Real-Time Public Reporting of Swap Transaction Data, 1182-1266 [2011-33173]
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Federal Register / Vol. 77, No. 5 / Monday, January 9, 2012 / Rules and Regulations
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 43
RIN 3038–AD08
Real-Time Public Reporting of Swap
Transaction Data
Commodity Futures Trading
Commission.
ACTION: Final rule.
AGENCY:
The Commodity Futures
Trading Commission (‘‘CFTC’’ or
‘‘Commission’’) is adopting regulations
to implement certain statutory
provisions enacted by the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (‘‘Dodd-Frank Act’’).
Specifically, in accordance with the
Dodd-Frank Act, the Commission is
adopting rules to implement a
framework for the real-time public
reporting of swap transaction and
pricing data for all swap transactions.
DATES: Effective date: March 9, 2012.
FOR FURTHER INFORMATION CONTACT:
Thomas Leahy, Associate Director,
Division of Market Oversight (‘‘DMO’’)
at (202) 418–5278 or tleahy@cftc.gov;
Jeffrey L. Steiner, Special Counsel, DMO
at (202) 418–5482 or jsteiner@cftc.gov;
Susan Nathan, Senior Special Counsel,
DMO at (202) 418–5133 or
snathan@cftc.gov; Jason Shafer,
Attorney-Advisor, Office of General
Counsel at (202) 418–5097 or
jshafer@cftc.gov; or Laurie Gussow,
Attorney-Advisor, DMO at (202) 418–
7623 or lgussow@cftc.gov; Commodity
Futures Trading Commission, Three
Lafayette Center, 1155 21st Street NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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Table of Contents
I. Background
A. Overview
B. Summary of the Proposed Part 43
Regulations
1. Proposed § 43.3—Method and Timing
for Real-Time Public Reporting
2. Proposed § 43.4—Swap Transaction and
Pricing Data To Be Publicly
Disseminated in Real-Time
3. Proposed § 43.5—Block Trades and
Large Notional Swaps for Particular
Markets and Transactions
4. Proposed Appendix A to Part 43
C. Overview of Comments Received
D. Proposed § 43.5—Block Trades and
Large Notional Swaps
II. Part 43 of the Commission’s Regulations—
Final Rules
A. Section 43.1—Purpose, Scope and Rules
of Construction
1. Scope—Generally
2. Swaps Between Affiliates and Portfolio
Compression Exercises
3. Uncleared or Bespoke Swaps
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4. Foreign Exchange (‘‘FX’’) Asset Class
5. Limitations and Special
Accommodations
6. Liquidity
7. International Issues
8. Final Rule Text of § 43.1
B. Section 43.2—Definitions
1. Harmonization
2. Defined Terms
3. Additional Issues Relating to Defined
Terms
C. Section 43.3—Method and Timing for
Real-Time Public Reporting
1. Responsibilities of Parties to a Swap
(§ 43.3(a))
2. Public Dissemination of Swap
Transaction and Pricing Data (§ 43.3(b))
3. Requirements for Registered Swap Data
Repositories in Providing the Public
Dissemination of Swap Transaction and
Pricing Data (§ 43.3(c))
4. Requirements for Third-Party Service
Providers (Proposed § 43.3(d))
5. Availability of Swap Transaction and
Pricing Data to the Public (§ 43.3(d))
6. Errors and Omissions (§ 43.3(e))
7. Hours of Operation of Registered Swap
Data Repositories (§ 43.3(f))
8. Acceptance of Data During Closing
Hours (§ 43.3(g))
9. Timestamp Requirements (§ 43.3(h))
10. Fees Charged by SDRs (§ 43.3(i))
D. Section 43.4—Swap Transaction and
Pricing Data to be Publicly Disseminated
in Real-Time
1. In General (§ 43.4(a))
2. Public Dissemination of Data Fields
(§ 43.4(b))
3. Additional Swap Information (§ 43.4(c))
4. Amendments to Data Fields (Proposed
§ 43.4(d))
5. Anonymity of the Parties to a Publicly
Reportable Swap Transaction (§ 43.4(d))
6. Unique Product Identifier (§ 43.4(e))
7. Reporting of Notional or Principal
Amounts to a Registered Swap
Repository (§ 43.4(f))
8. Public Dissemination of Rounded
Notional or Principal Amounts (§ 43.4(g))
9. Public Dissemination Caps on Notional
or Principal Amounts (§ 43.4(h))
E. Section 43.5—Time Delays for Public
Dissemination of Swap Transaction and
Pricing Data
F. Appendix A to Part 43 (‘‘Data Fields for
Public Dissemination’’)
III. Effectiveness/Implementation and Interim
Period
IV. Paperwork Reduction Act
V. Cost-Benefit Considerations
VI. Regulatory Flexibility Act
VII. List of Commenters
I. Background
A. Overview
On July 21, 2010, President Obama
signed into law the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (the ‘‘Dodd-Frank Act’’) 1 Title VII of
1 Public Law 111–203, 124 Stat. 1376 (2010),
available at https://www.cftc.gov/LawRegulation/
OTCDERIVATIVES/index.htm. Pursuant to section
701 of the Dodd-Frank Act, Title VII may be cited
as the ‘‘Wall Street Transparency and
Accountability Act of 2010.’’
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which amended the Commodity
Exchange Act (‘‘CEA’’ or the ‘‘Act’’) 2 to
establish a comprehensive new
regulatory framework for swaps and
security-based swaps. The legislation
was intended 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 (‘‘SDs’’) and
major swap participants (‘‘MSPs’’); (2)
imposing clearing and trade execution
requirements on standardized derivative
products; (3) creating robust
recordkeeping and real-time reporting
regimes; and (4) enhancing the
Commission’s rulemaking and
enforcement authorities with respect to,
among others, all registered entities and
intermediaries subject to the
Commission’s oversight.
Section 727 of the Dodd-Frank Act
added to the CEA new section 2(a)(13),
which establishes standards and
requirements related to real-time
reporting and the public availability of
swap transaction and pricing data. This
section directs the Commission to
promulgate rules providing for the
public availability of such data in realtime,3 in such form and at such times
as the Commission deems appropriate to
enhance price discovery.4 CEA section
2(a)(13)(C) establishes the four types of
swaps for which transaction and pricing
data must be reported to the public in
real-time.5 Because these categories
together comprise all swaps, the realtime reporting requirements apply to all
swaps, including those swaps executed
on or pursuant to the rules of a
registered swap execution facility
(‘‘SEF’’) or a designated contract market
(‘‘DCM’’), and those swaps executed
bilaterally between counterparties and
27
U.S.C. 1, et seq.
Section 2(a)(13)(A) of the CEA defines realtime public reporting as reporting ‘‘data relating to
a swap transaction, including price and volume, ‘as
soon as technologically practicable’ after the time
at which the swap transaction has been executed.’’
4 CEA section 2(a)(13)(B) states that ‘‘[t]he
purpose of this section is to authorize the
Commission to make swap transaction and pricing
data available to the public in such form and at
such times as the Commission determines
appropriate to enhance price discovery.’’
5 The four categories are: (i) Swaps that are
subject to the mandatory clearing requirement in
CEA section 2(h)(1) [added by Section 723(a)(3) of
the Dodd-Frank Act]; (ii) swaps that are not subject
to the mandatory clearing requirement but are
nonetheless cleared at a registered derivatives
clearing organization (‘‘DCO’’); (iii) swaps that are
not cleared at a registered DCO and which are
reported to a registered swap data repository
(‘‘SDR’’) or to the Commission pursuant to CEA
section 2(h)(6); and (iv) swaps that are ‘‘determined
to be required to be cleared’’ under CEA section
2(h)(2) but are not cleared.
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not pursuant to the rules of a SEF or
DCM (‘‘off-facility swaps’’).6
With regard to swaps that are subject
to the mandatory clearing requirement
(or excepted from such requirement)
and those that are not required to be
cleared by a registered DCO but are
cleared, CEA section 2(a)(13)(E) directs
the Commission to prescribe rules that
(i) ensure that publicly disclosed
information does not identify the
participants; (ii) specify the criteria for
determining what constitutes a large
notional swap transaction (block trade)
for particular markets and contracts; (iii)
specify the appropriate time delay for
reporting large notional swap
transactions (block trades) to the public;
and (iv) take into account whether
public disclosure will materially reduce
market liquidity. CEA section 2(a)(13)(E)
does not require explicitly that the rules
promulgated by the Commission contain
similar provisions for the uncleared
swaps described in CEA section
2(a)(13)(C)(iii) and (iv). However, in
exercising its authority under CEA
section 2(a)(13)(B) to ‘‘make swap
transaction and pricing data available to
the public in such form and at such
times as the Commission determines
appropriate to enhance price
discovery,’’ the Commission is
authorized to prescribe rules similar to
those provisions in CEA section
2(a)(13)(E) for uncleared swaps
described in CEA sections
2(a)(13)(C)(iii) and (iv).7
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B. Summary of the Proposed Part 43
Regulations
On December 7, 2010, the
Commission published for comment
proposed part 43 of its regulations to
implement the real-time reporting
mandate of the Dodd-Frank Act.8 At the
foundation of these regulations was the
Commission’s belief that real-time
public dissemination of swap
transaction and pricing data supports
the fairness and efficiency of markets
and increases transparency, which in
6 As explained more fully in the Commission’s
Notice of Proposed Rulemaking, the legislative
history of the Dodd-Frank Act suggests that the realtime reporting requirements of CEA section 2(a)(13)
apply to all swaps. See Commission, Notice of
Proposed Rulemaking: Real-Time Public Reporting
of Swap Transaction Data, 75 FR 76140 (Dec. 7,
2010) (‘‘Real-Time NPRM’’ or ‘‘Proposing Release’’).
7 In addition, the Commission is required by CEA
section 2(a)(13)(C)(iii) to prescribe real-time public
reporting requirements for uncleared swaps, other
than those uncleared swaps described in CEA
section 2(a)(13)(C)(iv), ‘‘in a manner that does not
disclose the business transactions and market
positions of any person.’’
8 See Real-Time NPRM supra note 6. Interested
persons are directed to the Real-Time NPRM for a
full discussion of each of the proposed part 43
rules.
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turn improves price discovery and
decreases risk (e.g., liquidity risk). The
Commission’s Proposing Release thus
introduced, in addition to definitions of
terms and processes relevant to realtime public reporting, rules governing:
(1) The entities or persons that shall be
responsible for reporting swap
transaction and pricing data; (2) the
entities or persons that shall be
responsible for publicly disseminating
such data; (3) the data fields and
guidance with respect to the appropriate
format and manner for data to be
reported to the public in real time; (4)
the appropriate minimum size and time
delay for block trades and large notional
swaps; and (5) the proposed effective
date and implementation schedule for
the proposed rules.
The Commission’s proposed part 43
rules reflected consultation with staff of
both the Securities and Exchange
Commission (the ‘‘SEC’’) 9 and the
Board of Governors of the Federal
Reserve.10 The proposed rules also were
informed by discussions during a joint
public roundtable to discuss swap data,
SDRs and real-time reporting conducted
by CFTC and SEC staff on September 14,
2010 (the ‘‘Roundtable’’); public
comments received and posted on the
Commission’s Internet Web site; 11 and
meetings and discussions between
CFTC staff and market participants.
As proposed, part 43 applied to all
swaps 12 as defined in CEA section
1a(47) and as may be further defined by
Commission regulations. The proposed
rules applied real-time reporting
requirements to registered entities
(SEFs, DCMs and registered swap data
repositories (‘‘SDRs’’)) and the swap
counterparties—including registered or
exempt SDs, registered or exempt MSPs
and U.S.-based end-users.
1. Proposed § 43.3—Method and Timing
for Real-Time Public Reporting
CEA section 2(a)(13) directed the
Commission to prescribe rules
specifying the method and timing for
9 Section 763 of the Dodd-Frank Act authorizes
the SEC to promulgate rules ‘‘to provide for the
public availability of security-based swap
transaction, volume, and pricing data * * *.’’ The
SEC is adopting rules related to the real-time
reporting of security-based swaps as required by
Section 763 of the Dodd-Frank Act.
10 Section 712(a)(1) of the Dodd-Frank Act
requires staff to consult with the SEC and other
prudential regulators.
11 Comment letters received in response to the
Proposing Release may be found on the
Commission’s Web site at https://comments.cftc.gov/
PublicComments/CommentList.aspx?id=919.
12 As noted, the categories of swaps described in
CEA section 2(a)(13)(C) account for all swaps,
whether cleared or uncleared and regardless of
whether executed on or pursuant to the rules of a
SEF or DCM, or executed off-facility.
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real time public reporting. Consistent
with that mandate, the Commission
proposed in § 43.3 to require: (1) The
parties to a swap transaction (including
agents of the parties) to report swap
transaction and pricing data to the
appropriate registered entity in a timely
manner; 13 and (2) registered entities to
publicly disseminate swap transaction
and pricing data.14 To implement its
authority to make swap transaction and
pricing data available to the public in
such form and at such times as it
determines appropriate to enhance price
discovery, the Commission proposed in
§ 43.3 to establish the manner in which
swap counterparties must report the
swap transaction and pricing data to the
appropriate registered entity, the
manner in which registered entities
must publicly disseminate the data in
real time and the responsibilities of the
reporting party to each swap. Proposed
§ 43.3 also established requirements for
acceptance and public dissemination of
swap transaction and pricing data by
SDRs and third-party service providers
and specified standards for data
recordkeeping and retention as well as
availability and accessibility of real-time
swap transaction and pricing data. In
addition, proposed § 43.3 established
the process by which errors or
omissions in publicly disseminated
swap transaction and pricing data
would be cancelled and/or corrected,
the hours of operation for SDRs and the
procedures for scheduling closing
hours.
