Acceptance of Public Submissions for a Study on International Swap Regulation Mandated by Section 719(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 44508-44511 [2011-18763]
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Federal Register / Vol. 76, No. 143 / Tuesday, July 26, 2011 / Proposed Rules
submissions provided to either Agency
in any electronic form or on paper will
be published on the Web site of the
respective Agency, without review and
without removal of personally
identifying information. Please submit
only information that you wish to make
publicly available.
By the Commodity Futures Trading
Commission.
Dated: July 21, 2011.
David A. Stawick,
Secretary.
By the Securities and Exchange
Commission.
Dated: July 21, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–18889 Filed 7–25–11; 8:45 am]
BILLING CODE 6351–01–P; 8011–01–P
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Chapter I
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Chapter II
[Release No. 34–64926; File No. 4–635]
Acceptance of Public Submissions for
a Study on International Swap
Regulation Mandated by Section 719(c)
of the Dodd-Frank Wall Street Reform
and Consumer Protection Act
Commodity Futures Trading
Commission; Securities and Exchange
Commission.
ACTION: Request for comment.
AGENCY:
Section 719(c) of the DoddFrank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act)
requires the Commodity Futures
Trading Commission (CFTC) and the
Securities and Exchange Commission
(SEC and, together with the CFTC, the
Commissions) jointly to study and then
report to Congress on swap regulation
and clearinghouse regulation in the
United States, Asia, and Europe and to
identify areas of regulation that are
similar and other areas of regulation that
could be harmonized. The report also
must identify major dealers, exchanges,
clearinghouses, clearing members, and
regulators in each geographic area and
describe the major contracts (including
trading volumes, clearing volumes, and
notional values), methods for clearing
swaps, and the systems used for setting
margin in each geographic area. In
connection with the study and report,
the CFTC and SEC are issuing this
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SUMMARY:
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request for information through public
comment.
Submit comments on or before
September 26, 2011.
ADDRESSES: You may submit comments
by any of the following methods:
DATES:
CFTC
• Agency Web site, via its Comments
Online process at http://
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.
Please submit comments using only
one method. Comments should be
identified by ‘‘International Swap
Regulation Study’’ in the subject line of
responses submitted electronically and
in paper submissions.
All comments must be submitted in
English or, if not, accompanied by an
English translation. Comments will be
posted on the CFTC’s Internet Web site
at http://www.cftc.gov, without review
and without removal of personally
identifying information. You should
submit only information that you wish
to make available publicly. If you wish
the CFTC to consider information that
may be exempt from disclosure under
the Freedom of Information Act (FOIA),
a petition for confidential treatment of
the exempt information may be
submitted according to the procedures
established in § 145.9 of the
Commission’s regulations.1 The CFTC
reserves the right, but shall have no
obligation, to review, pre-screen, filter,
redact, refuse, or remove any or all of
your submission from http://
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 will be retained in
the public comment file and may be
accessible under FOIA.
SEC
Electronic Comments
• Use the agency’s Internet comment
form at http://www.sec.gov/rules/
other.shtml; or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number 4–635 on the subject line.
1 CFTC regulations referred to herein are found at
17 CFR Ch. 1 (2010). They are accessible on the
Commission’s Web site at http://www.cftc.gov.
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Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number 4–635. This file number should
be included on the subject line if e-mail
is used. To help the SEC process and
review your comments more efficiently,
please use only one method. Comments
will be posted on the SEC’s Internet
Web site at http://www.sec.gov.
Comments also are available for Web
site viewing and printing in the SEC’s
Public Reference Room, Station Place,
100 F Street, NE., Washington, DC
20549, on official business days
between the hours of 10 a.m. and 3 p.m.
All comments received will be posted
without change; the SEC does not edit
personally identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT:
CFTC: Natalie Markman Radhakrishnan,
Senior Special Counsel, 202–418–5059,
nmradhakrishnan@cftc.gov, Office of
International Affairs, Commodity
Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581; SEC: Babback
Sabahi, Senior Counsel, 202–551–5398,
sabahib@sec.gov, Office of International
Affairs, Securities and Exchange
Commission, Station Place, 100 F Street,
NE., Washington, DC 20549–1004.
SUPPLEMENTARY INFORMATION:
I. Background
The Dodd-Frank Act was enacted on
July 21, 2010.2 Title VII of the
legislation 3 amends the Commodity
Exchange Act 4 and the Securities
Exchange Act of 1934 5 to establish a
comprehensive new regulatory
framework for swaps and security-based
swaps to reduce risk, increase
transparency, and promote market
integrity within the financial system.
Among other things, Title VII: (1)
Provides for the registration and
comprehensive regulation of swap
dealers, security-based swap dealers,
major swap participants, and major
security-based swap participants; (2)
imposes clearing and trade execution
2 See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. 111–203, 124
Stat. 1376 (2010). The text of the Dodd-Frank Act
may be accessed at http://www.cftc.gov/
LawRegulation/DoddFrankAct/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 15 U.S.C. 78a et seq.
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requirements on swaps and securitybased swaps, subject to certain
exceptions; (3) creates rigorous
recordkeeping and real-time reporting
regimes; and (4) enhances the
Commissions’ rulemaking and
enforcement authorities with respect to
certain registered entities and
intermediaries subject to the
Commissions’ oversight.
