Metropolitan Life Insurance Company

10 Park Avenue, Morristown, NJ 07962

Kevin M. Budd
Associate General Counsel
MetLife
Tel 973-355-4985
kbudd@metlife.com

February 28,2011
Mr. David A. Stawick
Secretary, Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

Re: RIN 3038 - AC96 - 17 CFR Part 23 - Confirmation, Portfolio Reconciliation, and
Portfolio Compression Requirements for Swap Dealers and Major Swap Participants

Dear Mr. Stawick:

MetLife welcomes the opportunity to comment on the proposed regulations regarding

MetLife, Inc. is the holding company ofthe MetLife family of insurance companies. The MetLife
organization is a leading provider of insurance, annuities and employee benefit programs, serving
90 million customers in over 60 countries. MetLife holds leading market positions in the United
States (where it is the largest life insurer based on insurance in force), Japan, Latin America, Asia
Pacific, Europe and the Middle East. MetLife, Inc. is a public company, registered under the
Securities Act of 1934 and has securities listed on the New York Stock Exchange.

MetLife is providing this comment letter from the perspective of an active end-user of financial
derivatives which relies on these instruments to hedge the risk associated with its investment
portfolio and insurance product liabilities. MetLife's continued ability to manage financial risks
through the use of derivative hedges is an essential component of our risk management framework
that allows us to offer a broad range of insurance products to our customers. To the extent
MetLife's costs of hedging these insurance products increases, a portion of such costs are likely to
be passed on to our customers in the form of higher premiums and, in some instances, may force us
to discontinue offering certain insurance products.

MetLife appreciates the substantial effort and consideration that the staff of the Commission has
dedicated to developing the Proposed Rules. MetLife recognizes the public policy rational behind
the Proposed Rules and supports the goals oflegal certainty associated with a timely
acknowledgement and confirmation process, the mutual agreement ofthe parties in the ongoing
valuation and maintenance of outstanding swap positions, and the mitigation of risk through the
netting ofoffsetting swap positions. However, we are concerned that many ofthe requirements set
forth in the Proposed Rules do not comport with established market practices for the execution and
maintenance of OTC derivatives transactions and may be inconsistent with other proposed rules
promulgated by the Commission. Specifically we believe that the proposed acknowledgement and
confirmation procedures create redundancies in the rules promulgated for the centralized clearing
and execution of swap transactions through Derivatives Clearing Organizations ("DCO") and Swap
Execution Facilities ("SEF"), respectively. We believe that such redundancies will ultimately
increase the execution costs for swap transactions. Additionally, MetLife believes that the proposed
portfolio reconciliation process should be limited in its scope to economic terms that affect
transaction valuations. Further, we feel that the proposed reconciliation rules fail to provide any
compliance enforcement when reconciliation disputes are not addressed in a timely manner or in
good faith by one of the parties. Finally, MetLife believes that any mandatory portfolio compression
requiring novation netting of swap positions will increase the portfolio risk of many derivatives end
users, in particular insurance companies, by reducing the hedge effectiveness of certain swap
transactions. Accordingly, MetLife respectfully recommends modifications to the Proposed Rules
as set forth below:

Proposed ConfIrmation Rule - Section 23.501.

Proposed Rule 23.501 (the "Confirmation Rule") would require that any swap transaction,
executed by a Swap Dealer ("SD") or a Major Swap Participant ("MSD"), must be; (i)
memorialized by a written or electronic record of all of the terms of such swap transaction, signed
and sent by one party to its counterparty in the transaction (an "Acknowledgement") and (ii)
verified and signed by such counterparty (a "Confirmation"). The Confirmation Rule would apply
to all swap transactions, whether or not such swap transaction is required to be executed through a
Swap Execution Facility ("SEF"), cleared trough a Derivatives Clearing Organization ("DCO") or
entered into on a bilateral basis by two market participants. The Proposed Confirmation Rule
further requires that any swap transaction executed by or among SD's or MSP's must be
Acknowledged and Confirmed on the same day as such swap transaction is executed. To the extent
a swap transaction is executed or processed "electronically" the Acknowledgement / Confirmation
would be required within 15 minutes of the execution. In the event a transaction is processed but
not executed "electronically", then the Acknowledgement / Confirmation would be required within
30 minutes of execution. If such swap transaction is neither processed nor executed electronically,
then the Acknowledgement would be required within the same calendar day as the swap execution.

