Interim Final Rule for Reporting Pre-Enactment Swap Transactions, 63080-63085 [2010-25325]
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Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Rules and Regulations
educational settings, such as schools,
summer camps, or child care facilities,
this type of a distribution strategy
would not necessarily convert a general
use product into a children’s product.
However, if the product is packaged in
such a manner that either expressly
states or implies with graphics, themes,
labeling, or instructions that the product
is designed or intended primarily for
children 12 years of age or younger,
then it may be considered a children’s
product if the required consideration of
all four statutory factors supports that
determination. The requirements of the
Labeling of Hazardous Art Materials Act
are similar to the labeling requirements
of the FHSA, of which it is a part.
Therefore, third party testing to LHAMA
is not required. An art material designed
or intended primarily for children 12
years of age or younger would have to
be tested by a third party laboratory to
demonstrate compliance with CPSIA,
but it would not require third party
testing and certification to the LHAMA
requirements. For the same reasons, no
general conformity certificate is
required for general use art materials.
(6) Books—The content of a book can
determine its intended audience.
Children’s books have themes,
vocabularies, illustrations, and covers
that match the interests and cognitive
capabilities of children 12 years of age
or younger. The age guidelines provided
by librarians, education professionals,
and publishers may be dispositive for
determining the intended audience.
Some children’s books have a wide
appeal to the general public, and in
those instances, further analysis may be
necessary to assess who the primary
intended audience is based on
consideration of relevant additional
factors, such as product design,
packaging, marketing, and sales data.
(7) Science Equipment—Microscopes,
telescopes, and other scientific
equipment that would be used by an
adult, as well as a child, are considered
general use products. Equipment that is
intended by the manufacturer for use
primarily by adults, although there may
be use by children through such
programs, is a general use product. Toy
versions of such items are considered
children’s products. If a distributor or
retailer sells or rents a general use
product in bulk through distribution
channels that target children 12 years of
age or younger in educational settings,
such as schools or summer camps, this
type of a distribution strategy would not
necessarily convert a general use
product into a children’s product.
However, if the product is packaged in
such a manner that either expressly
states or implies with graphics, themes,
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labeling, or instructions that the product
is designed or intended primarily for
children 12 years of age or younger,
then it may be considered a children’s
product if the required consideration of
all four statutory factors supports that
determination. Products mainly
intended for use by the instructor would
not be considered children’s products.
In general, scientific equipment that is
specifically sized for children, such as
protective gear, eyewear, gloves, or
aprons and/or has childish themes or
decorations and invites use by a child
12 years of age or younger or is
marketed to appeal primarily to
children is considered a children’s
product.
(8) Sporting Goods and Recreational
Equipment—Sporting goods that are
intended primarily for consumers older
than 12 years of age are considered
general use items. Sporting equipment,
sized for adults, are general use items
even though some children 12 years of
age or younger will use them. Unless
such items are specifically marketed to
children 12 years of age or younger, or
have extra features that make them more
suitable for children 12 years of age or
younger than for adults, they would be
considered general use products. If
children 12 years or younger would
mainly use the product because it
would be too small or inappropriate for
older children to use, then it likely
would be considered a children’s
product. Likewise, recreational
equipment, such as roller blades,
skateboards, bicycles, camping gear, and
fitness equipment are considered
general use products unless they are
sized to fit children 12 years of age or
younger and/or are decorated with
childish features by the manufacturer.
(9) Musical Instruments—Musical
instruments, including electronicallyaided instruments suited for an adult
musician, are general use products.
Instruments intended primarily for
children can be distinguished from
adult instruments by their size and
marketing themes. The Commission
notes that if a distributor or retailer sells
or rents in bulk, a general use musical
instrument through distribution
channels that target children 12 years of
age or younger in educational settings,
such as schools or summer camps, this
type of a distribution strategy would not
necessarily convert a general use
product into a children’s product.
However, if the product is packaged in
such a manner that either expressly
states or implies with graphics, themes,
labeling, or instructions that the product
is designed or intended primarily for
children 12 years of age or younger,
then it may be considered a children’s
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product if the required consideration of
all four statutory factors supports that
determination.
Dated: October 6, 2010.
Todd A. Stevenson,
Secretary, Consumer Product Safety
Commission.
[FR Doc. 2010–25645 Filed 10–13–10; 8:45 am]
BILLING CODE 6355–01–P
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 44
RIN 3038–AD24
Interim Final Rule for Reporting PreEnactment Swap Transactions
Commodity Futures Trading
Commission.
ACTION: Interim final rule; request for
public comment.
AGENCY:
The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is publishing for comment an
interim final rule to implement new
statutory provisions introduced by Title
VII of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(‘‘Dodd-Frank Act’’). Section 729 of the
Dodd-Frank Act requires the CFTC to
adopt, within 90 days of enactment of
the Dodd-Frank Act, an interim final
rule for the reporting of swap
transactions entered into before July 21,
2010 whose terms had not expired as of
that date (‘‘pre-enactment unexpired
swaps’’). Pursuant to this mandate, the
CFTC is today adopting an interim final
rule requiring specified counterparties
to pre-enactment unexpired swap
transactions to report certain
information related to such transactions
to a registered swap data repository
(‘‘SDR’’) 1 or to the Commission by the
compliance date to be established in
reporting rules required under
Section2(h)(5) of the CEA, or within 60
days after an SDR becomes registered
under Section 21 of the CEA, whichever
occurs first. An interpretive note to the
rule advises that counterparties that
may be required to report to an SDR or
the CFTC will need to preserve
information pertaining to the terms of
such swaps.
DATES: This interim final rule is
effective October 14, 2010. Comments
SUMMARY:
1 The term ‘‘swap data repository’’ is defined in
Section 1a(48) of the Commodity Exchange Act
(‘‘CEA’’ or the ‘‘Act’’) to mean ‘‘any person that
collects and maintains information or records with
respect to transactions or positions in, or the terms
and conditions of, swaps entered into by third
parties for the purpose of providing a centralized
recordkeeping facility for swaps.’’
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Federal Register / Vol. 75, No. 198 / Thursday, October 14, 2010 / Rules and Regulations
on all aspects of the interim final rule
must be received on or before November
15, 2010.
ADDRESSES: Comments may be
submitted by any of the following
methods:
• Agency Web Site: Follow the
instructions for submitting comments at
https://www.federalregister.gov/agencies/
commodity-futures-trading-commission.
• E-mail: peswapreport@cftc.gov.
• Mail: Address to David A. Stawick,
Secretary, Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to https://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that is exempt from disclosure under the
Freedom of Information Act, a petition
for confidential treatment of the exempt
information may be submitted according
to the established procedures in CFTC
Regulation 145.9.2
The Commission reserves the right,
but shall have no obligation, to review,
pre-screen, filter, redact, refuse or
remove any or all of your submission
from www.cftc.gov that it may deem to
be inappropriate for publication, such as
obscene language. All submissions that
have been redacted or removed that
contain comments on the merits of the
rulemaking will be retained in the
public comment file and will be
considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
Susan Nathan, Senior Special Counsel,
Division of Market Oversight,
Commodity Futures Trading
Commission, Washington, DC 20581, at
(202) 418.5133.
SUPPLEMENTARY INFORMATION: The
Commission is adopting Part 44 to its
Regulations under the Commodity
Exchange Act as an interim final rule
and is soliciting comment on all aspects
of the rule. The Commission will
carefully consider all comments
received and will address them, where
applicable, in connection with the
permanent reporting rules required to be
adopted by the Dodd-Frank Act.
I. Background
On July 21, 2010, President Obama
signed into law the Dodd-Frank Wall
2 17
CFR 145.9.
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Street Reform and Consumer Protection
Act (‘‘Dodd-Frank Act’’).3 Title VII of the
Dodd-Frank Act 4 amended the
Commodity Exchange Act (‘‘CEA’’) 5 to
establish a comprehensive new
regulatory framework for swaps and
security-based swaps. The legislation
was enacted to reduce risk, increase
transparency, and promote market
integrity within the financial system by,
among other things: (1) Providing for the
registration and comprehensive
regulation of swap dealers and major
swap participants; (2) imposing clearing
and trade execution requirements on
standardized derivative products; (3)
creating robust recordkeeping and realtime reporting regimes; and (4)
enhancing the Commission’s
rulemaking and enforcement authorities
with respect to, among others, all
registered entities and intermediaries
subject to the Commission’s oversight.