Section 719(c)(1) of the Dodd-Frank
Act requires the CFTC and SEC jointly
to conduct a study on swap regulation
and clearinghouse regulation in the
United States, Asia, and Europe and to
identify areas of regulation that are
similar and other areas of regulation that
could be harmonized.6 Pursuant to
Section 719(c)(2) of the Dodd-Frank Act,
the Commissions must submit a report
to Congress within 18 months after the
Dodd-Frank Act’s enactment (i.e., on or
before Monday, January 23, 2012) that
describes the results of the study and
includes: (1) The identification of the
major dealers, exchanges,
clearinghouses, and regulators in each
geographic area; (2) lists of the major
swap contracts (including trading
volumes, clearing volumes, and notional
values) in each geographic area; and (3)
a description of the methods for clearing
swaps and the systems used for setting
margin in each geographic area.7
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6 Section
719(c)(1) provides:
(1) IN GENERAL.–The Commodity Futures
Trading Commission and the Securities and
Exchange Commission shall jointly conduct a
study–
(A) relating to–
(i) swap regulation in the United States, Asia, and
Europe; and
(ii) clearing house and clearing agency regulation
in the United States, Asia, and Europe; and
(B) that identifies areas of regulation that are
similar in the United States, Asia and Europe and
other areas of regulation that could be
harmonized[.]
7 Section 719(c)(2) provides:
(2) REPORT.–Not later than 18 months after the
date of enactment of this Act, the Commodity
Futures Trading Commission and the Securities and
Exchange Commission shall submit to the
Committee on Agriculture, Nutrition, and Forestry
and the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on
Agriculture and the Committee on Financial
Services of the House of Representatives a report
that includes a description of the results of the
study under subsection (a), including–
(A) identification of the major exchanges and
their regulator in each geographic area for the
trading of swaps and security-based swaps
including a listing of the major contracts and their
trading volumes and notional values as well as
identification of the major swap dealers
participating in such markets;
(B) identification of the major clearing houses and
clearing agencies and their regulator in each
geographic area for the clearing of swaps and
security-based swaps, including a listing of the
major contracts and the clearing volumes and
notional values as well as identification of the
major clearing members of such clearing houses and
clearing agencies in such markets;
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II. Request for Comments
In connection with the study and
report required by Section 719(c) of the
Dodd-Frank Act, the CFTC and SEC
have determined to issue this request for
information through public comment.
Congress has directed the Commissions
to conduct an independent joint study
on specific topics and, in particular, to
identify areas of regulation that could be
harmonized.8 The Commissions have
determined that this request for public
comment will be an effective and
transparent means of gathering
information necessary for the study and
report from interested parties. This
public comment process will, as
needed, be supplemented by other
means of gathering the comprehensive
range of information requested by
Congress.9
The Commissions also are mindful of
differences in regulatory development
across jurisdictions. In the United States
and under the Dodd-Frank Act, many of
the required regulations with regard to
swaps already have been proposed and
made available for public comment.10
Other jurisdictions, however, are
proceeding under different time frames.
For example, the Japanese Diet amended
the Financial Instruments and Exchange
Act by adopting legislation on over-thecounter (OTC) derivatives on July 10,
2009, and on May 12, 2010. These
amendments are expected to be
implemented by November 2012. The
(C) a description of the comparative methods of
clearing swaps in the United States, Asia, and
Europe; and
(D) a description of the various systems used for
establishing margin on individual swaps, securitybased swaps, and swap portfolios.
The provision’s reference to ‘‘subsection (a)’’
presumably should be replaced with a reference to
subsection (1) because no such subsection (a)
applies to this study. Moreover, although Section
719(c) is entitled ‘‘International Swap Regulation’’
and does not consistently refer to both swaps and
security-based swaps throughout, Congress
mandated a joint study and, accordingly, the
Commissions have interpreted the terms ‘‘swap’’
and ‘‘swaps’’ to include both swap(s) and securitybased swap(s) in the context of this statutory
provision.
8 In addition to the study and report required by
Section 719(c), Congress directed the Commissions
(and prudential regulators) in Section 752(a) of the
Dodd-Frank Act to ‘‘as appropriate * * * consult
and coordinate with foreign regulatory authorities
on the establishment of consistent international
standards with respect to the regulation (including
fees) of swaps, security-based swaps, swap entities,
and security-based swap entities’’ in order to
‘‘promote effective and consistent global regulation
of swaps and security-based swaps’’.
9 For example, Commission staff will engage in
ongoing consultation with regulatory authorities
and others throughout the study.
10 For more information, visit CFTC and SEC Web
sites on implementation of the Dodd-Frank Act,
respectively at http://www.cftc.gov/LawRegulation/
DoddFrankAct/index.htm and http://www.sec.gov/
spotlight/dodd-frank.shtml.
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European Commission (EC), in turn,
proposed legislation on clearing and
trade repositories on September 15,
2010.11 This proposed legislation calls
for the European Securities and Markets
Authority to propose technical
standards by June 30, 2012.12
In order to strike a balance between
meeting the statutory deadline for the
study and report and providing timely
information to Congress, the
Commissions have determined to
publish the request at this time and to
provide for a 60-day comment period.
Given the pace of developments in the
regulation of OTC derivatives here in
the United States and in other
jurisdictions, the Commissions plan to
conduct the study based upon
information received and collected by
the last day of the comment period.13
Comments should be submitted during
the open comment period, but staff may
consider comments filed after the
deadline and may consult with
interested and/or relevant parties after
the comment period closes in order to
obtain additional or clarifying
information. The Commissions welcome
public comment on all aspects of the
study.14
The Commissions have developed the
following requests for comment to
gather information in support of the
study mandated by Section 719(c) and
request that commenters include a
description, either in English or
accompanied by an English translation,
of the underlying source material used
in composing each submitted response.
Commenters may also provide any
additional relevant information beyond
that specifically requested. Because
11 On December 8, 2010, the EC also issued a
public consultation to solicit views on revisions to
the Markets in Financial Instruments Directive that
are designed, among other things, to increase
transparency for OTC derivatives and other
instruments by setting requirements for trading
venues and investment firms, and to enhance
business conduct standards applicable to all
investment firms. The EC is expected to publish a
proposal further to this consultation during summer
2011.
12 See various provisions of the EC’s proposed
European Markets Infrastructure Regulation,
available at http://eur-lex.europa.eu/LexUriServ/
LexUriServ.do?uri=COM:2010:0484:FIN:EN:PDF.
