Proposed Rule on Confirmation, Portfolio Recognition, and Portfolio Compression Requirements

The Asset Management Group (AMG) of SIFMA provides comments to the Commodity Futures Trading Commission (CFTC) on a proposed rule to establish confirmation, portfolio reconciliation, and portfolio compression requirements for swap dealers and major swap participants, RIN 3038-AC96.  The proposal is intended to implement certain provisions under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The AMG shares their observations and recommendations on the proposal with the CFTC and the Securities and Exchange Commission (SEC) including:

• Counterparties should retain the right to choose electronic or manual confirmation for uncleared swaps.  Members feel they may be forced onto the one available confirmation platform and must accept potentially unfavorable fees and other material requirements.
• Members agree that all non-pricing related terms of a swap should be disclosed prior to execution.  This would likely reduce delays in trade confirmations and cut back on post-trade negotiations.
• A confirmation should not legally supersede any previous agreement made between counterparties.  Doing so would be confusing, and potentially conflicting, and the express terms of agreed upon contractual arrangements should control.
• The Commission should revise the same-day confirmation requirements to 24 hours when the counterparty is a financial entity.  Financial entities should not be treated worse than other counterparties, the time period may not be appropriate for complex swaps, and this would discourage late day trading.
• Across the board, time periods for required actions for Confirmations, Reconciliations and Compressions are inappropriately short.
• Non-dealer market participants should not be mandated to engage in forced compression exercises.  Doing so may be detrimental to their hedging activities and make it more difficult to track linked positions for accountholders.