

2 COMMISSIONER SOMMERS: Because I think that's

3 also where I have questions. How do we decide what

4 substantially compliant is. And is it only for those

5 people who are already acting as these data repositories?

6 What if we have other people who believe they can be

7 substantially compliant?

8 MR. SHILTS: That might be something, if

9 Commission decides to go through with that, that would be

10 something we can provide more guidance on.

11 MR. BURNS: And, also, the provisional would

12 give the Commission the ability to access the data.

13 COMMISSIONER SOMMERS: Another line of

14 questioning for me relates to foreign SDRs and how we

15 decide. I think there are a couple of concerns that you

16 outlined when you were giving your summary with regard to

17 indemnity and foreign regulators having access to

18 information that U.S. registry SDR.

19 What about foreign SDRs? I think one of the

20 provisions in the Act says specifically that it excludes

21 from U.S. jurisdictional swap activity that does not have

22 a direct and significant connection with activities in or

99

1 affect on commerce in the United States.

2 How do we decide what kind of swap activity

3 has a direct or significant connection? So is it if one

4 of the counterparties -- are we defining that?

5 MR. BURNS: I notice that this has not be

6 defined yet in any capacity. It's a pretty broad

7 definition, and it could have various permutations. But

8 we have not decided, nor do I believe anybody in any

9 other rulemaking team, at least today has.

10 If a foreign SDR is engage in U.S. activity

11 in terms of coming here to the U.S., that would obviously

12 have an effect on U.S. commerce.

13 COMMISSIONER SOMMERS: With regard to the

14 foreign SDRs, and we have a part in here that explains

15 how we would contemplate registering foreign SDRs. If

16 you could walk me through that and kind of what concerns

17 we have. Why isn't just information sharing agreements

18 sufficient?

19 MR. SHILTS: Can I just add something first?

20 I think the goal -- and I don't know how this will end up

21 -- to have foreign SDRs and U.S. SDRs, there may be SDRs

22 that will come in seeking registration that are located

100

1 overseas.

2 But I think in working with these

3 international regulators, when I asked them to have

4 single, what may end up with single or multiple per asset

5 class, that will be where all of the regulators will have

6 access to that information and will comply with generally

7 accepted and may be registered here and there may be

8 meeting requirement overseas.

9 But I think the goal is -- and again, I

10 don't how to this will work out, that where you have the

11 foreign versus the domestic, that isn't what we're

12 striving for.

13 COMMISSIONER SOMMERS: I couldn't agree more

14 that that's not what this release contemplates or lays

15 out. So it's a little bit confusing.

16 MR. BURNS: I think part of it has to do with

17 Dodd-Frank. It doesn't give us the ability to exempt.

18 So if you're a foreign SDR, you have to register.

19 Now, maybe that can be done in lighter way,

20 but the way this would work, they would have to file the

21 Form SDR and provide that opinion of counsel that would

22 allow us to get books and records, as well as on-site

101

1 inspections so that we are able to do our regular

2 repository duties because of the fact that we don't have

3 any exemplary privilege for it.

4 COMMISSIONER SOMMERS: I think I will stop

5 there. I have a number of other questions.

6 CHAIRMAN GENSLER: Thank you, Commissioner

7 Sommers. But please don't stop there in our bilateral

8 discussions because we benefit from these comments.

9 I think the foreign and domestic issues here,

10 we have to find a way of working with international

11 regulators that we all have access. And it doesn't

12 matter where they are located.

13 MR. BURNS: I believe that's the goal. These

14 are difficult issues in the current form of Dodd-Frank.

15 CHAIRMAN GENSLER: Commissioner Chilton?

16 COMMISSIONER CHILTON: I was interested in

17 Commissioner Sommers' question. I was trying to look at

18 the Act, not Dodd-Frank, but the CEA. And so you have to

19 read them together.

20 And in Section 3, 10-31-3: "The transaction

21 subject to this Act are entered into regularly interstate

22 commerce and international commerce. And are affected
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102

1 with a national, public interest by providing a means for

2 management and assuming price risk discover prices, and

3 disseminating the pricing information through the trading

4 liquid, fair, and financial secured trading facilities."

5 Does that definition add to the

6 conversation you're having with Commissioner Sommers?

7 MR. BURNS: I think it's consistent with

8 Commissioner Sommers' comments.

9 COMMISSIONER CHILTON: Mr. Burns, are SDRs

10 established under Dodd-Frank, are they intended to be

11 sort of public utilities like PUCO with the SEC for the

12 aggregation of swaps data?

13 MR. BURNS: Although SDRs provide what I will

14 call a "vital regulatory foundation," I don't think that

15 the intention to make them a public utility.

16 The statute doesn't provide that. And I

17 wouldn't assume that these are a public utility; although

18 they may have some aspects of a public utility in the

19 sense that the data will be maintained in one place or

20 regulate both as domestic and foreign to have access.

21 But I would resist in any indication that

22 these are a public utility. I don't think the statute

103

1 calls for it.

2 COMMISSIONER CHILTON: Thank you. And to

3 sort of follow up with the international question.

4 Do other regulators in Europe and the UK, do

5 they require that there's a single data repository, or

6 are they intending on doing that?

7 MR. BURNS: Currently, we know of no

8 legislation in Europe that would require that. That may

9 happen, I think just over time with the market, but not

10 from a regulatory mandate.

11 COMMISSIONER CHILTON: We talked earlier. I

12 know it sounded like we were probably dancing on the head

13 of a pin. But words are important and even letters are

14 important. So just like Sesame Street in like they have

15 the letter of the day, so my question is brought to you

16 also by the letter "s."

17 If you look at Section 720, and if you go

18 through it, there are multiple references to the swaps

19 data repositories. It's actually an "I" "E" and an "S."

20 It's not swap data repository. And I count at least 11.

21 I won't go though them all, but there's 11. It's not

22 "S." Some of them say "Each swap data repository." It

104

1 says, "Swap data repository," and some say "Each."

2 So my question is: Given that these things

3 do mean things in law, does that indicate some

4 requirement for morality of SDRs?

5 MR. BURNS: That would seem to be case. But

6 I also think that the presumption of Congress, that there

7 would be multiple "Ss."

8 COMMISSIONER CHILTON: Okay. And the final

9 question. ICE sent a letter. And they talked about how

10 the national place for SDRs to be in existing clearing

11 house. Is there anything that would prohibit that from

12 taking being place in what we're considering?

13 MR. BURNS: No. In fact, the statute

14 presumes that clearing houses would register as SDRs.

15 COMMISSIONER CHILTON: Thank you.

16 CHAIRMAN GENSLER: Thank you, Commissioner

17 Chilton. Commissioner O'Malia?

18 COMMISSIONER O'MALIA: I have one question:

19 In all of the data and how we move it, and

20 send it from the staff and real-time report and send it

21 to SDR, who owns the data, and does it change through the

22 process?

105

1 CHAIRMAN GENSLER: Can I just add? And do we

2 do anything to change this rule? His question, I just

3 want to add to Commissioner O'Malia's, do we do anything

4 to effect that?

5 MR. BURNS: We don't believe that the SDR

6 owns the data. The data is from the property of the

7 counterparties, the data reporting to the SDR. The SDR

8 is the warehouse that maintains the data. And from that

9 they then go manufacture property rights in the data just

10 from maintaining it.

11 Now, they will have a license to use the data

12 through their user agreements, and they'll have the

13 counterparties. But the data is the counterparty. We

14 don't change that in the proposal at all.

15 CHAIRMAN GENSLER: I think it's an

16 excellent question. You said "the counterparties." But

17 if it's done on a matching engine, might it not be the

18 matching engine or what we call "sups data." Again, we

19 don't change that?

20 MR. BURNS: We don't change that. And I

21 would hate to get into a property rights discussion.

22 CHAIRMAN GENSLER: And I'm not a lawyer. I
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1 was most interested that we're neutral on it. We don't

2 say in the regulation at all and the preamble of who the

3 owners of the data are.

4 CHAIRMAN GENSLER: If there are no further

5 questions, the motion in front of us as amended with the

6 unanimous consent is on the proposed swap data repository

7 rules, if I could hear by voice the "Ayes."

8 (Chorus of Ayes.)

9 CHAIRMAN GENSLER: Any opposed?

10 COMMISSIONER SOMMERS: No.

11 CHAIRMAN GENSLER: The ayes appear to have

12 it. The ayes have it. And so we thank you swap data

13 repository rulemaking team.

14 I think we will move on to -- I can't see

15 Dave here. He's in the back -- data recordkeeping and

16 alike. I'm conscious that we're moving along here. If

17 the Commission wants me to break at any time, I'm glad to

18 do so. Thank you all.

19 David Taylor, who is from the Division of

20 Market Oversight, and has been heading up a team on data.

21 And this is data for swap dears, data for

22 major swap participates, data for clearing houses, swap

107

1 execution facilities, designated contract markets,

2 possibly for futures commission merchants, not only how

3 they maintain data, but also what they have send to swap

4 data.

5 I would just say for public's benefit, we

6 chose earlier, since there are so many data requirements

7 on each of these registrants, and the best way to provide

8 consistency, which the statute says there should be

9 consistency, is to have one team to data element for all

10 of the different registrants. So this actually has an

11 effect on all of them.

12 Irina Leonova, who has been Dave's deputy,

13 and seems to be in all of the meetings and on these very

14 important matters. Anne Schubert, who is on the team

15 also from the Division of Market Oversight. And John

16 Rogers, who is here in the Commission, is our chief

17 information officer, and deals with all of what we do in

18 terms of information.

19 And we felt it was critical to have this

20 coordinate, not just with market oversight, but our over

21 data elements requirements. With that, David.

22 MR. TAYLOR: Good morning, Mr. Chairman and

108

1 Commissioners. My script says "good morning." I took a

2 look, and I can still say that.

3 I do want to thank, before I begin, my fellow

4 team members. In particular, my multitalented,

5 indispensable team members for their hard work in

6 preparing the proposal I'm about to present.

7 Today staff is recommending that the

8 Commission approve a notice of proposed rulemaking to

9 implement new regulation regarding swap data

10 recordkeeping. These regulations would govern swap data

11 to swap data repositories or as I will say later, SDRs.

12 The fundamental goal regulation is to ensure

13 that complete data concerning all swaps subject to the

14 Commission's jurisdiction is maintained in SDRs where we

15 not cannot be disclosed publically, but would be

16 available to the Commission and other financial

17 regulators for fulfillment of their various regulatory

18 mandate.

19 In preparing these regulations, staff has

20 engaged in extensive consultations with other U.S.

21 financial regulators, and with international financial

22 regulators and organizations. And has reviewed and

109

1 considered the work that's already been done

2 internationally in regard to derivatives reporting.

3 The regulations are designed to take into

4 account the difference between various swap asset classes

5 with respect to product type and associate data, as well

6 as their mark structures and trading processes.

7 The regulations are also designed to minimize

8 the extent possible the regulatory burden on the

9 industry, especially for end users and other swap

10 counterparties who are not swap dealer or major swap

11 participates.

12 The swap recordkeeping provisions we are

13 proposing are based on the Commission's existing

14 recordkeeping regulations that generally call for

15 registered entities and counterparties to keep records

16 related to swaps throughout the existence of the swap,

17 and for five years following final termination or

18 exploration of this fund.

19 The records would need to readily accessible

20 through the life of the swap and years thereafter, and

21 retrievable from storage within three business days

22 during are remainder of the retention period.
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1 In order to ensure the complete data

2 concerning swaps maintained in SDRs and available to the

3 Commission and other regulators, the swap data reporting

4 rule calls for reporting of swap data from each of the

5 two important stages of the existence of a swap: The

6 creation of the swap, and the continuation of a swap over

7 its existence until its final termination or expiration.

8 For both creation and continuation of data

9 involving credit swaps and equity swaps where we will

10 share jurisdiction with the SEC, the Rule is aligned with

11 the approach taken in the SEC data rules in order to

12 avoid the regulatory burden and regulatory outward cries

13 that could come from having two dissimilar reporting

14 regimes.

15 To ensure timeliness, accuracy, and

16 completeness with respect to data, the proposal requires

17 recording of two types of data relating to the creation

18 of the swap: The primary economic terms of the swap

19 verifying their match by their counterparty shortly or

20 after the time of execution, and then all the terms of

21 the swap included in legal confirmation.

22 To ensure inclusion of primary economic turns

111

1 necessary for regulatory purposes, the Rule specifies

2 minimal data elements or data categories that must be

3 reported for swaps in each asset class, and seeks comment

4 on whether additional data elements should be required to

5 be reported.

6 Continuation data reporting for credit and

7 equity swap follows the life-cycle approach, and requires

8 reporting of all life-cycle events affecting the terms of

9 the swap.

10 Reporting continuation data for interest

11 rate, currency, and other commodity swaps follows the

12 state or snapshot approach in requiring the reporting of

13 the daily snapshot of all the primary economic terms of

14 the swaps, including any changes that have occurred. And

15 for all asset classes, a continuation of data reporting

16 also includes specified valuation data.

17 The proposed rule calls for reporting by the

18 registered entity or counterparty that has the easiest,

19 fastest, and the cheapest access to the data in question.

20 Such entities and counterparties are also the most likely

21 to have automated systems that are suitable for

22 reporting.

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1 Counterparty reporting, when following the

2 hierarchy outlined in the statute in parallel with the

3 SEC reporting rule giving dealers and major swap

4 participants the duty to report when possible and

5 reporting by non-swap dealers and major swap participate

6 counterparties, including end users to situations where

7 there is no dealer or MSP counterparty, the Rule also

8 explicitly permits third-party facilitation of data

9 reporting without removing the responsibility involved

10 from the appropriate registered entity or counterparty.

11 The proposed rule also calls for the use of

12 three unique identifier in connections with swap

13 reporting: A unique swap identifier. A unique

14 counterparty identifier. A unique product identifier.

15 These unique identifiers will be crucial

16 regulatory tools for linking data together and enabling

17 data aggregation by regulator across counterparties asset

18 classes and transactions.

19 This will enhance regulators the ability to

20 mitigate systemic risk, prevent market manipulation,

21 conduct effective market and trade practice surveillance,

22 enforce positions, and exercise resolution authority.

