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F February 13, 2012 Mr. Davi A.

Stawic id ck Secretary of the Com y mmission United States Comm modity Future Trading Commission es C Three La afayette Cent tre 1155 21s Street, NW st W Washing gton, DC 205 581 Re: Process for a Desig R s gnated Contr Market or Swap Ex ract t xecution Fac cility To Make a Swap Available To Trade (RIN number 3038AD18) M p T (R r Dear Mr. Stawick: . Chatham Financial Corp. (Chat m C tham) is ple eased to resp pond to the request for comments b the by U.S. Com mmodity Fu utures Tradi ing Commis ssion (the Commissio on) regardin its Notic of ng ce Proposed Rulemakin (NPR) pertaining to the Proce for a Des d ng p o ess signated Contract Mark or ket Swap Ex xecution Facility To Ma a Swap Available T Trade i ake To issued under Title VII o the r of Dodd-Fra Wall St ank treet Reform and Consu m umer Protect tion Act (th Dodd-Frank Act or the he r Act). Introduc ction Chatham is a consulting compan that work with over one thousa compani from virt m ny ks r and ies tually all busine sectors that employ over-the-cou ess t unter (OTC derivativ to manag risks they face C) ves ge y in connec ction with th day-to-d business heir day ses. Chatham assists its clients with all facets o the m s h of hedging process, fro structur om ring and ex xecuting hed dges to pro oviding on-g going valuat tions, reporting and accoun g nting. Throu ughout the policy debate over regul p e lation of the OTC deriva atives market, Chatham has advocated for effective regulation that reduces systemic r and incr C s e risk reases transpare ency in the derivatives market, whil also ensur d m le ring that the market rem e mains an effi ficient venue for managing risk. r r The Imp pact on End Users The auth hors of the Dodd-Frank Act recogniz that end users did n contribut to the fina D A zed d not te ancial crisis, an do not po a system risk. Acc nd ose mic cordingly, th have rep hey peatedly emp phasized thr rough letters an colloqui that pol nd ies licy makers should str rive to ensu that en users are not ure nd e unnecess sarily burden by new regulations. While man end users will qualify for the end user ned r ny y d exception from the Acts mand n datory clearin and trad ng ding requirem ments, other end users (e.g., r small ban pension funds, enti nks, n ities that do not fit with the narro o hin owly crafted captive fin d nance exemptio etc.) will not be able to avail them on, mselves of th exception Conseque he n. ently, the cle earing and tradi requirem ing ments will ex xtend to tho ousands of e nd users. If not implem f mented carefully, the process for mak king a swap available to trade could nega p e atively impa end user by act rs increasin hedging costs and adm ng ministrative burdens. In b ncreased cost and admin ts nistrative bur rdens could arise due to the following: e

A swap subje to the cle ect earing requir rement may not have su ufficient liquidity to be tr raded on a swap ex n xecution faci ility (SEF or designa ) ated contract market (D DCM), and it d/or may not have sufficient liquidity on each of the swap execu m e e ution faciliti (SEFs) that ies ) make the swa available to trade. m ap e End users wil be required to expend resources to monitor the swaps deem availab to E ll d o e med ble tr rade and could also be subject to the burden and costs of ne s d eeding to con nnect to the latest SEF/DCM that is first to make a give swap ava en ailable to tra ade.

