Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment and Transition Swaps, 22833-22848 [2011-9446]
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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Proposed Rules
Subject
(d) Air Transport Association (ATA) of
America Code 25: Equipment/Furnishings.
emcdonald on DSK2BSOYB1PROD with PROPOSALS
Reason
(e) The mandatory continuing
airworthiness information (MCAI) states:
Cracks have been found on seats [with]
backrest links P/N (part number) 90–000200–
104–1 and 90–000200–104–2. These cracks
can significantly affect the structural integrity
of seat backrests.
Failure of the backrest links could result in
injury to an occupant during emergency
landing conditions. The required actions
include a general visual inspection for
cracking of the backrest links; replacement
with new, improved links if cracking is
found; and eventual replacement of all links
with new, improved links.
Actions and Compliance
(f) Unless already done, do the following
actions.
(1) At the later of the compliance times
specified in paragraphs (f)(1)(i) and (f)(1)(ii)
of this AD, do a general visual inspection of
the backrest links having P/Ns 90–000200–
104–1 and 90–000200–104–2, in accordance
with Part One of Sicma Aero Seat Service
Bulletin 90–25–013, Issue 4, dated March 19,
2004:
(i) Before 6,000 flight hours on the backrest
link since new.
(ii) Within 900 flight hours or 5 months
after the effective date of this AD, whichever
occurs later.
(2) If, during the inspection required by
paragraph (f)(1) of this AD, cracking is found
between the side of the backrest link and the
lock-out pin hole but the cracking does not
pass this lock-out pin hole (refer to Figure 2
of Sicma Aero Seat Service Bulletin 90–25–
013, Issue 4, dated March 19, 2004): Within
600 flight hours or 3 months after doing the
inspection, whichever occurs first, replace
both backrest links of the affected seat with
new, improved backrest links having P/Ns
90–100200–104–1 and 90–100200–104–2, in
accordance with Part Two of Sicma Aero Seat
Service Bulletin 90–25–013, Issue 4, dated
March 19, 2004.
(3) If, during the inspection required by
paragraph (f)(1) of this AD, cracking is found
that passes beyond the lock-out pin hole
(refer to Figure 2 of Sicma Aero Seat Service
Bulletin 90–25–013, Issue 4, dated March 19,
2004): Before further flight, replace both
backrest links of the affected seat with new,
improved backrest links having P/Ns 90–
100200–104–1 and 90–100200–104–2, in
accordance with Part Two of Sicma Aero Seat
Service Bulletin 90–25–013, Issue 4, dated
March 19, 2004.
(4) If no cracking is found during the
inspection required by paragraph (f)(1) of this
AD: Do the replacement required by
paragraph (f)(5) of this AD at the compliance
time specified in paragraph (f)(5) of this AD.
(5) At the later of the compliance times
specified in paragraphs (f)(5)(i) and (f)(5)(ii)
of this AD, replace the links, P/Ns 90–
000200–104–1 and 90–000200–104–2, with
new improved links, P/Ns 90–100200–104–1
and 90–100200–104–2, in accordance with
Part Two of Sicma Aero Seat Service Bulletin
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90–25–013, Issue 4, dated March 19, 2004.
Doing this replacement for an affected
passenger seat assembly terminates the
inspection requirements of paragraph (f)(1) of
this AD for that passenger seat assembly.
(i) Before 12,000 flight hours on the
backrest links, P/Ns 90–000200–104–1 and
90–000200–104–2, since new.
(ii) Within 900 flight hours or 5 months
after the effective date of this AD, whichever
occurs later.
Credit for Actions Done in Accordance With
Previous Service Information
(6) Actions done before the effective date
of this AD in accordance with Sicma Aero
Seat Service Bulletin 90–25–013, Issue 3,
dated December 19, 2001, including Annex 1,
Issue 2, dated March 19, 2004, are acceptable
for compliance with the corresponding
actions of this AD.
FAA AD Differences
Note 2: This AD differs from the MCAI
and/or service information as follows: The
MCAI specifies doing repetitive inspections
for cracking of links having over 12,000 flight
hours since new until the replacement of the
link is done. This AD does not include those
repetitive inspections because we have
reduced the compliance time for replacing
those links. This AD requires replacing the
link before 12,000 flight hours since new or
within 900 flight hours or 5 months of the
effective date of this AD, whichever occurs
later.
Other FAA AD Provisions
(g) The following provisions also apply to
this AD:
(1) Alternative Methods of Compliance
(AMOCs): The Manager, Boston Aircraft
Certification Office, FAA, has the authority to
approve AMOCs for this AD, if requested
using the procedures found in 14 CFR 39.19.
In accordance with 14 CFR 39.19, send your
request to your principal inspector or local
Flight Standards District Office, as
appropriate. If sending information directly
to the ACO, send it to ATTN: Jeffrey Lee,
Aerospace Engineer, Boston Aircraft
Certification Office, FAA, Engine & Propeller
Directorate, 12 New England Executive Park,
Burlington, Massachusetts 01803; telephone
(781) 238–7161; fax (781) 238–7170. Before
using any approved AMOC, notify your
appropriate principal inspector, or lacking a
principal inspector, the manager of the local
flight standards district office/certificate
holding district office. The AMOC approval
letter must specifically reference this AD.
(2) Airworthy Product: For any requirement
in this AD to obtain corrective actions from
a manufacturer or other source, use these
actions if they are FAA-approved. Corrective
actions are considered FAA-approved if they
are approved by the State of Design Authority
(or their delegated agent). You are required
to assure the product is airworthy before it
is returned to service.
Related Information
(h) Refer to MCAI French Airworthiness
Directive 2001–613(AB), dated December 12,
2001; and Sicma Aero Seat Service Bulletin
90–25–013, Issue 4, dated March 19, 2004,
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including Annex 1, Issue 2, dated March 19,
2004; for related information.
Issued in Renton, Washington, on April 18,
2011.
Kalene C. Yanamura,
Acting Manager, Transport Airplane
Directorate, Aircraft Certification Service.
[FR Doc. 2011–9942 Filed 4–22–11; 8:45 am]
BILLING CODE 4910–13–P
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 46
[3038–AD48]
Swap Data Recordkeeping and
Reporting Requirements: PreEnactment and Transition Swaps
Commodity Futures Trading
Commission.
ACTION: Proposed rulemaking.
AGENCY:
The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is proposing rules to
implement new statutory provisions
introduced by Title VII of the DoddFrank Wall Street Reform and Consumer
Protection Act (‘‘Dodd-Frank Act’’). The
Dodd-Frank Act amends the Commodity
Exchange Act (‘‘CEA’’ or ‘‘Act’’) directing
that rules adopted by the Commission
shall provide for the reporting of data
relating to swaps entered into before the
date of enactment of the Dodd-Frank
Act, the terms of which have not
expired as of the date of enactment of
that Act (‘‘pre-enactment swaps’’) and
data relating to swaps entered into on or
after the date of enactment of the DoddFrank Act and prior to the compliance
date specified in the Commission’s final
swap data reporting rules (‘‘transition
swaps’’). This proposal would establish
recordkeeping and reporting
requirements for pre-enactment swaps
and transition swaps.
DATES: Comments must be received by
June 9, 2011.
ADDRESSES: You may submit comments,
identified by RIN number 3038–AD48,
by any of the following methods:
• Agency Web site, via its Comments
Online process: https://
comments.cftc.gov. Follow the
instructions for submitting comments
through the 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.
SUMMARY:
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Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Proposed Rules
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
All comments must be submitted in
English, or must be accompanied by an
English translation. Comments will be
posted as received to https://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that may be exempt from disclosure
under the Freedom of Information Act,
you may submit a petition for
confidential treatment according to the
procedures established in CFTC
Regulation 145.9.1 The Commission
reserves the right, but shall have no
obligation, to review, pre-screen, filter,
redact, refuse or remove any or all of
your submission from https://
www.cftc.gov that it may deem to be
inappropriate for publication, such as
obscene language. All submissions that
have been redacted or removed that
contain comments on the merits of the
rulemaking will be retained in the
public comment file and will be
considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
David Taylor, Branch Chief, Market
Continuity, Division of Market
Oversight, 202–418–5488,
dtaylor@cftc.gov; or Irina Leonova,
Financial Economist, Division of Market
Oversight, 202–418–5646,
ileonova@cftc.gov; Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION: The
Commission is proposing rules under its
part 46 regulations relating to
recordkeeping and reporting
requirements applicable to both preenactment and transition swaps, and is
soliciting comment on all aspects of the
proposed rules. These rules, when
adopted, will supersede interim final
rules previously adopted by the
Commission in part 44 of its regulations.
emcdonald on DSK2BSOYB1PROD with PROPOSALS
Table of Contents
I. Background
A. Swap Data Provisions of the Dodd-Frank
Act
B. The Commission’s Proposed Rule on
Swap Data Recordkeeping and Reporting
Requirements
C. The Interim Final Rules for PreEnactment and Transition Swaps
II. Proposed New Regulations, Part 46
III. Related Matters
1 Commission regulations referred to herein are
found at 17 CFR Ch. 1.
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A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Analysis
IV. Proposed Compliance Date
V. General Solicitation of Comments
In carrying out [the duty to prescribe data
element standards], the Commission shall
prescribe consistent data element standards
applicable to registered entities and reporting
counterparties.8
I. Background
Section 727 of the Dodd-Frank Act
requires that each swap, either cleared
or uncleared, shall be reported to a
registered SDR. That Section also
amends Section 1(a) of the CEA to add
the definition of swap data repository:
A. Swap Data Provisions of the DoddFrank Act
On July 21, 2010, President Obama
signed into law the Dodd-Frank Act.2
Title VII of the Dodd-Frank Act 3
amended the CEA 4 to establish a
comprehensive new regulatory
framework for swaps and security-based
swaps. The legislation was enacted to
reduce risk, increase transparency, and
promote market integrity within the
financial system by, among other things:
(1) Providing for the registration and
comprehensive regulation of swap
dealers and major swap participants; (2)
imposing clearing and trade execution
requirements on standardized
derivatives products; (3) creating robust
recordkeeping and real-time reporting
regimes; and (4) enhancing the
Commission’s rulemaking and
enforcement authorities with respect to,
among others, all registered entities and
intermediaries subject to the
Commission’s oversight.
To enhance transparency, promote
standardization, and reduce systemic
risk, Section 728 of the Dodd-Frank Act
establishes a newly-created registered
entity—the swap data repository
(‘‘SDR’’) 5—to collect and maintain data
related to swap transactions as
prescribed by the Commission, and to
make such data electronically available
to regulators.6
Section 728 directs the Commission to
prescribe standards for swap data
recordkeeping and reporting.
Specifically, Section 728 provides that:
The Commission shall prescribe standards
that specify the data elements for each swap
that shall be collected and maintained by
each registered swap data repository.7
These standards are to apply to both
registered entities and counterparties
involved with swaps:
2 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 See also CEA § 1a(40)(E).
6 Regulations governing core principles and
registration requirements for, and the duties of,
SDRs are the subject of a separate notice of
proposed rulemaking under part 49 of the
Commission’s regulations. See CFTC Swap Data
Repositories: Proposed Rule, 75 FR 80898 (Dec. 23,
2010).
7 CEA § 21(b)(1)(A).
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The term ‘swap data repository’ means any
person that collects and maintains
information or records with respect to
transactions or positions in, or the terms and
conditions of, swaps entered into by third
parties for the purpose of providing a
centralized recordkeeping facility for swaps.9
Section 728 also directs the
Commission to regulate data collection
and maintenance by SDRs.
The Commission shall prescribe data
collection and data maintenance standards
for swap data repositories.10
Section 729 of the Dodd-Frank Act
added to the CEA new Section 4r, which
addresses reporting and recordkeeping
requirements for uncleared swaps.
Pursuant to this section, each swap not
accepted for clearing by any derivatives
clearing organization (‘‘DCO’’) must be
reported to an SDR (or to the
Commission if no SDR will accept the
swap).
Section 729 ensures that at least one
counterparty to a swap has an obligation
to report data concerning that swap. The
determination of this reporting
counterparty depends on the status of
the counterparties involved. If only one
counterparty is a swap dealer (‘‘SD’’), the
SD is required to report the swap. If one
counterparty is a major swap participant
(‘‘MSP’’), and the other counterparty is
neither an SD nor an MSP (‘‘non-SD/
MSP counterparty’’), the MSP must
report. Where the counterparties have
the same status—two SDs, two MSPs, or
two non-SD/MSP counterparties—the
counterparties must select a
counterparty to report the swap.11
Section 729 also provides for
reporting to the Commission of
uncleared swaps that are not accepted
by any SDR. Under this provision,
counterparties to such swaps must
maintain books and records pertaining
to their swaps in the manner and for the
time required by the Commission, and
must make these books and records
available for inspection by the
Commission or other specified
8 CEA
§ 21(b)(1)(B).
§ 1a(48).
10 CEA § 21(b)(2).
11 See CEA § 4r(a)(3).
9 CEA
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regulators if requested to do so.12 It also
requires counterparties to such swaps to
provide reports concerning such swaps
to the Commission upon its request, in
the form and manner specified by the
Commission.13 Such reports must be as
comprehensive as the data required to
be collected by SDRs.14
Section 729 establishes in new CEA
Section 4r(a)(2)(A) a transitional rule
applicable to pre-enactment swaps.
Section 4r(a)(2)(A) provides for the
reporting of pre-enactment swaps the
terms of which have not expired as of
the enactment of the Dodd-Frank Act to
an SDR or the Commission, by a date
that the Commission determines to be
appropriate.15 Section 4r(a)(2)(B)
directed the Commission to promulgate
an interim final rule within 90 days of
the date of enactment of the Dodd-Frank
Act providing for the reporting of such
pre-enactment swaps.16
Section 723 of the Dodd-Frank Act,
which adds to the CEA new Section
2(h)(5), addresses the reporting of swap
data for both swaps executed before the
enactment of the Dodd-Frank Act 17 and
swaps executed on or after the date of
that enactment but before the
compliance date specified in the
Commission’s final swap data
recordkeeping and reporting rules.18 In
a July 15, 2010 floor statement
concerning swap data reporting as well
12 CEA § 4r(c)(2) requires individuals or entities
that enter into an uncleared swap transaction that
is not accepted by an SDR to make required books
and records open to inspection by any
representative of the Commission; an appropriate
prudential regulator; the Securities and Exchange
Commission; the Financial Stability Oversight
Council; and the Department of Justice.
13 CEA § 4r(c).
14 CEA § 4r(d).
15 Subsection (A) of CEA Section 4r(a)(2) provides
that ‘‘Each swap entered into before the date of
enactment of the Wall Street Transparency and
Accountability Act of 2010, the terms of which have
not expired as of the date of enactment of that Act,
shall be reported to a registered swap data
repository or the Commission by a date that is not
later than—(i) 30 days after issuance of the interim
final rule; or (ii) such other period as the
Commission determines to be appropriate.’’
16 Pursuant to Section 4r(a)(2)(B), the Commission
on October 14, 2010 published in part 44 of its
regulations an interim final rule instructing
specified counterparties to pre-enactment swaps to
report data to a registered SDR or to the
Commission by a compliance date to be established
in reporting rules to be promulgated under Section
2(h)(5)(A) of the CEA and advising counterparties
of the necessity, inherent in the reporting
requirement, to retain information pertaining to the
terms of such swaps until reporting can be
effectuated under permanent rules. See PreEnactment Swaps IFR, supra, note 17.
17 See CFTC Interim Final Rule for Reporting PreEnactment Swap Transactions (‘‘Pre-Enactment
Swaps IFR’’), 75 FR 63080 (Oct. 14, 2010).
18 See CFTC Interim Final Rule for Reporting
Post-Enactment Swap Transactions (‘‘PostEnactment Swaps IFR’’ or ‘‘Transition Swaps IFR’’),
75 FR 78892 (Dec. 17, 2010).
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as other aspects of the Dodd-Frank Act,
Senator Blanche Lincoln emphasized
that the provisions of new CEA Section
4r (added by Section 729 of the DoddFrank Act) and new CEA Section 2(h)(5)
(added by Section 723 of the DoddFrank Act) ‘‘should be interpreted as
complementary to one another to assure
consistency between them. This is
particularly true with respect to issues
such as the effective dates of these
reporting requirements * * *’’ 19
This proposed rule refers to the two
types of swaps addressed in CEA
Section 2(h)(5) as follows. ‘‘Preenactment swap’’ means a swap
executed before date of enactment of the
Dodd-Frank Act (i.e., before July 21,
2010) the terms of which have not
expired as of the date of enactment of
that Act.20 ‘‘Transition swap’’ means a
swap executed on or after the date of
enactment of the Dodd-Frank Act (i.e.,
July 21, 2010) and before the
compliance date specified in the final
swap data reporting and recordkeeping
requirements regulations in part 45 of
this chapter.21 Collectively, the
proposed rule refers to pre-enactment
swaps and transition swaps as
‘‘historical swaps.’’