113

1 Such identifiers will also have great benefits

2 for internal recordkeeping and risk management by

3 financial entities themselves. The staff has consulted

4 with the SEC concerning these unique identifiers.

5 The USI or the swap identifier would be

6 created at the time the swap was executed and shared by

7 all registered entities involved with the swap and used

8 to track that particular swap over its entire existence.

9 The UCI or counterparty identifier would

10 identify the legal entity that is a counterparty to a

11 swap.

12 The Rules provide that the Commission will

13 require use of USIs in all swap data reporting.

14 Selecting an international developed identification

15 system for this purpose is one meeting the Commission's

16 requirement that's available prior to the implementation

17 of data for Rule, or imposing a system created by the

18 Commission if that is needed.

19 Confidential data concerning the corporate

20 affiliations of the legal entity involved would allow

21 regulators to monitor swap exposures.

22 The product identifier would categorize swaps
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1 with respect to the underlying products referenced in

2 them. This will allow regulators to aggregate, analyze,

3 and report the swap transaction by product type, and will

4 also enhance position under the enforcement.

5 To avoid fragmentation of data for a given

6 swap across multiple SDRs, the Rules require that all

7 data for a particular swap must be reported to the same

8 SDR.

9 Finally, regarding data standards, the

10 computer language used in swap data reporting, the

11 proposed regulation requires SDRs to maintain data and

12 transmitted to the Commission in the format required by

13 the Commission.

14 It prevents an SDR to allow use of reporting

15 data to use any data standard acceptable to the SDR, so

16 long as the SDR remains able to provide data to the

17 Commission and the Commission's required to form.

18 The proposed regulation will be open to a

19 60-day public comment period. That concludes my remarks.

20 I'm happy to answer any questions.

21 CHAIRMAN GENSLER: Do I hear a motion on

22 staff recommendation on data?

115

1 COMMISSIONER DUNN: So moved.

2 COMMISSIONER SOMMERS: Second.

3 CHAIRMAN GENSLER: Thank you, David and

4 everybody on that team. I know you coordinated not only

5 in this building, because you have to coordinate with 29

6 other rule teams because this is data for all of the

7 public with the SEC and the Federal Reserve, bank

8 regulators, treasuries, Office of Financial Reserve, and

9 international regulators.

10 I know you've gotten comments on your term

11 sheets and your draft rule from all of them. I don't

12 really know how you do it, but I thank you. This may be

13 one of those areas that's had the broadest consultation.

14 I do support the proposed rulemaking. As I

15 said earlier, it covers the data for all of the different

16 registrants, whether it's the swap dealer, trading

17 platforms, clearing houses, that which needs to be

18 maintained and sent over to the swap data repository in

19 some circumstances. And I think it's important that that

20 be consistent. So however the public comment on it, I

21 think it's really important. That statute says these are

22 consistent across. And we don't have even regulatory

116

1 arbitrage data elements.

2 I think it's -- also, the proposal and why

3 I'm supporting it, and as I have learned more about data

4 is that a swap exists over sometimes a period of days, or

5 many, many years. And so what the Rule includes is that

6 there's data at the day of a transaction or even the

7 moment of the transaction, but it has this continued data

8 or life cycle data over the course of the life of the

9 swap, and I think that's very important.

10 And I think that the third element and why I

11 support it and compliment the team because I must admit,

12 before July 21st, I had not been familiar with this whole

13 concepts in terms of unique identifiers.

14 The team that identified it, the industry

15 market participates, many people came in the meetings and

16 said this will be big help if some regulatory body or

17 swap data repositories for somebody had unique

18 identifiers.

19 And many people in the industry, in the

20 financial industry, usually not end users, but in the

21 financial industry have said they, too, would benefit if

22 there was a unique identifier for their counterparties.

117

1 The Europeans and the U.S. regulators also

2 seek to chime. And you have included, I think a

3 thoughtful proposal on that record.

4 I think the 60-day public comment period is

5 warranted. But I also think the Administrative

6 Procedures Act allows and hopefully -- General Counsel

7 Berkovitz is poking out -- but that we could possibly,

8 even as we go forward on this -- have roundtables.

9 If we get the 60 days of public comment, I

10 think it would be appropriate, if it's allowed under the

11 Administrative Procedures Act, to have roundtables, then

12 since we have these thousands of comments, and then staff

13 will be trying to help do a recommendation, whether it's

14 finalizing a unique ID, which is a really an important

15 component, or of any other component.

16 So I guess my first question is: Is that

17 allowed under the Administrative Procedures Act to do the

18 roundtables post those 60-day comment period?

19 MR. TAYLOR: My general impression about that

20 is yes. I will defer to the general counsel.

21 MR. BERKOVITZ: Yes, we could. The

22 Commission could do that.
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1 CHAIRMAN GENSLER: I think General Counsel

2 Berkovitz said yes. So I think that will be very helpful

3 because these are really important concepts. We want to

4 get them as close to right as we possibly can, and I

5 think you put together a strong proposal.

6 With that I thank you. I'm going to keep you

7 to that we can do that. Commissioner Dunn?

8 COMMISSIONER DUNN: Thank you, Mr. Chairman.

9 Again, my concerns are the wherewithal to fulfill this,

10 especially in the IT area. And perhaps

11 Mr. Rogers could amplify on where we are in that.

12 MR. ROGERS: Certainly. Well, as Chairman

13 Gensler has mentioned, before we put in a bunch of

14 requests of 18 million dollars in 2011, and then an

15 additional amount in 2012 to support the implementation

16 of these particular rules, in preparation for that, in

17 advance of that, we have been for the last two years

18 refreshing our technology infrastructure so that we have

19 the network band width with the storage capacity and

20 things like that to accommodate the receipt of additional

21 information.

22 We'll need to have, make an additional

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1 investment, obviously as mentioned, to first and

2 foremost, I guess, understand the business requirements

3 that we have within the Commission to build up

4 surveillance capabilities and tie those to existing

5 capabilities that we have as we oversee the futures

6 market and continue to enhance the infrastructure to

7 support that.

8 So, in essence, we have additional requests

9 that we need to make, but we've established an

10 infrastructure foundation that we think allows us to make

11 that investment moving forward.

12 COMMISSIONER DUNN: Any idea of developing

13 USI, UPIs, I think serves a great deal of merit. But I

14 also understand there are a lot other players out there

15 that have ideas of how that could be developed,

16 especially on the international scene, whether it's going

17 to be an ISO type of piece put together.

18 How are we to out reach to all of those other

19 players out there? And at the end of day, to make sure

20 we've got something that is, in fact, truly universal?

21 MR. TAYLOR: That is our intention,

22 Commissioner Dunn. We've already done all of the

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1 consultation we can do and still sleep, and we're going

2 to keep doing that.

3 CHAIRMAN DUNN: You still have time to sleep?

4 MR. TAYLOR. A little. We're participating

5 in the Commission's participation on the AOSCA task

6 force. And that helps us to do this consultation.

7 Our intention in drafting the Rule was to

8 allow international consensus to develop especially the

9 counterparty identifier. We've laid out principles that

10 we think will get us there. And we hope this provides

11 impetus for the world to come together on this solution.

12 COMMISSIONER DUNN: I know that some of the

13 entities that I visited, they have already built in their

14 own identifiers. What happens to those, and how will

15 measure with what we're proposing?

16 MR. TAYLOR: The rule explicitly says it's

17 perfectly all right to have your own identifiers. And

18 John can tell you pretty much any system will create its

19 identifier for something that it handles. We just want

20 to add one that will be universal.

21 CHAIRMAN GENSLER: Thank you, Commissioner

22 Dunn. Commissioner Sommers?

121

1 COMMISSIONER SOMMERS: Thank you, Mr.

2 Chairman. I want to thank this team. This is really

3 complicated stuff. I think you've done a great job

4 putting this all together.

5 I have questions with regard to specific

6 language that we're using, and how this overlaps with

7 real-time reporting.

8 So in the statute, the language

9 "technologically practicable" is used. But in other

10 places and in this rulemaking we use "promptly."

11 So is there a difference between those two,

12 and is there meant to be a difference.?

13 MR. TAYLOR: I think the answer is yes, there

14 is; because I think we used the word "promptly" when

15 we're dealing with end users and non-dealer and non-MSB

16 counterparties. We try to take great care in not to lay

17 more burden on them than was required.

18 We have basically asked for comment every

19 time we're asking them to do something on what their

20 appropriate burden should be.

21 COMMISSIONER SOMMERS: When we have been

22 consulting with the SEC on these rulemakings, do you know
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1 if the time frames that are included in our proposal

2 today, if they're identical to what the SEC is doing?

3 MR. TAYLOR: Yes. We did consult closely

4 about that. They are with one exception for situations

5 where reported where no technology was involved,

6 something not executed on a platform and not affirmed or

7 mapped electronically.

8 We're asking for comment on the length of the

9 time. They're saying 24 hours. We're not opposed to

10 that, we just wanted more input.

11 COMMISSIONER SOMMERS: Okay. Thank you very

12 much.

13 CHAIRMAN GENSLER: And, thank you. And thank

14 you for taking great care that when it's an end user to

15 an end user, and there's no swap dealer. I think it's a

16 very small part of the market, but I thank you for taking

17 care in that regard. And the use of the word "promptly"

18 rather than some other words. Commissioner Chilton?

19 COMMISSIONER CHILTON: I just had a quick

20 comment. I support the ruling. You've done a good job

21 with the proposal. I've got a big, long letter from a

22 not-for-profit energy end user. They said it was on data

123

1 recordkeeping reporting task. And, you know, it's really

2 too much. I will not ask a question on it. It's 47

3 pages long, so I'd be rushing to find the part, anyway.

4 But it makes this, has this concern, which is

5 a concern much of what Commissioner Sommers raised in how

6 do you do these things about definitions.

7 They are also special, but don't want to be

8 included here, but they're not special enough to be

9 excluded, you know. They want a transition time.

10 Essentially, they're saying we don't even know because

11 you have not done the definition.

12 But sort of like I said earlier, this is

13 becoming clearer and clearer as we go forward. I

14 understand it's a little tenuous now, but I think

15 ultimately this is going to be very good. We'll let

16 people know we're getting a visual. It's going to be

17 increased transparency. It's going to be good for

18 consumers, including not-for-profit energy users. Thank

19 you.

20 CHAIRMAN GENSLER: I know the public would as

21 much want to know as the Commissioners.

22 I said I was going to hold on this, but I

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1 guess I've got to rip this Band-Aid.

2 But the entity definition rule where

3 calendared for our next meeting, which is December 1st.

4 Yes. Yes. If it's this Commission, or if it's another

5 Commission, it's everybody edits, you all do have a

6 draft. I know there's Commissioners there and wonderful

7 individuals I know of each they have it. So it's trying

8 to get this all aligned and everybody's edits and

9 comments.

10 Our next meeting is December 1st. And the

11 entity definition one is, you know, that's what we're

12 trying to do. I will try to speak about the overall

13 calendar at the end. Commissioner O'Malia?

14 COMMISSIONER O'MALIA: You talked about and

15 we've all talked about balancing the international.

16 Commissioner Dunn mentioned it, as well. And you

17 mentioned you were going to lead the world.

18 Proposed reg 45.4 (b)(3) provides that the

19 identification system must be maintained by a voluntary

20 consensus standards by an associated registration

21 authority on a non-profit basis.

22 Do we have a sense of whether that will be

125

1 here or aborad? And when we lead the world, the

2 voluntary consensus part, leading the world, that doesn't

3 seem to be, you know -- how are we developing consensus

4 without dictating it?

5 MR. TAYLOR: Well, our intention is not to

6 dictate. That's why we sent out our principles that we

7 thought the Commission would want to follow this

8 identifier. But the way it's going to work best is if

9 the world does come together and agree on a standard for

10 these legal identifiers.

11 We think it's possible through an

12 international, voluntary consensus body that that can be

13 done. We are advised by the people we consulted with

14 it's sitting there almost ready to go.

15 It's isn't so much that we want to lead the

16 world, we just want to finally actually provide the

17 impetus that everybody can kick the ball into the net.

18 Everybody wants this. They have been

19 working on this for 10 years. It needs a push.

20 Dodd-Frank makes the push.

21 COMMISSIONER O'MALIA: Do you believe that

22 this -- you said it's on the doorstep. Is that push, is
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126

1 that going to come in consistent with our rulemaking

2 timetables?

3 MR. TAYLOR: I think the push is really our

4 rulemaking, our calling for these identifiers. But yes,

5 our understanding is that is possible, even likely that a

6 international consensus can develop for such an

7 identifier in advance of the implementation date for the

8 Rule, and that's the optimum amount. That's what we hope

9 for. The Rule provides for us to do it our own way if we

10 have to.

11 COMMISSIONER O'MALIA: This registration

12 authority, do you have an opinion whether it should here

13 or abroad and who would regulate it?

14 MS. LEONOVA: The way of the instruction, it

15 is an international protocol system, and has

16 international organizations for this.

17 It's more less government organization and

18 associations that implement those protocols. It's not

19 quite finished.

20 So the way we are trying to approach it is to

21 create a system that you for individual jurisdictions in

22 particular to move ahead in some kind of structure.

127

1 And we've had negotiations, reservations in

2 the European bank and European Commission, and we're

3 trying to move to facilitate and adopt it.

4 And the way we see it right now, it's not a

5 matter of regulators describing it, but more largely an

6 industry development and putting in some unified

7 consensus so everyone can use it.

8 COMMISSIONER O'MALIA: One of the issues

9 we've had I think in the two rulemakings thus far is the

10 ownership and control rule of future space. And we put

11 out proposals that come back. We've shifted them

12 republished them, proposals,, and we received a lot of

13 feedback about the cost of this and concern now.

14 Ananda, our director of Clearing and

15 Intermediary Oversight, did say it was his view that we

16 can't have a bifurcated system for margining.

17 Can we have a bifurcated system for futures

18 and swaps in terms of the universal identifier?

19 MR. TAYLOR: Well, I think we added some

20 language to the preamble, to the Rule precisely to

21 address this issue. This is really separate from the

22 whole ownership and control issue. That's about

128

1 accounts. It would be retrospective in some extent to

2 come up with data. And it would require people to reach

3 for data in multiple places.

