Real-Time Public Reporting of Swap Transaction Data, 76140-76183 [2010-29994]
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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 43
RIN 3038–AD08
Real-Time Public Reporting of Swap
Transaction Data
Commodity Futures Trading
Commission.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Commodity Futures
Trading Commission (‘‘Commission’’) is
proposing rules to implement new
statutory provisions enacted by Title VII
of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (the
‘‘Dodd-Frank Act’’). Specifically, in
accordance with Section 727 of the
Dodd-Frank Act, the Commission is
proposing rules to implement a new
framework for the real-time public
reporting of swap transaction and
pricing data for all swap transactions.
Additionally, the Commission is
proposing rules to address the
appropriate minimum size and time
delay relating to block trades on swaps
and large notional swap transactions.
DATES: Comments must be received by
February 7, 2011.
ADDRESSES: You may submit comments,
identified by RIN number 3038–AD08,
by any of the following methods:
• Federal eRulemaking Portal at
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Agency Internet Web site, via Its
Comments Online Process: https://
comments.cftc.gov. Follow the
instructions for submitting comments
through the Internet Web site.
• Mail: David A. Stawick, Secretary of
the Commission, Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW.,
Washington, DC 20581.
• Hand Delivery/Courier: Same as
mail above.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received on https://
www.cftc.gov. You should submit only
information that you wish to make
publicly available. 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
Commission Regulation § 145.9.1
The Commission reserves the right,
but shall not have the obligation, to
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SUMMARY:
1 17
CFR 145.9.
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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 from the
Commission’s Internet Web site, but 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, 5 U.S.C.
551 et seq., and other applicable laws,
and may be accessible under the
Freedom of Information Act, 5 U.S.C.
552.
FOR FURTHER INFORMATION CONTACT:
Thomas Leahy, Associate Director,
Division of Market Oversight, 202–418–
5278, tleahy@cftc.gov; or Jeffrey L.
Steiner, Special Counsel, Division of
Market Oversight, 202–418–5482,
jsteiner@cftc.gov; Commodity Futures
Trading Commission, Three Lafayette
Center, 1155 21st Street, NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Explanation of the Proposed Rules
A. Overview
1. Introduction
2. Parties Responsible for Reporting Swap
Transaction and Pricing Data to a
Registered Entity
3. Parties Responsible for Publicly
Disseminating Swap Transaction and
Pricing Data in Real-Time
4. Proposed Effective Date and
Implementation Schedule
B. Section-by-Section Analysis
1. Proposed Section 43.1—Purpose, Scope
and Rules of Construction
2. Proposed Section 43.2—Definitions
3. Proposed Section 43.3—Method and
Timing for Real-Time Public Reporting
i. Responsibilities of the Reporting Party To
Report Data
ii. Responsibilities of Swap Markets To
Publicly Disseminate Swap Transaction
and Pricing Data in Real-Time
iii. Requirements for Registered SDRs
iv. Requirements for Third-Party Service
Providers
v. Availability of Real-Time Swap
Transaction and Pricing Data
vi. Errors or Omissions
vii. Hours of Operation
viii. Recordkeeping Requirements
ix. Fees Charged by Registered SDRs
x. Consolidated Public Dissemination of
Swap Data
4. Proposed Section 43.4 and Appendix A
to Proposed Part 43—Swap Transaction
and Pricing Data to be Publicly
Disseminated in Real-Time
i. Ensuring the Anonymity of the Parties to
a Swap
ii. Unique Product Identifiers
iii. Price-Forming Continuation Data
iv. Reporting and Public Dissemination of
Notional or Principal Amount
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v. Appendix A to Proposed Part 43
vi. Examples to Illustrate the Public
Reporting of Real-Time Swap
Transaction and Pricing Data
5. Proposed Section 43.5—Block Trades
and Large Notional Swaps
i. Parties to a Block Trade or Large Notional
Swap
ii. Block Trades on Swaps
iii. Large Notional Swaps
iv. Time-Stamp and Reporting Requirements
for Block Trades and Large Notional
Swaps
v. Responsibilities of Registered SDRs in
Determining the Appropriate Minimum
Block Size
vi. Formula to Calculate the Appropriate
Minimum Block Size
vii. Distribution Test
viii. Multiple Test
ix. Responsibilities of Swap Markets in
Determining Minimum Block Trade
Sizes
x. Responsibilities of the Parties to a Swap
in Determining the Appropriate
Minimum Large Notional Swap Size
xi. Time Delay in the Real-Time Public
Reporting of Block Trades and Large
Notional Swaps
xii. Prohibition of Aggregation of Trades
III. Related Matters
A. Cost-Benefit Analysis
1. Introduction
2. Summary of Proposed Requirements
3. Costs
4. Benefits
B. Paperwork Reduction Act
1. Introduction
2. Information Provided by Reporting
Entities/Persons
i. Reporting Requirement
ii. Public Dissemination Requirement
iii. Recordkeeping Requirement
iv. Determination of Appropriate Minimum
Block Size
3. Information Collection Comments
C. Regulatory Flex Act
I. Background
On July 21, 2010, President Obama
signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(‘‘Dodd-Frank Act’’).2 Title VII of the
Dodd-Frank Act 3 amended the
Commodity Exchange Act (‘‘CEA’’) 4 to
establish a comprehensive, new
regulatory framework for swaps and
security-based swaps.5 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
2 See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–203, 124
Stat. 1376 (2010). The text of the Dodd-Frank Act
may be accessed at https://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
3 Pursuant to Section 701 of the Dodd-Frank Act,
Title VII may be cited as the ‘‘Wall Street
Transparency and Accountability Act of 2010.’’
4 7 U.S.C. 1 et seq.
5 Rules governing the reporting and dissemination
of security-based swaps are the subject of a separate
and forthcoming rulemaking by the Securities and
Exchange Commission (‘‘SEC’’).
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registration and comprehensive
regulation of swap dealers and major
swap participants (‘‘MSPs’’); (2)
imposing mandatory clearing and trade
execution requirements on standardized
derivative products; (3) creating robust
recordkeeping and real-time reporting
regimes; and (4) enhancing the
Commodity Futures Trading
Commission’s (‘‘Commission’’ or
‘‘CFTC’’) rulemaking and enforcement
authorities with respect to, among
others, all registered entities and
intermediaries subject to the
Commission’s oversight.
Accordingly, in order to ensure the
proper implementation of the new
regulatory framework, Section 727 of
the Dodd-Frank Act created Section
2(a)(13) of the CEA, which requires the
Commission to promulgate rules that
provide for the public availability of
swap transaction and pricing data in
real-time in such form and at such times
as the Commission determines
appropriate to enhance price discovery.6
Under new Section 2(a)(13)(A) of the
CEA, the definition of ‘‘real-time public
reporting’’ means reporting ‘‘data
relating to a swap transaction, including
price and volume, as soon as
technologically practicable after the
time at which the swap transaction has
been executed.’’
Sections 2(a)(13)(C)(i) through (iv) of
the CEA set out the four types of swaps
for which transaction and pricing data
must be reported to the public in realtime: (i) Swaps that are subject to the
mandatory clearing requirement 7
(including those swaps that may qualify
for a non-financial end-user exception
from the mandatory clearing
requirement); 8 (ii) swaps that are not
subject to the mandatory clearing
requirement but are cleared at a
registered derivatives clearing
organization (‘‘DCO’’); (iii) swaps that
are not cleared at a registered DCO and
which are reported to a registered swap
data repository (‘‘SDR’’) or to the
Commission pursuant to Section 2(h)(6)
of the CEA; and (iv) swaps that are
‘‘determined to be required to be
cleared’’ under Section 2(h)(2) of the
6 Section 2(a)(13)(B) of the CEA states that ‘‘[t]he
purpose of this section is to authorize the
Commission to make swap transaction and pricing
data available to the public in such form and at
such times as the Commission determines
appropriate to enhance price discovery.’’
It is notable that the CEA is silent as to the
appropriate method through which real-time public
reporting must occur.
7 The mandatory clearing requirement is found in
Section 2(h)(1) of the CEA, as added by Section
723(a)(3) of the Dodd-Frank Act.
8 Section 2(h)(7) of the CEA provides the nonfinancial end-user exception from the mandatory
clearing requirement.
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CEA but are not cleared. The four
categories described in Section
2(a)(13)(C) of the CEA cover all swaps
and, therefore, the real-time reporting
requirements apply to all swaps,
including those swaps executed on a
registered swap execution facility
(‘‘SEF’’) or a registered designated
contract market (‘‘DCM,’’ together with a
SEF, a ‘‘swap market’’) and those swaps
executed bilaterally between
counterparties and not pursuant to the
rules of a SEF or DCM (‘‘off-facility
swaps’’).9
With regard to swaps described in
Sections 2(a)(13)(C)(i) and (ii) of the
CEA, Section 2(a)(13)(E) of the CEA
provides that the Commission shall
prescribe rules that: (i) Ensure such
information does not identify the
participants; (ii) specify the criteria for
determining what constitutes a large
notional swap transaction (block trade)
for particular markets and contracts; (iii)
specify the appropriate time delay for
reporting large notional swap
transactions (block trades) to the public;
and (iv) take into account whether
public disclosure will materially reduce
market liquidity. CEA Section
2(a)(13)(E) does not state explicitly that
the proposed rules must contain similar
provisions for those swaps described in
Sections 2(a)(13)(C)(iii) and (iv).
However, in applying its authority
under Section 2(a)(13)(B) to ‘‘make swap
transaction and pricing data available to
the public in such form and at such
times as the Commission determines
appropriate to enhance price discovery,’’
the Commission is authorized to
prescribe similar rules to those
provisions in Section 2(a)(13)(E) for offfacility swap transactions described in
Sections 2(a)(13)(C)(iii) and (iv).10
9 The legislative history of the Dodd-Frank Act
also suggests that the real-time reporting
requirements of Section 2(a)(13) apply to all swaps.
Senate Agriculture Committee Chairwoman
Blanche Lincoln stated during Senate deliberations
that ‘‘[t]he major components of the derivatives title
include: 100 percent reporting of swaps and
security-based swaps, mandatory trading and
clearing of standardized swaps and security-based
swaps and real-time price reporting for all swap
transactions—those subject to mandatory trading
and clearing as well as those subject to the end-user
clearing exemption and customized swaps.’’ 156
Cong. Rec. S5,920 (daily ed. July 15, 2010)
(statement of Sen. Blanche Lincoln).
10 In addition, the Commission is required by
Section 2(a)(13)(C)(iii) of the CEA to prescribe realtime public reporting requirements for off-facility
swaps ‘‘in a manner that does not disclose the
business transactions and market positions of any
person.’’
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II. Explanation of the Proposed Rules
A. Overview
1. Introduction
The Commission proposes to create a
new part 43 of its regulations,
implementing the provisions of Section
2(a)(13) of the CEA. The proposed rules
in part 43 set out: (1) The entities or
persons that shall be responsible for
reporting swap transaction and pricing
data; (2) the entities or persons that
shall be responsible for publicly
disseminating such data; (3) the data
fields and guidance on the appropriate
order and format for data to be reported
to the public in real-time; (4) the
appropriate minimum size and time
delay for block trades and large notional
swaps; and (5) the proposed effective
date and implementation schedule for
the proposed rules.
The proposed rules reflect
consultation with staff of the Securities
and Exchange Commission (the
‘‘SEC’’) 11 and staff of the Board of
Governors of the Federal Reserve.12
Staff from each of these agencies has
provided verbal and/or written
comments and the proposed rules
incorporate elements of the comments
provided. The proposed rules have been
further informed by (i) the joint
roundtable conducted by CFTC staff and
staff of the SEC on September 14, 2010
(the ‘‘Roundtable’’); 13 (ii) public
comments posted on the Commission’s
Internet Web site; 14 and (iii) CFTC staff
meetings with market participants.15
The SEC is adopting rules related to
the real-time reporting of security based
swaps as required under Section 763 of
the Dodd-Frank Act. Understanding that
the Commission and the SEC regulate
different products and markets and, as
such may be proposing alternative
regulatory requirements, the
Commission requests comments on the
impact of any differences between the
Commission’s and the SEC’s approach
to the regulation and reporting of swaps
and security-based swaps and the public
dissemination of swap transaction and
11 Section 763 of the Dodd-Frank Act authorizes
the SEC to promulgate rules ‘‘to provide for the
public availability of security-based swap
transaction, volume, and pricing data * * *.’’
12 See Section 712(a)(1) of the Dodd-Frank Act
requires staff to consult with the SEC and other
prudential regulators.
13 The transcript from the Roundtable (the
‘‘Roundtable Tr.) is available at: https://
www.cftc.gov/ucm/groups/public/@swaps/
documents/file/derivative18sub091410.pdf.
14 Such comments are available at: https://
www.cftc.gov/LawRegulation/DoddFrankAct/
OTC_18_RealTimeReporting.html.
15 A list and description of such meetings is
available at: https://www.cftc.gov/LawRegulation/
DoddFrankAct/ExternalMeetings/index.htm.
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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules
pricing data in real-time. In addition,
the Commission requests specific
comment on the following issues:
• Would the regulatory approach of
the Commission in this proposed
rulemaking, pursuant to Section 727 of
the Dodd-Frank Act, and the SEC’s
proposed rulemaking, pursuant to
Section 763 and 766 of the Dodd-Frank
Act, result in duplicative or inconsistent
requirements on the part of market
participants to both regulatory regimes
or result in gaps between those regimes?
If so, in what way should these
duplications, inconsistencies or gaps be
minimized?
• Do commenters believe that the
proposed approaches by the
Commission and the SEC for the realtime reporting and public dissemination
of swap transaction and pricing data are
comparable? If not, why? Are there
approaches that could make the realtime reporting and public dissemination
of swap transaction and pricing data
more comparable? If so, what?
• Do commenters believe that it
would be appropriate for the
Commission to adopt an approach
proposed by the SEC that differs from
the Commission’s proposal? If so, which
one(s)? The Commission requests that
commenters provide data, to the extent
possible, to support any suggested
approaches.
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2. Parties Responsible for Reporting
Swap Transaction and Pricing Data to a
Registered Entity
Section 2(a)(13)(F) of the CEA
provides that the parties to a swap
(including agents of the parties to a
swap) shall be responsible for reporting
swap transaction information to the
appropriate registered entity 16 in a
timely manner as may be prescribed by
the Commission.17 For off-facility
16 Section 1a(40) of the CEA, as amended by
Section 721(a) of the Dodd-Frank Act, defines
‘‘registered entity’’ to include SEFs, DCMs and
SDRs, but does not include swap dealers and MSPs.
Section 1a(40) also defines registered entity to
include DCOs. The Commission has determined not
to apply this requirement to DCOs because it
believes that the value of timely public
dissemination outweighs the benefit of waiting
until a swap is presented to a clearing organization.
17 Sections 4s(f)(1)(A) and 4s(f)(2) of the CEA,
provide the Commission with broad authority to
adopt rules governing the reporting of all swap
transaction information for swap dealers and MSPs.
Specifically, Section 4s(f)(1)(A) of the CEA provides
that ‘‘[e]ach registered swap dealer and major swap
participant shall make such reports as are required
by the Commission by rule or regulation regarding
the transactions and positions and financial
condition of the registered swap dealer or major
swap participant * * *’’ Section 4s(f)(2) of the CEA
provides that ‘‘[t]he Commission shall adopt rules
governing reporting and recordkeeping for swap
dealers and major swap participants.’’ Additionally,
Sections 4s(h)(1)(D) and 4s(h)(3)(D) of the CEA
provide the Commission with rulemaking authority
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swaps, the Commission’s proposal
places the requirement to report the
swap transaction and pricing data in
real-time to a registered entity (i.e., a
registered SDR that accepts and publicly
disseminates real-time swap transaction
and pricing data in real-time) in a
manner similar to that in which all
swap transaction information for
uncleared swaps would be reported to a
registered SDR pursuant to Section
4r(a)(3) of the CEA.18 With respect to
swaps that are executed on a swap
market, the Commission’s proposal
provides that if the parties to a swap
execute a transaction on a swap market,
then the transacting parties’ reporting
requirements under Section 2(a)(13)(F)
of the CEA are satisfied. The
Commission views the real-time swap
transaction and pricing data that is sent
to a real-time disseminator and the swap
information that is sent to a registered
SDR as two separate and distinct data
streams.19
3. Parties Responsible for Publicly
Disseminating Swap Transaction and
Pricing Data in Real-Time
Section 2(a)(13)(D) of the CEA
authorizes the Commission to require
registered entities ‘‘to publicly
disseminate the swap transaction and
pricing data.’’ With respect to all offfacility swaps, the Commission’s
proposal requires that reporting parties
send swap transaction and pricing data
to registered SDRs to publicly
disseminate such data in real-time. With
respect to swaps that are executed on a
swap market, the Commission’s
proposal requires that swap markets
publicly disseminate swap transaction
and pricing data either through a
registered SDR or a third-party service
to establish business conduct standards and
requirements relating to the real-time reporting
requirements on swap dealers and major swap
participants.
18 Section 4r(a)(3) of the CEA provides that for
swaps in which only one counterparty is a swap
dealer or MSP, the swap dealer or MSP is required
to report the swap to a registered SDR. For swaps
in which only one counterparty is a swap dealer
and the other is an MSP, the swap dealer is required
to report to a registered SDR. For all other swaps,
Section 4r(a)(3) provides that the counterparties to
the swap shall select a counterparty to report to a
registered SDR.
19 The real-time reporting requirements pursuant
to Section 2(a)(13) of the CEA are separate and apart
from the requirements to report swap transaction
information to a registered SDR. The reporting
requirements for all swap transaction information to
an SDR are found in Sections 2(a)(13)(G) and
4r(a)(1) of the CEA. Specifically, Section 2(a)(13)(G)
of the CEA provides that [e]ach swap, (whether
cleared or uncleared) shall be reported to a
registered swap data repository.’’ In addition,
Section 4r(a)(1) provides that ‘‘[e]ach swap that is
not accepted for clearing by any [DCO] shall be
reported to [an SDR] described in section 21 [of the
CEA];’’ or if no SDR exists, to the Commission.
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provider. Under the proposal, if a swap
market sends the swap transaction and
pricing data to a registered SDR, the
swap market is responsible for ensuring
that such data is sent in a timely manner
for public dissemination. Alternatively,
if a swap market sends the swap
transaction and pricing data to a thirdparty service provider for the public
dissemination of such data, the swap
market does not absolve itself from or
satisfy the requirement to publicly
disseminate swap transaction and
pricing data until such time as the thirdparty service provider actually
disseminates such data. Indeed, under
the alternative, a swap market must
ensure that the third-party service
provider publicly disseminates the data
in the manner set forth in the
proposal.20
The Commission requests comment
on all aspects of the proposed rules, as
well as comment on the specific
provisions, issues and questions
highlighted in the discussion in Section
B below.
4. Proposed Effective Date and
Implementation Schedule
The Dodd-Frank Act requires the
Commission to promulgate rules to
implement these provisions by July 15,
2011.21 Proposed part 43 is designed to
provide clarity as to the real-time
reporting and public dissemination
requirements with respect to all swap
transaction and pricing data. The
Commission acknowledges that the
systems for reporting and public
dissemination described in proposed
part 43 may take a significant amount of
time and resources to implement
effectively. While the Commission is
fully committed to implementing
Congress’ directive to require real-time
public reporting of all swaps and will
adopt final rules by July 15, 2011,
participants will need a reasonable
amount of time in which to acquire or
configure the necessary systems, engage
20 In considering different schemes of real-time
public reporting requirements, the Commission also
considered a ‘‘first touch’’ method of reporting
whereby the swap dealer, MSP or swap market
where a swap transaction occurred would have
been required to real-time report the transaction by
posting the transaction on its Internet Web site or
through other electronic means. The Commission
chose not to pursue a ‘‘first touch’’ method because
it would likely lead to greater fragmentation of
market data, increased search costs for market
participants and potential concerns with the quality
of the data that would be publicly disseminated.
21 See Section 754 of the Dodd-Frank Act which
states: ‘‘Unless otherwise provided in this title, the
provisions of this subtitle shall take effect on the
later of 360 days after the date of enactment of this
subtitle or, to the extent a provision of this subtitle
requires a rulemaking, not less than 60 days after
publication of the final rule or regulation
implementing such provision of this subtitle.’’
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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules
and train the necessary staff and
develop and implement the necessary
policies and procedures to implement
the proposed rules. The Commission’s
proposed rules provide that appropriate
minimum block sizes will be published
by registered SDRs beginning in January
2012.22 Accordingly, it is anticipated
that registered entities and registrants
will have begun their compliance by
that time.
The Commission requests comment
on what would be an appropriate
implementation schedule (i.e., effective
date) for the final rules. In addition, the
Commission requests specific comment
on the following issues:
• How do commenters believe that an
appropriate implementation schedule
should be structured? Should there be a
phased-in approach? Please provide
specific examples.
• Do commenters believe that
different types of reporting parties (e.g.,
swap dealers, MSPs and end-users)
should have different implementation
timeframes? If so, why and what
timeframes? If not, why and what
timeframe?
• Do commenters believe that
different types of execution (e.g., SEF,
DCM and off-facility) should have
different implementation timeframes? If
so, why and what timeframes? If not,
why and what timeframe?
• How long would swap dealers,
MSPs and end-users need to establish
the appropriate connections to report
off-facility swaps to registered SDRs?
Please explain.
• How long after registration would
registered SDRs need to accept and
publicly disseminate swap transaction
and pricing data in real-time? Please
explain.
• Should there be different
implementation timeframes for
particular asset classes, markets or
contracts? If so, what criteria should be
used to select those asset classes,
markets or contracts?
• Should the implementation
timeframes for real-time reporting and
public dissemination requirements for
swaps and security-based swaps be
coordinated?
• Should there be different
implementation timeframes for the
block trade and large notional swap
rules explained in the discussion
relating to proposed § 43.5 below?
22 See discussion relating to proposed § 43.5(g)(4)
below.
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B. Section-by-Section Analysis
1. Proposed Section 43.1—Purpose,
Scope and Rules of Construction
The proposed rules apply to all swaps
as defined in Section 1a(47) of the CEA
and as may be further defined by
Commission regulations. The categories
of swaps described in Section
2(a)(13)(C) of the CEA account for all
swaps, whether cleared or uncleared,
and regardless of whether a swap is
executed on a SEF, DCM or off-facility.
The proposed rules apply real-time
reporting requirements to SEFs, DCMs,
SDRs and the parties of a swap,
including registered or exempt swap
dealers, registered or exempt MSPs and
U.S.-based end-users.
The Commission requests comment
generally on the scope of transactions
covered by this part. In addition, the
Commission requests specific comment
on which parties to a swap should be
covered by the reporting requirements
in this part in order to enhance price
discovery?
2. Proposed Section 43.2—Definitions
Proposed § 43.2 contains definitions
for, inter alia, the following terms:
‘‘Affirmation’’; ‘‘As Soon As
Technologically Practicable’’; ‘‘Asset
Class’’; ‘‘Confirmation’’; ‘‘Execution’’;
‘‘Public Dissemination’’ or ‘‘Publicly
Disseminate’’; ‘‘Real-Time
Disseminator’’; ‘‘Reportable Swap
Transaction’’; ‘‘Swap Instrument’’; and
‘‘Third-Party Service Provider’’.
Affirmation
Proposed § 43.2(b) defines
‘‘affirmation’’ as the process
(electronically, orally, in writing or
otherwise) in which the parties to a
swap verify that they agree on the
primary economic terms of a swap, but
not necessarily all terms of the swap.
The affirmation of the swap is only the
agreement to the primary economic
terms of the swap, as distinguished from
the confirmation of a swap in which all
of the terms of the swap are agreed to
in writing to memorialize the agreement
of all parties to the swap. Such
confirmation legally supersedes any
previous agreement of the parties.
Affirmation and execution can, but do
not necessarily, occur at the same time.
In either case, affirmation and execution
always occur prior to the confirmation
of a swap. One further distinction is that
‘‘affirmation’’, as defined in the
proposed rules, differs from
‘‘confirmation by affirmation’’. Some
confirmation service vendors (e.g.,
Deriv/SERV, MarkitSERV) have used the
term ‘‘affirmation’’ to describe the
process by which one party to a swap
PO 00000
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76143
(usually an end-user) electronically
acknowledges its assent to complete
swap terms submitted to the vendor by
its counterparty (usually a dealer). This
process allows for electronic
confirmation even when one party to
the swap does not have the systems
necessary to submit swap terms to the
vendor electronically. Upon such assent
to complete swap terms, a swap is
legally confirmed (i.e., ‘‘confirmation by
affirmation’’). Parties that use a
confirmation by affirmation process
previously will have affirmed the
primary economic terms of the trade
and therefore executed the trade
pursuant to the definitions in the
proposed rules.
As Soon as Technologically Practicable
Section 2(a)(13)(A) of the CEA defines
‘‘real-time public reporting’’ to mean ‘‘to
report data relating to a swap
transaction, including price and
volume, as soon as technologically
practicable after the time at which the
swap transaction has been executed.’’
‘‘As soon as technologically practicable’’
and ‘‘executed’’ are not defined in the
Dodd-Frank Act.23
The proposed rules provide
definitions for ‘‘as soon as
technologically practicable’’ and
‘‘executed’’. Proposed § 43.2(d) defines
the term ‘‘as soon as technologically
practicable’’ to mean as soon as possible,
taking into consideration the prevalence
of technology, implementation and use
of technology by comparable market
participants. In defining ‘‘as soon as
technologically practicable’’, the
Commission has considered that this
term may have different interpretations
for different parties to a swap (i.e., swap
dealers, MSPs and end-users), for
different types of swaps (e.g., energy
swaps, credit default swaps, interest rate
swaps, etc.) and for different methods of
execution (i.e., SEFs, DCMs and offfacility). Staff considered real-time
reporting regimes that are currently in
place, comments by market participants
at external meetings, the discussions at
the Roundtable and the potential costs
to market participants, among other
things. Cost, access to the latest
technology and other factors may
prevent some of the fastest, most
efficient technology from being
available to all market participants.
Because of these factors, the
Commission recognizes that what is
‘‘technologically practicable’’ for one
party to a swap may not be the same as
what is ‘‘technologically practicable’’ for
another party to a swap.
23 The terms ‘‘execution’’ and ‘‘executed’’ are
discussed below.
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The Commission requests comment
on whether the term should account for
other considerations not presently
identified in the definition.
Asset Class
Proposed § 43.2(e) defines the term
‘‘asset class’’ to mean the broad category
of goods, services or commodities
underlying a swap. The asset classes
include, but are not limited to, the
following five major categories: interest
rate, currency, credit, equity and other
commodity.24 In proposing these five
major categories, the Commission
considered market statistics that
distinguish between those general types
of underlying instruments, as well as
market infrastructures that have been
established for these five types of
instruments. The interest rate asset class
would encompass the underlying of any
swap which is primarily based on one
or more reference rates, such as swaps
of payments determined by fixed and
floating rates. The currency asset class
would encompass the underlying of any
swap that is primarily based on rates of
exchange between different currencies,
changes in such rates or other aspects of
such rates including any swap that is a
foreign exchange option. This category
includes foreign exchange swaps
defined in Section 1a(25) of the CEA.
The credit asset class would encompass
the underlying of any swap that is
primarily based on one instruments of
indebtedness, including without
limitation any swap primarily based on
one or more broad-based indices related
to instruments of indebtedness and any
swap that is an index credit default
swap or a total return swap on one or
more indices of debt instruments. The
equity asset class would encompass the
underlying of any swap that is primarily
based on equity securities, including,
without limitation, any swap primarily
based on one or more broad-based
indices of equity securities and any total
return swap on one or more equity
indices. The other commodity asset
class would encompass the underlying
of any swap not included in the credit,
currency, equity or interest rate asset
class categories, including, without
limitation, any swap for which the
primary underlying notional item is a
physical commodity or the price or any
other aspect of a physical commodity.25
24 Proposed § 43.2(e) also provides that the
Commission may determine other asset classes.
25 Proposed § 43.2(q) defines ‘‘other commodity’’
to mean any commodity that cannot be grouped in
one of the other four asset classes (i.e., interest rate,
currency, credit, equity). Other commodities may
include physical commodities (e.g., natural gas, oil)
but may also include non-physical commodities
(e.g., weather and property).
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The Commission requests comment
on the following issues related to the
definition of asset class:
• Do commenters agree with the
proposed asset class categories? If not,
why? Should there be any additional
categories of asset classes? Should any
categories of asset classes in the
proposed definition be changed or
removed?
• Do commenters agree on the
proposed method of allocating swaps
among asset class categories? If not,
why?
• Should the Commission classify
cross-currency rate swaps as belonging
to the interest rate asset class or to the
currency asset class? Please explain.
• Should the asset class for other
commodity be divided further (e.g.,
agricultural commodity, energy
commodity, etc.)? If so, how should it be
divided?
Confirmation
Proposed § 43.2(g) defines the term
‘‘confirmation’’ to mean the
consummation (electronically or
otherwise) of legally binding
documentation (electronic or otherwise)
that memorializes the agreement of the
parties to all terms of a swap. A
confirmation must be in writing
(whether electronic or otherwise) and
must legally supersede any previous
agreement (electronic or otherwise). A
confirmation between parties to a swap
may occur in various ways including via
facsimile, via ‘‘confirmation by
affirmation’’ and via electronic
matching. A confirmation will contain
all of the terms to a swap that have been
agreed to between two parties, whereas
an affirmation contains a subset of the
terms of the confirmation.
Execution
As noted above, swap counterparties
and reporting entities must report ‘‘as
soon as technologically practicable after
the time at which the swap transaction
has been executed.’’ 26 Proposed
§ 43.2(k) defines ‘‘execution’’ as the
agreement between parties to the terms
of a swap that legally binds the parties
to such terms under applicable law. An
agreement may be in electronic form
(e.g., on a swap market or via instant
message), oral (e.g., over the phone), in
writing (e.g., a bespoke, structured
transaction where documents are
exchanged) or in some other format not
contemplated at this time. Execution
immediately follows or is simultaneous
with the pre-execution affirmation of
the swap. The Commission notes that
the proposed definition of execution
26 Section
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does not attempt to define what
constitutes a legally enforceable
contract, only that execution occurs if
and when the parties have formed a
legally enforceable contract (which is a
matter to be decided by applicable
law).27 If pre-execution affirmation of
the primary economic terms creates a
legally enforceable contract under
applicable law, then it would also
constitute execution. If pre-execution
affirmation does not create a legally
enforceable contract, then execution
would not have occurred at that stage.
Public Dissemination and Publicly
Disseminate
Proposed § 43.2(r) defines ‘‘public
dissemination’’ and ‘‘publicly
disseminate’’ to mean publishing and
making available swap transaction and
pricing data in a non-discriminatory
manner, through the Internet or other
electronic data feed that is widely
published and in a machine-readable
format. The definition encompasses the
non-delayed provision of such data to
the public, including market
participants, end-users, data vendors
and news media.
Real-Time Disseminator
Proposed § 43.2(s) defines ‘‘real-time
disseminator’’ to mean any registered
SDR or third-party service provider that
is responsible for accepting and publicly
disseminating swap transaction and
pricing data in real-time from multiple
sources, in accordance with proposed
part 43.
Reportable Swap Transaction
Proposed § 43.2(v) defines ‘‘reportable
swap transaction’’ to mean any executed
swap, novation, swap unwind, partial
novation, partial swap unwind or such
post-execution event that affects the
price of a swap. A reportable swap
transaction includes not only the
execution of a swap contract, but also
certain price-affecting events that occur
over the ‘‘life’’ of a swap. The
Commission believes novations and
swap unwinds are events that clearly
affect the price of the swap and,
therefore, should be publicly
disseminated in real-time. In addition to
novations and swap unwinds, other
price-affecting events over the life of a
swap may be considered reportable
swap transactions. For example, certain
amendments that change the price terms
of a swap may be subject to the real-time
public reporting requirements. Further,
the Commission recognizes that certain
27 Because contract law varies by jurisdiction, the
time at which a legally enforceable contract is
formed may differ based on the applicable state or
local law.
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market participants may enter into a
swap and then immediately enter into
an amendment to the swap that alters
the price terms, thus reducing
transparency and price discovery. The
Commission believes that including
such post-execution price-affecting
events to be reportable for the purposes
of real-time public reporting will
enhance the transparency and price
discovery attributes of swaps trading.
The Commission requests comments
on other post-execution events that
could affect price and that should be
considered reportable swap
transactions.
Swap Instrument
Proposed § 43.2(y) defines ‘‘swap
instrument’’ to mean each swap in the
same asset class with the same or
similar characteristics. Under proposed
§ 43.5, discussed below, registered SDRs
would determine the appropriate
minimum block size based on the type
of swap instrument. After a registered
SDR sets the appropriate minimum
block size for a swap instrument and
groups a specific swap contract that is
listed on a swap market into a category
of swap instrument, a swap market that
lists such swap contract would then
reference such appropriate minimum
block size when adopting the minimum
block trade size for such swap. The
Commission believes that it is
appropriate to group particular swap
contracts into various broad categories
of swap instruments in determining the
appropriate minimum block size.
The Commission is requesting general
and specific comments on swap
instruments, as described in the
discussion of appendix A to proposed
part 43 below.
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Third-Party Service Provider
Proposed § 43.2(bb) defines ‘‘thirdparty service provider’’ to mean an
entity, other than a registered SDR, that
publicly disseminates swap transaction
and pricing data in real-time on behalf
of a swap market or, in the case of an
off-facility swap where there is no
registered SDR available to publicly
disseminate the data in real-time, on
behalf of a reporting party.
3. Proposed Section 43.3—Method and
Timing for Real-Time Public Reporting
Section 2(a)(13) of the CEA does not
provide an explicit method or timeframe
in which swap transaction and pricing
data must be reported to the public in
real-time. Instead, Section 2(a)(13) of the
CEA provides the Commission with
authority to prescribe rules requiring:
(1) The parties to a swap transaction
(including agents of the parties) to
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report swap transaction and pricing data
to the appropriate registered entity in a
timely manner; 28 and (2) registered
entities to publicly disseminate swap
transaction and pricing data.29 In
addition, Section 2(a)(13)(B) of the CEA
provides that the Commission is
authorized to make swap transaction
and pricing data available to the public
in such form and at such times as the
Commission determines appropriate to
enhance price discovery. Accordingly,
the Commission’s proposal in § 43.3 sets
out both the manner in which parties to
a swap must report the swap transaction
and pricing data to the appropriate
registered entity, as well as the manner
in which registered entities must
publicly disseminate such data. In
addition, proposed § 43.3 sets out
requirements for: (1) The acceptable
forms of media through which swap
transaction and pricing data must be
made available to the public; (2) the
appropriate methods to cancel or correct
erroneous or omitted data that has been
publicly disseminated; (3) the hours of
operation that swap markets and
registered SDRs must maintain for the
public dissemination of swap
transaction and pricing data; and (4) the
recordkeeping of data by swap markets
and registered SDRs.
i. Responsibilities of the Reporting Party
To Report Data
As discussed above, Section
2(a)(13)(F) of the CEA provides that the
parties to a swap (including agents of
the parties to a swap) shall be
responsible for reporting swap
transaction information to the
appropriate registered entity. In general,
proposed § 43.3(a) provides that the
‘‘reporting party’’ to each swap
transaction shall be responsible for
reporting any reportable swap
transaction to a registered entity as soon
as technologically practicable.30
Proposed § 43.2(w) defines ‘‘reporting
party’’ to mean a party to a swap with
the duty to report a reportable swap
transaction to a registered entity. Under
this proposal, the determination of who
has this duty depends on whether the
reportable swap transaction is executed
on a swap market. For reportable swap
transactions that are executed on a swap
market, proposed § 43.3(a)(2)(i) provides
28 See
Section 2(a)(13)(F) of the CEA.
29 See Section 2(a)(13)(D) of the CEA. As
discussed below, the Commission’s proposal
requires registered entities to publicly disseminate
swap transaction and pricing data ‘‘as soon as
technologically practicable’’. See Section
2(a)(13)(A).
30 The Commission proposes to define ‘‘timely
manner’’ to mean ‘‘as soon as technologically
practicable’’.
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76145
that the requirement for parties to report
the swap transaction and pricing data is
itself satisfied by the act of execution on
the swap market. The Commission
believes that this approach should result
in the timeliest and most efficient
method of reporting swap transaction
and pricing data, since swap markets by
definition would have immediate access
to the most accurate execution
information related to each swap
transaction (e.g., information on the
counterparties to the swap, date and
time of execution, bid-offer information,
final pricing information, whether the
swap should be deemed a block trade,
etc.). Proposed § 43.3(a)(2)(ii) recognizes
that block trades may not be executed
on a swap market, but would be
effective pursuant to the rules of the
swap market. For that reason, this
section would require the reporting
party to the block trade to report such
trades to the swap market in accordance
with the rules of the swap market and
proposed § 43.5.
For off-facility swaps, proposed
§ 43.3(a)(3) provides that, except
otherwise provided in proposed § 43.5,
the reporting party must report (i.e.,
transmit or otherwise electronically
transfer) swap transaction and pricing
data to a registered SDR as soon as
technologically practicable. Once a
reporting party has reported its swap
transaction and pricing data to a
registered SDR, the reporting party has
satisfied its requirement to report
pursuant to Section 2(a)(13)(F) of the
CEA and this proposed part 43.