2. Proposed § 43.4—Swap Transaction
and Pricing Data To Be Publicly
Disseminated in Real-Time
CEA section 2(a)(13)(B) directs the
Commission to make swap transaction
and pricing data available to the public
in such form and at such times as the
Commission determines appropriate to
enhance price discovery. Proposed
§ 43.4 required that swap transaction
information be reported to a real-time
disseminator and established the
manner and format in which this data
will be publicly disseminated. In that
regard, appendix A to proposed part 43
provides a list of data fields which an
SDR must publicly disseminate
regarding swap transactions, and pricing
data, as well as guidance on an
acceptable public reporting format and
order for the listed data fields.
CEA sections 2(a)(13)(C) and (E)
reflect Congress’ intent that regulators
‘‘ensure that the public reporting of
swap transactions and pricing data does
not disclose the names or identities of
13 See
14 See
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CEA section 2(a)(13)(F).
CEA section 2(a)(13)(D).
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the parties to the transactions.’’ 15 In
response, the Commission proposed in
§ 43.4(e)(1) to prohibit the public
dissemination of swap transaction and
pricing information which identifies or
otherwise facilitates the identification of
a party to a swap. This section further
provided that an SDR may not report
such data in a manner that discloses or
otherwise facilitates the identification of
a party to a swap. The Commission
recognized that the latter prohibition
may result in a loss of clarity with
respect to the precise characteristics of
swaps in certain circumstances, and
required in proposed § 43.4(e)(2) that a
reporting party or a swap market 16
provide the real-time disseminator with
a specific description of the underlying
asset and tenor of a swap that is general
enough to provide anonymity but
specific enough to permit a meaningful
understanding of the swap. For certain
off-facility swaps—particularly ‘‘other
commodity’’ swaps that have
underlying assets with specific delivery
or pricing points—market participants
may be able to infer the identity of a
party or swap counterparties based on
the description of an underlying asset.
Accordingly, proposed § 43.4(e)(2) was
intended to permit reporting parties of
off-facility swaps to publicly
disseminate a description of an
underlying asset or tenor in a way that
does not disclose a party to a swap but
nonetheless provides a meaningful
understanding of the swap for purposes
of enhancing price discovery.17
In proposing § 43.4(e), the
Commission recognized that SEFs and
DCMs may differ and that new types of
swaps may emerge. For that reason, the
Commission did not propose specific
guidelines for describing an underlying
asset for the purposes of this rule.
Because the specificity of the
description would vary based on
particular markets and contracts, the
proposed rules were intended to
provide reporting parties with
discretion in reporting swap transaction
and pricing data. Proposed § 43.4(e)(2)
and proposed part 23 of the
Commission’s regulations 18 would
require SDs and MSPs who do not
specifically describe an underlying asset
and/or tenor because such disclosure
would facilitate the identification of a
counterparty, to document why the
specific information was not publicly
disseminated.
The Commission anticipated that
unique product identifiers may develop
for various swap products in various
markets. Proposed § 43.4(f) provided
that if a unique product identifier is
developed that sufficiently describes the
information in one or more of the data
fields for public dissemination,
consistent with appendix A to proposed
part 43, the unique product identifier
may be used in lieu of such data fields.
Absent a unique product identifier, the
publicly disseminated swap transaction
and pricing data must contain all of the
appropriate product identification fields
in appendix A to proposed part 43.
As proposed, § 43.4(g) required public
dissemination of any swap-specific
event 19 that occurs during the life of a
swap and affects the price of the swap
(a ‘‘price forming continuation event’’).
Proposed §§ 43.4(h) and (i) would
govern public reporting of the notional
or principal amount for all swaps. As
proposed, these rules would require (i)
a reporting party to transmit to a SEF or
DCM the actual notional or principal
size of any swap (including large
notional swaps) or any block trade; and
(ii) a SEF or DCM to transmit to a realtime disseminator the actual notional or
principal size for all swaps executed on
or pursuant to its rules. Section 43.4(j)
proposed a rounding convention for
notional or principal size and provided
that the rounding should be applied at
the point of public dissemination.
15 156 Cong. Rec. S5921 (daily ed. July 15, 2010)
(Statement of Sen. Blanche Lincoln).
16 The term ‘‘swap market’’ was defined in
proposed § 43.2(z) as ‘‘any registered swap
execution facility or registered designated contract
market that makes swaps available for trading.’’ As
discussed below, the Commission is not adopting
the term ‘‘swap market’’ and is, for clarity, changing
such references to ‘‘registered swap execution
facility or designated contract market.’’
17 The Commission described a hypothetical
example in which the underlying asset to an offfacility swap that has a specific delivery point at
Lake Charles, Louisiana—a contract commonly
known to be traded by only two companies.
Disclosing the underlying asset to the public would
effectively disclose that one of those two companies
was entering into the trade. See Real-Time NPRM
supra note 6, at 76150. Proposed § 43.4(e)(2) would
enable the reporting party to use a broader
geographic region in place of the specific delivery
point.
18 The Commission issued proposed part 23
which was published in the Federal Register on
November 23, 2010. 75 FR 71397. Proposed part 23
provided, inter alia, the business conduct standards
for SDs and MSPs. Proposed § 23 establishes
reporting, recordkeeping, and daily trading records
requirements for SDs and MSPs. Specifically,
§ 23.201(d) provides that SDs and MSPs would be
required to maintain records of information
required to be reported on a real-time basis and
records of information relating to large notional
swaps in accordance with proposed part 43 and
CEA section (2)(a)(13). When a less specific data
field is reported in order to protect anonymity of
participants to such swap, then the record must
contain the rationale for reporting a less specific
data field. The comment period for proposed part
23 closed on June 3, 2011; however the rule has not
yet been adopted.
19 Swap-specific events would include novations,
swap unwinds, partial novations and partial swap
unwinds.
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3. Proposed § 43.5—Block Trades and
Large Notional Swaps for Particular
Markets and Transactions
CEA sections 2(a)(13)(E)(ii) and (iii)
require the Commission to prescribe
rules ‘‘to specify the criteria for
determining what constitutes a large
notional swap transaction (block trade)
for particular markets and contracts’’
and ‘‘to specify the appropriate time
delay for reporting large notional swap
transactions (block trades) to the
public,’’ with respect to swaps subject to
the clearing mandate (including swaps
that are excepted from the clearing
mandate pursuant to CEA section
2(h)(7)) and those swaps that are not
subject to the clearing mandate but are
cleared. Similar provisions are not
explicitly required for uncleared swaps,
however, the Commission is authorized
pursuant to its authority under CEA
section 2(a)(13)(B) to prescribe similar
rules for uncleared swaps described in
CEA sections 2(a)(13)(C)(iii) and (iv).
Proposed § 43.5 established: (1) The
procedures for determining the
appropriate minimum sizes for block
trades and large notional swaps; and (2)
the appropriate time delays for the
reporting of block trades and large
notional swaps. In describing the
proposed block trade rules, the
Commission noted that it would
continue to analyze and study the
effects of increased transparency on
post-trade liquidity in the context of
block trades and large notional swaps.20
The Commission anticipated that new
data would continue to inform this
discussion and could cause subsequent
revision of the Proposing Release.
As noted, CEA section 2(a)(13)(A)
requires that all parties to swap
transactions, including parties to block
trades and large notional swaps, report
data relating to swap transactions ‘‘as
soon as technologically practicable after
the time at which the swap transaction
has been executed.’’ The Dodd-Frank
Act also requires that the Commission
promulgate rules ‘‘to specify the
appropriate time delay for reporting
large notional swaps transactions (block
trades) to the public.’’ 21 In writing such
rules, the Commission is charged to
‘‘take into account whether public
disclosure will materially reduce market
20 See
75 FR 76159 at note 67.
section 2(a)(13)(E)(iii). As noted above, the
Commission is only required to prescribe rules
relating to CEA section 2(a)(13)(E) for swaps subject
to the mandatory clearing requirement (including
those excepted from such requirement pursuant to
CEA section 2(h)(7)) and swaps that are not subject
to the mandatory clearing requirement but are
cleared, as described in CEA sections 2(a)(13)(C)(i)
and (ii).
21 CEA
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liquidity.’’ 22 The Commission
recognized that the potential market
impact of reporting a block trade or
large notional swap is an important
consideration in the determination of an
appropriate time delay before public
dissemination of block trade or large
notional swap transaction and pricing
data. Proposed § 43.5(k) specified the
appropriate time delays for public
dissemination of block trades and large
notional swaps and established that the
time delay for public dissemination
begins at execution of the swap.
4. Proposed Appendix A to Part 43
The Commission anticipated that realtime swap transaction and pricing data
may be publicly disseminated by
multiple real-time disseminators in the
same asset class. In order to minimize
the effects of fragmentation and enhance
consistency both within and among
asset classes, the Commission proposed
in appendix A to part 43 a number of
data fields that should be publicly
disseminated and provided guidance on
the format and manner of reporting. The
Commission believes that the public
dissemination of standardized data
should reduce the search costs to the
public and market participants while
increasing consolidation of real-time
swap transaction and pricing data and
promoting post-trade transparency and
price discovery.
C. Overview of Comments Received 23
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The Commission received comments
from 88 interested parties 24
representing a cross-section of the global
financial services industry, including
trade associations for both financial and
non-financial end-users, potential SDs
and MSPs; law firms representing
diverse interests; exchanges; and
numerous service and technology
22 CEA section 2(a)(13)(E)(iv). As noted above, the
Commission is only required to prescribe rules
relating to CEA section 2(a)(13)(E) for swaps subject
to the mandatory clearing requirement (including
those excepted from such requirement pursuant to
CEA section 2(h)(7)) and swaps that are not subject
to the mandatory clearing requirement but are
cleared, as described in CEA sections 2(a)(13)(C)(i)
and (ii).
23 In addition to the comments specifically
discussed herein, the Commission also received
comments from various groups during the course of
external meetings. Those commenters include,
among others: Rabobank Nederland, Insurance
Groups (American Counsel of Life Insurers,
Genworth, Manulife, John Hancock Life, New York
Life, Northwestern Mutual, Prudential, MetLife and
Allstate Life); Fidelity Investments; and Vanguard.
24 The initial comment period with respect to
proposed part 43 closed on February 7, 2011. The
comment periods for most proposed rulemakings
implementing the Dodd-Frank Act—including the
proposed part 43 rules—subsequently were
reopened for the period of April 27 through June
2, 2011.
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providers.25 While many commenters
expressed general support for the
proposed part 43 rules, they also offered
recommendations for clarification or
modification of specific proposed
regulations. Other commenters objected
to particular aspects of the Proposing
Release.
In addition to a general solicitation for
comment on all aspects of the Proposing
Release, the Commission requested
comment on a number of specific,
focused questions related to particular
provisions. For example, commenters
were asked to address issues related to
(i) the appropriate implementation
schedule for the final rules; (ii) which
swap counterparties should be covered
by the reporting requirements of part 43
in order to enhance price discovery; (iii)
the responsibilities of the swap
counterparties to report swap
transaction and pricing data (including
the advisability of establishing
maximum timeframes in which
reporting parties must report data to an
SDR); (iv) whether the final rules should
address the reporting and public
dissemination of swap transaction and
pricing data for swaps transacted
between two non-U.S. persons; (v) the
circumstances under which SEFs and
DCMs are deemed to have satisfied their
public dissemination requirements; (vi)
recordkeeping and retention
requirements, including the anticipated
costs associated with storing real-time
swap transaction and pricing data for an
extended period of time; (vii) protection
of the anonymity of swap counterparties
(including the utility of rounding
notional amounts); (viii) the utility of
the proposed data fields (including
whether dissemination of additional
data fields would enhance transparency
and price discovery); and (ix) whether
there would be an adverse price impact
for traders and/or an impact on liquidity
if all market participants knew the swap
transaction and pricing details of all
swaps in real-time.
As noted, the SEC is separately
authorized by section 763 of the DoddFrank Act to adopt real-time reporting
rules for security-based swaps (‘‘SBSs’’).
Because the Commission and the SEC
regulate different products and markets
and thus may have proposed differing
regulatory requirements, the
Commission particularly requested
comments on the impact of any
differences between the two regulatory
approaches.
25 A complete list of the full names and
abbreviations of commenters is included in section
VII at the end of this release; comment letters are
available through the Commission Web site at
https://comments.cftc.gov/PublicComments/
CommentList.aspx?id=919.
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1185
The Commission also requested
comment with respect to its cost-benefit
considerations generally, and
specifically asked whether there are
alternative ways it can meet its mandate
under section 727 of the Dodd-Frank
Act in a less costly manner. Similarly,
commenters were invited to submit data
or other information quantifying or
qualifying the costs and benefits of the
Proposing Release.
The comments received will be
addressed as appropriate throughout the
following discussion of the final rules.
D. Proposed § 43.5—Block Trades and
Large Notional Swaps
Several commenters urged that the
Commission study additional data
before setting appropriate minimum
block sizes and time delays 26 for public
dissemination of block trades and large
notional off-facility swaps.27 The
Commission recognized the merit in
those concerns, and subsequent to
publication of the proposed part 43
rules, it continued to receive and
analyze swap data for various asset
classes in order to make informed
decisions with respect to the
appropriate criteria for determining
block trade sizes and the initial
appropriate minimum block trade sizes.
The Commission agrees with the
commenters that additional analysis is
necessary prior to issuance of final rules
for appropriate minimum block sizes,
and accordingly has determined not to
make final its proposed § 43.5 rules
specifying the criteria for determining
block trade sizes. Instead, the
Commission intends to issue a separate
notice of proposed rulemaking that will
specifically address the appropriate
criteria for determining appropriate
minimum block trade sizes in light of
data and comments received.28
Comments on these issues received in
connection with the instant rulemaking
will be considered by the Commission
in its re-proposal of the block trade
rules.