4 This is just about identifying the legal

5 entity that's a counterparty to the swap. It's really a

6 very separate thing. In some ways, a simpler thing. It

7 would be done going forward. You go get an identifier,

8 and then you don't have to hunt for data anywhere else.

9 COMMISSIONER O'MALIA: This does seem as

10 simple as having my Arlington library card. But I

11 suspect it's a little more difficult and a little more

12 costly, correct?

13 MR. TAYLOR: One of the principles we laid

14 out is this ought to be a royalty fee or on a reasonable,

15 royalty basis, which is language in an OMB release of

16 this sort of thing.

17 There would need to be a reasonable fee to an

18 entity that comes and says I want an identifier because

19 the registration authority has to come and verify they

20 are who they say they are. And that verification would

21 have to be maintained over time.

22 The principles call for this not to be

129

1 monitized, for the small costs to be involved not to be a

2 barrier.

3 COMMISSIONER O'MALIA: Thank you.

4 CHAIRMAN GENSLER: If there are no further

5 questions, then I will call the question on the proposal,

6 staff proposal on data. All that's in favor, indicate by

7 saying "Aye."

8 (Chorus of ayes.)

9 CHAIRMAN GENSLER: All those opposed indicate

10 by saying "No." The ayes appear to have it. The ayes

11 have it. Thank you very much.

12 We're going to move on to the third of the

13 data trio, public reporting house trade what Congress

14 laid out in the statute for real-time reporting, but is

15 related to the reporting of transactions, price, volume,

16 and futures after the transaction occurred. Sometimes we

17 call it "post-trade transparency."

18 And Tom Leahy from the Division of Market

19 Oversight has been our team leader. Jeff Steiner, also

20 from the Division of Market Oversight. Tom Quickly, I

21 think volunteered for this job. I've got a deputy. And

22 Rick Shilts, the head of our Power Division.
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130

1 MR. LEAHY: Thank you, Mr. Chairman. Thank

2 you, Commissioners. Before I begin, I'd like to thank

3 Jeff, and my fellow team members for their dedicated and

4 tireless efforts in preparing the proposal that I'm about

5 to present.

6 Today's staff is recommending that the

7 Commission approve a notice of proposed rulemaking to

8 implement new regulations regarding real-time public

9 reporting, swap transaction, and pricing data. And new

10 regulations regarding size of public reporting

11 requirements for block trades and large notional swap

12 transactions.

13 This notice of proposed rulemaking reflects

14 consultation with SEC staff, and the staff of the Board

15 of Governors of the Federal Reserve, as well as meeting

16 with and comments from market participates.

17 The proposed regulation specify who is

18 responsible for reporting and publically disseminating

19 swap transactions and pricing data and how such reporting

20 and public dissemination may be accomplished, and the

21 data fields to be reported.

22 In addition, the proposed regurgitations

131

1 established methodology for determining an appropriate

2 minimum block size and established time delay for

3 publically disseminating block trade and large notional

4 swap transaction for pricing data.

5 In drafting these proposed rules, staff took

6 into account possible effects on liquidity, the public

7 disclosure of swap transaction and pricing data.

8 With respect to the real-time public

9 reporting of swap transaction and pricing data, the

10 proposed regulation specify the timing and manner in

11 which parties to a swap should report such data to

12 registered entities.

13 Swap dealers, major swap participants, and

14 end users could satisfy their requirements by transacting

15 on a SEF or DCM. SEFs and DCMs must send such swap

16 transaction and pricing data to a real-time disseminator

17 as soon as technologically practicable.

18 If the swap is transacted in an

19 off-facility, meaning that it is executed bilaterally

20 between the two counterparties in default or in exchange

21 of the SEF, then one party to that swap must report the

22 swap transaction and pricing data to a registered SDR

132

1 that accepts and publically disseminates such swap and

2 transaction pricing data in real time as soon as

3 technologically practicable.

4 The proposed rules establish an order of

5 precedence to determine which party to the swap is

6 responsible for reporting. That order is swap dealer,

7 major swap participant, and then end user.

8 If the parties to the swap are of equal rank

9 in this order, then the participates must choose which

10 party would report the data.

11 Swap dealers may make swap transaction and

12 pricing data available to their customers, but must not

13 do so before the transmission of such data to the

14 real-time disseminator.

15 With respect to the real-time public

16 dissemination of swap transaction and pricing data, the

17 proposed regulations specify that registered entities

18 will be responsible for publically disseminating swap

19 transaction and pricing data in real time.

20 Swap execution facilities and designated

21 contract markets may satisfy the public dissemination

22 requirement by providing such data to A swap data

133

1 repository that accepts and publically disseminates such

2 data as soon as technologically practicable.

3 Alternatively, a SEF or DSM may publically

4 disseminate such data through a third-party service

5 provider. However, the SEF or DCM would not have

6 satisfied his public dissemination requirement until the

7 third-party service provider publically disseminates es

8 such data.

9 SEFs and DCMs may make swap transaction and

10 pricing data available to their market participates, but

11 must not do so before the transmission of such data to

12 the real-time disseminator.

13 Swap transaction of pricing and data for all

14 facility swaps must be provided to a swap data repository

15 that accepts and publically disseminates such swap

16 transaction and pricing data in real time so that the SDR

17 can disseminate such data to the public.

18 The proposed regulations also specify data

19 fields for the purpose of reporting swap transaction and

20 pricing data to the public. In this regard, the

21 Dodd-Frank Act specifies that price and volume data must

22 be reported.
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1 In order to give meaning to price, certain

2 data fields must be respected. These data fields

3 include, for example: Contract type, subtype, underlying

4 asset or assets, notional size, currency or currencies,

5 start date, payment date, payment frequency, et cetera.

6 Additionally, the proposed regulations

7 provide guides and examples relating to the format and

8 manner that such data fields may be publically

9 disseminated.

10 With respect with block trades and large

11 notional swap transactions, the proposed regulations

12 specify the transaction size that qualifies as block

13 trade large trading or a large notional swap and the time

14 delay in publically disseminating the swap and

15 transaction pricing data.

16 The proposed regulations define a block trade

17 as a "swap" and has the following criteria: It is made

18 available for trading on a SEF or a DCM; it occurs off

19 the SEF or DCM trading system or a platform pursuant to

20 the SEF or DCM rules; it has a size that is consistent

21 with the appropriate minimum block size requirements of

22 proposed regulations; and it is reported to the SEF or

135

1 DCM in accordance with the SEF or DCM rules and

2 procedures; and is subject to the appropriate time delay

3 in the proposed regulations.

4 Similarly, the proposed regulations define a

5 large notional swap as a swap that has the following

6 criteria: It is not available for trading or execution

7 on a SEF or DCM; and has a notional or principal amount

8 that is consistent with the appropriate minimum size

9 requirements for proposed regulations; and it is reported

10 in accordance with the appropriate time delay in proposed

11 regulations.

12 To qualify as a block trade or a large

13 notional swap, the transaction size must be at least as

14 large as the greater of either, five times the greatest

15 of the mean, median, and mode of transaction sizes for

16 similar swaps, or among the largest five percent of

17 transaction sizes in similar swaps.

18 Under the proposed regulations, SDRs would

19 make this calculation and publish it on their website

20 using transaction data from the prior calendar year.

21 SEFs and DCMs would then set the minimum

22 block trade size per particular contracts that they list

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1 based on the calculations published by the SDR.

2 The proposed regulations also specify a delay

3 of 15 minutes in publically disseminating swap

4 transaction of pricing data for block trades and large

5 notional transactions of standardized contracts.

6 The proposal seek comments from the public

7 regarding appropriate time delays for large notional,

8 customized swap transaction.

9 The proposed regulation will be open for a

10 60-day public comment period. That concludes my

11 remarks. My colleagues and I are happy to answer any

12 questions.

13 CHAIRMAN GENSLER: Tom and your team, I thank

14 you. I would entertain a motion for staff recommendation

15 on real-time reporting.

16 COMMISSIONER DUNN: So moved.

17 COMMISSIONER O'MALIA: Second.

18 CHAIRMAN GENSLER: I support the proposed

19 rulemaking to implement real-time public reporting as

20 Congressional directed us to. I think that rule does

21 fulfill Congress' direction to bring public transparency

22 to the entire swaps market. This is both the

137

1 standardized market and the customized swap market, and

2 that's what Congress has directed us to do.

3 This proposed trade transparency will enhance

4 price discovery and liquidity. I know that many market

5 users might take the other side of that, but I truly

6 believe that post-trade transparency and the economic

7 studies over many markets shows that it enhances both

8 price discovery and liquidity while, as Congress has

9 asked us to do, ensuring anonymity of participates and

10 protections for large trade in appropriate cases for

11 what's often known as "block trades."

12 Per Congress' direction, the proposed rule

13 requires real-time reporting for swap transactions and

14 pricing data to occur as soon as technologically

15 practicable -- those are the words of the statute. We're

16 not making them up in a rule. Those are the words in the

17 statute.

18 For trades that are under the size of a block

19 trade or other than trades that are of large notional

20 size or block trades, Congress mandated that these

21 trades be reported without delays. Or, in their words,

22 as soon as technologically practicable, regardless of
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1 whether they are standardized or customized. So we've

2 used the statute provisions and recommended that.

3 With regard to block trades or trades of

4 large notional size, the proposed rule include two

5 important features: And I just want to chat about each

6 of them and why I support the rule.

7 The first is a time delay. A time delay.

8 And the second is a method on how to report large trades.

9 Let me start with the time delay. For

10 standard transactions, those that might be, in essence,

11 or on a swap execution facility or on a designated

12 contract market, the proposal includes a one-minute delay

13 on standardized blocks.

14 This compares to the futures market place,

15 which is currently a five-minute delay. And an equities

16 marketplace, which is actually even shorter than a

17 five-minute delay.

18 With regard to customized trades of large

19 notional size, I think of the ones that are not

20 clearable, they're not at a clearing house, they're not

21 at a SEF or a DCM. For those, what I'll call "customized

22 trades," the proposal takes, really just asks a series of

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1 questions: Whether a 15-minute delay would be

2 appropriate for the interest rate, currency, and other

3 financial swaps, markets. And what delays may be

4 appropriate for customized, large trades in physical

5 commodities.

6 So there's, in essence, four different

7 categories one might think of. The non-block

8 standardized trades. Congress has said that's as soon as

9 technologically practicable. We're just following

10 statute; the customized non-block trades. We're

11 following the statute. That, too, is just as soon as

12 technologically practicable. But on the two categories

13 of larger trades, block trades, which are standardized

14 enough to be a SEF or DCM and so forth, we're

15 recommending a 15-minute delay.

16 And this then on a truly customized blocks,

17 we're asking a series of questions, starting with should

18 it be the 15 minutes on the financials, but just a series

19 of questions.

20 The second important feature with regard to

21 block trades or trades of large notional size is a

22 reporting methodology that says regardless of the size,

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1 if it gets over $250 dollars of notional math, the only

2 thing the report would say is $250 million plus. This

3 could be on a $260 million dollar trade. A billion

4 dollar trade. A $3 billion dollar trade. It would just

5 say $250 million and have a little plus.

6 This, I think, both helps protect anonymity,

7 but also helps to promote liquidity in these large

8 trades, whether there to be customized or on a standard

9 marketplace.

10 The proposal in real-time reporting includes

11 the methods by which the calculate what block trade is --

12 and I look forward to lot of public comment on this --

13 but they are a methodology that is across markets with

14 the thought being that they not be regularly arbitrage.

15 It will be one swap execution facility that have

16 different block sizes. And another swap execution

17 facility and that, in essence, trading market platform

18 might complete in an arbitrage of darkness.

19 Darkness is when you don't have to report

20 something. So the thinking here, and this will relate to

21 ultimately what we have in the swap execution facility

22 area, but that there's computation done by the swap data

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1 repository once a year based on the data across the

2 entire market place. And there are various formulas, as

3 Tom Leahy, he laid out with regard to that.

4 The proposal includes an initial

5 implementation date of January of 2012 so that the swap

6 data repositories can do those initial calculations, and

7 then in each January thereafter would do the

8 calculations.

9 But it also provides market participants,

10 whether that swap execution facilities or swap dealers

11 time to adjust; and although the statute ultimately takes

12 effect next July 15th, give additional for everybody to

13 move forward.

14 Real-time post-trade reporting is critical

15 to promoting market integrity. And, yes, Commissioner

16 O'Malia, you are right. I'm passionate about it because

17 I think it helps the economy. And I think it helps all

18 investors, hedgers, and end users.

19 It does shift some of the information

20 advantage from Wall Street, which I proudly served in for

21 18 years. But I will tell you, if I might, Wall Street

22 benefits by information advantages.
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1 And they will send us hundreds, if not

2 thousands of comments that we're hurting liquidity. And

3 I feel in my core we're helping liquidity. We're helping

4 the small municipal governments, the small companies that

5 will get a chance to see where the pricing is for these

6 swaps.

7 So I think Congress is set on the smaller

8 trades as soon as technologically practicable. And I

9 think Tom and his team have put those in his Rule. For

10 larger trades, there will be a time delay of 15 minutes.

11 Wall Street can hedge their first order risk

12 when there are standard trades, and probably their second

13 and third order risk. But they will tell us why they

14 can't and why they might need days or weeks. And that

15 information advantage, if we let it be days or weeks,

16 will stay with Wall Street.

17 And I think they should absolutely should

18 comment on this. But I think that we balance the

19 considerations here also with saying anything over $250

20 million will just have a plus sign next to it.

21 On the customized blocks, we ask a series of

22 questions because I think that is more challenging,

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1 particularly in a physical commodity area. If it's a

2 customized block trade of natural gas or jet fuel -- I

3 don't know if there are large trades like this in the

4 agricultural place, but I think it's appropriate to

5 consider what time delays on those customized blocks are

6 appropriate. And I look forward to comments from the

7 public.

8 So I don't have any questions for you today,

9 Tom. I just thought I would say why I'm so passionate to

10 help the American public to get lightness when we've had

11 so much darkness to date.