B. The Commission’s Proposed Rule on
Swap Data Recordkeeping and
Reporting Requirements
On December 8, 2010, the
Commission published for comment a
notice of proposed rulemaking
concerning swap data (the ‘‘Swap Data
NPRM’’) that would establish swap data
recordkeeping and reporting
requirements applicable to registered
SDRs, derivatives clearing organizations
(‘‘DCOs’’), designated contract markets
(‘‘DCMs’’), swap execution facilities
(‘‘SEFs’’), SDs, major swap participants
MSPs, and non-SD/MSP
counterparties.22 The latter category of
swap counterparties would include but
not be limited to counterparties who
qualify for the statutory end user
19 Senator Blanche Lincoln, ‘‘Wall Street
Transparency and Accountability Act,’’
Congressional Record, July 15, 2010, at S5923.
20 Subsection (A) of CEA Section 2(h)(5)
Reporting Transition Rules provides that ‘‘Swaps
entered into before the date of the enactment of this
subsection shall be reported to a registered swap
data repository or the Commission no later than 180
days after the effective date of this subsection.’’
21 Subsection (B) of CEA Section 2(h)(5) Reporting
Transition Rules provides that ‘‘Swaps entered into
on or after [the] date of enactment [of the DoddFrank Act] shall be reported to a registered swap
data repository or the Commission no later than the
later of (i) 90 days after [the] effective date [of
Section 2(h)(5)] or (ii) such other time after entering
into the swap as the Commission may prescribe by
rule or regulation.’’
22 75 FR 76574 (Dec. 8, 2010) (‘‘Swap Data
NPRM’’).
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22835
exception with respect to particular
swaps.23 Consistent with the purposes
of the Dodd-Frank Act, the Swap Data
NPRM would require generally that all
DCOs, DCMs, SEFs, and swap
counterparties keep full, complete and
systematic records, together with all
pertinent data and memoranda, of all
activities relating to the business of such
entities or persons with respect to
swaps. The proposed rules contemplate
that swap data reporting should include
data from each of two important stages
in the existence of a swap: the creation
of the swap, and the continuation of the
swap over its existence until its final
termination or expiration. The proposed
rules call for reporting of two sets of
data generated in connection with the
creation of the swap: primary economic
terms data and confirmation data.24
Reporting of swap continuation data can
follow either of two conceptual
approaches described in the Swap Data
NPRM: The life cycle or event flow
approach, or the state or snapshot
approach.25
The Swap Data NPRM did not address
CEA Section 2(h)(5)’s mandate that the
Commission adopt recordkeeping and
reporting rules applicable to preenactment swaps or transition swaps,
but instead noted that a separate
rulemaking to establish requirements for
these historical swaps would address
the records, information and data
required to be maintained and the
timeframe for reporting such
information to a registered SDR or to the
Commission.26 This proposal would
establish recordkeeping and reporting
standards applicable to pre-enactment
and transition swaps.
C. The Interim Final Rules for PreEnactment and Transition Swaps
Interim Final Rule for Pre-Enactment
Swaps. As described above, Title VII of
the Dodd-Frank Act added new Section
4r(a)(2) to the CEA, which provided for
the reporting of pre-enactment swaps
and directed that the Commission
promulgate, within 90 days of
enactment of the Dodd-Frank Act, an
interim final rule (‘‘IFR’’) providing for
the reporting of such swaps. On October
14, 2010, pursuant to the mandate of
CEA Section 4r(a)(2)(B), the
Commission published in new part 44
of its regulations an IFR instructing
specified counterparties to preenactment swaps to report data to a
registered SDR or to the Commission by
23 CEA
24 See
Section 2(h)(7).
Swap Data NPRM, supra, note 22 at 76580–
76582.
25 Id. at 76583–76584.
26 Id. at 76580 note 37.
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a compliance date to be established in
reporting rules to be promulgated under
CEA Section 2(h)(5), and advising such
counterparties of the necessity, inherent
in the reporting requirement, to preserve
information pertaining to the terms of
such swaps until reporting was
effectuated under permanent rules.27
This Pre-Enactment Swaps IFR stated
that the reporting and recordkeeping
provisions established by Section 4r and
§§ 44.00–44.02 of the Commission’s
regulations would remain in effect until
the effective date of the permanent
reporting rules to be adopted by the
Commission pursuant to Section 2(h)(5)
of the CEA.28 A principal purpose of
this IFR was to advise counterparties of
the need to retain data related to swap
transactions so that reporting could be
effectuated under permanent rules
subsequently to be adopted.
With respect to the scope and
coverage of the Pre-Enactment Swaps
IFR, the Commission acknowledged
inconsistencies between the two DoddFrank provisions governing the
Commission’s rulemaking. Specifically,
new CEA Section 4r(a)(2) limits
reportable pre-enactment swaps to those
whose terms have not expired on the
date of enactment of the Dodd-Frank
Act; Section 2(h)(5) does not contain the
same qualifying language. As discussed
in the Pre-Enactment Swaps IFR, the
Commission believes that failure to
limit the term ‘‘pre-enactment swap’’ to
unexpired swaps would require
reporting of every swap that has ever
been entered into; accordingly, the
Commission concluded that reportable
pre-enactment swaps should be limited
to those whose terms had not expired at
the time of enactment.29
Interim Final Rule for Transition
Swaps. Section 4r of the CEA did not
mandate an IFR establishing reporting
provisions for transition swaps. The
Commission nonetheless believed that
such a rule would provide clarity and
guidance with respect to such swaps, by
establishing that transition swaps will
be subject to Section 2(h)(5)(B)’s
reporting requirements and to
Commission regulations to be
promulgated thereunder. The
Commission also believed it was
prudent to advise potential
counterparties to such swaps that
implicit in this prospective reporting
requirement is the need to retain
relevant data until such time as
reporting can be effected. Accordingly,
on December 17, 2010 the Commission
27 See Pre-Enactment Swaps IFR, supra note 17,
at 63083.
28 See Pre-Enactment Swaps IFR, supra note 17.
29 Id. at 63082.
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published under Part 44 of its
regulations interim final rules
establishing that counterparties to
transition swaps will be subject to
permanent recordkeeping and reporting
requirements to be adopted by the
Commission pursuant to Section
2(h)(5)(B) of the CEA.30
The Commission intended both the
Pre-Enactment Swaps IFR and the
Transition Swaps IFR to put
counterparties on notice that swap data
should be retained pending the
adoption of permanent rules for preenactment and transition swaps under
proposed part 46 of this chapter. With
respect to both pre-enactment and
transition swaps, the Commission stated
that counterparties to these transactions
should retain material information
about such transactions. The
Commission emphasized, however, that
in the context of the interim rules, no
counterparty was being required to
create new records with respect to
transactions that occurred in the past;
instead, records relating to the terms of
such transactions could be retained in
their existing format to the extent and in
such form as they presently exist.31
Comments Received. The Commission
received a number of comments in
response to each of the IFRs. Comments
generally fell into one or more of several
broad categories and in a number of
instances were common to both IFRs.
Some commenters observed that
issuance of IFRs in advance of
regulations further defining the term
‘‘swap’’ (or defining other key terms in
the Dodd-Frank Act) creates legal and
regulatory uncertainty and increases
compliance risk; most of these
commenters urged the Commission to
further detail the record retention
aspects of the interim final rules.32 In
this connection, commenters requested
that the Commission issue guidance
clarifying and limiting the information
that must be retained,33 or create a safe
harbor for good faith compliance
efforts.34 Energy interests suggested that
the Commission should ensure that end
30 See
Transition Swaps IFR, supra note 18.
Pre-Enactment Swaps IFR, supra note 17,
at 63086, and Transition Swaps IFR, supra note 18,
at 78894.
32 See, e.g., letters dated November 15, 2010 and
January 18, 2011 from the Working Group of
Commercial Energy Firms (‘‘Working Group
letters’’); letter dated November 15, 2010 from Hess
Corporation (‘‘Hess Corporation letter’’); letter dated
November 15, 2010 from the Edison Electric
Institute (‘‘EEI letter’’); letters dated November 15,
2010 and January 18, 2011 from the Not-for-Profit
Electric End User Coalition (‘‘Coalition letters’’);
letter dated January 18, 2011 from the American
Gas Association (‘‘AGA letter’’).
33 EEI letter.
34 Working Group letters; EEI letter; Hess
Corporation letter.
31 See
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users need only report basic data in a
simplified reporting scheme, or should
outline categories of information that
need not be retained by persons who
anticipate becoming eligible for the end
user exemption under the Dodd-Frank
Act.35 One commenter urged greater
specificity with respect to the PreEnactment IFR’s requirements, as well
as consistency with the standards
adopted by the Securities and Exchange
Commission (‘‘SEC’’) and international
regulators, and proposed alternatives to
the requirements adopted in the IFR for
pre-enactment swaps, particularly with
respect to reporting protocols, record
retention, and confidentiality issues
(notably, those confidentiality issues
arising in the context of cross-border
transactions).36 Another commenter
urged that U.S. swap data reporting
requirements should not apply with
respect to foreign swaps transactions,
where counterparties are non-U.S.
entities.37
The Commission is mindful of these
concerns and expects to consider and
address them, as well as all comments
received in response to this proposed
rule, in formulating permanent rules
applicable to pre-enactment and
transition swaps.
II. Proposed New Regulations, Part 46
As provided in the Commission’s
Swap Data NPRM,38 Pre-Enactment
Swaps IFR,39 and Transition Swaps
IFR,40 this proposed rule addresses the
records, information, and data that must
be retained for historical swaps, the
timeframe for reporting data to an SDR
or the Commission concerning such
swaps, and the specific data to be
reported.
Recordkeeping. For historical swaps
in existence on or after the date of
publication of the proposed rule, the
rule would impose limited, specific
recordkeeping obligations.
Counterparties to such swaps would be
required to keep records of an asset
class-specific set of specified, minimum
primary economic terms. The
Commission believes that counterparties
to historical swaps will possess this
limited set of asset class-specific
information as part of their normal
35 AGA
letter; Coalition letters.
dated November 12, 2010, from the
International Swaps and Derivatives Association,
Inc. and the Futures Industry Association.
37 Letter dated January 11, 2011, from Barclays
Bank PLC, BNP Paribas S.A., Deutsche Bank AG,
Royal Bank of Canada, The Royal Bank of Scotland
´ ´ ´ ´
Group PLC, Societe Generale and UBS AG.
38 See Swap Data NPRM, supra note 20, at fn. 37.
39 See Pre-Enactment Swaps IFR, supra note 17.
40 See Transition Swaps IFR, supra note 18.
36 Letter
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business practices.41 Commission staff
have consulted with industry
representatives, including buy-side
counterparties, concerning information
routinely kept in this connection for
swaps in different asset classes.
Counterparties to historical swaps in
existence on or after the date of
publication of this proposed rule would
also be required to keep records of a
confirmation of their swaps if they have
that information in their possession on
or after the publication date (the date
from which public notice of this specific
proposed recordkeeping requirement is
available). The Commission requests
comment concerning the
appropriateness of these limited
recordkeeping requirements, and
specifically requests comment
concerning whether all counterparties to
historical swaps will possess the limited
set of asset class-specific information
called for by the proposed rule as part
of their normal business practices. If
there are any counterparties to historical
swaps who do not possess the limited
set of asset class-specific information
called for by the proposed rule, the
Commission requests comment from
such counterparties concerning what
information concerning historical swaps
such counterparties do possess, and
concerning what information such
counterparties retain concerning their
swaps in order to meet the requirements
of other applicable law, such as hedge
accounting requirements or the
requirements of applicable state law.
For historical swaps that were in
existence as of the date of enactment of
the Dodd-Frank Act but have expired or
been terminated prior to the publication
date of this proposed rule, a
counterparty would only be required to
keep records as provided in the
Commission’s IFRs concerning preenactment and transition swaps:
namely, the information and documents
relating to the terms of the swap that the
counterparty possessed when the
applicable IFR was published, in
whatever format that information is kept
by the counterparty.42
41 The Commission understands that the
terminology used to describe the specific terms and
conditions of a swap can vary among market
participants, and that agreed definitions for certain
terms could increase consistency among
participants in how historical swaps are described.
The Commission therefore requests comment on
whether the proposed minimum primary economic
terms for each asset class are sufficiently clear in
terms of what economic data is expected to be
reported, or whether further clarification is needed
in this respect.
42 As used in the IFRs, ‘‘format’’ refers to the
method by which the information is organized and
stored. It does not refer to a recording format (i.e.,
a format for electronic encoding of data).
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The Commission understands that the
minimum primary economic terms for a
swap can vary widely depending on the
asset class of the underlying products or
on the nature of a particular product
within an asset class. Consequently, the
Commission encourages the industry to
reach an internal consensus about the
appropriate, asset class-specific,
minimum primary economic terms to be
reported for pre-enactment and
transition swaps. The Commission
welcomes comments from industry and
market participants in this regard, and
will consider them in determining the
minimum primary economic terms to be
specified in the final swap data
recordkeeping and reporting rules.
Reporting timeframe. The proposed
rule provides that swap data reporting
for historical swaps would commence
on the compliance date specified in the
Commission’s final swap data
recordkeeping and reporting regulations
in part 45 of this chapter.43 The
Commission believes that the purposes
of the Dodd-Frank Act can be best
served by establishing a single date for
the commencement of all swap data
reporting pursuant to that Act. It also
believes that the compliance date for the
final swap data reporting regulations in
part 45—the date on which reporting
must commence—is the most
practicable and appropriate date for this
purpose. The effective date will be set
by the Commission in its final swap
data reporting regulations.44 In the
Swap Data NPRM, the Commission
requested comments concerning the
time needed to prepare automated
systems for swap data recordkeeping
and reporting prior to implementation
of the regulations, and it will carefully
consider the comments received in
response to that request. The
Commission similarly requests
comment concerning the proposal to
specify the same compliance date as the
date for initial data reporting concerning
pre-enactment and transition swaps,
and the time needed in this connection
for preparation of necessary automated
systems prior to the specified
compliance date.
Data to be reported. The proposed
rule specifies data to be reported for
historical swaps. For pre-enactment and
transition swaps in existence on or after
the date of publication of this proposed
rule, the rule specifies the data elements
to be reported. For historical swaps in
existence as of enactment of the Dodd43 17
CFR part 45.
provided in CEA Section 2(h)(5)(B), the
effective date must be no sooner than 90 days after
the effective date of CEA Section 2(h)(5), but may
be a later date set by the Commission.
44 As
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Frank Act which expired or were
terminated prior to publication of this
proposed rule, the rule provides for
reporting of the information relating to
the terms of the transaction that was in
the possession of a reporting
counterparty as of publication of the
applicable Commission IFR regarding
pre-enactment or transition swaps, in
such format as it is kept by the reporting
counterparty.
As noted above, the Dodd-Frank Act
requires reporting of data concerning all
swaps in existence as of the legislation’s
enactment.45 Data concerning preenactment swaps and transition swaps
will assist achievement of the systemic
risk mitigation, market transparency,
and market supervision purposes for
which the Dodd-Frank Act was enacted.
Such data will be needed to give
regulators the complete picture of the
swap market which the comprehensive
regulatory framework and reporting
requirements of the statute are designed
to provide. Data concerning historical
swaps also is necessary for the
Commission to prepare the semi-annual
reports it is required to provide to
Congress regarding the swap market.
The Commission is aware that
internal swap data retention policies are
not uniform among swap counterparties,
and that the current automated systems
of market participants vary with respect
to their suitability for swap data
reporting. The Commission believes it is
appropriate to limit the burden placed
on swap counterparties in connection
with data reporting for historical swaps,
to the extent that this can be done in a
manner consistent with the
requirements of the Dodd-Frank Act and
the Commission’s need for such data.
The Commission has also considered
comments received concerning the PreEnactment Swaps IFR and Transition
Swaps IFR which requested that the
Commission specify clearly what data
would be required to be reported
concerning historical swaps.
Data reporting for historical swaps in
existence as of or after publication of
this proposed rule. For each preenactment or transition swap in
existence as of or after publication of
this proposed rule, the rule calls (a) for
an initial data report on the compliance
date for data reporting, and (b), if such
a historical swap has not expired or
been terminated as of the compliance
date specified in the final part 45 swap
data reporting regulations, for ongoing
reporting of required swap continuation
data (as defined in the Commission’s
final part 45 swap data reporting
45 CEA
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regulations) during the remaining
existence of the swap.
The proposed rule calls for the initial
data report for historical swaps in
existence as of or after publication of
this proposed rule to include the
transaction terms included in the swap
confirmation if the confirmation was in
the reporting counterparty’s possession
on or after the publication date of this
proposed rule,46 and in any event to
include all of the minimum primary
economic terms for a pre-enactment or
transition swap specified in the
appropriate table in the Appendix to the
proposed rule.
The Commission understands that
industry definitions used in
documenting some swap transactions,
for instance in some master agreements
or confirmations, may not match exactly
the asset class definitions included in
this proposed rule, which are the same
as the asset class definitions in the
Commission’s part 45 proposed rules
regarding swap data recordkeeping and
reporting requirements. The
Commission requests comment on how
the proposed asset class definitions in
this proposed rule and the overall swap
classification scheme embodied in them
might most appropriately be aligned
with current swap instrument
classifications used by the industry, and
with definitions employed by, e.g., the
International Swaps and Derivatives
Association (‘‘ISDA’’), the Edison
Electric Institute, the North American
Energy Standards Board, and others.