The Commission believes that
advanced technologies presently exist
through which a reporting party to an
off-facility swap can send swap
transaction and pricing data to a
registered SDR as soon as
technologically practicable. Through
discussions with market participants,
the Commission understands that many
swaps are executed over the telephone
and then inputted manually into
electronic recording systems. The
Commission believes that reporting
parties should remain current with
changes in technology and regularly
update their technology infrastructure to
decrease the time of transmission of
swap transaction and pricing data to
real-time disseminators.31
31 Two examples of how reporting technology can
improve over time are seen in the evolution of (1)
the Financial Industry Regulatory Authority’s
(‘‘FINRA’’) Trade Reporting and Compliance Engine
(‘‘TRACE’’), and (2) the reporting of over-the-counter
(‘‘OTC’’) equity securities. Under the reporting rules
for TRACE, the current maximum reporting time
requirement for publicly reporting transaction and
pricing data for corporate bonds is 15 minutes.
FINRA staff has noted in meetings with
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The determination of which party to
a swap will be deemed the reporting
party for the purposes of proposed
§ 43.3(a) chiefly depends on the types of
entities that are parties to the swap.
Specifically, proposed § 43.3(a)(3)
provides that for off-facility swaps:
• If only one party is a swap dealer
or MSP, the swap dealer or MSP shall
be the reporting party.
• If one party is a swap dealer and the
other party is an MSP, the swap dealer
shall be the reporting party.
• If both parties are swap dealers, the
swap dealers shall designate which
party shall be the reporting party.
• If both parties are MSPs, the MSPs
shall designate which party shall be the
reporting party.
• If neither party is a swap dealer or
an MSP, the parties shall designate
which party (or its agent) shall be the
reporting party.
Through discussions with market
participants at the Roundtable and
external meetings, the Commission
believes that swap dealers and MSPs are
more likely to have the infrastructure
and resources available to report their
swap transaction information to a
registered SDR in a quicker period of
time than parties to an end-user-to-enduser, off-facility swap. Indeed, the
Commission recognizes that nonfinancial end-users do not frequently
enter into swap transactions and may
not have the technology readily
available to report swap transaction and
pricing data for the purposes of the realtime reporting requirements under
Section 2(a)(13)(F) of the CEA, and
therefore, may lead to longer reporting
time periods from execution for such
reporting parties.
The Commission understands that the
requirement to report swap transaction
and pricing data as soon as
technologically practicable may increase
costs for reporting parties as a result of
such parties having to upgrade their
technology infrastructures. Based on
discussions with market participants,
however, the Commission believes that
technology solutions may develop, such
as web portals and other Internet-based
Commission staff that over 90% of its trades are
reported within five minutes. See FINRA Rule 6730
(‘‘Transaction Reporting’’). Available at: https://
finra.complinet.com/en/display/
display_main.html?rbid=2403&element_id=4402.
With respect to the OTC securities market, FINRA
has recently reduced the reporting requirements for
these securities to within 30 seconds of execution.
See Securities Exchange Act Release No. 61819
(March 31, 2010), 75 FR 17806 (April 7, 2010
(Notice of Filing of Amendment No. 2 and Order
Granting Accelerated Approval of File No. SR–
FINRA–2009–061)); See also, FINRA Rules 6282(a);
6380A(a) and (g); 6380B(a) and (f); 6622(a) and (f);
7130(b); 7230A(b); 7230B(b); and 7330(b).
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interfaces, which will aide reporting
parties in complying with the
requirements proposed in § 43.3(a) and
reduce the cost burden associated with
their compliance. In addition, the
Commission believes that the total
number of end-user to end-user swaps
will be small and thus the costs
imposed on end-users will likely be
lower relative to the total number of
swaps.32
The Commission’s proposal with
respect to off-facility swaps is consistent
with the reporting requirements for the
reporting of uncleared swaps to a
registered SDR under Section 4r(a) of
the CEA.33 After consulting with market
participants at the Roundtable and in
meetings with market participants, the
Commission believes that this
consistency may reduce technology
infrastructure costs for swap dealers and
MSPs, particularly since swap dealers
and MSPs will likely establish direct
connectivity to registered SDRs to
satisfy the reporting requirements for
the reporting of uncleared swaps under
Section 4r(a) of the CEA.
In the event that no registered SDR
exists or is available to accept and
publicly disseminate swap transaction
and pricing data, proposed § 43.3(a)(4)
establishes a special rule for the realtime reporting of these swaps.
Specifically, proposed § 43.3(a)(4)
provides that the reporting party may
report such data to a third-party service
provider, which provides public
dissemination services. Similar to the
requirements placed on swap markets
when such markets choose to publicly
disseminate through a third-party
service provider, the reporting party
will be required to ensure that the swap
transaction and pricing data is publicly
disseminated in real-time.
The Commission requests comment
related to the responsibilities of the
parties to a swap to report swap
transaction and pricing data. In
addition, the Commission requests
specific comment on the following
issues:
• Should the Commission establish
maximum timeframes in which
reporting parties must report to a
registered SDR that accepts and publicly
disseminates swap transaction and
pricing data in real-time (e.g., as soon as
technologically practicable but no later
than five minutes)? If so, what should
the maximum timeframes be and how
should they be determined?
32 In addition, the Commission believes that
increased transparency may lead to more robust
price competition, thus decreasing bid-offer spreads
in certain swap contracts and benefiting end-users.
33 The requirements of Section 4r(a)(3) of the CEA
are discussed in footnote 18 above.
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• Do commenters believe that the
rules should require that any additional
parties to a swap be the reporting party
for a swap? If so, which parties and in
which circumstances?
• Should the Commission’s final
rules address the reporting and public
dissemination of swap transaction and
pricing data for swaps, which are
transacted between two non-U.S.
persons? If so, how should the
Commission’s final rules address these
situations?
• In off-facility swap transactions
where a non-U.S. swap dealer or nonU.S. MSP transacts with a U.S.-based
end-user, which party to the swap
should have the obligation to report to
a real-time disseminator? Are there
other situations involving non-U.S.
parties where this issue may arise? How
should the Commission address these
situations in its final rules?
• Should there be an alternative
method of reporting and subsequently
disseminating swap transaction and
pricing data in real-time when no
registered SDR is available to accept and
publicly disseminate such data? If there
is no registered SDR available and there
is no third-party service provider
available to accept and publicly
disseminate data for a swap transaction,
what should the real-time reporting
requirement be for such transaction?
• Is there a better or more efficient
alternative to have swap transaction and
pricing data reported by a reporting
party to a registered SDR for public
dissemination in real-time? If so, what
would that be?
ii. Responsibilities of Swap Markets To
Publicly Disseminate Swap Transaction
and Pricing Data in Real-Time
Section 2(a)(13)(D) of the CEA gives
the Commission the authority to require
registered entities to publicly
disseminate swap transaction and
pricing data.34 Proposed § 43.3(b)
provides the method and timeliness of
public dissemination of swap
transaction and pricing data. Proposed
§ 43.3(b) distinguishes the public
dissemination requirement for swaps
that are executed on a swap market
versus those swaps that are executed
off-facility.35 Irrespective of the mode of
34 As noted above, Section 1a(40) of the CEA, as
amended by Section 721(a) of the Dodd-Frank Act,
defines ‘‘registered entity’’ to include SEFs, DCOs,
DCMs and SDRs. The Commission has determined,
however, not to apply the Section 2(a)(13)(D)
requirement to DCOs because it believes that the
value of timely public dissemination outweighs the
benefit of waiting until a swap is presented to a
clearing organization.
35 Block trades that are transmitted pursuant to a
swap market’s rules are addressed in proposed
§ 43.5.
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execution, the Commission sought to
provide market participants with
reasonable guidelines to report and
publicly disseminate swap transaction
and pricing data in real-time.
With respect to reportable swap
transactions that are executed on a swap
market, proposed § 43.3(b)(1)(i) provides
that a swap market shall satisfy its
requirement to publicly disseminate
swap transaction and pricing data by:
(1) Sending, or otherwise electronically
transmitting, swap transaction and
pricing data to a registered SDR that
accepts swaps for the particular asset
class of reportable swap transactions; or
(2) disseminating such data to the
public through a third-party service
provider operating on behalf of the swap
market.36 The Commission notes that a
swap market that relies on a third-party
service provider to disseminate swap
transaction and pricing data, for
example through a contractual
agreement, remains responsible for
compliance with the rules of proposed
part 43.
If a swap market sends swap
transaction and pricing data to a
registered SDR, proposed § 43.3(b)(1)(i)
provides that such data must be sent as
soon as technologically practicable after
the swap has been executed. As a result
of industry comments made during staff
meetings and at the Roundtable, the
Commission believes that technologies
presently exist through which a swap
market can send swap transaction and
pricing data to a registered SDR almost
instantaneously after execution of a
reportable swap transaction.37 Under
the proposal, once the swap market has
sent the swap transaction and pricing
data to a registered SDR, the swap
market will have satisfied its
dissemination requirement.
In contrast, proposed § 43.3(b)(1)(ii)
provides that if a swap market sends
swap transaction and pricing data to a
third-party service provider, the swap
market does not satisfy its requirement
to publicly disseminate swap
transaction and pricing data until such
data is actually disseminated to the
public. The Commission’s proposal
distinguishes between a registered SDR
and a third-party service provider
because the Commission would have
36 As discussed immediately below,
proposed§ 43.3(b)(2) prohibits a swap market or
reporting parties from disclosing swap transaction
and pricing data prior to sending such data to a
real-time disseminator.
37 See, e.g., Comments by Steve Joachim,
Executive Vice President, Transparency Services,
FINRA (‘‘[T]he technology for collecting,
aggregating, and disseminating [swap] data,
assuming [the] use [of] current infrastructures
* * * can allow [real-time public reporting] to
work pretty efficiently.’’) Roundtable Tr. at 277–78.
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oversight authority over a registered
SDR, but not over a third-party service
provider. This distinction would be
especially important if, for example, a
third-party service provider failed to
publish swap transaction and pricing
data in real-time. Under those
circumstances, the Commission may
have no authority over the third-party
service provider to remedy the failure.
Since the swap market is still obligated
to publicly disseminate, the
Commission may require the swap
market to resolve the failure and
publicly disseminate the swap
transaction and pricing data through
another third-party service provider or a
registered SDR. Accordingly, the
Commission would expect that a swap
market that uses a third-party service
provider to meet its public
dissemination obligation should be
vigilant in monitoring the timeliness
and accuracy of the provider’s
publication of the swap market’s swap
transaction and pricing data.
Proposed § 43.3(b)(2)(i) prohibits
swap markets or any reporting party to
a swap from disclosing the swap
transaction and pricing data before the
real-time disseminator has publicly
disseminated such data. The
Commission believes that this
prohibition will ensure that swap
transaction and pricing data is
disseminated uniformly and is not
published in a manner that creates
unfair advantages for any segment of
market participants.
The proposed rules do allow for swap
markets and swap dealers to provide
their market participants and customers,
respectively, with swap transaction and
pricing data for swaps that they execute.
In particular, proposed § 43.3(b)(2)(ii)
provides that notwithstanding the nondisclosure provision in proposed
§ 43.3(b)(2)(i), a swap market may make
swap transaction and pricing data
available to participants on its market
prior to the public dissemination of
such data; however, the swap market
must send such swap transaction and
pricing data to a real-time disseminator
at the same time as or earlier than it
makes such data available to its market
participants. Similarly, proposed
§ 43.3(b)(2)(iii) provides that
notwithstanding the non-disclosure
provision in proposed § 43.3(b)(2)(i), a
swap dealer may make swap transaction
and pricing data for off-facility swaps
available to its customer base prior to
the public dissemination of such data;
however, such swap dealer must send
such swap transaction and pricing data
to a registered SDR at the same time as
or earlier than it makes such data
available to its customer base. In both
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cases, the data may only be made
available to the particular market (e.g.,
data for a swap executed on a particular
SEF or DCM may only be shared with
market participants on that SEF or
DCM). The Commission believes that
granting swap markets and swap dealers
the flexibility to provide swap
transaction and pricing data to its
market participants or customer base,
respectively, concurrent with reporting
to the real-time disseminator may
incentivize a rapid transmittal of data to
the real-time disseminator.
The Commission requests comment
generally on the responsibilities of swap
markets to publicly disseminate realtime swap transaction and pricing data.
In addition, the Commission requests
comment on the following issues:
• Should the Commission establish a
maximum timeframe in which swap
markets must report swap transaction
and pricing data to a real-time
disseminator? If so, what is an
appropriate maximum timeframe and
why?
• Do commenters agree with the
Commission’s proposal that swap
markets satisfy their public
dissemination requirement by either
sending to a registered SDR that accepts
and disseminates swap transaction and
pricing data or by publicly
disseminating through a third-party
service provider? If not, why? Should
there be any other means by which a
swap market can satisfy its public
dissemination requirement? If yes, by
what other means?
iii. Requirements for Registered SDRs
Sections 2(a)(13)(D) and 21(c)(4)(B) of
the CEA provide the Commission with
the authority to require registered SDRs
to publicly disseminate swap
transaction and pricing data in realtime. In particular, Section 2(a)(13)(D)
provides that the Commission may
require registered entities to publicly
disseminate swap transaction and
pricing data. Registered SDRs are
registered entities as defined in Section
1(a)(40)(E) of the CEA. Section
21(c)(4)(B) of the CEA provides that an
SDR must provide swap transaction
information in such form and at such
frequency as the Commission may
require to comply with the real-time
reporting requirements under Section
2(a)(13).
Pursuant to these authorities, the
Commission is proposing § 43.3(c)(1) to
require that registered SDRs that accept
and publicly disseminate such data in
real-time to comply with proposed part
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49 of the Commission’s regulations.38
Under proposed part 49, a registered
SDR may choose, but would not be
required, to publicly disseminate swap
transaction and pricing data in real-time
for an asset class of swaps. Further, a
registered SDR that accepts swap
transaction and pricing data for public
dissemination must publicly
disseminate such data as soon as
technologically practicable upon receipt
of such data. Proposed § 43.3(c)(2)
provides that if a registered SDR
chooses to publicly disseminate swap
transaction and pricing data in real-time
for its specified asset class,39 the
registered SDR must accept and publicly
disseminate swap transaction and
pricing data for all swaps within such
asset class. This requirement is intended
to minimize the number of swaps that
are not accepted by a registered SDR for
public dissemination by enabling
market participants to easily identify the
SDR that accepts particular asset
classes. In addition, proposed
§ 43.3(c)(3) provides that any registered
SDR that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall perform,
on an annual basis, an independent
review of its security and other system
controls, in accordance with established
audit procedures and standards, for the
purposes of ensuring that the
requirements of proposed part 43 are
met.
The Commission requests comment
generally on the requirements for
registered SDRs under proposed part 43.
In addition, the Commission requests
comment on whether it should require
registered SDRs to publicly disseminate
all real-time swap transaction and
pricing data.
srobinson on DSKHWCL6B1PROD with PROPOSALS2
iv. Requirements for Third-Party Service
Providers
If a swap market chooses to publicly
disseminate swap transaction and
pricing data through a third-party
service provider, proposed § 43.3(d)
provides that the swap market must
ensure that the provider maintains
standards that are, at a minimum, equal
to those standards for registered SDRs
38 In a forthcoming release, the Commission will
propose part 49 of the Commission’s regulations,
which will set out the requirements that a registered
SDR must satisfy in connection with its receipt and
public dissemination of swap transaction and
pricing data in real-time. Proposed part 49 of the
Commission’s regulations also will identify the
necessary systems that registered SDRs must
develop and maintain in order to receive and
publicly disseminate such data.
39 In the forthcoming proposed part 49 of the
Commission’s regulations, registered swap data
repositories will select the asset class(es) for which
they accept swaps.
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described in proposed part 43 and the
relevant provisions relating to real-time
public reporting that will be proposed
in part 49 of the Commission’s
regulations. In addition, this section
provides that the swap market must
ensure that the Commission has access
to any swap transaction and pricing
data, either through the swap market or
directly through the third-party service
provider.
v. Availability of Real-Time Swap
Transaction and Pricing Data
Under proposed § 43.3(e), registered
SDRs that report swap transaction and
pricing data to the public in real-time,
must make the data available and
accessible in an electronic format that is
capable of being downloaded, saved
and/or analyzed. The Commission is
proposing this provision to address the
concern that a registered SDR may flash
real-time swap transaction and pricing
data to selected market participants
with the technology to view such data
without making such information
available to the public and all market
participants. Requiring registered SDRs
to allow market participants and the
public to download, save and/or analyze
the real-time swap transaction and
pricing data upon public dissemination,
ensures equal access to real-time swap
transaction and pricing data.
vi. Errors or Omissions
Proposed § 43.3(f)(1) sets out the
process through which any errors or
omissions in swap transaction and
pricing data that were publicly
disseminated in real-time shall be
corrected or cancelled. Section 43.3(f)(1)
sets out different processes depending
on whether the data error or omission
was discovered by the reporting party to
the swap or the non-reporting party.
Proposed paragraph (f)(1)(i) provides
that if the non-reporting party becomes
aware of an error or omission in the data
reported for its swap, it shall promptly
notify the reporting party of the
correction. Proposed paragraph (f)(1)(ii)
provides that if the reporting party
becomes aware of an error or omission
in the reported data, it is required to
promptly submit the corrected data to
the swap market or real-time
disseminator. Proposed paragraph
(f)(1)(iii) provides that if the swap
market becomes aware of an error or
omission in the swap transaction and
pricing data reported for a swap,
whether or not it received notification
from the reporting party, the swap
market shall promptly submit corrected
data to the real-time disseminator.
Proposed paragraph (f)(1)(iv) provides
that a registered SDR that accepts and
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publicly disseminates swap transaction
and pricing data in real-time must
publicly disseminate any cancellations
or corrections to such data as soon as
technologically practicable after receipt
or discovery of such cancellation or
correction.
The proposal also seeks to prevent
fraudulent dissemination for the
purpose of distorting market pricing.
Specifically, proposed paragraph (f)(2)
of this section provides that reporting
parties, swap markets and registered
SDRs that accept and publicly
disseminate swap transaction and
pricing data in real-time are prohibited
from submitting or agreeing to submit a
cancellation or correction for the
purpose of re-reporting swap transaction
and pricing data in order to gain or
extend a delay in publication or to
otherwise evade the reporting
requirements of proposed part 43.
Proposed paragraph (f)(3) of this
section sets forth the appropriate
method of canceling incorrectly
published swap transaction and pricing
data. Specifically, this paragraph
provides that a real-time disseminator
must cancel incorrect data that has been
disseminated to the public by
publishing a cancellation of the
incorrect data in the format and manner
described in appendix A to proposed
part 43.
Proposed paragraph (f)(4) of this
section sets forth the appropriate
method of correcting erroneous or
omitted swap transaction and pricing
data. Specifically, this paragraph
provides that a real-time disseminator
must correct any erroneous or omitted
data that has been disseminated to the
public by first publicly disseminating a
cancellation of the incorrect data and
then publicly disseminating the correct
data pursuant to the format described in
appendix A to proposed part 43.
Depending on the situation, a
cancellation may or not be followed by
a correction. For example, a cancellation
may occur in a situation where a
clearinghouse does not accept a
particular swap for clearing and,
therefore, the swap may be busted and
not require a correction. In another
situation, one or more terms to a swap
may be incorrectly reported by the party
responsible for reporting the swap, and
upon confirmation of the swap the error
in the terms would be realized. Under
the proposed rules, such a situation
would require a cancellation of the
original incorrectly reported data,
followed by a correction with the
correct swap transaction and pricing
data. Whenever reporting a cancellation
or correction, the real-time disseminator
must report the data in the same form
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and manner in which it was originally
reported and include a date stamp
reflecting the time of the original
transaction, so that market participants
and the public are aware of exactly
which swap has been canceled or
corrected.
vii. Hours of Operation
Since Section 2(a)(13) of the CEA
requires that swap transaction and
pricing data be reported and
subsequently disseminated to the public
in real-time, the Commission proposes
that registered SDRs maintain certain
hours of operation in order to comply
with this legislative requirement.
Proposed § 43.3(g)(1) requires registered
SDRs that accept and publicly
disseminate swap transaction and
pricing data in real-time to be able to
receive and publicly disseminate such
data at all times, twenty-four hours a
day.
Because the Commission recognizes
that a registered SDR periodically may
need to conduct maintenance on its
electronic systems, proposed § 43.3(g)(2)
would permit a registered SDR to
declare special closing hours to perform
such maintenance on an ad hoc basis. In
addition, this section would require a
registered SDR to provide advance
notice of its special closing hours to
market participants and the public.
Further, proposed § 43.3(g)(3) provides
that registered SDRs should avoid
scheduling special closing hours during
those periods when the U.S. markets
and major foreign swap markets are
most active. Proposed § 43.3(h) provides
that during special closing hours, a
registered SDR that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall have the
capability to receive and hold in queue
information regarding reportable swap
transactions pursuant to proposed part
43.
The Commission requests comment
on the following questions regarding
hours of operation:
• Should swap markets have
requirements regarding hours of
operation for the purposes of the realtime reporting requirements?
• Do the proposed requirements
regarding hours of operation provide
registered SDRs with sufficient
flexibility to conduct the necessary
maintenance on their electronic
systems?
• Do commenters agree that registered
SDRs that accept and publicly
disseminate swap transaction and
pricing data should have the capability
to receive and hold such data in queue
during special closing hours? If not,
why and are there any alternatives?
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viii. Recordkeeping Requirements
Proposed § 43.3(i) requires reporting
parties, swap markets and registered
SDRs to retain all data related to a
reportable swap transaction (including
large notional swaps and block trades)
for a period of not less than five years
following the time at which such
reportable swap transaction is publicly
disseminated. The Commission believes
that it is necessary to retain such
records in order to recreate transaction
profiles for the purposes of trade
practice surveillance and compliance.
This requirement is separate and
distinct from any other recordkeeping
requirements under the Commission’s
regulations, including § 1.31.40
The Commission requests comment
on the following questions regarding
recordkeeping requirements:
• Do commenters believe that the
proposed retention period for data
related to reportable swap transactions
is an appropriate period of time?
• Should the recordkeeping
requirement be the same as § 1.31 of the
Commission’s regulations?
• What are the anticipated costs
associated with storing such real-time
swap transaction and pricing data for a
longer period of time?
ix. Fees Charged by Registered SDRs
The Commission believes that the
intent and purpose of Sections 2(a)(13)
and 21 of the CEA is for registered SDRs
to provide open and equal access to
their data collection services for the
purposes of real-time public reporting.41
Consistent with open and equal access
to registered SDR services, the
Commission further believes that fees or
charges adopted by a registered SDR for
its data collection services for the
purposes of real-time public reporting
must be equitable and nondiscriminatory. Proposed § 43.3(j)
ensures that any fees or charges assessed
on a reporting party or a swap market
are consistent with the intent and
purpose of Sections 2(a)(13) and 21.
Proposed § 43.3(j) also prohibits a
registered SDR from offering a discount
based on the volume of swap
transaction and pricing data reported to
the registered SDR for public
dissemination, unless such discount is
40 Section 1.31 of the Commission’s regulations
generally provides, inter alia, all books and records
required to be kept by the CEA or the Commission’s
regulations shall be kept for a period of five years
from the date such records come into existence. In
addition, § 1.31 provides that the records shall be
readily accessible during the first two years of the
five year period.
41 Section 21 of the CEA sets forth the rules with
respect to the business conduct standards and
regulation of SDRs.
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offered to all reporting parties and swap
markets.
x. Consolidated Public Dissemination of
Swap Data
The Commission recognizes the
benefits of consolidating the public
dissemination of swap transaction and
pricing data in real-time.42 During the
Roundtable and in Commission external
meetings, several market participants
commented on their desire for the
Commission to establish a consolidator
in order to avoid fragmentation of the
publication of swap transaction and
pricing data. The Commission believes
that a real-time reporting consolidator of
swap transaction and pricing data could
provide a comprehensive record of all
swaps executed in chronological order.
Additionally, a real-time reporting
consolidator would create greater
anonymity for the parties to
transactions, particularly for swap
dealers and MSPs.
Unlike the federal securities laws,43
however, neither the CEA nor the DoddFrank Act grants the Commission
explicit statutory authority to establish
a real-time reporting consolidator.44 The
Commission requests comment on
methods to encourage the consolidation
of publicly disseminated swap
transaction and pricing data.
42 The Commission considered the experience of
the European Union under the Markets in Financial
Instruments Directive (‘‘MiFID’’) and its Financial
Services Action Plan, which went into effect on
November 1, 2007 for OTC equity securities. Under
this plan, the European Union broadened post-trade
transparency requirements in European OTC equity
securities markets. While MiFID required
transparency, many market participants expressed
concerns about the fragmentation of post-trade
transparency under the MiFID regime, especially in
OTC trading. The quality, disparate timing of
publication and other barriers to consolidation of
post-trade data were all highlighted as problems by
the Committee of European Securities Regulators
(‘‘CESR’’) in its Technical Advice report. See ‘‘CESR
Technical Advice to the European Commission in
the Context of the MiFID Review and Responses to
the European Commission Request for Additional
Information’’ (CESR/10–802, CESR/10–799, CESR/
10–808, CESR/10–859), July 29, 2010. Available at:
https://www.cesr-eu.org/popup2.php?id=7003.
43 See, e.g., 15 U.S.C. 78k–1.
44 As mentioned above, FINRA oversees TRACE,
which is a mechanism through which post-trade
data regarding OTC secondary market securities in
fixed income is reported. FINRA requires its brokerdealer member firms to report transactions to
TRACE under an SEC-approved set of rules.
Beginning in 2002, TRACE published transaction
data on a consolidated tape. TRACE first published
data on very liquid transactions and later phasedin additional products. More information on
TRACE can be accessed at: https://www.finra.org/
Industry/Compliance/MarketTransparency/TRACE/
index.htm.
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4. Proposed Section 43.4 and Appendix
A to Proposed Part 43—Swap
Transaction and Pricing Data To Be
Publicly Disseminated in Real-Time
As noted above, Section 2(a)(13)(B)
authorizes the Commission to prescribe
regulations to make swap transaction
and pricing data available in real-time
in such form as the Commission
determines appropriate to enhance price
discovery. Proposed § 43.4 establishes
the format in which such data will be
publicly disseminated.
Proposed § 43.4(a) provides that swap
transaction information shall be
reported to a real-time disseminator so
that the real-time disseminator can
publicly disseminate swap transaction
and pricing data in real-time in
accordance with proposed part 43,
including the manner and format
described in appendix A to proposed
part 43.45 Appendix A to proposed part
43 provides a list of data fields for
which a registered SDR must publicly
disseminate swap transaction and
pricing data. The descriptions and
examples in appendix A to proposed
part 43 are intended to provide
guidance on an acceptable public
reporting format and order for the data
fields that are listed.
Proposed § 43.4(b) provides that any
registered SDR that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall publicly
disseminate the information in the data
fields described in appendix A to
proposed part 43.
Proposed § 43.4(c) provides that a
registered SDR that accepts and publicly
disseminates swap transaction and
pricing data in real-time may, as
necessary, require reporting parties and
swap markets to report such information
in addition to the data described in
appendix A to proposed part 43, in
order to match the swap transaction and
pricing data that was publicly
disseminated in real-time to the data
reported to a registered SDR or confirm
that parties to a swap have reported in
a timely manner pursuant to § 43.3.
Such additional information shall not be
publicly disseminated, on either a
transactional or aggregate basis, by the
registered SDR that accepts and publicly
disseminates swap transaction and
pricing data in real-time.
Proposed § 43.4(d) provides that the
Commission may determine from time
45 Proposed § 43.4 would not require that a
reporting party or swap market provide swap
transaction and pricing data in a particular format
or that such data be anonymized prior to being sent
to a real-time disseminator. Reporting parties and
swap markets must, however, provide real-time
disseminators with the information required to
publicly disseminate the required data fields.
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to time to amend the data fields
described in appendix A. This section
gives the Commission flexibility to add,
modify or delete data fields as the
Commission may deem appropriate and
necessary to enhance price discovery
and prevent the disclosure of the
identities of the parties to any swap.
The Commission requests comment
generally on the real-time reporting and
public dissemination of the data
described in appendix A to proposed
part 43. In addition, the Commission
requests comment on the following
issues:
• Should the Commission specify the
format and/or manner in which swap
transaction and pricing data must be
reported to a real-time disseminator?
• Should the Commission require that
registered SDRs follow a specified order
and format for the public dissemination
of swap transaction and pricing data
instead of providing examples and
guidance?
i. Ensuring the Anonymity of the Parties
to a Swap
Sections 2(a)(13)(C)(iii) and
2(a)(13)(E)(i) of the CEA emphasize the
importance of maintaining the
anonymity of the parties to a swap.46
Proposed § 43.4(e)(1) prohibits the
disclosure of swap transaction and
pricing data that is publicly
disseminated in real-time, which
identifies or otherwise facilitates the
identification of a party to a swap. This
section further provides that a registered
SDR may not report such data in a
manner that discloses or otherwise
facilitates the identification of a party to
a swap.
The Commission understands that
this latter prohibition may lead to a loss
of clarity with respect to the precise
characteristics of swaps in certain
circumstances.47 Proposed § 43.4(e)(2)
provides that a reporting party or a swap
market must provide a real-time
disseminator with a specific description
of the underlying asset and tenor of a
swap. The description must be general
enough to provide anonymity, but
specific enough to provide for a
46 The legislative history of the Dodd-Frank Act
states that ‘‘regulators are to ensure that the public
reporting of swap transactions and pricing data
does not disclose the names or identities of the
parties to the transactions.’’ 156 Cong. Rec. S5,921
(daily ed. July 15, 2010) (statement of Sen. Blanche
Lincoln).
47 See, e.g., comments from Steve Joachim,
Executive Vice President, Transparency Services,
FINRA (‘‘I think we have to recognize that when
we’re talking about transparen[cy] in marketplaces
that if we want to pursue the goal of transparency,
that trading in transparent markets is different than
trading in opaque markets and that you lose some
anonymity no matter what happens. There will not
be total confidentiality.’’), Roundtable Tr. at 258.
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meaningful understanding of the swap.
The Commission recognizes that it is
conceivable that in situations where few
parties trade a particular type of
underlying asset, the description of that
asset may inadvertently reveal the
identity of one or more party(ies) to the
swap.
For off-facility swaps, particularly
other commodity swaps with very
specific underlying assets, market
participants may be able to infer the
identity of a party or parties to a swap
based on the description of the
underlying asset.48 For example, if the
underlying asset to an off-facility swap
is an energy commodity contract that
has a specific delivery point at Lake
Charles, Louisiana and such contract is
only traded by two companies, then
disclosing the underlying asset to the
public would effectively disclose that
one of those companies was entering
into the trade. Proposed § 43.4(e)(2)
allows reporting parties of off-facility
swaps to publicly disseminate a
description an underlying asset or tenor
that by virtue of its real-time reporting
would enable market participants to
infer the identity of a party to the swap,
in a way that does not disclose a party
to a swap, but provides a meaningful
understanding of the swap for the
purpose of price discovery.49 In the
example, instead of saying a specific
delivery point of Lake Charles,
Louisiana, the reporting party may use
a broader geographic region (e.g.,
Louisiana, Gulf coast, etc.) under the
Commission’s proposal. The
Commission believes that the issue of
the description being too specific as to
divulge the identity of a party to a swap
48 See, e.g., comments from Peter Axilrod,
Managing Director, New Business Development,
The Depository Trust & Clearing Corporation (‘‘I
guess I’d like to make a plea for people to be careful
with commodities. It’s a little bit of a different
market than what most people have been talking
about. There are delivery points all over the
country, there are load-serving entities, many of
them all over the country, there are producers all
over the country, and if you force people to specify
a particular delivery point all the time, people are
pretty much going to know who’s making those
trades. So, whatever you do in terms of what
commodities data is reported publicly, you have to
leave room for some flexibility in terms of
anonymization [sic]. So, if the delivery points are
too specific, you may never get much anonymizing
[sic] of trades, but if you allow the geographic area
to be expanded or to have some anonymity criteria
and perhaps pick the set of the delivery points that
meets the anonymity criteria, something like that
needs to be done.’’), Roundtable Tr. at 252–253.
49 It is important to note that the reporting
requirement in this section is separate from the
requirement to report swap transaction information
to a registered SDR pursuant to Section 2(a)(13)(G)
of the CEA. The CEA does not require swap
transaction information be reported in a manner
that protects anonymity since such information will
not be publicly disseminated.
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is more likely to arise when the
underlying asset is a commodity. The
Commission, however, believes that
other asset classes and markets may
have similar issues. In contrast, for
those swaps that are executed on a swap
market, the Commission believes that,
since such contracts will be listed on a
particular trading platform or facility, it
will be unlikely that a party to a swap
could be inferred based on the reporting
of the underlying asset and therefore
parties to swaps executed on swap
markets must report the specific
underlying assets and tenor of the swap.
The Commission recognizes that swap
markets may differ and that new types
of swaps may emerge; therefore, the
Commission is not proposing specific
guidelines at this time for how an
underlying asset should be described for
the purposes of proposed § 43.4(e)(2).
The specificity of the description will
vary based on particular markets and
contracts, but the proposed rules
provide reporting parties with
discretion on how to report swap
transaction and pricing data. Proposed
§ 43.3(e)(2) and proposed part 23 of the
Commission’s regulations require that
swap dealers and MSPs who do not
disclose a specific description of an
underlying asset and/or tenor because
such disclosure would facilitate the
identity of a party to a swap, must
document why the specific information
regarding the underlying asset and/or
tenor was not publicly disseminated.50
Further, swap dealers and MSPs must
retain and provide such written
justifications to the Commission
pursuant to proposed part 23 of the
Commission’s regulations.51
The Commission notes that the
language found in Section
2(a)(13)(C)(iii) of the CEA, requiring that
real-time public reporting be done ‘‘in a
manner that does not disclose the
business transactions and market
positions of any person’’ is similar to the
language found in Section 8(a) of the
CEA. Section 8(a)(1) of the CEA
provides, in relevant part, that ‘‘the
Commission may not publish data and
information that would separately
disclose the business transactions or
market positions of any person and
trade secrets of or names of customers
* * *.’’ 52 For the purposes of protecting
the confidentiality of participants’
business transactions or market
50 In a forthcoming release, the Commission will
propose part 23 of the Commission’s regulations,
which will set out the internal business conduct
standards for swap dealers and MSPs, including
recordkeeping requirements in connection with
real-time public reporting.
51 See id.
52 7 U.S.C. 12(a)(1).
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positions as required under Section
8(a)(1) of the CEA, the Commission has
historically created guidelines for
various market information reports (e.g.,
Bank Participation Reports (‘‘BPRs’’) and
Commitments of Traders (‘‘COT’’)
reports) that prevent market participants
and the public from reverse-engineering
aggregate data to determine the
participants that submitted the data.53
The Commission believes that the
approach in the proposed rules
regarding protecting the identities of
parties to a swap under Sections
2(a)(13)(C)(iii) and 2(a)(13)(E)(i) of the
CEA is consistent with the approach to
confidentiality under Section 8(a)(1).
The Commission requests comment
generally on the protection of identities
of the parties to the swap relating to
real-time public reporting. In addition,
the Commission requests comment on
the following issues:
• Do commenters agree with the
proposed method for real-time reporting
of less specific information with regard
to the underlying asset and tenor data
fields in order to protect the anonymity
of parties to a swap? If not, why?
• Should any additional data fields be
allowed to have less specificity to
ensure the anonymity of the parties to
a swap? Should this proposed provision
apply to all asset classes? If so, why?
• In what situations, if any, would it
be appropriate for a reporting party to
report, for the purposes of public
dissemination, less specificity in the
underlying asset(s) of a swap and how
should such underlying asset(s) be
reported? Please provide specific
examples.
• Do commenters believe that it is
appropriate to allow for less specificity
than the month and year (as described
in appendix A to proposed part 43) for
the tenor of the swap? If not, why? If so,
in what situations would it be
appropriate for a reporting party to
report, for the purposes of public
53 The BPRs, which provide large-trader positions
of banks participating in various financial and nonfinancial commodity futures, collect data for every
market where five or more banks hold reportable
positions. The BPRs break the banks’ positions into
two categories—U.S. Banks and Non-U.S. Banks—
and show their aggregate gross long and short
market positions for each type. However, in those
markets where the number of banks in either
category (U.S. Banks or Non-U.S. Banks) is less than
five, the number of banks in each of the two
categories is omitted and only the total number of
banks is shown for that market. Available at:https://
www.cftc.gov/MarketReports/
BankParticipationReports/ExplanatoryNotes/
index.htm. Similarly, the COT reports provide a
breakdown of each Tuesday’s open interest for
markets in which 20 or more traders hold positions
equal to or above the reporting levels established by
the Commission. Available at:https://www.cftc.gov/
MarketReports/CommitmentsofTraders/
AbouttheCOTReports/index.htm.
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dissemination, less specificity in the
tenor of a swap and how should the
tenor be reported? Please provide
specific examples.
• What specific parameters for
reporting less specificity in the
underlying asset(s) and tenor of a swap
should be applied to swaps in order to
protect the identities of the
counterparties?