12 Commissioner Dunn?

13 COMMISSIONER DUNN: Thank you, Mr. Chairman.

14 In the course of this meeting today, you referred to the

15 three data regulations. And I think 3D is an appropriate

16 analogy here. I think getting these together, things

17 should pop out to us. They should pop out to the public

18 as to what's taking place.

19 I associate myself with your comments on

20 getting that information out. I am hopeful that we have

21 coordinated this well enough with our sister agency of

22 the SEC and our agencies internationally so that we do

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1 see a nice, crisp pop out and not a blurb of many

2 different colors. So I am looking really forward to

3 seeing the comments that we receive on this particular

4 one.

5 CHAIRMAN GENSLER: Thank you, Commissioner

6 Dunn. Commissioner Sommers?

7 COMMISSIONER SOMMERS: Thank you, Mr.

8 Chairman. And thank this team for all of your hard work

9 on this issue area. Again, I think all of these

10 different rulemakings on data kind of intersect with each

11 other. So I have a number of different concerns, but I

12 will start with the one that sort of intersects with the

13 SDR proposal in regard to the real-time disseminator.

14 So we define our real-time disseminators

15 either an SDR or third-party vendor. And we talk about

16 if the SDR is not going to be the entity to report to the

17 public in real time, that the third-party vendor is able

18 to do that or if the SDR does not exist.

19 What if there's not a third-party vendor that

20 is willing to take data, is there any sort of

21 contemplation like the statute says that the data would

22 then come to the Commission?

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1 MR. LEAHY: I think that would be the

2 default. But we do ask questions on that topic in this

3 proposed rulemaking.

4 COMMISSIONER SOMMERS: And do you think that

5 the third-party vendors should have obligations with

6 regard, you know -- an SDR has obligations, but we don't

7 really talk about what kind of obligations or

8 registration of a third-party vendor would have.

9 MR. LEAHY: At this time, the hook would be

10 on either the registered entity or the registrant to

11 ensure that the data is reported in real time if they

12 choose to report through a third-party service provider.

13 COMMISSIONER SOMMERS: How does that happen?

14 If you think about that, and I tried to think through

15 that. If you're a counterparty, and you're sending your

16 data, but you're responsible for making sure the

17 third-party vendor reports it in real time, how do you do

18 that?

19 MR. LEAHY: What I would expect is that would

20 be a contractual arrangement that the owner of the data

21 would, in essence, enter into a contract with the

22 third-party data, perhaps selling that data to a third
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1 party who would package up with others, perhaps, and sell

2 to market participates. But that's one potential model.

3 But again, the registered entity of the

4 registrants would be on the hook to ensure that it

5 happens.

6 MR. SHILTS: I don't know if that's

7 fundamentally different from when a DCM, for example,

8 contracts out with another party or a surveillance or

9 some regulatory function. The DCM ultimately is

10 responsible for core principles that are carried out.

11 COMMISSIONER SOMMERS: Another part of the

12 SDR proposal that I think intersects with this one is

13 where the SDR talks about the time delays that are

14 required for reporting the DSR reports. And they have

15 these 15-30 minutes.

16 And then depending on whether or not the

17 trade is electronically executed or electronically

18 confirmed, why wouldn't those time frames in that frame

19 work be relevant to what we're doing with real time? Why

20 are they different?

21 MR. LEAHY: Well, I think they are relevant

22 to some extent. I think they provide backstops.

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1 There are two different data sets; although

2 the real time data set may be a subset of the broader

3 data set that is provided for recordkeeping purposes.

4 But our feeling that if a registered entity

5 or registrant can provide data to the SDR within those

6 time frames, they can certainly provide the real time for

7 what is what we need to be disseminated to the public

8 certainly within that time frame.

9 We did not specify backstop for these because

10 we recognize different entities may have different

11 abilities to report. So we took -- we decided not to

12 include those. But we do have, like I said, we do have

13 those other backstops.

14 We can look, since all of these

15 transactions will be time stamped, we can -- the

16 Commission can go in and see how long it is taking. From

17 the time of execution to the time of reporting, we can

18 compare with other entities of similar size, of similar

19 or of similar prestige, whatever variables we decide are

20 appropriate, to determine whether or not reporting is

21 occurring in a timely fashion as soon as technologically

22 practicable.

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1 COMMISSIONER SOMMERS: Can you also walk

2 through on the difference between what we're looking at

3 in large notional swaps in customized versus standardized

4 in how we have taken into account the liquidity in those

5 markets because we do draw this line in this proposal?

6 Although we talk about, you know, the

7 difference between customized and standardized, if we

8 don't actually define those in the Rule, we'll keep

9 drawing this line and how those may be different. Or, if

10 there is difference that exists, if we consider the

11 liquidity in those different markets.

12 MR. LEAHY: I think the easiest way to

13 differentiate is whether or not the contract is available

14 for trading on the SEF or the DCM. Those contracts will

15 are going to the standardized contracts. If they're not

16 available for trading on a separate DCM, it's most likely

17 that those are going to be the customized contracts.

18 We do differentiate. And again, so that

19 standardized contracts have that 15 minute time delay for

20 blocks. It's 15 minutes because, as the Chairman said,

21 we believe market participants should be able to lay off

22 any risks that they, markets would take in assuming that

149

1 risk from others. It's the highly customized ones where

2 there may be other forms of risk that are associated with

3 those. There may be imbedded options, for example.

4 There may be a more specialized or a more specific

5 commodity definition.

6 The risk associated with those might be more

7 difficult to lay off, so that's why we're asking

8 questions to determine what is an property time delay for

9 those.

10 COMMISSIONER SOMMERS: My last line of

11 questioning is again on the consistency with other

12 regulators. Do we know what the SEC is proposing today?

13 Would you walk through that with us.

14 MR. STEINER: I don't know exactly where

15 they're ending up today, if there were any changes. But

16 like us, they say that it's as soon as technologically

17 practicable. I believe that they have a backstop of 15

18 minutes for all trades regardless of the counterparty.

19 And as far as block trades, their reporting

20 for block trades. The last that I heard was that they

21 will report everything as soon as technologically

22 practicable with the exception of the notional amount of
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1 the trade, which will then be reported at the end of the

2 day. Again, their markets are different, so you have to

3 take that into account.

4 COMMISSIONER SOMMERS: Thank you. I think

5 that one of the issues that I know we added a number of

6 questions is with regard to the asset class and how we

7 consider the difference in potentially the liquidity in

8 each of the different asset classes. I think that's one

9 of the areas that the European commission certainly has

10 differentiated their recommendations on, is depending on

11 the asset class.

12 So I guess I would suggest that I would hope

13 that we would continue to try to be consistent with them

14 on if they're going to make differentiations based on

15 asset class, that we would consider that, as well.

16 CHAIRMAN GENSLER: I'm sure there will be

17 reporting on what we do and SEC does and so forth. But

18 we both have the same statutory provisions, as soon as

19 technologically practicable, right?

20 MR. LEAHY: That's correct.

21 CHAIRMAN GENSLER: To determine what blocks

22 are.

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1 MR. LEAHY: That's correct.

2 MR. CHAIRMAN: Although we don't have what

3 you all a "backstop," we're both saying you have to do

4 the small trades as soon as technologically practicable?

5 MR. LEAHY: That's correct. The backstop. I

6 mean, you have to report your trade as soon as

7 technologically practicable.

8 CHAIRMAN GENSLER: So they might be more

9 restrictive because they have a deadline.

10 And isn't it right that if it's electrotonic

11 on a swap execution facility, that's probably pretty darn

12 fast as soon as technological practicable? In both

13 regimes, whether it's the SEC or ours, if it's

14 electronic, it's on a executed platform, it's probably,

15 it's pretty darn fast?

16 MR. LEAHY: That's correct. From market

17 participates and our roundtable discussion, that's the

18 case.

19 CHAIRMAN GENSLER: And then, obviously, if we

20 go all the way to the other spectrum, if it's a end user

21 to end user -- and again, we think that's a very small

22 part of the market, and they're just doing it on the

152

1 telephone, and it's customized, some very customized, I

2 don't know, the electricity market or something, as soon

3 as technologically practicable may mean something very

4 different?

5 MR. LEAHY: Yes, that's right.

6 CHAIRMAN GENSLER: Commissioner Chilton?

7 COMMISSIONER CHILTON: I'm just reading one

8 of the comment letters that came in October. A Bank of

9 America article. And they're sort of getting at this

10 whole issue of block trades. That's one of the things

11 they get to. And whether or not they do have inadequate

12 time to lay off risk.

13 I'm looking forward to the comment letters

14 because if they can't, ultimately the consumers pay for

15 it, so that doesn't make me very happy.

16 So I think it's a balancing act that we need

17 to get in here. They need to be able to lay off their

18 risk and effectively hedge. I look forward to seeing

19 what they have to say. I think you all have done a good

20 job in putting this forward.

21 CHAIRMAN GENSLER: Thank you, Commissioner

22 Chilton. I think maybe this might disagree with Tom. It

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1 might not lay off every single risk because you may

2 either have a basis risk. You could do a billion dollar,

3 14-year interest rate swap and decide to hedge it with 5,

4 10, and 30 year. You might still have some basis risk

5 during a 14 year point in the curve and 5, 10, and 30.

6 Or even in a very liquid oil markets, you might have a

7 locational basis risk, it might be crude oil, but

8 delivered to a different place. So it's that debate.

9 At most risk management of Wall Street, this

10 would want to try to hedge their first order, and maybe

11 their second and third order risk. So basis risk, they

12 can be managed for some time.

13 Commissioner O'Malia?

14 COMMISSIONER O'MALIA: Mr. Chairman, you

15 indicated that the Wall Street dealers would use this

16 liquidity argument to their advantage.

17 CHAIRMAN GENSLER: They might or might not.

18 COMMISSIONER O'MALIA: Well, all I can say is

19 we've been inundated already. Commission Chilton

20 mentioned buy side is also mentioned. And, ostensibly,

21 we're here to, you know, transparency is argued to be for

22 protecting and advantaging the buy side, so they have
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1 mentioned liquidity here.

2 Tom, you mentioned in your opening

3 statement you've looked at liquidity, but in this

4 rulemaking I cannot find that a economic analysis or any

5 analysis of the liquidity issue. Do you want to

6 elaborate on that?

7 In fact, in my opening statement, I

8 referenced footnote 7472 that said we have not really

9 looked at it. It could change. The more we know, then

10 we'll adjust our rules.

11 MR. LEAHY: This rulemaking, Dodd-Frank Act

12 fundamentally changes how the over-the-counter market

13 works. We don't have data specifically --

14 COMMISSIONER O'MALIA: Let me ask you about

15 that. Do you think it will change the way it works, or

16 change the way we regulate? There is still going to be

17 ill-liquid. There's still going to be thinly traded.

18 How does it change that?

19 MR. LEAHY: It will move more contracts, more

20 of these swaps onto SEFs and DCMs. It will change it in

21 that respect. That's actually an argument for a

22 different rulemaking.

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1 COMMISSIONER O'MALIA: I thought they should

2 all be brought together.

3 MR. LEAHY: But that will bring the pre-trade

4 transparency, this is the post-trade. But where I was

5 going with this is we don't have the data that has not

6 been tried before specifically for swaps.

7 At our roundtable and in conversations with

8 certain market participates, academics, the argument was

9 made with respect to the trace. That trace, if you

10 require reporting of over-the-counter fixed income

11 transactions, that's going to harm liquidity.

12 And one of our roundtable participants, a

13 former chief economist at the SEC, flat-out stated there

14 is no evidence that it will harmed liquidity. And, in

15 fact, the evidence points to the opposite.

16 So we had to use analogs like that. We don't

17 have -- there is no specific data with respect to swaps

18 and post-trade transparency. It doesn't exist at this

19 time.

20 COMMISSIONER O'MALIA: So the statute says we

21 have to consider it. Going forward how will we consider

22 it?

156

1 MR. LEAHY: Going forward, we have that data.

2 And we can analyze that data and determine whether or not

3 we're better off having post-trade transparency. But

4 until we have the data, until we tried, we can't. There

5 is no laboratory.

6 COMMISSIONER O'MALIA: We established on a

7 previous panel a swap is owned by the parties that

8 transacts on it. Do we limit swap owners, therefore, the

9 ability to sell and to distribute information regarding a

10 trade prior to sending it to a SDR?

11 MR. LEAHY: We are mostly silent on that. We

12 have implicitly and stated that this -- and I want to

13 emphasize "implicitly" -- that the owners of the data

14 would be the market participates of the swap facility or

15 the facility itself by allowing them to provide that data

16 to, if it's a swap dealer, to its customer base. Or if

17 it's a SEF or DCM, provide that data to its own market

18 participates. Whether that's a bonus for working with

19 us, or whether its sold, that would be up to owner of

20 that data.

21 COMMISSIONER O'MALIA: But there's no

22 limitation on when they send it? How they send? If they

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1 sell it at all?

2 MR. LEAHY: The limitation is that they

3 cannot do that earlier than they reported to the SDR. We

4 expect there would be some delay from the time it's sent

5 to the SDR until the SDR is able to publically

6 disseminate that data.

7 MR. STEINER: That's sending it to the SDR

8 for purposes of real-time dissemination. Or, in case of

9 a swap market, a SEF or a DCM and to a third-party

10 service provider real-time disseminator.

11 COMMISSIONER O'MALIA: When does it count

12 that you've complied with the Act to report, when it

13 transacts on a screen, or when it's actually disseminated

14 by a SDR?

15 MR. LEAHY: You've complied when you've sent

16 it to the real-time disseminator. Whether it's the SDR

17 or a third party, that's the point in which we believe

18 you have complied.

19 COMMISSIONER O'MALIA: What if it's on a SEF

20 that's a transparent mechanism we've talked about?

21 MR. LEAHY: That may not qualify. It depends

22 on how open it is. It would seem to me that that should
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1 be a way to comply. Perhaps we can receive comments on

2 that. If it is a fully public, publically available

3 website where you have data out there, that should be

4 consistent with the Act.

5 COMMISSIONER O'MALIA: We have a couple of

6 new terms introduced in the latest provision: The

7 standard swap trading, and customized large notional

8 trade. They're not defined. They're discussed in the

9 preamble, but they're not defined.