In addition, the Commission
anticipates that some swaps subject to
its jurisdiction may belong to two other
swap categories: mixed swaps, and
multi-asset swaps. Generally, a mixed
swap is in part a security-based swap
subject to the jurisdiction of the SEC
and in part a swap belonging to one of
the swap asset classes subject to the
jurisdiction of the Commission.47 Multiasset swaps are those that do not have
one easily identifiable primary
underlying notional item within the
Commission’s jurisdiction. The DoddFrank Act defines ‘‘mixed swap’’ as
follows: ‘‘The term ‘security-based swap’
includes any agreement, contract, or
transaction that is as described in
section 3(a)(68)(A) of the Securities
Exchange Act of 1934 (15 U.S.C.
78c(a)(68)(A)) and is also based on the
value of 1 [sic] or more interest or other
rates, currencies, commodities,
instruments of indebtedness, indices,
46 The Commission understands that
counterparties may use either a short-form or a
long-form confirmation. Either form can be used to
satisfy this requirement.
47 See Swap Data NPRM, supra note 20, at 76586.
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quantitative measures, other financial or
economic interest or property of any
kind (other than a single security or a
narrow-based security index), or the
occurrence, non-occurrence, or the
extent of the occurrence of an event or
contingency associated with a potential
financial, economic, or commercial
consequence (other than an event
described in subparagraph (A)(iii).’’ 48
The Commission requests comment
concerning how such swaps should be
treated with respect to swap data
reporting for historical swaps, and
concerning the category or categories
under which swap data for such swaps
should be reported to SDRs and
maintained by SDRs.
The initial data report for historical
swaps in existence as of or after
publication of this proposed rule would
also be required to include the Unique
Counterparty Identifier of the reporting
counterparty (as defined in part 45),49
and the reporting counterparty’s
internal system identifiers for the nonreporting counterparty and the
particular swap transaction in question.
The proposed rule would give nonreporting counterparties an additional
180 days after the compliance date
specified in the Commission’s final part
45 rules for data reporting before they
would be required to obtain and use a
Unique Counterparty Identifier in
connection with pre-enactment and
transition swaps. The Commission is
proposing this additional time because
it understands that the majority of nonreporting counterparties are likely to be
non-SD/MSP counterparties. While SDs
and MSPs are likely to have
infrastructure in place that can
incorporate and track Unique
Counterparty Identifiers, non-SD–MSP
counterparties could need to acquire
new automated systems or undertake
modifications of existing systems in
order to incorporate identifiers. The
Commission requests comment
concerning the appropriateness of this
additional time, concerning the length
of the additional time provided, and
concerning whether the Commission
should differentiate further between SD
and MSP counterparties versus non-SD/
MSP counterparties with respect to use
of Unique Counterparty Identifiers for
non-reporting counterparties to preenactment and transition swaps.
The proposed rule also requires the
reporting counterparty to report the
master agreement identifier (if any) used
48 Dodd-Frank
Act § 721(21), CEA § 1a(47)(D).
Commission intends to take the need for
reporting counterparties to obtain Unique
Counterparty Identifiers into account in setting the
effective date for the data reporting rules in part 45.
49 The
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by the reporting counterparty’s
automated systems to identify the
master agreement governing a preenactment or transition swap. This
information would allow the
Commission and other regulators to
aggregate transactional data to calculate
net or gross exposure of a particular
counterparty. The Commission requests
comment concerning whether its final
swap data recordkeeping and reporting
regulations for pre-enactment and
transition swaps should require such
reporting of a master agreement
identifier.
The Commission requests comment
concerning the appropriateness and
adequacy of these initial data report
requirements. Additionally, the
Commission requests comment on the
appropriate method for identifying the
association of an individual swap
transaction with a particular master
agreement or with a swap portfolio, in
order to identify individual swaps that
may be subject to close-out netting and
other provisions typical in portfolio
compression.50 Identifying this
association could be a necessary means
of enabling regulators to determine a
counterparty’s net exposure (current or
future) on the basis of transactional data
reported to SDRs. In particular, the
Commission requests comment on
whether reporting of a master agreement
identifier as provided in this proposed
rule is needed in this connection and
would provide a workable means of
achieving this goal.
The Commission has chosen to
propose limited requirements for
recordkeeping and initial data reports
concerning pre-enactment and
transition swaps because it understands
that the current recordkeeping and
reporting systems that some
counterparties to such swaps have at
present might not be able to fulfill, with
respect to historical swaps,
recordkeeping and reporting
requirements as extensive as those
proposed in part 45. In these
circumstances, the Commission believes
it is appropriate to limit the burden
imposed on such counterparties, to the
extent that this can be done in a way
50 The Commission’s proposed rule regarding
confirmation, portfolio reconciliation and portfolio
compression requirements for SDs and MSPs, 17
CFR part 23, defines portfolio compression as a
mechanism whereby substantially similar
transactions among two or more counterparties are
terminated and replaced with a smaller number of
transactions of decreased notional value, in an
effort to reduce the risk, cost, and inefficiency of
maintaining unnecessary transactions on the
counterparties’ books. See CFTC Notice of Proposed
Rulemaking: Confirmation, Portfolio Reconciliation
and Portfolio Compression Requirements for Swap
Dealers and Major Swap Participants, 75 FR 81519
(Dec. 28, 2010).
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that is consistent with the requirements
of the Dodd-Frank Act and the
Commission’s need for data concerning
historical swaps. The Commission
believes, however, that the limited set of
minimum primary economic terms data
set forth in this proposed rule with
respect to historical swaps is the
minimum necessary to give regulators a
picture of the risk exposures and
counterparty participation in such
swaps at the minimum level necessary
for the Commission and other regulators
to fulfill their regulatory
responsibilities. The Commission
requests comment concerning the
appropriateness of this approach to
initial data reporting for pre-enactment
and transition swaps.
Regarding ongoing reporting of
required swap continuation data during
the remaining existence of a preenactment or transition swap after the
compliance date, the proposed rule
follows the life cycle approach for credit
swaps and equity swaps, and the state
or snapshot approach for interest rate
swaps, currency swaps, and other
commodity swaps. This same
distinction is made in the Commission’s
Swap Data NPRM, which sets forth the
Commission’s reasons for making this
distinction, reasons which also apply
with respect to part 46. The Commission
believes that this unified approach to
swap data reporting rules for preenactment, transition, and postcompliance-date swaps will minimize
recordkeeping and swap data reporting
burdens for industry and provide a
coherent and consistent picture of the
overall swap market to regulators. Since
the proposed part 45 continuation data
reporting requirements are aligned with
the approach taken in the SEC’s
proposed rules for security-based credit
and equity swaps, this also serves to
avoid differing requirements for
security-based swaps and swaps. The
Commission requests comment
concerning whether required reporting
of the same swap continuation data for
pre-enactment and transition credit
swaps and equity swaps, in line with
the requirements of proposed part 45
and of the SEC’s proposed rules, is
appropriate in this connection.
For pre-enactment or transition
interest rate swaps, currency swaps, and
other commodity swaps, this proposed
rule also limits continuation data
reporting obligations for non-SD/MSP
reporting counterparties. Specifically,
the proposal requires that SD or MSP
reporting counterparties must meet
continuation data reporting
requirements for pre-enactment and
transition swaps in those asset classes
that are the same as the continuation
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data reporting requirements of proposed
part 45 for swaps in those asset classes.
While non-SD/MSP reporting
counterparties for such swaps are
required to report the state data 51
necessary to provide a daily snapshot
view of the primary economic terms of
the swap, the state data that must be
reported by non-SD/MSP reporting
counterparties for such swaps is limited
to the state data available to the non-SD/
MSP reporting counterparty on the
compliance date. This may consist of
only the data elements contained in the
table of minimum primary economic
terms for various swap asset classes, as
set forth in Appendix 1 to part 46, if that
is all that was available to the non-SD/
MSP reporting counterparty on that
date. This approach is designed to avoid
placing undue recordkeeping and
reporting burdens on non-SD/MSP
counterparties, who are the reporting
counterparties least likely to have the
automated systems needed for more
extensive reporting with respect to preenactment or transition swaps. The
Commission requests comment
concerning the appropriateness of this
approach to continuation data reporting
for pre-enactment and transition swaps.
Data reporting for historical swaps in
existence as of enactment of the DoddFrank Act but expired or terminated
prior to publication of this proposed
rule. For historical swaps in existence as
of enactment of the Dodd-Frank Act
which expired or were terminated prior
to publication of this proposed rule,
only an initial data report would be
required.52 For such swaps, the
proposed rule would require that the
reporting counterparty report such
information relating to the terms of the
transaction as was in that counterparty’s
possession as of issuance of the relevant
Commission IFR.53 This information
would be permitted to be reported in the
format in which it was kept by the
reporting counterparty.54
Selection of reporting counterparty.
This proposed rule provides that
determination of which counterparty to
a pre-enactment or transition swap is
the reporting counterparty for that swap
shall be made according to Dodd-Frank
Act’s hierarchy of counterparty types for
reporting obligation purposes, in which
SDs outrank MSPs, who outrank nonSD/MSP counterparties. Where both
51 For purposes of this proposed rule, ‘‘state data’’
has the meaning defined in part 45 of this chapter.
See Swaps Data NPRM, supra note 20, at 76599.
52 By its nature, continuation data reporting
occurs during the continuation of a swap prior to
its expiration or termination.
53 Pre-Enactment Swaps IFR, supra note 15, and
Transition Swaps IFR, supra note 18.
54 This could include submission of a PDF file.
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counterparties are at the same
hierarchical level, the statute calls for
them to select the counterparty
obligated to report. The proposed rule
establishes a mechanism for
counterparties to follow in choosing the
counterparty to report in situations
where both counterparties have the
same hierarchical status. Where both
counterparties are SDs, or both are
MSPs, or both are non-SD/MSP
counterparties, the proposed rule
requires the counterparties to agree as
on term of their swap transaction which
counterparty will fulfill reporting
obligations. The proposed rule also
provides that, where only one
counterparty to a swap is a U.S. person,
the U.S. person should be the reporting
counterparty. The Commission believes,
preliminarily, that this approach may be
necessary in order to ensure compliance
with reporting requirements in such
situations. In these respects, the
proposed rule mirrors the provision of
the part 45 Swap NPRM regarding
selection of the reporting counterparty.
The proposed rule also provides that
determination of the reporting
counterparty shall be made with respect
to the current counterparties to the swap
as of the compliance date (for historical
swaps in existence as of that date) or as
of the prior expiration or termination of
the swap (for historical swaps expired
or terminated prior to the compliance
date), regardless of who the
counterparties to the swap were when it
was originally executed.
As noted above, where both
counterparties have the same
hierarchical status, the proposed rule
calls for the counterparties to agree as
one term of their swap transaction
which counterparty will fulfill reporting
obligations. In the case of a historical
swap executed prior to publication of
this proposed rule, for which the
agreement to enter into the swap has
already been made, agreement by the
counterparties on selection of the
reporting counterparty would require
negotiation occurring after the
agreement to enter into the swap was
made, and could require amendment of
the agreement to enter into the swap in
this respect. The Commission requests
comment concerning how two SD
counterparties, two MSP counterparties,
or two non-SD/MSP counterparties
should select the reporting counterparty
for a pre-enactment or transition swap
which was executed prior to the
publication date of this proposed rule,
and thus does not include an agreement
term selecting the reporting
counterparty. The Commission also
requests comment concerning whether
its final data recordkeeping and
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reporting rules for historical swaps
should prescribe a method for selecting
a reporting counterparty in such
circumstances. The Commission may
include such a method in the final data
recordkeeping and reporting rules for
historical swaps.
The Commission has received
comments regarding the part 45 Swap
NPRM suggesting that, where only one
counterparty to a swap is a U.S. person,
the counterparty designated as the
reporting counterparty under the
hierarchical approach based on the
Dodd-Frank Act and discussed above
should be applied in the same way as
for a swap where both counterparties
are U.S. persons. This would mean, for
example, that for a swap between a nonU.S. SD and a U.S. non-SD/MSP
counterparty, the non-U.S. SD would be
the reporting counterparty. The
Commission requests comment
concerning how the reporting
counterparty for a historical swap
should be selected when one
counterparty is a non-U.S. person.
Non-duplication of previous
reporting. The Commission is aware that
in some instances, reporting
counterparties may have reported data
concerning pre-enactment or transition
swaps to a presently-existing trade
repository prior to the compliance date.
If such a repository is registered with
the Commission as an SDR as of the
compliance date, the Commission
would not require reporting
counterparties to report duplicate
information to the SDR, although it
would require reporting on the
compliance date of any information
required by this proposed rule that had
not already been reported to the SDR.
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III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) 55 requires that agencies
consider whether the rules they propose
will have a significant economic impact
on a substantial number of small entities
and, if so, provide a regulatory
flexibility analysis respecting the
impact.56 The regulations proposed by
the Commission would affect SDs,
MSPs, and non-SD/MSP counterparties
who are counterparties to one or more
pre-enactment or transition swaps. 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.57
55 5
U.S.C. 601 et seq.
U.S.C. 601 et seq.
57 47 FR 18618 (Apr. 30, 1982).
56 5
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The Commission hereby determines
that SDs and MSPs should not be
considered small entities for purposes of
the RFA. SDs and MSPs will play a
central role in the national regulatory
scheme overseeing the trading of swaps.
With respect to SDs, the Commission
previously has determined that Futures
Commission Merchants (‘‘FCMs’’)
should not be considered to be small
entities for purposes of the RFA.58 Like
FCMs, SDs will be subject to minimum
capital and margin requirements and are
expected to comprise the largest global
financial firms.59 Similarly, with respect
to MSPs, the Commission has
previously determined that large traders
are not ‘‘small entities’’ for RFA
purposes.60 Like large traders, MSPs
will maintain substantial positions,
creating substantial counterparty
exposure that could have serious
adverse effects on the financial stability
of the U.S. banking system or financial
markets.
With respect to non-SD/MSP
counterparties, the Commission believes
that the proposed regulations will not
create a significant economic impact on
a substantial number of small entities.
The proposed rule sets forth
recordkeeping and reporting
requirements with respect to preenactment and transition swaps. The
Commission believes that the records
the proposed rule would require to be
kept are already kept by swap
counterparties in their normal course of
business. The proposed rule would
require limited swap data reporting for
pre-enactment or transition swaps, and
would require such reporting by nonSD/MSP counterparties only with
respect to such swaps in which neither
counterparty is an SD or MSP. The
considerable majority of swaps involve
at least one SD or MSP. In addition,
most end users and other non-SD/MSP
counterparties who are regulated by the
Employee Retirement Income Security
Act of 1974 (‘‘ERISA’’), such as pension
funds, which are among the most active
participants in the swap market, are
prohibited from transacting directly
with other ERISA-regulated
participants.61 For these reasons, the
Commission does not believe that the
regulations would have a significant
economic impact on a substantial
number of small entities.
Accordingly, the Chairman, on behalf
of the Commission, hereby certifies
58 47
FR 18618 (Apr. 30, 1982).
the Commission is required to
exempt from designation entities that engage in a
de minimis level of swaps. Id. at 18619.
60 47 FR at 18620.
61 29 U.S.C. 1106.
59 Additionally,
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pursuant to 5 U.S.C. 605(b) that the
proposed rule will not have a significant
economic impact on a substantial
number of small entities. Nonetheless,
the Commission specifically requests
comment on the impact this proposed
rule may have on small entities.
B. Paperwork Reduction Act
Introduction. Provisions of the
proposed rule would result in new
collection of information requirements
within the meaning of the Paperwork
Reduction Act (‘‘PRA’’).62 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 ‘‘Regulations
46.2 and 46.3—Swap Data
Recordkeeping and Reporting: PreEnactment and Transition Swaps,’’ OMB
control number 3038–NEW. If adopted,
responses to this new 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 Act
strictly prohibits the Commission,
unless specifically authorized by the
Act, 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.
Information Provided by Reporting
Entities/Persons. The proposed rule sets
forth recordkeeping and reporting
requirements for SDs, MSPs, and nonSD/MSP counterparties.
Recordkeeping Burdens. Under
proposed Regulation 46.2, all
counterparties to pre-enactment or
transition swaps would be required to
keep records relating to such swaps. For
swaps that are in existence as of or after
the enactment of the Dodd-Frank Act,
but are expired as of the publication of
the proposed rule, the proposed
Regulation 46.2 requires that parties
simply maintain the swap records
already in their possession, in the form
in which they are already maintained.
For purposes of the PRA, the
Commission will not calculate the
burden for this requirement; the
Commission has previously calculated
the burden for this requirement in the
62 44
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PRA analyses for the interim final rules
for pre-enactment and transition swaps.
For pre-enactment or transition swaps
that are in existence as of or after the
publication of the proposed rule, the
proposed Regulation 46.2 would require
counterparties to keep records of a
minimum set of primary economic data
relating to such swaps. The Commission
believes that counterparties already
would possess this set of primary
economic data as part of their normal
business practices. The proposed
regulation provides that counterparties
must record certain additional
information (e.g., information relating to
confirmation) only if the counterparty is
in possession of that information on or
after the publication date of the
proposed rule. After the compliance
date specified in the Commission’s final
swap data rules in Part 45, proposed
Regulation 46.2 provides that
counterparties must record information
required by recordkeeping provisions of
those final swap rules only if such
information is available to the
counterparty on or after the compliance
date specified in those rules.