II. Part 43 of the Commission’s
Regulations—Final Rules
As proposed in the Real-Time NPRM,
the provisions of part 43 governed the
26 Commenters included: MFA; Barclays; AII; GS;
UBS; GFXD; Freddie Mac; ISDA/SIFMA; Better
Markets; ABC/CIEBA; SIFMA AMG; WMBAA;
FHLBanks; Coalition for Derivatives End-Users;
Cleary; and Vanguard.
27 In light of clarifications in § 43.2, the terms
‘‘large notional swap’’ and ‘‘large notional offfacility swap’’ will be used interchangeably
throughout this Adopting Release. See infra note 29.
28 The notice of proposed rulemaking regarding
block trade sizes and criteria is referenced
throughout this release as the ‘‘block trade reproposal’’ or ‘‘re-proposal of the block trade rules.’’
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method and timing of real-time public
reporting; swap transaction and pricing
data to be publicly disseminated in realtime; and time delays for public
dissemination of swap transaction and
pricing data. The purpose, scope and
rules of construction of part 43 were
established in proposed § 43.1;
proposed definitions of terms and
processes relevant to real-time public
reporting were specified in proposed
§ 43.2. Proposed § 43.3 established the
method and timing for real-time public
reporting and dissemination of swap
transaction and pricing data; this rule
also delineated the responsibilities of
swap counterparties and SDRs, and
established procedures for
recordkeeping, correction of errors and
omissions, and hours of operation.
Proposed § 43.4 specified the format in
which swap transaction and pricing
data would be publicly disseminated
and appendix A to proposed part 43
described the fields for which an SDR
must publicly disseminate swap
transaction and pricing data. As
proposed, § 43.5 prescribed the criteria
for determining what constitutes a large
notional swap transaction (block trade)
and specified the appropriate time delay
for reporting block trades to the public.
While the Commission has adopted
the part 43 rules substantially as
proposed, there are several salient
changes.29 As noted above, the
Commission is not adopting those
elements of proposed § 43.5 relating to
the establishment of block trade sizes.
The Commission believes, in
accordance with comments, that further
study and analysis of block trade data is
necessary prior to establishing
minimum block trade size and for that
reason has determined to make final
only those elements of proposed § 43.5
relating to timestamp requirements and
time delays for the public dissemination
of swap transaction and pricing data. In
that regard, § 43.5 provides that until
the Commission establishes an
appropriate minimum block size for a
swap or group of swaps, the time delays
specified therein will apply to all swaps
that do not have an appropriate
minimum block size. The anonymity
provisions in § 43.4 have been clarified,
and the Commission has eliminated a
provision in proposed § 43.3 which
would have permitted dissemination of
swap transaction and pricing data by
third-party service providers. Instead,
the Commission will require that all
public dissemination of such data occur
through an SDR. Unless otherwise
29 This adopting release is referred to herein as
the ‘‘Adopting Release.’’
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discussed in this section, the regulations
are adopted as proposed.
A. Section 43.1—Purpose, Scope and
Rules of Construction
Proposed § 43.1 applied to all swaps
as defined in CEA section 1a(47) and as
may be further defined by Commission
regulation. The provisions of part 43
also applied to the categories of swaps
set forth in CEA section 2(a)(13)(C);
those categories account for the universe
of swaps subject to the Dodd-Frank
Act’s regulatory regime, whether cleared
or uncleared, and regardless of whether
executed on a SEF, DCM or off-facility.
The proposed rules applied real-time
reporting requirements to SEFs, DCMs,
SDRs and the swap counterparties,
including registered or exempt SDs,
registered or exempt MSPs and U.S.based end-users. The Commission
requested comment generally on the
scope of transactions covered by this
part, and specifically with respect to
which swap counterparties should be
subject to the reporting requirements of
this part.
1. Scope—Generally
Proposed § 43.1(a) stated that the
purpose of part 43 related to ‘‘the
collection and public dissemination of
certain swap transaction and pricing
data to enhance transparency and price
discovery.’’ 30 As proposed, § 43.1(b)(1)
stated that the provisions of part 43
applied to all swaps as defined in CEA
section 1(a)(47) and any implementing
regulations therefrom, including the
categories of swaps set forth in section
2(a)(13)(C) of the Act.31 Further,
proposed § 43.1(b)(2) provided that the
provisions of part 43 apply to all SEFs,
DCMs, SDRs and swap counterparties
(including registered or exempt SDs,
registered or exempt MSPs and U.S.based end-users). Proposed § 43.1(c)
30 CEA section 2(a)(13)(B) provides that the
purpose of section 727 of the Dodd-Frank Act is ‘‘to
authorize the Commission to make swap transaction
and pricing data available to the public in such
form and at such times as the Commission
determines appropriate to enhance price
discovery.’’
31 CEA section 2(a)(13)(C) provides that ‘‘[t]he
Commission is authorized and required to provide
by rule for the public availability of swap
transaction and pricing data’’ for four categories of
swaps: (1) Swaps subject to the mandatory clearing
requirement described in CEA section 2(h)(1)
(including those swaps that are excepted from the
requirement pursuant to CEA section 2(h)(7)); (2)
swaps that are not subject to the mandatory clearing
requirement described in CEA section 2(h)(1), but
are cleared at a registered DCO; (3) swaps that are
not cleared at a registered DCO and are reported to
an SDR under CEA section 2(h)(6) (reporting for this
category of swaps must be done in a manner that
does not disclose the business transactions and
market positions of any person); and (4) swaps that
are determined to be required to be cleared under
CEA section 2(h)(2) but are not cleared.
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specified the rules of construction for
part 43, and explained that although the
examples in part 43 and the related
appendices are not exclusive,
compliance with an example would
constitute compliance with such
portions of the rule to which the
example relates.
Forty-six commenters addressed
various aspects of the scope
provisions.32 Commenters expressed
concerns related to swaps between
affiliates, portfolio compression
exercises,33 uncleared and bespoke 34
swaps, end-user to end-user swaps,
foreign exchange swaps, international
issues, distress scenarios and other
scope-related issues.35
32 See
supra note 23.
separate proposed rulemaking under part 23
addresses rules relating to portfolio compression. 75
FR 81519 (Dec. 18, 2010).
34 As used throughout this Adopting Release,
‘‘bespoke’’ indicates that a swap is off-facility and
is not standardized.
35 In addition, one commenter stated that the
reporting and disclosure requirements could violate
the First and Fifth Amendments to the United
States Constitution by purportedly compelling
‘‘non-commercial speech’’ without satisfying a
heightened standard and by ‘‘taking’’ protected
private information without just compensation. See
CL–Sadis and Goldberg. The Commission has
carefully considered these comments and pertinent
judicial precedent. It believes that the data
reporting and disclosure requirements at issue
would not violate the First Amendment because,
among other reasons, the information at issue is
commercial speech subject to a lower, reasonablyrelated standard. See, e.g., Zauderer v. Office of
Disciplinary Counsel of Supreme Court of Ohio, 471
U.S. 626, 650–53 (1985) (state bar did not violate
First Amendment by requiring attorneys to fully
disclose fee and cost arrangements in
advertisements; the speech was commercial because
it pertained to the economic interests of the parties,
applicable standard was therefore whether the
disclosure requirement was reasonably related to
legitimate state interest, and the disclosure
requirement at issue was rationally related to the
state’s interest in preventing deception of
consumers). The Commission also believes that the
requirements at issue would not violate the Fifth
Amendment. Among other reasons, participants
have no reasonable investment-backed expectation
that information they submit will be kept
confidential because they voluntarily submit it,
knowing that it will be publicly disclosed to the
extent provided by statute and regulation. In
addition, the reporting and disclosure requirements
are reasonably related to the government’s
legitimate interests in transparency and price
discovery. See, e.g., Ruckelshaus v. Monsanto, 467
U.S. 986, 1006–07 (1984) (determining that there
was no regulatory taking where applicant for
pesticide registration was required by federal
pesticide law to submit certain trade secret product
data to EPA that EPA could then publicly disclose;
applicant knew at time of submission that statute
authorized EPA to do so, applicant therefore could
not have had a ‘‘reasonable investment-backed
expectation’’ that data would be kept confidential,
and the government’s action was reasonably related
to legitimate government interest in an area of
public concern and regulation).
33 A
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2. Swaps Between Affiliates and
Portfolio Compression Exercises
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Several commenters questioned
whether swaps between affiliates should
be subject to the real-time public
reporting requirements of part 43. Some
commenters stated that swaps between
affiliates have no price discovery or
transparency value and thus should not
be publicly reported.36 One commenter
noted that the real time dissemination of
anonymous data regarding swaps
between affiliates that price credit and
market risk at or near zero might distort
price discovery, rather than enhance
it.37 Other commenters stated variously
that inter-affiliate trades and portfolio
management exercises should not be
considered ‘‘reportable transactions,’’ 38
and that reporting swaps between
affiliates will add reporting
requirements to end-users.39 A
commenter noted the reporting of data
on physical gas and power transactions
between affiliates is excluded in other
contexts.40 Another argued that the
public reporting of inter-affiliate
transactions could seriously interfere
with the internal risk management
practices of a corporate group, thereby
prompting market participants to act in
a way that would prevent the corporate
group from following through with its
risk management strategy. This
commenter suggested that such a result
could raise the costs to corporate groups
of managing risk internally, in addition
to confusing market participants with
irrelevant information.41
The Commission agrees with the
comments regarding the public
dissemination of certain swaps between
affiliates and portfolio compression
exercises. The Commission concurs that
publicly disseminating swap transaction
and pricing data related to certain swaps
between affiliates would not enhance
price discovery, as such swap
transaction and pricing data would
already have been publicly
disseminated in the form of the related
36 See, e.g., CL–Cleary; CL–FSR; CL–Working
Group of Commercial Energy Firms; CL–Coalition
of Energy End-Users; CL–ISDA/SIFMA; CL–
Japanese Banks; and CL–Coalition for Derivatives
End-Users.
37 The commenter stated that ‘‘default risk among
affiliated entities within a corporate group is
negligible,’’ and ‘‘an inter-affiliate swap does not
price hedging costs the same as a market-facing
swap because each inter-affiliate swap is entered
into on the general assumption that the market risk
of all transactions within the corporate group will
be hedged by the centralized hedging affiliate under
a market-facing transaction.’’ CL–Shell at 6.
38 See CL–TriOptima; CL–WMBAA.
39 See CL–Coalition for Derivatives End-Users.
40 See CL–Working Group of Commercial Energy
Firms.
41 See CL–Cleary.
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market-facing swap. This information
may create an inaccurate appearance of
market depth. Notably, there is a very
high volume of swaps between affiliates
in certain asset classes (e.g., foreign
exchange).42 To require public
dissemination of all such transactions
could be very costly for market
participants. Where there are no price
discovery benefits to publicly
disseminating such transactions, the
Commission has determined not to
require the public dissemination of
these transactions at this time.
Accordingly, the Commission is
adopting a definition in § 43.2 for the
term ‘‘publicly reportable swap
transaction’’ that does not presently
require the public dissemination of
internal swaps.43 Specifically, a
publicly reportable swap transaction
means, among other things, any
executed swap that is an arm’s length
transaction between two parties that
results in a corresponding change in the
market risk position between the two
parties. As adopted, the definition of a
publicly reportable swap transaction
also provides, by way of example, that
internal transactions to move risk
between wholly-owned subsidiaries of
the same parent, without having credit
exposure to the other party 44 would not
42 See CL–GFXD. ‘‘Many millions of trades occur
daily between different affiliates of the same
institution which are not relevant to the
institution’s external market positioning.’’ Id. at p.
13.
43 As discussed and referenced in this rule,
internal swaps between one-hundred percent
owned subsidiaries of the same parent entity may
include back-to-back swap transactions between or
among such wholly-owned subsidiaries to help
manage the risks associated with a market-facing
swap transaction. In general, a back-to-back swap
transaction effectively transfers the risks associated
with a market-facing swap transaction to an affiliate
that was not an original party to such transaction.
Back-to-back swap transactions may occur in a
number of different ways. For example, an affiliate
immediately may enter into a mirror swap
transaction with its affiliate on the same terms as
the marketing-facing swap transaction. By way of
further example, a market-facing affiliate may enter
into multiple transactions with affiliates that are not
at arm’s-length in order to transfer the risks
associated with an arm’s-length, market-facing
transaction.
44 Section 608 of the Dodd-Frank Act adds to
paragraph 7 of the definition of ‘‘covered
transaction’’ in Section 23A of the Federal Reserve
Act (12 U.S.C. 371(c)): ‘‘(G) a derivative transaction,
as defined in paragraph (3) of section 5200(b) of the
Revised Statutes of the United States (12 U.S.C.
84(b)), with an affiliate, to the extent that the
transaction causes a member bank or a subsidiary
to have credit exposure to the affiliate.’’ Hence, all
derivatives transactions will be subjected to Section
23A of the Federal Reserve Act to the extent that
they cause the bank to have credit exposure to the
affiliate. Section 23B of the Federal Reserve Act
contains an arm’s-length requirement stating that a
member bank and its subsidiaries may engage in
any covered transaction with an affiliate only ‘‘(A)
on terms and under circumstances, including credit
standards, that are substantially the same, or at least
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1187
presently require public dissemination
because such swaps are not arm’s-length
transactions.
Similarly, the Commission agrees that
portfolio compression exercises should
not be publicly disseminated at this
time.45 The purpose of such transactions
is to mitigate risk between
counterparties and any new swaps that
were executed as a result of portfolio
compression exercises would be a result
of the compression itself and not an
arm’s-length transaction between the
parties.46 As adopted, the definition of
a publicly reportable swap transaction
also cites portfolio compression
exercises as an example that does not
presently require public dissemination.
3. Uncleared or Bespoke Swaps
The Commission received comments
from various market participants
relating to the scope of CEA section
2(a)(13) and proposed part 43, as it
applies to uncleared and bespoke
swaps. Some commenters stated that
only standardized, cleared swaps
should be real-time reported and
publicly disseminated. Others urged
that uncleared trades be treated
differently than cleared trades and that
the statute does not require that nonstandardized swaps be real-time
reported (e.g., customized trades should
receive a greater time prior to public
dissemination).