10 Do you want to elaborate on them?

11 MR. LEAHY: The standardized are those that

12 are available for trading on a SEF or a DCM. Whether

13 they are traded on a SEF or DCM, is not a term. Those

14 contracts could be traded off of the SEF or DCM pursuant

15 to the end-user exception.

16 COMMISSIONER O'MALIA: Okay. So on SEF or

17 DCM, or off an exchange or DCM?

18 MR. LEAHY: Well, again, if it's eligible to

19 be traded on a SEF or DCM, in that respect, you could

20 have an end-user exception, transaction pursuant to the

21 end-use exception, which the contract that they're

22 trading felt that the trading is essentially

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1 standardized, it could have been traded on a SEF or DCM.

2 COMMISSIONER O'MALIA: Does it have to be

3 identical, or does have to be close?

4 MR. LEAHY: I would say it has to be close.

5 I don't think it needs to be identical. There are ways

6 you can make it difficult. We include those in the data

7 field.

8 For example, if an entity wanted to include a

9 worthless, embedded option, we would have visibility of

10 that. That would not be a sufficient reason for it to be

11 non-standarized, at least in my opinion.

12 So if it's eligible to traded on a SEF or

13 DCM, we would view that as standardized. If not, it

14 would be customized.

15 MR. SHILTS: Just some of statutory language

16 behind it. The standardized ones, we're looking at

17 Section 2(a)13(c) I and IV. And, as far as the

18 customized transactions, it would be II and III.

19 COMMISSIONER O'MALIA: That's all.

20 CHAIRMAN GENSLER: I thank the staff, and I

21 thank fellow Commissioners. This one is a very important

22 one. I think we do all share the view great transparency

160

1 markets. We might have a little difference. The public

2 will help us out tremendously.

3 If there are no further questions, the motion

4 having been seconded, all those in favor indicate by

5 saying "Aye."

6 (Chorus of ayes.)

7 CHAIRMAN GENSLER: All those opposed indicate

8 by saying "Nay."

9 COMMISSIONER SOMMERS: Nay.

10 COMMISSIONER O'MALIA: Nay.

11 CHAIRMAN GENSLER: The ayes appear to have

12 it. They ayes have it, and the motion carries.

13 I'm also going to ask at the point for a

14 unanimous consent to allow staff to make minor technical

15 corrections to the documents voted on today prior to

16 sending them to the Federal Register, including some

17 numerical corrections in the P.R.A -- P.R.A. means

18 Paperwork Reduction Act -- estimates.

19 And I guess I could make that motion. So, I

20 will make that motion for a unanimous consent. Are there

21 any objections? Not hearing any objections, that

22 carries.

161

1 I had said that I would just say a few words

2 on the scheduling. I think Commissioner O'Malia raised

3 this, so it's a good question.

4 We've identified 30 topic areas with the SEC.

5 And it's been a tremendous partnership collaboration

6 partnership with them. We've laid out a internal

7 schedule through the middle of December and always

8 recognizing flexibility.

9 I say, publically, that we're all human, with

10 flexibility with some taken up in January. But at least

11 we've kept our feet to the fire through December.

12 We currently have a meeting for December 1st

13 schedule. I'm losing track if we put it in the Federal

14 Register, but we do have two dates in December that we

15 will all come together on.

16 I won't try to make news here and say the

17 dates, but they are calendared, two very specific dates,

18 and some things were moved to January.

19 In terms of the topics, themselves, on

20 definitions, there are two major rules: Entity

21 definitions and product definitions. And Cyrus keeps

22 telling me that we're in good coordination with the SEC.
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42 (Pages 162 to 165)

162

1 We're looking to do the entity definition December 1st.

2 I suspect product definition will be one of

3 those other two dates. I think the last date in December

4 we have December 16th. And then, thankfully, people can

5 go on their holidays and everything. So that product

6 definition one will probably be later.

7 In terms of other things that we have in the

8 -- I'm just thinking by division. But in Division Market

9 Oversight, we have a number of rules. But the main two

10 pieces are designated contract markets and swap execution

11 facilities.

12 And the designated contract market, I think

13 is our next meeting. I think that's December 1st. And

14 the swap execution facility, I believe is in that next

15 one. I can't remember the date. What's that, David?

16 MR. TAYLOR: The 9th?

17 CHAIRMAN GENSLER: The 9th of December, so

18 it's almost. But I think the swap execution is on the

19 9th. So those are two main things from the Division of

20 Market Oversight.

21 In the Division of Clearing, we have what is

22 the second batch of both the internal business conduct

163

1 standards, and the designated contract market. The DCO

2 standards, and those are calendared for December 1st.

3 So the second batch, which is largely about

4 recordkeeping reporting and administration matters and so

5 forth. The risk management batch of both internal

6 business conduct and the risk management batch for the

7 clearing houses, I think is that December 16th meeting.

8 Again, all of this can move and change. We

9 have lots of moving parts, but those are the main pieces

10 that risk management piece being the latter one. And the

11 more administrative recordkeeping piece being December

12 1st on both internal business conduct and the clearing

13 houses.

14 The end user exception, the commercial

15 end-user exception, i think that's George's team. And

16 that in the Office of General Counsel. I think that's in

17 that middle meeting in December. But whether it's

18 actually ends up December 9th or December 16th, that's a

19 very important one. And that's what we've been looking

20 at trying to do.

21 And then position limits. Rick will tell us

22 when he's going to be able to have it in front of us.

164

1 But that will be one of these December meetings, this

2 position limits. I'm trying to think what have I left

3 out.

4 So the things that are probably going to be

5 later are if we do a roundtable on capital margin, which

6 I am committed to. I think it's a good idea. We'll do

7 that as soon as staff can do it early December.

8 I think that meeting on capital margin will

9 be in January rulemaking. I think that's just

10 appropriate. I know the public would like to know where

11 we're coming out, I think will add a little more time.

12 We have a joint rule with SEC, which is not

13 related to derivatives, which is related to hedge funds,

14 disclosure on hedge funds, that has to be joint. I think

15 that will be calendared for the middle of January.

16 We're really mostly working with the SEC.

17 They are taking the lead on that. I think it's probably

18 not specifically related to the derivatives, so I don't

19 feel we've slipped on that one.

20 And then we also put out an advanced notice

21 for proposed rulemaking on another topic, agricultural

22 swaps. And we've just been getting the public comments

165

1 in. So, inevitably, the actual proposal there, whether

2 staff can get that together to us by mid January, which

3 will be terrific if they can.

4 So I think the hedge fund work, the capital

5 margin is a good suggestion to have a roundtable. And

6 because we did an ANPR on the agricultural area, it was

7 not a mandated rule, but a discretionary rule.

8 Disruptive trading practices, we planned and

9 we put out an ANPR. Of course, when those comments come

10 back in, the staff will work with those comments. We'll

11 see when we can calendar that.

12 Dan, am I missing any of the big ones?

13 MR. BERKOVITZ: External business.

14 CHAIRMAN GENSLER: Thank you. The rule for

15 external business, which is very important. It's being

16 run out of the Division of Enforcement, will be either --

17 I can't remember if its the second or third meeting in

18 December. It's not December 1st, but in December.

19 I think December 1st is a full meeting, so

20 that one might be the second or third meeting or at least

21 tentatively.

22 These are not fixed dates. I say that to
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43 (Pages 166 to 167)

166

1 our friends on the Fourth Estate. We're not only human,

2 but we're trying to coordinate and do this right and all

3 of the comments. Commissioner O'Malia?

4 COMMISSIONER O'MALIA: The other question

5 that I just asked the staff was portfolio margining.

6 CHAIRMAN GENSLER: Thank you. Portfolio

7 margining, some of which we've taken up even today in

8 midst of proposed rulemaking for non-cleared swaps.

9 There are some technical parts of the

10 portfolio margin that will be taken up in risk management

11 rules for clearing houses, but there's still the big

12 issue with the SEC that has to be done jointly. I don't

13 think we'll be able to do that in December.

14 So we'll take up the things that we can and

15 need to do in clearing. I believe, as you do,

16 Commissioner O'Malia, we really need to do this, but it's

17 not calendared for December. But I'm associating my

18 remarks with you.

19 COMMISSIONER O'MALIA: Yes. I know. I know.

20 Thank you.

21 CHAIRMAN GENSLER: If there's no other

22 further business -- I've just probably got our press

167

1 secretary Scott Schneider upset with me in doing all of

2 that transparently, but it's there -- then I will

3 entertain a motion to adjourn the meeting.

4 COMMISSIONER DUNN: So moved.

5 COMMISSIONER SOMMERS: Second.

6 CHAIRMAN GENSLER: All in favor?

7 (Chorus of ayes.)

8 CHAIRMAN GENSLER: Any opposed? The ayes

9 appear to have it. The meeting is adjourned.

10 (The meeting adjourned at 1:15 p.m.)