Among other things, the Dodd-Frank
Act requires that swaps be reported to
a registered SDR or to the Commission
if there is no registered SDR that would
accept the swap. Section 723 of the
Dodd-Frank Act adds Section 2(h)(5) to
the CEA to require that pre-enactment
swaps be reported to a registered SDR or
to the Commission no later than 180
days after the effective date of that
subsection.6 By its terms, the
effectiveness of this rule is governed by
the effective date of the Dodd-Frank
Act—July 16, 2011. Section 729 of the
Dodd-Frank Act establishes, in new
Section 4r of the CEA, reporting
requirements that will remain in effect
until the effective date of the permanent
reporting rules to be adopted by the
Commission pursuant to Section 2(h)(5)
of the CEA.
Section 4r(a)(1) of the CEA, as
amended, provides generally that each
swap that is not accepted for clearing by
3 See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–203, 124
Stat. 1376 (2010), hereinafter cited as ‘‘Dodd-Frank
Act.’’ The text of the Dodd-Frank Act may be
accessed at https://www.cftc.gov/LawRegulation/
OTCDERIVATIVES/index.htm.
4 Pursuant to Section 701 of the Dodd-Frank Act,
Title VII may be cited as the ‘‘Wall Street
Transparency and Accountability Act of 2010.’’
5 7 U.S.C. 1 et seq.
6 ‘‘(5) Reporting Transition Rules.—Rules adopted
by the Commission under this section shall provide
for the reporting of data, as follows:
(A) Swaps entered into on or before the date of
the enactment of this subsection shall be reported
to a registered swap data repository or the
Commission no later than 180 days after the
effective date of this subsection.
(B) Swaps entered into on or after such date of
enactment shall be reported to a registered swap
data Repository or the Commission no later than the
later or—
(i) 90 days after such effective date; or such other
time after entering into the swap as the Commission
may prescribe by rule or regulation.
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63081
any derivatives clearing organization
(‘‘DCO’’) must be reported to a swap data
repository (‘‘SDR’’) registered in
accordance with new Section 21 of the
CEA 7 or, where there is no SDR that
would accept the swap, to the
Commission within the time period
prescribed by the Commission. Section
4r(a)(2) specifies that each swap entered
into before the date of enactment of the
Dodd-Frank Act, the terms of which had
not expired by the date of enactment of
that Act, must be reported to a
registered SDR or to the Commission,
and directs the Commission to
promulgate, within 90 days of
enactment of the Dodd-Frank Act, an
interim final rule providing for the
reporting of such swaps. Section
4r(a)(2)(A) directs that such swaps be
reported by a date not later than (i) 30
days after issuance of the interim final
rule; or (ii) such other period as the
Commission determines to be
appropriate.
Consistent with this mandate, the
Commission is adopting, in new Part 44
of the Commission’s regulations, Rule
44.02 to (i) establish a reporting time
frame for unexpired pre-enactment
swaps that is no later than 60 days from
the date the appropriate SDR is
registered with the Commission or by
the compliance date established in the
swap reporting rules required by
Section 2(h)(5) of the CEA, whichever
comes first; and (ii) require that
counterparties specified in Section
4r(a)(3) report information concerning
pre-enactment unexpired swaps to the
Commission on request during the
interim period. Finally, the Commission
is specifying in an interpretive note
(‘‘Note’’) to Rule 44.02(a) the information
the Commission believes reporting
entities should retain in order to comply
with the reporting obligations in the
rule.
II. The Interim Final Rule
A. Reconciling the Relevant Statutory
Provisions
Sections 723 and 729 of the DoddFrank Act establish requirements for the
reporting of pre-enactment swaps to
SDRs or to the Commission; each
provides generally that swaps must be
reported pursuant to such rules or
regulations as the Commission
prescribes. Section 729 provides that
swaps entered into prior to the July 21,
2010 enactment date and outstanding on
7 Section 21, added by Section 728 of the DoddFrank Act, requires that SDRs directly or indirectly
making use of the mails or any means or
instrumentality of interstate commerce to perform
the functions of an SDR be registered with the
Commission, and establishes statutory duties
applicable to registered SDRs.
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that date (hereafter ‘‘pre-enactment
unexpired swaps’’) must be reported to
a registered SDR or the CFTC not later
than 30 days after the CFTC issues an
interim final rule 8 or such other period
determined by the CFTC. Section 723
similarly provides that the Commission
must promulgate a rule that preenactment swaps must be reported to a
registered SDR not later than 180 days
after the effective date of the
subsection.9 The inconsistencies
between these two reporting provisions
must be reconciled in order to eliminate
uncertainty with respect to the actual
reporting requirements for preenactment swaps.
emcdonald on DSK2BSOYB1PROD with RULES
1. Section 729
Section 4r(a)(1) of the CEA, added by
section 729 of the Dodd-Frank Act,
provides generally that each swap that
is not accepted for clearing by any DCO
must be reported to an SDR described in
new Section 21 of the CEA or, in the
case where there is no SDR that would
accept the swap,10 to the Commission
within the time period prescribed by the
Commission. Specifically, preenactment swaps must, pursuant to new
CEA Section 4r(a)(2)(A), be reported to
a registered SDR, or to the Commission
if no SDR would accept the swap, by a
date that is not later than 30 days after
the issuance of the interim final rule
prescribed in new Section 4r(a)(2)(B) 11
or such other period as the Commission
determines to be appropriate. Section
4r(a)(3) delineates the reporting
obligations of the parties in specific
circumstances.12
8 The interim final rule must be promulgated
within 90 days of enactment of the Dodd-Frank Act.
See Section 4r(a)(2)(B).
9 Section 774 of the Dodd-Frank Act describes the
effective date as follows: ‘‘unless otherwise
provided,’’ the provisions of Title VII shall take
effect ‘‘on the later of 360 days after the date of
enactment’’ or to the extent that a provision of Title
VII requires a rulemaking, ‘‘not less than 60 days
after publication of the final rule or regulation
implementing’’ such provision of Title VII.
10 The Commission believes that this
circumstance might occur where no SDR has yet
been approved or where no SDR has been approved
for a particular asset class. In addition, it is
conceivable that an SDR’s system might not be
equipped to accept a particular bespoke swap
transaction.
11 Section 4r(a)(2)(B) provides that ‘‘[t]he
Commission shall promulgate an interim final rule
within 90 days of the date of enactment of this
section providing for the reporting of each swap
entered into before the date of enactment as
referenced in subparagraph (A).’’ See Section 729 of
the Dodd-Frank Act.
12 For swaps in which only one counterparty is
a swap dealer or major swap participant, that swap
dealer or major swap participant shall report the
swap (Section 4r(3)(A)); where one counterparty is
a swap dealer and the other is a major swap
participant, the swap dealer shall report the swap
(Section 4r(3)(B)). With respect to any other swap
not described in subsections (A) and (B), the
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2. Section 723
Section 723 of the Dodd-Frank Act
adds to the CEA new Section 2(h)(5),
which similarly requires that the
Commission adopt a reporting transition
rule for swaps entered into before the
date of enactment of that subsection.
Section 2(h)(5) provides that such swaps
shall be reported to a registered SDR or
to the Commission no later than 180
days after the effective date of that
subsection—or approximately 540 days
after the date of enactment.
3. Legislative Intent
In a July 15, 2010 floor statement,
Senator Lincoln addressed the
inconsistencies between Sections 2(h)(5)
and 4r(a)(2)(A) and emphasized that the
provisions of these two sections ‘‘should
be interpreted as complementary to one
another to assure consistency between
them. This is particularly true with
respect to issues such as the effective
dates of these reporting requirements
* * *.’’ 13
B. Scope and Coverage of the Interim
Final Rule
As noted, new Section 2(h)(5) does
not contain the same qualifying
language found in Section 4r(a)(2)(A),
which limits the swaps that must be
reported to pre-enactment swaps whose
terms have not expired as of the date of
enactment. In the Commission’s view,
failure to limit the term ‘‘pre-enactment
swaps’’ to ‘‘pre-enactment unexpired
swaps’’ would require reporting of every
swap that has ever been entered into.14
There are obvious practical and
operational difficulties in an
interpretation that imposes reporting
requirements on expired swaps:
counterparties may not have kept
thorough, complete—or indeed any—
records of such transactions. Moreover,
the argument can be made that a swap
whose terms have expired is no longer
a swap as defined in the Dodd-Frank
Act. For these reasons, the Commission
believes that the trades described in
Section 2(h)(5) should be viewed as
consistent with those described in
counterparties to the swap shall select a
counterparty to report the swap (Section
4r(a)(3)(C)).