For historical swaps that are in
existence as of or after the publication
date of the proposed rule, the rule
would require the counterparties to
keep the records beginning on the
publication date of the proposed rule
and through the life of the swap, and for
a period of at least five years from the
final termination of the swap. In
calculating the burden of this
recordkeeping requirement for purposes
of the PRA, the Commission will not
include the burdens occurring after the
compliance date specified in the
Commission’s final swap data rules in
Part 45; the burden occurring after the
compliance date is and will be
subsumed by the recordkeeping burdens
calculated for those final rules.63
Therefore, for this proposed rule, the
Commission will only calculate a
recordkeeping burden for the time
period beginning with the publication
date of this proposed rule, and ending
on the compliance date. The
Commission estimates this period of
time to be approximately one year. The
Commission estimates that 30,300 SDs,
MSPs, and non-SD/MSP counterparties
will be affected by these recordkeeping
burdens during this time.64 With respect
63 The recordkeeping burden for those final rules
is calculated based on the number of annual
counterparties to swaps and therefore implicitly
includes counterparties to pre-enactment and
transition swaps that are unexpired after the
effective date.
64 As noted, the applicable recordkeeping burden
applies during a period estimated by the
Commission to be one year. The Commission has
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to SDs and MSPs (an estimated 300
entities or persons), which will have
higher levels of swap recording activity
than non-SD/MSP counterparties, the
Commission estimates that the average
one-time burden per entity is 40 hours,
excluding customary and usual business
practices. With respect to non-SD/MSP
reporting counterparties (an estimated
30,000 entities or persons), who will
have lower levels of swap recording
activity, the Commission estimates that
the average one-time burden per entity
is 10 hours, excluding customary and
usual business practices. Therefore, the
total aggregate one-time burden is
312,000 hours. The Commission
requests comment on this estimate.
Reporting Burdens. The reporting
obligations set forth in proposed
Regulation 46.3 involve both an initial
data report and ongoing reporting of
required swap continuation data
relating to pre-enactment and transition
swaps. For historical swaps that are in
existence as of or after the enactment of
the Dodd-Frank Act, but expired prior to
publication of the proposed rule, the
rule would require only an initial data
report.
The proposed regulation provides that
reporting counterparties for preenactment or transition swaps must
make an initial data report relating to
those swaps. The frequency of the report
would be once per swap, and the report
would occur on the compliance date of
the Commission’s final swap data
recordkeeping and reporting regulations
in Part 45. The report would not be
required to be made for historical swaps
that are expired as of the enactment of
the Dodd-Frank Act. The Commission
estimates that there are 1,800 affected
entities who will be reporting
counterparties for pre-enactment and
transition swaps.65 The Commission
estimates that the average one-time
previously estimated that there are annually 30,000
non-SD/MSP entities who are counterparties to a
swap (see, e.g., the Commission’s Paperwork
Reduction Act statement for the Swap Data
Recordkeeping and Reporting Requirements
Proposed Rulemaking). The Commission has also
previously estimated that there are 250 SDs and 50
MSPs. Therefore, a total of 30,300 entities would be
subject to the recordkeeping burdens of the
proposed rule.
65 The Commission has previously estimated that
there are annually 1,500 non-SD/MSP
counterparties who are a ‘‘reporting counterparty’’
(see, e.g., the Commission’s Paperwork Reduction
Act statement for the Swap Data Recordkeeping and
Reporting Requirements Proposed Rulemaking). In
addition, the Commission has previously estimated
that there are 250 SDs and 50 MSPs. The
Commission believes that the number of entities
who are reporting counterparties to pre-enactment
or transition swaps (that are in existence as of or
after the enactment of the Dodd-Frank Act) is
similar to the number of annual reporting
counterparties. The Commission requests comment
on this estimate.
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reporting burden for each affected entity
is 24 hours. Therefore, the total
aggregate one-time burden is 43,200
hours. The Commission requests
comment on this estimate.
The proposed regulation also provides
for an ongoing reporting obligation that
must be fulfilled by reporting
counterparties to pre-enactment and
transition swaps that are in existence as
of the compliance date specified in the
Commission’s final swap data reporting
rules in part 45. The burden for this
ongoing reporting is and will be
subsumed by the reporting burden
calculated for the Commission’s final
swap data recordkeeping and reporting
regulations in part 45.66 Therefore, for
this proposed rulemaking, the
Commission will not calculate a burden
estimate for ongoing reporting.
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 solicits comments in order
to: (i) evaluate whether the proposed
collections of information are 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
collections 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
collections 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
66 The reporting burden for those final rules is
calculated based on the number of annual
‘‘reporting counterparties’’ to swaps and therefore
implicitly include reporting counterparties to preenactment and transition swaps that are unexpired
after the effective date.
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emcdonald on DSK2BSOYB1PROD with PROPOSALS
concerning the collection of information
between 30 and 60 days after
publication of this release.
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.
C. Cost-Benefit Analysis
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 Act. By
its terms, section 15(a) does not require
the Commission to quantify the costs
and benefits of the rulemaking or 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) 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) the
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 of or
accomplish any of the purposes of the
Act.
Summary of Proposed Requirements.
The proposed rule provides that
counterparties to pre-enactment or
transition swaps must keep records of,
and must report, certain information
relating to the swaps. The proposed
reporting requirements involve both an
initial report and ongoing reporting that
continues until the final termination of
the swap.
Costs. There are recordkeeping and
reporting costs associated with the
proposed requirements to record and
report certain swap information. The
Commission has crafted the rule to be
efficient in terms of those costs and has
also attempted to minimize the burden
on non-SD/MSP counterparties. The
proposed rule provides that certain
records must be kept by a counterparty
only if the counterparty is in possession
of that information on or after certain
dates as provided in the regulations.
The proposed rule would require a
counterparty to a pre-enactment or
transition swap in existence as of or
after publication of this proposed rule to
keep, at a minimum, records of a
specified set of primary economic terms
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data; however, the Commission believes
that counterparties already would
possess this information as part of their
normal business practices. For non-SD/
MSP reporting counterparties for preenactment or transition swaps in the
interest rate, currency, or other
commodity asset classes, the proposed
rule limits the scope of required
continuation data reporting to the data
elements available to the reporting
counterparty on the compliance date
specified in the Commission’s final
swap data rules in Part 45.
Benefits. In addition to being
mandated by the Dodd-Frank Act,
reporting of data concerning preenactment and transition swaps is
essential to the fundamental systemic
risk mitigation, transparency, and
market supervision purposes for which
the Dodd-Frank Act was enacted. This
reporting is necessary to give regulators
complete information regarding the
entire swap market. It provides the
Commission and other financial
regulators with necessary insight
concerning the number of transactions
and the number and type of participants
involved in the swap market, as well as
its outstanding notional size. Such
information provides both a baseline
against which to assess the development
of the swap market over time and a first
step toward a transparent and wellregulated market for swaps. Data
concerning pre-enactment and
transition swaps also is necessary for
the Commission to prepare the semiannual reports it is required to provide
to Congress.
Public Comment. For the reasons set
forth above, the Commission believes
that the benefits of the proposed
regulations outweigh their costs, and
has decided to issue them. The
Commission invites public comment on
its cost-benefit considerations.
Commenters are also invited to submit
any data or other information that they
may have quantifying or qualifying the
costs and benefits of the proposal with
their comment letters.
IV. Proposed Compliance Date
The Commission understands that,
after the date on which the Commission
issues final swap data recordkeeping
and reporting regulations, including its
final regulations concerning preenactment and transition swaps, the
industry will need a reasonable period
of time to implement the requirements
of those regulations. Time may be
required for entities to register as SEFs,
DCMs, DCOs, or SDRs (or for extant
DCMs or DCOs to revise their rules and
procedures) pursuant to new
Commission regulations concerning
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such entities. Time may also be needed
for registered entities and potential
swap counterparties to adapt or create
automated systems capable of fulfilling
the requirements of Commission
regulations concerning swap data
recordkeeping and reporting.
Accordingly, it may be appropriate for
the Commission’s final swap data
recordkeeping and reporting
regulations, including those for preenactment and transition swaps, to
establish a compliance date that is later
than the date the final regulations are
issued.
The Commission requests comment
concerning the need for a compliance
date for its final swap data
recordkeeping and reporting
regulations, including those for preenactment and transition swaps, that is
later than the date of their issuance;
concerning the benefits or drawbacks of
such an approach; concerning the length
of time needed for registered entities
and potential swap counterparties to
prepare for implementation in the ways
discussed above, or otherwise; and
concerning the compliance date which
the Commission should specify in its
final regulations concerning swap data
recordkeeping and reporting.
V. General Solicitation of Comments
The Commission requests comments
concerning all aspects of the proposed
regulations, including, without
limitation, all of the aspects of the
proposed regulations on which
comments have been requested
specifically herein.
Proposed Rules
List of Subjects in 17 CFR Part 46
Swaps, Data recordkeeping
requirements and Data reporting
requirements.
For the reasons set forth in the
preamble, and pursuant to the authority
in the Commodity Exchange Act, as
amended, and in particular Sections
2(h)(5) and 4r(a), the Commission also
hereby proposes to amend Chapter 1 of
Title 17 of the Code of Federal
Regulations by adding Part 46 to read as
follows:
PART 46—SWAP DATA
RECORDKEEPING AND REPORTING
REQUIREMENTS: PRE-ENACTMENT
AND TRANSITION SWAPS
Sec.
46.1
46.2
Definitions.
Recordkeeping for pre-enactment
swaps and transition swaps.
46.3 Swap data reporting for pre-enactment
swaps and transition swaps.
46.4 Unique identifiers.
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46.5
Determination of which counterparty
must report.
46.6 Third-party facilitation of data
reporting.
46.7 Reporting to a single swap data
repository.
46.8 Data reporting for swaps in a swap
asset class not accepted by any swap
data repository.
46.9 Required data standards.
46.10 Reporting of errors and omissions in
previously reported data.
Appendix to Part 46—Tables of Minimum
Primary Economic Terms Data for PreEnactment and Transition Swaps.
Authority: Title VII, sections 723 and 729,
Pub. L. 111–203, 124 Stat. 1738.
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§ 46.1
Definitions.
Terms used in this part are defined as
follows:
Asset class means the particular 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.
Compliance date means the
compliance date specified in the final
swap data recordkeeping and reporting
regulations in part 45 of this chapter as
the date on which those regulations will
be implemented, i.e., the date on which
registered entities and swap
counterparties must begin to comply
with those regulations.
Confirmation (confirming) 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
must legally supersede any previous
agreement (electronically or otherwise).
Confirmation data means all of the
terms of a swap matched and agreed
upon by the counterparties in
confirming the swap.
Credit support agreement means an
International Swaps and Derivatives
Association, Inc. credit support
agreement or equivalent agreement.
Credit swap means any swap that is
primarily based on 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 swap or
total return swap on one or more indices
of debt instruments.
Currency swap means any swap
which is primarily based on rates of
exchange between different currencies,
changes in such rates, or other aspects
of such rates. This category includes
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foreign exchange swaps as defined in
Commodity Exchange Act Section
1a(25).
Electronic reporting or reporting
electronically means reporting data in
compliance with § 46.9 of this part. The
obligation to report electronically is not
satisfied by electronic transmission of
an image of a document.
Equity swap means any swap that is
primarily based on equity securities,
including, without limitation: any swap
primarily based on one or more broadbased indices of equity securities; and
any total return swap on one or more
equity indices.
Interest rate swap means any swap
which is primarily based on one or more
interest rates, such as swaps of
payments determined by fixed and
floating interest rates.
Major swap participant has the
meaning set forth in Commodity
Exchange Act, Section 1a(33), and any
Commission regulation implementing
that Section.
Master agreement means an
agreement, signed by the counterparties,
providing comprehensive
documentation of standard terms and
conditions covering one or more swap
transactions between such
counterparties.
Non-swap dealer/major swap
participant counterparty means a swap
counterparty that is neither a swap
dealer nor a major swap participant.
Other commodity swap means any
swap not included in the credit swap,
currency swap, equity swap, or interest
rate swap categories, including, without
limitation, any swap for which the
primary underlying item is a physical
commodity or the price or any other
aspect of a physical commodity.
Pre-enactment swap means any swap
entered into prior to enactment of the
Dodd-Frank Act of 2010 (July 21, 2010),
the terms of which have not expired as
of the date of enactment of that Act.
Reporting counterparty means the
counterparty required to report swap
data pursuant to § 45.5 of this chapter.
Swap data repository has the meaning
set forth in Commodity Exchange Act
Section 1a(48), and any Commission
regulation implementing that Section.
Swap dealer has the meaning set forth
in Commodity Exchange Act, Section
1a(49), and any Commission regulation
implementing that Section.
Transition swap means any swap
entered into on or after the enactment of
the Dodd-Frank Act of 2010 (July 21,
2010) and prior to the compliance date
specified in the final swap data
reporting and recordkeeping
requirements regulations in part 45 of
this chapter.
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§ 46.2 Recordkeeping for pre-enactment
swaps and transition swaps.
(a) Recordkeeping for pre-enactment
and transition swaps in existence on or
after April 25, 2011. Each counterparty
to any pre-enactment swap or transition
swap that is in existence on or after
April 25, 2011 shall keep the following
records concerning each such swap:
(1) Minimum records required. The
minimum records required to be kept
concerning each pre-enactment swap
and transition swap shall be as follows:
(i) Each counterparty shall keep
records of all of the minimum primary
economic terms data specified in the
appendix to this part.
(ii) If at any time on or after April 25,
2011 a counterparty is in possession of
a confirmation of the swap executed by
the counterparties, the counterparty
shall keep records of all terms of that
confirmation.
(2) Additional records required to be
kept if possessed by a counterparty. In
addition to the minimum records
required pursuant to paragraph (a)(1) of
this part, a counterparty that is in
possession at any time on or after April
25, 2011 of any of the following
documentation shall keep copies
thereof:
(i) Any master agreement governing
the swap, and any modification or
amendment thereof.
(ii) Any credit support agreement or
equivalent documentation relating to
the swap, and any modification or
amendment thereof.
(3) Records created or available after
the compliance date. In addition to the
records required to be kept pursuant to
paragraphs (a)(1) and (2) of this section,
each counterparty to any pre-enactment
swap or transition swap that remains in
existence on the compliance date shall
keep for each such swap, from the
compliance date forward, all of the
records required to be kept by § 45.2 of
this chapter, to the extent that any such
records are created by or become
available to the counterparty on or after
the compliance date.
(b) Recordkeeping for pre-enactment
and transition swaps expired or
terminated prior to April 25, 2011. Each
counterparty to any pre-enactment swap
or transition swap that is expired or
terminated prior to April 25, 2011 shall
keep the following records concerning
each such swap:
(1) Pre-enactment swaps expired prior
to April 25, 2011. Each counterparty to
any pre-enactment swap that expired or
was terminated prior to April 25, 2011
shall retain the information and
documents relating to the terms of the
transaction that were possessed by the
counterparty on or after October 14,
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2010 (17 CFR 44.00 through 44.02).
Such information may be retained in the
format in which it existed on or after
October 14, 2010, or in such other
format as the counterparty chooses to
retain it. This paragraph (b)(1) does not
require the counterparty to create or
retain records of information not in its
possession on or after October 14, 2010,
or to alter the format, i.e., the method
by which the information is organized
and stored.
(2) Transition swaps expired prior to
April 25, 2011. Each counterparty to any
transition swap that expired or was
terminated prior to April 25, 2011 shall
retain the information and documents
relating to the terms of the transaction
that were possessed by the counterparty
on or after December 17, 2010 (17 CFR
44.03). Such information may be
retained in the format in which it
existed on or after December 17, 2010,
or in such other format as the
counterparty chooses to retain it. This
paragraph (b)(2) does not require the
counterparty to create or retain records
of information not in its possession on
or after December 17, 2010, or to alter
the format, i.e., the method by which
the information is organized and stored.
(c) Retention period. All records
required to be kept by this § 46.2 shall
be kept from the applicable dates
specified in paragraph (b) of this section
through the life of the swap, and for a
period of at least five years from the
final termination of the swap, in a form
and manner acceptable to the
Commission.
(d) Retrieval. Records required to be
kept pursuant to this § 46.2 shall be
retrievable as follows:
(1) Each record required to be kept by
a counterparty that is a swap dealer or
major swap participant shall be readily
accessible via real time electronic access
by the counterparty throughout the life
of the swap and for two years following
the final termination of the swap, and
shall be retrievable by the registrant or
its affiliates within three business days
through the remainder of the period
following final termination of the swap
during which it is required to be kept.
(2) Each record required to be kept by
a non-swap dealer/major swap
participant counterparty shall be
retrievable by the counterparty within
three business days through the period
during which it is required to be kept.
(e) Inspection. All records required to
be kept pursuant to this section shall be
open to inspection upon request by any
representative of the Commission, the
United States Department of Justice, or
the Securities and Exchange
Commission, or by any representative of
a prudential regulator. Copies of all
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such records shall be provided, at the
expense of the entity or person required
to keep the record, to any representative
of the Commission upon request, either
by electronic means, in hard copy, or
both, as requested by the Commission.
§ 46.3 Swap data reporting for preenactment swaps and transition swaps.
(a) Reporting for pre-enactment and
transition swaps in existence on or after
April 25, 2011. (1) Initial data report.