13 The Commissions may, however, in their
discretion and depending on the significance of the
developments, decide to address certain legislative
or regulatory developments that take place after the
comment period has ended.
14 In light of the statutory deadline established in
Section 719(c) of the Dodd-Frank Act, the
Commissions request comment on how best to
ensure that the study reflects the latest state of
regulatory implementation in Asia and Europe.
Commenters are encouraged to submit information
regarding significant relevant legislative or
regulatory developments occurring after the end of
the comment period and prior to the submission of
the report to Congress.
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Section 719(c) requires the
Commissions to prepare a report
relating to the swap markets of the
United States, Asia, and Europe,
commenters are specifically asked to
provide information about markets in
those jurisdictions. Commenters also
may provide any relevant information
on other jurisdictions. If regulatory
requirements in a jurisdiction are under
consideration but not yet enacted or
effective, commenters should make note
of this in their answer and provide as
much relevant information as possible
on recent and anticipated
developments.
While all commenters are welcome to
respond to the items below in their
entirety, in order to provide more focus,
the requests for comment have been
divided into three groups. The first
group, items A–E, inquires about
information to which foreign regulators
may have the most efficient access. Item
F, by contrast, inquires about
information that may be available to a
wider range of commenters, while item
G inquires about information that
exchanges and clearinghouses might be
uniquely positioned to provide.
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A. Status of Regulation
1. For each jurisdiction on which
comment is being provided, please
provide the name of the jurisdiction
being commented upon.
2. Does the jurisdiction have a legal
definition of the term ‘‘swap’’,
‘‘security-based swap’’, or other similar
term or terms (hereinafter referred to as
a ‘‘Swap’’ or ‘‘Swaps’’)? If so, please
provide such definition(s).15
3. Are Swaps included within the
scope of any statute, regulation, or other
legal requirement in the jurisdiction?
a. If not, is the jurisdiction planning
to or considering whether to regulate, or
to modify regulation of, Swaps?
b. Please further describe the present
status of regulatory efforts and the
anticipated timeline for such efforts.
4. What type of counterparty may
enter into a Swap? Do any limitations
apply?
5. Are certain types or classes of
Swaps prohibited, or are certain entities
prohibited from entering into certain
types or classes of Swaps?
6. If Swaps are regulated:
a. Who determines which
instruments, transactions, or agreements
should be regulated as Swaps?
b. Which Swaps, if any, are required
to be executed on an organized market,
15 These terms may include, but may not be
limited to, OTC derivatives. The Dodd-Frank Act
includes definitions of the terms ‘‘swap’’ and
‘‘security-based swap’’.
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on an electronic execution facility, or on
any other type of market?
c. Which Swaps, if any, are required
to be cleared by a central counterparty
and, for those required to be cleared,
how are the trades of non-clearing
participants cleared? 16
d. Which Swap transactions, if any,
are required to be reported to a data
repository or other entity, the public, or
regulatory authorities?
e. Is regulatory oversight of the Swap
market conducted by one single
regulatory authority or divided among
different regulatory authorities? If the
latter, please identify each relevant
regulatory authority and describe its
responsibilities and jurisdiction.
f. How does the regulatory framework
regulate potential systemic risk created
by Swaps? Does it, for example, create
a new oversight body or designate
certain entities as systemically
important?
g. Does the regulatory authority, or
regulatory authorities if more than one
regulator has oversight responsibilities
over the Swap market, have the ability
to share information related to Swaps
with domestic and foreign regulatory
authorities? 17
h. How are cross-border Swap
transactions regulated? Does the Swap
regulatory framework apply to persons
located outside of the jurisdiction doing
business with persons located within
the jurisdiction, and, more generally, to
cross-border Swap activities?
i. What enforcement authority exists
over Swaps, and who may exercise such
authority?
B. Regulatory Requirements for Market
Participants
1. How does the regulatory framework
address participants in the Swap
market? What are the registration or
licensing requirements for Swap-related
dealers, market participants,
intermediaries, or others (individually
and collectively, ‘‘Participants’’)?
2. Are any types of Participants in the
Swap market excluded or exempted
from Swap-related registration or
licensing requirements?
3. What is the process for updating,
withdrawing, or terminating Swaprelated registration or an exemption
from Swap-related registration?
16 If applicable, how does the mandatory clearing
requirement work, e.g., who decides which Swaps
are required to be cleared, what criteria are applied,
does the requirement apply to existing Swaps or to
those entered into at a certain point in time, are any
entities exempt from the clearing requirement?
17 In particular, are there any legal or other
barriers to the collection of information or to the
sharing of information, e.g., client confidentiality
protection or data privacy safeguards?
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4. What are the Swap-related
prudential regulatory requirements (e.g.,
capital, liquidity, margin, risk
management, segregation, collateral)?
5. What are the requirements related
to insolvency or bankruptcy in regard to
Participants?
6. What are the Swap-related business
conduct requirements (e.g., interaction
with counterparties, disclosure,
supervision, reporting, recordkeeping,
documentation, confirmation, valuation,
conflicts of interest, avoidance of fraud
and other abusive practices)?
7. Do Participants have the ability to
share information with domestic and/or
foreign regulatory authorities?
8. How are foreign Participants treated
(e.g., a special recognition category, an
exclusion or an exemption from
registration)?
C. Regulatory Requirements for
Organized Markets, Electronic
Execution Facilities, and Other Types of
Markets
1. Does the regulatory framework
include requirements for organized
markets, electronic execution facilities,
and/or other types of markets for Swaps
(hereinafter referred to as ‘‘Markets’’)?
2. What are the registration or
licensing requirements for such
Markets?
3. Are any Markets excluded or
exempted from such registration or
licensing requirements?
4. What is the process for updating,
withdrawing, or terminating such
registration or exempting from such
registration?
