On January 14, 2010, the Federal Reserve Bank of New York (the “Federal Reserve”) hosted a meeting of major market participants, including both major dealers and buy-side participants, industry groups (including the International Swaps and Derivatives Association, Inc. (“ISDA”), the Securities Industry and Financial Markets Association and the Managed Funds Association) and domestic and international supervisors.  The purpose of the meeting, the sixth such meeting with industry participants held at the Federal Reserve, was to discuss efforts to improve the infrastructure supporting the over-the-counter (“OTC”) derivatives market.

At the meeting, William C. Dudley, president of the Federal Reserve, noted that the industry needed to continue its efforts to bring greater transparency to the derivatives markets and reduce systemic risk.  Market participants updated the Federal Reserve on developments in the derivatives market and agreed to effect additional changes to reduce risk and increase transparency.  In particular, the market participants agreed to: (i) expand central clearing for interest rate swaps and credit derivatives (including expanding the range of products eligible for central clearing), (ii) expand reporting on OTC derivatives transactions to regulators and (iii) improve risk management for derivatives transactions that are not centrally cleared by formalizing “best practices” for managing the risks inherent in these transactions, including through collateralization.  These commitments are in addition to the commitments market participants have made to regulators to report non-cleared trades to central repositories and to work with central clearing parties to broaden the range of cleared products.  The market participants agreed to provide a letter to the regulators by March 1, 2010 detailing their progress on these new commitments.