For each pre-enactment swap or
transition swap in existence on or after
April 25, 2011, the reporting
counterparty shall report electronically
to a swap data repository (or to the
Commission if no swap data repository
for swaps in the asset class in question
is available), on the compliance date,
the following:
(i) All of the terms of the confirmation
that are recorded in the automated
systems of the reporting counterparty, if
the terms so reported include all of the
minimum primary economic terms data
specified in the appendix to this part; or
all of the minimum primary economic
terms data specified in the appendix to
this part;
(ii) The Unique Counterparty
Identifier required pursuant to § 46.4 of
this part; and
(iii) The following additional
identifiers:
(A) The internal counterparty
identifier used by the automated
systems of the reporting counterparty to
identify the non-reporting counterparty;
(B) The internal transaction identifier
used by the automated systems of the
reporting counterparty to identify the
swap; and
(C) The internal master agreement
identifier (if any) used by the automated
systems of the reporting counterparty to
identify the master agreement governing
the swap.
(2) Non-duplication of previous
reporting. If the reporting counterparty
for a pre-enactment or transition swap
has reported any of the information
required as part of the initial data report
by paragraph (a) of this section to a
trade repository prior to the compliance
date, and if as of the compliance date
that repository has registered with the
Commission as a swap data repository,
then:
(i) The counterparty shall not be
required to report such previously
reported information to the swap data
repository again;
(ii) The counterparty shall be required
to report to the swap data repository on
the compliance date any information
required as part of the initial data report
by § 46.3(a) of this part that has not been
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Fmt 4702
Sfmt 4702
reported prior to the compliance date;
and
(iii) The initial data report required by
paragraph (b)(2) of this section and all
subsequent data reporting concerning
the swap shall be made to the same
swap data repository to which data
concerning the swap was reported prior
to the compliance date (or to its
successor in the event that it ceases to
operate, as provided in part 49 of this
chapter).
(3) Reporting of required swap
continuation data for a credit swap or
equity swap. For each pre-enactment or
transition swap in either the credit swap
or equity swap asset class, that is in
existence on or after April 25, 2011,
throughout the existence of the swap
following the compliance date, the
reporting counterparty, as defined in
part 45 of this chapter, shall report all
required swap continuation data
required to be reported for credit swaps
or equity swaps under part 45 of this
chapter.
(4) Reporting of required swap
continuation data for an interest rate
swap, other commodity swap, or
currency swap. For each pre-enactment
or transition swap in the interest rate,
other commodity, or currency asset
class, that is in existence on or after
April 25, 2011, throughout the existence
of the swap following the compliance
date, the reporting counterparty as
defined in part 45 shall report required
swap continuation data as follows:
(i) Swaps for which the reporting
counterparty is a swap dealer or major
swap participant. For each preenactment swap or transition swap in
existence on or after April 25, 2011, for
which the reporting counterparty as
defined in part 45 is a swap dealer or
major swap participant, the reporting
counterparty shall report to a swap data
repository electronically all required
swap continuation data concerning the
swap as provided in part 45.
(ii) Swaps for which the reporting
counterparty is a non-swap dealer/
major swap participant counterparty.
For each pre-enactment swap or
transition swap in existence on or after
April 25, 2011, for which the reporting
counterparty as defined in part 45 is a
non-swap dealer/major swap participant
counterparty, the reporting counterparty
shall report to a swap data repository
electronically all required swap
continuation data concerning the swap
as provided in part 45. However,
notwithstanding any other provision of
part 45, the state data reported to
provide a snapshot view, on a daily
basis, of the primary economic terms of
the swap shall be the greater of the
following which is in the possession of
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the reporting counterparty on the
compliance date:
(A) The state data, or any part thereof,
for the swap as defined in part 45 of this
chapter; or
(B) All of the data elements contained
in the table of minimum primary
economic terms for pre-enactment or
transition swaps in the asset class of the
swap in question that is included in the
appendix to this part.
(b) Reporting for pre-enactment and
transition swaps expired or terminated
prior to April 25, 2011. (1) Preenactment swaps expired or terminated
prior to April 25, 2011. For each preenactment swap which expired or was
terminated prior to April 25, 2011, the
reporting counterparty shall report to a
swap data repository (or to the
Commission if no swap data repository
for swaps in the asset class in question
is available), on the compliance date,
such information relating to the terms of
the transaction as was in the reporting
counterparty’s possession on or after
October 14, 2010 (17 CFR 44.00 through
44.02). This information can be reported
via any method selected by the
reporting counterparty.
(2) Transition swaps expired or
terminated prior to April 25, 2011. For
each transition swap which expired or
was terminated prior to April 25, 2011,
the reporting counterparty shall report
to a swap data repository (or to the
Commission if no swap data repository
for swaps in the asset class in question
is available), on the compliance date,
such information relating to the terms of
the transaction as was in the reporting
counterparty’s possession on or after
December 17, 2010 (17 CFR 44.03). This
information can be reported via any
method selected by the reporting
counterparty.
emcdonald on DSK2BSOYB1PROD with PROPOSALS
§ 46.4
Unique identifiers.
The unique identifier requirements
for swap data reporting with respect to
pre-enactment or transition swaps shall
be as follows:
(a) By the compliance date, the
reporting counterparty (as defined by
part 45 of this chapter) for each preenactment or transition swap in
existence on or after April 25, 2011, for
which an initial data report is required
by this part 46, shall obtain a Unique
Counterparty Identifier, as provided in
part 45, for itself, and shall include its
own Unique Counterparty Identifier in
the initial data report concerning the
swap. With respect to that Unique
Counterparty Identifier, the reporting
counterparty and the swap data
repository to which the swap is reported
shall comply thereafter with all unique
identifier requirements of part 45
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17:25 Apr 22, 2011
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respecting Unique Counterparty
Identifiers.
(b) Within 180 days after the
compliance date, the non-reporting
counterparty for each pre-enactment or
transition swap in existence on or after
April 25, 2011 for which an initial data
report is required by this part 46, shall
obtain a Unique Counterparty Identifier,
as provided in part 45, for itself, and
shall provide that Unique Counterparty
Identifier to the reporting counterparty.
Upon receipt of the non-reporting
counterparty’s Unique Counterparty
Identifier, the reporting counterparty
shall provide that Unique Counterparty
Identifier to the swap data repository to
which swap data for the swap was
reported. Thereafter, with respect to the
Unique Counterparty Identifier of the
non-reporting counterparty the
counterparties to the swap and the swap
data repository to which it is reported
shall comply with all requirements of
part 45 respecting Unique Counterparty
Identifiers.
(c) The Unique Counterparty
Identifier requirements of parts 46 and
45 of this chapter shall not apply to preenactment or transition swaps expired
or terminated prior to April 25, 2011.
(d) The Unique Swap Identifier and
Unique Product Identifier requirements
of part 45 of this chapter shall not apply
to pre-enactment or transition swaps.
§ 46.5 Determination of which
counterparty must report.
(a) Determination of which
counterparty must report swap data
concerning each pre-enactment or
transition swap shall be made as
follows:
(1) If only one counterparty is an SD,
the SD shall fulfill all counterparty
reporting obligations.
(2) If neither party is an SD, and only
one counterparty is an MSP, the MSP
shall fulfill all counterparty reporting
obligations.
(3) For each pre-enactment swap or
transition swap for which both
counterparties are SDs, or both
counterparties are MSPs, or both
counterparties are non-SD/MSP
counterparties, the counterparties shall
agree as one term of their swap
transaction which counterparty shall
fulfill reporting obligations with respect
to that swap; and the counterparty so
selected shall fulfill all counterparty
reporting obligations.
(4) Notwithstanding the provisions of
paragraphs (a)(1) through (3) of this
section, if only one counterparty to a
pre-enactment swap or transition swap
is a U.S. person, that counterparty shall
be the reporting counterparty and shall
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Fmt 4702
Sfmt 4702
22845
fulfill all counterparty reporting
obligations.
(5) If a reporting counterparty selected
pursuant to paragraphs (a)(1) through (4)
of this section ceases to be a
counterparty to a swap due to an
assignment or novation, and the new
counterparty is a U.S. person, the new
counterparty shall be the reporting
counterparty and fulfill all reporting
counterparty obligations following such
assignment or novation. If a new
counterparty to a swap due to an
assignment or novation is not a U.S.
person, the counterparty that is a U.S.
person shall be the reporting
counterparty and fulfill all reporting
counterparty obligations following such
assignment or novation.
(b) For pre-enactment and transition
swaps in existence as of the compliance
date, determination of the reporting
counterparty shall be made by applying
the provisions of paragraph (a) of this
section with respect to the current
counterparties to the swap as of the
compliance date, regardless of whether
either or both were original
counterparties to the swap when it was
first executed.
(c) For pre-enactment and transition
swaps for which reporting is required,
but which have expired or been
terminated prior to the compliance date,
determination of the reporting
counterparty shall be made by applying
the provisions of paragraph (a) of this
section to the counterparties to the swap
as of the date of its expiration or
termination, regardless of whether
either or both were original
counterparties to the swap when it was
first executed.
§ 46.6 Third-party facilitation of data
reporting.
Counterparties required by this part
46 to report swap data for any preenactment or transition swap, while
remaining fully responsible for
reporting as required by this part 46,
may contract with third-party service
providers to facilitate reporting.
§ 46.7 Reporting to a single swap data
repository.
All data reported for each preenactment or transition swap pursuant
to this part 46, and all corrections of
errors and omissions in previously
reported data for the swap, by any
registered entity or counterparty, shall
be reported to the same swap data
repository to which the initial data
report concerning the swap is made (or
to its successor in the event that it
ceases to operate, as provided in part 49
of this chapter).
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§ 46.8 Data reporting for swaps in a swap
asset class not accepted by any swap data
repository.
Should there be a swap asset class for
which no swap data repository currently
accepts swap data, each counterparty
required by this part 46 to report swap
data with respect to a pre-enactment or
transition swap in that asset class must
report that same data at a time and in
a form and manner determined by the
Commission.
§ 46.9
Required data standards.
In reporting swap data to a swap data
repository as required by this part 46,
each reporting counterparty shall use
the facilities, methods, or data standards
provided or required by the swap data
repository to which counterparty reports
the data.
§ 46.10 Reporting of errors and omissions
in previously reported data.
(a) Each swap counterparty required
by this part 46 to report swap data shall
report any errors and omissions in the
data so reported. Corrections of errors or
omissions shall be reported as soon as
technologically practicable after
discovery of any such error or omission.
(b) For pre-enactment or transition
interest rate swaps, currency swaps, or
other commodity swaps in existence as
of the compliance date, reporting
counterparties fulfill the requirement to
report errors or omissions in state data
previously reported as part of required
continuation data reporting by making
appropriate corrections in their next
daily report of state data as required by
this part 46 and part 45 of this chapter.
(c) Each counterparty to a preenactment or transition swap that is not
the reporting counterparty as
determined pursuant to part 45, and that
discovers any error or omission with
respect to any swap data reported to a
swap data repository for that swap, shall
promptly notify the reporting
counterparty of each such error or
omission. Upon receiving such notice,
the reporting counterparty shall report a
correction of each such error or
omission to the swap data repository, as
provided in § 45.10(a) and (b) of this
chapter.
(d) Unless otherwise approved by the
Commission, or by the Director of
Market Oversight pursuant to part 45 of
this chapter, each swap counterparty
reporting corrections to errors or
omissions in data previously reported as
required by this part 46 shall report
such corrections in the same format as
it reported the erroneous or omitted
data.
Appendix to Part 46—Tables of
Minimum Primary Economic Terms
Data for Pre-Enactment and Transition
Swaps
MINIMUM PRIMARY ECONOMIC TERMS DATA FOR PRE-ENACTMENT AND TRANSITION CREDIT SWAPS AND EQUITY SWAPS
Sample category
Comment
emcdonald on DSK2BSOYB1PROD with PROPOSALS
An indication of the counterparty purchasing protection and of the
counterparty selling protection.
Information identifying the reference entity ..............................................
An indication of whether or not both counterparties are swap dealers.
An indication of whether or not both counterparties are major swap participants.
An indication of whether or not either counterparty is a swap dealer or
major swap participant.
The date and time of trade, expressed using Coordinated Universal
Time (‘‘CUT’’).
The venue where the swap was executed.
The effective date for the swap.
The expiration date for the swap.
The price ...................................................................................................
The notional amount, the currency in which the notional amount is expressed, and the equivalent notional amount in U.S. dollars.
The amount and currency or currencies of any up-front payment.
A description of the payment streams of each counterparty ...................
The title of any master agreement incorporated by reference and the
date of any such agreement.
If the transaction involved an existing swap, an indication that the
transaction did not involve an opportunity to negotiate a material
term of the contract, other than the counterparty.
The data elements necessary for a person to determine the market
value of the transaction.
Whether or not the swap will be cleared by a derivatives clearing organization.
The name of the derivatives clearing organization that will clear the
swap, if any.
If the swap is not cleared, all of the settlement terms, including, without
limitation, whether the swap is cash-settled or physically settled, and
the method for determining the settlement value.
Any other primary economic term(s) of the swap matched by the
counterparties in verifying the swap.
E.g., option buyer and option seller; buyer and seller.
The entity that is the subject of the protection being purchased and
sold in the swap.
E.g., strike, initial price, spread, etc.
E.g., coupon.
E.g., annex, credit agreement.
E.g., assignment.
MINIMUM PRIMARY ECONOMIC TERMS DATA FOR PRE-ENACTMENT AND TRANSITION CURRENCY SWAPS
Sample data field
Comments
1
Contract type .......................................................................................
2
Swap transaction date ........................................................................
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E.g., swap, swaption, forwards, options, basis swap, index swap, basket swap, other.
Date when the swap was entered.
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22847
MINIMUM PRIMARY ECONOMIC TERMS DATA FOR PRE-ENACTMENT AND TRANSITION CURRENCY SWAPS—Continued
Sample data field
Comments
3 Currency 1 ..........................................................................................
4 Currency 2 ..........................................................................................
5 Notional amount 1 ...............................................................................
6 Notional amount 2 ...............................................................................
7 Settlement agent of the reporting counterparty ..................................
8 Settlement agent of the non-reporting counterparty ...........................
9 Settlement currency ............................................................................
10 Exchange rate 1 ................................................................................
11 Exchange rate 2 ................................................................................
12 Swap delivery type ............................................................................
13 Expiration date ..................................................................................
Any other primary economic term(s) of the swap matched by the
counterparties in verifying the swap.
International Organization for Standardization Code.
International Organization for Standardization Code.
For currency one.
For currency two.
ID of the settlement agent.
ID of the settlement agent.
If applicable.
At the moment of trade/agreement.
At the moment of trade/agreement, if applicable.
Cash or physical.
Expiration date of the contract.
MINIMUM PRIMARY ECONOMIC TERMS DATA FOR PRE-ENACTMENT AND TRANSITION INTEREST RATE SWAPS
Sample data field
Comment
1
2
3
4
5
6
Contract type .......................................................................................
Swap transaction date ........................................................................
Swap effective date ............................................................................
Swap end-date ....................................................................................
Notional amount one ...........................................................................
Notional currency one .........................................................................
7
8
Notional amount two ...........................................................................
Notional currency two .........................................................................
9 Payer (fixed rate) ................................................................................
10 Fixed leg payment frequency ...........................................................
11 Direction ............................................................................................
12 Option type ........................................................................................
13 Fixed rate.
14 Fixed rate day count fraction.
15 Floating rate payment frequency.
16 Floating rate reset frequency.
17 Floating rate index name/rate period.
18 Leg 1 .................................................................................................
19 Leg 2 .................................................................................................
Any other primary economic term(s) of the swap matched by the
counterparties in verifying the swap.
E.g., swap, swaption, option, basis swap, index swap, etc.
Date when the swap was entered.
Effective date of the contract.
Expiration date of the contract.
The current active notional in local currency.
International Organization for Standardization code of the notional currency.
The second notional amount (e.g., receiver leg).
International Organization for Standardization code of the notional currency.
Is the reporting party a fixed rate payer? Yes/No/Not applicable.
How often will the payments on fixed leg be made.
For swaps—if the principal is paying or receiving the fixed rate. For
float-to-float and fixed-to-fixed swaps, it is unspecified. For non-swap
instruments and swaptions, the instrument that was bought or sold.
E.g., put, call, straddle.
If two floating legs, report what is paid.
If two floating legs, report what is received.
MINIMUM PRIMARY ECONOMIC TERMS DATA FOR PRE-ENACTMENT AND TRANSITION OTHER COMMODITY SWAPS
Sample data field
Comment
emcdonald on DSK2BSOYB1PROD with PROPOSALS
1
2
3
4
5
6
7
8
Contract type .......................................................................................
Swap transaction date ........................................................................
Quantity ...............................................................................................
Start date ............................................................................................
End-date ..............................................................................................
Buyer pay index ..................................................................................
Seller pay index ..................................................................................
Buyer ...................................................................................................
9
Seller ...................................................................................................
10 Price ..................................................................................................
11 Price unit ...........................................................................................
12 Grade ................................................................................................
Any other primary economic term(s) of the swap matched by the
counterparties in verifying the swap.
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E.g., swap, swaption, option, etc.
Date when the swap was entered.
The unit of measure applicable for the quantity on the swap.
Predetermined start date from which payments will be exchanged.
Predetermined end date from which payments will be exchanged.
The published price as paid by the buyer.
The published price as paid by the seller.
Party purchasing product, e.g. payer of the fixed price (for swaps), or
payer of the floating price (for put swaption), or payer of the fixed
price (for call swaption).