5. What are the ongoing regulatory
responsibilities of such Markets (e.g.,
access, surveillance, transparency,
compliance, recordkeeping)?
6. Do Markets have the ability to share
information with domestic and/or
foreign regulatory authorities?
7. How are foreign Markets treated
(e.g., a special recognition category, an
exclusion or an exemption from
registration)?
D. Regulatory Requirements for Central
Counterparties
1. Does the regulatory framework
include requirements for central
counterparties that provide clearing and
settlement services for Swaps?
2. What are the registration or
licensing requirements for such central
counterparties?
3. Who is excluded or exempted from
such registration or licensing
requirements?
4. What is the process for updating,
withdrawing, or terminating such
registration or exempting from such
registration?
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5. What are the ongoing regulatory
responsibilities of such central
counterparties (e.g., financial resources,
risk management, safeguards against
member or participant default, authority
in the event of a default,
recordkeeping)? 18
6. Do such central counterparties have
the ability to share information with
domestic and/or foreign regulatory
authorities?
7. How are foreign central
counterparties treated (e.g., a special
recognition category, an exclusion or an
exemption from registration)?
E. Regulatory Requirements for Data
Repositories
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1. Does the regulatory framework
include requirements for data
repositories for Swaps? 19
2. What are the registration or
licensing requirements for such data
repositories?
3. Who is excluded or exempted from
such registration or licensing
requirements?
4. What is the process for updating,
withdrawing, or terminating such
registration or exempting from such
registration?
5. What are the ongoing regulatory
responsibilities of such data repositories
(e.g., timing of reporting to the public,
recordkeeping)?
6. Are such data repositories required
to use a specified data standard when
they provide data to regulatory
authorities and, if so, what standard is
required?
7. Do such data repositories have the
ability to share information with
domestic and/or foreign regulatory
authorities?
8. How are foreign data repositories
treated (e.g., a special recognition
category, an exclusion or an exemption
from registration)?
9. What are the regulatory
requirements in connection with data
reporting for entities participating in the
Swap market, such as counterparties or
Participants (e.g., maintaining records,
reporting data to a repository, real-time
reporting to the public, providing
information to domestic and foreign
regulatory authorities)?
18 The Recommendations for Central
Counterparties were published in November 2004
(and currently are being revised) by the Committee
on Payment & Settlement Systems of the Bank for
International Settlements and the Technical
Committee of IOSCO. Links to this standard, as well
as related standards and the consultative report for
revising them, are available at http://www.bis.org/
publ/cpss94.htm.
19 If entities other than data repositories can fulfill
this function, please describe the jurisdiction’s
requirements for such activity and provide the
relevant information for each question on this topic.
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F. Regulatory Comparison
1. Across jurisdictions, for any or all
items listed above, which areas of
regulation are similar and which areas
are different?
2. In viewing the existing laws,
institutions, and enforcement
mechanisms of each respective
jurisdiction as a whole, are such
similarities and differences appropriate
and desirable for regulatory purposes, or
do certain aspects of a particular
jurisdiction’s Swap market warrant a
different regulatory approach?
3. What are the potential costs and
benefits (in terms of investor protection,
market efficiency, competition, or other
factors) that may arise from further
consistency/harmonization of
regulations across borders?
4. How should consistency in
regulation across jurisdictions be
measured and are there factors other
than the harmonized text of a regulation
that should be taken into consideration
when assessing the degree to which
cross-border regulatory harmonization
has been implemented in practice?
5. Assuming that a theoretically
‘‘optimal’’ set of regulations for a
particular jurisdiction might take into
consideration elements unique to a
specific market in ways that might make
cross-border harmonization difficult, to
what extent do the benefits of greater
regulatory harmonization across borders
outweigh the costs associated with
having regulations that might be less
tailored to a particular market’s
circumstances? In what areas do you
believe the benefits of harmonization
most outweigh any potential
downsides? 20 Are there any areas where
you believe the likely benefits of
‘‘optimal’’ market-specific regulation
outweigh the likely benefits of
harmonization?
6. In the United States, what steps
should or could be taken to better
harmonize statutory requirements under
the Dodd-Frank Act with statutory
requirements implemented in other
jurisdictions?
7. In the United States, what steps
could be taken to harmonize CFTC or
SEC regulations with regulations
promulgated by authorities in other
jurisdictions?
G. Swap Market Information
20 In particular, please identify any potential
opportunities for regulatory arbitrage or
impediments to the achievement of consistent
regulatory standards across jurisdictions.
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regulator(s) for each) for the trading of
Swaps.
a. For each market or facility, please
provide a listing and description of the
major contract classes and subclasses,
such as credit default swaps (CDS),21
equity swaps, currency swaps, interest
rate swaps (IRS),22 and commodity
swaps;
b. For classes and subclasses of
contracts identified in paragraph a
above, please provide:
i. The trading volumes in 2009, 2010,
and year-to-date; and
ii. The outstanding notional values at
year-end 2008, 2009, 2010, and the most
recent available.
2. Please identify major dealers
participating in Swap markets (and the
Swap-related regulator(s) for each).
3. Please identify major central
counterparties (and the Swap-related
regulator(s) for each) for the clearing of
Swaps.
a. For each central counterparty,
please provide a listing and description
of the major classes and subclasses of
cleared Swap contracts, such as CDS,
equity swaps, currency swaps, IRS, and
commodity swaps;
b. For classes and subclasses of
contracts identified in paragraph a
above, please provide:
i. The clearing volumes for 2009,
2010, and year-to-date; and
ii. The outstanding notional values at
year-end 2008, 2009, 2010, and the most
recent available;
c. For each central counterparty,
please provide:
i. A description of the method used to
clear Swaps;
ii. A description of the systems used
to establish margin on individual Swaps
and on Swap portfolios; and
iii. The name of each major clearing
member of the central counterparty (and
the Swap-related regulator(s) for each).