• Should there be an indication to the
public that a description of the
underlying asset or tenor lacks
specificity in order to protect the
identities of the parties to the swap?
ii. Unique Product Identifiers
The Commission anticipates that
unique product identifiers may develop
for various swap products in various
markets. Proposed § 43.4(f) provides
that if a unique product identifier is
developed and it sufficiently describes
the information in one or more of the
data fields for public dissemination in
real-time, as described in appendix A,
then such unique product identifier may
be used in lieu of such data fields. If a
swap does not have a unique product
identifier, the swap transaction and
pricing data must contain all of the
appropriate product identification fields
in appendix A to proposed part 43.54
iii. Price-Forming Continuation Data
Proposed § 43.4(g) requires any swapspecific event (including, but not
limited to, novations, swap unwinds,
partial novations and partial swap
unwinds) that occurs during the life of
a swap and affects the price of such
swap to be publicly disseminated (a
‘‘price forming continuation event’’). The
Commission does not believe that a
price-forming continuation event
includes the scheduled expiration of a
swap, any anticipated interest rate
adjustments, or any other event that
does not result in a change to the price
that would otherwise not have been
known at the point of execution.
v. Reporting and Public Dissemination
of Notional or Principal Amount
Proposed § 43.4(h) and (i) provide
rules for the public reporting of the
notional or principal amount for all
swaps. Proposed § 43.4(h)(1) would
require the reporting party to report the
actual notional size of any swap,
including large notional swaps, to the
registered SDR that accepts and publicly
disseminates such data. Proposed
§ 43.4(h)(2) would require a reporting
party to transmit the actual notional size
54 The Commission is considering the issue of
unique product identifiers in two forthcoming
rulemakings under proposed parts 45 and 49.
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of any block trade to a swap market.
Further, a swap market must transmit
the actual notional size for all swaps
executed on or pursuant to its rules to
a real-time disseminator. The
Commission believes that the
application of the rounding convention
for notional or principal size, described
in proposed § 43.4(i) should be done at
the point of public dissemination (as
opposed to the point at which it is
reported to real-time disseminator) since
this timing would provide for a more
efficient audit trail of the swap.
Proposed § 43.4(i) provides that for all
swaps the notional or principal amount
that must be reported pursuant to
proposed § 43.4 and appendix A to
proposed part 43 should be rounded
pursuant a specific rounding
convention. Specifically, proposed
§ 43.4(i) provides that if the notional or
principal amount of a swap is:
• Less than one million, round to the
nearest 100 thousand;
• Less than 50 million, but greater
than one million, round to the nearest
million;
• Less than 100 million, but greater
than 50 million, round to the nearest 5
million;
• Less than 250 million, but greater
than 100 million, round to the nearest
10 million; and
• Greater than 250 million, use
‘‘250+’’.
For example, if the notional size of a
swap is $575 million, the notional size
that would be reported by a reporting
party to a swap market (assuming such
swap is a block trade) would be $575
million. The swap market would then
report the notional amount of $575
million to a real-time disseminator and
the real-time disseminator would
publicly disseminate the notional
amount for such block trade as ‘‘$250+’’.
By reporting the notional or principal
transaction amount pursuant to the
rounding convention set forth in
proposed § 43.4(i), parties to swaps,
particularly those swaps that are of a
large notional size, would be given a
greater amount of anonymity.
The Commission requests comment
generally on all aspects of the proposed
rules relating to the reporting and public
dissemination of notional or principal
amount. In addition, the Commission
requests specific comment on the
following issues:
• Do commenters agree with the
proposed rounding convention for
public dissemination of large notional
or principal amount provided in
proposed § 43.4(i)? If not, why and
provide alternatives?
• Would this rounding convention be
appropriate for all swaps? For example,
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would this apply to swaps with an
underlying asset that is a physical
commodity with a specific delivery
point? If not, why and what additional
rounding convention may be needed?
• Does the rounding convention for
reporting notional and principal
transaction amounts in proposed
§ 43.4(i) help to protect the anonymity
of the parties to a swap?
• Should the actual notional or
principal amount be publicly
disseminated at a later time?
• Should registered SDRs publish the
aggregate volume for each category of
swap instrument on a daily basis? If so,
why? If not, why not?
• Would the daily publication of
aggregate volume of swap instruments
be useful to market participants and the
public?
v. Appendix A to Proposed Part 43
The Commission anticipates that realtime swap transaction and pricing data
may be publicly disseminated by
multiple real-time disseminators in the
same asset class. In order to reduce the
effects of fragmentation and increase
consistency both within an asset class
and between asset classes, the
Commission is proposing that the
information in the data fields in
appendix A to proposed part 43 be
publicly disseminated. In addition, the
Commission is providing proposed
guidance on the order and format of
reporting swap transaction and pricing
data.55 Additionally, the Commission
believes that the public dissemination of
standardized data should reduce the
search costs to the public and market
participants, increase consolidation of
real-time swap transaction and pricing
data and promote post-trade
transparency and price discovery.56
While appendix A to proposed part 43
attempts to provide consistency in
55 In developing the Commission’s proposal,
Commission staff considered technical advice
reports from CESR in the context of MiFID. In those
reports, CESR concluded that market participants in
the equities markets are not delivering consolidated
data to the market in a standard format as a result
of the ‘‘inadequate quality and consistency of the
raw data itself, the inconsistencies in the way in
which firms report it for publication, and the lack
of any formal requirements to publish data through
bodies with responsibilities for monitoring the
publication process.’’ Committee for European
Securities Regulators, ‘‘CESR Technical Advice to
the European Commission in the Context of the
MiFID Review—Equity Markets,’’ CESR/10–802,
July 29, 2010. Available at: https://www.cesr-eu.org/
popup2.php?id=7004. See also, ‘‘CESR Technical
Advice to the European Commission in the Context
of the MiFID Review and Responses to the
European Commission Request for Additional
Information’’ (CESR/10–802, CESR/10–799, CESR/
10–808, CESR/10–859), July 29, 2010. Available at:
https://www.cesr-eu.org/popup2.php?id=7003.
56 See id.
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describing which real-time data fields
must be publicly disseminated, the
Commission anticipates that certain
fields will be easier to standardize than
other fields. For example, it should be
easy to standardize the format for an
execution time-stamp across all swap
transactions; whereas it may be more
difficult to achieve standardization
when describing an underlying asset.
The Commission anticipates that, as
markets develop over time, real-time
disseminators and market participants
may develop a form of standardization
for certain data fields in certain asset
classes.
While real-time disseminators must
disseminate swap transaction and
pricing data to the public, the reporting
parties and swap markets must provide
the real-time disseminators with, at a
minimum, the relevant information
needed to report the data fields
described in appendix A to proposed
part 43. As discussed above, a real-time
disseminator that is a registered SDR
may require a reporting party or a swap
market to report additional information
to the information necessary for public
dissemination. Since all swap data must
be sent to a registered SDR pursuant to
Section 2(a)(13)(G) of the CEA and
forthcoming Commission proposals, and
an SDR may be a real-time disseminator,
as previously discussed, the proposed
rules provide that a registered SDR that
is a real-time disseminator may require
additional information to match the
real-time swap transaction and pricing
data to data reported to the registered
SDR or confirm that parties to a swap
have reported in a timely manner
pursuant to Section 2(a)(13)(F) of the
CEA. Such additional information
requested by a registered SDR may
include a transaction identification
code, the names of the parties to the
swap, or such other information as may
be necessary.
As mentioned above, proposed
§ 43.4(b) would require that the
information in any data field listed in
appendix A to proposed part 43 to be
publicly disseminated by a registered
SDR or swap market through a thirdparty service provider to the extent that
such data field captures a term of the
reportable swap transaction. In many
cases, several data fields listed in
appendix A to proposed part 43 will not
be applicable to a particular reportable
swap transaction. To the extent that a
data field is not a term of the swap, such
field need not be reported and should be
left blank. Appendix A to proposed part
43 also provides specific examples of
how the reporting of a particular field
should look (both in form and in order)
when disseminated to the public.
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Table A1 of appendix A to proposed
part 43 provides that the following data
fields be reported to the public in realtime.
1. Cancellation. This data field reports
the swap transaction and pricing data
that was incorrectly or erroneously
reported and is therefore being
canceled. Any cancellations must also
contain a date stamp of the original
swap, even if such date stamp was not
originally reported, followed by the full
swap transaction and pricing data that
is being canceled (including the original
time-stamp of execution). It must be
made clear to the public exactly which
transaction is being reported so that the
public can easily disregard such swap
transaction and pricing data. A
cancellation does not have to be
corrected; however, any corrections
must first be canceled. Any such
cancellation must be done in
accordance with proposed § 43.3(f).
2. Correction. This data field reports
the swap transaction and pricing data
that is being reported is a correction to
real-time swap transaction and pricing
data that has been incorrectly publicly
disseminated. Any corrections must also
contain a date stamp to indicate the date
of the initial swap that is being
corrected, even if such date stamp was
not originally reported, and the timestamp must indicate the time of
execution of the swap, not the time of
the correction. Providing the date and
original time-stamp of the swap will
allow the public to easily replace the
incorrect data. Any reportable swap
transaction for which there are
corrections to real-time swap
transaction and pricing data must first
be canceled prior to the correction, so
that the public is aware of which data
is being corrected. Any such correction
must be done in accordance with
proposed § 43.3(f).
3. Date stamp. This data field reports
the date of execution of the swap (if not
the same day or a correction). This data
field need only be publicly
disseminated if the swap that is being
reported was executed on a day other
than the current day or if the swap
transaction or pricing data is a
cancellation or correction to previously
real-time reported swap transaction and
pricing data.
4. Execution time-stamp. This data
field reports the time of execution of the
swap. The reporting party provides the
execution time-stamp of the swap. The
execution time-stamp is the only timestamp that will be publicly
disseminated.
5. Cleared or uncleared. This data
field reports whether a swap is cleared
through a DCO, which may affect the
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price of the swap. For cleared swaps,
the specific DCO that clears the swap
will not be listed. In consideration of
protecting the identities of the parties to
the swap, the Commission does not
believe that the specific DCO through
which a swap is cleared must be
reported to the public.
6. Indication of other price-affecting
term (non-standardized swaps). This
data field reports whether there are
other non-standard terms to the swap
that materially affect the price of the
swap. This indicator signals to market
participants that there may be
unreported terms of the contract that
affect the price. Any reporting of
bespoke swap transactions must include
this indicator, since in these
transactions there are other terms or
factors that materially affect the price of
the swap and are otherwise not
included in the required fields for realtime public reporting found elsewhere
in appendix A to proposed part 43.
7. Block trades and large notional
swaps. This data field reports whether
the swap is a block trade or large
notional swap. This data field does not,
however, make a distinction between
block trades and large notional swaps,
since the execution venue data field will
reveal that information.
8. Execution venue. This data field
reports where the swap was executed.
The reporting party must indicate
whether the swap was executed on a
swap market or whether such swap is an
off-facility swap. This data field assists
the public in understanding the other
data fields that are being reported. In
consideration of protecting the
identities of the parties, the Commission
does not believe that the specific swap
market on which the swap was executed
need be publicly disseminated.
Similarly, the Commission does not
believe that a distinction need be made
between those swaps executed on a SEF
and those executed on a DCM.
9. Swap instrument. This data field
must be reported only if a trade is a
block trade or a large notional swap.
Large notional swaps must refer to an
existing swap instrument that is posted
by a registered SDR and has an
appropriate minimum block size
associated with such instrument. The
parties to a swap must use the
appropriate minimum block size of the
swap instrument when determining if a
swap constitutes a large notional swap.
Swap markets, in setting the minimum
block trade size for a particular listed
swap, must reference the appropriate
minimum block size for the category of
swap instrument within which the
particular listed swap is included. A
swap market will set a minimum block
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76153
trade size for a listed swap based on the
appropriate minimum block size for the
relevant category of swap instrument as
calculated by the SDR. Proposed § 43.5
provides rules on block trades and large
notional swaps, including the
determination of minimum block trade
sizes. The reporting of the swap
instrument data field provides market
participants and the public with an
understanding of the type of swap
instrument for which a block trade is
occurring.
The Commission believes that within
each asset class there should be certain
criteria that are used to determine a
category of swap instrument. For
example, swaps in the interest rate asset
class may be considered the same swap
instrument if they are denominated in
the same major currency (or
denominated in any non-major currency
considered in the aggregate) and if they
have the same general tenor.57 With
regard to tenor, the Commission
believes that tenors may be grouped into
ranges based on maturity date (e.g.,
short, intermediate and long). For
example, a single category of swap
instrument may be ‘‘U.S. dollar interest
rate swaps in a short maturity bucket,
including swaps, swaptions, inflationlinked swaps, etc. and all underlying
reference rates.’’ Similarly, swaps in the
‘‘other commodity’’ asset class may be
considered the same swap instrument if
they have the same underlying asset,
which generally would include all
swaps whose economic terms relate to
the same underlying product (e.g., oil,
natural gas, heating oil, gold, etc.). In
contrast, the Commission believes that
for swaps under the Commission’s
jurisdiction in the credit or equity asset
classes all swaps within each asset class
can be considered to be the same swap
instrument. The swaps in the credit and
equity asset class will be broad-based or
on indexes and such swaps can likely be
grouped together for purposes of
determining the appropriate minimum
block size. In the currency asset class,
swap instruments may be defined by
major currency pair, not by whether a
major currency is one of the currencies
involved in the swap.
The Commission requests comment
generally about swap instruments. In
addition the Commission requests
comment on the following specific
issues:
• What criteria for each asset class
should a registered SDR consider in
determining if a swap falls within a
57 Major currencies are those of the United States,
Japan, the United Kingdom, Canada, Australia,
Switzerland, Sweden and the European Monetary
Union. See § 15.03 of the Commissions regulations.
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particular grouping of swap instrument?
Specifically, what criteria should be
used to classify a swap instrument and
how do those criteria differ by asset
class? What particular considerations
should apply to swaps in interest rate,
equity, credit, currency and other
commodity classes? Who should
determine the categories of swap
instrument?
• How broad or narrow should the
categories of swap instruments be for
each asset class? Do commenters believe
that the appropriate minimum block
size should be determined based on
particular types of swap contracts and
not on categories of swap instruments?
If so, why?
• Should certain asset classes have
additional or fewer criteria in
determining a swap instrument? If so,
what asset classes and what criteria?
• Should a registered SDR apply any
other criteria to the other commodity
asset class to decide whether a swap
falls within a particular type of swap
instrument? How should the underlying
asset be grouped for the other
commodity asset class?
• Is it an appropriate approach to
group tenors for swaps in the interest
rate asset class into ranges (e.g., shortterm, intermediate-term and long-term)?
What should be the appropriate ranges
of tenor or maturity date for each of
these ranges? Should there be tenor
ranges for other asset classes?
• Are there any other currencies other
than those described in § 15.03 of the
Commissions regulations that the
Commission should consider as a major
currency? If so, which currencies and
why?
10. Start date. This data field reports
the day on which the contractual
provisions of a swap commence or
become effective. The Commission
recognizes that the start date may be
different than the execution date. The
Commission also recognizes that the
markets may develop such that swaps
traded on swap markets become
standardized to the point where the start
date is embedded or understood by a
unique product identifier. For example,
the start date for a particular swap may
always be the day following execution
(i.e., T+1), and such information could
be captured by simply identifying the
product through a unique product
identifier. If the markets evolve in such
a manner, then this data field may not
be necessary to report for these swaps.
Nonetheless, the start date must always
be provided in a manner that is
apparent to the public.
11. Asset class. This data field
provides a general description of the
asset class for a swap, as defined in
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proposed § 43.2(e). This data field will
allow the public to easily compare
swaps within an asset class and to easily
identify the type of swap that is being
reported. Swaps within an asset class
would have broadly similar
characteristics.
12. Sub-asset class for other
commodity. This data field provides
greater detail as to the type of other
commodity that is being reported. The
Commission realizes that there may be
vast differences in the types of products
that fall under a particular asset class.
For this reason, a sub-asset class should
be reported for other commodities so
that the public can easily understand
similar types of swaps. Such sub-asset
classes may include, but are not limited
to, specific energy, weather, precious
metals, other metals, agricultural
commodities, etc.
13. Contract type. This data field
reports the specific type of swap that
has been executed. This data field
provides greater transparency and price
discovery to market participants and the
public, as knowledge of the contract
type will allow the public to understand
the swap transaction and pricing data
that is being reported. The Commission
has identified four broad categories of
contracts that may be entered into:
swaps, swaptions, forwards and standalone options. These categories may be
further defined by the contract sub-type
data field discussed immediately below.
14. Contract sub-type. This data field
provides more detail on the type of
contract specified in the contract type
data field. The Commission envisions
that there will be many contract subtypes. Such contract sub-types may
include, for example, basis swaps, index
swaps, broad-based security swaps and
basket swaps. Specific option types and
other information about options are
covered by the options fields found in
Table A2 to appendix A to proposed
part 43.
15. Price-forming continuation data.
This data field describes whether the
information that is being reported is a
price-affecting event to an existing
swap. Such events may include
novations, partial novations, swap
unwinds and partial swap unwinds as
well as other price-forming events that
may occur following the execution of
the swap. Such other events may also
include amendments to the swap that
have a specific affect on the price of the
swap.
16. Underlying asset 1 and underlying
asset 2. These data fields describe the
specifics of the swap and help the
public evaluate the price of the swap
transaction. It is likely that each leg of
a swap (i.e., the fixed and the variable)
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will have an underlying asset that
should be reported as a separate field.
If there are more than two underlying
assets, all underlying assets should be
real-time reported and publicly
disseminated. The Commission is not
providing a specific format for all
underlying asset fields, but the
description of each underlying asset
should be in a format that is commonly
used by market participants. The
Commission encourages reporting
parties and real-time reporting
disseminators to consult with one
another to determine consistent ways of
reporting similar underlying assets. If a
standardized industry abbreviation
exists for a particular underlying asset,
such abbreviation should be used to
describe the underlying asset. Whenever
possible, alphabetical abbreviations
should be used, including roman
numerals; provided, however the
underlying asset must be reasonably
apparent to the public (e.g., six-month
LIBOR could be represented as VIL, 10year Treasury could be represented as
TX, etc.). Further, if a unique product
identifier adequately captures the
underlying asset, the underlying asset
field may not need to be reported.
17. Price notation and additional
price notation. These data fields report
the price of the swap. These fields
should include the total or net of any
premium that is associated with a
party’s requirements under the swap.
For example, if Party A’s contractual
requirements are linked to a 10-year
Treasury note and Party B’s
requirements are linked to three-month
LIBOR, the price notation should be the
rate of 10-year Treasury note compared
to three-month LIBOR (e.g., 2.5).
The Commission recognizes that a
number of different pricing conventions
currently exist across swap transactions
and even among market participants for
similar swap transactions. Nevertheless,
the Commission believes that
standardizing of pricing conventions
will result in greater price transparency.
In order to promote such
standardization, it becomes important to
define what ‘‘pricing’’ means for swaps.
Notional or principal amount is the
amount on which payment rates are
calculated and is not the actual amount
or units exchanged in most cases.
Payments under the swap are based on
what the market refers to as ‘‘legs’’ and
what the Commission refers to as
‘‘underlying assets’’ in this proposed
rulemaking. The additional price
notation would be necessary in such
instances where there are multiple
premiums yields, spreads or rates are
characteristics of the swap. It is for this
reason that the proposed rules require
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the additional price notation to include,
inter alia, front-end payments, back-end
payments, mid-cycle flat payments,
collateral and margin. All of the
elements to additional price notation
must be represented in this field as a
single number, relative to the difference
in payments between the underlying
assets of the swap.
In the example above, if Party A’s
requirement is tied to the 10-year
Treasury note yield and Party B’s
requirement is linked to three-month
LIBOR and Party B is also required to
post a back-end payment of $100,000,
then the price notation would be the
rate of 10-year Treasury note compared
to three-month LIBOR (e.g., 2.5). The
additional price notation might be
calculated to be +0.05, because in this
example, the net present value of the
back-end payment of $100,000, as
applied to the exchange of payments
within the swap, would be equal to
+0.05. These two data fields provide the
public and market participants with an
easily accessible and uniform means of
understanding the price at which the
parties to a swap have reached an
agreement regarding the swap’s
payment streams.
18. Unique product identifier. This
data field, if available, describes a
standardized swap. If a unique product
identifier is available for a particular
product, it may be reported in lieu of
reporting other identifying fields
including, but not limited to, the
underlying asset, asset class, contract
type, contract sub-type and start date, so
long as such fields are adequately
described and apparent to the public.
The Commission believes that the
markets will evolve to a point where the
use of such unique product identifiers
will increase transparency and promote
price discovery across real-time
disseminators. The Commission
envisions unique product identifiers
will be uniform across different swap
markets.
19. Notional currency 1 and notional
currency 2. This data field is needed if
the notional or principal amounts are
referenced in terms of a currency. The
currency field may be reported in a
commonly-accepted code. For example,
U.S. dollars may be reported with the
ISO 4217 currency code ‘‘USD’’.58 The
notional currency 1 field should refer to
the notional or principal amount 1 field,
while the notional currency 2 field, if
58 The International Organization for
Standardization (‘‘ISO’’) provides a list of currency
and funds names that are represented by both a
three-letter alphabetical and a three-number
numerical code (the ‘‘ISO 4217’’ code list), which is
available at: https://www.iso.org/iso/support/
currency_codes_list-1.htm.
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applicable, should refer to the notional
or principal amount 2 field. If there are
more than two notional or principal
amounts that require a notional
currency field, then these fields should
be reported in a similar manner.
20. Notional or principal amount 1
and notional or principal amount 2.
This data field is needed to identify the
size or amount of the swap transaction.
The notional amount may be reported in
a currency and if so, the currency must
be disclosed and made easily
identifiable to the public. Such
disclosure can be done by reporting the
notional currency field with respect to
the notional amount that requires such
information. If a principal amount is in
units, then a currency description does
not need to be reported. Appendix A to
proposed part 43 contemplates the
potential for two or more notional or
principal amounts. When a swap has
more than two notional or principal
amounts, then all such amounts must be
reported and made easily identifiable by
reporting parties and real-time reporting
disseminators. The notional or principal
amount for swaps should be reported
pursuant to proposed § 43.4(h) and (i).
Each notional or principal amount (if
there is more than one) should be
labeled with a number (e.g., 1, 2, 3, etc.),
such that the number corresponds to the
underlying asset for which the notional
or principal amount is applicable.
21. Payment frequency 1 and payment
frequency 2. This data field is needed to
assist in understanding the price of a
swap. It represents the frequency at
which payments will be made for a
party’s contractual requirements under a
swap. It is possible that the payment
frequency may be the same for both
parties to a swap; however, the payment
frequency also may be different. If there
is a difference, the payment frequencies
must be reported for each requirement
under the swap. The format for payment
frequency should be consistent and may
be reported as a numerical character
followed by a letter.59 For example, if
payments are to be made every two
weeks, then ‘‘2W’’ may be reported in
this field; if payments are to be made
every year, then ‘‘1Y’’ may be reported,
etc. Each payment frequency (if there is
more than one) should be labeled with
a number (e.g., 1, 2, 3, etc.), such that
the number corresponds to the
underlying asset for which the payment
frequency is applicable.
22. Reset frequency 1 and reset
frequency 2. This data field is needed to
assist in understanding the price of a
swap. It represents the frequency that a
price for an underlying asset may be
adjusted. It is possible that there is no
reset frequency, that the reset frequency
is the same for both underlying assets or
that the reset is different for both
underlying assets. If different, the reset
frequencies must be reported for each
underlying asset. The format for reset
frequency must be consistent and may
be a numerical character followed by a
letter.60 For example, if adjustments are
to be made every two weeks, then ‘‘2W’’
may be reported in this field, if
adjustments are to be made every year,
then ‘‘1Y’’ may be reported, etc. Each
reset frequency (if there is more than
one) should be labeled with a number
(e.g., 1, 2, 3, etc.), such that the number
corresponds to the underlying asset for
which the reset frequency is applicable.
23. Tenor. This data field is needed to
describe the duration of a swap and
when a swap will terminate, mature or
end. To protect the anonymity of the
parties to a swap, the tenor field should
only be reported as the month and year
that the swap terminates, matures or
ends. Such description may use the
three character alpha-numerical format
that is used in describing futures
contracts.61 For example, if a swap ends
on March 15, 2020, the tenor may be
reported as ‘‘H20’’.
Table A2 of appendix A to proposed
part 43 provides the following data
fields to be publicly disseminated in
real-time for options, swaptions and
swaps with embedded options, if
applicable to a swap. If a swap has more
than one embedded option or swaption
provision, then all such embedded
options or swaptions should be realtime reported to the public in the same
manner.
1. Embedded option on swap. This
data field is needed to describe whether
the data listed in the option fields is an
option that is embedded in the price of
the swap. Proposed § 43.2(i) defines
‘‘embedded option’’ as any right, but not
an obligation, provided to one party of
a swap by the other party to the same
swap that provides the party in
possession of the option with the ability
to change any one or more of the
economic terms of the swap as they
were previously established at
confirmation (or were in effect on the
start date). By requiring a separate field
for embedded options on swaps, market
participants and the public will be able
to compare prices across the same or
60 See
id.
61 Futures
59 Such
period descriptions may be described as
follows: daily (D), weekly (W), monthly (M) and
yearly (Y).
PO 00000
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76155
month symbols are as follows: January
(F), February (G), March (H), April (J), May (K), June
(M), July (N), August (Q), September (U), October
(V), November (X) and December (Z).
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similar swaps. The Commission believes
that requiring this field will increase
transparency and price discovery across
the swap markets, as it will allow for the
easy comparison of price by market
participants and the public. Further, the
Commission does not wish to see
market participants wasting resources to
try to avoid transparency by adding
embedded options to otherwise
standardized swap contracts. If the
Commission did not require separate
reporting of the embedded option field,
it would be possible for market
participants to attach worthless options
to a swap in order to avoid real-time
public reporting the swap in the same
format as a standardized swap that does
not have an embedded option.
2. Option strike price. This data field
reports the level or price at which a
party to a swap may exercise an option.
The Commission recognizes that for
some option types, such as collars,
strangles and condors, it will be
necessary to report two or more prices
in this field. This data field is the first
field that would be reported for options
and real-time disseminators may choose
to place an ‘‘O’’ prior to the strike price.
After the ‘‘O’’, the level or price should
follow immediately thereafter. For
example, an option or swaption with a
strike price of $25 should be real-time
publicly reported as ‘‘O25’’.
3. Option type. This data field reports
the type of option. The option type is
important because it clarifies how the
buying or selling of the asset is to be
transacted between two parties. To
promote standardization, this data field
should be reported from the perspective
of the party to the swap associated with
underlying asset 1. The Commission
recognizes that there are several
different types of options, and has tried
to identify some of the more common
option types and their suggested twocharacter alphabetical descriptors in
Table A2 of appendix A to proposed
part 43. The Commission intends for the
list of options in Table A2 to promote
consistency and transparency across
reporting parties and real-time
disseminators. Some examples of option
types include caps, collars, floors, puts,
calls, pay fixed versus floating, receive
fixed versus floating, straddles, strangles
and knock-outs.
4. Option family. This data field
reports the family associated with the
option. The option family is important
because it identifies the period of time
over which an option may be executed.
The Commission recognizes that there
are several different types of option
families, and has tried to identify some
of the more common option families
and provided suggested two-character
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alphabetical descriptors in Table A2 of
appendix A to proposed part 43. The
Commission intends for the list in Table
A2 to promote consistency and
transparency across reporting parties
and real-time disseminators. Some
examples of option families include
American, Bermudan, European and
Asian.
5. Option currency. This data field is
needed to explain the currency for the
option that is being reported. If
applicable, the option currency field
shall refer to both the option premium
field and the option strike price.
6. Option premium. This data field
reports the purchase price for the option
at the time of execution of the swap.
This number represents the total
additional cost of the option as a
numerical value and is broken out
separately from the price notation and
additional price notation fields to allow
for an easier comparison of a swap with
an option to similar swaps that do not
include an option.
7. Option lockout period. This data
field reports the time at which an option
first can be exercised and thus, assist
them in evaluating the price of an
option. The option lockout date should
be reported in the year and month
format used in futures markets.62 This
field most often will be needed for
European style options and other
options where the start date for the
requirements to a swap with an
embedded option may be different than
the date that an embedded option is
available for execution. The option
lockout period should be reported in the
year and month format used in futures.
8. Option expiration. This data field
reports when an option can no longer be
exercised. This data field will assist the
public and market participants in
evaluating the price of an option. In
most cases, this data field can be
omitted, as a standard option would
expire at the same time as the swap
contract to which it is linked. The
option expiration should be reported in
the year and month format used in
futures markets.
v. Examples To Illustrate the Public
Reporting of Real-Time Swap
Transaction and Pricing Data
The Commission envisions that the
reporting of the data fields in appendix
A to proposed part 43 may eventually be
reported in the form of a consolidated
ticker, particularly for the more
standardized swaps that are traded on
swap markets. Additionally, the
Commission believes that when unique
product identifiers emerge they will be
62 See
PO 00000
publicly disseminated, increase
uniformity and transparency across realtime disseminators and ultimately lead
to greater transparency and price
discovery. Below, the Commission has
set out two examples of how real-time
public reporting of swap transaction and
pricing data may evolve as
consolidation and standardization
develops in particular asset classes and
markets.
Example 1
On Friday, February 4, 2011, Bank X
enters into a new plain vanilla 10-year
fixed versus floating interest rate swap
with Bank Y, for a notional amount of
$10 million U.S. dollars. The swap is
scheduled to start on Tuesday, February
8, 2011 (note: start dates are usually 2
business days later for interest rate
swaps). Bank X is the payer of the fixed
leg of the swap and is obligated to pay
a fixed rate of 2.53% on the notional
amount for the ten-year tenor of the
swap. Bank Y is the payer of the floating
leg of the swap and is obligated to pay
the prevailing three-month LIBOR on
the $10 million notional amount. The
first LIBOR payment will be based upon
the three-month LIBOR rate for February
4, 2011 with the rate reset on a quarterly
basis going forward. This interest rate
swap is plain vanilla with both banks
using the same day count convention,
payment currency and notional value
for both of the underlying assets to the
swap.
Bank X and Bank Y have no
additional premiums or payments under
the terms of the swap. In this example,
the reset and payment frequency for the
fixed-rate are semi-annual. The reset
and payment frequency for the floating
rate (i.e., three-month LIBOR) are
quarterly. The parties’ requirements
under the swap for both the fixed leg
and floating leg are scheduled to mature
on Monday, February 8, 2021. Bank X
and Bank Y are both members in good
standing with a SEF named ‘‘Xeqution
Co.’’ and use a DCO named ‘‘ClearitAll’’.
Field
Description
Execution time-stamp
Cleared or uncleared
16:20:47
C (note: the name of
DCO is not reported)
SWM (note: the
name of SEF is not
reported)
08–02–11
IR
S-
Execution Venue .......
Start date ..................
Asset class ................
Contract type .............
id.
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Field
Description
Underlying asset 1 ....
TX (note: TX represents the reference rate of
Treasury 10 year,
which is the fixed
rate)
IIIL (note: IIIL represents 3 month
LIBOR, which is
the floating rate)
USD
10M (note: this may
be reported as
‘‘10,000,000’’)
2.53
6M
3M
6M
3M
G21 (note: actual
day is not reported)
Underlying asset 2 ....
Notional currency 1 ...
Notional or principal
amount 1.
Pricing Notation .........
Payment frequency 1
Payment frequency 2
Reset frequency 1 .....
Reset frequency 2 .....
Tenor .........................
srobinson on DSKHWCL6B1PROD with PROPOSALS2
The Commission believes that as
swaps become more standardized,
market participants and real-time
disseminators may develop a
nomenclature that combines data fields
in an easy-to-follow manner, ensuring
that all the relevant information in
appendix A to this proposed part 43 is
publicly disseminated. For example, the
swap in the above example may be
displayed as follows:
16:20:47 IRS 10 TXIIIL 2.53 @0 G21.
In the illustration above, the symbol
‘‘C’’ is not included, because as the
markets develop, the majority of
standardized swaps will be cleared
through DCOs and an indication of ‘‘U’’
would only be necessary for the
reporting of uncleared swaps. The term
‘‘SWM’’ is also omitted since it could be
assumed by market participants and the
public that the swap has taken place on
a swap market. Such an indication
would only be needed if the swap was
done off-facility pursuant to the nonfinancial end-user exception from the
mandatory clearing requirement under
Section 2(h)(7) of the CEA. The start
date is not reported because in this
illustration it is assumed for a swap of
‘‘TXIIIL’’ the start date is always two
business days after the date of execution
(i.e., T+2). The term ‘‘IRS’’ would replace
the separate data fields for asset class
‘‘IR’’ and contract type ‘‘S–’’ as the
standard format once market
participants have become accustomed to
reading data on a consolidated tape for
swaps. The terms ‘‘USD’’ and ‘‘M’’ in
10,000,000 are also dropped because in
this illustration the market would have
developed in such a manner as to
understand that the standard trade is
done in U.S. dollars and in round lots
of one million or in this case ‘‘10’’.
Payment frequency and reset frequency
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would also be excluded for both of the
underlying assets because the symbol
‘‘TXIIIL’’ now represents a plain vanilla
interest rate swap where payment
frequency and reset frequency are
standardized terms of the swap
transaction. The number ‘‘2.53’’ for price
notation remains but in some cases,
such as a basis swap, this field may be
omitted as the market develops. The
symbol ‘‘@0’’ is used because in some
cases front-end, back-end, margin,
collateral or other payments that are not
included in the terms of the swap must
be reported as an additional price
notation characteristic. In this example,
there is no additional price notation that
must be reported. The symbol ‘‘G21’’ is
still reported to indicate that the swap
matures (i.e., terminates) in February
2016.
Example 2:
On Friday, February 4, 2011, Bank X,
once again enters into a plain vanilla 10year fixed versus floating interest rate
swap with Bank Y for a notional amount
of $10 million U.S. dollars. The swap is
scheduled to start on Tuesday, February
8, 2011 (Note: start dates are usually 2
business days later). Bank X is payer of
the fixed leg of the swap and is
obligated to pay a fixed rate of 2.53% on
the notional amount for the ten-year
tenor of the swap. Bank Y is the payer
of the floating leg of the swap and is
obligated to pay the prevailing threemonth LIBOR on the $10 million
notional amount. To illustrate an
exception from the plain vanilla swap,
the first LIBOR payment in this example
is based on the three-month LIBOR rate
for February 4, 2011 with a weekly rate
reset, instead of the normal quarterly
rate reset. Both parties have agreed to
use the same day count convention,
payment currency and notional amount
for both of the underlying assets to the
swap.
Bank X and Bank Y have additional
payments to be made between the two
parties under the terms of the swap.
Bank X is required to deliver a front-end
payment of $500,000 U.S. dollars to
Bank Y, which is represented by an
increase to the fixed-rate payer’s
requirement of ‘‘+0.07’’ and reported in
the additional price notation data field.
For the sake of clarity, this additional
price notation data field should be in
the same format as the price notation
field and be displayed as an addition or
subtraction to the fixed-rate payer’s rate
under the swap.
In order for the parties to protect
themselves from a possible increase in
interest rates, Bank Y purchases a oneyear pay fixed versus floating swaption
with a strike rate of 2.53% to pay fixed
PO 00000
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76157
for 9-years to Bank X (i.e., through the
maturity of the swap). This swaption
effectively will terminate the original
swap with Bank X, and in this example,
we can assume that the cost of the
swaption is $100,000. This swaption
might also be listed as an adjustment to
the fixed rate that Bank Y would receive
from Bank X in the initial swap if the
payments were not made outright, but
were blended into the initial fixed rate.
In this example, this might be
represented by subtracting four basis
points or ‘‘–0.04’’.
The reset and payment frequency for
the fixed rate is semi-annual (every six
months), while the reset and payment
frequency for the three-month LIBOR is
weekly, upon the request of the variable
rate payer. The parties’ requirements
under the swap are scheduled to mature
on Monday, February 8, 2021. Bank X
and Bank Y are both members in good
standing with a SEF named ‘‘Xeqution
Co.’’ and use a DCO named ‘‘ClearitAll’’.
Field
Description
Execution time-stamp
Cleared or uncleared
16:20:47
C (note: the name of
DCO is not reported)
SWM (note: the
name of SEF is not
reported)
08–02–11
IR
S–
TX (note: TX represents Treasury
10 year)
IIIL (note: IIIL represents 3 month
LIBOR)
2.53
+0.07
Execution Venue .......
Start date ..................
Asset class ................
Contract type .............
Underlying asset 1 ....
Underlying asset 2 ....
Price Notation ...........
Additional price notation.
Notional currency 1 ...
Notional or principal
amount 1.
Payment frequency 1
Payment frequency 2
Reset frequency 1 .....
Reset frequency 2 .....
Tenor .........................
Embedded option on
swap.
Option Strike Price ....
Option Type ..............
Option Family ............
Option currency .........
Option premium ........
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07DEP2
USD
10M (note: this may
be reported as
‘‘10,000,000’’)
6M
1W
6M
1W
G21 (note: actual
day is not reported)
EMBED1
O2.53
PF (note: this is always reported from
the point of view of
the variable leg)
EU (note: this is a
European style option)
USD
–.04 (note: this may
be reported as
‘‘$100,000’’ depending on market
conventions)
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Field
Description
Option lockout period
G12 (note: actual
day is not reported)
G21 (note: actual
day is not reported)
Option expiration .......