A commenter argued that only
uncleared swaps that perform a
significant price discovery function
should be publicly disseminated.47
Another commenter argued that bespoke
trade data has little value and public
dissemination of such information
involves complex technical issues.48
as favorable to such bank or its subsidiary, as those
prevailing at the time for comparable transactions
with or involving other nonaffiliated companies, or
(B) in the absence of comparable transactions, on
terms and under circumstances, including credit
standards, that in good faith would be offered to,
or would apply to, nonaffiliated companies.’’ The
Commission considers any covered transaction
between affiliates as described in Sections 23A and
23B of the Federal Reserve Act to be publicly
reportable swap transactions.
45 In its proposed part 23 release relating to
‘‘Confirmation, Portfolio Reconciliation, and
Portfolio Compression Requirements for Swap
Dealers and Major Swap Participants,’’ portfolio
compression is defined 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.’’ 75 FR
81532.
46 See CL–TriOptima; CL–Shell.
47 The commenter recommended that the
Commission utilize a process to identify swaps that
perform a ‘‘significant price discovery’’ function.
See CL–Dominion.
48 See CL–TriOptima.
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Still another commenter explained that
the public dissemination of swap
transaction and pricing data should be
phased in based on liquidity.49 In
contrast, two commenters said that the
real-time reporting requirements should
apply to all swaps, both standard and
bespoke.50
Several commenters asserted that
bespoke or customized swap
transactions are not subject to real-time
reporting, citing a perceived absence of
authority under CEA section
2(a)(13)(C)(iii) to include these
transactions. Others commented that
bespoke transactions should not be
subjected to real-time public reporting
obligations because the transactions do
not enhance price discovery and may
compromise anonymity of the parties to
the swap.
Some commenters focused on
perceived burdens to end-users inherent
in the proposed rules; many stated that
end-users should not be required to
report swaps.51 Additionally, certain
commenters stated that end-users do not
have sufficient technology to report
swaps; one commenter stated that enduser to end-user swaps should have next
business day reporting.52 Others
contended that end-users should be
treated differently because the public
dissemination of swaps information
involving such parties does not enhance
price discovery.53 Two commenters
questioned the value of disclosing
information relating to end-user to enduser power swaps compared to the harm
that disclosing such information would
have to these end-users and the public
in general.54
The Commission interprets CEA
section 2(a)(13)(C) to grant the
Commission the authority to require the
real-time public reporting of all swaps
in order enhance price discovery.55
Accordingly, the Commission does not
49 See
CL–FINRA.
CL–IECA; CL–Better Markets.
51 See CL–IPAA; CL–IECA; CL–COPE; CL–PCS
Nitrogen Fertilizer; CL–Coalition of Energy EndUsers; CL–NFPEEU; CL–API; and Meeting with EEI
(Feb. 10, 2011).
52 See CL–IPAA.
53 See CL–COPE; CL–Coalition of Energy EndUsers.
54 See CL–Coalition of Energy End-Users; CL–
NFPEEU.
55 The Commission stated in in the Proposing
Release that it interprets CEA section 2(a)(13)(C) to
apply to all swap transactions. The Commission
agrees with the overall concern expressed by
commenters regarding the statutory duty to ensure
confidentiality. CEA sections 2(a)(13)(C)(iii) and
2(a)(13)(E)(i) emphasize the importance of not
identifying swap counterparties. As discussed more
fully below, CEA section 2(a)(13)(C)(iii) explicitly
directs the Commission to require that real-time
public reporting of transactions occur in a manner
that does not disclose a party’s business
transactions and market position.
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50 See
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believe that the transactions described
above (e.g., bespoke, end-user to enduser, etc.) should be excluded from realtime reporting obligations. Such swap
transactions, unlike internal swaps
between affiliates and portfolio
compression exercises, are executed at
arm’s length and result in a change in
market risk between the swap
counterparties. Thus, the Commission
believes that the public dissemination of
these transactions will provide price
discovery benefits and transparency to
the swap markets.
However, the Commission agrees with
commenters that the real-time public
dissemination of swap transaction and
pricing data should be phased in with
longer initial time delays for public
dissemination, as well as phased in
compliance dates, for different asset
classes and market participants within
an asset class. Phasing in real-time
reporting for certain transactions by
allowing for longer initial time delays
and phased compliance dates addresses
concerns regarding bespoke
transactions, including market liquidity
and the ability for parties to report
transactions. In particular, phasing in
the public dissemination of bespoke
transactions will allow the Commission
to ensure that the public dissemination
of such transactions will protect the
identities of swap participants, not
disclose the business transactions and
market positions of any person involved
in an uncleared swap and mitigate any
adverse impact on market liquidity.
4. Foreign Exchange (‘‘FX’’) Asset Class
Several commenters sought
clarification as to which FX swaps will
be subject to the real-time public
reporting requirements; some argued
that FX forwards and swaps should not
be subject to real-time public reporting
rules. One commenter argued that the
universe of FX market participants is
massive given that FX transactions are
an integral part of the global payment
systems, presenting a practical
challenge to ensuring that all relevant
reporting participants are able to report.
To the extent that FX swaps or
forwards, or both, are excluded from the
definition of ‘‘swap’’ pursuant to a
determination by United States
Department of the Treasury
(‘‘Treasury’’), the requirements of CEA
section 2(a)(13) would not apply to
those transactions, and such
transactions shall not be subject to the
real-time public reporting requirements
of part 43. Treasury issued a proposed
determination on April 29, 2011, in
which it stated that FX swaps and
forwards that would be excluded from
the definition of ‘‘swap,’’ and thereby
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exempt from certain requirements
established in the Dodd-Frank Act,
including registration and clearing.
However, the CEA provides that, even if
Treasury determines that FX swaps and
forwards may be excluded from the
definition of ‘‘swap,’’ these transactions
are not excluded from regulatory
reporting requirements to an SDR.56
Nonetheless, such transactions would
not be subject to the real-time reporting
requirements under part 43. Treasury
has proposed to act pursuant to the
authority in Section 721 of the DoddFrank Act that permits a determination
that certain FX swaps and forwards
should not be regulated as swaps and
are not structured to evade the DoddFrank Act. The Commission has noted
that, as proposed, Treasury’s
determination would exclude FX swaps
and forwards, as defined in CEA section
1a, but would not apply to FX options
or non-deliverable forwards (‘‘NDFs’’).57
FX instruments that are not covered by
Treasury’s final determination would
still be subject to the real-time public
reporting rules described in part 43.58
Section 43.1 as adopted does not
distinguish between transactions within
the FX asset class; such a decision to
exclude FX forwards and swaps will be
determined by Treasury pursuant to
CEA section 1(a)(47).
5. Limitations and Special
Accommodations
Several scope-related comments
focused on very specific issues. Some
commenters argued that novations
should not be publicly reportable swap
transactions. Another commenter
asserted that the Commission has no
statutory basis for requiring that postswap events (e.g., novations,
amendments, terminations, etc.) be
subject to part 43. This commenter
stated that real-time reporting should be
limited to trade execution and that
lifecycle events should not be
reported.59
The Commission agrees that to the
extent that novations or other lifecycle
events do not change the pricing of an
initial execution of the swap they would
not be considered publicly reportable
swap transactions and therefore would
not be publicly disseminated.60 As two
56 See
CEA section 1(a)(47)(E).
76 FR 29818, 29835–29837 (May 23, 2011)
(proposed rulemaking issued jointly by Commission
and SEC to further define, among others, the term
‘‘swap’’).
58 See 76 FR 25774 (May 5, 2011). Treasury’s
proposed determination may also be found at
https://www.treasury.gov/initiatives/wsr/Documents/
FX%20Swaps%20and%20Forwards%20NPD.pdf.
59 See CL–NFPEEU.
60 See the definition of ‘‘publicly reportable swap
transaction’’ in § 43.2.
57 See
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commenters pointed out, the reporting
of a novation that is just a change in
ownership could lead to duplication in
reporting and misrepresentative prices
in the market.61 As discussed more fully
below, in the case of novations where
there is no change in the pricing, the
novations would not be publicly
reportable swap transactions pursuant
to § 43.2.
The Commission recognizes that there
are certain swap contract amendments
or other transactions that could enhance
price discovery. Those transactions that
have a price impact should be subject to
the real-time reporting rules of part 43.
If price-changing lifecycle events were
not required to be publicly
disseminated, swap counterparties
could enter into a swap at one price and
then immediately enter into an
amendment to change a material term of
the swap. The Commission is clarifying
the definition of ‘‘publicly reportable
swap transaction’’ to ensure that only
those lifecycle or continuation events
that have a price-changing impact
should be publicly disseminated.
Requiring such price-forming
continuation data to be publicly
disseminated eliminates the incentive
for swap counterparties to enter into a
swap followed by an amendment in
order to disguise the price of a swap.
Commenters stated that illiquid
markets should not be subject to realtime reporting.62 The Commission
believes that, consistent with CEA
section 2(a)(13), such swaps generally
are subject to the public dissemination
requirements of part 43. Certain
accommodations, however, have been
made for such swaps in part 43,
including longer initial time delays for
public dissemination in final § 43.5.
One commenter stated that power
markets should not be subject to realtime reporting.63 The Commission
acknowledges this commenter’s
concern; swaps in the power market are
priced in reference to specific locations
and thus present issues regarding the
protection of the identities of the
counterparties. To the extent that these
are off-facility swaps, the Commission
intends to propose to describe the form
and manner for their reporting in its
block trade re-proposal. As discussed
more fully below, until such standards
are adopted, such off-facility swaps
would not be subject to the real-time
61 See CL–Barclays; CL–Working Group of
Commercial Energy Firms.
62 See CL–Members of Congress; CL–MS.
Additionally, one commenter suggested less
frequent reporting for illiquid parts of the market.
CL–Chesapeake.
63 See CL–NFPEEU.
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public reporting requirements of part
43.
A few commenters argued that
physical forwards should be expressly
excluded from the real-time reporting
requirements. Others contended that
various types of swaps—including total
return swaps, stand-alone options and
structured transactions—should not be
subject to the real-time reporting
requirements of part 43 or should be
given special accommodations. To the
extent that any of these types of swaps
are excluded from the definition of
‘‘swap,’’ such transactions are not
subject to the real-time reporting
requirements. Accordingly, the
Commission does not intend to provide
any specific exemption from part 43 at
this time.
The Commission received two
comments regarding special
accommodations for real-time public
reporting in distress scenarios and DCO
default scenarios.64 One commenter
stated that special accommodations
should be made for distress scenarios;
the other stated that swaps in
connection with a DCO’s default
management should not be reported.
This commenter also provided language
to address this situation in the final
rule.
The Commission agrees that,
depending on the circumstances, default
and distress scenarios may warrant
different reporting requirements. The
Commission believes that distress and
DCO default scenarios may be situations
in which the Commission may exercise
its authority to temporarily suspend
real-time public reporting obligations
under part 43. The Commission may
address such emergency authority in a
future Commission rulemaking. The
Commission does not accept the
recommendation that real-time
reporting obligations be suspended
automatically upon the occurrence of a
distress scenario; in its view any
suspension or delay of reporting should
occur only upon a Commission
determination. Further, the Commission
believes that time delays described in
§ 43.5 will address some of the concerns
expressed in these comments.
6. Liquidity
Some commenters asserted that realtime public reporting could cause a
reduction of liquidity, particularly in
already illiquid markets.65 The
Commission believes that the
availability of previously-inaccessible
64 See
CL–Barclays; CL–LCH.Clearnet.
e.g., CL–Chesapeake; CL–Dominion; CL–
MS; CL–ATA and Meeting with Barclays (January
24, 2011).
65 See,
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1189
swap pricing data in close to real-time
will increase the competition among
potential swap counterparties regarding
the pricing of such swaps, and that such
increased competition will be a central
benefit of the real-time reporting rules.
The enhanced transparency and
reliability of transactional data provided
by the real-time dissemination of swap
transaction data can be expected to
promote confidence in the fairness and
integrity of swaps markets. Thus, the
Commission anticipates that while a
trade-off between liquidity and
transparency may manifest itself in the
beginning of the implementation period,
the increased transparency ultimately
should increase participation in the
swaps markets.66
Another key benefit of real-time
reporting of previously unavailable
swap transaction and pricing data is
enhanced price discovery. Broader
access to information will be of
particular value to buy-side participants
and end-users. As one commenter
noted, the ability to observe information
about recent transactions and to seek
customized trades offers potential
benefits to end-users.67 In this regard,
the Commission disagrees with
commenters who opined that
transaction data about bespoke, bilateral
swaps provides no price discovery
information. On the contrary, such
information helps to complete the
picture of the swap market for all
market participants, and would likely
inform traders seeking to transact
economically similar—although not
identical—swaps.
As SDs and MSPs adapt to the realtime public reporting of swap
transaction data, the Commission
anticipates that these market
participants, who typically are large and
technologically sophisticated, will
compete on price to attract end-users
and other typically smaller, lesssophisticated market participants as
swap counterparties. The Commission
believes that its phase in approach to
dissemination delays provided in § 43.5
of this rule will allow market
participants time to adapt to the new
procedures.
7. International Issues
The Commission received several
comments addressing international
66 The Commission believes that it has achieved
the appropriate balance between transparency and
liquidity. However, the Commission recognizes that
certain market participants may disagree with the
Commission and choose not to enter into certain
types of swaps. The Commission believes that
increased price transparency will attract additional
liquidity providers based on confidence that their
competitive pricing will better attract business.
