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58725 Jeff Bauman

58725 Jeff Bauman

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Published by MarketsWiki

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Published by: MarketsWiki on Nov 26, 2012
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12/04/2012

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 August 27
th
, 2012Mr. David Stawick Secretary of the CommissionCommodity Futures Trading CommissionThree Lafayette Centre1155 21
st
Street NWWashington, DC 20581Re: Clearing Requirement Determination Under Section 2(h) of the CEA; RIN 3038-AD86Dear Mr. Stawick 
R.J. O’Brien appreciates the opportunity to comment on the recent proposal of the
regulations to establish which classes of credit default swaps and interest rate swaps willbe required to be cleared by certain market participants who trade various contractscleared by a derivatives clearing organization registered with the commission.
R.J. O’Brien
is the largest independently owned futures clearing merchant and has been apart of the futures industry since the early 1900s. Over this span of time, our firm haswitnessed and persevered through a number of financial catastroph
es. While R.J. O’Brien
has always been diligent with its own risk management practices, we believe thecomponents of centralized clearing and price discovery in which the futures marketsoperate have been key elements to our long term existence. Furthermore, we feel theseattributes are key components to minimizing systemic financial risk. It is evident to us theDodd/Frank Act is trying to implement some these elements the futures industry hasemployed for years.We strongly support the implementation of a centralized clearing requirement which has
already proven effective in today’s futures markets. Perhaps the best argument wo
uld beto convey our own experience during the financial crisis of 2008. As the credit marketsbegan to deteriorate in late 2007,
R.J. O’Brien’s
fixed Income division had a largenumber of their accounts file for bankruptcy. These accounts had billions of dollars of interest rate futures contracts on our books. Because of real time pricing, posting of margin, and the liquidity the futures market provided, our firm did not lose a dollar fromthese closed businesses and the futures positions were covered in an orderly fashion.

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