Party offering product, e.g. payer of the floating price (for swaps),
payer of the fixed price (for put swaption), or payer of the floating
price (for call swaption).
E.g., fixed price, the heat rate value, etc.
The unit of measure applicable for the price on the transaction.
E.g., the grade of oil or refined product being delivered.
Sfmt 4700
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22848
Federal Register / Vol. 76, No. 79 / Monday, April 25, 2011 / Proposed Rules
Issued in Washington, DC, on April 6,
2011, by the Commission.
David A. Stawick,
Secretary of the Commission.
Regulatory Procedures
[FR Doc. 2011–9446 Filed 4–22–11; 8:45 am]
BILLING CODE 6351–01–P
DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 83
[Docket ID DOD–2010–OS–0108]
RIN 0790–AI63
Alternative Dispute Resolution (ADR)
and Conflict Management
AGENCY:
Defense Legal Services Agency,
DoD.
ACTION:
Proposed rule.
This part establishes policy
and assigns responsibilities. It
establishes a framework for encouraging
the expanded use of alternative means
of dispute resolution and conflict
management practices as an integral
part of normal business practices within
the Department of Defense.
SUMMARY:
Comments must be received by
June 24, 2011.
DATES:
You may submit comments,
identified by docket number and or RIN
number and title, by any of the
following methods:
• Federal Rulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Federal Docket Management
System Office, 1160 Defense Pentagon,
Room 3C843, Washington, DC 20301–
1160.
Instructions: All submissions received
must include the agency name and
docket number or Regulatory
Information Number (RIN) for this
Federal Register document. The general
policy for comments and other
submissions from members of the public
is to make these submissions available
for public viewing on the Internet at
https://www.regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
emcdonald on DSK2BSOYB1PROD with PROPOSALS
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Christine M. Kopocis, 703–696–1809.
SUPPLEMENTARY INFORMATION:
VerDate Mar<15>2010
17:25 Apr 22, 2011
Jkt 223001
Executive Order 12866, ‘‘Regulatory
Planning and Review’’ and Executive
Order 13563, ‘‘Improving Regulation
and Regulatory Review’’
It has been certified that 32 CFR part
83 does not:
(1) Have an annual effect on the
economy of $100 million or more or
adversely affect in a material way the
economy; a section of the economy;
productivity; competition; jobs; the
environment; public health or safety; or
State, local, or tribal governments or
communities;
(2) Create a serious inconsistency or
otherwise interfere with an action taken
or planned by another Agency;
(3) Materially alter the budgetary
impact of entitlements, grants, user fees,
or loan programs, or the rights and
obligations of recipients thereof; or
(4) Raise novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in these Executive Orders.
Sec. 202, Public Law 104–4, ‘‘Unfunded
Mandates Reform Act’’
It has been certified that 32 CFR part
83 does not contain a Federal mandate
that may result in expenditure by State,
local and tribal governments, in
aggregate, or by the private sector, of
$100 million or more in any one year.
Public Law 96–354, ‘‘Regulatory
Flexibility Act’’ (5 U.S.C. 601)
It has been certified that 32 CFR part
83 is not subject to the Regulatory
Flexibility Act (5 U.S.C. 601) because it
[would or would not], if promulgated,
have a significant economic impact on
a substantial number of small entities.
Public Law 96–511, ‘‘Paperwork
Reduction Act’’ (44 U.S.C. Chapter 35)
It has been certified that 32 CFR part
83 does not impose reporting or
recordkeeping requirements under the
Paperwork Reduction Act of 1995.
Executive Order 13132, ‘‘Federalism’’
It has been certified that 32 CFR part
83 does not have federalism
implications, as set forth in Executive
Order 13132. This rule does not have
substantial direct effects on:
(1) The States;
(2) The relationship between the
National Government and the States; or
(3) The distribution of power and
responsibilities among the various
levels of Government.
List of Subjects in 32 CFR Part 83
Personnel, Dispute resolution.
Accordingly, 32 CFR Part 83 is
proposed to be added to read as follows:
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PART 83—ALTERNATIVE DISPUTE
RESOLUTION (ADR) AND CONFLICT
MANAGEMENT
Sec.
83.1
83.2
83.3
83.4
83.5
Purpose.
Applicability.
Definitions.
Policy.
Responsibilities.
Authority: 5 U.S.C. 571–584; Executive
Order 12988.
§ 83.1
Purpose.
This part:
(a) Establishes policy pursuant to title
5, United States Code (U.S.C.) 571–584
and Executive Order 12988.
(b) Assigns responsibilities, and
(c) Establishes a framework for
encouraging the expanded use of
alternative means of dispute resolution
and conflict management practices as an
integral part of normal business
practices within the Department of
Defense.
§ 83.2
Applicability.
This part applies to the Office of the
Secretary of Defense, the Military
Departments, the Office of the Chairman
of the Joint Chiefs of Staff and the Joint
Staff, the Combatant Commands, the
Office of the Inspector General of the
Department of Defense, the Defense
Agencies, the DoD Field Activities, and
all other organizational entities within
the Department of Defense (hereafter
referred to collectively as the ‘‘DoD
Components’’).
§ 83.3
Definitions.
These terms and their definitions are
for the purpose of this part.
Alternative dispute resolution (ADR).
Any procedure that is used to resolve
issues in controversy, including, but not
limited to, conciliation, facilitation,
mediation, fact finding, mini-trials,
arbitration, and use of ombuds, or any
combination thereof.
ADR coordinating committee. The
group consisting of the dispute
resolution specialists designated under
title 5 U.S.C. 571–584 or their
representatives from the DoD
Components and other officials
appointed by the Deputy General
Counsel (Legal Counsel) (DGC(LC)). The
purpose of the ADR Coordinating
Committee is to promote among the DoD
Components the exchange of
information on ADR and conflict
management design and
implementation.
Conflict management. A systemic
process used to proactively identify and
manage, at the earliest stage possible,
conflict that can lead to one or more
disputes, for the purpose of reducing the
E:\FR\FM\25APP1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 79 (Monday, April 25, 2011)]
[Proposed Rules]
[Pages 22833-22848]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-9446]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 46
[3038-AD48]
Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment
and Transition Swaps
AGENCY: Commodity Futures Trading Commission.
ACTION: Proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing rules to implement new statutory provisions
introduced by Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (``Dodd-Frank Act''). The Dodd-Frank Act amends
the Commodity Exchange Act (``CEA'' or ``Act'') directing that rules
adopted by the Commission shall provide for the reporting of data
relating to swaps entered into before the date of enactment of the
Dodd-Frank Act, the terms of which have not expired as of the date of
enactment of that Act (``pre-enactment swaps'') and data relating to
swaps entered into on or after the date of enactment of the Dodd-Frank
Act and prior to the compliance date specified in the Commission's
final swap data reporting rules (``transition swaps''). This proposal
would establish recordkeeping and reporting requirements for pre-
enactment swaps and transition swaps.
DATES: Comments must be received by June 9, 2011.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD48,
by any of the following methods:
Agency Web site, via its Comments Online process: https://comments.cftc.gov. Follow the instructions for submitting comments
through the 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.
[[Page 22834]]
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
All comments must be submitted in English, or must be accompanied
by an English translation. Comments will be posted as received to
https://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that may be exempt from disclosure under the Freedom of
Information Act, you may submit a petition for confidential treatment
according to the procedures established in CFTC Regulation 145.9.\1\
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from https://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act.
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\1\ Commission regulations referred to herein are found at 17
CFR Ch. 1.
FOR FURTHER INFORMATION CONTACT: David Taylor, Branch Chief, Market
Continuity, Division of Market Oversight, 202-418-5488,
dtaylor@cftc.gov; or Irina Leonova, Financial Economist, Division of
Market Oversight, 202-418-5646, ileonova@cftc.gov; Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
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Washington, DC 20581.
SUPPLEMENTARY INFORMATION: The Commission is proposing rules under its
part 46 regulations relating to recordkeeping and reporting
requirements applicable to both pre-enactment and transition swaps, and
is soliciting comment on all aspects of the proposed rules. These
rules, when adopted, will supersede interim final rules previously
adopted by the Commission in part 44 of its regulations.
Table of Contents
I. Background
A. Swap Data Provisions of the Dodd-Frank Act
B. The Commission's Proposed Rule on Swap Data Recordkeeping and
Reporting Requirements
C. The Interim Final Rules for Pre-Enactment and Transition
Swaps
II. Proposed New Regulations, Part 46
III. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Analysis
IV. Proposed Compliance Date
V. General Solicitation of Comments
I. Background
A. Swap Data Provisions of the Dodd-Frank Act
On July 21, 2010, President Obama signed into law the Dodd-Frank
Act.\2\ Title VII of the Dodd-Frank Act \3\ amended the CEA \4\ to
establish a comprehensive new regulatory framework for swaps and
security-based swaps. The legislation was enacted to reduce risk,
increase transparency, and promote market integrity within the
financial system by, among other things: (1) Providing for the
registration and comprehensive regulation of swap dealers and major
swap participants; (2) imposing clearing and trade execution
requirements on standardized derivatives products; (3) creating robust
recordkeeping and real-time reporting regimes; and (4) enhancing the
Commission's rulemaking and enforcement authorities with respect to,
among others, all registered entities and intermediaries subject to the
Commission's oversight.
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\2\ 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.
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To enhance transparency, promote standardization, and reduce
systemic risk, Section 728 of the Dodd-Frank Act establishes a newly-
created registered entity--the swap data repository (``SDR'') \5\--to
collect and maintain data related to swap transactions as prescribed by
the Commission, and to make such data electronically available to
regulators.\6\
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\5\ See also CEA Sec. 1a(40)(E).
\6\ Regulations governing core principles and registration
requirements for, and the duties of, SDRs are the subject of a
separate notice of proposed rulemaking under part 49 of the
Commission's regulations. See CFTC Swap Data Repositories: Proposed
Rule, 75 FR 80898 (Dec. 23, 2010).
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Section 728 directs the Commission to prescribe standards for swap
data recordkeeping and reporting. Specifically, Section 728 provides
that:
The Commission shall prescribe standards that specify the data
elements for each swap that shall be collected and maintained by
each registered swap data repository.\7\
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\7\ CEA Sec. 21(b)(1)(A).
These standards are to apply to both registered entities and
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counterparties involved with swaps:
In carrying out [the duty to prescribe data element standards],
the Commission shall prescribe consistent data element standards
applicable to registered entities and reporting counterparties.\8\
\8\ CEA Sec. 21(b)(1)(B).
Section 727 of the Dodd-Frank Act requires that each swap, either
cleared or uncleared, shall be reported to a registered SDR. That
Section also amends Section 1(a) of the CEA to add the definition of
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swap data repository:
The term `swap data repository' means any person that collects
and maintains information or records with respect to transactions or
positions in, or the terms and conditions of, swaps entered into by
third parties for the purpose of providing a centralized
recordkeeping facility for swaps.\9\
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\9\ CEA Sec. 1a(48).
Section 728 also directs the Commission to regulate data collection
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and maintenance by SDRs.
The Commission shall prescribe data collection and data
maintenance standards for swap data repositories.\10\
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\10\ CEA Sec. 21(b)(2).
Section 729 of the Dodd-Frank Act added to the CEA new Section 4r,
which addresses reporting and recordkeeping requirements for uncleared
swaps. Pursuant to this section, each swap not accepted for clearing by
any derivatives clearing organization (``DCO'') must be reported to an
SDR (or to the Commission if no SDR will accept the swap).
Section 729 ensures that at least one counterparty to a swap has an
obligation to report data concerning that swap. The determination of
this reporting counterparty depends on the status of the counterparties
involved. If only one counterparty is a swap dealer (``SD''), the SD is
required to report the swap. If one counterparty is a major swap
participant (``MSP''), and the other counterparty is neither an SD nor
an MSP (``non-SD/MSP counterparty''), the MSP must report. Where the
counterparties have the same status--two SDs, two MSPs, or two non-SD/
MSP counterparties--the counterparties must select a counterparty to
report the swap.\11\
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\11\ See CEA Sec. 4r(a)(3).
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Section 729 also provides for reporting to the Commission of
uncleared swaps that are not accepted by any SDR. Under this provision,
counterparties to such swaps must maintain books and records pertaining
to their swaps in the manner and for the time required by the
Commission, and must make these books and records available for
inspection by the Commission or other specified
[[Page 22835]]
regulators if requested to do so.\12\ It also requires counterparties
to such swaps to provide reports concerning such swaps to the
Commission upon its request, in the form and manner specified by the
Commission.\13\ Such reports must be as comprehensive as the data
required to be collected by SDRs.\14\
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\12\ CEA Sec. 4r(c)(2) requires individuals or entities that
enter into an uncleared swap transaction that is not accepted by an
SDR to make required books and records open to inspection by any
representative of the Commission; an appropriate prudential
regulator; the Securities and Exchange Commission; the Financial
Stability Oversight Council; and the Department of Justice.
\13\ CEA Sec. 4r(c).
\14\ CEA Sec. 4r(d).
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Section 729 establishes in new CEA Section 4r(a)(2)(A) a
transitional rule applicable to pre-enactment swaps. Section
4r(a)(2)(A) provides for the reporting of pre-enactment swaps the terms
of which have not expired as of the enactment of the Dodd-Frank Act to
an SDR or the Commission, by a date that the Commission determines to
be appropriate.\15\ Section 4r(a)(2)(B) directed the Commission to
promulgate an interim final rule within 90 days of the date of
enactment of the Dodd-Frank Act providing for the reporting of such
pre-enactment swaps.\16\
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\15\ Subsection (A) of CEA Section 4r(a)(2) provides that ``Each
swap entered into before the date of enactment of the Wall Street
Transparency and Accountability Act of 2010, the terms of which have
not expired as of the date of enactment of that Act, shall be
reported to a registered swap data repository or the Commission by a
date that is not later than--(i) 30 days after issuance of the
interim final rule; or (ii) such other period as the Commission
determines to be appropriate.''
\16\ Pursuant to Section 4r(a)(2)(B), the Commission on October
14, 2010 published in part 44 of its regulations an interim final
rule instructing specified counterparties to pre-enactment swaps to
report data to a registered SDR or to the Commission by a compliance
date to be established in reporting rules to be promulgated under
Section 2(h)(5)(A) of the CEA and advising counterparties of the
necessity, inherent in the reporting requirement, to retain
information pertaining to the terms of such swaps until reporting
can be effectuated under permanent rules. See Pre-Enactment Swaps
IFR, supra, note 17.
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Section 723 of the Dodd-Frank Act, which adds to the CEA new
Section 2(h)(5), addresses the reporting of swap data for both swaps
executed before the enactment of the Dodd-Frank Act \17\ and swaps
executed on or after the date of that enactment but before the
compliance date specified in the Commission's final swap data
recordkeeping and reporting rules.\18\ In a July 15, 2010 floor
statement concerning swap data reporting as well as other aspects of
the Dodd-Frank Act, Senator Blanche Lincoln emphasized that the
provisions of new CEA Section 4r (added by Section 729 of the Dodd-
Frank Act) and new CEA Section 2(h)(5) (added by Section 723 of the
Dodd-Frank Act) ``should be interpreted as complementary to one another
to assure consistency between them. This is particularly true with
respect to issues such as the effective dates of these reporting
requirements * * *'' \19\
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\17\ See CFTC Interim Final Rule for Reporting Pre-Enactment
Swap Transactions (``Pre-Enactment Swaps IFR''), 75 FR 63080 (Oct.
14, 2010).
\18\ See CFTC Interim Final Rule for Reporting Post-Enactment
Swap Transactions (``Post-Enactment Swaps IFR'' or ``Transition
Swaps IFR''), 75 FR 78892 (Dec. 17, 2010).
\19\ Senator Blanche Lincoln, ``Wall Street Transparency and
Accountability Act,'' Congressional Record, July 15, 2010, at S5923.
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This proposed rule refers to the two types of swaps addressed in
CEA Section 2(h)(5) as follows. ``Pre-enactment swap'' means a swap
executed before date of enactment of the Dodd-Frank Act (i.e., before
July 21, 2010) the terms of which have not expired as of the date of
enactment of that Act.\20\ ``Transition swap'' means a swap executed on
or after the date of enactment of the Dodd-Frank Act (i.e., July 21,
2010) and before the compliance date specified in the final swap data
reporting and recordkeeping requirements regulations in part 45 of this
chapter.\21\ Collectively, the proposed rule refers to pre-enactment
swaps and transition swaps as ``historical swaps.''
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\20\ Subsection (A) of CEA Section 2(h)(5) Reporting Transition
Rules provides that ``Swaps entered into before the date of the
enactment of this subsection shall be reported to a registered swap
data repository or the Commission no later than 180 days after the
effective date of this subsection.''
\21\ Subsection (B) of CEA Section 2(h)(5) Reporting Transition
Rules provides that ``Swaps entered into on or after [the] date of
enactment [of the Dodd-Frank Act] shall be reported to a registered
swap data repository or the Commission no later than the later of
(i) 90 days after [the] effective date [of Section 2(h)(5)] or (ii)
such other time after entering into the swap as the Commission may
prescribe by rule or regulation.''