Issued in Washington, DC, on July 20,
2011, by the Commodity Futures Trading
Commission.
David A. Stawick,
Secretary.
Issued in Washington, DC, on July 20,
2011, by the Securities and Exchange
Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–18763 Filed 7–25–11; 8:45 am]
BILLING CODE 8011–01–P; 6351–01–P
1. Please identify major organized
markets and electronic execution
facilities (and the Swaps-related
PO 00000
44511
21 For CDS, include: corporate single name,
sovereign single name, multi-name, index; CDS on
domestic and non-domestic reference assets
(classified by country, in the latter case); and CDS
between domestic and non-domestic participants
(classified by country, in the latter case).
22 For IRS, include: underlying currency,
structure, and maturity.
E:\FR\FM\26JYP1.SGM
26JYP1
Agencies
[Federal Register Volume 76, Number 143 (Tuesday, July 26, 2011)]
[Proposed Rules]
[Pages 44508-44511]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18763]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Chapter I
SECURITIES AND EXCHANGE COMMISSION
17 CFR Chapter II
[Release No. 34-64926; File No. 4-635]
Acceptance of Public Submissions for a Study on International
Swap Regulation Mandated by Section 719(c) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act
AGENCY: Commodity Futures Trading Commission; Securities and Exchange
Commission.
ACTION: Request for comment.
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SUMMARY: Section 719(c) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act) requires the Commodity Futures
Trading Commission (CFTC) and the Securities and Exchange Commission
(SEC and, together with the CFTC, the Commissions) jointly to study and
then report to Congress on swap regulation and clearinghouse regulation
in the United States, Asia, and Europe and to identify areas of
regulation that are similar and other areas of regulation that could be
harmonized. The report also must identify major dealers, exchanges,
clearinghouses, clearing members, and regulators in each geographic
area and describe the major contracts (including trading volumes,
clearing volumes, and notional values), methods for clearing swaps, and
the systems used for setting margin in each geographic area. In
connection with the study and report, the CFTC and SEC are issuing this
request for information through public comment.
DATES: Submit comments on or before September 26, 2011.
ADDRESSES: You may submit comments by any of the following methods:
CFTC
Agency Web site, via its Comments Online process at http://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.
Please submit comments using only one method. Comments should be
identified by ``International Swap Regulation Study'' in the subject
line of responses submitted electronically and in paper submissions.
All comments must be submitted in English or, if not, accompanied
by an English translation. Comments will be posted on the CFTC's
Internet Web site at http://www.cftc.gov, without review and without
removal of personally identifying information. You should submit only
information that you wish to make available publicly. If you wish the
CFTC to consider information that may be exempt from disclosure under
the Freedom of Information Act (FOIA), a petition for confidential
treatment of the exempt information may be submitted according to the
procedures established in Sec. 145.9 of the Commission's
regulations.\1\ The CFTC reserves the right, but shall have no
obligation, to review, pre-screen, filter, redact, refuse, or remove
any or all of your submission from http://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
will be retained in the public comment file and may be accessible under
FOIA.
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\1\ CFTC regulations referred to herein are found at 17 CFR Ch.
1 (2010). They are accessible on the Commission's Web site at http://www.cftc.gov.
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SEC
Electronic Comments
Use the agency's Internet comment form at http://www.sec.gov/rules/other.shtml; or
Send an e-mail to rule-comments@sec.gov. Please include
File Number 4-635 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number 4-635. This file number
should be included on the subject line if e-mail is used. To help the
SEC process and review your comments more efficiently, please use only
one method. Comments will be posted on the SEC's Internet Web site at
http://www.sec.gov. Comments also are available for Web site viewing
and printing in the SEC's Public Reference Room, Station Place, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. All comments received will be posted
without change; the SEC does not edit personally identifying
information from submissions. You should submit only information that
you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: CFTC: Natalie Markman Radhakrishnan,
Senior Special Counsel, 202-418-5059, nmradhakrishnan@cftc.gov, Office
of International Affairs, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581; SEC:
Babback Sabahi, Senior Counsel, 202-551-5398, sabahib@sec.gov, Office
of International Affairs, Securities and Exchange Commission, Station
Place, 100 F Street, NE., Washington, DC 20549-1004.
SUPPLEMENTARY INFORMATION:
I. Background
The Dodd-Frank Act was enacted on July 21, 2010.\2\ Title VII of
the legislation \3\ amends the Commodity Exchange Act \4\ and the
Securities Exchange Act of 1934 \5\ to establish a comprehensive new
regulatory framework for swaps and security-based swaps to reduce risk,
increase transparency, and promote market integrity within the
financial system. Among other things, Title VII: (1) Provides for the
registration and comprehensive regulation of swap dealers, security-
based swap dealers, major swap participants, and major security-based
swap participants; (2) imposes clearing and trade execution
[[Page 44509]]
requirements on swaps and security-based swaps, subject to certain
exceptions; (3) creates rigorous recordkeeping and real-time reporting
regimes; and (4) enhances the Commissions' rulemaking and enforcement
authorities with respect to certain registered entities and
intermediaries subject to the Commissions' oversight.
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\2\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. 111-203, 124 Stat. 1376 (2010). The text of the Dodd-
Frank Act may be accessed at http://www.cftc.gov/LawRegulation/DoddFrankAct/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\ 15 U.S.C. 78a et seq.