11

12 * * * *

13

14

15

16

17

18

19

20

21

22
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broaden 77:2

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brought 26:1

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bucket 81:5

budget 93:18 94:2

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build 119:3

building 115:5

built 94:2 120:13

bunch 62:10

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burden 21:17

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businesses 16:2

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capital 25:10 38:2

43:1,6 45:2 46:3

76:15 164:5,8

165:4

card 128:10

care 121:16 122:14

122:17

carefully 7:7 69:13

carried 35:8

146:10

carries 160:12,22

carry 94:22

case 57:5 68:1,6

104:5 151:18

157:8

cases 65:12 137:10

categories 111:2

139:7,12

categorize 113:22

cats 26:4

caught 15:7

cause 20:14 45:15

82:3

CDS 97:3

CEA 101:18

central 8:9 12:21

CEO 32:6

certain 44:12 63:15

63:15 86:21 87:3

87:22 90:13 94:7

134:1 155:8

certainly 22:19

38:21 58:5 67:1

68:17 75:2,17

118:12 147:6,8

150:9

certainty 18:19

26:14 27:16

certify 82:12

cetera 134:5

CFTC 9:19,22 21:8

26:19

CFTC's 8:21

Chairman 2:3 3:3

6:20 7:10,12 10:2

10:5 12:5 16:12

17:14,18,21 18:4

20:19 22:9 24:17

25:15,20,21 28:16

30:6 36:5,9,15

37:13,22 38:6

41:4,8,12 42:4

50:14,19 51:8

52:20 53:16,20

54:12,18 55:8

58:15 59:20 60:1

60:7,16 62:3,12

63:20 65:14,20

69:6 73:7 74:18

75:5,9,11,18

76:19 77:14,18

78:2,8,21 79:1

87:8 88:14,20

89:3,17 90:13,19

91:7,8,18,22 92:5

92:8,20 93:2,12

95:3,16 101:6,15

104:16 105:1,15

105:22 106:4,9,11

107:22 114:21

115:3 118:1,8,12

120:3,21 121:2

122:13 123:20

129:4,9 130:1

136:13,18 143:13

144:5,8 148:20

150:16,21 151:2,8

151:19 152:6,21

153:14,17 159:20

160:7,11 162:17

165:14 166:6,21

167:6,8

Chairman's 25:14

challenge 46:1 75:3

challenging 14:11

14:14 142:22

chance 142:5

change 26:21,22

27:13 32:13,15

35:22 45:8 57:17

57:19,19 67:17

104:21 105:2,14

105:19,20 154:9

154:15,16,18,20

163:8

changed 35:17

69:19

changes 10:15

17:11 28:9,15

32:22 33:3 35:20

44:15 49:3,9,10

49:12,20 58:12

70:16 111:14

149:15 154:12

changing 17:16

charged 49:16

Charter 87:1,4

chat 41:14 138:5

chatted 29:1

chatting 50:19

cheapest 111:19

check 75:16

chief 30:14 81:13

107:16 155:13

Chilton 2:4 4:21

14:1,2 17:19 38:6

38:7 39:2,4 40:1

41:3,9 62:4,5 63:2

63:21 101:15,16

102:9 103:2,11

104:8,15,17

122:18,19 152:6,7

152:22 153:19

chime 117:2

choice 33:11,14

37:2

choose 31:20 49:14

83:6 132:9 145:12

choosing 61:18

70:20

chorus 17:21 41:11

78:1 106:8 129:8

160:6 167:7

chose 107:6

church 15:2

circumstances 8:17

48:9 115:19

claim 65:7,7

claims 64:20 65:1

clarify 22:12

clarity 33:20 56:2

class 83:4,5 94:6,10

100:5 111:3 150:6

150:11,15

classes 109:4

111:15 112:18

150:8

clause 54:2

clear 8:1 9:11 19:1

23:6 29:18 31:15

34:4 39:15 40:15

44:6 70:10 75:1,4

75:6,14,15

clearable 138:20

cleared 3:17 8:9

24:6 30:22 36:3

38:15 41:19 43:13

44:4 50:16 80:21

clearer 123:13,13

clearing 2:10 3:18

23:17 29:20 30:2

30:7 41:1,18

42:12,13,15 43:6

43:7,14,19 44:9

44:10,18 45:3,5,8

45:12,21 46:1

47:3,9,21 48:1

49:7,12 52:3,15

52:16,21 53:6

56:18,19 59:6

64:13,17,19,21

65:2,10 66:3,4

67:1,4,12 69:20

71:3,9,17,20 72:2

72:9,10,14,20

73:20 75:8,9,10

75:11,13,21 76:10

76:11 77:3 89:12

97:12 104:10,14

106:22 115:17

127:14 138:20

162:21 163:7,12

166:11,15

clearly 19:21 20:1

67:22 70:10

climate 15:13

close 118:4 159:3,4

closely 122:3

closer 72:9

closing 24:17

CME 65:5,7

code 35:11,19

58:10,12 63:19

codes 63:13,14

codified 31:5

cognizant 23:8

coined 7:22

collaboration

161:5

collateral 3:11

30:18 31:3 34:10

34:13,16 36:18

43:8,9 44:2 45:6

45:14,16 47:7,9

47:22 48:7 49:15

49:15 51:13 65:7

67:2

colleague 78:15,17

colleagues 30:13

136:11

collect 45:20 79:11

80:17

collecting 89:19
Meeting November 19, 2010

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Page 5

collection 20:22

22:12

collective 24:4

collectively 23:18

27:2 66:11,14,16

collects 45:21

college 16:3

colors 144:2

come 3:4 12:18

20:13 27:11 40:10

46:6 65:3 78:6,9

97:19 99:22

110:13 120:11

125:9 126:1

127:11 128:2,19

144:22 161:15

165:9

comes 51:21 64:22

128:18

coming 5:5,6 14:12

15:6 40:5 55:18

99:11 164:11

comment 6:17 18:8

21:14 22:2,3,22

28:19 30:21 33:13

35:3 36:2 38:9

46:13 48:15 51:20

55:16 56:3 59:1

62:12 84:3 88:16

91:6 111:3 114:19

115:20 117:4,9,18

121:18 122:8,20

136:10 140:12

142:18 152:8,13

commentator 51:2

commentators

49:13 50:11

commented 13:1

17:15

commenting 17:12

comments 5:6 6:11

7:8 10:15 11:8

12:18 13:2,6,19

13:20 17:7,9 21:3

22:3 23:3 24:12

25:17 47:15 49:13

54:19 55:22 56:3

57:1 60:21 61:8

101:8 102:8

115:10 117:12

124:9 130:16

136:6 142:2 143:6

143:19 144:3

158:1 164:22

165:9,10 166:3

commerce 99:1,12

101:22,22

commercial 31:12

34:20 71:5 87:14

89:11 163:14

commingle 63:3

commingled 55:1

commingling 47:6

commission 1:4 2:2

3:5,17 5:16 12:20

13:9 18:20,21

20:11 22:7,17

23:14,20 24:7

26:11 28:4 34:12

35:6 38:11 40:2

41:20 43:18 46:12

46:14 52:3 53:10

53:11 54:4,6 55:4

69:17,18,22 76:3

76:6,14 79:7,20

81:20 82:3,4,14

82:16 84:10,14

85:20 88:4 94:11

98:9,12 106:17

107:2,16 108:8,16

110:3 113:12,18

114:12,13,17

117:22 119:3

124:4,5 125:7

127:2 130:7

144:22 147:16

150:9 153:19

Commissioner 2:4

2:5,6,7 4:20,20,21

5:18 6:19,20 7:15

7:22 10:2,3,4 11:1

12:5,6,7 14:1,2

16:20 17:18,19,20

25:16,20,22 28:16

28:21 36:13,14

37:12,13,20 38:3

38:4,6,7 39:2,4

40:1 41:3,8 50:17

50:18,21 51:6

52:11 55:8,9,13

56:10,21 57:20

58:14,16 60:14,15

60:20 62:3,4,5

63:2,20,21,22

64:1 65:14 66:20

67:20 70:3 72:15

73:6,9 74:14 77:5

77:9 89:1,2 91:7,9

91:13,15 92:3,7

93:1,2,11 94:4

95:3,12,14,15

96:14 97:1,5,21

98:2,13 99:13

100:13 101:4,6,15

101:16,17 102:6,8

102:9 103:2,11

104:8,15,16,17,18

105:3 106:10

115:1,2 118:7,8

119:12,22 120:12

120:21,22 121:1

121:21 122:11,18

122:19 123:5

124:13,14,16

125:21 126:11

127:8 128:9 129:3

136:16,17 141:15

143:12,13 144:5,6

144:7 145:4,13

146:11 148:1

149:10 150:4

152:6,7,21 153:13

153:14,18 154:14

155:1,20 156:6,21

157:11,19 158:5

158:16 159:2,19

160:9,10 161:2

166:3,4,16,19

167:4,5

Commissioners 5:4

12:9 17:10 25:17

37:17 79:2 108:1

123:21 124:6

130:2 159:21

Commissioner's

5:6,12 43:21

commissions 26:19

28:4

Commission's 21:5

22:13 24:11 35:13

35:21 79:9 80:12

108:14 109:13

113:15 114:17

120:5

committed 164:6

committee 1:10

12:22 79:21 95:14

commodities 35:10

53:1,22 54:9 81:8

81:11 139:5

commodity 1:4 3:5

31:1,5 35:18 36:4

43:11 53:3 81:7

111:11 143:1

149:5

common 38:17

communication

83:18

communities 21:19

companies 142:4

company 92:6

compare 25:7

147:18

compared 19:20

48:16 62:21,22

compares 13:12

138:14

compelled 9:13

competition 77:2

competitive 87:14

complete 8:4

108:13 110:1

140:18

completeness

110:16

complex 22:1,18

compliance 44:14

81:13,21 83:16

96:12 97:22

compliant 96:17

98:4,7

complicated 10:10

52:6 121:3

complied 157:12

157:15,18

compliment 116:11

comply 100:6

158:1

component 75:20

117:15,15

components 45:10

comprehensive

10:10

comprised 19:19

Comptroller 79:19

computation

140:22

computer 114:10

concentrated 76:8

concept 21:20

concepts 116:13

118:3

concern 8:1 19:14

20:5 40:15,22

93:3 123:4,5

127:13

concerned 17:6

44:4 74:21

concerning 30:17

30:21 31:2 33:21

35:14 36:3,17

51:13 108:13

110:2 113:4,19

concerns 10:17,19

22:16 23:12 44:11

44:17 46:7 50:6

86:3 95:16 98:15

99:16 118:9

144:11

concluded 66:8

concludes 114:19

136:10

conditions 19:4

conduct 19:2 25:9

50:9 112:21
Meeting November 19, 2010

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Page 6

162:22 163:6,12

confidence 45:14

73:22

confident 17:16

18:13 45:15

Confidential

113:19

confidentiality

85:1,22

confidentially 85:6

confirmation 83:11

83:18 110:21

confirmed 146:18

conflict 58:10,11

conflicts 87:18,21

conform 35:21

80:6

confused 90:6

confusing 100:15

Congress 20:1 26:2

26:18 27:4,7 31:6

31:13 39:18 61:22

67:21 68:2 69:12

89:5,14 104:6

129:13 136:21

137:2,8,12,20

139:8 142:7

congressional 37:1

136:20

connection 68:11

79:16 98:22 99:3

connections 112:12

conscious 106:16

consensus 23:6

120:8 124:20

125:2,3,12 126:6

127:7

consent 50:21 51:8

51:11 92:21 106:6

160:14,20

consider 3:5 7:16

23:11 24:8,15

25:13 58:7 61:12

143:5 148:10

150:7,15 155:21

155:21

considerable 19:16

considerations

80:8 86:12 142:19

considered 57:13

61:16 109:1

considering 3:8

11:17 104:12

considers 87:13

consist 11:22 84:12

consistency 107:8,9

149:11

consistent 11:18

13:7 80:3,10,11

102:7 115:20,22

126:1 134:20

135:8 150:13

158:4

consistently 5:2

consists 81:18

consult 122:3

consultation

115:13 120:1,6

130:14

consultations 43:17

43:20 108:20

Consultative 80:8

consulted 79:17

113:3 125:13

consulting 121:22

Consumer 80:16

consumers 123:18

152:14

consumes 48:10

consuming 34:2

contact 86:5,6

contained 23:20

contemplate 99:15

contemplates

100:14

contemplation

144:21

context 6:13 20:12

40:15

continuation 110:6

110:8 111:6,10,15

continue 6:13 9:2

10:8 11:9 27:18

47:21 119:6

150:13

continued 116:7

continuity 88:7

contract 52:22

107:1 132:21

134:3 138:12

145:21 148:13

158:21 162:10,12

163:1

contracts 8:9,12

42:21 43:3,13

135:22 136:5

146:8 148:14,15

148:17,19 154:19

158:14

contractual 145:20

contribution 48:2

contributions 45:4

46:2,4 48:3,11

control 33:22 34:5

34:7 44:8 127:10

127:22

controlled 88:2

convenience 55:1,2

55:5,6,7,10,11

convenient 15:3

conversation 102:6

conversations

155:7

convinced 18:14

26:13

cooperating 8:22

cooperation 9:5

coordinate 107:20

115:5 166:2

coordinated 79:17

115:4 143:21

coordination 11:15

12:7 161:22

copy 24:12

core 71:4 79:13

81:7,22 86:10,11

86:13 88:3 142:3

146:10

corporate 113:19

corporations 37:6

correct 52:20 53:19

54:17 59:20 60:6

90:10,11 98:1

128:12 150:20

151:1,5,16

corrected 28:5

corrections 160:15

160:17

cost 21:16 22:22

44:14 48:16 62:7

62:10,10,16,17

68:14,20 69:1

70:22 127:13

costly 8:1 57:13

128:12

costs 44:11,15,16

46:4,7,8,15,19

47:12,13,16 48:13

48:18,22 49:3,4,8

49:9,11,16,18,18

50:8,9 63:1 88:10

129:1

counsel 30:1,4,12

52:13 78:12,16,18

78:19 82:13

100:21 117:6,20

118:1 163:16

counsel's 60:8,11

count 13:10 103:20

157:11

counter 38:17

counterparties

3:11,13,17 30:18

31:3,8,10 36:18

83:12,19 99:4

105:7,13,16

109:10,15 111:20

112:6,17 116:22

121:16 131:20

counterparty 31:15

31:19,22 32:5,7

32:10,13 33:5,8

34:16,19 39:10,13

105:13 110:19

111:18 112:1,7,10

112:14 113:9,10

120:9 128:5

145:15 149:18

couple 5:7,14 10:18

26:15 27:21 51:14

66:21 90:1 98:15

158:5

course 6:10 116:8

143:14 165:9

covers 32:22

115:15

co-leading 78:13

craft 69:13

crafts 69:12

create 44:15 97:17

120:18 126:21

created 21:10

113:6,17

creation 23:2 110:6

110:8,17

credit 97:4 110:9

111:6

creditor 42:10

cries 110:12

CRIG 8:12

crisp 144:1

criteria 33:14

97:20,21 134:17

135:6

critical 4:6,10

59:17 89:10,21

107:19 141:14

crucial 112:15

crude 153:7

currencies 134:4

currency 79:19

111:11 134:4

139:2

current 7:6 32:22

53:17 101:14

currently 44:3

59:12 63:7 64:17

103:7 138:15

161:12

curve 153:5

custodian 33:7,18

34:3 37:4 39:14

custody 33:17

38:12,16 40:15

customer 23:17,22
Meeting November 19, 2010

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Page 7

24:4,6 29:12

34:12 35:8,14,15

39:9 40:16 41:1

41:18 42:1,3,4,7,8

42:9,11,16,20

43:2,4,5 44:1,13

44:20 45:16,20

46:17 47:2,8

49:14 50:6,8

51:14 53:13,15

54:5,7,11,15

55:10 63:11,12

64:11,12,15 65:1

65:4 66:6 67:2,9,9

67:9 68:8 70:19

71:11 72:21 73:10

73:14 74:2,5,22

76:12 156:16

customers 23:19

30:22 35:10 36:3

42:14 43:8,10,12

43:14,18 44:6,11

44:17 45:2,7,19

46:5,6 47:7,18,19

47:22 48:4,8,11

48:18 49:17,22

50:2,8 53:11

54:10,15 64:11,18

64:19 65:5,10,10

65:12 66:7,11,12

66:13 67:5,12

68:8 69:2 70:19

71:12,15,20 73:14

73:21 74:3,4,11

77:10 132:12

customer's 24:2

43:2 46:22 47:10

customized 29:13

36:22 136:8 137:1

138:1,18,21 139:4