The Commission believes that as
swaps become more standardized,
market participants or real-time
disseminators may develop a
nomenclature that combines data fields
in an easy-to-follow manner, while
ensuring that all the relevant
information in appendix A to this
proposed part 43 is publicly
disseminated. Even swaps with one or
more non-standard terms may still be
reported in a consolidated format. For
example, the swap in the example above
may be displayed as follows:
srobinson on DSKHWCL6B1PROD with PROPOSALS2
16:20:47 IRS 10 TXIIIL S/1W 2.53 @0.07
G21 EMBED1 EU 2.53PF@–.04 LOG12
In the illustration above, the symbol
‘‘C’’ is not included because as the
markets develop the majority of
standardized swaps will be cleared
through DCOs, and an indication (e.g.,
the symbol ‘‘U’’) would only be
necessary for the reporting of uncleared
swaps. The term ‘‘SWM’’ is also omitted
since, it could be assumed by market
participants and the public that the
swap has taken place on a swap market.
Such indication would only be
necessary if the swap was done offfacility, pursuant to the non-financial
end-user exception from the mandatory
clearing requirement under Section
2(h)(7) of the CEA. The start date not
reported for this swap because in this
illustration, it is assumed that for a
swap of ‘‘TXIIIL’’ the start date is always
two business days after the date of
execution (i.e., T+2). The term ‘‘IRS’’
would replace the separate data fields
for asset class ‘‘IR’’ and contract type ‘‘S’’ as the standard format once market
participants have come accustomed
reading data on a consolidated tape for
swaps. The terms ‘‘USD’’ and ‘‘M’’ in
10,000,000 are also dropped because in
this illustration the market has
developed in such manner as to
understand that the standard trade is
done in U.S. dollars and in round lots
of one million or in this case ‘‘10’’.
The Commission anticipates that in
order for the price notation and
additional price notation data fields to
be of the greatest value to market
participants and the public, some form
of standardization likely will develop
for the purposes of real-time public
reporting and market participants
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consistently use these data fields.63 An
example of the evolution of
standardization is shown in the
illustration above where price notation
is displayed as the number ‘‘2.53’’,
which is equal to the rates associated
with payments on each leg at execution.
Each leg of the swap’s present value of
future payments would be equal to zero
(i.e., a par swap’s value). The symbol
‘‘@0.07’’ is listed in the illustration above
because the present value of the frontend payment is the equivalent of a
higher interest payment of 0.07 over the
life of the swap for the party that is
paying the fixed rate at execution.
Payment frequency and reset frequency
have been represented with an ‘‘S/1W’’
for the underlying assets because the
symbol ‘‘TXIIIL’’ represents a plain
vanilla interest rate swap where
payment frequency and reset frequency
are standardized terms of the swap
transaction. In the illustration above,
however, only the Treasury leg is
standard, while the floating LIBOR leg
is set to weekly versus its standard
quarterly format. The symbol ‘‘G21’’ is
reported to indicate that the
requirements under the swap terminate
in February 2021. In this illustration,
‘‘TXIIIL’’ is still used as a symbol that
lets participants know several of the
previously required data fields are
standardized and combined and
therefore do not need to be displayed
separately for real-time public reporting,
while those fields that are non-standard
are simply broken out and reported
separately in a more traditional long
format.
The interest rate swap in this
illustration contains an embedded
option that is broken out so that data
fields can be easily comparable across a
wider variety of similar, but not
identical swaps, thus promoting posttrade price transparency. The term
‘‘EMBED1’’ indicates that this interest
rate swap has an embedded option and
the pricing information for such
embedded option follows on the realtime public reporting consolidated tape.
The symbol ‘‘2.53PF’’ replaces the
separate data fields for option strike
price ‘‘O2.53’’ and option type ‘‘PF’’.
Option family ‘‘EU’’ is included in the
consolidated tape to indicate the family
of the embedded option. The option
currency ‘‘USD’’ is left off of this
transaction because it is assumed for a
‘‘TXIIIL’’ swap, the option currency for
any embedded options would be ‘‘USD’’,
unless broken out and reported
individually. The symbol ‘‘LOG12’’ is
63 It
is important to note that such standards are
not intended to change the form in which market
participants use to quote or construct swaps.
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used instead of ‘‘G12’’ to indicate the
lock out period to provide clarity. The
option expiration of ‘‘G21’’ is omitted
because the embedded option is
assumed to be in a standard form and
as such would be set to expire at the
same time as the swap itself. If such
embedded option was not in standard
form, then the option expiration field
would have been reported as an
additional data field.
The Commission requests comment
on all aspects of the data fields in
appendix A to proposed part 43 that
would be required to be reported in realtime under this proposal. In addition,
the Commission requests specific
comment on the following issues:
• Do commenters agree with the
proposed data fields that would be
required to be reported in real-time? If
not, what additional data fields should
be reported and why? How would
public dissemination of these data fields
enhance transparency and price
discovery?
• Which data fields, if any, should
not be required to be publicly
disseminated in real-time and why?
• Would public dissemination of
certain data fields reduce market
liquidity? 64 If so, why?
• Should the portion of the amount
reported in the additional price notation
data field that relates to the
creditworthiness of a counterparty be
extracted and reported as a separate data
field? If so, why? Should the
creditworthiness of a counterparty be
reported in some other way?
• Do commenters agree that tenure
should only be reported with month and
year? Is this a useful method for
protecting the anonymity of the
counterparties? Does this provide an
adequate level of transparency?
• Do commenters agree with the
proposed method for real-time reporting
and public dissemination of nonstandardized swaps? Should the
‘‘indication of other price affecting term’’
data field contain more specificity as to
what type of term is affecting the price?
If so, what additional information
should be included and how should it
be reported?
• Would public dissemination of
information concerning nonstandardized swaps materially reduce
market liquidity? If so, why? 65
• Under the proposal, the swap
instrument data field would only be
required for block trades and large
notional swaps, should this data field be
reported for all swaps? If so, why?
64 Section 2(a)(13)(E)(iv) requires that the
Commission ‘‘take into account whether the public
disclosure will materially reduce market liquidity.’’
65 See Section 2(a)(13)(E)(iv).
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srobinson on DSKHWCL6B1PROD with PROPOSALS2
• Would information concerning the
type of counterparties that enter into a
swap enhance transparency and price
discovery (e.g., whether the
counterparty is a swap dealer, MSP, or
not)? If so, why?
• Would separately reporting
embedded option information enhance
price discovery and transparency? If
not, why?
• Do proposed § 43.4 and appendix A
to proposed part 43 provide adequate
guidance with respect to the
information that must be reported? If
not, what additional guidance do
commenters believe is necessary?
• Do commenters agree with the
reporting of price-affecting continuation
events? Should data relating to these
events be publicly disseminated in realtime in the same way as new swap
transactions? What additional types of
transactions, if any, would be priceaffecting continuation events that
should be reported and publicly
disseminated in real-time?
• What would be the costs of
reporting and publicly disseminating
the proposed data fields? What would
be the benefits? Please provide
examples, if possible.
5. Proposed Section 43.5—Block Trades
and Large Notional Swaps
Sections 2(a)(13)(E)(ii) and (iii) of the
CEA authorize the Commission to
prescribe rules ‘‘to specify the criteria
for determining what constitutes a large
notional swap transaction (block trade)
for particular markets and contracts’’
and ‘‘to specify the appropriate time
delay for reporting large notional swap
transactions (block trades) to the
public.’’ As discussed in the Background
Section above, while Section 2(a)(13)(E)
of the CEA specifically refers to the
swaps described only in Sections
2(a)(13)(C)(i) and 2(a)(13)(C)(ii) of the
CEA (i.e., clearable swaps, including
swaps that are exempt from clearing),
the Commission believes that it is
appropriate to consider the four criteria
in Section 2(a)(13)(E) of the CEA for all
four categories of swaps described in
Section 2(a)(13)(C) of the CEA.66
Therefore, proposed § 43.5 establishes:
(1) the procedures for determining the
appropriate minimum sizes for block
trades and large notional swaps; and (2)
the appropriate time delays for the
reporting of block trades and large
notional swaps.
In developing the proposed rules with
respect to block trades and large
notional swaps, the Commission
considered its guidance with respect to
66 Pursuant to the Commission’s authority under
Sections 2(a)(13)(B) and 2(a)(13)(E)(iii) of the CEA.
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block trades in the futures markets.
Additionally, the Commission
considered the treatment of block trades
in other markets (both foreign and
domestic), such as those for equities,
options and corporate bonds. Further,
the Commission considered the
treatment and effects of swaps with
large notional or principal amounts in
the current OTC swap markets. The
Commission is not aware of any
academic literature that offers empirical
evidence to support the claim of
impaired liquidity given greater
transparency or how block trades on
swaps or large notional swaps are
affected by a post-trade transparency
regime.67
The Commission recognizes that the
term ‘‘block trade’’ has different
meanings in different markets. For
example, in the futures markets, a block
trade is a permissible, privately
negotiated transaction that equals or
exceeds a DCM’s specified minimum
quantity of futures or options contracts
and is executed away from the DCM’s
centralized market but pursuant to its
rules.68 Block trades are large-sized
transactions that would cause a
significant price impact if required to be
executed on the DCM’s centralized
market. In contrast, the Commission
understands, through discussions with
market participants, that in the swaps
markets, asset managers that execute
OTC swaps and then later distribute or
allocate the swap to various clients or
funds may refer to such bunched
transactions as block trades. To clarify
the Commission’s view of block trades
on swaps, the proposed rules include
definitions for both ‘‘block trade’’ and
‘‘large notional swap’’.69
67 The Commission will continue to analyze and
study the effects of increased transparency on posttrade liquidity, particularly in the context of block
trades on swaps and large notional swaps. The
Commission expects that, as post-trade
transparency is implemented in the context of the
Dodd-Frank Act, new data will come to light that
will inform the discussion and could cause
subsequent revision of the proposed rules.
68 See, e.g., CME Rulebook, Rule 526 (‘‘Block
Trades’’). Available at: https://www.cmegroup.com/
rulebook/CME/; ICE Futures U.S.
Rulebook, Rule 4.31 (‘‘Block Trading’’). Available at:
https://www.theice.com/Rulebook.shtml?
futuresUSRulebook=.
69 The legislative history to the Dodd-Frank Act
provides the following statement by Senate
Agriculture Committee Chairwoman Blanche
Lincoln regarding block trades and large notional
swaps: ‘‘I would like to specifically note the
treatment of ‘block trades’ or ‘large notional’ swap
transactions. Block trades, which are transactions
involving a very large number of shares or dollar
amount of a particular security or commodity and
which transactions could move the market price for
the security or contract, are very common in the
securities and futures markets. Block trades, which
are normally arranged privately, off exchange, are
subject to certain minimum size requirements and
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76159
i. Parties to a Block Trade or Large
Notional Swap
Proposed § 43.5(b)(1) provides that
any party to a block trade or large
notional swap is required to be an
eligible contract participant (‘‘ECP’’) as
that term is defined in Section 1(a)(18)
of the CEA. The ECP requirement relies
on Section 2(e) of the CEA, which
provides that ‘‘[i]t shall be unlawful for
any person, other than an eligible
contract participant, to enter into a swap
unless the swap is entered into on, or
subject to the rules of, a board of trade
designated as a contract market under
section 5.’’ The parties to any block
trade, pursuant to a swap market’s rules,
and any large notional swap executed
off-facility, must be ECPs. However, the
proposed rule makes clear that a
registered DCM may allow commodity
trading advisors acting in an asset
managerial capacity and investment
advisors that have over $25 million in
assets under management, including
foreign persons performing equivalent
roles, to carry out block trades on a
registered DCM for non-ECP customers.
Any such person may not conduct a
trade on behalf of a customer unless the
person receives instruction or prior
consent to do so.
Proposed § 43.5(b)(2) requires that
parties to a swap that is equal to or
greater than the minimum block trade
size must elect to be treated as a block
trade and that the swap market must
provide the real-time disseminator with
such election. The block trade election
allows parties to a swap to calculate the
impact of executing the transaction
bilaterally and delaying public
dissemination versus executing the
transaction on a swap market’s trading
system or platform where there would
be no delay in the dissemination of the
swap’s transaction and pricing data.
Proposed § 45.5(b)(2) also requires that
the parties to a swap that qualifies as a
large notional swap must elect to be
treated as a large notional swap and the
reporting party must provide the realtime disseminator with such election.70
ii. Block Trades on Swaps
Proposed § 43.2(f) and (l) define
‘‘block trade’’ and ‘‘large notional swap’’
time delayed reporting * * *.’’ 156 Cong. Rec.
S5921 (daily ed. July 15, 2010) (statement of Sen.
Blanche Lincoln).
70 By way of comparison, a party to a futures
contract may elect not to treat the transaction as a
block trade. By not electing to treat the transaction
as a block trade, the party is choosing to place its
order on the DCM’s centralized market. The party
who makes such an election may believe that it will
receive a better price in settling its trade
immediately, on the DCM’s centralized market,
rather than bilaterally negotiating the transaction
and delaying the reporting of the trade.
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as separate concepts to distinguish the
difference between large notional or
principal sized trades executed
pursuant to a swap market’s rules (block
trades) and off-facility swaps that are
not subject to a swap market’s rules but
have very large notional or principal
sizes (large notional swaps). Proposed
§ 43.2(f) defines a block trade as a swap
transaction that: (1) Involves a swap that
is made available for trading or
execution on a swap market; (2) occurs
off the swap market’s trading system or
platform pursuant to the swap market’s
rules and procedures; (3) is consistent
with the minimum block trade size
requirements set forth in proposed
§ 43.5; and (4) is reported in accordance
with the swap market’s rules and
procedures and subject to the
appropriate time delay set forth in
proposed § 43.5.71
Proposed § 43.5(c)(2) provides that a
reporting party for any block trade must
report the block trade transaction and
pricing data pursuant to the rules of the
swap market that makes that swap
available for trading. Such reporting
must occur as soon as technologically
practicable after execution of the block
trade and pursuant to the rules of the
swap market.
Proposed § 43.5(c)(3) would require
the swap market that accepts the block
trade to immediately send the block
trade transaction and pricing data to a
real-time disseminator, which shall not
publicly disseminate the swap
transaction and pricing data before the
expiration of the appropriate time delay
described in proposed § 43.5(k)
discussed below.
The Commission requests comment
generally on all aspects of the proposed
rules regarding block trades. In addition,
the Commission requests specific
comment on the following issues:
• Do commenters agree with the
proposed definition of ‘‘block trade’’? If
not, why?
• Do commenters believe that the
Commission should set a maximum
time frame in which a reporting party
must report a block trade to a swap
market, or should such time period be
defined pursuant to the rules of the
respective swap markets?
srobinson on DSKHWCL6B1PROD with PROPOSALS2
iii. Large Notional Swaps
Proposed § 43.2(l) defines a large
notional swap as a swap that (1) is not
available for trading or execution on a
swap market; (2) is consistent with the
appropriate size requirements for large
notional swaps set forth in proposed
71 Both
block trades and large notional swaps
would only apply to new events (i.e., not price
affecting continuation events).
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§ 43.5; and (3) is reported in accordance
with the appropriate time delay
requirements set forth in proposed
§ 43.5. Similar to the proposed reporting
requirements for block trades, the
reporting party to a large notional swap
must report to a real-time disseminator
as soon as technologically practicable.
Such large notional swaps may include:
(1) Swaps that would have been subject
to mandatory clearing, and for which an
end-user relies on the exception from
the mandatory clearing requirement in
Section 2(h)(7) of the CEA; 72 or (2) other
off-facility swaps that are not subject to
mandatory clearing but have large
notional amounts (which would include
non-standardized swaps). The proposed
rules provide that if a swap is
sufficiently large in notional or
principal amount, such swap could be
considered a large notional swap and
therefore may be eligible for the same
time delay in real-time public reporting
as block trades.
Proposed § 43.5(d) requires the
registered SDR that has received the
swap transaction and pricing data for a
large notional swap not to publicly
disseminate such data before the
expiration of the appropriate time delay
described in proposed § 43.5(k).
Proposed § 43.5(e) provides that an
off-facility swap where neither
counterparty is a swap dealer or an MSP
(e.g., a swap between two end-users)
may be eligible to be a large notional
swap. Although the parties to these
swaps will not be registrants with the
Commission, this provision specifies
that such swaps (i.e., end-user to enduser transactions) will be treated the
same as swaps in which a swap dealer
or MSP is a party.
The Commission requests comment
generally on all aspects of the proposed
rules regarding large notional swaps. In
addition, the Commission requests
specific comment on the following
issues:
• Do commenters agree with the
proposed definition of ‘‘large notional
swap’’? If not, why?
• Do commenters agree that offfacility swaps in which neither party is
a swap dealer or an MSP be eligible to
be treated as large notional swaps? If
not, why?
iv. Time-Stamp and Reporting
Requirements for Block Trades and
Large Notional Swaps
In addition to the execution timestamp requirement under proposed
72 As described below, swaps that rely on the
exception in Section 2(h)(7) of the CEA, although
large notional swaps, are subject to the same time
delay as block trades.
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§ 43.4 and appendix A to proposed part
43, proposed § 43.5(f) would require a
swap market and registered SDR that
accepts and publicly disseminates swap
transaction and pricing data in real-time
to have additional time-stamp
requirements with respect to block
trades and large notional swaps.
Proposed § 43.5(f)(1) would require
swap markets to time-stamp swap
transaction and pricing data with the
date and time to the nearest second (1)
when such swap market receives the
data from a reporting party and (2) when
a swap market transmits such data to a
real-time disseminator. Proposed
§ 45.5(f)(2) would require registered
SDRs that accept and publicly
disseminate swap transaction and
pricing data in real-time to time-stamp
such data with the date and time to the
nearest second when (1) such registered
SDR receives such swap transaction and
pricing data from a swap market or
reporting party and (2) when such data
is publicly disseminated.73 Proposed
§ 43.5(f)(3) would require that records of
these additional time-stamps be
maintained for a period of at least five
years from the execution of the block
trade or large notional swap. The
Commission believes that requiring a
swap market and a registered SDR to
time-stamp these actions for block
trades and/or large notional swaps is
essential in providing an audit trail for
block trade and large notional swap
transactions from execution through
public dissemination. Additionally,
such time-stamps would provide the
Commission ability to monitor whether
reporting parties, swap markets and
registered SDRs are reporting the block
trades and large notional swaps in the
manner described in proposed part 43.
v. Responsibilities of Registered SDRs in
Determining the Appropriate Minimum
Block Size
Proposed § 43.5(g) would require
registered SDRs to calculate the
appropriate minimum block size 74 for
73 Proposed § 43.5(f) would require five distinct
time-stamps for block trades and three distinct
time-stamps for large notional swaps. Block trades
would receive a time-stamp by: (1) The parties at
execution; (2) the swap market upon receipt of the
data; (3) the swap market when it sends the data
to a real-time disseminator; (4) the real-time
disseminator upon receipt of the data; and (5) the
real-time disseminator upon public dissemination
of the data. A large notional swap would receive a
time-stamp: (1) The parties at execution; (2) the
real-time disseminator (a registered SDR, if
available) upon receipt of the data; and (3) the realtime disseminator (a registered SDR, if available)
upon public dissemination of the data.
74 Proposed § 43.2(c) defines ‘‘appropriate
minimum block size’’ to mean the minimum
notional or principal size of a swap instrument that
qualifies swaps within such category of swap
instrument as a block trade.
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determinations of the appropriate
minimum block size for swap
instruments?
srobinson on DSKHWCL6B1PROD with PROPOSALS2
swaps for which such registered SDR
receives data in accordance with
Section 2(a)(13)(G) of the CEA. Such
appropriate minimum block size for a
swap instrument 75 shall be the greater
of the resulting number derived from
the ‘‘distribution test’’ and the ‘‘multiple
test’’ (each described below).76 If there is
only one registered SDR for a particular
asset class, the registered SDR would
have to calculate the appropriate
minimum block size. Since registered
SDRs will be receiving data from all
swaps within an asset class, they should
have a more complete set of swap data
and therefore the calculations will be
based off of a more complete set of swap
data. In the event that there are multiple
registered SDRs for an asset class, and
therefore, multiple registered SDRs
would accept swaps for a particular
category of swap instrument, the
Commission will prescribe how the
appropriate minimum block size should
be calculated, in a way that accounts for
all the relevant data.77
The Commission requests comment
on the appropriate methods to calculate
the appropriate minimum block size
when more than one registered SDR
accepts swap data for a particular asset
class or swap instrument. In addition,
the Commission requests specific
comment on the following issues:
• Who should determine the
appropriate minimum block size when
there is more than one registered SDR
that accepts swap data for a particular
asset class or instrument?
• Should the Commission require
registered SDRs to self-certify
Section 2(a)(13)(E)(ii) of the CEA
directs the Commission to determine the
appropriate minimum size for large
notional swaps and block trades.78
Proposed § 43.5(g)(1) describes the
procedure and calculations that a
registered SDR must follow in
determining the appropriate minimum
block size. In determining the
appropriate calculations, the
Commission considered: (1) Currently
existing size standards for block trades
in other markets; (2) the potential
impact of block trades on liquidity; and
(3) the frequency of block trades in other
markets, including equities, bonds and
futures markets. The Commission also
considered the standards used by
TRACE in setting its minimum
threshold for block trades.79 In that
regard, for trades with a par value
exceeding $5 million for investmentgrade bonds or $1 million for noninvestment grade bonds (e.g., high-yield
and unrated debt), TRACE publicly
disseminates the quantity as ‘‘5MM+’’
and ‘‘1MM+’’, respectively.80 In
developing the appropriate minimum
block size formula, the Commission
considered the many differences within
the swaps markets, including
differences in liquidity between
particular markets and contracts and
differences in product types between
75 As discussed below, proposed § 43.2(y) defines
‘‘swap instrument’’ to mean a grouping of swaps in
the same asset class with the same or similar
characteristics. Swaps in a category of swap
instruments may be traded on SEFs, DCMs or offfacility. The Commission is requesting general and
specific comment about the determination of swap
instrument, as explained in the discussion of
appendix A to part 43 above.
76 The Commission has the authority to require
registered SDRs to provide the appropriate block
trade minimum size to the public under Sections
21(c)(4)(B) and 21(c)(5) of the CEA. Section
21(c)(4)(B) of the CEA states that an SDR shall
provide data ‘‘in such form and at such frequency
as the Commission may require to comply with the
public reporting requirements contained in section
2(a)(13).’’ Section 21(c)(5) of the CEA states that an
SDR shall ‘‘at the direction of the Commission,
establish automated systems for monitoring,
screening, and analyzing swap data, including
compliance and frequency of end-user clearing
exemption claims by individual and affiliate
entities.’’
77 The Commission is considering alternative
methods on how to determine the appropriate
minimum block size when there is more than one
registered SDR that accepts data for a particular
asset class, including requiring a registered SDR to
follow the requirements in § 40.6(a) of the CEA to
self-certify the appropriate minimum block size and
having the Commission make a determination of the
appropriate minimum block size for a swap
instrument.
78 The legislative history to the Dodd-Frank Act
provides the following statement by Senate
Agriculture Committee Chairwoman Blanche
Lincoln regarding the calculation of the minimum
size for block trades and large notional swaps: ‘‘The
committee expects that regulators to distinguish
between different types of swaps based on the
commodity involved, size of the market, term of the
contract and liquidity in that contract and related
contracts, i.e.; for instance the size/dollar amount of
what constitutes a block trade in 10-year interest
rate swap, 2-year dollar/euro swap, 5-year CDS, 3year gold swap, or a 1-year unleaded gasoline swap.
While we expect the regulators to distinguish
between particular contracts and markets, the
guiding principal in setting appropriate block trade
levels should be that the vast majority of swap
transactions should be exposed to the public
through exchange trading.’’ 156 Cong. Rec. S5,921–
22 (daily ed. July 15, 2010) (statement of Sen.
Blanche Lincoln).
79 TRACE does not use the term ‘‘block trades.’’
Rather, the TRACE system uses the term
‘‘disseminated volume caps.’’ In discussions
between TRACE representatives and staff, TRACE
informed staff that disseminated volume caps are,
for all intents and purposes, substantially similar to
the minimum size requirements for block trades.
80 See TRACE, Trade Reporting and Compliance
Engine, User Guide, Version 2.4—March 31, 2010,
p. 50, https://www.finra.org/web/groups/industry/
@ip/@comp/@mt/documents/appsupportdocs/
p116039.pdf.
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vi. Formula To Calculate the
Appropriate Minimum Block Size
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asset classes and within the same asset
class.
Proposed § 43.5(g)(1) would also
require a registered SDR to set the
appropriate minimum block size at the
greater resulting number of each of the
‘‘distribution test’’ and ‘‘multiple test.’’
vii. Distribution Test
Proposed § 43.5(g)(1)(i) describes the
distribution test as applying the
‘‘minimum threshold’’ to the
‘‘distribution of the notional or principal
transaction amounts.’’ The proposed
distribution test would require a
registered SDR to create a distribution
curve to see where the most and least
liquidity exists based on the notional or
principal transaction amounts for all
swaps within a category of swap
instrument.81 The application of the
distribution test requires a registered
SDR to determine first the distribution
of the rounded notional or principal
transaction amounts of swaps (rounded
pursuant to the proposed rules in
§ 43.4(i)) within a category of swap
instrument and then calculate a notional
or principal size for such swap
instrument that is greater than the
minimum threshold.
Proposed § 43.5(g)(1)(i)(A) would
require a registered SDR to pool and
perform an empirical distributional
analysis on the transactional data for the
swaps included in each category of
swap instrument by pooling the data
from such swaps for which it has data
that are executed on a swap market and
that are executed off-facility. Proposed
§ 43.5(g)(1)(i)(A) also provides that a
registered SDR may consider other
economic information in determining
the appropriate minimum block size, in
consultation with the Commission.82
The registered SDR should: (1) identify
all of the rounded notional or principal
amounts traded; (2) group the
transactions of a particular swap
instrument based on the rounded
notional or principal amounts; 83 and (3)
81 For the purposes of determining the
appropriate minimum block size, swaps may be
grouped by asset class into a category of swap
instruments. As discussed above, proposed § 43.2(y)
defines swap instrument as a grouping of swaps in
the same asset class with the same or similar
characteristics. A registered SDR would determine
a swap instrument based on different criteria per
asset class. The Commission is requesting comment
on the appropriate criteria to determine the
categories of swap instruments for a particular asset
class.
82 The Commission anticipates that as swap
markets develop, certain adjustments for
seasonality, etc., may become relevant depending
on the particular type of swap contract.
83 Rounding would occur pursuant to the
rounding rules for the real-time public reporting of
notional or principal amounts which are illustrated
in proposed § 43.4(i).
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srobinson on DSKHWCL6B1PROD with PROPOSALS2
calculate the empirical distribution of
all trades for the swap instrument.
Once the distribution of notional or
principal transaction amounts is
completed for a swap instrument, a
registered SDR must then apply the
minimum threshold to such
distribution. Proposed § 43.5(g)(1)(i)(B)
describes the ‘‘minimum threshold’’ as a
notional or principal amount that is
greater than 95% of transaction sizes in
a category of swap instrument during
the period of time represented by the
distribution of the notional or principal
transaction amounts. Setting the
threshold level at 95% ensures that the
resulting number from the distribution
test will be large relative to the notional
value of other swaps of the same type.
In determining the appropriate
percentage at which to set the
‘‘minimum threshold,’’ the Commission
considered the impact of block trades in
selected futures markets.84 In the
studies conducted by the Commission,
the Commission found that block trades
made up a small percentage of the
overall markets, accounting for less than
0.075% of total trades in the three
observed markets (i.e., ED, CL and RB
futures contracts). Recognizing that the
market for swaps is not as liquid as that
of futures, and recognizing market
participants’ needs to lay-off risk
associated with block trades, the
Commission is proposing a minimum
threshold of greater than 95%.
viii. Multiple Test
Proposed § 43.5(g)(1)(ii) provides that
to apply the multiple test to a swap
instrument, a registered SDR shall
multiply the ‘‘block multiple’’ by the
‘‘social size’’.85 The multiple test is
necessary since the market for a swap
instrument may be illiquid and there
may be very few transactions over a
particular period to provide a
meaningful distribution of transaction
amounts.
Proposed § 43.5(g)(1)(ii)(A) provides
that the social size shall be determined
by: (1) Calculating the mode, median
and mean transaction sizes for all swaps
within a category swap instrument; and
(2) choosing the greatest of the mode,
median and mean transaction sizes.86
Commission staff’s research and
external meetings with market
participants indicated that a swap’s
‘‘social size’’ is an important criterion in
quantifying an appropriate minimum
block size.87 The social size, or
84 The Commission examined trading data for the
Eurodollar (‘‘ED’’), crude oil (‘‘CL’’) and reformulated
gasoline blendstock for oxygenate blending (‘‘RB’’)
futures contracts, among other contracts. In the ED,
CL and RB studies, the relevant time period was
February 2009 to September 2010 (‘‘relevant time
period’’). The Commission evaluated the frequency
of use and impact of block trades in these three
futures markets, which represent both liquid (e.g.,
ED) and less liquid (e.g., RB) markets. In the ED
futures market, the Commission looked at a total of
56,643,563 trades of which 502 trades were block
trades under CME’s rules, representing 0.00089% of
all trades in the ED futures market during the
relevant time period. The average size of an ED
futures block trade during the relevant time period
consisted of 2,835 contracts, and the largest ED
futures block trade consisted of 21,800 contracts. In
the RB futures market, the Commission looked at
10,230,939 trades of which 7,551 trades met the
minimum qualifications of a block trade,
representing 0.0739% of all trades in the RB futures
market during the relevant time period. The average
size of a RB futures block trade was 106.47
contracts and the largest RB futures block trade was
1,050 contracts. Lastly, in the CL futures market, the
Commission looked at 53,796,956 trades of which
9,346 trades were block trades, representing
0.0173% of all trades during the relevant time
period. The average size of a block trade in CL
futures was 294.2 contracts and the largest
individual trade was 5,200 contracts.
At the time of the study, the block trade
minimum was 4,000 ED futures contracts (or 1,000
ED futures contracts, provided that a minimum of
1,000 contracts are transacted in years 6–10), the
block trade minimum size for RB futures was 100
contracts and the block trade minimum size for RB
futures was 100 contracts. See CME & CBOT Market
Regulation Advisory Notice RA1006–3, October 19,
2010. Available at:
https://www.cmegroup.com/rulebook/files/
CME_CBOT_RA1006–3.pdf. See also, CME Rule 526
(‘‘Block Trades’’). Available at: https://
www.cmegroup.com/rulebook/CME/I/5/26.html.
85 Proposed § 43.2(x) defines the ‘‘social size’’ as
the greatest of the mode, median and mean
transaction sizes of a particular type of swap.
86 The Commission also considered using one of
the mode, median, or mean of a swap instrument
category as the sole measurement of social size
without first comparing the three to determine
which is largest. However, the Commission
determined such a methodology would render an
incomplete understanding of a particular swap
category. By itself, the mean would not represent
the social size of a particular type of swap because,
as the sum of the values divided by the total
number of transactions, it would fail to accurately
account for the influence of outliers at the extreme
large end of the data set. The median, although it
would take into account swap transaction outliers,
would fail to accurately reflect which trade size is
transacted most often. Finally, the mode, which
would represent the trade size that occurs most
frequently in a particular type of swap, would fail
to take into account a market where trade sizes were
thinly spread and where there were large gaps in
data points or in swap markets without a normal
distribution.
87 See, e.g., Comments from Robert Cook, Director
of the Division of Trading and Markets, SEC, Yunho
Song, Managing Director/Senior Trader, Bank of
America Merrill Lynch and Conrad Volstad, Chief
Executive Officer, ELX Futures, L.P.:
Mr. Cook: Let me ask in terms of methodology,
it’s been argued by some to us that there are certain
markets where there’s a social size of trade or fairly
standardized level of trading that could be used as
a part of a building block or measuring—
measurement of a block trade and others where
there aren’t. I would just ask if, in your experience,
there are generalizations that can be drawn and, if
so, what product categories do you think would
lend themselves most to that type of approach to
the issue?
Mr. Song: Well, I’ll have a go at this. It’s relatively
the easiest for the most liquid products say like
interest rate swaps because you can get data from
banks and brokers as to—like data mining. How
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customary transaction size, for a swap
varies by asset class, tenor and delivery
points.
Once the social size is determined,
the registered SDR must then apply the
block multiplier. Proposed
§ 43.5(g)(1)(ii)(B) provides that the block
multiple shall be set at five, so therefore
the registered SDR should multiply the
social size by five. The resulting product
will be the number that the registered
SDR compares to the resulting number
from the distribution test, the greater of
which will be the appropriate minimum
block size for such swap instrument. In
determining the block multiplier, the
Commission selected a number that it
believed would help to ensure that the
block trade size was sufficiently large
relative to the trading in a particular
market and would take into account
those markets that have very little
trading.
The Commission believes this
proposed two-part test is necessary to
ensure that qualifying block trades are,
in fact, large trades relative to the
notional or principal amounts for a
swap instrument.88 For example,
suppose there is a swap instrument that
has 500 trades over a one month period
and all of the specific swap instruments
had notional values between $50 and
$60 million. Using the distribution test,
the appropriate minimum block size
would be somewhere close to $60
million. Using the multiple test, the
appropriate minimum block size would
be $275 million.89 The $60 million
many trades have you done? What is the maturity
profile? What is the median ticket size? What ticket
size will put you in the top tenth percentile? Those,
I think, you would have the relatively the least
amount of hurdles to derive those number
scientifically. Where it gets difficult is with the
products that might trade, like, once a month,
because then you’ve got the issue with these lumpy
trades, right. It could be very illiquid. Well, you
may not trade for a few months. You do this
gigantic trade and then you do very little trades
again and then another gigantic trade. But for—
again for the bulk of the OTC derivative market, for
interest rate swaps and plain vanilla options, I
believe that that data is relatively readily available.
Mr. Voldstad: I would think the same is true for
(inaudible) credit default swaps as it is for various
indices. Roundtable Tr. at 376–377.
88 The legislative history to the Dodd-Frank Act
provides the following statement by Senate
Agriculture Committee Chairwoman Blanche
Lincoln regarding the calculation of the minimum
size for block trades and large notional swaps:
‘‘Block trades, which are transactions involving a
very large number of shares or dollar amount of a
particular security or commodity and which
transactions could move the market price for the
security or contract, are very common in the
securities and futures markets. ’’ 156 Cong. Rec.
S5,921 (daily ed. July 15, 2010) (statement of Sen.
Blanche Lincoln).
89 Assuming that the median ($55 million) is the
largest of the mode, median and mean, the median
would be multiplied by the block multiplier (five
(5)) to equal $275 million.
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notional size determined by the
distribution test would not move the
market (since the market can clearly
handle that size) and would therefore
not be a large notional amount relative
to the other notional amounts that
traded over the one month period.
Therefore, in this example, the
distribution test alone would not
provide a good measure for the
appropriate minimum block size. The
proposed rules would require the
registered SDR to compare the resulting
number from the distribution test to
resulting number from the multiple test.
The greater of the two numbers would
be the appropriate minimum block size
for a swap instrument, which the
registered SDR would post on its
Internet Web site. In the example above,
the result of the multiple test ($275
million) is greater than the distribution
test and therefore would be the
appropriate minimum block size that is
posted by the registered SDR for the
swap instrument.
With respect to newly-listed swaps, a
registered SDR would be required to
evaluate the distribution of notional or
principal transaction amounts and
calculate the mode, median and mean,
over the one month period following the
registered SDR’s acceptance of the swap
data pursuant to Section 2(a)(13)(G) of
the CEA. Proposed § 43.5(g)(2) provides
that after such one month period, the
registered SDR would assign the newlylisted swap to the appropriate category
of swap instrument or determine that a
new category of swap instrument was
necessary and would set an appropriate
minimum block size. Proposed
§ 43.5(g)(2) also provides that registered
SDRs should make an initial
determination of the appropriate
minimum block size 90 for a newlylisted swap one month after such newlylisted swap is first executed and
reported to the registered SDR pursuant
to Section 2(a)(13)(G) of the CEA. The
Commission believes that one month of
trading data provides a registered SDR
with sufficient data to determine an
appropriate minimum block size for a
swap instrument.
Proposed § 43.5(g)(3) provides that
registered SDRs must publish the list of
the appropriate minimum block sizes in
swap instruments on its Internet Web
site, for which the registered SDR has
received data pursuant to Section
2(a)(13)(G) of the CEA. Such appropriate
minimum block size information must
90 As discussed, such initial determination may
be done by either grouping such newly-listed swap
into an existing swap instrument category or by
creating a new category of swap instrument and
determining the appropriate minimum block size
based on the criteria set forth in proposed § 43.5.
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be available to the public in an open
and non-discriminatory manner.
Proposed § 43.5(g)(4) would require
that a registered SDR evaluate the
distribution of notional or principal
transaction amounts and calculate the
mode, median and mean, on a yearly
basis, initially beginning in accordance
with the implementation timeframe for
which the Commission is requesting
public comment. The Commission
recognizes that the appropriate
minimum block size for a swap
instrument may change due to market
conditions. Such annual adjustments
are in addition to the requirement to
provide an appropriate minimum block
size for newly-listed swaps one month
after the registered SDR first receives
data for such swap. Publishing the
information on the same date each year
(10th business day) will allow swap
markets, market participants and the
public certainty as to when they should
check the appropriate minimum block
sizes and, in the case of swap markets,
adjust the minimum block trade sizes.
In making its calculations, the registered
SDR should look back to the data over
the previous year for a category of swap
instrument. If a particular swap
instrument does not have a an entire
year’s worth of data, the proposed rules
provide that the registered SDR should
use the data that it has to make its
determination of the appropriate
minimum block size for a particular
swap instrument. Proposed § 43.5(g)(4)
also provides that registered SDRs shall
begin to publish appropriate minimum
block sizes for swap instruments in
January 2012. The Commission believes
that such timeframe allows the
registered SDRs enough time to receive
data to determine appropriate minimum
block sizes for swap instruments.