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B. The Commission's Proposed Rule on Swap Data Recordkeeping and
Reporting Requirements
On December 8, 2010, the Commission published for comment a notice
of proposed rulemaking concerning swap data (the ``Swap Data NPRM'')
that would establish swap data recordkeeping and reporting requirements
applicable to registered SDRs, derivatives clearing organizations
(``DCOs''), designated contract markets (``DCMs''), swap execution
facilities (``SEFs''), SDs, major swap participants MSPs, and non-SD/
MSP counterparties.\22\ The latter category of swap counterparties
would include but not be limited to counterparties who qualify for the
statutory end user exception with respect to particular swaps.\23\
Consistent with the purposes of the Dodd-Frank Act, the Swap Data NPRM
would require generally that all DCOs, DCMs, SEFs, and swap
counterparties keep full, complete and systematic records, together
with all pertinent data and memoranda, of all activities relating to
the business of such entities or persons with respect to swaps. The
proposed rules contemplate that swap data reporting should include data
from each of two important stages in the existence of a swap: the
creation of the swap, and the continuation of the swap over its
existence until its final termination or expiration. The proposed rules
call for reporting of two sets of data generated in connection with the
creation of the swap: primary economic terms data and confirmation
data.\24\ Reporting of swap continuation data can follow either of two
conceptual approaches described in the Swap Data NPRM: The life cycle
or event flow approach, or the state or snapshot approach.\25\
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\22\ 75 FR 76574 (Dec. 8, 2010) (``Swap Data NPRM'').
\23\ CEA Section 2(h)(7).
\24\ See Swap Data NPRM, supra, note 22 at 76580-76582.
\25\ Id. at 76583-76584.
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The Swap Data NPRM did not address CEA Section 2(h)(5)'s mandate
that the Commission adopt recordkeeping and reporting rules applicable
to pre-enactment swaps or transition swaps, but instead noted that a
separate rulemaking to establish requirements for these historical
swaps would address the records, information and data required to be
maintained and the timeframe for reporting such information to a
registered SDR or to the Commission.\26\ This proposal would establish
recordkeeping and reporting standards applicable to pre-enactment and
transition swaps.
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\26\ Id. at 76580 note 37.
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C. The Interim Final Rules for Pre-Enactment and Transition Swaps
Interim Final Rule for Pre-Enactment Swaps. As described above,
Title VII of the Dodd-Frank Act added new Section 4r(a)(2) to the CEA,
which provided for the reporting of pre-enactment swaps and directed
that the Commission promulgate, within 90 days of enactment of the
Dodd-Frank Act, an interim final rule (``IFR'') providing for the
reporting of such swaps. On October 14, 2010, pursuant to the mandate
of CEA Section 4r(a)(2)(B), the Commission published in new part 44 of
its regulations an IFR instructing specified counterparties to pre-
enactment swaps to report data to a registered SDR or to the Commission
by
[[Page 22836]]
a compliance date to be established in reporting rules to be
promulgated under CEA Section 2(h)(5), and advising such counterparties
of the necessity, inherent in the reporting requirement, to preserve
information pertaining to the terms of such swaps until reporting was
effectuated under permanent rules.\27\ This Pre-Enactment Swaps IFR
stated that the reporting and recordkeeping provisions established by
Section 4r and Sec. Sec. 44.00-44.02 of the Commission's regulations
would remain in effect until the effective date of the permanent
reporting rules to be adopted by the Commission pursuant to Section
2(h)(5) of the CEA.\28\ A principal purpose of this IFR was to advise
counterparties of the need to retain data related to swap transactions
so that reporting could be effectuated under permanent rules
subsequently to be adopted.
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\27\ See Pre-Enactment Swaps IFR, supra note 17, at 63083.
\28\ See Pre-Enactment Swaps IFR, supra note 17.
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With respect to the scope and coverage of the Pre-Enactment Swaps
IFR, the Commission acknowledged inconsistencies between the two Dodd-
Frank provisions governing the Commission's rulemaking. Specifically,
new CEA Section 4r(a)(2) limits reportable pre-enactment swaps to those
whose terms have not expired on the date of enactment of the Dodd-Frank
Act; Section 2(h)(5) does not contain the same qualifying language. As
discussed in the Pre-Enactment Swaps IFR, the Commission believes that
failure to limit the term ``pre-enactment swap'' to unexpired swaps
would require reporting of every swap that has ever been entered into;
accordingly, the Commission concluded that reportable pre-enactment
swaps should be limited to those whose terms had not expired at the
time of enactment.\29\
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\29\ Id. at 63082.
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Interim Final Rule for Transition Swaps. Section 4r of the CEA did
not mandate an IFR establishing reporting provisions for transition
swaps. The Commission nonetheless believed that such a rule would
provide clarity and guidance with respect to such swaps, by
establishing that transition swaps will be subject to Section
2(h)(5)(B)'s reporting requirements and to Commission regulations to be
promulgated thereunder. The Commission also believed it was prudent to
advise potential counterparties to such swaps that implicit in this
prospective reporting requirement is the need to retain relevant data
until such time as reporting can be effected. Accordingly, on December
17, 2010 the Commission published under Part 44 of its regulations
interim final rules establishing that counterparties to transition
swaps will be subject to permanent recordkeeping and reporting
requirements to be adopted by the Commission pursuant to Section
2(h)(5)(B) of the CEA.\30\
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\30\ See Transition Swaps IFR, supra note 18.
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The Commission intended both the Pre-Enactment Swaps IFR and the
Transition Swaps IFR to put counterparties on notice that swap data
should be retained pending the adoption of permanent rules for pre-
enactment and transition swaps under proposed part 46 of this chapter.
With respect to both pre-enactment and transition swaps, the Commission
stated that counterparties to these transactions should retain material
information about such transactions. The Commission emphasized,
however, that in the context of the interim rules, no counterparty was
being required to create new records with respect to transactions that
occurred in the past; instead, records relating to the terms of such
transactions could be retained in their existing format to the extent
and in such form as they presently exist.\31\
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\31\ See Pre-Enactment Swaps IFR, supra note 17, at 63086, and
Transition Swaps IFR, supra note 18, at 78894.
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Comments Received. The Commission received a number of comments in
response to each of the IFRs. Comments generally fell into one or more
of several broad categories and in a number of instances were common to
both IFRs. Some commenters observed that issuance of IFRs in advance of
regulations further defining the term ``swap'' (or defining other key
terms in the Dodd-Frank Act) creates legal and regulatory uncertainty
and increases compliance risk; most of these commenters urged the
Commission to further detail the record retention aspects of the
interim final rules.\32\ In this connection, commenters requested that
the Commission issue guidance clarifying and limiting the information
that must be retained,\33\ or create a safe harbor for good faith
compliance efforts.\34\ Energy interests suggested that the Commission
should ensure that end users need only report basic data in a
simplified reporting scheme, or should outline categories of
information that need not be retained by persons who anticipate
becoming eligible for the end user exemption under the Dodd-Frank
Act.\35\ One commenter urged greater specificity with respect to the
Pre-Enactment IFR's requirements, as well as consistency with the
standards adopted by the Securities and Exchange Commission (``SEC'')
and international regulators, and proposed alternatives to the
requirements adopted in the IFR for pre-enactment swaps, particularly
with respect to reporting protocols, record retention, and
confidentiality issues (notably, those confidentiality issues arising
in the context of cross-border transactions).\36\ Another commenter
urged that U.S. swap data reporting requirements should not apply with
respect to foreign swaps transactions, where counterparties are non-
U.S. entities.\37\
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\32\ See, e.g., letters dated November 15, 2010 and January 18,
2011 from the Working Group of Commercial Energy Firms (``Working
Group letters''); letter dated November 15, 2010 from Hess
Corporation (``Hess Corporation letter''); letter dated November 15,
2010 from the Edison Electric Institute (``EEI letter''); letters
dated November 15, 2010 and January 18, 2011 from the Not-for-Profit
Electric End User Coalition (``Coalition letters''); letter dated
January 18, 2011 from the American Gas Association (``AGA letter'').
\33\ EEI letter.
\34\ Working Group letters; EEI letter; Hess Corporation letter.
\35\ AGA letter; Coalition letters.
\36\ Letter dated November 12, 2010, from the International
Swaps and Derivatives Association, Inc. and the Futures Industry
Association.
\37\ Letter dated January 11, 2011, from Barclays Bank PLC, BNP
Paribas S.A., Deutsche Bank AG, Royal Bank of Canada, The Royal Bank
of Scotland Group PLC, Soci[eacute]t[eacute] G[eacute]n[eacute]rale
and UBS AG.
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The Commission is mindful of these concerns and expects to consider
and address them, as well as all comments received in response to this
proposed rule, in formulating permanent rules applicable to pre-
enactment and transition swaps.
II. Proposed New Regulations, Part 46
As provided in the Commission's Swap Data NPRM,\38\ Pre-Enactment
Swaps IFR,\39\ and Transition Swaps IFR,\40\ this proposed rule
addresses the records, information, and data that must be retained for
historical swaps, the timeframe for reporting data to an SDR or the
Commission concerning such swaps, and the specific data to be reported.
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\38\ See Swap Data NPRM, supra note 20, at fn. 37.
\39\ See Pre-Enactment Swaps IFR, supra note 17.
\40\ See Transition Swaps IFR, supra note 18.
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Recordkeeping. For historical swaps in existence on or after the
date of publication of the proposed rule, the rule would impose
limited, specific recordkeeping obligations. Counterparties to such
swaps would be required to keep records of an asset class-specific set
of specified, minimum primary economic terms. The Commission believes
that counterparties to historical swaps will possess this limited set
of asset class-specific information as part of their normal
[[Page 22837]]
business practices.\41\ Commission staff have consulted with industry
representatives, including buy-side counterparties, concerning
information routinely kept in this connection for swaps in different
asset classes. Counterparties to historical swaps in existence on or
after the date of publication of this proposed rule would also be
required to keep records of a confirmation of their swaps if they have
that information in their possession on or after the publication date
(the date from which public notice of this specific proposed
recordkeeping requirement is available). The Commission requests
comment concerning the appropriateness of these limited recordkeeping
requirements, and specifically requests comment concerning whether all
counterparties to historical swaps will possess the limited set of
asset class-specific information called for by the proposed rule as
part of their normal business practices. If there are any
counterparties to historical swaps who do not possess the limited set
of asset class-specific information called for by the proposed rule,
the Commission requests comment from such counterparties concerning
what information concerning historical swaps such counterparties do
possess, and concerning what information such counterparties retain
concerning their swaps in order to meet the requirements of other
applicable law, such as hedge accounting requirements or the
requirements of applicable state law.
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\41\ The Commission understands that the terminology used to
describe the specific terms and conditions of a swap can vary among
market participants, and that agreed definitions for certain terms
could increase consistency among participants in how historical
swaps are described. The Commission therefore requests comment on
whether the proposed minimum primary economic terms for each asset
class are sufficiently clear in terms of what economic data is
expected to be reported, or whether further clarification is needed
in this respect.
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For historical swaps that were in existence as of the date of
enactment of the Dodd-Frank Act but have expired or been terminated
prior to the publication date of this proposed rule, a counterparty
would only be required to keep records as provided in the Commission's
IFRs concerning pre-enactment and transition swaps: namely, the
information and documents relating to the terms of the swap that the
counterparty possessed when the applicable IFR was published, in
whatever format that information is kept by the counterparty.\42\
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\42\ As used in the IFRs, ``format'' refers to the method by
which the information is organized and stored. It does not refer to
a recording format (i.e., a format for electronic encoding of data).
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The Commission understands that the minimum primary economic terms
for a swap can vary widely depending on the asset class of the
underlying products or on the nature of a particular product within an
asset class. Consequently, the Commission encourages the industry to
reach an internal consensus about the appropriate, asset class-
specific, minimum primary economic terms to be reported for pre-
enactment and transition swaps. The Commission welcomes comments from
industry and market participants in this regard, and will consider them
in determining the minimum primary economic terms to be specified in
the final swap data recordkeeping and reporting rules.
Reporting timeframe. The proposed rule provides that swap data
reporting for historical swaps would commence on the compliance date
specified in the Commission's final swap data recordkeeping and
reporting regulations in part 45 of this chapter.\43\ The Commission
believes that the purposes of the Dodd-Frank Act can be best served by
establishing a single date for the commencement of all swap data
reporting pursuant to that Act. It also believes that the compliance
date for the final swap data reporting regulations in part 45--the date
on which reporting must commence--is the most practicable and
appropriate date for this purpose. The effective date will be set by
the Commission in its final swap data reporting regulations.\44\ In the
Swap Data NPRM, the Commission requested comments concerning the time
needed to prepare automated systems for swap data recordkeeping and
reporting prior to implementation of the regulations, and it will
carefully consider the comments received in response to that request.
The Commission similarly requests comment concerning the proposal to
specify the same compliance date as the date for initial data reporting
concerning pre-enactment and transition swaps, and the time needed in
this connection for preparation of necessary automated systems prior to
the specified compliance date.
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\43\ 17 CFR part 45.
\44\ As provided in CEA Section 2(h)(5)(B), the effective date
must be no sooner than 90 days after the effective date of CEA
Section 2(h)(5), but may be a later date set by the Commission.
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Data to be reported. The proposed rule specifies data to be
reported for historical swaps. For pre-enactment and transition swaps
in existence on or after the date of publication of this proposed rule,
the rule specifies the data elements to be reported. For historical
swaps in existence as of enactment of the Dodd-Frank Act which expired
or were terminated prior to publication of this proposed rule, the rule
provides for reporting of the information relating to the terms of the
transaction that was in the possession of a reporting counterparty as
of publication of the applicable Commission IFR regarding pre-enactment
or transition swaps, in such format as it is kept by the reporting
counterparty.
As noted above, the Dodd-Frank Act requires reporting of data
concerning all swaps in existence as of the legislation's
enactment.\45\ Data concerning pre-enactment swaps and transition swaps
will assist achievement of the systemic risk mitigation, market
transparency, and market supervision purposes for which the Dodd-Frank
Act was enacted. Such data will be needed to give regulators the
complete picture of the swap market which the comprehensive regulatory
framework and reporting requirements of the statute are designed to
provide. Data concerning historical swaps also is necessary for the
Commission to prepare the semi-annual reports it is required to provide
to Congress regarding the swap market.
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\45\ CEA Section 4r(a)(2)(A).
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The Commission is aware that internal swap data retention policies
are not uniform among swap counterparties, and that the current
automated systems of market participants vary with respect to their
suitability for swap data reporting. The Commission believes it is
appropriate to limit the burden placed on swap counterparties in
connection with data reporting for historical swaps, to the extent that
this can be done in a manner consistent with the requirements of the
Dodd-Frank Act and the Commission's need for such data. The Commission
has also considered comments received concerning the Pre-Enactment
Swaps IFR and Transition Swaps IFR which requested that the Commission
specify clearly what data would be required to be reported concerning
historical swaps.
Data reporting for historical swaps in existence as of or after
publication of this proposed rule. For each pre-enactment or transition
swap in existence as of or after publication of this proposed rule, the
rule calls (a) for an initial data report on the compliance date for
data reporting, and (b), if such a historical swap has not expired or
been terminated as of the compliance date specified in the final part
45 swap data reporting regulations, for ongoing reporting of required
swap continuation data (as defined in the Commission's final part 45
swap data reporting
[[Page 22838]]
regulations) during the remaining existence of the swap.
The proposed rule calls for the initial data report for historical
swaps in existence as of or after publication of this proposed rule to
include the transaction terms included in the swap confirmation if the
confirmation was in the reporting counterparty's possession on or after
the publication date of this proposed rule,\46\ and in any event to
include all of the minimum primary economic terms for a pre-enactment
or transition swap specified in the appropriate table in the Appendix
to the proposed rule.
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\46\ The Commission understands that counterparties may use
either a short-form or a long-form confirmation. Either form can be
used to satisfy this requirement.
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The Commission understands that industry definitions used in
documenting some swap transactions, for instance in some master
agreements or confirmations, may not match exactly the asset class
definitions included in this proposed rule, which are the same as the
asset class definitions in the Commission's part 45 proposed rules
regarding swap data recordkeeping and reporting requirements. The
Commission requests comment on how the proposed asset class definitions
in this proposed rule and the overall swap classification scheme
embodied in them might most appropriately be aligned with current swap
instrument classifications used by the industry, and with definitions
employed by, e.g., the International Swaps and Derivatives Association
(``ISDA''), the Edison Electric Institute, the North American Energy
Standards Board, and others.
In addition, the Commission anticipates that some swaps subject to
its jurisdiction may belong to two other swap categories: mixed swaps,
and multi-asset swaps. Generally, a mixed swap is in part a security-
based swap subject to the jurisdiction of the SEC and in part a swap
belonging to one of the swap asset classes subject to the jurisdiction
of the Commission.\47\ Multi-asset swaps are those that do not have one
easily identifiable primary underlying notional item within the
Commission's jurisdiction. The Dodd-Frank Act defines ``mixed swap'' as
follows: ``The term `security-based swap' includes any agreement,
contract, or transaction that is as described in section 3(a)(68)(A) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and is
also based on the value of 1 [sic] or more interest or other rates,
currencies, commodities, instruments of indebtedness, indices,
quantitative measures, other financial or economic interest or property
of any kind (other than a single security or a narrow-based security
index), or the occurrence, non-occurrence, or the extent of the
occurrence of an event or contingency associated with a potential
financial, economic, or commercial consequence (other than an event
described in subparagraph (A)(iii).'' \48\ The Commission requests
comment concerning how such swaps should be treated with respect to
swap data reporting for historical swaps, and concerning the category
or categories under which swap data for such swaps should be reported
to SDRs and maintained by SDRs.