139:10,16 140:8

142:21 143:2,5

148:3,7,17 149:1

152:1,1 158:7

159:14,18

cycle 89:20 116:8

Cyrus 161:21

D

D 2:6 3:1

daily 67:8 111:13

Dan 16:11 30:4

60:12 65:16

165:12

dancing 103:12

danger 69:20

darkness 140:18,19

143:11

darn 151:11,15

data 2:13 3:20,22

4:1,1,3,9,9 5:9 7:3

7:4 20:13,19

21:17 22:11 78:7

78:8,14 79:10,12

79:14 80:17,19,21

83:2,4,5,12,14

84:1,3,6,11,17

85:2,4,5,7,7 86:2

88:22 89:5,8,9,14

89:18,20,20 90:8

90:14,16,21,22

91:2,11 92:5,9,10

92:10,12,15 94:15

94:22 95:10 96:21

96:22 97:9 98:5

98:12 102:12,19

103:5,19,20,22

104:1,19,21 105:6

105:6,7,8,9,11,13

105:18 106:3,6,12

106:15,20,21,21

106:22 107:3,4,6

107:9,21 108:9,10

108:11,13 109:5

110:1,3,4,8,11,16

110:17 111:2,2,4

111:6,10,15,16,19

112:8,16,17

113:13,17,19

114:5,7,9,10,11

114:15,15,16,22

115:6,15,18 116:1

116:3,6,7,8,17

122:22 128:2,3,8

129:6,13 130:9,19

130:21 131:4,7,9

131:11,16,22

132:2,10,12,13,16

132:19,22,22

133:2,4,8,10,11

133:13,14,16,17

133:18,20,21

134:2,2,8,15

135:20 136:4

137:14 140:22

141:1,6 143:15

144:10,20,21

145:11,16,20,22

145:22 147:1,2,3

147:5 154:13

155:5,17 156:1,2

156:4,13,15,17,20

157:6 158:3 159:6

date 6:9,9 24:8

25:13 35:1 126:7

134:5,5 141:5

143:11 162:3,15

dates 6:8,10 10:22

161:14,17,17

162:3 165:22

Dave 18:1 30:14

106:15

Dave's 107:12

David 2:15 106:19

107:21 115:3

162:15

day 28:1,10 43:3

55:20 57:15

103:15 116:6

119:19 150:2

days 5:7 6:15,17

35:19,20 55:15

61:9 88:15 93:4

109:21 116:4

117:9 142:14,15

day-to-day 44:14

DCIO 30:12

DCM 131:15 133:5

134:18,19,20

135:1,1,7 138:21

139:14 146:7,9

148:14,16 156:17

157:9 158:12,13

158:14,17,17,19

159:1,13

DCMs 131:15

133:9 135:21

154:20

DCO 24:3 71:6,7

73:3 163:1

DCOs 23:19 57:6

de 60:13 65:21

deadline 22:2 25:4

151:9

deadlines 8:3 10:21

13:16

deal 24:18 93:3

96:3 119:13

dealer 29:14 32:11

33:7 34:19 39:14

109:10 112:7

115:16 122:15

132:6 156:16

dealers 3:13 4:2

12:22 18:16 31:6

112:3,5 131:13

132:11 141:10

153:15

dealing 43:13

121:15

deals 31:18 107:17

dears 106:21

debate 24:21 59:9

153:8

DeBorg 30:13

decades 42:7

December 4:15 6:5

6:6,7 75:21 124:3

124:10 161:7,11

161:12,14 162:1,3

162:4,13,17 163:2

163:7,11,17,18,18

164:1,7 165:18,18

165:18,19 166:13

166:17

decide 37:2 39:19

59:11 76:12 96:16

98:3,15 99:2

147:19 153:3

decided 39:18 40:2

99:8 147:11

decides 98:9

decision 18:9 32:3

69:3

decisions 26:20

87:6

decision-maker

32:7

decision-making

87:20

declared 8:8

declaring 86:7

dedicated 130:3

default 24:3 43:6

45:3,7,9,10 46:1,3

47:22 48:2,9

49:10 66:5,6,7

71:6 131:20 145:2

defaulting 45:1

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9:9 10:9,20 11:6,9

11:10 14:9,9 27:7

28:1,6,10 47:2

59:15 87:4,20,21

97:16 104:22

processes 109:6

product 109:5

112:14 113:22

114:3 161:21

162:2,5

production 46:17

products 19:12,19

114:1

professional 72:4

profile 74:10,11
Meeting November 19, 2010

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prohibit 104:11

prohibits 54:2

promise 55:2

promote 80:14

140:7

promoting 141:15

prompt 82:14

promptly 121:10

121:14 122:17

promulgate 9:3

promulgation 35:2

property 23:18

31:9 35:9,15

44:22 46:22 47:2

53:9 66:9,10 67:8

105:6,9,21 149:8

proportionately

43:15

proposal 4:4 5:17

6:3 19:6,9 23:7

24:14 36:20,22

37:8 39:5,6,8 40:7

56:9 59:4,17

60:19 64:7 79:16

80:12 81:1,1,17

88:14,18 89:4

90:12 91:5 92:19

105:14 108:6

110:16 116:2

117:3 118:5 122:1

122:21 129:5,6

130:4 136:6

138:12,22 140:10

141:4 144:13

146:12 148:5

165:1

proposals 3:9,10,19

6:12 9:16 10:7,13

10:16 11:7,16

13:18 23:13 24:19

70:7,12 127:11,12

propose 24:5 41:21

56:17 58:8,9,12

59:13 82:22

proposed 3:6,9,15

3:21 5:21 6:1,16

7:2,5,17 9:1,10,15

12:17 20:14 21:10

22:18 28:11 29:6

29:7 30:17,20

31:2 32:4 33:5,10

33:11 35:1,4 36:2

36:10,17 37:15

39:21 46:12,16

50:16 51:12 52:8

54:19 55:18 61:12

70:6 76:9 79:7,8

80:3,10 82:1 84:8

86:8,12,16 87:18

88:22 89:3 106:6

108:8 111:17

112:11 114:11,18

115:14 124:18

130:7,13,17,22

131:5,10 132:4,17

133:18 134:6,11

134:16,22 135:3,4

135:9,10,18 136:2

136:9,18 137:3,12

138:4 145:3

164:21 166:8

proposing 61:17

86:15 109:13

120:15 149:12

prospective 18:3

protect 44:11 61:4

85:6 140:6

protected 42:8

66:13

protecting 29:15

153:22

protection 3:11,16

29:12 30:17,22

31:2 36:3,18 42:2

44:13 49:15,16

51:13 54:14 63:11

63:13 66:13 76:22

80:16

protections 36:21

37:5 52:2 64:15

137:10

protects 66:10

protocol 84:13

126:15

protocols 126:18

proudly 141:20

provide 50:3,11

63:14 81:12 82:13

82:14 85:21 86:14

88:9,11 90:15

98:10 100:21

102:13,16 107:7

113:12 114:16

125:16 134:7

146:22 147:5,6

156:15,17

provided 81:12

89:15 133:14

147:3

provider 133:5,7

145:12 157:10

providers 90:14,21

provides 9:10,19

19:1 21:2 32:10

39:9 86:17 88:3

120:10 124:18

126:9 141:9

providing 18:17

24:20 82:21 84:10

102:1 132:22

provision 21:14

35:12 41:20 52:17

52:21 53:2 54:1,8

54:9,14 82:6

89:13 90:8 96:5

158:6

provisional 82:5

95:18 96:5 97:7

98:11

provisionally 95:21

96:10,16

provisions 52:14

53:1 89:7,10

98:20 109:12

138:2 150:18

prudent 22:17

public 1:10 3:4

4:12,22 6:7,11,17

7:8,10,16,17 9:4

11:7 12:8 13:13

13:19 20:7 22:3

22:19 23:9 24:10

25:6 29:17 51:16

51:17,19 52:9

58:18 59:9 60:8

65:22 81:14 84:7

86:18 87:3 91:1,5

92:1,16 102:1,11

102:15,17,18,22

114:19 115:7,20

117:4,9 123:20

129:13 130:8,10

130:20 131:6,8

132:15,21 133:6

133:17,20 136:6

136:10,19,21

140:12 143:7,10

143:17 144:17

147:7 158:2 160:1

164:10,22

publically 108:15

130:18 131:3

132:1,18 133:1,3

133:7,15 134:8,14

136:3 157:5 158:2

161:9

public's 61:8 107:5

publish 46:12

50:15 77:6 135:19

published 24:14

80:4 136:1

publishes 76:14

publishing 7:6

PUCO 102:11

pull 61:10

purpose 16:8

113:15 133:19

purposes 35:10

42:18 84:6 111:1

147:3 157:8

pursuant 7:17

134:19 158:14,20

push 125:19,20,22

126:3

pushed 84:13

put 11:21 22:17

39:20 60:10 72:8

84:3 91:5 92:19

118:5,13 119:17

127:10 142:9

161:13 164:20

165:9

putting 11:7,16

16:22 60:10 121:4

127:6 152:20

puzzle 17:1

p.m 167:10

P.R.A 160:17,17

Q

qualifies 134:12

qualify 135:12

157:21

question 22:6

37:14 50:22 51:1

52:12 54:21 55:3

55:13 56:3 63:22

64:4 72:17 74:19

90:5,19 91:1,5,16

91:22 92:16,19,21

92:22 101:17

103:3,15 104:2,9

104:18 105:2,16

111:19 117:16

123:2 129:5 161:3

166:4

questioning 98:14

149:11

questions 3:15

20:16 21:4 26:10

37:12 38:5 41:9

46:18 48:14 49:22

50:12 51:14 52:10

61:2 62:15 64:2

66:2 67:10 70:5

70:22 71:12,19

77:20 81:19 88:19

90:1 95:17,18

98:3 101:5 106:5

114:20 121:5

129:5 136:12

139:1,17,19

142:22 143:8

145:2 149:8 150:6

160:3
Meeting November 19, 2010

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Page 21

quick 55:13 56:17

122:19

quickly 55:22

129:20

quite 18:13,14

60:13 126:19

quote 38:10 53:2

R

R 3:1

Radhakishnan

29:19 40:13 41:6

56:16 57:5 58:3

59:19 60:5 72:13

72:17 74:1,17

75:2,7,10,12

76:10 77:8,16

raise 56:4 70:12

77:6

raised 12:7 26:11

76:20 95:18 123:5

161:2

raises 95:3

range 19:10 23:3

rank 132:8

rata 65:1

rate 111:11 139:2

153:3

rates 97:3

rather 39:10 56:1

64:13,19 66:16

67:7 69:1 122:18

rational 21:15 24:9

reach 50:5 119:18

128:2

reaching 8:22

read 32:8 51:1

101:19

readily 83:22

109:19

reading 7:13 30:3

152:7

ready 125:14

real 132:2,19

133:16 144:17

145:11,17 146:19

147:2,6

realized 69:17

really 5:6,11 11:19

15:5 29:11 46:9

51:6,18 59:17

62:20 68:6 76:20

85:17 96:3 115:12

115:21 117:14

118:3 121:2 123:1

126:3 127:21

128:5 138:22

144:2 145:7 154:8

164:16 166:16

real-time 4:4,13

7:3 18:5,7 19:14

25:4,5 81:14 84:6

84:7,12 85:7,10

85:12 89:19 90:3

90:7,9,15 92:11

92:14 104:20

121:7 129:14

130:8 131:8,16

132:14,15 133:12

136:15,19 137:13

140:10 141:14

144:13,14 157:8

157:10,16

reams 16:20

reason 76:19

159:10

reasonable 128:14

128:17

reasonably 85:6

receipt 118:20

receive 94:5 144:3

158:1

received 23:3 53:7

89:17 127:12

receives 7:8 85:2

receiving 93:7

recent 80:12

recently 12:16

recognize 21:16

24:17 147:10

recognized 20:1

recognizing 161:8

recommendation

50:15 59:16 88:21

114:22 117:13

136:14

recommendations

150:10

recommended 56:9

138:2

recommending

29:18 46:11 79:6

108:7 130:6

139:15

record 25:8 117:3

recording 73:17

84:7 110:17

recordkeeping 7:3

20:19 83:20 84:7

106:15 108:10

109:12,14 113:2

123:1 147:3 163:4

163:11

records 82:15

83:21 100:22

109:15,19

recover 24:3

recovery 88:6

redaction 36:10

redactions 7:9

reduce 80:15

reduces 47:12

70:19

reducing 9:18

reduction 70:9

160:18

refer 54:9

referenced 114:1

154:8

references 103:18

referred 44:21

47:17 143:14

refers 54:7

reflect 7:18

reflected 43:21

reflects 130:13

reform 8:14 80:16

refreshing 118:18

reg 124:18

regard 3:6,11,16

3:16,21 4:1 5:16

10:17,20 12:1

20:6 22:15 25:2

29:12 37:10 38:20

61:1,16 65:2

98:16 99:13 109:2

121:5 122:17

133:20 138:3,18

139:20 141:3

144:13 145:6

150:6

regarding 6:22 7:3

20:7 34:20 79:9

84:2 87:2 108:9

114:9 130:8,10

136:7 156:9

regardless 24:1

137:22 139:22

149:18

regime 19:5 23:15

regimes 110:14

151:13

register 24:14

58:19,21 59:1

90:21 91:2,16

92:2,15 96:15

100:18 104:14

160:16 161:14

registered 82:19

83:13 96:21 100:7

109:15 111:18

112:10 113:7

131:12,22 132:17

145:10 146:3

147:4

registering 95:21

96:1 99:15

registrant 145:10

147:5

registrants 70:17

107:7,10 115:16

146:4

registrars 4:2

registration 79:10

81:3,16,18 82:5,8

82:9,19 95:18

97:7 99:22 124:20

126:11 128:19

145:8

registry 98:18

regular 101:1

regularly 101:21

140:14

regulate 102:20

126:13 154:16

regulated 15:13,16

89:6

regulating 12:1

regulation 20:15

32:4,19 33:4,5,10

33:16,20 34:9,11

34:14,18 37:19

39:22 55:19 79:10

84:19 85:15 86:12

86:17 87:19 106:2

108:9,12 114:11

114:18 130:17

131:10 136:9

regulations 9:15

26:22 27:8,13

35:14,21 41:21

79:8,9 80:7 86:8

108:10,19 109:3,7

109:14 130:8,10

132:17 133:18

134:6,11,16,22

135:3,4,9,11,18

136:2 143:15

regulator 12:21

112:17

regulators 4:8,10

8:19 9:2,7 11:15

12:11,12,19 13:12

63:10 79:22 80:20

85:15,16 89:9

92:11 98:17 100:3

100:5 101:11

103:4 108:17,21

108:22 110:3

112:19 113:21

114:2 115:8,9

117:1 127:5

149:12

regulatory 13:17

15:11 21:9 63:5
Meeting November 19, 2010

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83:15 92:10

102:14 103:10

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regurgitations

130:22

relate 90:4 140:20

related 34:21 76:9

80:12,18 109:16

129:15 164:13,13

164:18

relates 90:2 98:14

relating 110:17

134:7

relationship 20:3

42:16 71:18 73:10

90:2

relative 46:20

release 40:19 95:17

95:19 100:14

128:15

releases 50:13

relevant 54:2 65:19

146:19,21

relied 23:20 66:15

rely 47:21

remain 48:12

remainder 109:22

remaining 18:18

47:21

remains 114:16

remarkable 5:11

remarks 25:18

88:18 114:19

136:11 166:18

remember 15:2

162:15 165:17

remind 27:3

reminds 18:7

remiss 61:21

removal 87:16

remove 73:4,4

removing 112:9

renew 24:21 25:9

reorganize 22:10

report 76:15,18

80:8,10 104:20

112:4 114:3

131:11,21 132:10

138:8 140:2,19

144:16 145:12

147:11 149:21

151:6 157:12

reported 8:12

83:15 96:22 111:3

111:5 114:7 122:5

130:21 133:22

134:22 135:9

137:21 145:11

150:1 157:3

reporting 4:5,13

7:3 18:5,7,15,18

19:5,15,17 20:4,9

22:6 25:4,6 31:19

79:15 81:14 84:6

85:8,11,12 88:1

89:19 90:7,9,15

97:2 105:7 109:2

110:3,4,13 111:6

111:8,10,12,15,17

111:22 112:1,3,5

112:9,13 113:13

114:10,14 121:7

123:1 129:13,14

129:15 130:9,10

130:18,19 131:9

132:6 133:19

136:15,19 137:13

139:22 140:10

141:14 146:14

147:17,20 149:19

150:17 155:10

163:4

reports 145:17

146:14

repositories 2:13

3:22 4:3,9 8:13

78:7,8,14 79:10

80:5,9,13 88:22

89:5,14,18 90:9

90:22 91:3 92:9

94:5,9 95:11 98:5

103:19 108:11

116:17 141:6

repository 7:4

92:15 96:11 101:2

103:5,20,22 104:1

106:6,13 115:18

133:1,14 141:1

representative 34:7

republished 127:12

request 24:21 25:9

30:21 35:3 36:2

37:17,21 46:13

82:4 85:19 93:18

93:19 94:2,21

requesting 88:16

94:7

requests 21:2 22:3

93:5 94:5 118:14

119:8

require 9:16 31:6,9