MetLife believes that the Confirmation Rule need only be applied to swap transactions which are
not executed through a SEF or cleared through a DCO. Application ofthe Confirmation Rule to
swap transactions executed through a SEF and / or cleared through a DCO create unnecessary
operational redundancies. As the Commission correctly indicates, any transaction executed trough a
SEF will have its terms and conditions verified by the SEF in the bidding process, and the SEF will
be responsible for executing such swap transaction by matching such terms and conditions between
prospective parties to the Swap. Accordingly, it should be the responsibility of the SEF to provide
the formal Acknowledgement and Confirmation for any swap which it has arranged and executed.
Similarly, any swap transaction which is executed bilaterally and cleared through a DCO will, as a
matter of course, have its terms and conditions matched and verified by the DCO prior to being
accepted for clearing. Again, it should be the responsibility of the DCO to provide an
2
Acknowledgement and Confirmation of all swap transactions for which it clears. In mandatingthat
an SD, MSP or a financial institution end user individually provide an Acknowledgement and
Confirmation of a swap transaction, the terms of which have already been verified by a SEF or will
be verified by a DCa, creates an undo operational and recordkeeping burden on those parties
which will ultimately increase the implicit and explicit cost of executing swap transactions.
Moreover, operational risk is also likely to increase to the extent that multiple parties are generating
Acknowledgments and Confirmations for the same swap transactions. For the forgoing reasons
MetLife strongly urges the Commission to limit the obligations ofSD's and MSP's under the
Confirmation Rule to swap transactions not executed through a SEF or cleared through a DCa.

MetLife agrees that swap transactions executed bilaterally by SD's and MSP's should require a
prompt Acknowledgement and Confirmation by the parties to the swap transaction. MetLife
suggests, however, that the final Confirmation Rule specifically indicate which party to the
transaction is responsible for delivery of such Acknowledgement and which party is responsible for
the return Confirmation. The Confirmation Rule should be consistent with other proposed rules
under the Dodd-Frank Act which allocates responsibility for generating transactional information to
SD's in respect of transactions with MSP's and end users. For example, in a transaction executed
between an SD and a MSP, theSD would be required to deliver the Acknowledgment and the MSP
to deliver the Confirmation. Additionally, MetLife encourages the Commission to further define the
terms "electronically executed" and "electronically processed" in order to clarify the confirmation
timing requirements under the Confirmation Rule. The Commissions expanded definition ofthese
terms would be a significant factor in determining whether or not an "electronically traded" or
"electronically processed" swap transaction would provide sufficient trade related information to
Acknowledge and Confirm such transactions in accordance with the Confirmation Rule. Without a
precise definition of the terms "electronically processed" and "electronically executed" it is
impossible at this juncture to determine whether such time frames are realistic within current
market capabilities.

Finally, MetLife respectfully requests that the Commission consider extending the timeframe for the
delivery and return of Acknowledgements and Confirmations ofbilaterally executed transactions
which are often highly structured and customized ("Bespoke Transactions"). As the commission is
aware, Bespoke Transactions often contain highly negotiated economic and legal terms that are
often negotiated up until the point immediately preceding their execution. Based upon the
complexity of such transactions, it would be unreasonable to generate an Acknowledgement and
Confirmation within the time parameters set forth in the Confirmation Rule. Accordingly, MetLife
suggests that the delivery period for an Acknowledgement in respect of Bespoke Transactions be
extended to a minimum of three (3) business days subsequent to its execution, and that the
counterparty be provided at least two (2) business day following the receipt of an
Acknowledgement to review and return a Confirmation. These time frames are consistent with
current market practices for the confirmation of aTC derivatives.