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\47\ See Swap Data NPRM, supra note 20, at 76586.
\48\ Dodd-Frank Act Sec. 721(21), CEA Sec. 1a(47)(D).
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The initial data report for historical swaps in existence as of or
after publication of this proposed rule would also be required to
include the Unique Counterparty Identifier of the reporting
counterparty (as defined in part 45),\49\ and the reporting
counterparty's internal system identifiers for the non-reporting
counterparty and the particular swap transaction in question.
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\49\ The Commission intends to take the need for reporting
counterparties to obtain Unique Counterparty Identifiers into
account in setting the effective date for the data reporting rules
in part 45.
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The proposed rule would give non-reporting counterparties an
additional 180 days after the compliance date specified in the
Commission's final part 45 rules for data reporting before they would
be required to obtain and use a Unique Counterparty Identifier in
connection with pre-enactment and transition swaps. The Commission is
proposing this additional time because it understands that the majority
of non-reporting counterparties are likely to be non-SD/MSP
counterparties. While SDs and MSPs are likely to have infrastructure in
place that can incorporate and track Unique Counterparty Identifiers,
non-SD-MSP counterparties could need to acquire new automated systems
or undertake modifications of existing systems in order to incorporate
identifiers. The Commission requests comment concerning the
appropriateness of this additional time, concerning the length of the
additional time provided, and concerning whether the Commission should
differentiate further between SD and MSP counterparties versus non-SD/
MSP counterparties with respect to use of Unique Counterparty
Identifiers for non-reporting counterparties to pre-enactment and
transition swaps.
The proposed rule also requires the reporting counterparty to
report the master agreement identifier (if any) used by the reporting
counterparty's automated systems to identify the master agreement
governing a pre-enactment or transition swap. This information would
allow the Commission and other regulators to aggregate transactional
data to calculate net or gross exposure of a particular counterparty.
The Commission requests comment concerning whether its final swap data
recordkeeping and reporting regulations for pre-enactment and
transition swaps should require such reporting of a master agreement
identifier.
The Commission requests comment concerning the appropriateness and
adequacy of these initial data report requirements. Additionally, the
Commission requests comment on the appropriate method for identifying
the association of an individual swap transaction with a particular
master agreement or with a swap portfolio, in order to identify
individual swaps that may be subject to close-out netting and other
provisions typical in portfolio compression.\50\ Identifying this
association could be a necessary means of enabling regulators to
determine a counterparty's net exposure (current or future) on the
basis of transactional data reported to SDRs. In particular, the
Commission requests comment on whether reporting of a master agreement
identifier as provided in this proposed rule is needed in this
connection and would provide a workable means of achieving this goal.
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\50\ The Commission's proposed rule regarding confirmation,
portfolio reconciliation and portfolio compression requirements for
SDs and MSPs, 17 CFR part 23, defines portfolio compression as a
mechanism whereby substantially similar transactions among two or
more counterparties are terminated and replaced with a smaller
number of transactions of decreased notional value, in an effort to
reduce the risk, cost, and inefficiency of maintaining unnecessary
transactions on the counterparties' books. See CFTC Notice of
Proposed Rulemaking: Confirmation, Portfolio Reconciliation and
Portfolio Compression Requirements for Swap Dealers and Major Swap
Participants, 75 FR 81519 (Dec. 28, 2010).
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The Commission has chosen to propose limited requirements for
recordkeeping and initial data reports concerning pre-enactment and
transition swaps because it understands that the current recordkeeping
and reporting systems that some counterparties to such swaps have at
present might not be able to fulfill, with respect to historical swaps,
recordkeeping and reporting requirements as extensive as those proposed
in part 45. In these circumstances, the Commission believes it is
appropriate to limit the burden imposed on such counterparties, to the
extent that this can be done in a way
[[Page 22839]]
that is consistent with the requirements of the Dodd-Frank Act and the
Commission's need for data concerning historical swaps. The Commission
believes, however, that the limited set of minimum primary economic
terms data set forth in this proposed rule with respect to historical
swaps is the minimum necessary to give regulators a picture of the risk
exposures and counterparty participation in such swaps at the minimum
level necessary for the Commission and other regulators to fulfill
their regulatory responsibilities. The Commission requests comment
concerning the appropriateness of this approach to initial data
reporting for pre-enactment and transition swaps.
Regarding ongoing reporting of required swap continuation data
during the remaining existence of a pre-enactment or transition swap
after the compliance date, the proposed rule follows the life cycle
approach for credit swaps and equity swaps, and the state or snapshot
approach for interest rate swaps, currency swaps, and other commodity
swaps. This same distinction is made in the Commission's Swap Data
NPRM, which sets forth the Commission's reasons for making this
distinction, reasons which also apply with respect to part 46. The
Commission believes that this unified approach to swap data reporting
rules for pre-enactment, transition, and post-compliance-date swaps
will minimize recordkeeping and swap data reporting burdens for
industry and provide a coherent and consistent picture of the overall
swap market to regulators. Since the proposed part 45 continuation data
reporting requirements are aligned with the approach taken in the SEC's
proposed rules for security-based credit and equity swaps, this also
serves to avoid differing requirements for security-based swaps and
swaps. The Commission requests comment concerning whether required
reporting of the same swap continuation data for pre-enactment and
transition credit swaps and equity swaps, in line with the requirements
of proposed part 45 and of the SEC's proposed rules, is appropriate in
this connection.
For pre-enactment or transition interest rate swaps, currency
swaps, and other commodity swaps, this proposed rule also limits
continuation data reporting obligations for non-SD/MSP reporting
counterparties. Specifically, the proposal requires that SD or MSP
reporting counterparties must meet continuation data reporting
requirements for pre-enactment and transition swaps in those asset
classes that are the same as the continuation data reporting
requirements of proposed part 45 for swaps in those asset classes.
While non-SD/MSP reporting counterparties for such swaps are required
to report the state data \51\ necessary to provide a daily snapshot
view of the primary economic terms of the swap, the state data that
must be reported by non-SD/MSP reporting counterparties for such swaps
is limited to the state data available to the non-SD/MSP reporting
counterparty on the compliance date. This may consist of only the data
elements contained in the table of minimum primary economic terms for
various swap asset classes, as set forth in Appendix 1 to part 46, if
that is all that was available to the non-SD/MSP reporting counterparty
on that date. This approach is designed to avoid placing undue
recordkeeping and reporting burdens on non-SD/MSP counterparties, who
are the reporting counterparties least likely to have the automated
systems needed for more extensive reporting with respect to pre-
enactment or transition swaps. The Commission requests comment
concerning the appropriateness of this approach to continuation data
reporting for pre-enactment and transition swaps.
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\51\ For purposes of this proposed rule, ``state data'' has the
meaning defined in part 45 of this chapter. See Swaps Data NPRM,
supra note 20, at 76599.
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Data reporting for historical swaps in existence as of enactment of
the Dodd-Frank Act but expired or terminated prior to publication of
this proposed rule. For historical swaps in existence as of enactment
of the Dodd-Frank Act which expired or were terminated prior to
publication of this proposed rule, only an initial data report would be
required.\52\ For such swaps, the proposed rule would require that the
reporting counterparty report such information relating to the terms of
the transaction as was in that counterparty's possession as of issuance
of the relevant Commission IFR.\53\ This information would be permitted
to be reported in the format in which it was kept by the reporting
counterparty.\54\
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\52\ By its nature, continuation data reporting occurs during
the continuation of a swap prior to its expiration or termination.
\53\ Pre-Enactment Swaps IFR, supra note 15, and Transition
Swaps IFR, supra note 18.
\54\ This could include submission of a PDF file.
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Selection of reporting counterparty. This proposed rule provides
that determination of which counterparty to a pre-enactment or
transition swap is the reporting counterparty for that swap shall be
made according to Dodd-Frank Act's hierarchy of counterparty types for
reporting obligation purposes, in which SDs outrank MSPs, who outrank
non-SD/MSP counterparties. Where both counterparties are at the same
hierarchical level, the statute calls for them to select the
counterparty obligated to report. The proposed rule establishes a
mechanism for counterparties to follow in choosing the counterparty to
report in situations where both counterparties have the same
hierarchical status. Where both counterparties are SDs, or both are
MSPs, or both are non-SD/MSP counterparties, the proposed rule requires
the counterparties to agree as on term of their swap transaction which
counterparty will fulfill reporting obligations. The proposed rule also
provides that, where only one counterparty to a swap is a U.S. person,
the U.S. person should be the reporting counterparty. The Commission
believes, preliminarily, that this approach may be necessary in order
to ensure compliance with reporting requirements in such situations. In
these respects, the proposed rule mirrors the provision of the part 45
Swap NPRM regarding selection of the reporting counterparty.
The proposed rule also provides that determination of the reporting
counterparty shall be made with respect to the current counterparties
to the swap as of the compliance date (for historical swaps in
existence as of that date) or as of the prior expiration or termination
of the swap (for historical swaps expired or terminated prior to the
compliance date), regardless of who the counterparties to the swap were
when it was originally executed.
As noted above, where both counterparties have the same
hierarchical status, the proposed rule calls for the counterparties to
agree as one term of their swap transaction which counterparty will
fulfill reporting obligations. In the case of a historical swap
executed prior to publication of this proposed rule, for which the
agreement to enter into the swap has already been made, agreement by
the counterparties on selection of the reporting counterparty would
require negotiation occurring after the agreement to enter into the
swap was made, and could require amendment of the agreement to enter
into the swap in this respect. The Commission requests comment
concerning how two SD counterparties, two MSP counterparties, or two
non-SD/MSP counterparties should select the reporting counterparty for
a pre-enactment or transition swap which was executed prior to the
publication date of this proposed rule, and thus does not include an
agreement term selecting the reporting counterparty. The Commission
also requests comment concerning whether its final data recordkeeping
and
[[Page 22840]]
reporting rules for historical swaps should prescribe a method for
selecting a reporting counterparty in such circumstances. The
Commission may include such a method in the final data recordkeeping
and reporting rules for historical swaps.
The Commission has received comments regarding the part 45 Swap
NPRM suggesting that, where only one counterparty to a swap is a U.S.
person, the counterparty designated as the reporting counterparty under
the hierarchical approach based on the Dodd-Frank Act and discussed
above should be applied in the same way as for a swap where both
counterparties are U.S. persons. This would mean, for example, that for
a swap between a non-U.S. SD and a U.S. non-SD/MSP counterparty, the
non-U.S. SD would be the reporting counterparty. The Commission
requests comment concerning how the reporting counterparty for a
historical swap should be selected when one counterparty is a non-U.S.
person.
Non-duplication of previous reporting. The Commission is aware that
in some instances, reporting counterparties may have reported data
concerning pre-enactment or transition swaps to a presently-existing
trade repository prior to the compliance date. If such a repository is
registered with the Commission as an SDR as of the compliance date, the
Commission would not require reporting counterparties to report
duplicate information to the SDR, although it would require reporting
on the compliance date of any information required by this proposed
rule that had not already been reported to the SDR.
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \55\ requires that
agencies consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and, if so, provide a regulatory flexibility analysis respecting the
impact.\56\ The regulations proposed by the Commission would affect
SDs, MSPs, and non-SD/MSP counterparties who are counterparties to one
or more pre-enactment or transition swaps. 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.\57\
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\55\ 5 U.S.C. 601 et seq.
\56\ 5 U.S.C. 601 et seq.
\57\ 47 FR 18618 (Apr. 30, 1982).
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The Commission hereby determines that SDs and MSPs should not be
considered small entities for purposes of the RFA. SDs and MSPs will
play a central role in the national regulatory scheme overseeing the
trading of swaps. With respect to SDs, the Commission previously has
determined that Futures Commission Merchants (``FCMs'') should not be
considered to be small entities for purposes of the RFA.\58\ Like FCMs,
SDs will be subject to minimum capital and margin requirements and are
expected to comprise the largest global financial firms.\59\ Similarly,
with respect to MSPs, the Commission has previously determined that
large traders are not ``small entities'' for RFA purposes.\60\ Like
large traders, MSPs will maintain substantial positions, creating
substantial counterparty exposure that could have serious adverse
effects on the financial stability of the U.S. banking system or
financial markets.
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\58\ 47 FR 18618 (Apr. 30, 1982).
\59\ Additionally, the Commission is required to exempt from
designation entities that engage in a de minimis level of swaps. Id.
at 18619.
\60\ 47 FR at 18620.
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With respect to non-SD/MSP counterparties, the Commission believes
that the proposed regulations will not create a significant economic
impact on a substantial number of small entities. The proposed rule
sets forth recordkeeping and reporting requirements with respect to
pre-enactment and transition swaps. The Commission believes that the
records the proposed rule would require to be kept are already kept by
swap counterparties in their normal course of business. The proposed
rule would require limited swap data reporting for pre-enactment or
transition swaps, and would require such reporting by non-SD/MSP
counterparties only with respect to such swaps in which neither
counterparty is an SD or MSP. The considerable majority of swaps
involve at least one SD or MSP. In addition, most end users and other
non-SD/MSP counterparties who are regulated by the Employee Retirement
Income Security Act of 1974 (``ERISA''), such as pension funds, which
are among the most active participants in the swap market, are
prohibited from transacting directly with other ERISA-regulated
participants.\61\ For these reasons, the Commission does not believe
that the regulations would have a significant economic impact on a
substantial number of small entities.
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\61\ 29 U.S.C. 1106.
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Accordingly, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that the proposed rule will not
have a significant economic impact on a substantial number of small
entities. Nonetheless, the Commission specifically requests comment on
the impact this proposed rule may have on small entities.
B. Paperwork Reduction Act
Introduction. Provisions of the proposed rule would result in new
collection of information requirements within the meaning of the
Paperwork Reduction Act (``PRA'').\62\ 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 ``Regulations 46.2 and
46.3--Swap Data Recordkeeping and Reporting: Pre-Enactment and
Transition Swaps,'' OMB control number 3038-NEW. If adopted, responses
to this new 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 Act strictly
prohibits the Commission, unless specifically authorized by the Act,
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.
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\62\ 44 U.S.C. 3501 et seq.
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Information Provided by Reporting Entities/Persons. The proposed
rule sets forth recordkeeping and reporting requirements for SDs, MSPs,
and non-SD/MSP counterparties.
Recordkeeping Burdens. Under proposed Regulation 46.2, all
counterparties to pre-enactment or transition swaps would be required
to keep records relating to such swaps. For swaps that are in existence
as of or after the enactment of the Dodd-Frank Act, but are expired as
of the publication of the proposed rule, the proposed Regulation 46.2
requires that parties simply maintain the swap records already in their
possession, in the form in which they are already maintained. For
purposes of the PRA, the Commission will not calculate the burden for
this requirement; the Commission has previously calculated the burden
for this requirement in the
[[Page 22841]]
PRA analyses for the interim final rules for pre-enactment and
transition swaps.
For pre-enactment or transition swaps that are in existence as of
or after the publication of the proposed rule, the proposed Regulation
46.2 would require counterparties to keep records of a minimum set of
primary economic data relating to such swaps. The Commission believes
that counterparties already would possess this set of primary economic
data as part of their normal business practices. The proposed
regulation provides that counterparties must record certain additional
information (e.g., information relating to confirmation) only if the
counterparty is in possession of that information on or after the
publication date of the proposed rule. After the compliance date
specified in the Commission's final swap data rules in Part 45,
proposed Regulation 46.2 provides that counterparties must record
information required by recordkeeping provisions of those final swap
rules only if such information is available to the counterparty on or
after the compliance date specified in those rules.
For historical swaps that are in existence as of or after the
publication date of the proposed rule, the rule would require the
counterparties to keep the records beginning on the publication date of
the proposed rule and through the life of the swap, and for a period of
at least five years from the final termination of the swap. In
calculating the burden of this recordkeeping requirement for purposes
of the PRA, the Commission will not include the burdens occurring after
the compliance date specified in the Commission's final swap data rules
in Part 45; the burden occurring after the compliance date is and will
be subsumed by the recordkeeping burdens calculated for those final
rules.\63\ Therefore, for this proposed rule, the Commission will only
calculate a recordkeeping burden for the time period beginning with the
publication date of this proposed rule, and ending on the compliance
date. The Commission estimates this period of time to be approximately
one year. The Commission estimates that 30,300 SDs, MSPs, and non-SD/
MSP counterparties will be affected by these recordkeeping burdens
during this time.\64\ With respect to SDs and MSPs (an estimated 300
entities or persons), which will have higher levels of swap recording
activity than non-SD/MSP counterparties, the Commission estimates that
the average one-time burden per entity is 40 hours, excluding customary
and usual business practices. With respect to non-SD/MSP reporting
counterparties (an estimated 30,000 entities or persons), who will have
lower levels of swap recording activity, the Commission estimates that
the average one-time burden per entity is 10 hours, excluding customary
and usual business practices. Therefore, the total aggregate one-time
burden is 312,000 hours. The Commission requests comment on this
estimate.
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\63\ The recordkeeping burden for those final rules is
calculated based on the number of annual counterparties to swaps and
therefore implicitly includes counterparties
