Derivatives Clearing Organizations Regulation - Comment Letter - BlackRock - March 21, 2011

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Risk Management Requirements for Derivatives Clearing Organizations
March 21, 2011

In their comment letter, BlackRock offers the following suggestions to the Commission:

  • Regarding Core Principle D, they strongly supports the proposed requirement that each DCO set margin requirements for its clearing members that are risk-based and subject to regular review. However, they believe the minimum liquidation requirement would raise the cost of executing swaps on SEFs, undermine the competitiveness of SEFs, and restrict artificially the ability of market participants, including asset managers, to select the best means of execution for their swap transactions. They recommend that the Commission require that a DCO's margin model use a consistent liquidation time for cleared swaps without regard to whether that swap is executed on a SEF or DCM.
  • Regarding Core Principle F, they believe that final rules on the protection of customer funds should not require customers of clearing members to assume fellow customer risk unless the customers choose to do so. They respectfully request that the Commission adopt rules that eliminate the current model of an omnibus customer segregation account as the sole solution for cleared OTC derivatives and allow DCOs enhanced flexibility in how they will protect customers and ensure financial integrity.

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