From: Riley, John <JRiley@CFTC.

gov>
Sent: Sunday, November 15, 2009 9:23 PM
To: Chon, Julie (Banking) <Julie_Chon@banking.senate.gov>
Cc: Leslie, Douglass <dleslie@CFTC.gov>; Arbit, Terry <tarbit@CFTC.gov>
Subject: Additional CFTC Staff Technical Assistance re Senate' Banking OTC reform: (1)
Segregation; (2) ASEF criteria

Julie -

CFTC Staff has provided the following additional technical comments as they continue to review your
bill. I hope that you find them helpful:

1. Page 455, line 2: Staff believes that cleared and non-cleared swaps should be treated the same with
respect to the investment of segregated funds. Accordingly, we suggest that the segregation provision in
subsection 4t(a) of the Commodity Exchange Act regarding cleared swaps include the same language at the end
that will apply to non-cleared swaps under subsection 4t(b) (see page 455, line 18 through page 456, line 2).
Specifically, we suggest that the following sentence be added at the end of subsection 4t(a) (on page 455, line 2):
"This subsection shall not be interpreted to preclude commercial arrangements regarding the investment of the
segregated funds or other property and the related allocation of gains and losses resulting from any such
investment, provided, however, that the segregated funds or other property under this subsection may be invested
only in such investments as the Commission or the Financial Institutions Regulatory Administration, as
applicable, permits by rule or regulation." (Note that the same change should then be made to the securities-side
with respect to segregation for security-based swaps on page 577, line 6.)

2. Page 458, lines 20-22: The wording of this registration criterion for ASEFs has been changed from the
Administration version of capturing information that may be used in establishing whether "rule violations have
occurred" to require instead the means to capture information that may be used in establishing whether "any
violations of this section have occurred." Staff believes that this criterion would more appropriately require, as
under the Administration bill, that ASEFs be able to capture information required to monitor for violations of any
ASEF rule. That is the wording currently used in the Commodity Exchange Act with respect to "derivatives
transaction execution facilities," which are expected to be replaced by the new alternative swap execution
facilities under the OTC reform legislation. Accordingly, staff suggests that this wording be returned to the
formulation in the Administration bill, which read: "capture information that may be used in establishing whether
rule violations have occurred." (Note that the same change should then be made to the securities-side with respect
to ASEFs for security-based swaps on page 525, lines 14-16.)

John P. Riley
Director of Legislative Affairs
Office ofthe Chairman
u.s. Connnodity Futures Trading Connnission
115521 51 St., NW
Washington, DC 20581
(202) 418-5383
JRi1ey@CFTC.gov

CFTC-CREW-0475