67 See CL–Reval.
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concerns as they relate to the scope of
the Proposing Release. Four commenters
stated that the Commission should
explicitly require that only data relating
to swap transactions involving at least
one U.S.-person must be reported and
publicly disseminated.68 Seven
comments urged that the Commission
consult with foreign regulators before
establishing extraterritoriality scope; 69
one comment stated that jurisdictional
boundaries should be defined 70 and
seven comments stated that any SD or
MSP in a swap should be the reporting
party regardless of whether it is a U.S.
person.71 Additionally, the Public
Roundtable on Dodd-Frank
Implementation produced comments
regarding the need for the CFTC and
SEC to harmonize their reporting
requirements with international
regulators.72
Two commenters questioned whether
the Commission has the legal authority
to implement proposed § 43.1(b)(2) with
respect to non-U.S. parties 73 and
suggested the Commission reach
agreements with foreign regulators
before requiring that all transactions
with any U.S. person be subject to the
requirements in part 43.74
The Commission recognizes the
benefits of consultation with
international regulators in developing
the real-time public reporting rules set
forth in part 43 of the Commission’s
regulations. To that end, Commission
staff has had discussions with a number
of international regulators, including the
UK FSA, AEuropean Commission
(‘‘EC’’),75 European Parliament
68 See CL–ISDA/SIFMA; CL–GFXD; CL–Foreign
Headquartered Banks; and CL–Working Group of
Commercial Energy Firms.
69 See CL–ISDA/SIFMA; CL–Commodity Markets
Council; CL–Foreign Headquartered Banks; CL–
WFE/IOMA; CL–Tradeweb; CL–SIFMA AMG; and
CL–Soc Gen.
70 See CL–ISDA/SIFMA.
71 See CL–Vanguard; CL–MarkitSERV; CL–SIFMA
AMG; CL–ICI; CL–ISDA/SIFMA; CL–BlackRock;
and CL–DTCC.
72 See CL–MarkitSERV; CL–AFGI; and CFTC/SEC
Public Roundtable on International Issues Relating
to Dodd-Frank (Aug. 1, 2011). Public Roundtable
comments can be found at https://
comments.cftc.gov/publiccomments/
commentlist.aspx?id=1065.
73 As proposed, § 43.1(b) established the scope of
part 43. Proposed § 43.1(b)(2) provides that the part
43 rules apply to all SEFs, DCMs, SDRs, as well as
parties to a swap including registered SDs,
registered MSPs and U.S.-based end-users.
74 See CL–ISDA/SIFMA; CL–GFXD.
75 It should be noted that the 2004 version of
Markets in Financial Instruments’ Directive
(‘‘MiFID’’) contained language for equities that
‘‘Member States shall, at least, require regulated
markets to make public the price, volume and time
of the transactions executed in respect of shares
admitted to trading. Member States shall require
details of all such transactions to be made public,
on a reasonable commercial basis and as close to
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Rapporteur for the Regulation on OTC
Derivatives, Central Counterparties and
Trade Repositories, European Securities
and Markets Authority (‘‘ESMA’’),
Canadian Provincial Regulators and
Japan FSA.76 Commission staff
continues to discuss with international
regulators issues related to
extraterritoriality.
Several commenters stated that an SD
or MSP should be the reporting party
regardless of whether it is a U.S. person.
The Commission generally agrees that if
a registered SD or MSP is a party to a
publicly reportable swap transaction, it
should be the reporting party, to the
extent that such transaction is subject to
real-time reporting. The Commission
understands the need for flexibility
where one party to a swap is a U.S.
counterparty and the other is a foreign
counterparty. Accordingly, as discussed
in greater detail below, the Commission
is adopting language in § 43.3(a)(3) that
allows parties to a publicly reportable
swap transaction involving an offfacility swap to mutually agree on the
reporting party for such transaction;
such agreement would be a term of the
swap.
8. Final Rule Text of § 43.1
After consideration of comments
relating to the purpose, scope and rules
of construction in proposed § 43.1, the
Commission is adopting § 43.1
substantially as proposed, with some
clarifying changes responsive to
commenters’ concerns relating to the
extraterritorial scope of part 43.
Additionally, as discussed below, the
Commission is adopting other
provisions, including a revised
definition of ‘‘publicly reportable swap
transaction’’ that responds to many
commenters’ concerns.
The Commission is adopting § 43.1(a)
as proposed, with technical and
clarifying changes including (i)
changing the words ‘‘set forth’’ to
‘‘implements;’’ (ii) changing the word
real-time as possible.’’ The European Commission
published its MiFID and Markets in Financial
Instruments Regulation (‘‘MiFIR’’) on October 20,
2011. The European Commission’s legislative
proposals require that regulated markets,
multilateral trading facilities (‘‘MTFs’’) and
organized trading facilities (‘‘OTFs’’) shall make
public the price, volume and time of transaction
executed for all derivatives admitted to trading or
which are traded on an MTF or an OTF. These
organized trading venues shall make this
transaction data public as close to real-time as is
technically possible. Investment firms that make
public trades outside of trading venues must make
those trades available through Approved
Publication Arrangements which are regulated by
MiFID.
76 In addition, the Commission met with
European industry representatives, including Credit
Suisse, Deutsche Bank, Citi, J.P. Morgan, Barclays,
Goldman Sachs and UBS (Mar. 22, 2011).
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‘‘collection’’ to ‘‘reporting;’’ and (iii) the
addition of a reference to the DoddFrank Act. The Commission is adopting
§ 43.1(b) with technical and clarifying
changes relating to numbering and word
changes as well as with a change to the
last sentence. The last sentence of
§ 43.1(b), as adopted, states that ‘‘[t]his
part shall apply to registered entities as
defined in the Act, as well as to parties
to a swap including SDs, MSPs and
U.S.-based market participants in a
manner as the Commission may
determine.’’ The change to the last
sentence of § 43.1(b) deletes the
references to ‘‘registered or exempt’’
when referring to SDs and adds the
clause ‘‘in a manner as the Commission
may determine’’ as compared to
proposed § 43.1(b). Finally, § 43.1(c) is
being adopted with two clarifying
changes: ‘‘constitute’’ is changed to
‘‘shall constitute;’’ and ‘‘such’’ is
changed to ‘‘the particular.’’
B. Section 43.2—Definitions
As proposed, § 43.2 specified
definitions for a number of terms and
concepts related to real-time public
reporting of swap transaction and
pricing data. In response, the
Commission received comments from
20 interested parties, including industry
associations representing myriad
financial market participants, potential
SDs, an asset manager, potential SDRs
and a DCM. In addition to comments on
the definitions proposed in § 43.2,
commenters addressed terms not
defined in proposed § 43.2, such as
‘‘illiquid market.’’
1. Harmonization
A number of commenters suggested
that the Commission and the SEC
harmonize the use of the defined terms
in proposed § 43.2 in order to foster
operational efficiency, lessen the
incidence of errors and place fewer
burdens on reporting agencies.77 The
Commission agrees that harmonization
of certain terms is desirable and the two
agencies have coordinated their
responses to the Dodd-Frank Act as
closely as possible. The Commission
notes that the two agencies have
jurisdiction over different types of
swaps which necessitates some
differences in terminology. The
Commission believes therefore that any
differences between the two
commissions with respect to defined
terms are justified and necessary to
accomplish the purposes of the Act.
77 See CL–GFXD; CL–ISDA/SIFMA; and CL–
Vanguard.
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2. Defined Terms
Section 43.2 contains the definitions
for terms and concepts throughout part
43 and its related appendices.78 The
specific terms defined in § 43.2 are
discussed below.
Act—Proposed § 43.2(a)
The Commission is adopting the
definition as proposed with a clarifying
citation to the United States Code.79
Affirmation—Proposed § 43.2(b)
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A commenter suggested that the use
of terms like ‘‘affirmation’’ should
reflect long-standing market
conventions that differ according to the
type of underlying reference asset.80
Another commenter pointed to a
perceived loophole in the Commission’s
proposed definition that would allow
for the avoidance of block trade
reporting by agreeing on swap terms at
one point in time and affirming terms of
trade details later.81 The Commission
believes that the definition as proposed
provided adequate clarity to permit
flexibility for different market
participants, asset classes and methods
of execution. The Commission is not
persuaded by the argument that the
proposed definition contains a loophole
that would allow for the avoidance of
block trade reporting. The Commission
believes that the business conduct and
straight-through processing rules
proposed in part 23 of its regulations,82
in addition to anti-evasion requirements
(proposed to be included in part 1 of its
regulations), should provide adequate
oversight rules.83
Comments emphasizing the need for
harmonization between the CFTC and
the SEC focused in part on the
definition of ‘‘affirmation.’’ The SEC’s
proposed Regulation SBSR does not
include the concept of ‘‘affirmation’’;
however, the Commission believes that
this difference is not material.
78 Proposed § 43.2 used subparagraph lettering for
the definitions; however, the Commission has
removed the subparagraph lettering from final
§ 43.2 to enable the addition of defined terms as
rules relating to block trades and large notional offfacility swaps are promulgated, without
necessitating a renumbering with § 43.2.
79 No comments were received in connection with
the proposed definition for ‘‘Act.’’
80 See CL–ISDA/SIFMA. As discussed below, this
comment was broadly applied to terms such as
‘‘execution’’ and ‘‘confirmation.’’
81 See Communication with Darrell Duffie (Dec.
15, 2010).
82 See supra note 18.
83 Proposed part 1 of the Commission’s
regulations provides that all transactions that are
willfully structured to evade the requirements of
the Dodd-Frank Act will be treated as swaps. See
76 FR 29818 at 29865–66 (May 23, 2011). The rule
has not yet been adopted.
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For the reasons discussed above, the
Commission believes that the proposed
definition of ‘‘affirmation’’ provides
adequate clarity for different market
participants, asset classes and methods
of execution. Accordingly, the
Commission is adopting the definition
as proposed.
Appropriate Minimum Block Size—
Proposed § 43.2(c)
The Commission is adopting the
definition of ‘‘appropriate minimum
block size’’ with a few modifications. As
discussed below, since the definition of
‘‘swap instrument’’ is not being adopted
in these final rules, the reference to that
definition is removed.84 The statement
in the proposed definition regarding the
calculation of appropriate minimum
block sizes has been removed since
those proposed rules are being
reconsidered at this time.
As Soon as Technologically
Practicable—Proposed § 43.2(d)
Proposed § 43.2(d) defined the term
‘‘as soon as technologically practicable’’
as ‘‘as soon as possible, taking into
consideration the prevalence of
technology, implementation and use of
technology by comparable market
participants.’’ The Commission
anticipated that this term could have
different interpretations for different
swap counterparties (i.e., SDs, MSPs
and end-users), for different types of
swaps (e.g., energy swaps, credit default
swaps, interest rate swaps, etc.) and for
different methods of execution (i.e.,
SEFs, DCMs and off-facility swaps).
The Commission received twelve
comments from various interested
parties, including trading platforms,
industry groups/associations and a data
vendor. One commenter 85 stated that
while the SEC’s proposed definition of
‘‘real time’’ more easily replicates
current market practice than ‘‘as soon as
technologically practicable,’’ the CFTC
and SEC should propose one consistent
definition of real-time reporting for their
respective rules.
While the comments generally
support the flexibility of the definition,
some commenters requested further
clarification. One commenter, for
example, requested that the Commission
distinguish between SDs that are banks
and those that are non-banks.86 Another
commenter requested clarification
whether ‘‘as soon as technologically
practicable’’ would mean the same thing
for swaps executed on or pursuant to
the rules of a SEF or DCM as for swaps
under CEA section 2(h)(7).87
Some commenters suggested that the
Commission refrain from establishing
maximum reporting time frames, except
for large SDs and MSPs or, at a
minimum, either adopt longer time
frames for reporting for market
participants that are not SDs or MSPs,
or allow custom and market practice to
eventually define the time period that is
a responsible interpretation of
‘‘technologically practicable.’’ 88 Other
commenters addressed the concept of
backstops for real-time reporting for
non-block trades.89 One stated that there
must be a maximum time limit of no
longer than five minutes,90 while
another said that maximum reporting
timeframes should be given only for SDs
and MSPs (or at a minimum reporting
timeframes should be longer for endusers).91 Another commenter contended
that real-time reporting should occur
after confirmation to reduce errors and
omissions and since the confirmation
process is what drives the booking of a
trade into a firm’s trade capture
system.92
The Commission acknowledges that
SDs and MSPs are more likely to have
the infrastructure and resources
available to report their swap
transaction and pricing data to an SDR
faster than other categories of market
participants (i.e., financial and nonfinancial end-users). However, the
Commission believes it would be
premature to establish maximum
timeframes at this time without
information on the manner and
frequency in which these swaps are
executed or a clear understanding of the
technological capabilities of reporting
parties. Declining to establish backstops
is a less prescriptive approach that takes
into account the different technological
capabilities of different markets and
market participants. The Commission
can analyze timestamp data, which is
not currently available, to determine
whether reporting parties are reporting
‘‘as soon as technologically practicable.’’
In response to comments requesting
further clarification of the definition,
the Commission believes that the
proposed definition provided adequate
flexibility for different market
participants, asset classes and methods
of execution. If the definition of ‘‘as
87 See
84 No
comments were received in connection with
the language of the proposed definition for
‘‘appropriate minimum block size.’’
85 See CL–Chris Barnard.
86 See CL–Working Group of Commercial Energy
Firms.
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CL–Coalition for Derivatives End-Users.
88 Id.
89 See CL–Better Markets; CL–Markit; and CL–
Coalition for Derivatives End-Users.
90 See CL–Better Markets.
91 See CL–Coalition for Derivatives End-users.
92 See CL–DTCC.
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soon as technologically practicable’’
were more rigid (e.g., setting forth
maximum reporting times) the costs to
less sophisticated reporting parties
could be greater, particularly in the
initial phases of the rule.93
With respect to comments regarding
backstops, the Commission believes that
there could be potentially significant
costs to certain market participants—
particularly end-users—in complying
with a backstop. For this reason as well,
the Commission has determined to
retain the flexibility of the definition by
excluding backstops. While the SEC’s
proposed Regulation SBSR provided a
15-minute backstop, it is important to
note that the markets overseen by the
SEC have significantly fewer end-users
participating in the credit and equities
markets than the markets under the
Commission’s authority. The
Commission believes this distinction
justifies the difference in approach
between the agencies.