Addition nally, even end users that are ex xempt from the mand m datory clear ring and tra ading requirem ments still ma be impacted indirectl by the req ay ly quirement fo swaps to be executed on a or d SEF/DCM As an end user ex M. xecutes hedg with a s ges swap dealer, the swap dealer will often execute a subsequent swap in the market to lay off the r t risk associat with the end users s ted swap. If the sw dealer is required to transact the offsetting swap on a SEF/DCM and that sw is wap s o eir g wap not suffic ciently liquid to be trade on a SEF/ d ed /DCM, the c incurred as a result of transactin on cost d ng an illiqui venue will be passed on to end use and hedg id l o ers ging will bec come more e expensive. For these reasons, we urge the Commission to ensure th available to trade pr e C he e rocess minim mizes the poten ntial for unne ecessary costs due to dec creased liqui idity and inc creased operational burd dens. Liquidity y Some ma arket particip pants anticip that only the most st pate y tandardized and highly l liquid swaps would be subject to the clearing requirement and would t e t r therefore aut utomatically b deemed be suitable for trading on a SEF/DC f o CM. While th is one po his ossible scena ario, we beli ieve it pruden nt that the Commissions approach acknowledg the possib C ge bility that oth scenarios are similar her s rly feasible. The Comm mission has cr rafted numer rous rules w which sugges that a subs of swaps st set subject to the clearing requirement may be su o ubject to the trading requ e uirement, he ence the very y creation of the propo for a pro o osal ocess to desig gnate swaps as availabl to trade. Likewise, P le Part 43 and Part 45 report ting requirem ments put for scenarios where a sw would be subject to rth s wap b ed /DCM. clearing but not trade on a SEF/ We stron ngly support the approach of having a separate te to ensure that a swap subject to th h est he clearing requirement is in fact su r uitable for tra ading on a SEF/DCM. T approac acknowledges This ch the essen ntial need for swaps only to be design r y nated as ava ailable for tra ading if thos swaps are se sufficient liquid. This principle has also be emphasi tly T e een ized by then Senate Agri iculture Committ Chairman Lincoln, who noted: tee n w n g able to trade, it is intend that the , ded In interpreting the phrase makes the swap availa Commission should take a practical rather than a formal or le C r egalistic appr roach. Thus, in , determining whether a sw executio facility m w wap on makes the sw available to trade, t wap e the Commission should evalu not just whether the swap execu C uate e ution facility permits the y e sw to be tra wap aded on the facility, or id f dentifies the swap as a c candidate for trading on t r the fa acility, but also whether, as a practic matter, it is in fact po , cal ossible to trade the swap on th facility. The Commiss he T sion could consider, for example, wh hether there is a minimu um am mount of liq quidity such that the swap can actual be traded on the facility. The mer t p lly d re l listing of th swap by a swap execu he ution facility in and of it y, tself, withou a minimum ut m

am mount of liq quidity to ma trading possible, sho ake p ould not be su ufficient to t trigger the T Trade 1 Execution Re E equirement. To addre the need for liquidity on SEFs/DC ess f CMs, the Co ommission proposed eigh criteria ht 2 H intended to ensure sw waps are suff ficiently liqu to be trad on a SEF uid ded F/DCM. However since no single fac would be dispositive - and the eighth criteri is essentia anything the SEF/DC ctor b e ia ally g CM deems re elevant - the process may allow for le liquid pr y ess roducts to be made avai e ilable to trad de. Consequently, as suc the propos rule mak it feasibl that the pr ch sed kes le rocess may r result in outcomes that are ave to the best interests of end users s erse s. We urge the Commis ssion to ensu the key li ure iquidity fact are alwa satisfied before a swa is tors ays ap deemed available to trade rathe just than allowing any other facto the SEF/D o er a y or DCM deems relevant. We believe end users would benefi by having proper chec and balan e w it cks nces in the process that allow ma arket particip pants to offe input bo qualitativ and quant er oth ve titative when they belie the tradi requirem should not apply du to the rela eve ing ment n ue ative illiquidi of a prod ity duct being con nsidered for the trading requirement This shoul be true du r t. ld uring the init process t tial to determin if a swap should be ma available to trade a a simila process sh ne s ade and ar hould be established in the eve a swap becomes unsu ent uitable to tra on a SEF ade F/DCM after the initial r determin nation. This would help ensure that swaps that ar made av s re vailable to tra ade are inde eed appropria for execu ate ution on a SE EF/DCM. Operatio onal and Lo ogistical Bur rdens End user subject to the clearing requirement will be requ rs t t uired to com mmit resourc to researc ces ch, sign up and connect with SEFs/D a w DCMs. It is not yet clear that the tim and cost t set up with one r me to h or more SEFs/DCMs is worth the relatively small numbe of swaps m S s e s er many end us execute per sers year. Furthermore, if SEF/DCM can quickl make swap availabl to trade, w are f Ms ly aps le we concerne that end users may nee to sign up with multip SEFs/DC ed ed p ple CMs, or chase the latest SEF/DCM that has made a releva swap typ available to trade. T may be particularly true M m ant pe e This e y if the end user has co d ontracted wit a particula SEF/DCM and that S th ar M, SEF/DCM do not offer a oes r swap that becomes re equired to tra on such a venue. Th SEF/DCM self-certifi ade he M fication proce ess must be kept in check and provid end users sufficient tim to compl Such tim may also k k de me ly. me allow for competing SEFs/DCMs to ensure they are able to match th product of r e he fferings of competin SEFs/DCM further promoting ro ng Ms, p obust compe etition for th benefit of end users. A he process that inadvertently promo a SEF/D otes DCM to bene from a fir mover ad efit rst dvantage, or requires end users co e omply in a sh timefram risks cre hort me, eating unnece essary burde and costs for ens s end users with no app s preciable benefit.