The Commission considered the
burden on registered SDRs and the
benefit to market participants, swap
markets and the public in proposing an
annual update of the appropriate
minimum block size. Allowing for a
longer period between reviews would,
presumably, bring more certainty to
traders who engage in long-term
investment strategies. However, such
longer periods would fail to take into
account the dynamic nature of swaps
markets, as significant changes in swaps
markets may occur in a relatively short
amount of time. Therefore, previously
established appropriate minimum block
sizes may fail to accurately reflect the
market. Conversely, shorter timeframes
(e.g., weekly, monthly, quarterly, etc.)
were considered by the Commission,
but such updates may be burdensome
on registered SDRs and may create
instability for market participants who
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76163
engage in long-term investment
strategies. The Commission believes that
an annual review of the appropriate
minimum block sizes is appropriate to
balance these competing interests.91
ix. Responsibilities of Swap Markets in
Determining Minimum Block Trade
Sizes
Proposed § 43.5(h) provides that after
an ‘‘appropriate minimum block size’’ is
established by either a registered SDR or
by a Commission prescribed method, a
swap market shall set the ‘‘minimum
block trade size’’ 92 for those swaps that
it lists and wishes to allow block
trading, by referring to the appropriate
minimum block size that is posted on a
registered SDR’s Internet Web site for
the swap instrument category for such
swap. A swap market must set the
minimum block trade size for a swap at
an amount that is equal to or greater
than the appropriate minimum block
size listed by the appropriate registered
SDR. A swap market would be
responsible for ensuring that the
minimum block trade sizes for swaps
that it lists are consistent with the
annual updates to the appropriate
minimum block size for swap
instruments. Additionally, a swap
market would have to immediately
apply any change to the minimum block
size of a particular swap, following the
posting of an appropriate minimum
block size by a registered SDR. The
swap market should follow the
requirements set forth in § 40.6(a) of the
Commission’s regulations.93
Proposed § 43.5(h) provides that if a
swap market wishes to set a minimum
block trade size for a swap that does not
have an appropriate minimum block
size listed by a registered SDR, the swap
market must follow the rules in
proposed § 43.5(i) which discusses the
procedure for setting the minimum
block trade size for newly-listed swaps.
Proposed § 43.5(i) would require a
swap market to set a minimum block
trade size for newly-listed swap.
Proposed § 43.2(n) defines a ‘‘newly91 Registered SDRs will have the relevant swap
data readily available since it will be sent to them
pursuant to Section 2(a)(13)(G) of the CEA, and the
Commission does not anticipate that the annual
review calculations required by this proposed rule
will be burdensome on a registered SDR.
Additionally, market participants and the public
will receive the benefit of having up-to-date,
appropriate minimum block sizes that accurately
reflect the current market for a swap instrument.
92 Proposed § 43.2(m) defines ‘‘minimum block
trade size’’ as the minimum notional or principal
amount, as determined by each swap market, for a
block trade in a particular type of swap that is listed
or executed on such swap market.
93 The Commission recently proposed
amendments to § 40.6(a) of the CEA. See 75 FR
67282 (November 2, 2010).
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listed swap’’ as a swap that is listed on
any swap market where an appropriate
minimum block size has not been
published by a registered SDR.94 The
minimum block trade size for a newlylisted swap that is set by a swap market
would govern the trading of the newlylisted swaps on such swap market until
such time as a registered SDR
establishes an appropriate minimum
block size for the newly-listed swap.
Proposed§ 43.5(i)(1) provides that if a
newly-listed swap is within the
parameters of an existing category of
swap instrument for which a registered
SDR has posted an appropriate
minimum block size, the swap market
shall set the minimum block trade size
for such newly-listed swap at a level
equal to or greater than such appropriate
minimum block size. The requirement
would enable a swap market to
reference a currently existing
appropriate minimum block size as a
point of reference during the one-month
interim period until the registered SDR
actually puts the swap in a particular
category of swap instrument and
establishes an appropriate minimum
block size. Proposed § 43.5(i)(2)
provides that in setting the minimum
block trade size for a newly-listed swap
that is not within an existing category of
swap instrument, the swap market
should consider: (i) The anticipated
distribution of notional or principal
transaction amounts; (ii) the social size
for swaps in other markets that are in
substance the same as the newly-listed
swap; and (iii) the minimum block trade
sizes of similar swaps in the same asset
class.. After taking into account these
considerations, proposed § 43.5(i)(3)
provides that the swap market must
ensure that the notional or principal
amount selected represents a reasonable
estimate of the greater of (i) a notional
or principal amount that is greater than
all but 95% of the total anticipated
distribution of notional or principal
transaction amounts over the one-month
period immediately following the first
execution of the swap; or (ii) five times
the anticipated social size over the onemonth period immediately following
the first execution of the swap.
In the event that a registered SDR
does not set an appropriate minimum
block size for a newly-listed swap after
one month, as described in proposed
§ 43.5(g)(2), the Commission believes
that in order to comply with the
proposed requirements of § 43.5(i), a
swap market should continue to revise
94 A swap market may, however choose not to
allow block trading for such swaps and would
therefore not be required to make such
determination.
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the minimum block trade size for such
newly-listed swap as trading increases
in order to ensure that the estimated
minimum block trade size is reasonable
relative to increased trading activity for
such newly-listed swap. Such process
should continue until an appropriate
minimum block size is published for the
type of swap by a registered SDR.95
If the same type of swap begins
trading on more than one swap market
during the one-month period before a
registered SDR sets the appropriate
minimum block size, proposed § 43.5(i)
would apply to each swap market where
such swap is traded. Each such swap
market should set the minimum block
trade size the swap listed on its facility
until an appropriate minimum block
size is published by a registered SDR.96
x. Responsibilities of the Parties to a
Swap in Determining the Appropriate
Minimum Large Notional Swap Size
Section 43.5(j)(1) provides the
procedure for parties to a swap to
determine the appropriate minimum
large notional swap size.97 Because the
appropriate minimum block size for
swap instruments will be available on a
registered SDR’s Internet Web site with
respect to swaps that have been trading
for one month or longer, the proposed
rules provide that parties who engage in
an off-facility swap, and seek to qualify
their swap as a large notional swap,
must refer to the appropriate minimum
block sizes for swap instruments. Parties
to such off-facility swap must then
identify the category of swap instrument
in which the swap that they wish to be
considered a large notional swap would
likely fall. The parties to the off-facility
swap should refer to the appropriate
minimum block size that is associated
95 If the initial minimum block trade size
established by a swap market is greater than or
equal to the appropriate minimum block size posted
on a registered SDR’s Internet Web site, a swap
market may not have to adjust its minimum block
trade size. In such a situation, a swap market may
reduce its minimum block trade size to the
appropriate minimum block size.
96 For example, if on March 1, a newly-listed
swap is executed on swap market 1 and a registered
SDR is available to accept the swap transaction and
pricing data for the swap. If on March 15, a swap
is traded on swap market 2 with the same terms as
the swap traded on swap market 1. The minimum
block trade size established by swap market 1 will
prevail until the appropriate minimum block size
is calculated and posted on the registered SDR’s
Internet Web site on April 1, at which time swap
market 1 must ensure its minimum block trade size
is greater than or equal to the appropriate minimum
block size. The minimum block trade size
established by swap market 2 will only be its
prevailing block trade size until April 1st, when it
must conform to the appropriate minimum block
size as calculated by the registered SDR.
97 As noted, proposed § 45.3(b)(2) requires the
reporting party of a large notional swap to elect to
treat such swap as a large notional swap.
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with the selected swap instrument, and
the notional or principal amount of such
swap must be equal to or greater than
the appropriate minimum block size. If
there is not an existing category of swap
instrument with an appropriate
minimum block size available to
reference, then such swap between the
parties shall not qualify as a large
notional swap and would not be
afforded any time delay in public
reporting. In determining the
appropriate category of existing swap
instrument, the parties to a swap should
consider and must document: (1) The
similarities of the terms of the swap
between the parties compared to the
terms of swaps that are grouped within
the existing category of swap instrument
(e.g., similarities of the fields listed in
appendix A to proposed part 43); and
(2) other swaps listed on swap markets
that were considered in evaluating the
swaps that are grouped within the
existing swap instrument.
The Commission considered several
factors in determining this proposed
method for calculating the appropriate
minimum size for large notional swaps.
First, the appropriate minimum block
sizes that are posted by a registered SDR
should be accurate, up to date and
accessible to market participants.
Additionally, to the extent that the
reporting party to a large notional swap
is a swap dealer or MSP, such reporting
parties would be subject to the
Commission’s proposed rules for
internal business conduct standards in
proposed part 23 of the Commission’s
regulations. Further, the swap
instrument categories should be broadly
defined to allow parties to a large
notional swap to easily place their swap
into one of the categories of swap
instrument. The parties to an off-facility
swap should therefore be able to
accurately choose a swap instrument
based on the criteria set forth in this
proposed rule.
Proposed § 43.5(j)(2) provides that, to
the extent that the parties to a large
notional swap transaction are swap
dealers and/or MSPs, such parties must
maintain records that illustrate the basis
for the selection of the swap instrument
for the large notional swap in
accordance with proposed part 23 of the
Commission’s regulations. This section
also requires that such records be made
available to the Commission upon
request. This proposed recordkeeping
requirement should ensure that parties
to an off-facility swap do not attempt to
manipulate these proposed rules.
Proposed § 43.5(j)(3) provides that if
the parties to a swap are unable to
determine, identify or agree on the
appropriate swap instrument to
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reference for the purposes of treating
such swap as a large notional swap,
such swap cannot qualify as a large
notional swap and therefore will not be
eligible for a time delay thereby
requiring that such swap transaction
and pricing data be publicly
disseminated in real-time.
The Commission requests comment
generally on all aspects of determining
the appropriate minimum size for block
trades and large notional swaps. In
addition, the Commission requests
comment on the following issues:
• Do commenters agree with the
approach of having a registered SDR
calculate and publicize appropriate
minimum block size, but allowing swap
markets to individually set their own
minimum block sizes for particular
contracts at a higher level based on the
appropriate minimum block size? Why
or why not? If not, please provide an
alternative approach.
• Is the distribution test an acceptable
method of determining an appropriate
minimum block size? If so, is 95% the
appropriate minimum threshold?
• Is the multiple test an acceptable
method of determining an appropriate
minimum block size? If so, is five the
appropriate block multiple?
• Do the distribution test and the
multiple test, taken together, account for
a situation where there is a swap
instrument with an extremely small
sample (e.g., less than 40 transactions
for a category of swap instrument)? If
not, what alternative method of
calculation can be added for swap
instruments with a small number of
transactions?
• Do commenters agree with the
proposal to use the greater of the
distribution test or the multiple test)? If
not, what alternative approach should
be used and why?
• The Commission recognizes that the
two-pronged formula for determining
the appropriate minimum block size
may lead to a relatively small
appropriate minimum block size and
the possibility that a significant
percentage of the overall notional or
principal amount of swaps transacted in
a particular category of swap instrument
could be executed pursuant to block
trade rules or as large notional swaps,
which are subject to a delay in real-time
public dissemination. Therefore, should
the Commission adopt an additional
standard which would limit the
aggregate notional or principal amount
of block trades and large notional swap
transactions to a percentage of the
overall notional or principal volume
over the prior year? If not, why not? If
so, why and what should that
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percentage be? Should some other test
be used to address this situation?
• Do commenters agree that the
appropriate minimum block sizes for
swap instruments, as determined by a
registered SDR, should apply to all swap
markets and off-facility swaps,
regardless of differences in liquidity in
swap markets or off-facility? 98
• Should there be one block trade
formula for all swaps? Should there be
one block trade formula for all swaps in
an asset class? Should different swap
instruments have different block trade
formulas? If commenters believe there
should be various block trade formulas
for different markets, for which markets
and how should those standards be
defined?
• Do commenters agree with the
proposed method for determining the
minimum block size for large notional
swaps? If not, why (please provide
alternative methods)? Do commenters
believe that there should be other
criteria that should be considered in
determining if a swap is a large notional
swap? If so, what other criteria?
• If there is more than one registered
SDR per asset class, how could the
Commission ensure that all registered
SDRs implement the same appropriate
minimum block size formula for the
entire market for a category of swap
instrument? How should the
Commission approach this issue?
• Do commenters believe that the
concept of block trades should exist for
newly-listed swaps? If not, why? Do
commenters agree with the proposed
method for determining the minimum
block trade size for newly-listed swaps?
If not, why?
• Do commenters believe that the
registered SDRs should initially
calculate the appropriate minimum
block size for a swap one month after a
swap has been executed on a swap
market? If so, why? If not, why?
• If there is no registered SDR to
accept swaps for an asset class, do
commenters agree with the
Commission’s proposal that swap
markets will determine the minimum
block sizes in the manner described in
proposed § 43.5(h) and (i)?
• Do commenters believe that having
registered SDRs perform an annual
review of all appropriate minimum
block sizes is the appropriate frequency?
If so, why? If not, why?
• How much data would be necessary
for the initial determination by
registered SDRs of appropriate
minimum block trade sizes? When
should such initial determination of
appropriate minimum block trade sizes
98 See
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76165
begin? Should there be different initial
determinations times based on asset
class? If so, why?
• Should registered SDRs consider
data for pre-existing swaps (i.e., swaps
entered into prior to the effective date
of the Dodd-Frank Act) in making their
determinations of the appropriate
minimum block sizes for swap
instruments? If so, why? If not, why?
• Should registered SDRs have a
requirement to consult with swap
markets in calculating the appropriate
minimum block size of a swap
instrument? If not, should swap markets
have an ability to dispute and/or appeal
the calculation of the appropriate
minimum block size for a swap
instrument that is determined by a
registered SDR?
• Should registered SDRs submit to
the Commission their formulas/
calculations for the appropriate
minimum block sizes of swap
instruments in order to ensure market
transparency?
xi. Time Delay in the Real-Time Public
Reporting of Block Trades and Large
Notional Swaps
Section 2(a)(13)(A) of the CEA
requires that all parties to swap
transactions, including parties to block
trades and large notional swap
transactions, to report data relating to
swap transactions ‘‘as soon as
technologically practicable after the
time at which the swap transaction has
been executed.’’ 99 However, the DoddFrank Act also requires the Commission
to promulgate rules ‘‘to specify the
appropriate time delay for reporting
large notional swap transactions (block
trades) to the public.’’ 100 Additionally,
the Dodd-Frank Act requires that the
Commission, in writing these proposed
rules, ‘‘take into account whether public
disclosure will materially reduce market
liquidity.’’ 101
The Commission recognizes the
potential market impact that the
reporting of a block trade or large
notional swap may have on the market.
Such potential market impact is critical
to the determination of an appropriate
time delay before public dissemination
of block trade or large notional swap
transaction and pricing data. The ability
for market participants to trade in large
99 Section 2(a)(13)(A) of the CEA; see also,
Statement of Senate Agriculture Committee
Chairwoman Blanche Lincoln’s statement: ‘‘With
respect to delays in public reporting of block trades,
we expect the regulators to keep the reporting
delays as short as possible.’’ 156 Cong. Rec. S5,922
(daily ed. July 15, 2010) (statement of Sen. Blanche
Lincoln).
100 Section 2(a)(13)(E)(iii) of the CEA.
101 Section 2(a)(13)(E)(iv) of the CEA.
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notional or principal amounts without
market prices moving significantly
against them is a vital component of any
vibrant and liquid marketplace.
In external meetings with market
participants, CFTC staff was often told
that increased pre-trade and post-trade
transparency would enable frontrunning and may have an adverse
impact on market liquidity. Specifically,
market participants expressed concern
that if they were required to publicly
disseminate swap transaction and
pricing data immediately after the
execution of a block trade or large
notional swap, other market participants
would be able to profit on this
information by anticipating the trading
activity of the block trade or large
notional swap participants who are
attempting to hedge their swap
portfolios. As other market participants
anticipate the block trade or large
notional swap parties’ hedges, prices
may rise adverse to the market
participant who is attempting to hedge
and, as a result, certain market
participants may be forced to take on
increased costs and market exposure in
offsetting their risk. Although CFTC
staff was often told of the adverse
impact of post-trade transparency on
market liquidity, staff is not aware of
any empirical evidence to support this
position.102
Proposed § 43.5(k)(1) provides the
appropriate time delays for public
dissemination of block trades and large
notional swaps. The time delay for
public dissemination begins at
execution of the swap (i.e., upon or
immediately following or simultaneous
102 See, e.g., the exchange at the Roundtable
between Chester Spatt, Pamela R. and Kenneth B.
Dunn Professor of Finance, Tepper School of
Business, Director, Center for Financial Markets
Carnegie Mellon University and Yunho Song,
Managing Director/Senior Trader, Bank of America
Merrill Lynch:
MR. SPATT: So just to follow up on that as well,
in the three years that I was at the SEC, was
basically coincided with the three years after much
of the implementation of TRACE. And while folks
from industry repeatedly came in and pressed the
point that spreads were wider, they never presented
to us in any format a convincing empirical study
and nor am I aware of any empirical study in the
academic community to show those effects. So I do
think it’s incumbent upon critics of post-trade
disclosure to point to and identify convincing
empirical evidence of these effects. And I think
that’s extremely important to the regulators as they
go forward, but I must say, I’m not aware of that
evidence right now.
MR. SONG: If I may comment on that—I think
one of the distinctions we have is a market that may
be [smaller] in retail based versus a market that is
with [a] far small number of participant[s] and
that’s institutional based. So, you may not be able
to, for example, find who was doing a specific trade
looking at a TRACE report so it has a marginal
impact on the marketplace * * *.
Roundtable Tr. at 332–333.
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with affirmation of the parties to the
swap). Therefore, in the case of a block
trade, the time delay would begin prior
to the time that that a swap market
receives the swap transaction and
pricing data from a reporting party. The
registered SDR that publicly
disseminates such data would be
responsible for ensuring that such data
is disseminated in accordance with
proposed § 43.5(k).
Proposed § 43.5(k)(2) requires that the
time delay for block trades be no later
than 15 minutes after the time of
execution. After the 15 minute time
delay has expired, the registered SDR or
the swap market (through a third-party
service provider) must immediately
disseminate the swap transaction and
pricing data to the public.103 As
discussed above, such delay does not
apply to the reporting party’s
requirement to report to a swap market
or to a swap party’s requirement to
report to a real-time disseminator. It is
the responsibility of the registered SDR
or the swap market (through a thirdparty service provider) to hold the swap
data for a period of 15 minutes after the
execution of the trade prior to
dissemination. The 15 minute time
delay would apply to all swaps in
Sections 2(a)(13)(C)(i) and (iv) of the
CEA, meaning that even though some
swaps may be large notional swaps (e.g.,
those subject to the non-financial enduser exception from mandatory clearing)
they would be subject to the same time
delay as block trades executed pursuant
to the rules of a swap market. The
Commission believes that since swaps
in Sections 2(a)(13)(i) and (iv) of the
CEA will be standardized, they should
be subject to the same time delay as
other standardized swaps.
In determining this proposed time
delay for standardized block trades and
large notional swaps, the Commission
considered time delays for reporting
block trades or large notional
transactions in other markets. FINRA’s
TRACE system for corporate and agency
debt securities requires that
‘‘transactions in TRACE-eligible
securities executed on a business day at
or after 8:00 a.m. Eastern Time through
6:29:59 p.m. Eastern Time must be
reported within 15 minutes of the time
of execution.’’ 104 Given the 15 minute
103 In calculating the 15 minute time delay, the
clock begins immediately upon execution of the
swap transaction. Under proposed § 43.5(k), no
pause in the running of the clock is permitted
during the time it takes the reporting party or swap
market to report the swap data to a real-time
disseminator.
104 FINRA Rule 6730 (‘‘Transaction Reporting’’).
Available at: https://finra.complinet.com/en/display/
display_main.html?rbid=2403&element_id=4402.
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reporting delay, TRACE does not
provide any additional time delay for
those trades that are subject to
disseminated volume caps.105 On the
other hand, in the equity securities
markets the New York Stock Exchange
(‘‘NYSE’’) requires all trades to be
reported within 30 seconds; no
additional time delay is provided for
block trades.106 The London Stock
Exchange (‘‘LSE’’) allows the publication
of the trade to be delayed, if requested,
for a specified period of time which is
dependent on the volume of the trade
compared to the average daily turnover,
as published by LSE, for that particular
security.107 In the futures markets, CME
Group’s rules require the seller in a
block trade transaction to report to the
exchange within five minutes of
execution if the trade is executed during
regular trading hours (as compared to
the immediate reporting exchange
executed transactions). After the
reporting of the block trade data, the
exchange ‘‘promptly publishes such
information separately from the reports
of transactions in the regular
markets.’’ 108 NYSE Liffe U.S., on the
other hand, allows a 15 minute delay
after the trade is executed to publicly
report the block trade information.109
Proposed § 43.5(k)(3) provides that
large notional swap transaction and
pricing data must be reported to the
public by the registered SDR that
accepts and publicly disseminates such
data subject to a time delay as may be
105 See TRACE, Trade Reporting and Compliance
Engine, User Guide, Version 2.4—March 31, 2010,
p. 50. Available at: https://www.finra.org/web/
groups/industry/@ip/@comp/@mt/documents/
appsupportdocs/p116039.pdf.
106 The NYSE has a definition of ‘‘block trade’’ but
such designation does not affect how such
transactions are reported. See NYSE Rule 127.
107 LSE rules require member firms to submit
trade reports to LSE as ‘‘close to instantaneously as
technically possible and that the authorized limit of
three minutes should only be used in exceptional
circumstances,’’; however, publication of such data
may be deferred. See, LSE Rules 3020 and 3030,
effective August 2, 2010. Available at: https://
www.londonstockexchange.com/traders-andbrokers/rules-regulations/rules-lse-2010.pdf.
108 See, CME Rule 526(F), (‘‘The seller must
ensure that each block trade is reported to the
Exchange within five minutes of the time of
execution; except that block trades in interest rate
futures and options executed outside of Regular
Trading Hours (7 a.m.–4 p.m. Central Time,
Monday–Friday on regular business days) and
Housing and Weather futures and options must be
reported within fifteen minutes of the time of
execution.’’). Available at: https://
www.cmegroup.com/rulebook/CME/I/5/26.html.
109 See NYSE Liffe U.S. Rule 423(d), (‘‘Block
Trades must be reported to the Exchange in a
manner prescribed from time to time by the
Exchange. Block Trades must be reported to the
Exchange within 15 minutes after the completion of
negotiations, but may not be submitted any later
than 15 minutes prior to the Contract’s Trading
Session close time.’’). Available at: https://
www.nyse.com/pdfs/rulebook.pdf.
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prescribed by the Commission. The
Commission believes that such time
delay for large notional swaps may vary
based on whether a swap’s underlying
asset is a financial or a physical
commodity, asset class, and/or other
factors. This provision covers all swaps
under Sections 2(a)(13)(C)(ii) and (iii) of
the CEA, which covers those swaps that
are not subject to the mandatory
clearing requirement. The swaps that
fall under Sections 2(a)(13)(C)(ii) and
(iii) of the CEA generally will be more
customized and may, in some instances
require, in the case of large notional
swaps, different time delays than the
time delays for block trades.
Proposed § 43.5(l) provides that all
information in the data fields described
in appendix A to this part and proposed
§ 43.4 shall be disseminated to the
public for block trades and large
notional swaps.
The Commission requests comment
generally on all aspects of the proposed
time delay in reporting block trade and
large notional swap transaction and
pricing data to the public. In addition,
the Commission requests specific
comment on the following issues:
• Do commenters believe that any
time delay is appropriate for block
trades and/or large notional swaps? If
not, why? If so, why?
• Is a 15 minute time delay for
publicly reporting the block trade
transaction and pricing data described
in the proposed rules an appropriate
amount of time? If not, why? If so, why?
• Should the Commission consider
different time delays for block trades
that are significantly larger than the
appropriate minimum block trade size?
If so, why? How much larger than the
appropriate minimum block trade size
should the notional or principal amount
be to warrant an additional time delay?
• Should the Commission consider
different time delays for block trades
and large notional swaps based on asset
classes, swap instruments or particular
contracts? If so, what factors or specific
examples would warrant such longer
time delays?
• How should the Commission
determine an appropriate time delay for
large notional swaps? The Commission
believes that swaps will fall under the
Commission’s jurisdiction in the equity,
credit, currency and interest rate asset
classes (i.e., financial swaps) can be
distinguished from those swaps that fall
in the other commodity asset class (e.g.,
physical commodities). The
Commission’s presumption is that
swaps in the equity, credit, currency
and interest rate asset classes be subject
to the same time delay as block trades
(i.e., 15 minutes). Do commenters agree
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that 15 minutes is an appropriate delay
for these trades? If not, why and what
would be an appropriate time delay?
With regard to the time delay for large
notional swaps in the other commodity
asset class, the Commission recognizes
a longer time delay may be necessary
due to the hedging strategies that are
associated with such swaps. What time
delay would be appropriate for swaps in
the other commodity asset class and
why?
• What are the factors that should be
considered in determining how long a
time delay for a large notional swap
should be? Which characteristics of a
swap should be taken into consideration
in determining the time delay for
publicly disseminating swap transaction
and pricing data relating to a large
notional swap?
• If commenters believe that there
would be an adverse price impact for
traders if all information on block trades
were made available in real-time, do
commenters have any studies or
empirical evidence to support that
assertion? What would be the long-term
effects on the market if all market
participants knew the swap transaction
and pricing details of all swaps in realtime? Would this impact liquidity? If so,
how?
• Would the differences between the
Commission’s and the SEC’s proposals
for treatment of block trades,
particularly regarding the time delay for
public dissemination of block trade
information provide for unfair treatment
for any market participants? If so, how?
Could the differences in the proposals
regarding the time delay lead to any
disruption in trading in any swaps
markets? If so, how?
xii. Prohibition of Aggregation of Trades
Proposed § 43.5(m) prohibits the
aggregation of orders for different
trading accounts in order to satisfy the
minimum block size requirement,
except if done on a DCM by a
commodity trading advisor acting in an
asset manager capacity or an investment
advisor who has $25 million in total
assets under management.
III. Related Matters
A. Cost-Benefit Analysis
1. Introduction
Section 15(a) of the CEA requires the
Commission to consider the costs and
benefits of its actions before issuing a
rulemaking under the CEA.110 By its
terms, Section 15(a) of the CEA does not
require the Commission to quantify the
costs and benefits of the rulemaking or
110 See
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76167
to determine whether the benefits of the
rulemaking outweigh its costs; rather, it
requires that the Commission ‘‘consider’’
the costs and benefits of its actions.
Section 15(a) of the CEA further
specifies that the costs and benefits
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 markets; (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 and could in its
discretion determine that,
notwithstanding its costs, a particular
rule is necessary or appropriate to
protect the public interest or to
effectuate any of the provisions or
accomplish any of the purposes of the
CEA.
2. Summary of Proposed Requirements
The proposal provides rules for the
real-time public reporting of all swap
transaction data, including volume and
pricing data. The proposed rules
mandate that reporting parties (which
include swap dealers, MSPs and endusers) and swap markets (which include
SEFs and DCMs), be responsible for the
reporting of the swap transaction and
pricing data in real-time by sending the
data to an appropriate real-time
disseminator. For swaps traded on a
swap market, the swap market must
send the data to a registered SDR or
third-party service provider and such
entity will publicly disseminate the
swap transaction and pricing data in
real-time. For off-facility swaps, the
reporting party (either an MSP, swap
dealer, or end-user) must send the data
to a registered SDR, or if no registered
SDR is available, to a third-party service
provider, who will publicly disseminate
the swap transaction and pricing data.
The proposed rules also specify rules for
how swap transaction and pricing data
for trades deemed as either a block trade
or large notional swap should be
publicly disseminated.
3. Costs
With respect to costs, the Commission
believes that the proposed reporting and
recordkeeping requirements would
impose significant compliance costs on
registered SDRs, SEFs, DCMs, swap
dealers, MSPs, end-users and thirdparty service providers. The proposed
rules may reduce liquidity in the market
by discouraging dealers from holding
inventory as part of a market
participant’s risk management practice.
Disclosing the terms of a trade
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immediately after execution exposes the
price paid for a large position by a
particular dealer to the rest of the
market. Market participants may
attempt to anticipate trading activity
that the dealer will engage in to
rebalance its portfolio, which may
induce adverse price movements against
such dealer. Additionally, real-time
public reporting may obstruct some
trading in illiquid instruments. Swap
dealers may be less likely to commit
capital in less liquid products because
the terms of the trade are disclosed as
soon as the trade is executed and the
dealer fears his ability to lay off the risk
in the market. If a trade is considered a
block trade or large notional swap, the
proposed rules may lead to increased
costs associated with added liquidity
risks, which may be passed on to endusers.
4. Benefits
With respect to benefits, the
Commission believes that the proposed
rules promote transparency in swaps
trading which, in turn, creates greater
efficiency in the swap markets.111
Additionally, real-time reporting may
expand trading opportunities as market
participants have more data to analyze
and research when producing
investment strategies. The Commission
believes that transparency in the form of
real-time public dissemination of swap
transaction and pricing data leads to the
fairness and efficiency of markets and
improves price discovery. The
facilitation of price discovery decreases
risk to market participants by promoting
responsible and informed risk taking
and, to the extent that swaps play a
central role in the national economy,
decreases the risk of another financial
disaster by enabling market participants
to measure systematic risk. The
Commission believes that the federal
government will be better positioned to
protect the public as a result of
increased surveillance and monitoring
of the swap markets and its market
participants. The Commission requests
public comment on its cost-benefit
considerations. Specifically, the
Commission requests comment on
whether there are alternative ways we
can meet these statutory requirements
under Section 727 of the Dodd-Frank
Act in a less costly manner.
Commenters are also invited to submit
any data or other information that they
may have quantifying or qualifying the
111 Under Section 727 of the Dodd-Frank Act,
Congress has mandated that swap transaction and
pricing data be real-time reported and publicly
disseminated. The Commission has requested
comments on ways we can meet these statutory
requirements in a less costly manner.
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costs and benefits of the proposal with
their comment letters.
B. Paperwork Reduction Act
1. Introduction
The purposes of the Paperwork
Reduction Act (‘‘PRA’’) are, among other
things, to minimize the paperwork
burden to the private sector, ensure that
any collection of information by a
government agency is put to the greatest
possible uses, and minimize duplicative
information collections across
government.112 The PRA applies with
extraordinary breadth to all information,
‘‘regardless of form or format,’’ a
government agency is ‘‘obtaining,
causing to be obtained [or] soliciting’’
and includes requiring ‘‘disclosure to
third parties or the public, of facts or
opinion,’’ when the information
collection calls for ‘‘answers to identical
questions posed to, or identical
reporting or recordkeeping requirements
imposed on, ten or more people.’’ 113
This provision has been determined to
include not only mandatory but also
voluntary information collections, and
include both written and oral
communications.114
To effect the purposes of the PRA,
Congress requires all agencies to
quantify and justify the burden of any
information collection it imposes.115
This includes submitting each
collection, whether or not it is
contained in a rulemaking, to the Office
of Management and Budget (‘‘OMB’’) for
review.116 The OMB submission process
includes completing a form 83–I and a
supporting statement with the agency’s
burden estimate and justification for the
collection. When the information
collection is established within a
rulemaking, the agency’s burden
estimate and justification should be
provided in the proposed rulemaking,
subjecting it to the rulemaking’s public
comment process.
Provisions of proposed part 43 of the
Commission’s regulations would result
in new collection of information
requirements within the meaning of the
PRA. The Commission therefore is
submitting this proposal to the Office of
Management and Budget (‘‘OMB’’) for
review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. The title for
this collection of information is
‘‘Regulation 43—Real-Time Public
Reporting,’’ OMB control number 3038–
NEW. If adopted, responses to this new
112 See
44 U.S.C. 3501.
U.S.C. 3502.
114 See 5 CFR 1320.3(c)(1).
115 See 44 U.S.C. 3506.
116 See 44 U.S.C. 3507.
113 44
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collection of information would be
mandatory.
The Commission will protect
proprietary information according to the
Freedom of Information Act and 17 CFR
part 145, ‘‘Commission Records and
Information.’’ In addition, section 8(a)(1)
of the CEA strictly prohibits the
Commission, unless specifically
authorized by the CEA, from making
public ‘‘data and information that would
separately disclose the business
transactions or market positions of any
person and trade secrets or names of
customers.’’ The Commission also is
required to protect certain information
contained in a government system of
records according to the Privacy Act of
1974, 5 U.S.C. 552a.
2. Information Provided by Reporting
Entities/Persons
As mentioned above, proposed part
43 of the Commission’s regulations
would result in three new collections of
information requirements within the
meaning of the PRA. First, proposed
part 43 would create a new reporting
requirement either on a ‘‘swap market’’
when a swap is executed on a facility,
or on the parties to each swap
transaction when a swap is not executed
on such a facility. Second, proposed
part 43 would create a public
dissemination requirement on a ‘‘realtime disseminator’’. Third, proposed
part 43 creates a recordkeeping
requirement for swap markets, real-time
disseminators, any reporting party.
i. Reporting Requirement
Under proposed § 43.3(a), reporting
parties 117 would be required to
electronically report any reportable
swap transactions 118 to a real-time
disseminator, except as otherwise
provided in such section. Proposed
§ 43.3 places the duty to report on
several entities or persons depending
on: (1) The manner in which the
transaction is executed; and (2) the
parties to the swap transaction.
For those swap transactions that are
executed on a swap market (i.e., a DCM
or SEF), proposed § 43.3 requires the
swap market to publicly disseminate
such swap transaction and pricing data
by either sending swap transaction
information to a registered SDR that
accepts and publicly disseminates swap
transaction and pricing data or by
117 Proposed § 43.2(w) defines ‘‘reporting party’’ to
include the party to a swap with the duty to report
a reportable swap transaction.
118 Proposed § 43.2(v) defines ‘‘reportable swap
transaction’’ to mean any executed swap, notation,
swap unwind, partial novation, partial swap
unwind or any other post-execution event that
affects the pricing of a swap.
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sending swap transaction information
through a third-party service provider
for public dissemination. The
Commission estimates that DCMs and
SEFs (an estimated 57 entities or
persons) will have approximately 2,080
burdens hours per swap market.119
For those swap transactions that are
executed ‘‘off-facility’’, proposed § 43.3
requires reporting parties (i.e., swap
dealers, MSPs and swap end-users) to
report their swap transaction and
pricing data to a registered SDR or, if no
registered SDR will accept such data, to
a third-party service provider. With
respect to swap dealers and MSPs (an
estimated 300 entities or persons),
proposed § 43.3 requires only one party
to such transaction report to a real-time
disseminator. The Commission
estimates that swap dealers and MSPs
will have 2,080 annual burden hours
associated with the reporting
requirement under proposed § 43.3.
With respect to swap end-users,
proposed § 43.3 requires swap end-users
to report their swap transaction and
pricing data only for end-user-to-enduser transactions. In addition, proposed
§ 43.3 provides that only one swap enduser in an end-user-to-end-user swap
transaction will have the obligation to
report to a real-time disseminator. For
that reason, the Commission estimates
that the total number of swap end-users
that would be required to report their
swap transaction and pricing data is
1,500 entities or persons.120 The
Commission estimates that swap endusers will have four (4) annual burden
hours per reporting party or person, for
a total of 6,000 aggregate annual burden
hours.121
Based on the foregoing, the
Commission has determined the
estimated aggregate annual burden
hours on swap markets and with respect
to off-facility swap transactions to be
748,560.
119 Because the Commission has not regulated the
swap market, it has not collected data relevant to
this estimate. Therefore, the Commission requests
comment on this estimate.
120 The Commission requests comment on the
number of swap end-users that would be required
to report their swap transaction and pricing data
pursuant to proposed § 43.3. The Commission
estimates that there will be a total of 30,000 swap
market participants and that 1,500 of those
participants will engage in end-user-to-end-user
swap transactions (5% of 30,000) requiring at least
one of those participants to report such swap
transaction and pricing data.
121 Estimated burden hours were obtained in
consultation with the Commission’s experts on
information technology. This estimate includes the
expectation that end users who participate in enduser-to-end-user swaps will contract with other
entities to report the swap transaction and pricing
data to a registered SDR or third party service
provider. The Commission requests comment on
these estimates.
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ii. Public Dissemination Requirement
Proposed § 43.3 requires a registered
SDR to publish through an electronic
medium swap transaction and pricing
data received from reporting parties as
soon as technologically practicable,
except when the registered SDR is
required to delay the publication of
information relating to large notional
swaps or block trades. The Commission
estimates that there will be
approximately 15 registered SDRs 122
Proposed § 43.3(h) requires registered
SDRs to receive and publicly
disseminate real-time swap transaction
and pricing data at all times, 24-hours
a day. The Commission anticipates that
there will be 6,900 annual burden hours
per registered SDR. Based on the
foregoing, the Commission has
determined the estimated aggregate
annual burden hours to be 103,500 for
all registered SDRs.123 Therefore, the
total aggregate annual burden hours
associated with this public
dissemination requirement, including
the burden hours associated with third
party service providers, is estimated to
be 207,000.
iii. Recordkeeping Requirement
Under proposed § 43.3(i), swap
markets (an estimated 57 entities or
persons), registered SDRs (an estimated
122 Because the Commission has not regulated the
swap market, the Commission was unable to collect
data relevant to these estimates. For that reason, the
Commission requests comment on these estimates.