13 Lincoln, ‘‘Wall Street Transparency and
Accountability,’’ Congressional Record (July 15,
2010) at S5923.
14 Financial historians believe that the first swap
transaction was executed between the World Bank
and IBM Corporation in 1981. See Paul C. Harding,
Mastering the ISDA Master Agreements (1992 and
2002) (FT Prentice Hall, 3d Ed. 2010) at 9. As noted
in the text accompanying this footnote, the
operational difficulties in requiring reporting of all
swaps executed since 1981 could be substantial,
and the cost in terms of technology and human
capital resources would far outweigh any potential
benefits for swaps that have expired.
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Section 4r(a)(2); that is, limited to those
pre-enactment trades whose terms had
not expired at the time of enactment—
i.e., July 21, 2010.
1. Reporting Obligations
Rule 44.02(a) requires that the
designated counterparty to a preenactment unexpired swap
transaction 15 submit, with respect to
such transaction, the following
information to a registered SDR or to the
Commission: (i) A copy of the
transaction confirmation in electronic
form, if available, or in written form if
there is no electronic copy; and (ii) if
available, the time the transaction was
executed. In addition, Rule 44.02(b)
provides that a counterparty to a preenactment unexpired swap transaction
must report to the Commission on
request any information relating to such
transaction during the time that this
interim final rule is in effect. The
Commission expects that such
information would vary depending
upon the needs of the Commission and
may include actual as well as summary
trade data. Such summary data may
include a description of a swap dealer’s
counterparties or the total number of
pre-enactment swap transactions
entered into by the dealer and some
measure of the frequency and duration
of those contracts. The Commission
believes that this requirement will
facilitate its ability to understand and
evaluate the current market for swaps
and may inform its analysis of other
required rulemakings under the DoddFrank Act.
2. Reporting Party
Section 4r(a)(3) of the CEA specifies
the party obligated to report a swap
transaction: either a swap dealer, a
major swap participant, or a
counterparty to the transactions. These
provisions apply to reporting under the
interim final rule. Specifically, Section
4r(a)(3) provides, with respect to a swap
in which only one counterparty is a
swap dealer or major swap participant,
it is that entity’s responsibility to report
the swap. With respect to a swap in
which one counterparty is a swap dealer
and the other counterparty is a major
swap participant, the swap dealer must
report the swap; with respect to any
other swap, the counterparties shall
select one of them to report the swap.
Rule 44.02(b) incorporates these
provisions.
15 The reporting obligations of specified
counterparties are delineated in Section 4r(a)(3) of
the CEA, as amended.
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3. Effective Date for Reporting PreEnactment Unexpired Swaps
New CEA Section 4r(a)(2)(C)
establishes that the reporting provisions
of section 4r are effective immediately
upon enactment of the Dodd-Frank Act,
despite the fact that at this time (i) there
are no registered SDRs to immediately
accept the swap data; (ii) the
Commission is not prepared to accept
swap data; and (iii) the Commission has
not adopted rules governing either the
registration of swap dealers or major
swap participants or the reporting and
maintenance of such data and is not
required to do so until 360 days after
enactment of the Dodd-Frank Act.16 In
these circumstances, Section 4r should
be read to require that the reporting
obligation became effective on
enactment of the Dodd-Frank Act and
that counterparties who are subject to
this obligation should, as of the date of
enactment, retain all data relating to
pre-enactment unexpired swaps until
such time as reporting can be effected—
e.g., when swap dealers and major swap
participants, as well as the appropriate
SDRs, have been registered, or when
permanent regulations are enacted
pursuant to Section 2(h)(5) of the CEA,
whichever occurs first.
emcdonald on DSK2BSOYB1PROD with RULES
4. Record Retention
The pre-enactment swap transactions
that must be reported pursuant to
Section 4r of the CEA, as amended, and
the new interim final rule (Part 44 of the
Commission’s Regulations) occurred
prior to enactment of the Dodd-Frank
Act. Accordingly, implicit in the
reporting requirements established by
Section 4r and Rule 44 is the obligation
of each counterparty to such
transactions to retain information and
documents relating to the terms of the
transaction. Rule 44.02 includes a Note
to paragraphs (a)(1) and (2) advising
counterparties to a pre-enactment
unexpired swap that may be required to
report such transaction to retain in its
existing format all information and
documents, to the extent and in such
form as they presently exist, relating to
the terms of the transaction. This
information includes, but is not limited
to: (i) Any information necessary to
identify and value the transaction; (ii)
the date and time of execution of the
16 Section 2(h)(5) does not specify an effective
date. In these circumstances, the ‘‘default’’ effective
date would be 360 days after enactment of the
Dodd-Frank Act or 60 days after publication of a
final rule or regulation. Adoption of the effective
date prescribed in Section 2(h)(5) permits the
implementation of Section 4r and achieves Senator
Lincoln’s goal of assuring consistency between the
two legislative provisions embodied in Sections 4r
and 2(h)(5).
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transaction; (iii) information relevant to
the price of the transaction; (iv) whether
the transaction was accepted for
clearing by any clearing agency or
derivatives clearing organization, and if
so the identity of such agency or
organization; (v) any modification(s) to
the terms of the transaction; and (vi) the
final confirmation of the transaction.
The Commission believes that
counterparties that may be required to
report such transactions should retain
such information in order to comply
with the reporting requirements of Rule
44.02. The information identified above
and in the Note is designed to
encompass material information about
pre-enactment unexpired swap
transactions that may be the subject of
a request by the Commission to report
pursuant to the interim final rule, as
well as rules subsequently adopted
pursuant to new Section 2(h)(5) of the
CEA, and that will assist the
Commission in performing its oversight
functions under the CEA.
The Note does not require any
counterparty to a pre-enactment
unexpired swap to create or retain new
records with respect to transactions that
occurred in the past. Permitting records
to be retained in their existing format is
designed to ensure that important
information relating to the terms of preenactment unexpired swaps is
preserved with minimal burden on the
counterparties. Similarly, the
Commission understands that
information that the counterparty does
not have prior to the effective date of the
interim final rule cannot be reported.
III. Related Matters
A. Administrative Procedure Act
The Administrative Procedure Act 17
(‘‘APA’’) generally requires an agency to
publish notice of a proposed rulemaking
in the Federal Register.18 This
requirement does not apply, however,
when the agency ‘‘for good cause finds
* * * that notice and public procedure
are impracticable, unnecessary, or
contrary to the public interest.’’ 19
Moreover, while the APA requires
generally that an agency publish an
adopted rule in the Federal Register 30
days before it becomes effective, this
requirement does not apply if the
agency finds good cause to make the
rule effective sooner.20 Section 729 of
the Dodd-Frank Act amended the CEA
to add new Section 4r, which in turn
requires the Commission to adopt,
within 90 days of enactment of the
17 5
U.S.C. 553.
U.S.C. 553(b).
19 Id.
20 5 U.S.C. 553(d).
Dodd-Frank Act, an interim final rule
providing for the reporting of swaps
entered into before the date of
enactment of the Dodd-Frank Act the
terms of which were not expired as of
that date. The Commission is adopting
Part 44 to its Regulations in response to
this mandate. In these circumstances,
the Commission, for good cause, fines
that notice and solicitation is
impracticable, unnecessary or contrary
to the public interest. This finding also
satisfies the requirements of 5 U.S.C.
808(2), permitting the rule to become
effective notwithstanding the
requirement of 5 U.S.C. 801 (if a federal
agency finds that notice and public
comment are ‘‘impractical, unnecessary
or contrary to the public interest,’’ a rule
‘‘shall take effect at such time as the
federal agency promulgating the rule
determines.’’).
B. Paperwork Reduction Act
1. Reporting Requirements
The Commission has determined that
these proposed orders will not impose
on swap counterparties any new
reporting requirements that would be
collections of information requiring the
approval of the Office of Management
and Budget under the Paperwork
Reduction Act.21 The reporting
requirements associated with Section
723 of the Dodd-Frank Act will be
adopted by the Commission, at which
time the Commission will issue a notice
and request comments on the reporting
requirements and seek OMB approval as
provided by 5 CFR 1320.8 and 1320.11.
