November 16, 2010
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Dear Chairwoman Schapiro:
As a Connecticut energy supply company, I write to ask for you to adopt a rule that will accurately reflect the intent of Sections 726 and 765 of the Dodd-Frank Financial Services Reform Act and the Lynch Amendment that originally passed in the House of Representatives.
In the Securities Exchange Commission (SEC) proposed rulemaking on this topic, your agency has correctly identified many of the conflicts of interest that will arise if swap dealers control market infrastructure. If these dealers are allowed to continue to control the clearing function, now only five large dealers control over 97% of this market, they will restrict access to clearing prices, limit the number of products that are cleared, and skew the clearinghouse's risk management decisions.
The current SEC proposed regulation fails to address the conflicts identified by the agency and would completely miss Congress' goal of adopting rules that promote open, true and fair competition. If these regulations are adopted as proposed, clearing and trading will be monopolized until the agencies put stronger collective ownership limits in place.
One of the key goals of the legislation was to have the SEC adopt clear and tough rules that would help to promote fair and open competition in the trading marketplace. It also sought to have the SEC, through these regulations, mitigate systemic risk and conflicts of interest to ensure that competition remained open and fair.
It is absolutely essential that the SEC strongly oppose allowing dealers to band together under the guise of a 5% cap on ownership by any one entity to avoid a broader class-of-ownership cap. We need to do this so we can prevent the domination of a clearinghouse, swap execution facility or exchange by a small number of dealers.
Very truly yours,