123 The Commission estimates that there will be
15 third-party service providers. These third-party
service providers are anticipated to have the same
public dissemination and recordkeeping burden
hours as those estimated for registered SDRs.
Proposed § 43.3(d) would require a swap market
that chooses to publicly disseminate swap
transaction and pricing data in real-time through a
third-party service provider to (1) ensure that any
such third-party service provider that publicly
disseminates the swap market’s swap transaction
and pricing data in real-time does so in a manner
that complies with those standards for registered
swap data repositories described in this part; and
(2) ensure that the Commission has access to any
such swap transaction and pricing data, through
either the swap market or via direct access to the
third-party service provider. Additionally, certain
off-facility swaps may be publicly disseminated
through a third-party service provider in those
instances where no registered SDR is available to
accept and publish the swap transaction and
pricing data. Therefore, although the ultimate
responsibility is on the swap market who uses a
third-party service provider to ensure it complies
with standards set forth in part 43 for registered
SDRs, the third-party service provider will be the
entity actually performing the public dissemination
and, in some cases, recordkeeping function for
certain swaps. Therefore, as was estimated for
registered SDRs, the Commission estimates a public
dissemination burden of 6,900 hours per third-party
service provider, for an aggregate of 103,500 annual
burden hours for all third-party service providers.
Also, the Commission estimates a recordkeeping
burden of 250 hours per third-party service
provider, for an aggregate of 3,750 annual burden
hours for all third-party service providers.
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76169
15 entities or persons) and reporting
parties must retain all data relating to a
reportable swap transaction for a period
of not less than five years following the
time at which such reportable swap
transaction is publicly disseminated in
real-time. With respect to swap markets
and real-time disseminators, the
Commission estimates that proposed
recordkeeping requirement will be 250
annual burden hours per swap market
and registered SDR.124 As referenced
above, the Commission anticipates that
1,500 swap end-users will be reporting
parties for the purposes of this part of
the Commission’s regulations. Since the
Commission anticipates that there will
be lower levels of activity relating to the
requirement for swap end-users, the
Commission estimates that there will be
two (2) annual burden hours per swap
end-user. It is important to note that the
Commission addresses the
recordkeeping requirements of swap
dealers and MSPs in a separate, but
related rulemaking relating to the
internal business conduct standards of
these entities as part of the
Commission’s overall rulemaking
initiative implementing the Dodd-Frank
Act.125
Based on the foregoing, the
Commission estimates that the aggregate
annual burden hours associated with
the recordkeeping requirement under
the proposed § 43.3 will be 39,250.
iv. Determination of Appropriate
Minimum Block Size
Under proposed § 43.5(g), registered
SDRs (an estimated 15 entities or
persons) will be required to determine
the appropriate minimum block size for
swaps for which these registered SDRs
receive data in accordance with Section
2(a)(13)(G) of the CEA. A registered SDR
shall set and publish annually the
appropriate minimum block size for
each swap instrument as the greater of
the numbers derived from two formulas:
A distribution test and a multiple test as
described in the proposal. Additionally,
under proposed § 43.5(i), the SDR shall
set the appropriate minimum block size
for newly-listed swaps one month after
the registered SDR receives data in
accordance with Section 2(a)(13)(G).
The registered SDR may set the
appropriate minimum block size for
newly-listed swaps by placing them in
124 See
footnote 123 above.
agency may not conduct or sponsor, and
a person is not required to respond to, a collection
of information unless it displays a currently valid
control number. The Commission invites public
comment on the accuracy of its estimate that no
additional recordkeeping or information collection
requirements related to swap dealers and MSPs
would result from the rules proposed herein.
125 An
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a category of existing swap instrument
with an appropriate minimum block
size or by creating a new category of
swap instrument and performing the
calculations described in § 43.5(g). The
Commission estimates that proposed
requirement will impose 20 annual
burden hours per registered SDR.
Based on the foregoing, the
Commission estimates that the aggregate
annual burden hours associated with
this requirement under the proposed
§ 43.5(g) and (i) will be 300.
srobinson on DSKHWCL6B1PROD with PROPOSALS2
3. Information Collection Comments
The Commission invites the public
and other Federal agencies to comment
on any aspect of the reporting and
recordkeeping burdens discussed above.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the
Commission requests comments in
order to: (i) Evaluate whether the
proposed collection of information is
necessary for the proper performance of
the functions of the Commission,
including whether the information will
have practical utility; (ii) evaluate the
accuracy of the Commission’s estimate
of the burden of the proposed collection
of information; (iii) determine whether
there are ways to enhance the quality,
utility and clarity of the information to
be collected; and (iv) minimize the
burden of the collection of information
on those who are to respond, including
through the use of automated collection
techniques or other forms of information
technology.
Comments may be submitted directly
to the Office of Information and
Regulatory Affairs, by fax at (202) 395–
6566 or by e-mail at
OIRAsubmissions@omb.eop.gov. Please
provide the Commission with a copy of
submitted comments so that all
comments can be summarized and
addressed in the final rule preamble.
Refer to the Addresses section of this
notice of proposed rulemaking for
comment submission instructions to the
Commission. A copy of the supporting
statements for the collections of
information discussed above may be
obtained by visiting RegInfo.gov. OMB
is required to make a decision
concerning the collection of information
between 30 and 60 days after
publication of this release in the Federal
Register. Consequently, a comment to
OMB is most assured of being fully
effective if received by OMB (and the
Commission) within 30 days after
publication of this notice of proposed
rulemaking. Nothing in the foregoing
affects the deadline enumerated above
for public comment to the Commission
on the proposed rules.
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C. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) was adopted to address the
concerns that government regulations
may have a significant and/or
disproportionate effect on small
businesses. To mitigate this risk, the
RFA requires agencies to conduct an
initial and final regulatory flexibility
analysis for each rule of general
applicability for which the agency
issues a general notice of proposed
rulemaking.126 These analyses must
describe the impact of the proposed rule
on small entities, including a statement
of the objectives and the legal bases for
the rulemaking; an estimate of the
number of small entities to be affected;
identification of federal rules that may
duplicate, overlap, or conflict with the
proposed rules; and a description of any
significant alternatives to the proposed
rule that would minimize any
significant impacts on small entities.127
Proposed part 43 shall affect real-time
disseminators (i.e., registered SDRs and
third-party service providers), SEFs,
DCMs, swap dealers, MSPs and swap
end-users that transact with other swap
end-users. The Commission has
previously established certain
definitions of ‘‘small entities’’ to be used
by the Commission in evaluating the
impact of its regulations on small
entities in accordance with the RFA.128
In its previous determinations, the
Commission has concluded that DCMs
are not small entities for the purpose of
the RFA.129
As registered SDRs and SEFs are new
entities to be regulated by the
Commission pursuant to the DoddFrank Act, the Commission previously
has not determined whether these
entities are ‘‘small entities’’ for the
purpose of the RFA. The Commission is
proposing to determine that registered
SDRs and SEF covered by these
proposed regulations, for reasons
similar to those applicable to DCMs, are
not small entities for purposes of the
RFA. Specifically, the Commission
proposes that registered SDRs and SEFs
should not be considered small entities
based on, among other things, the
central role they will play in the
national regulatory scheme overseeing
the trading of swaps. Because they will
be required to accept swaps across asset
classes, registered SDRs will require
significant resources to operate. With
respect to SEFs, not only will SEFs play
a vital role in the national economy, but
they will be required to operate a self5 U.S.C. 601 et seq.
5 U.S.C. 603, 604.
128 See 5 U.S.C. 601 et seq.
129 See 47 FR 18618 (Apr. 30, 1982).
regulatory organization, subject to
Commission oversight, with statutory
duties to enforce the rules adopted by
their own governing bodies. Most of
these entities will not be small entities
for the purposes of the RFA.
With respect to swap dealers, the
Commission previously has determined
that futures commission merchants
(‘‘FCMs’’) should not be considered to be
small entities for the purposes of the
RFA.130 Like FCMs, swap dealers will
be subject to minimum capital and
margin requirements, and are excepted
to comprise the largest global financial
firm. Additionally, the Commission is
required to exempt from designation
entities that engage in a de minimis
level of swaps.131
Similarly, with respect to swap
dealers and MSPs, the Commission has
previously determined that large traders
are not ‘‘small entities’’ for RFA
purposes. Like large traders, swap
dealers and MSPs will maintain
substantial positions, creating
substantial counterparty exposure that
could have serious adverse effects on
the financial stability of the United
States banking system or financial
markets.
Although the regulations will require
reporting from a single end-user
transacting in a swap with another enduser, in all other situations (such as
when an end-user engages in a swap
with a swap or MSP), the reporting
requirement will be borne by the swap
dealer or MSP. Additionally, most endusers regulated by the Employee
Retirement Income Security Act of 1974
(‘‘ERISA’’) 132 such as pension funds,
which are among the most active endusers in the swap market, are prohibited
from transacting directly with other
ERISA-regulated end-users. The
Commission does not believe that the
reporting requirements under this
rulemaking will create a significant
economic impact on a substantial
number of small entities.
Accordingly, the Chairman, on behalf
of the Commission, hereby certifies
pursuant to 5 U.S.C. 605(b) that the
proposed rules, will not have a
significant impact on a substantial
number of small entities. Nonetheless,
the Commission specifically requests
comment on the impact these proposed
rules may have on small entities.
List of Subjects in 17 CFR Part 43
Real-time public reporting; block
trades; large notional swaps; reporting
and recordkeeping requirements.
126 See
127 See
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130 See
47 FR 18618 (Apr. 30, 1982).
id. at 18619.
132 See 29 U.S.C. 1106.
131 See
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In consideration of the foregoing, and
pursuant to the authority in the
Commodity Exchange Act, as amended,
and in particular Section 2(a)(13) of the
Act, the Commission hereby proposes to
amend Chapter I of Title 17 of the Code
of Federal Regulation by adding part 43
as follows:
PART 43—REAL-TIME PUBLIC
REPORTING
Sec.
43.1
Purpose, scope, and rules of
construction.
43.2 Definitions.
43.3 Method and timing for real-time public
reporting.
43.4 Swap transaction and pricing data to
be publicly disseminated in real-time.
43.5 Block trades and large notional swaps
for particular markets and contracts.
Appendix A to Part 43—Data Fields for
Real-Time Public Reporting
Authority: 7 U.S.C. 2(a), 12a(5) and 24a,
amended by Pub. L. 111–203, 124 Stat. 1376
(2010).
srobinson on DSKHWCL6B1PROD with PROPOSALS2
§ 43.1 Purpose, scope and rules of
construction.
(a) Purpose. This part sets forth rules
relating to the collection and public
dissemination of certain swap
transaction and pricing data to enhance
transparency and price discovery.
(b) Scope. (1) The provisions of this
part shall apply to all swaps as defined
in Section 1a(47) of the Act and any
implementing regulations therefrom,
including:
(i) Swaps subject to the mandatory
clearing requirement described in
Section 2(h)(1) of the Act (including
those swaps that are excepted from the
requirement pursuant to Section 2(h)(7)
of the Act);
(ii) Swaps that are not subject to the
mandatory clearing requirement
described in Section 2(h)(1) of the Act,
but are cleared at a registered
derivatives clearing organization;
(iii) Swaps that are not cleared at a
registered derivatives clearing
organization and are reported to a
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in realtime; and
(iv) Swaps that are required to be
cleared under Section 2(h)(2) of the Act,
but are not cleared.
(2) This part applies to all swap
execution facilities, designated contract
markets, swap data repositories, as well
as parties to a swap including registered
or exempt swap dealers, registered or
exempt major swap participants and
U.S.-based end-users.
(c) Rules of Construction. The
examples in this part and in appendix
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A to this part 43 are not exclusive.
Compliance with a particular example
or application of a sample clause, to the
extent applicable, constitutes
compliance with such portion of the
rule to which the example relates.
§ 43.2.
Definitions.
As used in this part:
(a) Act means the Commodity
Exchange Act, as amended.
(b) Affirmation means the process by
which parties to a swap verify (orally,
in writing, electronically or otherwise)
that they agree on the primary economic
terms of a swap (but not necessarily all
terms of the swap). Affirmation may
constitute ‘‘execution’’ of the swap or
may provide evidence of execution of
the swap, but does not constitute
confirmation (or confirmation by
affirmation) of the swap.
(c) Appropriate minimum block size
means the minimum notional or
principal size of a swap instrument that
qualifies swaps within such category of
swap instrument as a block trade. The
appropriate minimum block size is
calculated by a registered swap data
repository or is prescribed by the
Commission.
(d) As soon as technologically
practicable means as soon as possible,
taking into consideration the
prevalence, implementation and use of
technology by comparable market
participants.
(e) Asset class means the broad
category of goods, services or
commodities underlying a swap. The
asset classes include interest rate,
currency, credit, equity, other
commodity and such other asset classes
as may be determined by the
Commission.
(f) Block trade means a swap
transaction that:
(1) Involves a swap that is made
available for trading or execution on a
swap market;
(2) Occurs off the swap market’s
trading system or platform pursuant to
the swap market’s rules and procedures;
(3) Is consistent with the minimum
block trade size requirements set forth
in § 43.5; and
(4) Is reported in accordance with the
swap market’s rules and procedures and
the appropriate time delay set forth in
§ 43.5(k).
(g) Confirmation means the
consummation (electronically or
otherwise) of legally binding
documentation (electronic or otherwise)
that memorializes the agreement of the
parties to all terms of a swap. A
confirmation must be in writing
(whether electronic or otherwise) and
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must legally supersede any previous
agreement (electronically or otherwise).
(h) Confirmation by affirmation. The
process by which one party to a swap
acknowledges its assent to the complete
swap terms submitted by the other party
to the swap. If the parties to a swap are
using a confirmation service vendor,
complete swap terms may be submitted
electronically by a party to such
vendor’s platform and the other party
may affirm such terms on such platform.
With the affirmation by one party to the
complete swap terms submitted by the
other party, the swap is legally
confirmed and a legally binding
confirmation is consummated (i.e.,
‘‘confirmation by affirmation’’).
(i) Embedded option means any right,
but not an obligation, provided to one
party of a swap by the other party to the
same swap that provides the party in
possession of the option with the ability
to change any one or more of the
economic terms of the swap as they
were previously established at
confirmation (or were in effect on the
start date).
(j) Executed means the completion of
the execution process.
(k) Execution means an agreement by
the parties (whether orally, in writing,
electronically, or otherwise) to the terms
of a swap that legally binds the parties
to such swap terms under applicable
law. Execution occurs immediately
following or simultaneous with the
affirmation of the swap.
(l) Large notional swap means a swap
transaction that:
(1) Involves a swap that is not
available for trading or execution on a
swap market;
(2) Is consistent with the appropriate
size requirements for large notional
swaps set forth in § 43.5; and
(3) Is reported in accordance with the
appropriate time delay requirements set
forth in § 43.5(k).
(m) Minimum block trade size means
the minimum notional or principal
amount, as determined by each swap
market, for a block trade in a particular
type of swap that is listed or executed
on such swap market. The minimum
block trade size shall be equal to or
greater than the appropriate minimum
block size.
(n) Newly-listed swap means a swap
that is listed on any swap market where
an appropriate minimum block size has
not been published by a registered swap
data repository pursuant to § 43.5.
(o) Novation means the process by
which a party to a swap transfers all of
its rights, liabilities, duties and
obligations under the swap to a new
legal party other than the counterparty
to the swap. The transferee accepts all
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of the transferor’s rights, liabilities,
duties and obligations under the swap.
A novation is valid so long as the
transferor and remaining party to the
swap are given notice, and the
transferor, transferee and remaining
party to the swap consent to the
transfer.
(p) Off-facility swap means any
reportable swap transaction that is not
executed on or subject to the rules of a
swap market.
(q) Other commodity means any
commodity that cannot be grouped in
the credit, currency, equity or interest
rate asset class categories.
(r) Public dissemination and publicly
disseminate means to publish and make
available swap transaction and pricing
data in a non-discriminatory manner,
through the Internet or other electronic
data feed that is widely published and
in machine-readable electronic format.
(s) Real-time disseminator means a
registered swap data repository or thirdparty service provider that accepts swap
transaction and pricing data from
multiple data sources and publicly
disseminates such data in real-time
pursuant to this part.
(t) Real-time public reporting means
the reporting of data relating to a swap
transaction, including price and
volume, as soon as technologically
practicable after the time at which the
swap transaction has been executed.
(u) Remaining party means a party to
a swap that consents to a transferor’s
transfer by novation of all of the
transferor’s rights, liabilities, duties and
obligations under such swap to a
transferee.
(v) Reportable swap transaction
means any executed swap, novation,
swap unwind, partial novation or partial
swap unwind, or such post-execution
events that affect the pricing of a swap.
(w) Reporting party means the party
to a swap with the duty to report a
reportable swap transaction in
accordance with this part and Section
2(a)(13)(F) of the Act.
(x) Social size means the greatest of
the mode, median and mean transaction
sizes of a particular swap contract or
swap instrument, as commonly
observed in the marketplace.
(y) Swap instrument means a
grouping of swaps in the same asset
class with the same or similar
characteristics.
(z) Swap market means any registered
swap execution facility or registered
designated contract market that makes
swaps available for trading.
(aa) Swap unwind means the
termination and liquidation of a swap,
typically followed by a cash settlement
between the parties to such swap.
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(bb) Third-party service provider
means an entity, other than a registered
swap data repository, that publicly
disseminates swap transaction and
pricing data in real-time on behalf of a
swap market or, in the case of an offfacility swap where there is no
registered swap data repository
available to publicly disseminate the
swap transaction and pricing data in
real-time, on behalf of a reporting party.
(cc) Transferee means a party to a
swap that accepts, by way of novation,
all of a transferor’s rights, liabilities,
duties and obligations under such swap
with respect to a remaining party.
(dd) Transferor means a party to a
swap that transfers, by way of novation,
all of its rights, liabilities, duties and
obligations under such swap, with
respect to a remaining party, to a
transferee.
(ee) Unique product identifier means
a unique identification of a particular
level of the taxonomy of the asset class
or sub-asset class in question, as further
described in § 43.4(f) and § 45.4(c) of
this chapter. Such unique product
identifier may combine the information
from one or more of the data fields
described in appendix A to this part 43.
(ff) U.S. person means any U.S.-based
swap dealer, major swap participant,
eligible contract participant, end-user or
other U.S.-based entity or person that
transacts in a swap.
§ 43.3 Method and timing for real-time
public reporting.
(a) Responsibilities of parties to a
swap to report swap transaction and
pricing data in real-time. (1) In general.
A reporting party shall report any
reportable swap transaction to a realtime disseminator as soon as
technologically practicable.
(2) Swaps listed or executed on a
swap market. (i) For swaps executed on
a swap market’s trading system or
platform, a reporting party shall satisfy
its reporting requirement under this
section by executing such reportable
swap transaction on the swap market.
(ii) For block trades executed
pursuant to the rules of a swap market,
the reporting party shall satisfy its
reporting requirement by reporting such
trades to the swap market in accordance
with the rules of the swap market and
§ 43.5.
(3) Off-facility swaps. Except as
otherwise provided in § 43.5, all offfacility swaps shall be reported as soon
as technologically practicable following
execution, by the reporting party, to a
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in
accordance with the rules set forth in
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this part. The following persons shall be
reporting parties for off-facility swaps:
(i) If only one party is a swap dealer
or major swap participant, the swap
dealer or major swap participant shall
be the reporting party.
(ii) If one party is a swap dealer and
the other party is a major swap
participant, the swap dealer shall be the
reporting party.
(iii) If both parties are swap dealers,
the swap dealers shall designate which
party shall be the reporting party.
(iv) If both parties are major swap
participants, the major swap
participants shall designate which party
shall be the reporting party.
(v) If neither party is a swap dealer
nor a major swap participant, the parties
shall designate which party (or its agent)
shall be the reporting party.
(4) Special rules when no registered
swap data repository will accept and
publicly disseminate data. If no
registered swap data repository is
available to accept and publicly
disseminate swap transaction and
pricing data, the reporting party of an
off-facility swap may satisfy the realtime public reporting requirement under
this part by publicly disseminating such
data through a third-party service
provider in the same manner that a
swap market may report through a thirdparty service provider.
(b) Public dissemination of swap
transaction and pricing data. (1)
Reportable swap transactions executed
on a swap market. (i) A swap market
shall publicly disseminate all swap
transaction and pricing data for swaps
executed thereon, as soon as
technologically practicable after the
swap has been executed. A swap market
shall satisfy this public dissemination
requirement by either sending or
otherwise electronically transmitting
swap transaction information to a
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data or by
publicly disseminating swap transaction
information through a third-party
service provider for public
dissemination.
(ii) A swap market that sends swap
transaction information to a third-party
service provider to publicly disseminate
such data in real-time does not satisfy
its requirements under this section until
such data is publicly disseminated
pursuant to this part.
(2) Prohibition of disclosure of data
prior to sending data to a real-time
disseminator.
(i) No swap market or reporting party
shall disclose swap transaction and
pricing data prior to the public
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dissemination of such data by a realtime disseminator.
(ii) Notwithstanding the disclosure
prohibition of § 43.5(b)(2)(i), a swap
market may disclose swap transaction
and pricing data available to
participants on its market prior to the
public dissemination of such data,
provided that such disclosure is made
no earlier than the disclosure of such
data to a real-time disseminator for
public dissemination.
(iii) Notwithstanding the disclosure
prohibition of § 43.5(b)(2)(i), a swap
dealer may disclose swap transaction
and pricing data for off-facility swaps
available to its customer base prior to
the public dissemination of such data,
provided that such disclosure is made
no earlier than the disclosure of such
data to a registered swap data repository
that accepts swap transaction and
pricing data for public dissemination.
(c) Requirements for registered swap
data repositories in providing the realtime public dissemination of swap
transaction and pricing data. (1)
Compliance with part 49 of this chapter.
Any registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall comply with part 49 of this
chapter and shall publicly disseminate
swap transaction and pricing data as
soon as technologically practicable
upon receipt of such data, unless the
data is subject to a time delay in
accordance with § 43.5.
(2) Acceptance of all swaps in an
asset class. Any registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time for swaps in its
selected asset class shall accept and
publicly disseminate swap transaction
and pricing data in real-time for all
swaps within such asset class.
(3) Annual independent review. Any
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall perform, on an annual basis, an
independent review in accordance with
established audit procedures and
standards of the registered swap data
repository’s security and other system
controls for the purposes of ensuring
compliance with the requirements in
this part.
(d) Requirements if a swap market
publicly disseminates through a thirdparty service provider. If a swap market
chooses to publicly disseminate swap
transaction and pricing data in real-time
through a third-party service provider,
such swap market shall —
(1) Ensure that any such third-party
service provider that publicly
disseminates the swap market’s swap
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transaction and pricing data in real-time
does so in a manner that complies with
those standards for registered swap data
repositories described in this part.
(2) Ensure that the Commission has
access to any such swap transaction and
pricing data, through either the swap
market or via direct access to the thirdparty service provider.
(e) Availability of swap transaction
and pricing data to the public.
Registered swap data repositories shall
publicly disseminate swap transaction
and pricing data in such a format that
may be downloaded, saved and/or
analyzed.
(f) Errors or omissions. (1) In general.
Any errors or omissions in swap
transaction and pricing data that were
publicly disseminated in real-time shall
be corrected or cancelled in the
following manner:
(i) If a party to the swap that is not
the reporting party becomes aware of an
error or omission in the swap
transaction and pricing data reported
with respect to such swap, such party
shall promptly notify the reporting party
of the correction.
(ii) If the reporting party to a swap
becomes aware of an error or omission
in the swap transaction and pricing data
which it reported to a swap market or
real-time disseminator with respect to
such swap, either through its own
initiative or through notice by the other
party to the swap, the reporting party
shall promptly submit corrected data to
the same swap market or real-time
disseminator.
(iii) If the swap market becomes aware
of an error or omission in the swap
transaction and pricing data reported
with respect to such swap, or receives
notification from the reporting party, the
swap market shall promptly submit
corrected data to the same real-time
disseminator.
(iv) Any registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall publicly
disseminate any cancellations or
corrections to such data, as soon as
technologically practicable after receipt
or discovery of any such cancellation or
correction.
(2) Improper cancellation or
correction. Reporting parties, swap
markets and registered swap data
repositories that accept and publicly
disseminate swap transaction and
pricing data in real-time shall not
submit or agree to submit a cancellation
or correction for the purpose of rereporting swap transaction and pricing
data in order to gain or extend a delay
in publication or to otherwise evade the
reporting requirements in this part.
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(3) Cancellation. A registered swap
data repository that accepts and
publicly disseminates swap transaction
and pricing data in real-time shall
cancel any incorrect data that had been
publicly disseminated, by publicly
disseminating a cancellation of such
data, in the manner and format
described in Appendix A to this part.
(4) Correction. A registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall correct
any incorrect data that had been
publicly disseminated to the public, by
publicly disseminating a cancellation of
the incorrect swap transaction and
pricing data and then publicly
disseminating the correct data, as soon
as technologically practicable, in the
manner and format described in
Appendix A to this part.
(g) Hours of operation. A registered
swap data repository that accepts and
publicly disseminates swap transaction
and pricing data in real-time:
(1) Shall maintain hours of operation
to receive and publicly disseminate
swap transaction and pricing data at all
times, twenty-four hours a day;
(2) May declare, on an ad hoc basis,
special closing hours to perform system
maintenance and shall provide
reasonable advance notice of its special
closing hours to market participants and
to the public; and
(3) Shall, to the extent reasonably
possible under the circumstances, avoid
scheduling special closing hours when,
in its estimation, the U.S. market and
major foreign markets are most active.
(h) Acceptance of data during special
closing hours. During special closing
hours, a registered swap data repository
that accepts and publicly disseminates
swap transaction and pricing data in
real-time shall have the capability to
receive and hold in queue information
regarding reportable swap transactions
pursuant to this part.
(i) Recordkeeping. All data related to
a reportable swap transaction shall be
maintained for a period of not less than
five years following the time at which
such reportable swap transaction is
publicly disseminated pursuant to this
part.
(1) Retention of data by a swap
market. Any swap market and any
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall retain all swap transaction
information that is received from
reporting parties for public
dissemination, including data related to
block trades and large notional swaps
and information that is received by a
swap market or by a registered swap
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data repository that accepts and
publicly disseminates swap transaction
and pricing data in real-time but is not
publicly reported pursuant to § 43.4(c).
(2) Retention of data by a swap dealer
or major swap participant. In
accordance with this part and part 23 of
this chapter, a swap dealer or major
swap participant shall retain all data
relating to a reportable swap transaction
that such swap dealer or major swap
participant sends to a swap market or a
registered swap data repository that
accepts and publicly disseminates such
data in real-time or that such swap
dealer or major swap participant retains
in accordance with § 43.5.
(j) Fees. Any fees or charges assessed
on a reporting party or swap market by
a registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
for the collection of such data must be
equitable and non-discriminatory. If
such registered swap data repository
allows a discount based on the volume
of data reported to it for public
dissemination, such discount shall be
provided to all reporting parties and
swap markets impartially.
srobinson on DSKHWCL6B1PROD with PROPOSALS2
§ 43.4 Swap transaction and pricing data
to be publicly disseminated in real-time.
(a) In general. Swap transaction
information shall be reported to a realtime disseminator so that the real-time
disseminator can publicly disseminate
swap transaction and pricing data in
real-time in accordance with this part,
including the manner and format
requirements described in appendix A
to this part 43 and this section.
(b) Public dissemination of data
fields. Any registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall publicly
disseminate the information in the data
fields described in appendix A to this
part.
(c) Additional swap information. A
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
may require reporting parties and swap
markets to report to such registered
swap data repository, such information
that is necessary to match the swap
transaction and pricing data that was
publicly disseminated in real-time to
the data reported to a registered swap
data repository pursuant to Section
2(a)(13)(G) of the Act or to confirm that
parties to a swap have reported in a
timely manner pursuant to § 43.3. Such
additional information shall not be
publicly disseminated by the registered
swap data repository that accepts and
publicly disseminates swap transaction
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and pricing data in real-time on a
transactional or aggregate basis.
(d) Amendments to data fields. The
Commission may determine from time
to time to amend the data fields
described in appendix A to this part.
(e) Anonymity of the parties to a swap
transaction. (1) In general. Swap
transaction and pricing data that is
publicly disseminated in real-time may
not disclose the identities of the parties
to the swap. A registered swap data
repository that accepts and publicly
disseminates such data in real-time may
not do so in a manner that discloses or
otherwise facilitates the identification of
a party to a swap.
(2) Use of general description.
Reporting parties and swap markets
shall provide a registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time with a specific
description of the underlying asset(s)
and tenor of the swap; this description
must be general enough to provide
anonymity but specific enough to
provide for a meaningful understanding
of the economic characteristics of the
swap. This requirement is separate from
the requirement that a reporting party
must report swap data to a registered
swap data repository pursuant to
Section 2(a)(13)(G) of the Act. If a swap
dealer or major swap participant does
not report the exact description of the
underlying asset(s) or tenor for the
purposes of real-time reporting pursuant
to this part, because such exact
description would facilitate the identity
of a party to a swap, such swap dealer
or major swap participant must comply
with the related documentation and
recordkeeping requirements described
in Part 23 of this chapter.
(f) Unique product identifier. If a
unique product identifier is developed
that sufficiently describes one or more
swap transaction and pricing data fields
for real-time reporting described in
appendix A to this part, then such
unique product identifier may be used
in lieu of the data fields that it
describes.
(g) Price forming continuation data.
Any swap-specific event including, but
not limited to novations, swap unwinds,
partial novations, and partial swap
unwinds, that occurs during the life of
a swap and affects the price of such
swap shall be publicly disseminated
pursuant to this part.
(h) Reporting of notional or principal
amount. (1) Off-facility swaps. The
actual notional or principal amount for
any off-facility swap shall be reported
by the reporting party to the registered
swap data repository that accepts and
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publicly disseminates such data in realtime.
(2) Swaps executed on or pursuant to
the rules of a swap market. The actual
notional or principal amount for any
block trade executed pursuant to the
rules of a swap market shall be reported
by the reporting party to the swap
market. A swap market shall transmit
the actual notional amount for all swaps
executed on or pursuant to its rules to
the real-time disseminator.
(i) Public dissemination of notional or
principal amount. The notional or
principal amount data fields described
in Appendix A to this Part 43 shall be
publicly disseminated as follows:
(1) If the notional or principal amount
is less than 1 million, round to nearest
100 thousand;
(2) If the notional or principal amount
is less than 50 million but greater than
1 million, round to the nearest million;
(3) If the notional or principal amount
is less than 100 million but greater than
50 million, round to the nearest 5
million;
(4) If the notional or principal amount
is less than 250 million but greater than
100 million, round to the nearest 10
million;
(5) If the notional or principal amount
is greater than 250 million, round to
‘‘250+’’.
§ 43.5 Block trades and large notional
swaps for particular markets and contracts.
(a) In general. The provisions in this
§ 43.5 shall apply to both block trades
on swaps and large notional swaps.
(b) Eligible block trade or large
notional swap parties. (1) In general.
Parties to a block trade or large notional
swap must be ‘‘eligible contract
participants’’ as defined in Section
1a(18) of the Act. However, a designated
contract market may allow a commodity
trading advisor acting in an asset
managerial capacity and registered
pursuant to Section 4n of the Act, or a
principal thereof, including any
investment advisor who satisfies the
criteria of § 4.7(a)(2)(v) of this chapter,
or a foreign person performing a similar
role or function and subject as such to
foreign regulation, to transact block
trades for customers who are not eligible
contract participants, if such commodity
trading advisor, investment advisor or
foreign person has more than
$25,000,000 in total assets under
management. A person transacting a
block trade on behalf of a customer must
receive written instruction or prior
consent from the customer to do so.
(2) Election to be treated as a block
trade or large notional swap. Parties to
a swap of a large notional value shall
elect to have the swap treated as a block
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trade or large notional swap. Any
reporting party or swap market shall
indicate such election to a real-time
disseminator.
(c) Block trades on swaps. (1) A swap
market that permits block trades must
have rules that specify the minimum
size of such block trades pursuant to
this section.
(2) The reporting party of a block
trade shall report the block trade
transaction and pricing data to the swap
market, as soon as technologically
practicable after execution of the block
trade and pursuant to the rules of such
swap market.
(3) The swap market shall transmit
block trade transaction and pricing data
to a real-time disseminator as soon as
technologically practicable after receipt
of such data. Such information shall not
be publicly disseminated until the
expiration of the appropriate time delay
described in § 43.5(k).
(d) Large notional swaps. A registered
swap data repository that accepts and
publicly disseminates swap transaction
and pricing data in real-time shall not
publicly report the large notional swap
transaction and pricing data until the
expiration of the appropriate time delay
described in § 43.5(k). Immediately
upon expiration of the appropriate time
delay, the registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time must publicly
disseminate the large notional swap
transaction and pricing data.
(e) Off-facility swaps in which neither
counterparty is a swap dealer or a major
swap participant. Off-facility swaps in
which neither counterparty is a swap
dealer or a major swap participant may
qualify as large notional swaps. Parties
to such transactions shall follow the
requirements for large notional swaps in
§ 43.5.
(f) Time-stamp and reporting
requirements for block trades and large
notional swaps. In addition to the
requirements under § 43.4 and appendix
A to this part, a swap market and a
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall have the following additional
time-stamp requirements with respect to
block trades and large notional swaps:
(1) A swap market shall time-stamp
swap transaction and pricing data with
the date and time, to the nearest second
of when such swap market:
(i) Receives data from a reporting
party; and
(ii) Transmits such data to a real-time
disseminator.
(2) A registered swap data repository
that accepts and publicly disseminates
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swap transaction and pricing data in
real-time shall time-stamp such data
with the date and time, to the nearest
second when such swap data:
(i) Is received from a swap market or
reporting party; and
(ii) Is publicly disseminated.
(3) All records relating to the timestamps required by this section shall be
maintained for a period of at least five
years from the execution of the block
trade or large notional swap.
(g) Responsibilities of registered swap
data repositories in determining
appropriate minimum block size.
(1) In general. A registered swap data
repository shall determine the
appropriate minimum block size for
swaps for which such registered swap
data repository receives data in
accordance with Section 2(a)(13)(G) of
the Act. A registered swap data
repository shall set the appropriate
minimum block size for each swap
instrument as the greater of the numbers
derived from the distribution test and
the multiple test described in this
paragraph. To qualify as a block trade,
the notional or principal amount of the
swap must be equal to or greater than
the appropriate minimum block size.
(i) Distribution test. To apply the
distribution test to a swap instrument, a
registered swap data repository shall
apply the minimum threshold to the
distribution of the notional or principal
transaction amounts, each as set forth in
this paragraph.
(A) In determining the distribution of
the notional or principal transaction
amounts of a swap instrument, a
registered swap data repository shall
evaluate the transaction sizes, rounded
in the manner discussed in § 43.4(i), for
all swaps within a category of swap
instrument, by looking at swaps within
the category of swap instrument that are
executed: on all swap execution
facilities; on all designated contract
markets; and as off-facility swaps.
Registered swap data repositories may
also consider other economic
information to establish the total market
size of a category of swap instrument, in
consultation with the Commission.
(B) The minimum threshold shall be
a notional or principal amount that is
greater than 95% of the notional or
principal transaction sizes in a swap
instrument during the applicable period
of time, as represented by the
distribution of the notional or principal
transaction amounts for such swap.
(ii) Multiple test. To apply the
multiple test to a swap instrument, a
registered swap data repository shall
multiply the block multiple by the
social size, as described in this
paragraph.
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76175
(A) In determining the social size for
a swap instrument, the registered swap
data repository shall calculate the mode,
mean and median transaction sizes for
all swaps in the category of swap
instrument and choose the greatest of
the mode, mean and median transaction
sizes.
(B) For all swaps, the block multiple
shall be five.
(2) Initial determination of
appropriate minimum block size for
newly-listed swaps. A registered swap
data repository shall make its initial
determination of the appropriate
minimum block size for a newly-listed
swap one month after such newly-listed
swap is first executed and reported to
the registered swap data repository.
Such registered swap data repository
may make such a determination by:
(i) Grouping a newly-listed swap into
an existing category of swap instrument
for which the registered swap data
repository has already determined an
appropriate minimum block size; or
(ii) Creating a new category of swap
instrument for the newly-listed swap
and calculating the appropriate
minimum block size based on the
previous month’s data.
(3) Publication of appropriate
minimum block sizes. A registered swap
data repository shall publish the
appropriate minimum block sizes on its
Internet Web site for all swap
instruments. Additionally, a registered
swap data repository shall publish the
types of swaps that fall within a
particular category of swap instrument,
for which the registered swap data
repository has received data on its
Internet Web site. The appropriate
minimum block size information and
swap instrument information on the
registered swap data repository’s
Internet Web site must be available to
the public in an open and nondiscriminatory manner.
(4) Annual update. A registered swap
data repository shall each year
beginning in January 2012, publish and
update the appropriate minimum block
sizes for the swap instruments for which
the registered swap data repository
accepts data. Any such updates must be
posted on the registered swap data
repository’s Internet Web site by the
tenth business day of each year. The
registered swap data repository shall
calculate the appropriate minimum
block size based on the data that it has
received over the previous year. If a
registered swap data repository has
received data for a category of swap
instrument for less than one year, the
appropriate minimum block size shall
be calculated based on such data.
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(5) Appropriate minimum block size
determination when more than one
registered swap data repository. If more
than one registered swap data repository
maintains data for a swap instrument,
then the Commission shall prescribe the
manner in which the appropriate
minimum block trade size shall be
determined.