2. Recordkeeping Requirements
Proposed Commission Regulation
44.02 imposes a recordkeeping
requirement on swap counterparties that
is considered to be a collection of
information within the meaning of the
Paperwork Reduction Act (‘‘PRA’’).22
The Commission therefore is required to
submit to the Office of Management and
Budget (OMB) an information collection
request for review and approval in
accordance with 44 U.S.C. 3507(d) and
5 CFR 1320.8 an d1320.11. The
Commission will, by separate action,
publish in the Federal Register a notice
and request for comments on the
paperwork burden associated with these
recordkeeping requirements in
accordance with 5 CFR 1320.8. If
approved, this new collection of
information will be mandatory.
C. Cost-Benefit Analysis
Section 15 of the CEA requires the
Commission to consider the costs and
18 5
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22 44
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benefits of its action before issuing a
new regulation or order under the Act.
By its terms, Section 15(a) does not
require the Commission to quantify the
costs and benefits of its action or to
determine whether the benefits of the
action outweigh its costs. Rather,
Section 15(a) requires the Commission
simply to ‘‘consider the costs and
benefits’’ of the subject rule or order.
Section 15(a) further specifies that the
costs and benefits of Commission
regulations shall be evaluated in light of
five broad areas of market and public
concern: (1) Protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of the market for
listed derivatives; (3) price discovery;
(4) sound risk management practices;
and (5) other public interest
considerations. The Commission may,
in its discretion, give greater weight to
any one of the five enumerated areas of
concern and may, in its discretion,
determine that notwithstanding its
costs, a particular regulation is
necessary or appropriate to protect the
public interest or to effectuate any of the
provisions or to accomplish any of the
purposes of the CEA.
Title VII of the Dodd-Frank Act
requires the Commission to undertake a
number of rulemakings to implement
the regulatory framework for swaps set
forth in that Act, including the reporting
of swap transactions. This interim final
rule implements the Dodd-Frank Act by
establishing reporting requirements for
pre-enactment unexpired swaps as
required by Section 729 of that Act and
serving as notice to reporting entities of
a present obligation to retain data
related to such swaps for reporting at a
future date. The rule will enable the
Commission to obtain data on preenactment swaps and will also provide
for the preservation of data on such
swaps until the Commission issues
permanent recordkeeping and reporting
rules for all swaps. By making available
transaction data on pre-enactment
swaps, this action will enable the
Commission to gain a better
understanding of the swap market—
including the size and scope of that
market; this understanding will
ultimately lead to a more robust and
transparent environment for the market
for swaps. Further, the Commission
expects this rule to make available
information that could inform the
Commission’s decision-making with
respect to the rules it is required to
implement under the Dodd-Frank Act.
The Note to Rule 44.02(a)(1) and (2)
addresses the retention of records
relating to swaps entered into before
July 21, 2010, the terms of which had
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16:06 Oct 13, 2010
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not expired as of that date. Although
there are recordkeeping costs associated
with retention of existing swap
transaction information, the
Commission does not believe those
costs will be significant. The rule does
not require market participants to
modify the data they have for retention
purposes, and the information that is
required to be reported should be
information that is already kept by swap
counterparties in their normal course of
business, and it may be reported in the
format in which it is kept. Moreover,
counterparties must report the time of
execution only to the extent such
information is available.
The permanent reporting rules that
the Commission is required to adopt
under new CEA Section 2(h)(5) also will
apply to pre-enactment swaps.
Accordingly, in adopting this interim
final rule, the Commission has sought to
limit the burden on market participants
by not imposing substantial or
potentially conflicting reporting
requirements.
D. The Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’), 5 U.S.C. 601 et seq., requires
Federal agencies, in promulgating rules,
to consider the impact of those rules on
small entities. The term ‘‘rule’’ under the
RFA is defined as ‘‘any rule for which
the agency publishes a general notice of
proposed rulemaking pursuant to
Section 553(B) of this title, or any other
law * * *.’’ 23 However, a general notice
of proposed rulemaking under Section
553(b) does not apply ‘‘when the agency
for good cause finds (and incorporates
the finding and a brief statement of
reasons therefor in the rules [issued]
that notice and public procedure
thereon are impracticable, unnecessary
or contrary to the public interest.’’ 24
Congress in Section 4r(a)(2)(B) of the
CEA directs the Commission to
promulgate an interim final rule within
90 days of enactment of the Dodd-Frank
Act to require the reporting of
unexpired pre-enactment swaps. The
Commission believes that the RFA does
not apply to this interim final rule
because ‘‘good cause’’ under 5 U.S.C.
553(b) has been established by specific
order of Congress in the Dodd-Frank
Act.
List of Subjects in 17 CFR Part 44
Swap markets, Counterparties,
Reporting and recordkeeping
requirements.
■ In consideration of the foregoing, and
pursuant to the authority in the
23 5
24 5
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U.S.C. 553(b).
Frm 00046
Fmt 4700
Sfmt 4700
Commodity Exchange Act, as amended,
and in particular Section 4r (a)(2) of the
Act, the Commission hereby proposes to
amend Chapter I of Title 17 of the Code
of Federal Regulation by adding a new
Part 44 as follows:
PART 44—INTERIM FINAL RULE FOR
PRE-ENACTMENT SWAP
TRANSACTIONS
Sec.
44.00 Definition of terms used in Part 44 of
this chapter.
44.01 Effective date.
44.02 Reporting pre-enactment swaps to a
swap data repository or the Commission.
Authority: 7 U.S.C. 2(h)(5), 4r, and 12a(5),
as amended by Title VII of the Wall Street
Reform and Consumer Protection Act (DoddFrank Act of 2010), Pub. L. 111–203, 124
Stat. 1376 (2010).
§ 44.00 Definition of terms used in Part 44
of this chapter.
(a) Major swap participant shall have
the meaning provided in Section 1a(33)
of the Commodity Exchange Act, as
amended, and any rules or regulations
thereunder.
(b) Pre-enactment unexpired swap
means any swap entered into prior to
the enactment of the Dodd-Frank Act of
2010 (July 21, 2010) the terms of which
had not expired as of the date of
enactment of that Act;
(c) Reporting entity, when used in this
Part, means any counterparty referenced
or identified in Section 4r(a)(3)(A)–(C)
of the Commodity Exchange Act, as
amended;
(d) Swap Data Repository shall have
the meaning provided in Section 1a(48)
of the Commodity Exchange Act, as
amended, and any rules or regulations
thereunder;
(e) Swap Dealer shall have the
meaning provided in Section 1(a)(49) of
the Commodity Exchange Act, as
amended, and any rules or regulations
thereunder;
§ 44.01
Effective date.
The provisions of this Part are
effective immediately on publication in
the Federal Register.
§ 44.02 Reporting pre-enactment swaps to
a swap data repository or the Commission.
(a) A counterparty to a pre-enactment
unexpired swap transaction shall:
(1) Report to a registered swap data
repository or the Commission by the
compliance date established in the
reporting rules required under Section
2(h)(5) of the Commodity Exchange Act,
or within 60 days after a swap data
repository becomes registered with the
Commission and commences operations
to receive and maintain data related to
such swap, whichever occurs first, the
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emcdonald on DSK2BSOYB1PROD with RULES
following information with respect to
the swap transaction:
(i) A copy of the transaction
confirmation, in electronic form if
available, or in written form if there is
no electronic copy; and
(ii) The time, if available, that the
transaction was executed; and
(2) Report to the Commission on
request, in a form and manner
prescribed by the Commission, any
information relating to the swap
transaction.
Note to Paragraphs (a)(1) and (a)(2). In
order to comply with the reporting
requirements contained in paragraph
(a)(1) and (a)(2) of this section, each
counterparty to a pre-enactment
unexpired swap transaction that may be
required to report such transaction
should retain, in its existing format, all
information and documents, to the
extent and in such form as they
presently exist, relating to the terms of
a swap transaction, including but not
limited to any information necessary to
identify and value the transaction; the
date and time of execution of the
transaction; information relevant to the
price of the transaction; whether the
transaction was accepted for clearing
and, if so, the identity of such clearing
organization; any modification(s) to the
terms of the transaction; and the final
confirmation of the transaction.
(b) Reporting party. The
counterparties to a swap transaction
shall report the information required
under paragraph (a) of this section as
follows:
(1) Where only one counterparty to a
swap transaction is a swap dealer or a
major swap participant, the swap dealer
or major swap participant shall report
the transaction;
(2) Where one counterparty to a swap
transaction is a swap dealer and the
other counterparty is a major swap
participant, the swap dealer shall report
the transaction; and
(3) Where neither counterparty to a
swap transaction is a swap dealer or a
major swap participant, the
counterparties to the transaction shall
select the counterparty who will report
the transaction.