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Section 719(c)(1) of the Dodd-Frank Act requires the CFTC and SEC
jointly to conduct a study on swap regulation and clearinghouse
regulation in the United States, Asia, and Europe and to identify areas
of regulation that are similar and other areas of regulation that could
be harmonized.\6\ Pursuant to Section 719(c)(2) of the Dodd-Frank Act,
the Commissions must submit a report to Congress within 18 months after
the Dodd-Frank Act's enactment (i.e., on or before Monday, January 23,
2012) that describes the results of the study and includes: (1) The
identification of the major dealers, exchanges, clearinghouses, and
regulators in each geographic area; (2) lists of the major swap
contracts (including trading volumes, clearing volumes, and notional
values) in each geographic area; and (3) a description of the methods
for clearing swaps and the systems used for setting margin in each
geographic area.\7\
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\6\ Section 719(c)(1) provides:
(1) IN GENERAL.-The Commodity Futures Trading Commission and the
Securities and Exchange Commission shall jointly conduct a study-
(A) relating to-
(i) swap regulation in the United States, Asia, and Europe; and
(ii) clearing house and clearing agency regulation in the United
States, Asia, and Europe; and
(B) that identifies areas of regulation that are similar in the
United States, Asia and Europe and other areas of regulation that
could be harmonized[.]
\7\ Section 719(c)(2) provides:
(2) REPORT.-Not later than 18 months after the date of enactment
of this Act, the Commodity Futures Trading Commission and the
Securities and Exchange Commission shall submit to the Committee on
Agriculture, Nutrition, and Forestry and the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on
Agriculture and the Committee on Financial Services of the House of
Representatives a report that includes a description of the results
of the study under subsection (a), including-
(A) identification of the major exchanges and their regulator in
each geographic area for the trading of swaps and security-based
swaps including a listing of the major contracts and their trading
volumes and notional values as well as identification of the major
swap dealers participating in such markets;
(B) identification of the major clearing houses and clearing
agencies and their regulator in each geographic area for the
clearing of swaps and security-based swaps, including a listing of
the major contracts and the clearing volumes and notional values as
well as identification of the major clearing members of such
clearing houses and clearing agencies in such markets;
(C) a description of the comparative methods of clearing swaps
in the United States, Asia, and Europe; and
(D) a description of the various systems used for establishing
margin on individual swaps, security-based swaps, and swap
portfolios.
The provision's reference to ``subsection (a)'' presumably
should be replaced with a reference to subsection (1) because no
such subsection (a) applies to this study. Moreover, although
Section 719(c) is entitled ``International Swap Regulation'' and
does not consistently refer to both swaps and security-based swaps
throughout, Congress mandated a joint study and, accordingly, the
Commissions have interpreted the terms ``swap'' and ``swaps'' to
include both swap(s) and security-based swap(s) in the context of
this statutory provision.
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II. Request for Comments
In connection with the study and report required by Section 719(c)
of the Dodd-Frank Act, the CFTC and SEC have determined to issue this
request for information through public comment. Congress has directed
the Commissions to conduct an independent joint study on specific
topics and, in particular, to identify areas of regulation that could
be harmonized.\8\ The Commissions have determined that this request for
public comment will be an effective and transparent means of gathering
information necessary for the study and report from interested parties.
This public comment process will, as needed, be supplemented by other
means of gathering the comprehensive range of information requested by
Congress.\9\
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\8\ In addition to the study and report required by Section
719(c), Congress directed the Commissions (and prudential
regulators) in Section 752(a) of the Dodd-Frank Act to ``as
appropriate * * * consult and coordinate with foreign regulatory
authorities on the establishment of consistent international
standards with respect to the regulation (including fees) of swaps,
security-based swaps, swap entities, and security-based swap
entities'' in order to ``promote effective and consistent global
regulation of swaps and security-based swaps''.
\9\ For example, Commission staff will engage in ongoing
consultation with regulatory authorities and others throughout the
study.
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The Commissions also are mindful of differences in regulatory
development across jurisdictions. In the United States and under the
Dodd-Frank Act, many of the required regulations with regard to swaps
already have been proposed and made available for public comment.\10\
Other jurisdictions, however, are proceeding under different time
frames. For example, the Japanese Diet amended the Financial
Instruments and Exchange Act by adopting legislation on over-the-
counter (OTC) derivatives on July 10, 2009, and on May 12, 2010. These
amendments are expected to be implemented by November 2012. The
European Commission (EC), in turn, proposed legislation on clearing and
trade repositories on September 15, 2010.\11\ This proposed legislation
calls for the European Securities and Markets Authority to propose
technical standards by June 30, 2012.\12\
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\10\ For more information, visit CFTC and SEC Web sites on
implementation of the Dodd-Frank Act, respectively at http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm and http://www.sec.gov/spotlight/dodd-frank.shtml.
\11\ On December 8, 2010, the EC also issued a public
consultation to solicit views on revisions to the Markets in
Financial Instruments Directive that are designed, among other
things, to increase transparency for OTC derivatives and other
instruments by setting requirements for trading venues and
investment firms, and to enhance business conduct standards
applicable to all investment firms. The EC is expected to publish a
proposal further to this consultation during summer 2011.
\12\ See various provisions of the EC's proposed European
Markets Infrastructure Regulation, available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0484:FIN:EN:PDF.
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In order to strike a balance between meeting the statutory deadline
for the study and report and providing timely information to Congress,
the Commissions have determined to publish the request at this time and
to provide for a 60-day comment period. Given the pace of developments
in the regulation of OTC derivatives here in the United States and in
other jurisdictions, the Commissions plan to conduct the study based
upon information received and collected by the last day of the comment
period.\13\ Comments should be submitted during the open comment
period, but staff may consider comments filed after the deadline and
may consult with interested and/or relevant parties after the comment
period closes in order to obtain additional or clarifying information.
The Commissions welcome public comment on all aspects of the study.\14\
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\13\ The Commissions may, however, in their discretion and
depending on the significance of the developments, decide to address
certain legislative or regulatory developments that take place after
the comment period has ended.
\14\ In light of the statutory deadline established in Section
719(c) of the Dodd-Frank Act, the Commissions request comment on how
best to ensure that the study reflects the latest state of
regulatory implementation in Asia and Europe. Commenters are
encouraged to submit information regarding significant relevant
legislative or regulatory developments occurring after the end of
the comment period and prior to the submission of the report to
Congress.