(h) Responsibilities of swap markets
in determining minimum block trade
sizes. For any swap listed on a swap
market, the swap market shall set the
minimum block trade size. Swap
markets must set the minimum block
trade sizes for all listed contracts at
levels greater than or equal to the
appropriate minimum block sizes
posted on the swap data repositories’
Internet Web sites. Swap markets shall
immediately apply any change to the
minimum block trade size of a listed
swap following the posting of a new or
adjusted appropriate minimum block
size on a registered swap data
repository’s Internet Web site, pursuant
to the requirements set forth in part 40
of this chapter. If a swap listed on a
swap market does not have an
appropriate minimum block size, such
swap market shall apply the rules set
forth in § 43.5(i).
(i) Minimum block trade size
determination for newly-listed swaps.
For any newly-listed swap, the swap
market that lists the swap for trading
shall set the minimum block trade size.
(1) If a newly-listed swap is within
the parameters of a category of swap
instrument for which a registered swap
data repository has posted an
appropriate minimum block size, the
swap market shall set the minimum
block size for such newly listed swap at
a level equal to or greater than such
appropriate minimum block size.
(2) In determining the minimum block
trade size for a newly-listed swap that
is not within an existing category of
swap instrument, swap markets shall
take into account:
(i) The anticipated distribution of
notional or principal transaction
amounts;
(ii) The social size for swaps in other
markets that are in substance the same
as such newly-listed swap; and
(iii) The minimum block trade sizes of
similar swaps in the same asset class.
(3) In determining the minimum block
trade size for a newly-listed swap that
is not within an existing category of
swap instrument, the swap market that
lists the swap must ensure that the
notional or principal amount selected
represents a reasonable estimate of the
greater of:
(i) A notional or principal amount
that is greater than all but 95% of the
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anticipated distribution of notional or
principal transaction amounts over the
one month period immediately
following the first execution of the
swap; or
(ii) Five times the anticipated social
size over the one month period
immediately following the first
execution of the swap.
(j) Responsibilities of the parties to a
swap in determining the appropriate
minimum large notional swap size. (1)
The parties to a large notional swap
shall be responsible for determining the
category of existing swap instrument in
which such swap should be included.
Once the category of existing swap
instrument is identified by the parties to
the swap, the parties shall refer to the
appropriate minimum block size that is
associated with such existing swap
instrument and made available to the
public on the appropriate registered
swap data repository’s Internet Web site,
or as otherwise prescribed by the
Commission. The notional or principal
amount of the swap must be equal to or
greater than the appropriate minimum
block size of the swap instrument in
order to qualify as a large notional swap.
If there is not a swap instrument with
an appropriate minimum block size
available to reference, then such swap
between the parties shall not qualify as
a large notional swap or for any time
delay in reporting. In determining the
appropriate swap instrument, the
following factors shall be documented—
(i) The similarities of the terms of the
swap between the parties compared to
the terms of swaps that are grouped
within the existing swap instrument;
and
(ii) Other swaps listed on swap
markets that are grouped within an
existing category of swap instrument.
(2) To the extent that the parties to a
large notional swap are swap dealers
and/or major swap participants, such
parties shall maintain records
illustrating the basis for the selection of
the swap instrument for the large
notional swap pursuant to part 23 of
this chapter. Such records shall be made
available to the Commission upon
request.
(3) In the event that the parties to a
swap seek to qualify such swap as a
large notional swap, but are unable to
determine, identify or agree on the
appropriate swap instrument to refer to,
such swap shall not qualify as a large
notional swap and shall not qualify for
any time delay in reporting.
(k) Time delay in the real-time public
reporting of block trades and large
notional swaps. (1) In general. The time
delay for the real-time public reporting
of a block trade or large notional swap
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begins upon execution. It is the
responsibility of the registered swap
data repository that accepts and
publicly disseminates swap transaction
and pricing data in real-time to ensure
the block trade or large notional swap
transaction and pricing data is publicly
disseminated following the appropriate
time delay described in this section.
(2) Time delay for standardized block
trades and large notional swaps. The
block trade or large notional swap
transaction and pricing data shall be
reported to the public by the swap
market (through a third-party service
provider) or registered swap data
repository that accepts and publicly
disseminates such data within 15
minutes of the time of execution
reflected in the data. This provision
covers all swaps under Sections
2(a)(13)(C)(i) and (iv) of the Act.
(3) Time delay for customized large
notional swaps. The large notional swap
transaction and pricing data shall be
reported to the public by the registered
swap data repository that accepts and
publicly disseminates such data subject
to a time delay as may be prescribed by
the Commission. This provision covers
all swaps under Sections 2(a)(13)(C)(ii)
and (iii) of the Act.
(l) Data to be reported to the public.
With respect to block trades and large
notional swaps, all information in the
data fields described in appendix A to
this part and § 43.4 shall be
disseminated to the public.
(m) Aggregation. Except as otherwise
stated in this paragraph, the aggregation
of orders for different accounts in order
to satisfy the minimum block trade size
requirement is prohibited. Aggregation
is permissible if done by a commodity
trading advisor acting in an asset
managerial capacity and registered
pursuant to Section 4n of the Act, or a
principal thereof, including any
investment advisor who satisfies the
criteria of § 4.7(a)(2)(v) of this chapter,
or a foreign person performing a similar
role or function and subject as such to
foreign regulation, if such commodity
trading advisor, investment advisor or
foreign person has more than
$25,000,000 in total assets under
management.
Appendix A to Part 43—Data Fields for
Real-Time Public Reporting
The data fields described in Table A1 and
Table A2, to the extent applicable for a
particular reportable swap transaction, shall
be real-time reported to the public. Table A1
and Table A2 provide guidance and
examples for compliance with the reporting
of each data field.
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TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP
TRANSACTION AND PRICING DATA
Field
Description
Example
Data application
Cancellation .................
An indication that a reportable swap transaction has been incorrectly or erroneously
reported and is canceled. There shall be a
clear indication to the public that the reportable swap transaction is being canceled
(e.g., ‘‘CANCEL’’) followed by the swap
transaction and pricing data that is being
canceled same form and manner that it
was erroneously reported. Any cancellations should be made in accordance with
§ 43.3(f).
If a reportable swap transaction is canceled,
it may be corrected by reporting the ‘‘Correction’’ data field and the correct information.
An indication that the swap transaction and
pricing data that is being reported is a correction to previously publicly disseminated
swap transaction and pricing data that contained an error or omission. In order for a
correction to occur, the registered swap
data repository that accepts and publicly
disseminates swap transaction and pricing
data shall first cancel the incorrectly reported swap transaction and pricing data
and the follow such cancellation with the
correction. There shall be a clear indication
to the public that the swap transaction and
pricing data that is being reported is a correction (e.g., ‘‘CORRECT’’). Any corrections should be made in accordance with
§ 43.3(f).
The date of execution of the reportable swap
transaction. The date shall be displayed
with two digits for day, month, and year.
The date stamp shall be reported only
when the reportable swap transaction is
executed on a day other than the current
day or if the reportable swap transaction is
a correction or cancellation.
The time of execution of the reportable swap
transaction in Coordinated Universal Time
(UTC). The time-stamp shall be displayed
with two digits for each of the hour, minute
and second.
An indication of whether or not a reportable
swap transaction is cleared by a derivatives clearing organization. If the reportable
swap transaction is cleared by a derivatives clearing organization, a ‘‘C’’ may be
used and if uncleared a ‘‘U’’ may be used.
Alternatively, the entirety of the data fields reported to the public for the reportable swap
transaction may be color coded white if the
swap is cleared by a derivatives clearing
organization and red if the reportable swap
transaction is uncleared.
An indication that the reportable swap transaction has one or more additional term(s)
or provision(s), other than those listed in
the required real-time data fields, that materially affect(s) the price of the reportable
swap transaction. Reportable swap transactions that are reported with this designation would be non-standardized (bespoke)
swaps.
CANCEL .....................
Information is needed to inform market participants and the public that swap transaction and pricing data was erroneously
disseminated to the public.
CORRECT ..................
Information needed to inform market participants and the public that a particular reportable swap transaction that is being reported is a correction to swap transaction
and pricing data that has been publicly disseminated by a real-time disseminator.
13–10–07 ...................
Information needed to indicate the date of
execution of the reportable swap transaction (if not the same day).
15:25:47 .....................
Information needed to indicate the time of
execution of the reportable swap transaction.
C .................................
Information needed to indicate whether or not
a reportable swap transaction is cleared
through a derivatives clearing organization.
B* ................................
Information needed to indicate whether a reportable swap transaction is non-standardized (bespoke) and to inform the public that
there are one or more additional term(s) or
provision(s) that materially affect the price
of the reportable swap transaction.
Correction ....................
Date stamp ..................
Execution time-stamp ..
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Cleared or uncleared ...
Indication of other price
affecting term (nonstandardized swaps).
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TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP
TRANSACTION AND PRICING DATA—Continued
Field
Description
Block trades and large
notional swaps.
Execution venue ..........
Swap instrument ..........
Start date .....................
Asset class ..................
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Sub-asset class for
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Contract type ...............
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Example
Some common material price affecting terms
may include counterparty credit, collateral,
day count fraction, changing notional
amount, etc. A ‘‘B*’’ may be used to indicate that a reportable swap transaction has
a material price affecting term that is not
otherwise shown..
An indication of whether a reportable swap
transaction is a block trade or large notional swap. If a reportable swap transaction is a block trade or a large notional
swap and subject to a time delay in realtime public reporting pursuant to § 43.5,
such block trade or large notional swap
may be indicated as follows: block trade or
large notional swap (‘‘BLK’’). If a trade is
not a block trade or large notional swap,
then this field may be left blank.
An indication of the venue of execution of a
reportable swap transaction. Such indication may be indicated with a three character reference code as follows: reportable
swap transaction executed on or pursuant
to the rules of a swap market (SWM) or an
off-facility swap (OFF).
A description of the instrument used to determine the appropriate minimum block size
for block trades and large notional swaps.
The swap instrument may be reported with
the letters ‘‘SWI’’ followed by the description of the swap instrument. The swap instrument should be described in such a
manner that it is clear to market participants and the public what is being reported. If there is no swap instrument, then
‘‘NA’’ may be reported.
The date that the reportable swap transaction
becomes effective or starts. The effective
date shall be displayed with two digits for
day, month, and year. If a standardized
start date is established for a particular
swap, for example, the start date is always
T+1 for a particular swap contract or the
start date is standardized to start on a
given date in the future (e.g., the first of the
following month), this field may not be necessary.
An indication of one of the five broad categories as described in § 43.2(e). Reportable swap transactions may be reported in
the following asset classes with an appropriate two character symbol: interest rate
(IR), currency (CU), credit (CD), equity
(EQ), other commodity (CO)..
An indication of a more specific description of
the asset class for other commodity. Such
sub-asset classes for other commodity reportable swap transactions may include,
but are not limited to, energy, precious
metals, metals—other, agriculture, weather,
emissions and volatility. The sub-asset
class may be reported with an appropriate
two character symbol (e.g., energy (EN)).
An indication of one of four specific contract
types of reportable swap transactions. The
following product types shall be reported
with an appropriate two character symbol:
swap (S-), swaption (SO), forward (FO)
and stand-alone options (O-).
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Data application
BLK .............................
Information needed to indicate whether a reportable swap transaction is a block trade
or a large notional swap. This information
is important since it will alert market participants and the public to the differences in
notional or principal amount and the time
delay in real-time reporting the swap transaction and pricing data.
OFF ............................
Information needed to indicate whether a reportable swap transaction is executed on a
swap market, as an off-facility swap, or as
a block trade or large notional swap.
SWI–ST–USD–IRS
(e.g., short term
USD interest rate
swaps).
Information needed to understand what swap
instrument was used by the parties to a
block trade or large notional swap to determine the appropriate minimum block trade
size that was relied on to delay reporting
pursuant to § 43.5.
20–02–09 ...................
Information needed to indicate when the
terms of the reportable swap transaction
become effective or start.
IR ................................
Information needed to broadly describe the
underlying asset to facilitate comparison
with other similar reportable swap transactions.
AG (agriculture swap)
Information needed to define with greater
specificity, the type of other commodity that
is being real-time reported and to facilitate
comparison with other similar reportable
swap transactions.
S- ................................
Information needed to describe the reportable
swap transaction and to be able to compare such reportable swap transaction to
other similar reportable swap transactions.
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TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP
TRANSACTION AND PRICING DATA—Continued
Field
Description
Example
Data application
Contract sub-type ........
An indication of more specificity into the type
of contract described in the contract type
field. Such contract sub-types may include,
but are not limited to, basis swaps, index
swaps, broad based security swaps, and
basket swaps. The contract sub-type may
be reported with an appropriate two character symbol (e.g., basket swap (SK)).
An indication of whether such reportable
swap transaction is a post-execution event
that affects the price of the reportable swap
transaction. The following price-forming
continuation data may be reported with a
designation as follows: novation (N-), partial novation (PN), swap unwind (U-), partial swap unwind (PU), other price-forming
continuation data (PF).
The asset, reference asset or reference obligation for payments of a party’s obligations
under the reportable swap transaction reference. The underlying asset may be a reference price, index, obligation, physical
commodity with delivery point, futures contract or any other instrument agreed to by
the parties to a reportable swap transaction.
Reporting entities may refer to § 43.4(e) when
reporting underlying asset.
The asset, reference asset or reference obligation for payments of a party’s obligations
under the reportable swap transaction reference. The underlying asset may be a reference price, index, obligation, physical
commodity with delivery point, futures contract or any other instrument agreed to by
the parties to a reportable swap transaction..
Reporting entities may refer to § 43.4(e) when
reporting underlying asset..
If there are more than two underlying assets,
such underlying assets shall be reported in
the same manner as above.
The premium, yield, spread or rate, depending on the type of swap, that is calculated
at affirmation and nets to a present value
of zero at execution. The pricing characteristic shall not include any premiums
associated with margin, collateral, independent amounts, reconcilable post-execution events, options on a swap, or other
non-economic characteristics. The format
in which the pricing characteristic is realtime reported to the public shall be the format commonly sought by market participants for each particular market or contract.
The additional pricing characteristic shall include any premiums associated with margin, collateral, independent amounts, reconcilable post-execution events, front end
payments, back end payments, or other
non-economic characteristics not illustrated
in the reporting field for pricing characteristic. The additional pricing characteristic shall not include options as they
are reported elsewhere. The format in
which the additional pricing characteristic is
real-time reported to the public shall be as
an addition or subtraction of the pricing
characteristic and in a way commonly
sought by market participants for each particular market or contract.
SS (basis swap) .........
Information needed to define with greater
specificity, the type of contract that is being
real-time reported and to facilitate comparison with other similar reportable swap
transactions.
PN ..............................
Information needed to describe whether the
reportable swap transaction is a post-execution event for a pre-existing swap (i.e.,
not a newly executed swap) that materially
affects the price of the reportable swap
transaction.
TX (e.g., TX represents ‘‘Treasury
10 year’’).
Information needed to describe the reportable
swap transaction and to help market participants and the public evaluate the price
of the reportable swap transaction.
IIIL (e.g., IIIL represents 3-month
LIBOR).
Information needed to describe the reportable
swap transaction and to help market participants and the public evaluate the price
of the reportable swap transaction.
2.53 ............................
Information needed to describe the reportable
swap transaction and to help market participants and the public evaluate the price
of the reportable swap transaction.
+0.25 ..........................
Additional information needed to describe the
reportable swap and to help market participants and the public evaluate the price of
the reportable swap transaction.
Price-forming continuation data.
Underlying asset 1 ......
Underlying asset 2 ......
Price notation ..............
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Additional price notation.
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TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP
TRANSACTION AND PRICING DATA—Continued
Field
Description
Example
Data application
Unique product identifier.
Certain fields may be replaced with a unique
product identifier, if such unique identifier
exists, to the extent that such unique product identifier adequately describes such
fields..
To be determined .......
Notional currency 1 .....
An indication of the type of currency that the
notional amount is in. The notional currency may be reported in a commonly accepted code (e.g., the three character alphabetic ISO 4217 currency code).
The total currency amount or quantity of units
of the underlying asset. The notional or
principal amounts for reportable swap
transactions, including block trades and
large notional swaps shall be reported pursuant § 43.4.
An indication of the type of currency that the
notional amount is in. The notional currency may be reported in a commonly accepted code (e.g., the three character alphabetic ISO 4217 currency code).
The total currency amount or quantity of units
of the underlying asset. The notional or
principal amounts for reportable swap
transactions, including block trades and
large notional swaps, shall be reported pursuant to § 43.4.
Each notional or principal amount (if there is
more than one) should be labeled with a
number (e.g., 1, 2, 3, etc.) such that the
number corresponds to the underlying
asset for which the notional or principal
amount is applicable.
If there are more than two notional or principal amounts, each such additional notional or principal amount shall be reported
in the same manner.
An integer multiplier of a time period describing how often the parties to the reportable
swap transaction exchange payments associated with each party’s obligation under
the reportable swap transaction. Such payment frequency may be described as one
letter preceded by an integer. Such letter
convention may be reported as follows: D
(daily), W (weekly), M (monthly), Y (yearly).
An integer multiplier of a time period describing how often the parties to the reportable
swap transaction exchange payments associated with each party’s obligation under
the reportable swap transaction. Such payment frequency may be described as one
letter preceded by an integer. Such letter
convention may be reported as follows: D
(daily), W (weekly), M (monthly), or Y
(yearly).
Each payment frequency (if there is more
than one) should be labeled with a number
(e.g., 1, 2, 3, etc.) such that the number
corresponds to the underlying asset for
which the payment frequency is applicable.
If there are more than two payment frequency, each such additional payment frequency shall be reported in the same manner.
EUR ............................
Information needed to describe the reportable
swap transaction and for market participants and the public to be able to compare
such reportable swap transaction to other
similar reportable swap transactions. Such
information would substitute the information
described in one or more reportable fields
in accordance with § 43.4.
Information needed to describe the type of
currency of the notional amount.
Notional or principal
amount 1.
Notional currency 2 .....
Notional or principal
amount 2.
Payment frequency 1 ..
srobinson on DSKHWCL6B1PROD with PROPOSALS2
Payment frequency 2 ..
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200 .............................
Information needed to identify the size of the
reportable swap transaction and to help
evaluate the price of the reportable swap
transaction.
USD ............................
Information needed to describe the type of
currency of the notional amount.
45 ...............................
Information needed to identify the size of the
reportable swap transaction and to help
market participants and the public evaluate
the price of the reportable swap transaction.
2M ..............................
Information needed to identify the pricing
characteristic of the reportable swap transaction and to help market participants and
the public evaluate the price of the reportable swap transaction.
6W ..............................
Information needed to identify the pricing
characteristic of the reportable swap transaction and to help market participants and
the public evaluate the price of the reportable swap transaction.
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TABLE A1—DATA FIELDS AND SUGGESTED FORM AND ORDER FOR REAL-TIME PUBLIC REPORTING OF SWAP
TRANSACTION AND PRICING DATA—Continued
Field
Description
Example
Data application
Reset frequency 1 .......
An integer multiplier of a period describing
how often the parties to the reportable
swap transaction shall evaluate and, when
applicable, change the price used for the
underlying assets of the reportable swap
transaction. Such reset frequency may be
described as one letter preceded by an integer. Such letter convention may be reported as follows: D (daily), W (weekly), M
(monthly), or Y (yearly).
An integer multiplier of a period describing
how often the parties to the reportable
swap transaction shall evaluate and, when
applicable, change the price used for the
underlying assets of the reportable swap
transaction. Such reset frequency may be
described as one letter preceded by an integer. Such letter convention may be reported as follows: D (daily), W (weekly), M
(monthly), or Y (yearly).
Each reset frequency (if there is more than
one) should be labeled with a number
(e.g., 1, 2, 3, etc.) such that the number
corresponds to the underlying asset for
which the reset frequency is applicable.
If there are more than two reset frequencies,
each such additional reset frequency shall
be reported in the same manner.
The maturity, termination, or end date of the
reportable swap transaction. The tenor may
be displayed with the 3 character month
and year format used for futures contracts..
1Y ...............................
Information needed to identify the pricing
characteristic of the reportable swap transaction and to help market participants and
the public evaluate the price of the reportable swap transaction.
6M ..............................
Information needed to identify the pricing
characteristic of the reportable swap transaction and to help market participants and
the public evaluate the price of the reportable swap transaction.
Z15 .............................
Information needed to determine the end
month and year of the reportable swap
transaction and to help market participants
and the public evaluate the price of the reportable swap transaction.
Reset frequency 2 .......
Tenor ...........................
Reporting entities may refer to § 43.4(e) in reporting tenor.
If a swap has more than one embedded
option, or multiple swaptions provisions, all
such option provisions shall be reported in
the same manner pursuant to the fields in
Table A2 of Appendix A to this Part 43.
When disseminated to the public, multiple
embedded options associated with the same
swap shall be clearly described and clearly
linked to the swap with which the embedded
option is associated.
TABLE A2—ADDITIONAL REAL-TIME PUBLIC REPORTING DATA FIELDS FOR OPTIONS, SAPTIONS AND SWAPS WITH
EMBEDDED OPTIONS
Field
Description
Embedded option on
swap.
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Option Strike Price ......
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Example
Data application
An indication of whether or not the option
fields are for an embedded option. This indication may be displayed as ‘‘EMBED1,’’
‘‘EMBED2,’’ etc. and should precede the
option fields that describe the embedded
option.
The level or price at which an option may be
exercised. The option strike price may be
displayed with the letter ‘‘O’’ followed immediately by the level or price.
EMBED1 .....................
Information needed to describe whether an
option is embedded in a swap to prevent
confusion and allow the market participants
and the public to understand the information that is being reported.
O25 .............................
Information needed to indicate the level or
price at which the option may be exercised
to market participants and the public.
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Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Proposed Rules
TABLE A2—ADDITIONAL REAL-TIME PUBLIC REPORTING DATA FIELDS FOR OPTIONS, SAPTIONS AND SWAPS WITH
EMBEDDED OPTIONS—Continued
Field
Description
Example
Data application
Option Type .................
An indication of the type of option. The option
type may be displayed with a two character
code as follows: put (P-), call (C-), purchase to pay fixed vs. floating (PF), purchase to receive fixed vs. floating (RF) cap
(PC), floors (F-), collar (RC), straddle (D-),
strangle (G-), amortizing (A-), cancelable
(NC), compounding (DC), knock-in (KI),
knock-out (KO), reverse knock-in (RI), reverse knock-out (RO), one touch (OT), no
touch (NT), double one-touch (DO), double
no touch (DN), butterfly (BU), collar (L-),
condor (R-), callable inverse snowball (JC),
other exotic option types (XX).
An indication of the style of the option transaction. The option style/family may be displayed as a two letter code as follows: European (EU), American (AM), Bermudan
(BM), Asian (AS), other option style/family
(YY).
An indication of the type of currency of the
option premium. The option currency may
be reported in a commonly accepted code
(e.g., the three character alphabetic ISO
4217 currency code).
An indication of the additional cost of the option to the reportable swap transaction as a
numerical value, not as the difference of
the premiums of the party’s obligations to
the reportable swap transaction. This field
shall be combined with the option currency
field.
An indication of the first allowable exercise
date of the option. Such option lockout
date shall be rounded to the month and reported using the three character month and
year format used for futures contracts.
An indication of the date that the option is no
longer available for exercise. Such option
expiration shall be rounded off to the
month and reported using the three character month and year format used for futures contracts.
P- ................................
Information needed to adequately describe
the option to market participants and the
public.
EU ..............................
Information needed to adequately describe
the option to market participants and the
public.
USD ............................
Information needed to identify the type of currency of the option premium to market participants and the public.
50000 .........................
Information needed to explain the market
value of the option to market participants
and the public at the time of execution.
This field will allow the public to understand
the price of the reportable swap transaction.
J19 ..............................
Information is needed to identify when the
option can first be exercised and to help
market participants and the public evaluate
the price of the option.
Z20 .............................
Information is needed to identify when the
option can no longer be exercised and to
help market participants and the public
evaluate the price of the option.
Option Family ..............
Option currency ...........
Option premium ...........
Option lockout period ..
Option expiration .........
Issued in Washington, DC, on November
19, 2010, by the Commission.
David A. Stawick,
Secretary of the Commission.
srobinson on DSKHWCL6B1PROD with PROPOSALS2
Statement of Chairman Gary Gensler
Real-Time Public Reporting of Swap
Transaction Data
I support the proposed rulemaking to
implement a real-time public reporting
regime for swaps. The proposed rules
are designed to fulfill Congress’s
direction to bring public transparency to
the entire swaps market, both
standardized and customized swaps.
This post-trade transparency will
enhance price discovery and liquidity
while ensuring anonymity and
protection for large trades in appropriate
cases. Per Congress’s direction, the
proposal requires real time reporting for
swap transaction and pricing data to
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18:32 Dec 06, 2010
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occur as soon as technologically
practicable for trades other than trades
of large notional size or block trades.
Congress mandated that these trades be
reported without delay regardless of
whether they are standardized or
customized.
With regard to block trades or trades
of large notional size, the proposed rule
includes two important features: a time
delay and a method to report the large
sizes. With regard to the delay, the
proposed rule includes a 15-minute
delay on standardized blocks. This
compares to the futures marketplace,
which currently has a five-minute delay
for blocks, and the equities marketplace,
which has an even shorter delay. With
regard to customized trades of large
notional size, the proposal asks a series
of questions as to whether a similar
delay of 15 minutes would be
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appropriate for interest rate, currency
and other financial swaps and what
delays may be appropriate for
customized large trades referencing
physical commodities. The second
important feature with regard to block
trades or trades of large notional size is
a reporting method that transactions
greater than $250 million notional
amount—even the very largest of
trades—will just be reported as being
greater than $250 million. This will
protect anonymity and promote the
liquidity of these large trades.
The proposal on real time reporting
includes the methods by which to
calculate what a block trade is across
the market for various swap
instruments. This will be based on data
collected by the swap data repositories
in each of the asset classes. Lastly, the
proposal includes an initial
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srobinson on DSKHWCL6B1PROD with PROPOSALS2
implementation date of January 2012 to
provide time for the initial setting of
block sizes based on market data and
time for market participants to prepare
for such real time reporting
requirements.
Real time post-trade reporting is
critical to promoting market integrity
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and to benefit the investing and hedging
public. When corporations, municipal
governments, farmers and merchants
seek to hedge their risk, they will
benefit from seeing an accurate picture
of where similar transactions are being
priced concurrent with their decision-
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76183
making. It is an essential ingredient of
well-functioning markets. Such
transparency increases liquidity and
enhances the price discover function of
the market.
[FR Doc. 2010–29994 Filed 12–6–10; 8:45 am]
BILLING CODE P
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]]>Agencies
[Federal Register Volume 75, Number 234 (Tuesday, December 7, 2010)]
[Proposed Rules]
[Pages 76140-76183]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-29994]
[[Page 76139]]
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Part III
Commodity Futures Trading Commission
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17 CFR Part 43
Real-Time Public Reporting of Swap Transaction Data; Proposed Rule
Federal Register / Vol. 75 , No. 234 / Tuesday, December 7, 2010 /
Proposed Rules
[[Page 76140]]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 43
RIN 3038-AD08
Real-Time Public Reporting of Swap Transaction Data
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is
proposing rules to implement new statutory provisions enacted by Title
VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the ``Dodd-Frank Act''). Specifically, in accordance with Section 727
of the Dodd-Frank Act, the Commission is proposing rules to implement a
new framework for the real-time public reporting of swap transaction
and pricing data for all swap transactions. Additionally, the
Commission is proposing rules to address the appropriate minimum size
and time delay relating to block trades on swaps and large notional
swap transactions.
DATES: Comments must be received by February 7, 2011.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD08,
by any of the following methods:
Federal eRulemaking Portal at https://www.regulations.gov.
Follow the instructions for submitting comments.
Agency Internet Web site, via Its Comments Online Process:
https://comments.cftc.gov. Follow the instructions for submitting
comments through the Internet Web site.
Mail: David A. Stawick, Secretary of the Commission,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581.
Hand Delivery/Courier: Same as mail above.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received on
https://www.cftc.gov. You should submit only information that you wish
to make publicly available. 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
Commission Regulation Sec. 145.9.\1\
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\1\ 17 CFR 145.9.
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The Commission reserves the right, but shall not have the
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 from the Commission's
Internet Web site, but 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, 5 U.S.C.
551 et seq., and other applicable laws, and may be accessible under the
Freedom of Information Act, 5 U.S.C. 552.
FOR FURTHER INFORMATION CONTACT: Thomas Leahy, Associate Director,
Division of Market Oversight, 202-418-5278, tleahy@cftc.gov; or Jeffrey
L. Steiner, Special Counsel, Division of Market Oversight, 202-418-
5482, jsteiner@cftc.gov; Commodity Futures Trading Commission, Three
Lafayette Center, 1155 21st Street, NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Explanation of the Proposed Rules
A. Overview
1. Introduction
2. Parties Responsible for Reporting Swap Transaction and
Pricing Data to a Registered Entity
3. Parties Responsible for Publicly Disseminating Swap
Transaction and Pricing Data in Real-Time
4. Proposed Effective Date and Implementation Schedule
B. Section-by-Section Analysis
1. Proposed Section 43.1--Purpose, Scope and Rules of
Construction
2. Proposed Section 43.2--Definitions
3. Proposed Section 43.3--Method and Timing for Real-Time Public
Reporting
i. Responsibilities of the Reporting Party To Report Data
ii. Responsibilities of Swap Markets To Publicly Disseminate Swap
Transaction and Pricing Data in Real-Time
iii. Requirements for Registered SDRs
iv. Requirements for Third-Party Service Providers
v. Availability of Real-Time Swap Transaction and Pricing Data
vi. Errors or Omissions
vii. Hours of Operation
viii. Recordkeeping Requirements
ix. Fees Charged by Registered SDRs
x. Consolidated Public Dissemination of Swap Data
4. Proposed Section 43.4 and Appendix A to Proposed Part 43--
Swap Transaction and Pricing Data to be Publicly Disseminated in
Real-Time
i. Ensuring the Anonymity of the Parties to a Swap
ii. Unique Product Identifiers
iii. Price-Forming Continuation Data
iv. Reporting and Public Dissemination of Notional or Principal
Amount
v. Appendix A to Proposed Part 43
vi. Examples to Illustrate the Public Reporting of Real-Time Swap
Transaction and Pricing Data
5. Proposed Section 43.5--Block Trades and Large Notional Swaps
i. Parties to a Block Trade or Large Notional Swap
ii. Block Trades on Swaps
iii. Large Notional Swaps
iv. Time-Stamp and Reporting Requirements for Block Trades and Large
Notional Swaps
v. Responsibilities of Registered SDRs in Determining the
Appropriate Minimum Block Size
vi. Formula to Calculate the Appropriate Minimum Block Size
vii. Distribution Test
viii. Multiple Test
ix. Responsibilities of Swap Markets in Determining Minimum Block
Trade Sizes
x. Responsibilities of the Parties to a Swap in Determining the
Appropriate Minimum Large Notional Swap Size
xi. Time Delay in the Real-Time Public Reporting of Block Trades and
Large Notional Swaps
xii. Prohibition of Aggregation of Trades
III. Related Matters
A. Cost-Benefit Analysis
1. Introduction
2. Summary of Proposed Requirements
3. Costs
4. Benefits
B. Paperwork Reduction Act
1. Introduction
2. Information Provided by Reporting Entities/Persons
i. Reporting Requirement
ii. Public Dissemination Requirement
iii. Recordkeeping Requirement
iv. Determination of Appropriate Minimum Block Size
3. Information Collection Comments
C. Regulatory Flex Act
I. Background
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\ Title VII
of the Dodd-Frank Act \3\ amended the Commodity Exchange Act (``CEA'')
\4\ to establish a comprehensive, new regulatory framework for swaps
and security-based swaps.\5\ 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
[[Page 76141]]
registration and comprehensive regulation of swap dealers and major
swap participants (``MSPs''); (2) imposing mandatory clearing and trade
execution requirements on standardized derivative products; (3)
creating robust recordkeeping and real-time reporting regimes; and (4)
enhancing the Commodity Futures Trading Commission's (``Commission'' or
``CFTC'') rulemaking and enforcement authorities with respect to, among
others, all registered entities and intermediaries subject to the
Commission's oversight.
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\2\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act may be accessed at https://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
\3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\4\ 7 U.S.C. 1 et seq.
\5\ Rules governing the reporting and dissemination of security-
based swaps are the subject of a separate and forthcoming rulemaking
by the Securities and Exchange Commission (``SEC'').
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Accordingly, in order to ensure the proper implementation of the
new regulatory framework, Section 727 of the Dodd-Frank Act created
Section 2(a)(13) of the CEA, which requires the Commission to
promulgate rules that provide for the public availability of swap
transaction and pricing data in real-time in such form and at such
times as the Commission determines appropriate to enhance price
discovery.\6\ Under new Section 2(a)(13)(A) of the CEA, the definition
of ``real-time public reporting'' means reporting ``data relating to a
swap transaction, including price and volume, as soon as
technologically practicable after the time at which the swap
transaction has been executed.''
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\6\ Section 2(a)(13)(B) of the CEA states that ``[t]he purpose
of this section is to authorize the Commission to make swap
transaction and pricing data available to the public in such form
and at such times as the Commission determines appropriate to
enhance price discovery.''
It is notable that the CEA is silent as to the appropriate
method through which real-time public reporting must occur.
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Sections 2(a)(13)(C)(i) through (iv) of the CEA set out the four
types of swaps for which transaction and pricing data must be reported
to the public in real-time: (i) Swaps that are subject to the mandatory
clearing requirement \7\ (including those swaps that may qualify for a
non-financial end-user exception from the mandatory clearing
requirement); \8\ (ii) swaps that are not subject to the mandatory
clearing requirement but are cleared at a registered derivatives
clearing organization (``DCO''); (iii) swaps that are not cleared at a
registered DCO and which are reported to a registered swap data
repository (``SDR'') or to the Commission pursuant to Section 2(h)(6)
of the CEA; and (iv) swaps that are ``determined to be required to be
cleared'' under Section 2(h)(2) of the CEA but are not cleared. The
four categories described in Section 2(a)(13)(C) of the CEA cover all
swaps and, therefore, the real-time reporting requirements apply to all
swaps, including those swaps executed on a registered swap execution
facility (``SEF'') or a registered designated contract market (``DCM,''
together with a SEF, a ``swap market'') and those swaps executed
bilaterally between counterparties and not pursuant to the rules of a
SEF or DCM (``off-facility swaps'').\9\
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\7\ The mandatory clearing requirement is found in Section
2(h)(1) of the CEA, as added by Section 723(a)(3) of the Dodd-Frank
Act.
\8\ Section 2(h)(7) of the CEA provides the non-financial end-
user exception from the mandatory clearing requirement.
\9\ The legislative history of the Dodd-Frank Act also suggests
that the real-time reporting requirements of Section 2(a)(13) apply
to all swaps. Senate Agriculture Committee Chairwoman Blanche
Lincoln stated during Senate deliberations that ``[t]he major
components of the derivatives title include: 100 percent reporting
of swaps and security-based swaps, mandatory trading and clearing of
standardized swaps and security-based swaps and real-time price
reporting for all swap transactions--those subject to mandatory
trading and clearing as well as those subject to the end-user
clearing exemption and customized swaps.'' 156 Cong. Rec. S5,920
(daily ed. July 15, 2010) (statement of Sen. Blanche Lincoln).
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With regard to swaps described in Sections 2(a)(13)(C)(i) and (ii)
of the CEA, Section 2(a)(13)(E) of the CEA provides that the Commission
shall prescribe rules that: (i) Ensure such information does not
identify the participants; (ii) specify the criteria for determining
what constitutes a large notional swap transaction (block trade) for
particular markets and contracts; (iii) specify the appropriate time
delay for reporting large notional swap transactions (block trades) to
the public; and (iv) take into account whether public disclosure will
materially reduce market liquidity. CEA Section 2(a)(13)(E) does not
state explicitly that the proposed rules must contain similar
provisions for those swaps described in Sections 2(a)(13)(C)(iii) and
(iv). However, in applying its authority under Section 2(a)(13)(B) to
``make swap transaction and pricing data available to the public in
such form and at such times as the Commission determines appropriate to
enhance price discovery,'' the Commission is authorized to prescribe
similar rules to those provisions in Section 2(a)(13)(E) for off-
facility swap transactions described in Sections 2(a)(13)(C)(iii) and
(iv).\10\
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\10\ In addition, the Commission is required by Section
2(a)(13)(C)(iii) of the CEA to prescribe real-time public reporting
requirements for off-facility swaps ``in a manner that does not
disclose the business transactions and market positions of any
person.''
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II. Explanation of the Proposed Rules
A. Overview
1. Introduction
The Commission proposes to create a new part 43 of its regulations,
implementing the provisions of Section 2(a)(13) of the CEA. The
proposed rules in part 43 set out: (1) The entities or persons that
shall be responsible for reporting swap transaction and pricing data;
(2) the entities or persons that shall be responsible for publicly
disseminating such data; (3) the data fields and guidance on the
appropriate order and format for data to be reported to the public in
real-time; (4) the appropriate minimum size and time delay for block
trades and large notional swaps; and (5) the proposed effective date
and implementation schedule for the proposed rules.