For the reasons discussed above, the
Commission has retained a less
prescriptive definition of ‘‘as soon as
technologically practicable’’ in order to
provide adequate flexibility for different
market participants, asset classes and
methods of execution, particularly when
weighed against the potential costs to
market participants to comply with
more rigid timeframes. Accordingly, the
Commission is adopting the definition
as proposed.
Asset Class—Proposed § 43.2(e)
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Proposed § 43.2(e) provided that the
asset classes include five major
categories: Interest rate, currency, credit,
equity and ‘‘other commodity,’’ as well
as any other asset class that may be
determined by the Commission.
Commenters offered various views with
respect to categorizing the asset classes.
One commenter recommended that
relatively few defined asset classes
would create increased aggregation of
services and reduce the risks of
duplication or omission in public
dissemination or erroneous
consolidation by the public of available
data, while also reducing the burden on
market participants to connect and
reconcile among multiple SDRs.94 ISDA
and SIFMA jointly opined that
providing sub-asset classes for ‘‘other
93 The Commission notes that real-time swap
transaction and pricing data must be reported ‘‘as
soon as technologically practicable’’ after
‘‘execution’’ which is linked to the ‘‘affirmation’’ of
the swap. ‘‘Confirmation’’ of the swap may occur
at a point after the affirmation and execution, or at
the same time (e.g., SEF or DCM execution of a
swap).
94 See CL–DTCC.
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commodity’’ would be advisable for
reporting requirements.95
One commenter expressed concern
with respect to the definition, treatment
and reporting of an FX forward under
the Proposing Release.96 This
commenter requested clarification that
spot transactions with value dates less
than or equal to T+2 97 are excluded
from the definition and further
requested clarification with respect to
the reporting obligations on those FX
products that may be excluded by
Treasury. Commenters also requested
further clarification in defining an ‘‘FX
swap’’ and ‘‘cross currency swap.’’
These commenters distinguished
between a cross currency swap (an
interest rate product with multipayment schedules, traded by interest
rate desks with interest rate market
participants) and an FX swap (‘‘FX
products traded by distinct FX desks
with different market participants using
different internal and external systems
infrastructure’’).98 In the commenters’
opinion, cross-currency swaps should
be reported in the interest rate asset
class, while FX swaps should be
reported in a separate FX asset class.
One commenter suggested that, with
respect to FX instruments, market
conventions are needed to determine
whether (i) both legs of the transaction
are reported by a single counterparty; or
(ii) whether the transaction is instead
reported separately as two legs by two
counterparties with two separate trade
identifications. Additionally, the
commenter suggested that an FX subclassification system should be
categorized by an industry association
sufficiently familiar with the FX
market.99
One commenter recommended that
the definition of ‘‘asset class’’ be
harmonized with the SEC’s definition to
facilitate ease of tracking by market
participants.100 The Commission
believes that references to the credit and
equity asset classes should, to the extent
possible, be defined consistently
between the two agencies, but notes that
the SEC will not be regulating products
in asset classes other than credit and
equity. Because the Commission is best
situated to define the asset classes
within its jurisdiction, it believes that
any differences between the CFTC and
the SEC with respect to the definition of
‘‘asset class’’ have their origins in
95 See
CL–ISDA/SIFMA.
CL–GFXD.
97 The terms ‘‘T+1’’ and ‘‘T+2’’ refer to the
transaction date plus one day or two days,
respectively.
98 See CL–GFXD.
99 Id.
100 See CL–Vanguard.
96 See
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different statutory and regulatory
schemes and are justified and necessary.
The Commission is persuaded by the
suggestions regarding the subdivision of
asset classes and agrees that fewer asset
classes will decrease fragmentation of
data and reduce the burden of market
participants to reconcile among
multiple SDRs. Additionally, since an
SDR that accepts swap transaction and
pricing data for a swap within an asset
class must accept data for all swaps in
that asset class, market participants will
more likely be able to report data for
both real-time and regulatory reporting
purposes.101 The Commission also
agrees that there is merit to providing a
sub-class for the ‘‘other commodity’’
asset class. The ‘‘other commodity’’
asset class may be broken down into
sub-asset classes for purposes of public
dissemination;102 however, the ‘‘other
commodity’’ asset class remains an asset
class that includes energy, metals,
precious metals, agricultural
commodities, weather, property and
other commodities.
Finally, the Commission agrees that
clarification and additional guidance is
needed to address FX products.103
Specifically, the Commission has
determined to include cross-currency
swaps in the interest rate asset class and
FX options, swaps and forwards will be
included in an FX asset class. Therefore,
the Commission has modified the
definition to better reflect the fact that
the industry typically characterizes
‘‘currency’’ swaps as ‘‘interest rate
swaps.’’ 104 Accordingly, the
Commission is replacing the term
‘‘currency’’ in the definition of asset
class with ‘‘foreign exchange’’ in § 43.2
to accurately reflect the asset classes
employed by the swaps market.
As discussed above, to the extent that
FX swaps or forwards, or both, are
excluded from the definition of ‘‘swap’’
pursuant to a determination by
Treasury, the requirements of CEA
section 2(a)(13) would not apply to
those transactions, and such
transactions shall not be subject to the
real-time reporting requirements of part
43. Under Treasury’s proposed
determination, while FX swaps and
forwards would be excluded from the
101 See § 49.10(b). See also 76 FR 54538, 54579
(Sep. 1, 2011). Part 49 establishes the registration
and compliance requirements for SDRs. See also
§ 43.3(c)(2).
102 Accordingly, appendix A to part 43 provides
a data field for public dissemination entitled ‘‘subasset class for other commodity.’’
103 See CL–GFXD.
104 This characterization is based on the attributes
of currency swaps that resemble the structure and
operation exhibited by interest rate swaps while in
‘‘foreign exchange’’ swaps, the underlying
currencies are exchanged by the parties.
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real-time reporting requirements of part
43, FX options and NDFs would not be
excluded and would be subject to part
43’s real-time reporting requirements.105
The Commission has determined to
clarify the definition of ‘‘asset class’’ by
changing the asset class from
‘‘currency’’ to ‘‘foreign exchange.’’ In
addition, such change would place
‘‘cross-currency swaps’’ in the ‘‘interest
rate’’ asset class. Finally, the
Commission is making technical
changes to the definition of ‘‘asset
class.’’ For example, ‘‘the broad category
of goods, services or commodities’’ is
changed to ‘‘a broad category of
commodities, including, without
limitation, any ‘excluded commodity’ as
defined in Section 1a(19) of the Act,
with common characteristics underlying
a swap.’’ 106
Block Trade—Proposed § 43.2(f)
The Commission has determined to
modify the proposed definition of
‘‘block trade’’ by making certain
technical and conforming changes in
light of other definitional changes and
terminology usage throughout part
43.107 The Commission clarified that a
block trade involves a swap that is
‘‘listed on a SEF or DCM’’ and therefore
deleted the phrase ‘‘made available for
trading.’’ Such change ensures that
block trades may be executed with
respect to any listed contract.
Additionally, the Commission clarified
certain aspects of the definition,
including changing the word ‘‘off’’ to
‘‘away from’’ to indicate that a block
trade is executed away from the trading
system or platform. The other revisions
to the ‘‘block trade’’ definition provide
clarification and reflect consistency
with other changes to the final rule. As
previously discussed, this rulemaking
does not address issues related to the
determination of appropriate minimum
block sizes.
tkelley on DSK3SPTVN1PROD with RULES2
Business Day
The Commission has determined to
add ‘‘business day’’ as a defined term to
address the final time delay provisions
in § 43.5. The Commission defined the
term ‘‘business day’’ in § 43.2 as
follows: ‘‘Business day means the
twenty-four hour day, on all days except
Saturdays, Sundays and legal holidays
105 See 76 FR 25774 at 25776. ‘‘[U]nlike most
derivatives, foreign exchange swaps and forwards
have fixed payment obligations, are physically
settled, and are predominantly short-term
instruments.’’
106 The terms ‘‘commodity’’ and ‘‘excluded
commodity’’ as used in the definition of ‘‘asset
class’’ are defined in CEA sections 1a(9) and 1a(19)
respectively.
107 The Commission received no comments
addressing its proposed definition of ‘‘block trade.’’
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in the location of the reporting party or
registered entity reporting data for the
swap.’’
The Commission believes that
defining business day as twenty-four
hours is necessary given the global
nature of the swaps market. The
determination of the business day will
be based on the time zone of the
location of the reporting party, SEF or
DCM. For example, if the reporting
party is an SD located in London who
enters into a swap with a U.S.-based
entity, London time would be used to
determine the business day.
Business Hours
The Commission did not receive
comments suggesting a definition of
‘‘business hour;’’ however, it believes
that the addition of such defined term
is necessary to provide clarity with
respect to the real-time reporting
provisions in final § 43.5. The term
‘‘business hours’’ is defined in § 43.2 as
follows: ‘‘Business hours means the
consecutive hours of one or more
consecutive business days.’’
Since ‘‘business day’’ is defined as the
twenty-four hour day, ‘‘business hours’’
are consecutive hours during and across
‘‘business days.’’ For example if a
publicly reportable swap transaction has
a time delay of 24 business hours and
it is executed at 6 a.m. EST on Friday,
then such swap would be publicly
disseminated at 6 a.m. EST on Monday,
assuming that weekend days are not
business days in the locale of the
reporting party.
Confirmation—Proposed § 43.2(g)
One commenter stated that the
definition of confirmation was
appropriately broad.108 With respect to
the proposed requirement that a
confirmation would legally supersede
any previous agreement (electronic or
otherwise), this commenter requested
clarification or confirmation that this
provision does not mean that a
confirmation supersedes terms in the
package of documentation that make up
the ‘‘agreement,’’ unless the parties
themselves so agree.109 The commenter
stated that this clarification is necessary
because some fiduciaries of plans
ensure that the terms of a swap are the
best terms available from the
perspective and interests of plan
participants by having the lead fiduciary
centralize the negotiation of the terms of
the Schedule and Paragraph 13 of the
ISDA Agreement.110
108 See
CL–ABC/CIEBA. See supra note 80.
109 Id.
110 The Schedule provides an opportunity for
parties to a swap to negotiate terms of or add terms
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A commenter suggested that use of
terms such as ‘‘confirmation’’ should
reflect long-standing market
conventions that differ according to the
type of underlying reference asset.111
Another commented similarly that the
definition used for ‘‘confirmation’’
should reflect the underlying
conventions that are prevalent in the FX
market, which may be different to those
used in other asset classes.112
The Commission agrees that
clarification is necessary with respect to
the proposed requirement that a
confirmation would legally supersede
any previous agreement (electronically
or otherwise).113 The Commission
believes that adding the phrase ‘‘relating
to the swap’’ following ‘‘previous
agreement’’ provides sufficient clarity.
Absent a requirement that the
confirmation legally supersedes the
previous agreement relating to the swap,
transparency could be lost as key terms
could be included in the schedule or
credit support annex and conflict with
terms later added to the confirmation. It
is industry practice that the
confirmation is the controlling
document, and such confirmation will
usually incorporate the schedule, master
and any collateral arrangement(s) by
reference.
With respect to the comment that
‘‘confirmation’’ should reflect longstanding market conventions that differ
according to the type of underlying
reference class, the Commission
believes that the definition as proposed,
with the modification as described
above, provides adequate clarity to
allow flexibility for different market
participants, asset classes and methods
of execution. Therefore, the Commission
is adopting the definition of
confirmation as proposed with some
minor clarifications, including adding
‘‘relating to the swap’’ to the end of the
definition to make clear that the
agreement that would be legally
superseded would have to relate to the
same swap.
Confirmation by Affirmation—Proposed
§ 43.2(h)
This term is adopted as proposed,
except for the deletion of the last
to the pre-printed ISDA Master Agreement.
Paragraph 13 provides an opportunity for parties to
a swap to negotiate the terms of or add terms to the
Credit Support Annex (New York Agreement) for
the OTC swap transaction.
111 See CL–ISDA/SIFMA. This suggestion is part
of a broader comment recommending that defined
terms should follow market conventions.
112 See CL–GFXD.
113 See CL–ABC/CIEBA.
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sentence of the proposed definition.114
Upon further consideration, while it
agrees with that statement, the
Commission believes that this statement
is not necessary and therefore should
not be included in the definition.
Embedded Option—Proposed § 43.2(i)
This defined term is adopted as
proposed with a minor clarification. The
proposed definition stated that an
embedded option was a right, but not an
obligation, provided to one party of a
swap by the other party ‘‘to the same
swap that provides the party in
possession of the option * * *.’’ The
Commission is clarifying this language
to provide that the ‘‘party holding the
option’’ that has the ability to change
any of the economic terms of the swap
‘‘as those terms previously were
established at confirmation (or were in
effect on the start date).’’
Executed—Proposed § 43.2(j)
The Commission is adopting this term
as proposed.
tkelley on DSK3SPTVN1PROD with RULES2
Execution—Proposed 43.2(k)
Proposed § 43.2(k) defined
‘‘execution’’ as the agreement between
parties to the terms of a swap that
legally binds the parties to such terms
under applicable law. An agreement
may be in electronic form (e.g., on a SEF
or DCM or via instant message); oral
(e.g., telephonically); in writing (e.g., a
bespoke, structured transaction where
documents are exchanged); or in some
other format not contemplated at this
time. Execution is simultaneous with or
immediately follows the affirmation of
the swap. The SEC does not define
‘‘execution’’ in its Proposed Regulation
SBSR, but rather defines ‘‘time of
execution’’ as the ‘‘point at which the
counterparties to an SBS become
irrevocably bound under applicable
law.’’ 115 One commenter asserted that
the use of terms such as ‘‘execution’’
should reflect long-standing market
conventions that differ according to the
type of underlying reference asset.116
The commenter further stated that
harmonization of these terms in the
Commission’s and SEC’s rules for a
particular product type will foster
operational efficiency, lessen the
incidence of errors, and place fewer
burdens on reporting agencies. Another
commenter stated that the definition
114 Proposed § 43.2(h) contained the sentence:
‘‘With the affirmation by one party to the complete
swap terms submitted by the other party, the swap
is legally confirmed and a legally binding
confirmation is consummated (i.e., confirmation by
affirmation).’’