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The Commissions have developed the following requests for comment
to gather information in support of the study mandated by Section
719(c) and request that commenters include a description, either in
English or accompanied by an English translation, of the underlying
source material used in composing each submitted response. Commenters
may also provide any additional relevant information beyond that
specifically requested. Because
[[Page 44510]]
Section 719(c) requires the Commissions to prepare a report relating to
the swap markets of the United States, Asia, and Europe, commenters are
specifically asked to provide information about markets in those
jurisdictions. Commenters also may provide any relevant information on
other jurisdictions. If regulatory requirements in a jurisdiction are
under consideration but not yet enacted or effective, commenters should
make note of this in their answer and provide as much relevant
information as possible on recent and anticipated developments.
While all commenters are welcome to respond to the items below in
their entirety, in order to provide more focus, the requests for
comment have been divided into three groups. The first group, items A-
E, inquires about information to which foreign regulators may have the
most efficient access. Item F, by contrast, inquires about information
that may be available to a wider range of commenters, while item G
inquires about information that exchanges and clearinghouses might be
uniquely positioned to provide.
A. Status of Regulation
1. For each jurisdiction on which comment is being provided, please
provide the name of the jurisdiction being commented upon.
2. Does the jurisdiction have a legal definition of the term
``swap'', ``security-based swap'', or other similar term or terms
(hereinafter referred to as a ``Swap'' or ``Swaps'')? If so, please
provide such definition(s).\15\
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\15\ These terms may include, but may not be limited to, OTC
derivatives. The Dodd-Frank Act includes definitions of the terms
``swap'' and ``security-based swap''.
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3. Are Swaps included within the scope of any statute, regulation,
or other legal requirement in the jurisdiction?
a. If not, is the jurisdiction planning to or considering whether
to regulate, or to modify regulation of, Swaps?
b. Please further describe the present status of regulatory efforts
and the anticipated timeline for such efforts.
4. What type of counterparty may enter into a Swap? Do any
limitations apply?
5. Are certain types or classes of Swaps prohibited, or are certain
entities prohibited from entering into certain types or classes of
Swaps?
6. If Swaps are regulated:
a. Who determines which instruments, transactions, or agreements
should be regulated as Swaps?
b. Which Swaps, if any, are required to be executed on an organized
market, on an electronic execution facility, or on any other type of
market?
c. Which Swaps, if any, are required to be cleared by a central
counterparty and, for those required to be cleared, how are the trades
of non-clearing participants cleared? \16\
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\16\ If applicable, how does the mandatory clearing requirement
work, e.g., who decides which Swaps are required to be cleared, what
criteria are applied, does the requirement apply to existing Swaps
or to those entered into at a certain point in time, are any
entities exempt from the clearing requirement?
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d. Which Swap transactions, if any, are required to be reported to
a data repository or other entity, the public, or regulatory
authorities?
e. Is regulatory oversight of the Swap market conducted by one
single regulatory authority or divided among different regulatory
authorities? If the latter, please identify each relevant regulatory
authority and describe its responsibilities and jurisdiction.
f. How does the regulatory framework regulate potential systemic
risk created by Swaps? Does it, for example, create a new oversight
body or designate certain entities as systemically important?
g. Does the regulatory authority, or regulatory authorities if more
than one regulator has oversight responsibilities over the Swap market,
have the ability to share information related to Swaps with domestic
and foreign regulatory authorities? \17\
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\17\ In particular, are there any legal or other barriers to the
collection of information or to the sharing of information, e.g.,
client confidentiality protection or data privacy safeguards?
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h. How are cross-border Swap transactions regulated? Does the Swap
regulatory framework apply to persons located outside of the
jurisdiction doing business with persons located within the
jurisdiction, and, more generally, to cross-border Swap activities?
i. What enforcement authority exists over Swaps, and who may
exercise such authority?
B. Regulatory Requirements for Market Participants
1. How does the regulatory framework address participants in the
Swap market? What are the registration or licensing requirements for
Swap-related dealers, market participants, intermediaries, or others
(individually and collectively, ``Participants'')?
2. Are any types of Participants in the Swap market excluded or
exempted from Swap-related registration or licensing requirements?
3. What is the process for updating, withdrawing, or terminating
Swap-related registration or an exemption from Swap-related
registration?
4. What are the Swap-related prudential regulatory requirements
(e.g., capital, liquidity, margin, risk management, segregation,
collateral)?
5. What are the requirements related to insolvency or bankruptcy in
regard to Participants?
6. What are the Swap-related business conduct requirements (e.g.,
interaction with counterparties, disclosure, supervision, reporting,
recordkeeping, documentation, confirmation, valuation, conflicts of
interest, avoidance of fraud and other abusive practices)?
7. Do Participants have the ability to share information with
domestic and/or foreign regulatory authorities?
8. How are foreign Participants treated (e.g., a special
recognition category, an exclusion or an exemption from registration)?
C. Regulatory Requirements for Organized Markets, Electronic Execution
Facilities, and Other Types of Markets
1. Does the regulatory framework include requirements for organized
markets, electronic execution facilities, and/or other types of markets
for Swaps (hereinafter referred to as ``Markets'')?
2. What are the registration or licensing requirements for such
Markets?
3. Are any Markets excluded or exempted from such registration or
licensing requirements?
4. What is the process for updating, withdrawing, or terminating
such registration or exempting from such registration?
5. What are the ongoing regulatory responsibilities of such Markets
(e.g., access, surveillance, transparency, compliance, recordkeeping)?
6. Do Markets have the ability to share information with domestic
and/or foreign regulatory authorities?
7. How are foreign Markets treated (e.g., a special recognition
category, an exclusion or an exemption from registration)?
D. Regulatory Requirements for Central Counterparties
1. Does the regulatory framework include requirements for central
counterparties that provide clearing and settlement services for Swaps?
2. What are the registration or licensing requirements for such
central counterparties?