Portfolio Reconciliation Rule - Section 23.502.

MetLife recognizes the Commission's overall objective under the portfolio reconciliation rule
23.502 (the "Portfolio Reconciliation Rule") which would work to ensure that non DCa cleared
swap transactions are valued appropriately, that the risk attendant to such transactions is accurately
identified, and any collateral required to be posted in connection with these transactions is sufficient
to mitigate such risk. MetLife proposes that any final Portfolio Reconciliation Rule be limited in
scope to a reconciliation ofthe variable economic tenus of the affected swap transactions. As a
general matter, other than such variable economic tenus, there are few tenus and conditions of a
swap transaction that will vary during the tenor of a swap transaction. A full review of each swap
transaction in a portfolio would create an unnecessary redundancy in the review of static provisions
that would have already been confirmed during the Acknowledgement and Confirmation process
set forth in the Commission's proposed Confirmation Rule. The additional review of otherwise
static tenus and conditions creates an undue burden, and concomitant expense, for each of the
parties required to comport with the Reconciliation Rule.

Further, MetLife agrees with the commission that the resolution of valuation discrepancies in
respect of non-Df.O cleared swap transactions should be limited to such discrepancies that exceed
10% of the calculated valuation for a particular swap transaction. However, MetLife proposes that
the Commission extend the dispute resolution period from one (1) business day, to at least three (3)
business days in respect of Bespoke Transactions. The complexity of Bespoke Transactions, the
availability of applicable pricing sources and the manner in which such transactions are valued
necessitate the flexibility oflonger dispute resolution periods.

Finally, MetLife suggests that the Commission consider adding a reporting component to the
Reconciliation Rule that would require SD's and MSP's to submit a report of all identified but
unresolved valuation discrepancies that have been outstanding for at least ninety (90) calendar days
as of the end of a calendar month. We believe that some form of reporting and / or enforcement
mechanism would create a more robust dispute resolution process and ensure that the parties
involved exercised good faith in their efforts to resolve such dispute.

Portfolio Compression Rule - Section 23.503

MetLife strongly opposes the proposed portfolio compression rule (the "Portfolio Compression
Rule") that would mandate novation netting of offsetting swap positions with the aim ofreducing
the outstanding notional amount of swap transactions between the parties to such swap
transactions. Although the Portfolio Compression Rule would provide a safe harbor exclusion for
those transactions that, if subject to compression, would "likely increase significantly the risk
exposure of a SD or MSP," the exception is not sufficiently broad to ensure that a party's essential
hedging transactions will not be eliminated during a portfolio compression exercise. In the
alternative, MSP's and end-users should be allowed to opt-out ofportfolio compression for
transactions that constitute "bona fide" hedges, in the same manner as provided for in futures

agreements and aTC derivatives master agreements. MetLife, as well as other insurers, use
derivatives to hedge risk not only on a macro portfolio level, but also on a micro level which would
include separate account and line ofbusiness assets and liabilities. With hedging of assets and
liabilities occurring on both a macro and micro level, it is likely that certain swap transactions
occurring within an insurer's derivatives portfolio may appear as offsetting transactions on a macro
level, but on a micro level, serve to hedge specific assets or liabilities. The type of compression
exercises contemplated by the Portfolio Compression Rule would potentially disrupt the hedge
effectiveness of individual swap transactions; which in turn could materially increase the portfolio
risk ofmany derivatives end users, in particular insurance companies. Additionally, such
compression of hedging transactions may result in a conflict with state insurance laws governing the
allocation ofhedging transactions to specific assets and liabilities. MetLife concurs with other
commentators that oppose this rule and encourage the Commission to exclude insurance companies
from the requirements ofmandatory portfolio compression.

Metl.ife is pleased to be able to continue to participate through the comment process in the framing
ofthis critical new regulatory framework. Please feel free to contact me at my email address above
ifyou have any questions regarding this comment letter.