By the Commission.
Dated: October 1, 2010.
David A. Stawick,
Secretary.
[FR Doc. 2010–25325 Filed 10–13–10; 8:45 am]
BILLING CODE 6351–01–P
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DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Part 529
[Docket No. FDA–2010–N–0002]
Certain Other Dosage Form New
Animal Drugs; Progesterone
Intravaginal Inserts
AGENCY:
Food and Drug Administration,
HHS.
ACTION:
Final rule.
The Food and Drug
Administration (FDA) is amending the
animal drug regulations to reflect
approval of a supplemental new animal
drug application (NADA) filed by
Pharmacia & Upjohn Co., a Division of
Pfizer, Inc. The supplemental NADA
provides for use of progesterone
intravaginal inserts and dinoprost
tromethamine by injection for
synchronization of estrus in lactating
dairy cows.
DATES: This rule is effective October 14,
2010.
FOR FURTHER INFORMATION CONTACT:
Suzanne J. Sechen, Center for Veterinary
Medicine (HFV–126), Food and Drug
Administration, 7500 Standish Pl.,
Rockville, MD 20855, 240–276–8105,
e-mail: suzanne.sechen@fda.hhs.gov.
SUPPLEMENTARY INFORMATION: Pharmacia
& Upjohn Co., a Division of Pfizer, Inc.,
235 East 42d St., New York, NY 10017
filed a supplement to NADA 141–200
that provides for use of EAZI–BREED
CIDR Progesterone Intravaginal Inserts
and dinoprost tromethamine by
injection for synchronization of estrus
in lactating dairy cows. The NADA is
approved as of July 22, 2010, and the
regulations are amended in 21 CFR
529.1940 to reflect the approval.
In accordance with the freedom of
information provisions of 21 CFR part
20 and 21 CFR 514.11(e)(2)(ii), a
summary of safety and effectiveness
data and information submitted to
support approval of this application
may be seen in the Division of Dockets
Management (HFA–305), Food and Drug
Administration, 5630 Fishers Lane, rm.
1061, Rockville, MD 20852, between
9 a.m. and 4 p.m., Monday through
Friday.
Under section 512(c)(2)(F)(iii) of the
Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 360b(c)(2)(F)(iii)), this
supplemental approval qualifies for 3
years of marketing exclusivity beginning
on the date of approval.
The agency has determined under 21
CFR 25.33 that this action is of a type
SUMMARY:
PO 00000
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63085
that does not individually or
cumulatively have a significant effect on
the human environment. Therefore,
neither an environmental assessment
nor an environmental impact statement
is required.
This rule does not meet the definition
of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because
it is a rule of ‘‘particular applicability.’’
Therefore, it is not subject to the
congressional review requirements in
5 U.S.C. 801–808.
List of Subjects in 21 CFR Part 529
Animal drugs.
■ Therefore, under the Federal Food,
Drug, and Cosmetic Act and under the
authority delegated to the Commissioner
of Food and Drugs and redelegated to
the Center for Veterinary Medicine, 21
CFR part 529 is amended as follows:
PART 529—CERTAIN OTHER DOSAGE
FORM NEW ANIMAL DRUGS
1. The authority citation for 21 CFR
part 529 continues to read as follows:
■
Authority: 21 U.S.C. 360b.
2. In § 529.1940, revise paragraphs
(d)(2) and (e)(1) and remove the last
sentence in paragraph (e)(2)(iii) to read
as follows:
■
§ 529.1940
inserts.
Progesterone intravaginal
*
*
*
*
*
(d) * * *
(2) Cows. This product is approved
with the concurrent use of dinoprost
solution when used for indications
listed in paragraphs (e)(1)(ii)(A) and
(e)(1)(ii)(B) of this section. See
§ 522.690(c) of this chapter.
(e) * * *
(1) Cows—(i) Amount. Administer one
intravaginal insert per animal for 7 days.
When used for indications listed in
paragraph (e)(1)(ii)(A) of this section,
administer 25 milligrams (mg) dinoprost
(5 milliliters (mL) of 5 mg/mL solution
as in § 522.690(a) of this chapter) as a
single intramuscular injection 1 day
prior to insert removal (Day 6). When
used for indications listed in paragraph
(e)(1)(ii)(B) of this section, administer 25
mg dinoprost as a single intramuscular
injection on the day of insert removal
(Day 7).
(ii) Indications for use—(A) For
synchronization of estrus in suckled
beef cows and replacement beef and
dairy heifers; for advancement of first
postpartum estrus in suckled beef cows;
and for advancement of first pubertal
estrus in replacement beef heifers.
(B) For synchronization of estrus in
lactating dairy cows.
(C) For synchronization of the return
to estrus in lactating dairy cows
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]]>Agencies
[Federal Register Volume 75, Number 198 (Thursday, October 14, 2010)]
[Rules and Regulations]
[Pages 63080-63085]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-25325]
=======================================================================
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 44
RIN 3038-AD24
Interim Final Rule for Reporting Pre-Enactment Swap Transactions
AGENCY: Commodity Futures Trading Commission.
ACTION: Interim final rule; request for public comment.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is publishing for comment an interim final rule to implement
new statutory provisions introduced by Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section
729 of the Dodd-Frank Act requires the CFTC to adopt, within 90 days of
enactment of the Dodd-Frank Act, an interim final rule for the
reporting of swap transactions entered into before July 21, 2010 whose
terms had not expired as of that date (``pre-enactment unexpired
swaps''). Pursuant to this mandate, the CFTC is today adopting an
interim final rule requiring specified counterparties to pre-enactment
unexpired swap transactions to report certain information related to
such transactions to a registered swap data repository (``SDR'') \1\ or
to the Commission by the compliance date to be established in reporting
rules required under Section2(h)(5) of the CEA, or within 60 days after
an SDR becomes registered under Section 21 of the CEA, whichever occurs
first. An interpretive note to the rule advises that counterparties
that may be required to report to an SDR or the CFTC will need to
preserve information pertaining to the terms of such swaps.
---------------------------------------------------------------------------
\1\ The term ``swap data repository'' is defined in Section
1a(48) of the Commodity Exchange Act (``CEA'' or the ``Act'') to
mean ``any person that collects and maintains information or records
with respect to transactions or positions in, or the terms and
conditions of, swaps entered into by third parties for the purpose
of providing a centralized recordkeeping facility for swaps.''
DATES: This interim final rule is effective October 14, 2010. Comments
[[Page 63081]]
on all aspects of the interim final rule must be received on or before
---------------------------------------------------------------------------
November 15, 2010.
ADDRESSES: Comments may be submitted by any of the following methods:
Agency Web Site: Follow the instructions for submitting
comments at https://www.federalregister.gov/agencies/commodity-futures-trading-commission.
E-mail: peswapreport@cftc.gov.
Mail: Address to David A. Stawick, Secretary, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street,
NW., Washington, DC 20581.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
https://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that is exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the established procedures in
CFTC Regulation 145.9.\2\
---------------------------------------------------------------------------
\2\ 17 CFR 145.9.
---------------------------------------------------------------------------
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from www.cftc.gov that it may deem to be inappropriate for
publication, such as obscene language. All submissions that have been
redacted or removed that contain comments on the merits of the
rulemaking will be retained in the public comment file and will be
considered as required under the Administrative Procedure Act and other
applicable laws, and may be accessible under the Freedom of Information
Act.
FOR FURTHER INFORMATION CONTACT: Susan Nathan, Senior Special Counsel,
Division of Market Oversight, Commodity Futures Trading Commission,
Washington, DC 20581, at (202) 418.5133.
SUPPLEMENTARY INFORMATION: The Commission is adopting Part 44 to its
Regulations under the Commodity Exchange Act as an interim final rule
and is soliciting comment on all aspects of the rule. The Commission
will carefully consider all comments received and will address them,
where applicable, in connection with the permanent reporting rules
required to be adopted by the Dodd-Frank Act.
I. Background
On July 21, 2010, President Obama signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\3\
Title VII of the Dodd-Frank Act \4\ amended the Commodity Exchange Act
(``CEA'') \5\ to establish a comprehensive new regulatory framework for
swaps and security-based swaps. The legislation was enacted to reduce
risk, increase transparency, and promote market integrity within the
financial system by, among other things: (1) Providing for the
registration and comprehensive regulation of swap dealers and major
swap participants; (2) imposing clearing and trade execution
requirements on standardized derivative products; (3) creating robust
recordkeeping and real-time reporting regimes; and (4) enhancing the
Commission's rulemaking and enforcement authorities with respect to,
among others, all registered entities and intermediaries subject to the
Commission's oversight.