3. Who is excluded or exempted from such registration or licensing
requirements?
4. What is the process for updating, withdrawing, or terminating
such registration or exempting from such registration?
[[Page 44511]]
5. What are the ongoing regulatory responsibilities of such central
counterparties (e.g., financial resources, risk management, safeguards
against member or participant default, authority in the event of a
default, recordkeeping)? \18\
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\18\ The Recommendations for Central Counterparties were
published in November 2004 (and currently are being revised) by the
Committee on Payment & Settlement Systems of the Bank for
International Settlements and the Technical Committee of IOSCO.
Links to this standard, as well as related standards and the
consultative report for revising them, are available at http://www.bis.org/publ/cpss94.htm.
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6. Do such central counterparties have the ability to share
information with domestic and/or foreign regulatory authorities?
7. How are foreign central counterparties treated (e.g., a special
recognition category, an exclusion or an exemption from registration)?
E. Regulatory Requirements for Data Repositories
1. Does the regulatory framework include requirements for data
repositories for Swaps? \19\
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\19\ If entities other than data repositories can fulfill this
function, please describe the jurisdiction's requirements for such
activity and provide the relevant information for each question on
this topic.
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2. What are the registration or licensing requirements for such
data repositories?
3. Who is excluded or exempted from such registration or licensing
requirements?
4. What is the process for updating, withdrawing, or terminating
such registration or exempting from such registration?
5. What are the ongoing regulatory responsibilities of such data
repositories (e.g., timing of reporting to the public, recordkeeping)?
6. Are such data repositories required to use a specified data
standard when they provide data to regulatory authorities and, if so,
what standard is required?
7. Do such data repositories have the ability to share information
with domestic and/or foreign regulatory authorities?
8. How are foreign data repositories treated (e.g., a special
recognition category, an exclusion or an exemption from registration)?
9. What are the regulatory requirements in connection with data
reporting for entities participating in the Swap market, such as
counterparties or Participants (e.g., maintaining records, reporting
data to a repository, real-time reporting to the public, providing
information to domestic and foreign regulatory authorities)?
F. Regulatory Comparison
1. Across jurisdictions, for any or all items listed above, which
areas of regulation are similar and which areas are different?
2. In viewing the existing laws, institutions, and enforcement
mechanisms of each respective jurisdiction as a whole, are such
similarities and differences appropriate and desirable for regulatory
purposes, or do certain aspects of a particular jurisdiction's Swap
market warrant a different regulatory approach?
3. What are the potential costs and benefits (in terms of investor
protection, market efficiency, competition, or other factors) that may
arise from further consistency/harmonization of regulations across
borders?
4. How should consistency in regulation across jurisdictions be
measured and are there factors other than the harmonized text of a
regulation that should be taken into consideration when assessing the
degree to which cross-border regulatory harmonization has been
implemented in practice?
5. Assuming that a theoretically ``optimal'' set of regulations for
a particular jurisdiction might take into consideration elements unique
to a specific market in ways that might make cross-border harmonization
difficult, to what extent do the benefits of greater regulatory
harmonization across borders outweigh the costs associated with having
regulations that might be less tailored to a particular market's
circumstances? In what areas do you believe the benefits of
harmonization most outweigh any potential downsides? \20\ Are there any
areas where you believe the likely benefits of ``optimal'' market-
specific regulation outweigh the likely benefits of harmonization?
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\20\ In particular, please identify any potential opportunities
for regulatory arbitrage or impediments to the achievement of
consistent regulatory standards across jurisdictions.
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6. In the United States, what steps should or could be taken to
better harmonize statutory requirements under the Dodd-Frank Act with
statutory requirements implemented in other jurisdictions?
7. In the United States, what steps could be taken to harmonize
CFTC or SEC regulations with regulations promulgated by authorities in
other jurisdictions?
G. Swap Market Information
1. Please identify major organized markets and electronic execution
facilities (and the Swaps-related regulator(s) for each) for the
trading of Swaps.
a. For each market or facility, please provide a listing and
description of the major contract classes and subclasses, such as
credit default swaps (CDS),\21\ equity swaps, currency swaps, interest
rate swaps (IRS),\22\ and commodity swaps;
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\21\ For CDS, include: corporate single name, sovereign single
name, multi-name, index; CDS on domestic and non-domestic reference
assets (classified by country, in the latter case); and CDS between
domestic and non-domestic participants (classified by country, in
the latter case).
\22\ For IRS, include: underlying currency, structure, and
maturity.
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b. For classes and subclasses of contracts identified in paragraph
a above, please provide:
i. The trading volumes in 2009, 2010, and year-to-date; and
ii. The outstanding notional values at year-end 2008, 2009, 2010,
and the most recent available.
2. Please identify major dealers participating in Swap markets (and
the Swap-related regulator(s) for each).
3. Please identify major central counterparties (and the Swap-
related regulator(s) for each) for the clearing of Swaps.
a. For each central counterparty, please provide a listing and
description of the major classes and subclasses of cleared Swap
contracts, such as CDS, equity swaps, currency swaps, IRS, and
commodity swaps;
b. For classes and subclasses of contracts identified in paragraph
a above, please provide:
i. The clearing volumes for 2009, 2010, and year-to-date; and
ii. The outstanding notional values at year-end 2008, 2009, 2010,
and the most recent available;
c. For each central counterparty, please provide:
i. A description of the method used to clear Swaps;
ii. A description of the systems used to establish margin on
individual Swaps and on Swap portfolios; and
iii. The name of each major clearing member of the central
counterparty (and the Swap-related regulator(s) for each).
Issued in Washington, DC, on July 20, 2011, by the Commodity
Futures Trading Commission.
David A. Stawick,
Secretary.
Issued in Washington, DC, on July 20, 2011, by the Securities
and Exchange Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-18763 Filed 7-25-11; 8:45 am]
BILLING CODE 8011-01-P; 6351-01-P