115 See 75 FR 75211, n. 30 (Dec. 2, 2010).
116 See CL–ISDA/SIFMA. See supra note 80.
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used for ‘‘execution’’ should reflect the
underlying conventions that are
prevalent in the FX market, which may
be different from those used in other
asset classes.117
In response to the comments that
‘‘execution’’ should reflect longstanding market conventions that differ
according to the type of underlying
reference asset and underlying
conventions in the FX market, the
Commission believes that the definition
as proposed provides adequate clarity to
allow flexibility for different market
participants, asset classes and methods
of execution. Additionally, the
definition is substantially similar to that
in proposed Commission regulation
§ 23.500(d).118
However, in order to provide
additional clarity with respect to the
definition of ‘‘execution,’’ the
Commission is modifying the last
sentence of the proposed definition to
read, ‘‘Execution occurs simultaneous
with or immediately following the
affirmation of the swap.’’ The
Commission believes that swaps
associated with structured transactions
will, for the most part, be bespoke, or
customized, transactions. These
structured transactions will be
identified as bespoke when publicly
disseminated. Additionally, the
Commission believes it is necessary to
make clear that execution (i.e., when a
legally binding contract is formed) for
certain structured transactions may not
occur until the documents are signed
and/or the deal is funded.
Large Notional Swap—Proposed
§ 43.2(l)
Although no comments were received
in connection with the proposed
definition, the Commission has
determined to make certain technical
and conforming changes consistent with
other definitional changes and
terminology throughout part 43: The
term ‘‘large notional swap’’ is renamed
‘‘large notional off-facility swap’’ for
added clarity. All references to ‘‘large
notional swap’’ should be read
interchangeably with the term ‘‘large
notional off-facility swap’’ for the
purposes of these part 43 rules. In
addition, the Commission has made
minor technical and conforming
changes to the definition. Specifically,
the definition is simplified to clarify
117 See
CL–GFXD.
is defined in proposed
§ 23.500(d) to mean, with respect to a swap
transaction, ‘‘an agreement by the counterparties
(whether orally, in writing, electronically, or
otherwise) to the terms of the swap transaction that
legally binds the counterparties to such terms under
applicable law.’’ See 75 FR 81519 at 81530.
118 ‘‘Execution’’
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that the term large notional off-facility
swaps applies to all off-facility swaps
with a notional or principal amount at
or above the appropriate minimum
block size that nevertheless are not
block trades.
Minimum Block Trade Size—Proposed
§ 43.2(m)
The Commission is not adopting a
definition for ‘‘minimum block trade
size’’ at this time; the definition will be
addressed in connection with the block
trade re-proposal to be published for
comment in the Federal Register.
Newly-Listed Swap—Proposed § 43.2(n)
The Commission is not adopting a
definition for ‘‘newly-listed swap’’ in
this final rulemaking; the definition will
be addressed in connection with the
block trade re-proposal to be published
for comment in the Federal Register.
Novation—Proposed § 43.2(o)
The Commission is adopting the
defined term ‘‘novation’’ as proposed
with a minor, non-substantive
clarification.
Off-Facility Swap—Proposed § 43.2(p)
One commenter contended that the
definition of ‘‘off-facility swaps’’
unnecessarily complicate an already
complex process and is not required by
the Act.119 The Commission disagrees:
Terms and sufficiently detailed
definitions assist readers to understand
the rule, to adequately define complex
products and to assist in describing the
requirements for registered entities and
market participants.
While there are no substantive
changes to this definition, the
Commission made minor technical and
conforming changes by adding
‘‘publicly’’ before ‘‘reportable swap
transaction’’ to conform with the change
to the defined term.
Other Commodity—Proposed § 43.2(q)
Although the Commission did not
receive comments addressing the
definition of ‘‘other commodity,’’ it has
determined to modify the definition to
more appropriately reflect other
revisions to proposed § 43.2. The
proposed definition stated, ‘‘Other
commodity means any commodity that
cannot be grouped in the credit,
currency, equity or interest rate asset
class categories.’’ Section 43.2 defines
‘‘other commodity’’ as follows: ‘‘Other
commodity means any commodity that
is not categorized in the other asset
classes as may be determined by the
Commission.’’
119 See
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The phrase ‘‘as may be determined by
the Commission’’ modifies the phrase
‘‘other asset classes’’ to adequately
reflect the language in the definition of
‘‘asset class.’’
tkelley on DSK3SPTVN1PROD with RULES2
Public Dissemination and Publicly
Disseminate—Proposed § 43.2(r)
The proposed definition of ‘‘publicly
disseminate’’ states that data should be
disseminated on a non-discriminatory
basis. Commenters requested further
clarification relating to the definition of
‘‘publicly disseminate.’’ One believed
that the definition was too passive in
describing how the data is delivered.
Two commenters asked for clarification
whether the data that is publicly
disseminated is pre- or post-allocation.
The Commission clarifies that the
swap transaction and pricing data that
must be publicly disseminated is preallocation data. Accordingly, the
notional or principal amount that would
be publicly disseminated would be the
pre-allocated amount.
The Commission disagrees that the
definition of ‘‘publicly disseminate’’ is
too passive in describing how the data
are delivered. The Commission believes
that ‘‘publicly disseminate’’ should
mean making the data readily available
in a non-discriminatory manner to those
who wish to access it, rather than
pushing out the data to market
participants, data vendors, news media,
etc.
In the Commission’s view the
proposed definition of ‘‘publicly
disseminate,’’ is sufficiently clear. This
definition is intended to convey that the
data are available to all interested
parties. The Commission believes that
posting the swap transaction and
pricing data on an Internet Web site and
providing the Commission with a link to
a conspicuous Internet Web site on
which anyone can freely access the
information is sufficient to satisfy the
definition of publicly disseminate. The
Commission expects to post these links
on its Web site to provide market
participants and the public with a
central location to access such data.120
The Commission agrees with
commenters that the term ‘‘widely
published’’ should be clarified, and has
defined ‘‘widely published’’ in § 43.2 to
mean, ‘‘to publish and make available
through electronic means and in a
manner that is freely available and
readily accessible to the public.’’
120 The Commission’s Web site can be accessed at
www.cftc.gov.
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Real-Time Disseminator—Proposed
§ 43.2(s)
All real-time data must be sent to
SDRs, and SDRs must ensure that such
data is publicly disseminated. For this
reason, the Commission has concluded
that a separate definition of ‘‘real-time
disseminator’’ could be confusing and is
unnecessary. Accordingly, the
Commission has determined not to
adopt this defined term in § 43.2.
Real-Time Public Reporting—Proposed
§ 43.2(t)
The Commission is adopting this term
as proposed.121
Remaining Party—Proposed § 43.2(u)
This Commission is adopting this
term as proposed.122
Reportable Swap Transaction—
Proposed § 43.2(v)
Proposed § 43.2(v) defined this term
as ‘‘any executed swap, novation, swap
unwind, partial novation, partial swap
unwind or such post-execution event
that affects the price of a swap.’’ The
proposed definition included both the
execution of a swap and certain priceaffecting events that occur over the life
of a swap. The Commission believes
novations and swap unwinds are events
that may affect the price of the swap and
should be publicly disseminated in realtime, but only to the extent that they
affect the pricing of the swap. In
addition to novations and swap
unwinds, other price-affecting events
over the life of a swap may be
considered ‘‘reportable swap
transactions.’’ One commenter
contended that the criteria for
‘‘reportable swap transaction’’ should
exclude internal transactions between
related or affiliated parties, such as
back-to-back transactions between
trading centers for the purpose of
transferring the management of risk,
where the pricing of the individual
transaction could be influenced by
group internal issues.123 Another
commenter stated that the reporting of
lifecycle events should be limited to
price-forming events. This commenter
further suggested the inclusion of an
unconditional requirement to report any
information which could affect prices or
pricing attributes during the life of a
swap.124
The Commission recognizes
commenters’ concerns regarding the
121 No comments were received in response to the
proposed definition of ‘‘real-time public reporting.’’
122 No comments were received in response to the
proposed definition of ‘‘remaining party.’’
123 See CL–TriOptima.
124 See CL–Chris Barnard.
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criteria for ‘‘reportable swap
transaction’’ and also agrees that the
reporting of lifecycle events should be
limited to price-forming events.
Accordingly, it is modifying the
definition of ‘‘reportable swap
transaction’’ in proposed § 43.2(v) to
address these concerns. The defined
term has been changed to ‘‘publicly
reportable swap transaction’’ to make
clear that the scope of the definition
covers only those swaps and lifecycle
events that are to be publicly
disseminated pursuant to part 43, and
not necessarily all of the swaps and
lifecycle events that must be reported to
SDRs for regulatory purposes. The
Commission is limiting the scope of
publicly reportable swap transactions to
those executed swaps that are arm’slength and that result in a change in the
market risk position between two
parties. The Commission also is
providing clarifying examples in the
definition regarding executed swaps
that need not be publicly disseminated
because they are not arm’s-length
transactions between two parties,
notwithstanding that they do result in a
corresponding change in the market risk
position between the two parties. The
definition provides that such swaps
include: (1) Internal swaps between onehundred percent owned subsidiaries of
the same parent entity; and (2) portfolio
compression exercises.125
The Commission’s definition of
publicly reportable swap transaction
does not include swaps that are not
executed at arm’s-length. These
transactions do not serve the price
discovery objective of CEA section
2(a)(13)(B). Moreover, the public
dissemination of such trades and
exercises may reveal the identity of a
counterparty in violation of CEA
sections 2(a)(13)(E)(i) and (C)(iii).
Further, the public dissemination of
such information may mislead the
market.126 The definition also modifies
the list of lifecycle events (‘‘priceforming continuation events’’). This
modification was made to provide
clarity as to the types of lifecycle events
that are publicly reportable swap
transactions and to provide conformity
between Commission regulations.127
125 The Commission notes that the examples
provided in the definition of ‘‘publicly reportable
swap transaction’’ are not exhaustive.
126 See the discussion of § 43.1 for further
discussion relating to swaps between affiliates and
portfolio compression exercises.
127 This language is consistent with the definition
of ‘‘swap transaction’’ in proposed § 23.500(m). See
75 FR 81519 (December 28, 2010).
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Reporting Party—Proposed § 43.2(w)
The Commission is adopting this
definition as proposed with minor
conforming changes including adding
the word ‘‘publicly’’ before ‘‘reportable
swap transaction’’ and adding ‘‘43’’ after
‘‘part.’’
tkelley on DSK3SPTVN1PROD with RULES2
Social Size—Proposed § 43.2(x)
The Commission is not adopting the
defined term ‘‘social size’’ at this time.
The Commission will address the
concept of ‘‘social size’’ in a
forthcoming re-proposal of the block
trade rules to be published for comment
in the Federal Register. Comments
regarding ‘‘social size’’ received in
connection with the Proposing Release
will be considered by the Commission
in its re-proposal of the block trade
rules.
Swap Instrument—Proposed § 43.2(y)
In the Proposing Release, the
Commission stated that swap
instrument groupings or categories
should be relatively broad for the
purposes of calculating minimum block
sizes.128 The Commission solicited
comments addressing how it should
refine the definition and received eleven
comments from various interested
parties, including industry associations
representing myriad financial market
participants, SDs, an asset manager,
potential SDRs and a financial end-user.
Several commenters requested further
clarification of this definition. Others
challenged the Commission’s ability to
develop adequate swap instrument
categories and a definition without
adequate data.
Some commenters urged the
Commission to consider various criteria
when creating groupings or categories of
swaps instruments. One commenter
provided a list of major currencies to
consider while another cited a list of the
key drivers of liquidity. Another
commenter submitted information on
how liquidity should be considered
when determining the swap instrument
groupings. Other commenters argued
that the groupings or categories for
‘‘swap instrument’’ should be more
specific. One commenter suggested that
the Commission define the relevant
swap markets and contracts with
sufficient granularity to appropriately
reflect different types of swap
transactions. The Commission does not
believe it is necessary to adopt a more
granular definition of swap contracts in
light of the revisions to the asset class
definition, the re-proposal relating to
block trades sizes and the
implementation phase in.
128 See
Real-Time NPRM supra note 6, at 76145.
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The Commission agrees that its ability
to develop adequate swap instrument
groupings or categories would benefit
from adequate market data as well as
further research. Therefore the
Commission has determined not to
define ‘‘swap instrument’’ at this time.
The Commission will address the
concept of ‘‘swap instrument’’ in a reproposal of the block trade rules to be
published for comment in the Federal
Register.129
Swap Market—Proposed § 43.2(z)
As discussed above, the Commission
disagrees that definitions such as ‘‘swap
markets,’’ ‘‘off-facility swaps,’’ ‘‘realtime price disseminators’’ and ‘‘third
party service providers’’ unnecessarily
complicate an already complex
process.130 The Commission believes
that such terminology, including
sufficiently-detailed definitions, is
necessary to assist readers’
understanding of the rule and to
adequately define and describe complex
products and the requirements of
registered entities and market
participants. Nor does the Commission
agree that the creation of such terms is
inconsistent with the statute. The
Commission believes the terms are
consistent with the statutory purposes
and/or requirements of CEA section
2(a)(13). However, in the interest of
clarity the Commission is replacing the
term ‘‘swap market’’ with ‘‘registered
swap execution facility or designated
contract market’’ in the final rule.