---------------------------------------------------------------------------
\3\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010), hereinafter cited as
``Dodd-Frank Act.'' The text of the Dodd-Frank Act may be accessed
at https://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
\4\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\5\ 7 U.S.C. 1 et seq.
---------------------------------------------------------------------------
Among other things, the Dodd-Frank Act requires that swaps be
reported to a registered SDR or to the Commission if there is no
registered SDR that would accept the swap. Section 723 of the Dodd-
Frank Act adds Section 2(h)(5) to the CEA to require that pre-enactment
swaps be reported to a registered SDR or to the Commission no later
than 180 days after the effective date of that subsection.\6\ By its
terms, the effectiveness of this rule is governed by the effective date
of the Dodd-Frank Act--July 16, 2011. Section 729 of the Dodd-Frank Act
establishes, in new Section 4r of the CEA, reporting requirements that
will remain in effect until the effective date of the permanent
reporting rules to be adopted by the Commission pursuant to Section
2(h)(5) of the CEA.
---------------------------------------------------------------------------
\6\ ``(5) Reporting Transition Rules.--Rules adopted by the
Commission under this section shall provide for the reporting of
data, as follows:
(A) Swaps entered into on or before the date of the enactment of
this subsection shall be reported to a registered swap data
repository or the Commission no later than 180 days after the
effective date of this subsection.
(B) Swaps entered into on or after such date of enactment shall
be reported to a registered swap data Repository or the Commission
no later than the later or--
(i) 90 days after such effective date; or such other time after
entering into the swap as the Commission may prescribe by rule or
regulation.
---------------------------------------------------------------------------
Section 4r(a)(1) of the CEA, as amended, provides generally that
each swap that is not accepted for clearing by any derivatives clearing
organization (``DCO'') must be reported to a swap data repository
(``SDR'') registered in accordance with new Section 21 of the CEA \7\
or, where there is no SDR that would accept the swap, to the Commission
within the time period prescribed by the Commission. Section 4r(a)(2)
specifies that each swap entered into before the date of enactment of
the Dodd-Frank Act, the terms of which had not expired by the date of
enactment of that Act, must be reported to a registered SDR or to the
Commission, and directs the Commission to promulgate, within 90 days of
enactment of the Dodd-Frank Act, an interim final rule providing for
the reporting of such swaps. Section 4r(a)(2)(A) directs that such
swaps be reported by a date not later than (i) 30 days after issuance
of the interim final rule; or (ii) such other period as the Commission
determines to be appropriate.
---------------------------------------------------------------------------
\7\ Section 21, added by Section 728 of the Dodd-Frank Act,
requires that SDRs directly or indirectly making use of the mails or
any means or instrumentality of interstate commerce to perform the
functions of an SDR be registered with the Commission, and
establishes statutory duties applicable to registered SDRs.
---------------------------------------------------------------------------
Consistent with this mandate, the Commission is adopting, in new
Part 44 of the Commission's regulations, Rule 44.02 to (i) establish a
reporting time frame for unexpired pre-enactment swaps that is no later
than 60 days from the date the appropriate SDR is registered with the
Commission or by the compliance date established in the swap reporting
rules required by Section 2(h)(5) of the CEA, whichever comes first;
and (ii) require that counterparties specified in Section 4r(a)(3)
report information concerning pre-enactment unexpired swaps to the
Commission on request during the interim period. Finally, the
Commission is specifying in an interpretive note (``Note'') to Rule
44.02(a) the information the Commission believes reporting entities
should retain in order to comply with the reporting obligations in the
rule.
II. The Interim Final Rule
A. Reconciling the Relevant Statutory Provisions
Sections 723 and 729 of the Dodd-Frank Act establish requirements
for the reporting of pre-enactment swaps to SDRs or to the Commission;
each provides generally that swaps must be reported pursuant to such
rules or regulations as the Commission prescribes. Section 729 provides
that swaps entered into prior to the July 21, 2010 enactment date and
outstanding on
[[Page 63082]]
that date (hereafter ``pre-enactment unexpired swaps'') must be
reported to a registered SDR or the CFTC not later than 30 days after
the CFTC issues an interim final rule \8\ or such other period
determined by the CFTC. Section 723 similarly provides that the
Commission must promulgate a rule that pre-enactment swaps must be
reported to a registered SDR not later than 180 days after the
effective date of the subsection.\9\ The inconsistencies between these
two reporting provisions must be reconciled in order to eliminate
uncertainty with respect to the actual reporting requirements for pre-
enactment swaps.
---------------------------------------------------------------------------
\8\ The interim final rule must be promulgated within 90 days of
enactment of the Dodd-Frank Act. See Section 4r(a)(2)(B).
\9\ Section 774 of the Dodd-Frank Act describes the effective
date as follows: ``unless otherwise provided,'' the provisions of
Title VII shall take effect ``on the later of 360 days after the
date of enactment'' or to the extent that a provision of Title VII
requires a rulemaking, ``not less than 60 days after publication of
the final rule or regulation implementing'' such provision of Title
VII.
---------------------------------------------------------------------------
1. Section 729
Section 4r(a)(1) of the CEA, added by section 729 of the Dodd-Frank
Act, provides generally that each swap that is not accepted for
clearing by any DCO must be reported to an SDR described in new Section
21 of the CEA or, in the case where there is no SDR that would accept
the swap,\10\ to the Commission within the time period prescribed by
the Commission. Specifically, pre-enactment swaps must, pursuant to new
CEA Section 4r(a)(2)(A), be reported to a registered SDR, or to the
Commission if no SDR would accept the swap, by a date that is not later
than 30 days after the issuance of the interim final rule prescribed in
new Section 4r(a)(2)(B) \11\ or such other period as the Commission
determines to be appropriate. Section 4r(a)(3) delineates the reporting
obligations of the parties in specific circumstances.\12\
---------------------------------------------------------------------------
\10\ The Commission believes that this circumstance might occur
where no SDR has yet been approved or where no SDR has been approved
for a particular asset class. In addition, it is conceivable that an
SDR's system might not be equipped to accept a particular bespoke
swap transaction.
\11\ Section 4r(a)(2)(B) provides that ``[t]he Commission shall
promulgate an interim final rule within 90 days of the date of
enactment of this section providing for the reporting of each swap
entered into before the date of enactment as referenced in
subparagraph (A).'' See Section 729 of the Dodd-Frank Act.
\12\ For swaps in which only one counterparty is a swap dealer
or major swap participant, that swap dealer or major swap
participant shall report the swap (Section 4r(3)(A)); where one
counterparty is a swap dealer and the other is a major swap
participant, the swap dealer shall report the swap (Section
4r(3)(B)). With respect to any other swap not described in
subsections (A) and (B), the counterparties to the swap shall select
a counterparty to report the swap (Section 4r(a)(3)(C)).
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2. Section 723
Section 723 of the Dodd-Frank Act adds to the CEA new Section
2(h)(5), which similarly requires that the Commission adopt a reporting
transition rule for swaps entered into before the date of enactment of
that subsection. Section 2(h)(5) provides that such swaps shall be
reported to a registered SDR or to the Commission no later than 180
days after the effective date of that subsection--or approximately 540
days after the date of enactment.
3. Legislative Intent
In a July 15, 2010 floor statement, Senator Lincoln addressed the
inconsistencies between Sections 2(h)(5) and 4r(a)(2)(A) and emphasized
that the provisions of these two sections ``should be interpreted as
complementary to one another to assure consistency between them. This
is particularly true with respect to issues such as the effective dates
of these reporting requirements * * *.'' \13\
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\13\ Lincoln, ``Wall Street Transparency and Accountability,''
Congressional Record (July 15, 2010) at S5923.