1 156CONG G.REC.S5923(d dailyed.July15, ,2010)(stateme entofSenatorBllancheLincoln) 2 Page7773 32FederalRegis ster/Vol.76,No o.240Theeightfactorsare:(1) )Whetherthere earereadyandw willingbuyersan nd
sellers;(2)T Thefrequencyorsizeoftransact tionsonSEFs,DCMs,orofbilate eraltransactions s;(3)Thetrading gvolumeonSEF Fs, DCMs,orof fbilateraltransa actions;(4)Then numberandtype esofmarketpar rticipants;(5)Th hebid/askspread;(6)Theusual numberofr restingfirmorin ndicativebidsan ndoffers;(7)Wh hetheraSEFstra adingsystemor rplatformoraD DCMstradingfacility willsupport ttradinginthes swap;or(8)Anyotherfactortha attheSEForDCM Mmayconsider rrelevant.Nosin nglefactorwoul ldbe dispositive,astheDCMorS SEFmayconside eranyonefactor rorseveralfacto orstomakeasw wapavailabletotrade. 3

With resp to the ti pect iming and pr rocess specif in Part 4 fied 40.5 and Par 40.63 a sw could be rt wap required to trade on a SEF/DCM as quickly as 75 days vi voluntary submission by a SEF/D a ia y n DCM ng y iod C ap (includin the 45 day review peri for the Commission4 and the 30 day period after the swa is 5) an as quickly as 40 days via the self-certification process first mad available to trade nd de t y n 6 and the 30 day period after the swa is (includin the 10 day review peri for the Commission ng y iod C ap first mad available to trade). Bo scenarios would prov little tim for end u de t oth s vide me users to beco ome aware, vo concern and take steps to comp oice ns ply. Both th voluntary submission for approva and he al self-certi ification proc cesses shoul be subject to at least a 90 day revi by the C ld t iew Commission with a 30 day public comm period in all cases. ment From a lo ogistical per rspective, it is worth noti that thou i ing usands of end users will b required to d be monitor the various websites of various SEFs DCMs, an the Comm t w v s, nd mission on a regular basi is perhaps daily or weekly - to see if a swap the may need to execute t manage ri will be d i ey d to isk subject to the availa to trade designation While the may be m o able n. ere multiple approaches to n notify all marke participant one appro et ts, oach to ease this logistic burden w cal would be to h have the proc cess span a gr reater time period to faci ilitate broad market awar reness. For example, a q quarterly or annual pr rocess for en users to ch nd heck which swaps are a available to trade, while still potent tially burdenso ome, would at least align with other quarterly or annual busin process a n q ness ses. Once a swap is deemed available to trade en users shou then hav 6 to 9 mon to ensur they will b nd uld ve nths re be able to co omply with the trading requirement. This amoun of time w t r unt would enable end users to o research new SEFs/D DCMs if needed, negotia contracts, connect, learn how to u the syste ate , use em tute es y. ally, this tim period wil permit othe SEFs/DCMs me ll er and instit processe to comply Additiona to make the same sw availabl to trade and prevent e users fro needing to chase the t wap le a end om latest SEF/DCM. Even wit extended periods of tim end user could be r th p me, rs required to c commit signi ificant resou urces just to en nsure they co omply with the trading re t equirements . Without a additional tim complian me, nce could bec come unnece essarily burd densome and potentially costly for e users. d y end Economically Equiv valent The prop posed rule st tates, Upon a determina ation that a s swap is avai ilable to trad all other swap de, execution facilities and designa n a ated contract markets lis t sting or off fering for tra ading such swap and/or an economically equiva ny alent swap, shall make those swap available to trade.7 The ps economic equivalenc test shou be suffic c cy uld ciently granu ular so that customized swaps use for t d ed hedging are not inad dvertently su ubject to the SEF/DCM trading wit e M thout suffici ient liquidity just y because they are sim t milar in some respects to other swaps made avai e ilable on a S SEF/DCM. I the If economic cally equiva alent provis sions were interpreted too broadl it would only serv to ly, d ve exacerba the concerns related to liquidity and opera ate d y ational burd dens that we have iden e ntified

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above. We urge the Commissio to preven such unne W e on nt ecessary bur rdens associ iated with o overly broad or unclear econ nomic equiv valency test. Conclusi ion Chatham appreciates the opportu m s unity to com mment on the proposed ru impleme e ule enting the process for makin a swap a ng available to trade becau it will af use ffect all participants in th swaps ma he arket. We look forward to working with the Comm mission to h help impleme rules tha will streng ent at gthen the derivatives marke without pl et lacing an undue burden o end users or the large economy. on s er

Sincerely y,

Ted McC Cullough Managin Director ng Chatham Financial Corp. m C