The proposed rules reflect consultation with staff of the
Securities and Exchange Commission (the ``SEC'') \11\ and staff of the
Board of Governors of the Federal Reserve.\12\ Staff from each of these
agencies has provided verbal and/or written comments and the proposed
rules incorporate elements of the comments provided. The proposed rules
have been further informed by (i) the joint roundtable conducted by
CFTC staff and staff of the SEC on September 14, 2010 (the
``Roundtable''); \13\ (ii) public comments posted on the Commission's
Internet Web site; \14\ and (iii) CFTC staff meetings with market
participants.\15\
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\11\ Section 763 of the Dodd-Frank Act authorizes the SEC to
promulgate rules ``to provide for the public availability of
security-based swap transaction, volume, and pricing data * * *.''
\12\ See Section 712(a)(1) of the Dodd-Frank Act requires staff
to consult with the SEC and other prudential regulators.
\13\ The transcript from the Roundtable (the ``Roundtable Tr.)
is available at: https://www.cftc.gov/ucm/groups/public/@swaps/documents/file/derivative18sub091410.pdf.
\14\ Such comments are available at: https://www.cftc.gov/LawRegulation/DoddFrankAct/OTC_18_RealTimeReporting.html.
\15\ A list and description of such meetings is available at:
https://www.cftc.gov/LawRegulation/DoddFrankAct/ExternalMeetings/index.htm.
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The SEC is adopting rules related to the real-time reporting of
security based swaps as required under Section 763 of the Dodd-Frank
Act. Understanding that the Commission and the SEC regulate different
products and markets and, as such may be proposing alternative
regulatory requirements, the Commission requests comments on the impact
of any differences between the Commission's and the SEC's approach to
the regulation and reporting of swaps and security-based swaps and the
public dissemination of swap transaction and
[[Page 76142]]
pricing data in real-time. In addition, the Commission requests
specific comment on the following issues:
Would the regulatory approach of the Commission in this
proposed rulemaking, pursuant to Section 727 of the Dodd-Frank Act, and
the SEC's proposed rulemaking, pursuant to Section 763 and 766 of the
Dodd-Frank Act, result in duplicative or inconsistent requirements on
the part of market participants to both regulatory regimes or result in
gaps between those regimes? If so, in what way should these
duplications, inconsistencies or gaps be minimized?
Do commenters believe that the proposed approaches by the
Commission and the SEC for the real-time reporting and public
dissemination of swap transaction and pricing data are comparable? If
not, why? Are there approaches that could make the real-time reporting
and public dissemination of swap transaction and pricing data more
comparable? If so, what?
Do commenters believe that it would be appropriate for the
Commission to adopt an approach proposed by the SEC that differs from
the Commission's proposal? If so, which one(s)? The Commission requests
that commenters provide data, to the extent possible, to support any
suggested approaches.
2. Parties Responsible for Reporting Swap Transaction and Pricing Data
to a Registered Entity
Section 2(a)(13)(F) of the CEA provides that the parties to a swap
(including agents of the parties to a swap) shall be responsible for
reporting swap transaction information to the appropriate registered
entity \16\ in a timely manner as may be prescribed by the
Commission.\17\ For off-facility swaps, the Commission's proposal
places the requirement to report the swap transaction and pricing data
in real-time to a registered entity (i.e., a registered SDR that
accepts and publicly disseminates real-time swap transaction and
pricing data in real-time) in a manner similar to that in which all
swap transaction information for uncleared swaps would be reported to a
registered SDR pursuant to Section 4r(a)(3) of the CEA.\18\ With
respect to swaps that are executed on a swap market, the Commission's
proposal provides that if the parties to a swap execute a transaction
on a swap market, then the transacting parties' reporting requirements
under Section 2(a)(13)(F) of the CEA are satisfied. The Commission
views the real-time swap transaction and pricing data that is sent to a
real-time disseminator and the swap information that is sent to a
registered SDR as two separate and distinct data streams.\19\
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\16\ Section 1a(40) of the CEA, as amended by Section 721(a) of
the Dodd-Frank Act, defines ``registered entity'' to include SEFs,
DCMs and SDRs, but does not include swap dealers and MSPs. Section
1a(40) also defines registered entity to include DCOs. The
Commission has determined not to apply this requirement to DCOs
because it believes that the value of timely public dissemination
outweighs the benefit of waiting until a swap is presented to a
clearing organization.
\17\ Sections 4s(f)(1)(A) and 4s(f)(2) of the CEA, provide the
Commission with broad authority to adopt rules governing the
reporting of all swap transaction information for swap dealers and
MSPs. Specifically, Section 4s(f)(1)(A) of the CEA provides that
``[e]ach registered swap dealer and major swap participant shall
make such reports as are required by the Commission by rule or
regulation regarding the transactions and positions and financial
condition of the registered swap dealer or major swap participant *
* *'' Section 4s(f)(2) of the CEA provides that ``[t]he Commission
shall adopt rules governing reporting and recordkeeping for swap
dealers and major swap participants.'' Additionally, Sections
4s(h)(1)(D) and 4s(h)(3)(D) of the CEA provide the Commission with
rulemaking authority to establish business conduct standards and
requirements relating to the real-time reporting requirements on
swap dealers and major swap participants.
\18\ Section 4r(a)(3) of the CEA provides that for swaps in
which only one counterparty is a swap dealer or MSP, the swap dealer
or MSP is required to report the swap to a registered SDR. For swaps
in which only one counterparty is a swap dealer and the other is an
MSP, the swap dealer is required to report to a registered SDR. For
all other swaps, Section 4r(a)(3) provides that the counterparties
to the swap shall select a counterparty to report to a registered
SDR.
\19\ The real-time reporting requirements pursuant to Section
2(a)(13) of the CEA are separate and apart from the requirements to
report swap transaction information to a registered SDR. The
reporting requirements for all swap transaction information to an
SDR are found in Sections 2(a)(13)(G) and 4r(a)(1) of the CEA.
Specifically, Section 2(a)(13)(G) of the CEA provides that [e]ach
swap, (whether cleared or uncleared) shall be reported to a
registered swap data repository.'' In addition, Section 4r(a)(1)
provides that ``[e]ach swap that is not accepted for clearing by any
[DCO] shall be reported to [an SDR] described in section 21 [of the
CEA];'' or if no SDR exists, to the Commission.
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3. Parties Responsible for Publicly Disseminating Swap Transaction and
Pricing Data in Real-Time
Section 2(a)(13)(D) of the CEA authorizes the Commission to require
registered entities ``to publicly disseminate the swap transaction and
pricing data.'' With respect to all off-facility swaps, the
Commission's proposal requires that reporting parties send swap
transaction and pricing data to registered SDRs to publicly disseminate
such data in real-time. With respect to swaps that are executed on a
swap market, the Commission's proposal requires that swap markets
publicly disseminate swap transaction and pricing data either through a
registered SDR or a third-party service provider. Under the proposal,
if a swap market sends the swap transaction and pricing data to a
registered SDR, the swap market is responsible for ensuring that such
data is sent in a timely manner for public dissemination.
Alternatively, if a swap market sends the swap transaction and pricing
data to a third-party service provider for the public dissemination of
such data, the swap market does not absolve itself from or satisfy the
requirement to publicly disseminate swap transaction and pricing data
until such time as the third-party service provider actually
disseminates such data. Indeed, under the alternative, a swap market
must ensure that the third-party service provider publicly disseminates
the data in the manner set forth in the proposal.\20\
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\20\ In considering different schemes of real-time public
reporting requirements, the Commission also considered a ``first
touch'' method of reporting whereby the swap dealer, MSP or swap
market where a swap transaction occurred would have been required to
real-time report the transaction by posting the transaction on its
Internet Web site or through other electronic means. The Commission
chose not to pursue a ``first touch'' method because it would likely
lead to greater fragmentation of market data, increased search costs
for market participants and potential concerns with the quality of
the data that would be publicly disseminated.
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The Commission requests comment on all aspects of the proposed
rules, as well as comment on the specific provisions, issues and
questions highlighted in the discussion in Section B below.
4. Proposed Effective Date and Implementation Schedule
The Dodd-Frank Act requires the Commission to promulgate rules to
implement these provisions by July 15, 2011.\21\ Proposed part 43 is
designed to provide clarity as to the real-time reporting and public
dissemination requirements with respect to all swap transaction and
pricing data. The Commission acknowledges that the systems for
reporting and public dissemination described in proposed part 43 may
take a significant amount of time and resources to implement
effectively. While the Commission is fully committed to implementing
Congress' directive to require real-time public reporting of all swaps
and will adopt final rules by July 15, 2011, participants will need a
reasonable amount of time in which to acquire or configure the
necessary systems, engage
[[Page 76143]]
and train the necessary staff and develop and implement the necessary
policies and procedures to implement the proposed rules. The
Commission's proposed rules provide that appropriate minimum block
sizes will be published by registered SDRs beginning in January
2012.\22\ Accordingly, it is anticipated that registered entities and
registrants will have begun their compliance by that time.
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\21\ See Section 754 of the Dodd-Frank Act which states:
``Unless otherwise provided in this title, the provisions of this
subtitle shall take effect on the later of 360 days after the date
of enactment of this subtitle or, to the extent a provision of this
subtitle requires a rulemaking, not less than 60 days after
publication of the final rule or regulation implementing such
provision of this subtitle.''
\22\ See discussion relating to proposed Sec. 43.5(g)(4) below.
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The Commission requests comment on what would be an appropriate
implementation schedule (i.e., effective date) for the final rules. In
addition, the Commission requests specific comment on the following
issues:
How do commenters believe that an appropriate
implementation schedule should be structured? Should there be a phased-
in approach? Please provide specific examples.
Do commenters believe that different types of reporting
parties (e.g., swap dealers, MSPs and end-users) should have different
implementation timeframes? If so, why and what timeframes? If not, why
and what timeframe?
Do commenters believe that different types of execution
(e.g., SEF, DCM and off-facility) should have different implementation
timeframes? If so, why and what timeframes? If not, why and what
timeframe?
How long would swap dealers, MSPs and end-users need to
establish the appropriate connections to report off-facility swaps to
registered SDRs? Please explain.
How long after registration would registered SDRs need to
accept and publicly disseminate swap transaction and pricing data in
real-time? Please explain.
Should there be different implementation timeframes for
particular asset classes, markets or contracts? If so, what criteria
should be used to select those asset classes, markets or contracts?
Should the implementation timeframes for real-time
reporting and public dissemination requirements for swaps and security-
based swaps be coordinated?
Should there be different implementation timeframes for
the block trade and large notional swap rules explained in the
discussion relating to proposed Sec. 43.5 below?
B. Section-by-Section Analysis
1. Proposed Section 43.1--Purpose, Scope and Rules of Construction
The proposed rules apply to all swaps as defined in Section 1a(47)
of the CEA and as may be further defined by Commission regulations. The
categories of swaps described in Section 2(a)(13)(C) of the CEA account
for all swaps, whether cleared or uncleared, and regardless of whether
a swap is executed on a SEF, DCM or off-facility. The proposed rules
apply real-time reporting requirements to SEFs, DCMs, SDRs and the
parties of a swap, including registered or exempt swap dealers,
registered or exempt MSPs and U.S.-based end-users.
The Commission requests comment generally on the scope of
transactions covered by this part. In addition, the Commission requests
specific comment on which parties to a swap should be covered by the
reporting requirements in this part in order to enhance price
discovery?
2. Proposed Section 43.2--Definitions
Proposed Sec. 43.2 contains definitions for, inter alia, the
following terms: ``Affirmation''; ``As Soon As Technologically
Practicable''; ``Asset Class''; ``Confirmation''; ``Execution'';
``Public Dissemination'' or ``Publicly Disseminate''; ``Real-Time
Disseminator''; ``Reportable Swap Transaction''; ``Swap Instrument'';
and ``Third-Party Service Provider''.
Affirmation
Proposed Sec. 43.2(b) defines ``affirmation'' as the process
(electronically, orally, in writing or otherwise) in which the parties
to a swap verify that they agree on the primary economic terms of a
swap, but not necessarily all terms of the swap. The affirmation of the
swap is only the agreement to the primary economic terms of the swap,
as distinguished from the confirmation of a swap in which all of the
terms of the swap are agreed to in writing to memorialize the agreement
of all parties to the swap. Such confirmation legally supersedes any
previous agreement of the parties.
Affirmation and execution can, but do not necessarily, occur at the
same time. In either case, affirmation and execution always occur prior
to the confirmation of a swap. One further distinction is that
``affirmation'', as defined in the proposed rules, differs from
``confirmation by affirmation''. Some confirmation service vendors
(e.g., Deriv/SERV, MarkitSERV) have used the term ``affirmation'' to
describe the process by which one party to a swap (usually an end-user)
electronically acknowledges its assent to complete swap terms submitted
to the vendor by its counterparty (usually a dealer). This process
allows for electronic confirmation even when one party to the swap does
not have the systems necessary to submit swap terms to the vendor
electronically. Upon such assent to complete swap terms, a swap is
legally confirmed (i.e., ``confirmation by affirmation''). Parties that
use a confirmation by affirmation process previously will have affirmed
the primary economic terms of the trade and therefore executed the
trade pursuant to the definitions in the proposed rules.
As Soon as Technologically Practicable
Section 2(a)(13)(A) of the CEA defines ``real-time public
reporting'' to mean ``to report data relating to a swap transaction,
including price and volume, as soon as technologically practicable
after the time at which the swap transaction has been executed.'' ``As
soon as technologically practicable'' and ``executed'' are not defined
in the Dodd-Frank Act.\23\
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\23\ The terms ``execution'' and ``executed'' are discussed
below.
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The proposed rules provide definitions for ``as soon as
technologically practicable'' and ``executed''. Proposed Sec. 43.2(d)
defines the term ``as soon as technologically practicable'' to mean as
soon as possible, taking into consideration the prevalence of
technology, implementation and use of technology by comparable market
participants. In defining ``as soon as technologically practicable'',
the Commission has considered that this term may have different
interpretations for different parties to a swap (i.e., swap dealers,
MSPs and end-users), for different types of swaps (e.g., energy swaps,
credit default swaps, interest rate swaps, etc.) and for different
methods of execution (i.e., SEFs, DCMs and off-facility). Staff
considered real-time reporting regimes that are currently in place,
comments by market participants at external meetings, the discussions
at the Roundtable and the potential costs to market participants, among
other things. Cost, access to the latest technology and other factors
may prevent some of the fastest, most efficient technology from being
available to all market participants. Because of these factors, the
Commission recognizes that what is ``technologically practicable'' for
one party to a swap may not be the same as what is ``technologically
practicable'' for another party to a swap.
[[Page 76144]]
The Commission requests comment on whether the term should account
for other considerations not presently identified in the definition.
Asset Class
Proposed Sec. 43.2(e) defines the term ``asset class'' to mean the
broad category of goods, services or commodities underlying a swap. The
asset classes include, but are not limited to, the following five major
categories: interest rate, currency, credit, equity and other
commodity.\24\ In proposing these five major categories, the Commission
considered market statistics that distinguish between those general
types of underlying instruments, as well as market infrastructures that
have been established for these five types of instruments. The interest
rate asset class would encompass the underlying of any swap which is
primarily based on one or more reference rates, such as swaps of
payments determined by fixed and floating rates. The currency asset
class would encompass the underlying of any swap that is primarily
based on rates of exchange between different currencies, changes in
such rates or other aspects of such rates including any swap that is a
foreign exchange option. This category includes foreign exchange swaps
defined in Section 1a(25) of the CEA. The credit asset class would
encompass the underlying of any swap that is primarily based on one
instruments of indebtedness, including without limitation any swap
primarily based on one or more broad-based indices related to
instruments of indebtedness and any swap that is an index credit
default swap or a total return swap on one or more indices of debt
instruments. The equity asset class would encompass the underlying of
any swap that is primarily based on equity securities, including,
without limitation, any swap primarily based on one or more broad-based
indices of equity securities and any total return swap on one or more
equity indices. The other commodity asset class would encompass the
underlying of any swap not included in the credit, currency, equity or
interest rate asset class categories, including, without limitation,
any swap for which the primary underlying notional item is a physical
commodity or the price or any other aspect of a physical commodity.\25\
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\24\ Proposed Sec. 43.2(e) also provides that the Commission
may determine other asset classes.
\25\ Proposed Sec. 43.2(q) defines ``other commodity'' to mean
any commodity that cannot be grouped in one of the other four asset
classes (i.e., interest rate, currency, credit, equity). Other
commodities may include physical commodities (e.g., natural gas,
oil) but may also include non-physical commodities (e.g., weather
and property).
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The Commission requests comment on the following issues related to
the definition of asset class:
Do commenters agree with the proposed asset class
categories? If not, why? Should there be any additional categories of
asset classes? Should any categories of asset classes in the proposed
definition be changed or removed?
Do commenters agree on the proposed method of allocating
swaps among asset class categories? If not, why?
Should the Commission classify cross-currency rate swaps
as belonging to the interest rate asset class or to the currency asset
class? Please explain.
Should the asset class for other commodity be divided
further (e.g., agricultural commodity, energy commodity, etc.)? If so,
how should it be divided?
Confirmation
Proposed Sec. 43.2(g) defines the term ``confirmation'' to mean
the consummation (electronically or otherwise) of legally binding
documentation (electronic or otherwise) that memorializes the agreement
of the parties to all terms of a swap. A confirmation must be in
writing (whether electronic or otherwise) and must legally supersede
any previous agreement (electronic or otherwise). A confirmation
between parties to a swap may occur in various ways including via
facsimile, via ``confirmation by affirmation'' and via electronic
matching. A confirmation will contain all of the terms to a swap that
have been agreed to between two parties, whereas an affirmation
contains a subset of the terms of the confirmation.
Execution
As noted above, swap counterparties and reporting entities must
report ``as soon as technologically practicable after the time at which
the swap transaction has been executed.'' \26\ Proposed Sec. 43.2(k)
defines ``execution'' as the agreement between parties to the terms of
a swap that legally binds the parties to such terms under applicable
law. An agreement may be in electronic form (e.g., on a swap market or
via instant message), oral (e.g., over the phone), in writing (e.g., a
bespoke, structured transaction where documents are exchanged) or in
some other format not contemplated at this time. Execution immediately
follows or is simultaneous with the pre-execution affirmation of the
swap. The Commission notes that the proposed definition of execution
does not attempt to define what constitutes a legally enforceable
contract, only that execution occurs if and when the parties have
formed a legally enforceable contract (which is a matter to be decided
by applicable law).\27\ If pre-execution affirmation of the primary
economic terms creates a legally enforceable contract under applicable
law, then it would also constitute execution. If pre-execution
affirmation does not create a legally enforceable contract, then
execution would not have occurred at that stage.
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\26\ Section 2(a)(13)(A) of the CEA.
\27\ Because contract law varies by jurisdiction, the time at
which a legally enforceable contract is formed may differ based on
the applicable state or local law.
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Public Dissemination and Publicly Disseminate
Proposed Sec. 43.2(r) defines ``public dissemination'' and
``publicly disseminate'' to mean publishing and making available swap
transaction and pricing data in a non-discriminatory manner, through
the Internet or other electronic data feed that is widely published and
in a machine-readable format. The definition encompasses the non-
delayed provision of such data to the public, including market
participants, end-users, data vendors and news media.
Real-Time Disseminator
Proposed Sec. 43.2(s) defines ``real-time disseminator'' to mean
any registered SDR or third-party service provider that is responsible
for accepting and publicly disseminating swap transaction and pricing
data in real-time from multiple sources, in accordance with proposed
part 43.
Reportable Swap Transaction
Proposed Sec. 43.2(v) defines ``reportable swap transaction'' to
mean any executed swap, novation, swap unwind, partial novation,
partial swap unwind or such post-execution event that affects the price
of a swap. A reportable swap transaction includes not only the
execution of a swap contract, but also certain price-affecting events
that occur over the ``life'' of a swap. The Commission believes
novations and swap unwinds are events that clearly affect the price of
the swap and, therefore, should be publicly disseminated in real-time.
In addition to novations and swap unwinds, other price-affecting events
over the life of a swap may be considered reportable swap transactions.
For example, certain amendments that change the price terms of a swap
may be subject to the real-time public reporting requirements. Further,
the Commission recognizes that certain
[[Page 76145]]
market participants may enter into a swap and then immediately enter
into an amendment to the swap that alters the price terms, thus
reducing transparency and price discovery. The Commission believes that
including such post-execution price-affecting events to be reportable
for the purposes of real-time public reporting will enhance the
transparency and price discovery attributes of swaps trading.
The Commission requests comments on other post-execution events
that could affect price and that should be considered reportable swap
transactions.
Swap Instrument
Proposed Sec. 43.2(y) defines ``swap instrument'' to mean each
swap in the same asset class with the same or similar characteristics.
Under proposed Sec. 43.5, discussed below, registered SDRs would
determine the appropriate minimum block size based on the type of swap
instrument. After a registered SDR sets the appropriate minimum block
size for a swap instrument and groups a specific swap contract that is
listed on a swap market into a category of swap instrument, a swap
market that lists such swap contract would then reference such
appropriate minimum block size when adopting the minimum block trade
size for such swap. The Commission believes that it is appropriate to
group particular swap contracts into various broad categories of swap
instruments in determining the appropriate minimum block size.
The Commission is requesting general and specific comments on swap
instruments, as described in the discussion of appendix A to proposed
part 43 below.
Third-Party Service Provider
Proposed Sec. 43.2(bb) defines ``third-party service provider'' to
mean an entity, other than a registered SDR, that publicly disseminates
swap transaction and pricing data in real-time on behalf of a swap
market or, in the case of an off-facility swap where there is no
registered SDR available to publicly disseminate the data in real-time,
on behalf of a reporting party.
3. Proposed Section 43.3--Method and Timing for Real-Time Public
Reporting
Section 2(a)(13) of the CEA does not provide an explicit method or
timeframe in which swap transaction and pricing data must be reported
to the public in real-time. Instead, Section 2(a)(13) of the CEA
provides the Commission with authority to prescribe rules requiring:
(1) The parties to a swap transaction (including agents of the parties)
to report swap transaction and pricing data to the appropriate
registered entity in a timely manner; \28\ and (2) registered entities
to publicly disseminate swap transaction and pricing data.\29\ In
addition, Section 2(a)(13)(B) of the CEA provides that the Commission
is authorized to make swap transaction and pricing data available to
the public in such form and at such times as the Commission determines
appropriate to enhance price discovery. Accordingly, the Commission's
proposal in Sec. 43.3 sets out both the manner in which parties to a
swap must report the swap transaction and pricing data to the
appropriate registered entity, as well as the manner in which
registered entities must publicly disseminate such data. In addition,
proposed Sec. 43.3 sets out requirements for: (1) The acceptable forms
of media through which swap transaction and pricing data must be made
available to the public; (2) the appropriate methods to cancel or
correct erroneous or omitted data that has been publicly disseminated;
(3) the hours of operation that swap markets and registered SDRs must
maintain for the public dissemination of swap transaction and pricing
data; and (4) the recordkeeping of data by swap markets and registered
SDRs.
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\28\ See Section 2(a)(13)(F) of the CEA.
\29\ See Section 2(a)(13)(D) of the CEA. As discussed below, the
Commission's proposal requires registered entities to publicly
disseminate swap transaction and pricing data ``as soon as
technologically practicable''. See Section 2(a)(13)(A).
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i. Responsibilities of the Reporting Party To Report Data
As discussed above, Section 2(a)(13)(F) of the CEA provides that
the parties to a swap (including agents of the parties to a swap) shall
be responsible for reporting swap transaction information to the
appropriate registered entity. In general, proposed Sec. 43.3(a)
provides that the ``reporting party'' to each swap transaction shall be
responsible for reporting any reportable swap transaction to a
registered entity as soon as technologically practicable.\30\ Proposed
Sec. 43.2(w) defines ``reporting party'' to mean a party to a swap
with the duty to report a reportable swap transaction to a registered
entity. Under this proposal, the determination of who has this duty
depends on whether the reportable swap transaction is executed on a
swap market. For reportable swap transactions that are executed on a
swap market, proposed Sec. 43.3(a)(2)(i) provides that the requirement
for parties to report the swap transaction and pricing data is itself
satisfied by the act of execution on the swap market. The Commission
believes that this approach should result in the timeliest and most
efficient method of reporting swap transaction and pricing data, since
swap markets by definition would have immediate access to the most
accurate execution information related to each swap transaction (e.g.,
information on the counterparties to the swap, date and time of
execution, bid-offer information, final pricing information, whether
the swap should be deemed a block trade, etc.). Proposed Sec.
43.3(a)(2)(ii) recognizes that block trades may not be executed on a
swap market, but would be effective pursuant to the rules of the swap
market. For that reason, this section would require the reporting party
to the block trade to report such trades to the swap market in
accordance with the rules of the swap market and proposed Sec. 43.5.
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\30\ The Commission proposes to define ``timely manner'' to mean
``as soon as technologically practicable''.
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For off-facility swaps, proposed Sec. 43.3(a)(3) provides that,
except otherwise provided in proposed Sec. 43.5, the reporting party
must report (i.e., transmit or otherwise electronically transfer) swap
transaction and pricing data to a registered SDR as soon as
technologically practicable. Once a reporting party has reported its
swap transaction and pricing data to a registered SDR, the reporting
party has satisfied its requirement to report pursuant to Section
2(a)(13)(F) of the CEA and this proposed part 43.
The Commission believes that advanced technologies presently exist
through which a reporting party to an off-facility swap can send swap
transaction and pricing data to a registered SDR as soon as
technologically practicable. Through discussions with market
participants, the Commission understands that many swaps are executed
over the telephone and then inputted manually into electronic recording
systems. The Commission believes that reporting parties should remain
current with changes in technology and regularly update their
technology infrastructure to decrease the time of transmission of swap
transaction and pricing data to real-time disseminators.\31\
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\31\ Two examples of how reporting technology can improve over
time are seen in the evolution of (1) the Financial Industry
Regulatory Authority's (``FINRA'') Trade Reporting and Compliance
Engine (``TRACE''), and (2) the reporting of over-the-counter
(``OTC'') equity securities. Under the reporting rules for TRACE,
the current maximum reporting time requirement for publicly
reporting transaction and pricing data for corporate bonds is 15
minutes. FINRA staff has noted in meetings with Commission staff
that over 90% of its trades are reported within five minutes. See
FINRA Rule 6730 (``Transaction Reporting''). Available at: https://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4402.
With respect to the OTC securities market, FINRA has recently
reduced the reporting requirements for these securities to within 30
seconds of execution. See Securities Exchange Act Release No. 61819
(March 31, 2010), 75 FR 17806 (April 7, 2010 (Notice of Filing of
Amendment No. 2 and Order Granting Accelerated Approval of File No.
SR-FINRA-2009-061)); See also, FINRA Rules 6282(a); 6380A(a) and
(g); 6380B(a) and (f); 6622(a) and (f); 7130(b); 7230A(b); 7230B(b);
and 7330(b).
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[[Page 76146]]
The determination of which party to a swap will be deemed the
reporting party for the purposes of proposed Sec. 43.3(a) chiefly
depends on the types of entities that are parties to the swap.
Specifically, proposed Sec. 43.3(a)(3) provides that for off-
facility swaps:
If only one party is a swap dealer or MSP, the swap dealer
or MSP shall be the reporting party.
If one party is a swap dealer and the other party is an
MSP, the swap dealer shall be the reporting party.
If both parties are swap dealers, the swap dealers shall
designate which party shall be the reporting party.
If both parties are MSPs, the MSPs shall designate which
party shall be the reporting party.
If neither party is a swap dealer or an MSP, the parties
shall designate which party (or its agent) shall be the reporting
party.
Through discussions with market participants at the Roundtable and
external meetings, the Commission believes that swap dealers and MSPs
are more likely to have the infrastructure and resources available to
report their swap transaction information to a registered SDR in a
quicker period of time than parties to an end-user-to-end-user, off-
facility swap. Indeed, the Commission recognizes that non-financial
end-users do not frequently enter into swap transactions and may not
have the technology readily available to report swap transaction and
pricing data for the purposes of the real-time reporting requirements
under Section 2(a)(13)(F) of the CEA, and therefore, may lead to longer
reporting time periods from execution for such reporting parties.
The Commission understands that the requirement to report swap
transaction and pricing data as soon as technologically practicable may
increase costs for reporting parties as a result of such parties having
to upgrade their technology infrastructures. Based on discussions with
market participants, however, the Commission believes that technology
solutions may develop, such as web portals and other Internet-based
interfaces, which will aide reporting parties in complying with the
requirements proposed in Sec. 43.3(a) and reduce the cost burden
associated with their compliance. In addition, the Commission believes
that the total number of end-user to end-user swaps will be small and
thus the costs imposed on end-users will likely be lower relative to
the total number of swaps.\32\
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\32\ In addition, the Commission believes that increased
transparency may lead to more robust price competition, thus
decreasing bid-offer spreads in certain swap contracts and
benefiting end-users.
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The Commission's proposal with respect to off-facility swaps is
consistent with the reporting requirements for the reporting of
uncleared swaps to a registered SDR under Section 4r(a) of the CEA.\33\
After consulting with market participants at the Roundtable and in
meetings with market participants, the Commission believes that this
consistency may reduce technology infrastructure costs for swap dealers
and MSPs, particularly since swap dealers and MSPs will likely
establish direct connectivity to registered SDRs to satisfy the
reporting requirements for the reporting of uncleared swaps under
Section 4r(a) of the CEA.
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\33\ The requirements of Section 4r(a)(3) of the CEA are
discussed in footnote 18 above.
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In the event that no registered SDR exists or is available to
accept and publicly disseminate swap transaction and pricing data,
proposed Sec. 43.3(a)(4) establishes a special rule for the real-time
reporting of these swaps. Specifically, proposed Sec. 43.3(a)(4)
provides that the reporting party may report such data to a third-party
service provider, which provides public dissemination services. Similar
to the requirements placed on swap markets when such markets choose to
publicly disseminate through a third-party service provider, the
reporting party will be required to ensure that the swap transaction
and pricing data is publicly disseminated in real-time.
The Commission requests comment related to the responsibilities of
the parties to a swap to report swap transaction and pricing data. In
addition, the Commission requests specific comment on the following
issues:
Should the Commission establish maximum timeframes in
which reporting parties must report to a registered SDR that accepts
and publicly disseminates swap transaction and pricing data in real-
time (e.g., as soon as technologically practicable but no later than
five minutes)? If so, what should the maximum timeframes be and how
should they be determined?
Do commenters believe that the rules should require that
any additional parties to a swap be the reporting party for a swap? If
so, which parties and in which circumstances?
Should the Commission's final rules address the reporting
and public dissemination of swap transaction and pricing data for
swaps, which are transacted between two non-U.S. persons? If so, how
should the Commission's final rules address these situations?
In off-facility swap transactions where a non-U.S. swap
dealer or non-U.S. MSP transacts with a U.S.-based end-user, which
party to the swap should have the obligation to report to a real-time
disseminator? Are there other situations involving non-U.S. parties
where this issue may arise? How should the Commission address these
situations in its final rules?
Should there be an alternative method of reporting and
subsequently disseminating swap transaction and pricing data in real-
time when no registered SDR is available to accept and publicly
disseminate such data? If there is no registered SDR available and
there is no third-party service provider available to accept and
publicly disseminate data for a swap transaction, what should the real-
time reporting requirement be for such transaction?
Is there a better or more efficient alternative to have
swap transaction and pricing data reported by a reporting party to a
registered SDR for public dissemination in real-time? If so, what would
that be?
ii. Responsibilities of Swap Markets To Publicly Disseminate Swap
Transaction and Pricing Data in Real-Time
Section 2(a)(13)(D) of the CEA gives the Commission the authority
to require registered entities to publicly disseminate swap transaction
and pricing data.\34\ Proposed Sec. 43.3(b) provides the method and
timeliness of public dissemination of swap transaction and pricing
data. Proposed Sec. 43.3(b) distinguishes the public dissemination
requirement for swaps that are executed on a swap market versus those
swaps that are executed off-facility.\35\ Irrespective of the mode of
[[Page 76147]]
execution, the Commission sought to provide market participants with
reasonable guidelines to report and publicly disseminate swap
transaction and pricing data in real-time.
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\34\ As noted above, Section 1a(40) of the CEA, as amended by
Section 721(a) of the Dodd-Frank Act, defines ``registered entity''
to include SEFs, DCOs, DCMs and SDRs. The Commission has determined,
however, not to apply the Section 2(a)(13)(D) requirement to DCOs
because it believes that the value of timely public dissemination
outweighs the benefit of waiting until a swap is presented to a
clearing organization.
\35\ Block trades that are transmitted pursuant to a swap
market's rules are addressed in proposed Sec. 43.5.
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With respect to reportable swap transactions that are executed on a
swap market, proposed Sec. 43.3(b)(1)(i) provides that a swap market
shall satisfy its requirement to publicly disseminate swap transaction
and pricing data by: (1) Sending, or otherwise electronically
transmitting, swap transaction and pricing data to a registered SDR
that accepts swaps for the particular asset class of reportable swap
transactions; or (2) disseminating such data to the public through a
third-party service provider operating on behalf of the swap
market.\36\ The Commission notes that a swap market that relies on a
third-party service provider to disseminate swap transaction and
pricing data, for example through a contractual agreement, remains
responsible for compliance with the rules of proposed part 43.
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\36\ As discussed immediately below, proposedSec. 43.3(b)(2)
prohibits a swap market or reporting parties from disclosing swap
transaction and pricing data prior to sending such data to a real-
time disseminator.
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If a swap market sends swap transaction and pricing data to a
registered SDR, proposed Sec. 43.3(b)(1)(i) provides that such data
must be sent as soon as technologically practicable after the swap has
been executed. As a result of industry comments made during staff
meetings and at the Roundtable, the Commission believes that
technologies presently exist through which a swap market can send swap
transaction and pricing data to a registered SDR almost instantaneously
after execution of a reportable swap transaction.\37\ Under the
proposal, once the swap market has sent the swap transaction and
pricing data to a registered SDR, the swap market will have satisfied
its dissemination requirement.
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\37\ See, e.g., Comments by Steve Joachim, Executive Vice
President, Transparency Services, FINRA (``[T]he technology for
collecting, aggregating, and disseminating [swap] data, assuming
[the] use [of] current infrastructures * * * can allow [real-time
public reporting] to work pretty efficiently.'') Roundtable Tr. at
277-78.
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In contrast, proposed Sec. 43.3(b)(1)(ii) provides that if a swap
market sends swap transaction and pricing data to a third-party service
provider, the swap market does not satisfy its requirement to publicly
disseminate swap transaction and pricing data until such data is
actually disseminated to the public. The Commission's proposal
distinguishes between a registered SDR and a third-party service
provider because the Commission would have oversight authority over a
registered SDR, but not over a third-party service provider. This
distinction would be especially important if, for example, a third-
party service provider failed to publish swap transaction and pricing
data in real-time. Under those circumstances, the Commission may have
no authority over the third-party service provider to remedy the
failure. Since the swap market is still obligated to publicly
disseminate, the Commission may require the swap market to resolve the
failure and publicly disseminate the swap transaction and pricing data
through another third-party service provider or a registered SDR.
Accordingly, the Commission would expect that a swap market that uses a
third-party service provider to meet its public dissemination
obligation should be vigilant in monitoring the timeliness and accuracy
of the provider's publication of the swap market's swap transaction and
pricing data.
Proposed Sec. 43.3(b)(2)(i) prohibits swap markets or any
reporting party to a swap from disclosing the swap transaction and
pricing data before the real-time disseminator has publicly
disseminated such data. The Commission believes that this prohibition
will ensure that swap transaction and pricing data is disseminated
uniformly and is not published in a manner that creates unfair
advantages for any segment of market participants.
The proposed rules do allow for swap markets and swap dealers to
provide their market participants and customers, respectively, with
swap transaction and pricing data for swaps that they execute. In
particular, proposed Sec. 43.3(b)(2)(ii) provides that notwithstanding
the non-disclosure provision in proposed Sec. 43.3(b)(2)(i), a swap
market may make swap transaction and pricing data available to
participants on its market prior to the public dissemination of such
data; however, the swap market must send such swap transaction and
pricing data to a real-time disseminator at the same time as or earlier
than it makes such data available to its market participants.
Similarly, proposed Sec. 43.3(b)(2)(iii) provides that notwithstanding
the non-disclosure provision in proposed Sec. 43.3(b)(2)(i), a swap
dealer may make swap transaction and pricing data for off-facility
swaps available to its customer base prior to the public dissemination
of such data; however, such swap dealer must send such swap transaction
and pricing data to a registered SDR at the same time as or earlier
than it makes such data available to its customer base. In both cases,
the data may only be made available to the particular market (e.g.,
data for a swap executed on a particular SEF or DCM may only be shared
with market participants on that SEF or DCM). The Commission believes
that granting swap markets and swap dealers the flexibility to provide
swap transaction and pricing data to its market participants or
customer base, respectively, concurrent with reporting to the real-time
disseminator may incentivize a rapid transmittal of data to the real-
time disseminator.
The Commission requests comment generally on the responsibilities
of swap markets to publicly disseminate real-time swap transaction and
pricing data. In addition, the Commission requests comment on the
following issues:
Should the Commission establish a maximum timeframe in
which swap markets must report swap transaction and pricing data to a
real-time disseminator? If so, what is an appropriate maximum timeframe
and why?
Do commenters agree with the Commission's proposal that
swap markets satisfy their public dissemination requirement by either
sending to a registered SDR that accepts and disseminates swap
transaction and pricing data or by publicly disseminating through a
third-party service