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B. Scope and Coverage of the Interim Final Rule
As noted, new Section 2(h)(5) does not contain the same qualifying
language found in Section 4r(a)(2)(A), which limits the swaps that must
be reported to pre-enactment swaps whose terms have not expired as of
the date of enactment. In the Commission's view, failure to limit the
term ``pre-enactment swaps'' to ``pre-enactment unexpired swaps'' would
require reporting of every swap that has ever been entered into.\14\
There are obvious practical and operational difficulties in an
interpretation that imposes reporting requirements on expired swaps:
counterparties may not have kept thorough, complete--or indeed any--
records of such transactions. Moreover, the argument can be made that a
swap whose terms have expired is no longer a swap as defined in the
Dodd-Frank Act. For these reasons, the Commission believes that the
trades described in Section 2(h)(5) should be viewed as consistent with
those described in Section 4r(a)(2); that is, limited to those pre-
enactment trades whose terms had not expired at the time of enactment--
i.e., July 21, 2010.
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\14\ Financial historians believe that the first swap
transaction was executed between the World Bank and IBM Corporation
in 1981. See Paul C. Harding, Mastering the ISDA Master Agreements
(1992 and 2002) (FT Prentice Hall, 3d Ed. 2010) at 9. As noted in
the text accompanying this footnote, the operational difficulties in
requiring reporting of all swaps executed since 1981 could be
substantial, and the cost in terms of technology and human capital
resources would far outweigh any potential benefits for swaps that
have expired.
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1. Reporting Obligations
Rule 44.02(a) requires that the designated counterparty to a pre-
enactment unexpired swap transaction \15\ submit, with respect to such
transaction, the following information to a registered SDR or to the
Commission: (i) A copy of the transaction confirmation in electronic
form, if available, or in written form if there is no electronic copy;
and (ii) if available, the time the transaction was executed. In
addition, Rule 44.02(b) provides that a counterparty to a pre-enactment
unexpired swap transaction must report to the Commission on request any
information relating to such transaction during the time that this
interim final rule is in effect. The Commission expects that such
information would vary depending upon the needs of the Commission and
may include actual as well as summary trade data. Such summary data may
include a description of a swap dealer's counterparties or the total
number of pre-enactment swap transactions entered into by the dealer
and some measure of the frequency and duration of those contracts. The
Commission believes that this requirement will facilitate its ability
to understand and evaluate the current market for swaps and may inform
its analysis of other required rulemakings under the Dodd-Frank Act.
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\15\ The reporting obligations of specified counterparties are
delineated in Section 4r(a)(3) of the CEA, as amended.
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2. Reporting Party
Section 4r(a)(3) of the CEA specifies the party obligated to report
a swap transaction: either a swap dealer, a major swap participant, or
a counterparty to the transactions. These provisions apply to reporting
under the interim final rule. Specifically, Section 4r(a)(3) provides,
with respect to a swap in which only one counterparty is a swap dealer
or major swap participant, it is that entity's responsibility to report
the swap. With respect to a swap in which one counterparty is a swap
dealer and the other counterparty is a major swap participant, the swap
dealer must report the swap; with respect to any other swap, the
counterparties shall select one of them to report the swap. Rule
44.02(b) incorporates these provisions.
[[Page 63083]]
3. Effective Date for Reporting Pre-Enactment Unexpired Swaps
New CEA Section 4r(a)(2)(C) establishes that the reporting
provisions of section 4r are effective immediately upon enactment of
the Dodd-Frank Act, despite the fact that at this time (i) there are no
registered SDRs to immediately accept the swap data; (ii) the
Commission is not prepared to accept swap data; and (iii) the
Commission has not adopted rules governing either the registration of
swap dealers or major swap participants or the reporting and
maintenance of such data and is not required to do so until 360 days
after enactment of the Dodd-Frank Act.\16\ In these circumstances,
Section 4r should be read to require that the reporting obligation
became effective on enactment of the Dodd-Frank Act and that
counterparties who are subject to this obligation should, as of the
date of enactment, retain all data relating to pre-enactment unexpired
swaps until such time as reporting can be effected--e.g., when swap
dealers and major swap participants, as well as the appropriate SDRs,
have been registered, or when permanent regulations are enacted
pursuant to Section 2(h)(5) of the CEA, whichever occurs first.
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\16\ Section 2(h)(5) does not specify an effective date. In
these circumstances, the ``default'' effective date would be 360
days after enactment of the Dodd-Frank Act or 60 days after
publication of a final rule or regulation. Adoption of the effective
date prescribed in Section 2(h)(5) permits the implementation of
Section 4r and achieves Senator Lincoln's goal of assuring
consistency between the two legislative provisions embodied in
Sections 4r and 2(h)(5).
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4. Record Retention
The pre-enactment swap transactions that must be reported pursuant
to Section 4r of the CEA, as amended, and the new interim final rule
(Part 44 of the Commission's Regulations) occurred prior to enactment
of the Dodd-Frank Act. Accordingly, implicit in the reporting
requirements established by Section 4r and Rule 44 is the obligation of
each counterparty to such transactions to retain information and
documents relating to the terms of the transaction. Rule 44.02 includes
a Note to paragraphs (a)(1) and (2) advising counterparties to a pre-
enactment unexpired swap that may be required to report such
transaction to retain in its existing format all information and
documents, to the extent and in such form as they presently exist,
relating to the terms of the transaction. This information includes,
but is not limited to: (i) Any information necessary to identify and
value the transaction; (ii) the date and time of execution of the
transaction; (iii) information relevant to the price of the
transaction; (iv) whether the transaction was accepted for clearing by
any clearing agency or derivatives clearing organization, and if so the
identity of such agency or organization; (v) any modification(s) to the
terms of the transaction; and (vi) the final confirmation of the
transaction. The Commission believes that counterparties that may be
required to report such transactions should retain such information in
order to comply with the reporting requirements of Rule 44.02. The
information identified above and in the Note is designed to encompass
material information about pre-enactment unexpired swap transactions
that may be the subject of a request by the Commission to report
pursuant to the interim final rule, as well as rules subsequently
adopted pursuant to new Section 2(h)(5) of the CEA, and that will
assist the Commission in performing its oversight functions under the
CEA.
The Note does not require any counterparty to a pre-enactment
unexpired swap to create or retain new records with respect to
transactions that occurred in the past. Permitting records to be
retained in their existing format is designed to ensure that important
information relating to the terms of pre-enactment unexpired swaps is
preserved with minimal burden on the counterparties. Similarly, the
Commission understands that information that the counterparty does not
have prior to the effective date of the interim final rule cannot be
reported.
III. Related Matters
A. Administrative Procedure Act
The Administrative Procedure Act \17\ (``APA'') generally requires
an agency to publish notice of a proposed rulemaking in the Federal
Register.\18\ This requirement does not apply, however, when the agency
``for good cause finds * * * that notice and public procedure are
impracticable, unnecessary, or contrary to the public interest.'' \19\
Moreover, while the APA requires generally that an agency publish an
adopted rule in the Federal Register 30 days before it becomes
effective, this requirement does not apply if the agency finds good
cause to make the rule effective sooner.\20\ Section 729 of the Dodd-
Frank Act amended the CEA to add new Section 4r, which in turn requires
the Commission to adopt, within 90 days of enactment of the Dodd-Frank
Act, an interim final rule providing for the reporting of swaps entered
into before the date of enactment of the Dodd-Frank Act the terms of
which were not expired as of that date. The Commission is adopting Part
44 to its Regulations in response to this mandate. In these
circumstances, the Commission, for good cause, fines that notice and
solicitation is impracticable, unnecessary or contrary to the public
interest. This finding also satisfies the requirements of 5 U.S.C.
808(2), permitting the rule to become effective notwithstanding the
requirement of 5 U.S.C. 801 (if a federal agency finds that notice and
public comment are ``impractical, unnecessary or contrary to the public
interest,'' a rule ``shall take effect at such time as the federal
agency promulgating the rule determines.'').
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\17\ 5 U.S.C. 553.
\18\ 5 U.S.C. 553(b).
\19\ Id.
\20\ 5 U.S.C. 553(d).
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B. Paperwork Reduction Act
1. Reporting Requirements
The Commission has determined that these proposed orders will not
impose on swap counterparties any new reporting requirements that would
be collections of information requiring the approval of the Office of
Management and Budget under the Paperwork Reduction Act.\21\ The
reporting requirements associated with Section 723 of the Dodd-Frank
Act will be adopted by the Commission, at which time the Commission
will issue a notice and request comments on the reporting requirements
and seek OMB approval as provided by 5 CFR 1320.8 and 1320.11.
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\21\ 44 U.S.C. 3501 et seq.