31:15,16,20 32:8

33:6 39:11,12

87:12 91:19,21

103:5,8 113:13

114:6 128:2

155:10

required 10:22

34:18 44:6 45:16

45:18,19 46:3

48:2 81:17 82:12

83:4,15,21 84:16

84:20 85:3,18

88:11 92:1 96:14

111:4 114:12,17

121:17 146:14

requirement 21:12

21:16 47:9 71:4

76:15 81:3 82:18

83:8,17 85:17

89:12 90:15 100:8

104:4 113:16

132:22 133:6

requirements

22:14 31:19 33:4

33:17 81:2,15

82:1 84:8,21

86:18 87:16 94:15

107:6,21 119:2

130:11 131:14

134:21 135:9

requires 8:4 9:19

32:4 33:20 34:5

35:6 39:9,13

41:17 83:13 86:13

87:7,19 110:16

111:7 114:11

137:13

requiring 111:12

research 60:8

researched 30:1

reservations 127:1

reserve 7:7 12:10

38:1 79:18 115:7

115:8 130:15

residence 68:10,11

resides 73:16 77:12

resist 102:21

resolution 112:22

resolved 23:9

resolving 87:21

resource 48:1

resources 9:17

44:19,21 45:8

48:3,12 84:21

88:8 93:3 94:21

respect 31:1 32:15

39:1,8 42:21

93:20 109:5

110:16 114:1

131:8 132:15

134:10 154:21

155:9,17 158:19

respected 80:22

134:2

respond 28:22

response 5:5

responsibilities

21:9 87:17 95:1

responsibility

42:22 72:20 112:9

responsible 10:11

130:18 132:6,18

145:16 146:10

rest 8:5 79:4

restrictive 151:9

result 23:22 48:12

48:21 83:3

resulting 24:2

34:22

retain 40:8

retention 20:22

109:22

retrievable 109:21

retrospective 128:1

review 7:8 56:14

59:3 82:2 93:4,8

96:8,13 97:16,20

reviewed 69:9

108:22

reviewing 55:17

revision 20:14

revisions 35:11

revocation 82:8

Rick 96:4 129:22

163:21

right 18:10 24:19

28:3 29:4 31:8,11

32:18 39:11,16,16

39:17 40:16 41:6

56:18 57:12 64:12

67:20 71:2 76:11

78:21 90:17 91:19

91:20 95:22 97:2

97:9 118:4 120:17

127:4 141:16

150:19 151:10

152:5 166:2

rights 105:9,21

rip 124:1

risk 9:18 23:13

32:5 42:1,5,17

44:7,15 47:13

48:8,13 49:4 50:2

50:4,7,9 63:1 69:2

69:5 70:9,11,12

70:19 71:3,6,10

71:19,19 72:3,11

72:14,21 73:11,15

73:20 74:2,6,9,11

74:12,22 75:21

77:11 80:15 102:2
Meeting November 19, 2010

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142:11,13 149:1,2

149:6 152:12,18

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166:10

risks 38:14 44:5

72:8 88:9 148:22

Rob 26:7

ROBERT 2:9

Rock 57:9

Rogers 94:14

107:16 118:11,12

role 89:13,19 91:1

Roosevelt 18:8

rough 46:8

roughly 51:1

roundtable 9:10

25:10 37:16,21

38:3 43:22 45:12

51:18 57:6 151:17

155:7,12 164:5

165:5

roundtables 9:9

117:8,11,18

royalty 128:14,15

rule 3:6 7:6,14 8:4

12:17 14:7 21:10

21:11 22:16 32:9

38:18 39:2,5 40:8

56:18,18 58:10,13

69:18 90:2,3,7

92:17 93:22 105:2

110:4,10 111:1,17

112:3,7,11 113:17

115:6,11 116:5

120:7,16 124:2

126:8,9 127:10,20

136:20 137:12,16

138:4,6 142:9

148:8 164:12

165:7,7,14

rulemaking 3:9,15

3:22 6:16 18:7

19:3 20:6,6,18,20

21:6,22 22:4,18

23:7,11 24:13,22

27:3 29:6,7 30:17

30:21 31:2 35:4

35:20 36:2,11,17

37:15 46:13 50:16

51:3,4,13 52:8

54:20 70:6 74:15

78:20 79:5,7 89:4

94:15 99:9 106:13

108:8 115:14

121:10 126:1,4

130:7,13 136:19

145:3 154:4,11,22

164:9,21 166:8

rulemakings 3:22

6:1 18:3 25:12

121:22 127:9

144:10

rules 3:21 4:15 5:9

5:16,21 6:13,15

7:2,4,5,7,17 8:21

9:1,3,6,6,10,11

10:9 11:7,10,20

14:10 19:15 21:2

27:17 28:11,13,13

33:11 35:1,2

75:20,22 76:9

78:14 82:7 86:14

86:21 87:7,12,16

87:20 88:22 89:6

106:7 110:11

113:12 114:6

118:16 131:5

132:4 134:20

135:1 154:10

161:20 162:9

166:11

rule-writing 8:19

ruling 61:12,13

122:20

rulings 5:21 13:22

run 58:17 59:2

165:16

running 14:5 59:7

95:22 97:8,15

runs 29:19

rushing 123:3

S

s 3:1 54:15,16 60:4

67:19 68:6,9

69:17,19,20 70:1

70:4 103:16,19,22

safe 19:1

same 11:18 37:20

39:21 49:4 52:15

54:12 65:12 92:4

95:19 97:7 114:7

150:18

satisfied 133:6

satisfy 131:14

132:21

Saturday 15:2

saying 10:5 27:14

40:5,19 57:12

60:16 70:22 74:9

74:11 122:9

123:10 129:7,10

142:19 151:3

160:5,8

says 16:17 26:17

32:18 65:9,18

68:2,2 98:20

104:1 107:8 108:1

115:21 120:16

128:18 139:22

144:21 155:20

scared 14:15

scene 119:16

schedule 161:7,13

scheduling 29:3

161:2

Schneider 167:1

School 26:6

Schubert 107:14

scope 94:1

Scott 2:6 4:21

167:1

screen 157:13

screening 84:17

script 108:1

SDR 80:22 81:4,18

82:5,8,12,13,18

83:3,8,13,20 84:5

84:11,15,19 85:2

85:3,5,15,19 86:1

86:4,6,14,22 88:7

88:10,11 94:15

96:2,21 98:18

99:10 100:18,21

104:21 105:5,7,7

114:8,14,15,16

131:22 133:16

136:1 144:13,15

144:16,18 145:6

146:12,13 147:5

156:10 157:3,5,5

157:7,14,16

SDRs 79:11,11,13

80:17 81:8 82:11

82:12 87:19 93:20

95:21 98:14,19

99:14,15,21,21,21

102:9,13 104:4,10

104:14 108:11,14

110:2 114:6,11

135:18

SEC 11:15,17,19

11:21 12:10 26:8

26:19 79:18

102:11 110:10,11

112:3 113:4 115:7

121:22 122:2

130:14 143:22

149:12 150:17

151:13 155:13

161:4,22 164:12

164:16 166:12

second 19:14 35:16

36:14 47:5,19

50:18 81:5,8

83:11 88:7 89:2

92:13 115:2

136:17 138:8

139:20 142:12

153:11 162:22

163:3 165:17,20

167:5

seconded 36:16

160:4

secretary 167:1

section 15:19 31:4

31:5,18 35:5,19

37:10 41:16 80:15

81:6,11 101:20

103:17 159:17

sectors 22:22

secured 102:4

securities 12:22

13:8 35:7 53:9

79:21

see 5:13 7:13 73:18

74:13 75:22

106:14 127:4

142:5 144:1

147:16 165:11

seeing 14:4 87:8

144:3 152:18

seek 8:18 38:11

73:10 76:22 117:2

136:6

seeking 34:7 48:15

99:22

seeks 111:3

seem 104:5 125:3

128:9 157:22

seemed 5:20

seems 68:18 107:13

seen 31:20

SEF 19:8 25:2,6

91:16 131:15,21

133:3,5 134:18,19

134:20,22 135:1,7

138:21 139:14

148:14 156:17

157:9,19 158:12

158:13,14,16,19

159:1,12

SEFs 131:15 133:9

135:21 154:20

SEG 48:15 57:8,9

57:10,12 59:14

64:6,7 73:3

segregate 33:5

39:20

segregated 24:6

33:6 34:21 37:2,3

42:9 53:8 66:5

segregation 7:4
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seminar 26:6

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sending 145:15

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sets 33:4,16 81:1

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shift 69:2,5 72:18

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shifted 127:11

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shoot 20:16

short 50:22 74:9,13

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shortly 110:19

shoulder 56:11

shows 137:7

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sign 142:20

significant 21:18

44:15 87:6 98:22

99:3

significantly 23:7

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similar 3:16 26:11

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135:16,17 147:18

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similarities 64:8

Similarly 135:4

simple 128:10

simpler 128:6

simply 62:15 69:2

since 8:16 12:15

36:6 52:22 85:4

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117:12 147:14

single 94:6 100:4,4

103:5 153:1

single-spaced

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singular 54:8,11

singularly 16:8

66:11,17

sister 8:18 143:21

sitting 5:13 30:11

125:14

situation 28:12

34:3 59:22

situations 112:6

122:4

six 15:17 35:2

sixth 84:22

size 45:10 130:10

131:2 134:4,12,20

134:21 135:8,13

135:22 137:18,20

138:4,19 139:21

139:22 147:18

sizes 135:15,17

140:16

sizing 45:9

slap 40:18

sleep 120:1,3

slight 52:18

slip 7:13

slipped 68:4 164:19

small 69:10 122:16

129:1 142:4,4

151:4,21

smaller 142:7

snapshot 111:12,13

sold 156:19

solicit 51:20

solution 57:22 58:1

58:4 120:11

some 6:8 11:6,10

11:17 13:8 14:6

14:15,15,16 15:5

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18:19 20:5 26:14

26:20 30:3 40:2

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56:12 57:7,9

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62:5 63:8,9 67:17

68:20 70:21 73:5

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120:12 122:18

126:22 127:6,19

128:1,6 141:19

146:9,22 152:1

153:4,12 157:4

159:15 160:16

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somebody 13:10

40:18 65:17 74:20

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116:17

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40:3,9,12 41:22

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120:19 121:19

122:6 140:20

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67:20 89:2 95:14

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102:8 106:10

115:2 120:22

121:1,21 122:11

123:5 144:6,7

145:4,13 146:11

148:1 149:10

150:4 160:9 167:5

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133:2 137:14,22

139:8,11 142:8

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152:2 164:7

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59:5 63:12 76:5

102:11 103:3

123:12 128:16

144:12,20 152:9

sorted 13:21

sorts 30:2

sought 80:6

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space 127:10

speak 67:21,22

76:20 124:12

special 15:3,4,5

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specialized 149:4

specific 74:10

121:5 149:4

155:17 161:17

specifically 12:18

20:10 69:18 88:16

98:20 154:13

155:6 164:18

specified 84:14

111:16

specifies 81:2 111:1

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Stern 26:6

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108:2 120:1,3

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22:13 23:5 36:17

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116:11 118:15

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90:21 91:2 92:9

92:15 95:10 96:21

98:21 99:2 103:20

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107:3 108:9,10,11

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109:16,20 110:3,4

110:5,6,6,18,18

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113:5,6,7,8,11,13

113:21 114:3,6,7

114:10 115:16,18

116:4,9,17 122:15

128:5 130:9,11,19

131:4,7,9,11,13

131:13,15,18,21

131:22 132:1,5,6

132:7,8,11,11,16

132:18,20,22

133:9,13,14,15,19

134:11,13,14,17

135:5,5,13 136:3

136:8 137:1,13

138:11 140:15,16

140:21,22 141:5

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technical 94:13

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technological 21:5

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131:17 132:3

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110:18,20 111:8

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10:2,4 11:12 12:5

17:13,17,18,20

25:11,15,16 28:15

28:16 30:6 38:7

41:3,8,16 50:13

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60:15 62:3 63:20

78:4 79:1,2 88:20

93:2 95:15 101:6

103:2 104:15,16

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115:3,12 118:6,8

120:21 121:1,2

122:11,13,13,16

123:18 129:3,11

130:1,1,2 136:13

143:13 144:5,7,8

150:4 152:21

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thankfully 162:4

thanking 17:22

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27:18 31:7,10

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71:3,19 73:10

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108:17 109:6

110:19,19 116:22

120:13 121:19

130:3 131:14

132:12 133:10

135:19 137:21

142:11,12 149:19

150:2,10 152:17

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68:2,3 69:15 70:4

76:14 77:13,14,19

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things 15:9 16:13

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26:21 27:6 28:7

29:10 35:18 56:14

58:19 62:16 66:22

67:3 68:5 70:21

71:15 85:18 95:11

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think 3:8 4:3,6,22

5:2,13,16,18,21

6:2,6,15,15 8:13

10:8,18 11:10,16

13:6,10,11,16

14:11 17:4 24:10

24:15,22 25:19

26:20 28:1 29:1,1

36:9,20 37:5,18

38:1 41:2 50:20

51:16,19 52:1,6

55:2 58:3,4 59:9

59:14,17,21 60:12

60:18,21 61:22

62:7 63:6,12

66:21 67:3,6,14

67:18 68:13,17,20

68:21,21 70:3,15

73:2 74:1 76:4,8

76:22,22 77:3

78:5 82:10 84:9

85:9,14 89:4,7,21

90:10,14 91:2,4

91:18 92:5,18

93:9 94:16,17

95:4,7 96:7 97:10
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16:19 21:20 32:14

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times 14:20 135:14

timetables 126:2

Time-Periods

35:17

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today 3:8 4:4 5:17

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Meeting November 19, 2010

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