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2. Recordkeeping Requirements
Proposed Commission Regulation 44.02 imposes a recordkeeping
requirement on swap counterparties that is considered to be a
collection of information within the meaning of the Paperwork Reduction
Act (``PRA'').\22\ The Commission therefore is required to submit to
the Office of Management and Budget (OMB) an information collection
request for review and approval in accordance with 44 U.S.C. 3507(d)
and 5 CFR 1320.8 an d1320.11. The Commission will, by separate action,
publish in the Federal Register a notice and request for comments on
the paperwork burden associated with these recordkeeping requirements
in accordance with 5 CFR 1320.8. If approved, this new collection of
information will be mandatory.
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\22\ 44 U.S.C. 3501 et seq.
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C. Cost-Benefit Analysis
Section 15 of the CEA requires the Commission to consider the costs
and
[[Page 63084]]
benefits of its action before issuing a new regulation or order under
the Act. By its terms, Section 15(a) does not require the Commission to
quantify the costs and benefits of its action or to determine whether
the benefits of the action outweigh its costs. Rather, Section 15(a)
requires the Commission simply to ``consider the costs and benefits''
of the subject rule or order. Section 15(a) further specifies that the
costs and benefits of Commission regulations shall be evaluated in
light of five broad areas of market and public concern: (1) Protection
of market participants and the public; (2) efficiency, competitiveness,
and financial integrity of the market for listed derivatives; (3) price
discovery; (4) sound risk management practices; and (5) other public
interest considerations. The Commission may, in its discretion, give
greater weight to any one of the five enumerated areas of concern and
may, in its discretion, determine that notwithstanding its costs, a
particular regulation is necessary or appropriate to protect the public
interest or to effectuate any of the provisions or to accomplish any of
the purposes of the CEA.
Title VII of the Dodd-Frank Act requires the Commission to
undertake a number of rulemakings to implement the regulatory framework
for swaps set forth in that Act, including the reporting of swap
transactions. This interim final rule implements the Dodd-Frank Act by
establishing reporting requirements for pre-enactment unexpired swaps
as required by Section 729 of that Act and serving as notice to
reporting entities of a present obligation to retain data related to
such swaps for reporting at a future date. The rule will enable the
Commission to obtain data on pre-enactment swaps and will also provide
for the preservation of data on such swaps until the Commission issues
permanent recordkeeping and reporting rules for all swaps. By making
available transaction data on pre-enactment swaps, this action will
enable the Commission to gain a better understanding of the swap
market--including the size and scope of that market; this understanding
will ultimately lead to a more robust and transparent environment for
the market for swaps. Further, the Commission expects this rule to make
available information that could inform the Commission's decision-
making with respect to the rules it is required to implement under the
Dodd-Frank Act.
The Note to Rule 44.02(a)(1) and (2) addresses the retention of
records relating to swaps entered into before July 21, 2010, the terms
of which had not expired as of that date. Although there are
recordkeeping costs associated with retention of existing swap
transaction information, the Commission does not believe those costs
will be significant. The rule does not require market participants to
modify the data they have for retention purposes, and the information
that is required to be reported should be information that is already
kept by swap counterparties in their normal course of business, and it
may be reported in the format in which it is kept. Moreover,
counterparties must report the time of execution only to the extent
such information is available.
The permanent reporting rules that the Commission is required to
adopt under new CEA Section 2(h)(5) also will apply to pre-enactment
swaps. Accordingly, in adopting this interim final rule, the Commission
has sought to limit the burden on market participants by not imposing
substantial or potentially conflicting reporting requirements.
D. The Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,
requires Federal agencies, in promulgating rules, to consider the
impact of those rules on small entities. The term ``rule'' under the
RFA is defined as ``any rule for which the agency publishes a general
notice of proposed rulemaking pursuant to Section 553(B) of this title,
or any other law * * *.'' \23\ However, a general notice of proposed
rulemaking under Section 553(b) does not apply ``when the agency for
good cause finds (and incorporates the finding and a brief statement of
reasons therefor in the rules [issued] that notice and public procedure
thereon are impracticable, unnecessary or contrary to the public
interest.'' \24\ Congress in Section 4r(a)(2)(B) of the CEA directs the
Commission to promulgate an interim final rule within 90 days of
enactment of the Dodd-Frank Act to require the reporting of unexpired
pre-enactment swaps. The Commission believes that the RFA does not
apply to this interim final rule because ``good cause'' under 5 U.S.C.
553(b) has been established by specific order of Congress in the Dodd-
Frank Act.
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\23\ 5 U.S.C. 601(2).
\24\ 5 U.S.C. 553(b).
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List of Subjects in 17 CFR Part 44
Swap markets, Counterparties, Reporting and recordkeeping
requirements.
0
In consideration of the foregoing, and pursuant to the authority in the
Commodity Exchange Act, as amended, and in particular Section 4r (a)(2)
of the Act, the Commission hereby proposes to amend Chapter I of Title
17 of the Code of Federal Regulation by adding a new Part 44 as
follows:
PART 44--INTERIM FINAL RULE FOR PRE-ENACTMENT SWAP TRANSACTIONS
Sec.
44.00 Definition of terms used in Part 44 of this chapter.
44.01 Effective date.
44.02 Reporting pre-enactment swaps to a swap data repository or the
Commission.
Authority: 7 U.S.C. 2(h)(5), 4r, and 12a(5), as amended by Title
VII of the Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act of 2010), Pub. L. 111-203, 124 Stat. 1376 (2010).
Sec. 44.00 Definition of terms used in Part 44 of this chapter.
(a) Major swap participant shall have the meaning provided in
Section 1a(33) of the Commodity Exchange Act, as amended, and any rules
or regulations thereunder.
(b) Pre-enactment unexpired swap means any swap entered into prior
to the enactment of the Dodd-Frank Act of 2010 (July 21, 2010) the
terms of which had not expired as of the date of enactment of that Act;
(c) Reporting entity, when used in this Part, means any
counterparty referenced or identified in Section 4r(a)(3)(A)-(C) of the
Commodity Exchange Act, as amended;
(d) Swap Data Repository shall have the meaning provided in Section
1a(48) of the Commodity Exchange Act, as amended, and any rules or
regulations thereunder;
(e) Swap Dealer shall have the meaning provided in Section 1(a)(49)
of the Commodity Exchange Act, as amended, and any rules or regulations
thereunder;
Sec. 44.01 Effective date.
The provisions of this Part are effective immediately on
publication in the Federal Register.
Sec. 44.02 Reporting pre-enactment swaps to a swap data repository or
the Commission.
(a) A counterparty to a pre-enactment unexpired swap transaction
shall:
(1) Report to a registered swap data repository or the Commission
by the compliance date established in the reporting rules required
under Section 2(h)(5) of the Commodity Exchange Act, or within 60 days
after a swap data repository becomes registered with the Commission and
commences operations to receive and maintain data related to such swap,
whichever occurs first, the
[[Page 63085]]
following information with respect to the swap transaction:
(i) A copy of the transaction confirmation, in electronic form if
available, or in written form if there is no electronic copy; and
(ii) The time, if available, that the transaction was executed; and
(2) Report to the Commission on request, in a form and manner
prescribed by the Commission, any information relating to the swap
transaction.
Note to Paragraphs (a)(1) and (a)(2). In order to comply with the
reporting requirements contained in paragraph (a)(1) and (a)(2) of this
section, each counterparty to a pre-enactment unexpired swap
transaction that may be required to report such transaction should
retain, in its existing format, all information and documents, to the
extent and in such form as they presently exist, relating to the terms
of a swap transaction, including but not limited to any information
necessary to identify and value the transaction; the date and time of
execution of the transaction; information relevant to the price of the
transaction; whether the transaction was accepted for clearing and, if
so, the identity of such clearing organization; any modification(s) to
the terms of the transaction; and the final confirmation of the
transaction.
(b) Reporting party. The counterparties to a swap transaction shall
report the information required under paragraph (a) of this section as
follows:
(1) Where only one counterparty to a swap transaction is a swap
dealer or a major swap participant, the swap dealer or major swap
participant shall report the transaction;
(2) Where one counterparty to a swap transaction is a swap dealer
and the other counterparty is a major swap participant, the swap dealer
shall report the transaction; and
(3) Where neither counterparty to a swap transaction is a swap
dealer or a major swap participant, the counterparties to the
transaction shall select the counterparty who will report the
transaction.
By the Commission.
Dated: October 1, 2010.
David A. Stawick,
Secretary.
[FR Doc. 2010-25325 Filed 10-13-10; 8:45 am]
BILLING CODE 6351-01-P