Swap Unwind—Proposed § 43.2(aa)
In light of changes to the term
‘‘publicly reportable swap transaction,’’
the Commission is not adopting the
defined term ‘‘swap unwind.’’
Third-Party Service Provider—Proposed
§ 43.2(bb)
In light of changes to final § 43.3, the
Commission is not adopting the defined
term ‘‘third-party service provider.’’
Transferee—Proposed § 43.2(cc)
The Commission is adopting this
defined term as proposed.
Transferor—Proposed § 43.2(dd)
The Commission is adopting this
defined term as proposed.
Unique Product Identifier—Proposed
§ 43.2(ee)
The Commission is adopting this
defined term as proposed with the
129 Comments regarding ‘‘swap instrument’’
received in connection with the Proposing Release
also will be considered by the Commission in its
re-proposal of the block trade rules.
130 See CL–NFPEEU.
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clarification that the definition refers to
a ‘‘product in an asset class or sub-asset
class’’ and not the asset class itself, as
well as an additional reference to
appendix A to part 43.
U.S. Person—Proposed § 43.2(ff)
The Commission is not adopting the
defined term ‘‘U.S. person’’ since the
term is not used in the final rules.
3. Additional Issues Relating to Defined
Terms
Several commenters suggested adding
defined terms that were not included in
proposed § 43.2:
Illiquid Markets
Commenters suggested that the
Commission define ‘‘illiquid markets’’
subject to this provision by reference to
particular commodities, such as jet fuel,
or by a formula relating to the average
number of transactions per day. One
comment suggested that market
segments be defined by distance on the
forward curve.131 The commenter
believes that many swap contracts in
physical commodities that are longer
than nine months forward should be
eligible for a delay in public
dissemination. Another commenter
suggested that the determination of
what constitutes an illiquid market
should be based on the number of
reported transactions, and that any
market in which the average number of
transactions (measured annually) is less
than five transactions per day be
deemed to be ‘‘illiquid.’’ 132
The Commission has considered these
comments, but does not believe that a
definition of ‘‘illiquid markets’’ is
necessary to this rulemaking. Comments
regarding liquidity are discussed in this
Adopting Release and will be further
considered by the Commission in its reproposal of the block trade rules.
Widely Published
One commenter suggested that the
term ‘‘widely published,’’ as used
within the definition of ‘‘public
dissemination and publicly
disseminate’’ is subject to interpretation
and should be separately defined.133
Accordingly, the Commission has
defined ‘‘widely published’’ in § 43.2 as
follows: ‘‘Widely published means to
publish and make available through
electronic means in a manner that is
freely available and readily accessible to
the public.’’
131 See
CL–ATA.
CL–MS.
133 See CL–CME.
132 See
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C. Section 43.3—Method and Timing for
Real-Time Public Reporting
As proposed, § 43.3 specified both the
manner in which swap counterparties
must report swap transaction and
pricing data to the appropriate
registered entity, and the manner in
which registered entities must publicly
disseminate such data. This section also
established requirements for: (1)
Acceptable forms of media through
which swap transaction and pricing
data may be made available to the
public; (2) appropriate methods to
cancel or correct erroneous or omitted
data that has been publicly
disseminated; (3) the hours of operation
that SEFs, DCMs and SDRs must
maintain for the public dissemination of
swap transaction and pricing data; and
(4) recordkeeping of data.
1. Responsibilities of Parties to a Swap
(§ 43.3(a))
CEA section 2(a)(13)(F) provides the
Commission with authority to
determine reporting requirements for
swap counterparties:
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[p]arties to a swap (including agents of the
parties to a swap) shall be responsible for
reporting swap transaction information to the
appropriate registered entity in a timely
manner as may be prescribed by the
Commission.
As proposed, § 43.3(a) provided that
the reporting party to each swap
transaction would be responsible for
reporting to a real-time disseminator ‘‘as
soon as technologically practicable.’’
The designation of the responsible party
depended on the execution of the swap
transaction. For swap transactions
executed on a SEF or DCM, proposed
§ 43.3(a)(2)(i) provided that the SEF or
DCM must report to a real-time
disseminator ‘‘as soon as
technologically practicable.’’ For offfacility swaps, proposed § 43.3(a)(3)
established the following hierarchy of
counterparties to determine who has the
responsibility to report to an SDR:
• If only one party is an SD or MSP,
the SD or MSP shall be the reporting
party.
• If one party is an SD and the other
party is an MSP, the SD shall be the
reporting party.
• If both parties are SDs, the SDs shall
designate which party shall be the
reporting party.
• If both parties are MSPs, the MSPs
shall designate which party shall be the
reporting party.
• If neither party is an SD or MSP, the
parties shall designate which party (or
its agent) shall be the reporting party.
Proposed § 43.3(a)(3) provided that
the reporting party must report swap
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transaction and pricing data to a realtime disseminator ‘‘as soon as
technologically practicable.’’ The abovereferenced hierarchy is consistent with
the reporting requirements for uncleared
swaps to an SDR under CEA section
4r(a).134
Proposed § 43.3(a)(2)(i) also specified
that for swaps executed on a SEF’s or
DCM’s trading system or platform, ‘‘a
reporting party shall satisfy its reporting
requirement under this section by
executing such reportable swap
transaction on [such SEF or DCM].’’
Proposed § 43.3(b) provided that a SEF
or DCM satisfies its reporting
requirement by (i) sending the real-time
swap transaction and pricing data to an
SDR that accepts and publicly
disseminates such data; or (ii) sending
such data to a third party service
provider. Proposed § 43.3(a)(3) provided
that bilateral swaps must be sent to an
SDR that accepts and publicly
disseminates swap transaction and
pricing data.
The Commission received 21
comments addressing the
responsibilities of swap counterparties
with respect to real-time public
reporting. The commenters included
industry associations representing
myriad financial market participants, a
potential SD, and several service
providers to the OTC derivatives
industry.135
Several commenters expressed
concern regarding the proposed
framework for determining
responsibility to report swap transaction
and pricing data pursuant to part 43.
Specifically, commenters questioned
how responsibility is allocated when
two parties are within the same category
(i.e., both parties are MSPs or endusers). Proposed § 43.3(a)(3) provided
that when both parties to an off-facility
swap are within the same category, the
parties must designate which of them
will be the reporting party. Some
commenters agreed with this approach.
134 The Commission notes that CEA section
4r(a)(3) provides: (A) ‘‘With respect to a swap in
which only 1 counterparty is a swap dealer or major
swap participant, the swap dealer or major swap
participant shall report the swap as required under
[CEA sections 4r(a)(1) and (2)];’’ (B) ‘‘With respect
to a swap in which 1 counterparty is a swap dealer
and the other is a major swap participant, the swap
dealer shall report the swap as required under [CEA
sections 4r(a)(1) and (2)];’’ and (C) ‘‘With respect to
any other swap not described in subparagraph (A)
or (B), the counterparties to the swap shall select
a counterparty to report the swap as required under
[CEA sections 4r(a)(1) and (2)].’’
135 Commenters include: WFE/IOMA; GFXD;
Tradeweb; Working Group of Commercial Energy
Firms; FHLBanks; SIFMA AMG; DTCC; Markit;
MarkitSERV; BlackRock; Barclays; ISDA/SIFMA;
Coalition of Derivatives End-Users; ICE; Foreign
Headquartered Banks; WMBAA; NFPEEU; ICI; FSR;
Coalition of Energy End-Users; and Better Markets.
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1197
Others, however, believe that the
Commission should amend proposed
part 43 to follow current market
conventions. For instance, a few
commenters noted that in the
interdealer market, the seller of
protection is responsible for confirming
the swap transaction with a
confirmation service.136 Another
commenter noted that while adopting
current market conventions would
eliminate confusion in asset classes like
credit and equity, it would not eliminate
confusion in other asset classes such as
foreign exchange.137 Commenters also
questioned whether DCOs should be
able to act as reporting parties when an
off-facility swap is cleared.138 Several
other commenters argued that the
reporting party should be able to
contract with any third-party service
providers to fulfill its reporting
obligation, including SEFs and existing
confirmation/matching service
providers.139 Many of these commenters
emphasized the perceived adverse and
disproportionate impact that reporting
obligations would place on endusers.140 Indeed, one commenter stated
that an end-user would have to expend
significant time and resources to
develop infrastructure and automation
to comply with the reporting
requirements in the Proposing
Release.141
Two commenters argued that, to
ensure accuracy and reduce
fragmentation, only regulated SDRs
should be able to satisfy the real-time
reporting requirement. Several
commenters also stated that the
Commission’s Proposing Release was
not consistent with the SEC’s proposed
Regulation SBSR regarding the explicit
ability of end-users to use third parties
to comply with their reporting
obligations.
Certain comments focused on the
Commission’s reporting framework in
proposed § 43.3(a)(3). Three
commenters contended that the
Proposing Release was somewhat
inflexible and would create
disproportionate burdens on end-users
that would not have the capacity to
report swap transaction and pricing data
136 The commenters addressing this issue include:
Barclays; BlackRock; ISDA/SIFMA; GFXD;
Coalition of Energy End-Users; ICE; and
MarkitSERV.
137 See CL–GFXD.
138 The commenters include: Barclays; BlackRock;
WFE/IOMA; ISDA/SIFMA; WMBAA; SIFMA AMG;
ICI; NFPEEU; DTCC; Markit; and MarkitSERV.
139 See CL–MarkitSERV.
140 See CL–ICI; CL–SIFMA AMG.
141 See CL–ICI.
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in real-time.142 To relieve this perceived
burden, these commenters asked the
Commission to allow parties to offfacility swaps to independently
designate the reporting party or, in the
alternative, to place most of the
responsibility on dealers and MSPs.
These commenters believe that the swap
counterparties should be able to decide
the reporting party, regardless of
whether the parties are within the same
category.
As noted, the Proposing Release
provided that the reporting party must
report swap transaction and pricing data
‘‘as soon as technologically
practicable.’’ 143 The Commission
solicited comments as to whether it
should establish maximum reporting
timeframes for the various categories of
reporting parties to swap transactions
(e.g., ‘‘as soon as technologically
practicable but no later than X
minutes’’). In response, some
commenters recommended that the
Commission not establish maximum
reporting timeframes, primarily because
of the end-users’ limited technological
reporting capacity and the resulting
significant financial burdens on endusers.144 These commenters argued
alternatively that if the Commission
prescribes specific timeframes, it should
aim for an appropriate balance between
speed and accuracy and adopt longer
time frames for end-users.
Many commenters supported
proposed § 43.3(a)(2)(i), which provided
that the swap transaction and pricing
data reporting requirement is itself
satisfied by the act of execution on the
SEF or DCM.145 Commenters reasoned
that SEFs and DCMs should have the
capability to report transactions ‘‘as
soon as technologically practicable’’ and
to preserve anonymity. Two
commenters recommended that the
decision where to report remain with
the parties of the swap and not be
satisfied by executing on a SEF or
DCM.146 As noted in the discussion of
§ 43.1(b) above, commenters also raised
extraterritoriality concerns with regard
to reporting parties of swaps.
After consideration of these
comments the Commission is adopting
§ 43.3(a) with certain revisions. The
142 The specific commenters include: FSR; ICI;
and SIFMA AMG.
143 Additionally, CEA section 2(a)(13)(A) states
that the definition of real-time public reporting
means ‘‘to report data relating to a swap transaction,
including price and volume, as soon as
technologically practicable after the time at which
the swap transaction has been executed.’’
144 See CL–Coalition for Derivatives End-Users;
CL–ISDA/SIFMA.
145 See CL–ICE; CL–Tradeweb; CL–Coalition of
Energy End-Users; CL–DTCC; and CL–MarkitSERV.
146 See CL-DTCC; CL–MarkitSERV.
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Commission received no comments
directly addressing proposed
§ 43.3(a)(1). It is adopting these
provisions with technical and clarifying
changes to reflect changes to defined
terms in § 43.2 as well as a clarification
that the reporting should occur ‘‘after
such publicly reportable swap
transaction is executed.’’ Additionally,
the Commission is adding a sentence at
the end of this provision to make clear
that, for purposes of part 43, any
references to a ‘‘registered swap data
repository’’ would include provisionally
registered SDRs.147
With respect to proposed
§ 43.3(a)(2)(i), the Commission agrees
that SEFs and DCMs should serve as
reporting parties for swaps that are
executed on the execution platform. The
Commission acknowledges the
recommendation that the decision
where to report the swap transaction
and pricing data instead remain with
the parties to the swap. However, the
Commission believes that there are
several benefits to requiring SEFs and
DCMs to report these transactions
directly to SDRs, including utilization of
the technology of the execution
platform, increased speed of reporting
(and therefore increased transparency)
and the ability for straight-through
processing.
Proposed § 43.3(a)(2)(ii) prescribed
the method and timing for real time
public reporting of block trades
executed pursuant to the rules of a SEF
or DCM. Although the Commission has
determined not to adopt the proposed
§ 43.5 rules relating to block trades, it
believes that proposed § 43.3(a)(2)(i) and
(ii) can be combined in this final rule to
simplify the requirement. For the
reasons discussed above, the
Commission is adopting the provisions
of § 43.3(a)(2) largely as proposed, with
several clarifying, technical and
conforming changes necessitated by
other part 43 definitional and
terminology changes.
The provision now references swaps
‘‘executed’’ on or pursuant to the rules
of a SEF or DCM to ensure that block
trades executed ‘‘pursuant to the rules
of’’ a SEF or DCM would be included in
the provision. Accordingly, if parties
executed a block trade away from a SEF
or DCM and then brought the swap
transaction and pricing data pertaining
to that block trade to the SEF or DCM
pursuant to its rules, the parties to the
147 Pursuant to part 49, the Commission may
grant provisional registration to an SDR if the
applicant is in substantial compliance with the
registration standards set forth in § 49.3(a)(4) and is
able to demonstrate operational capability, real-time
processing, multiple redundancy and robust
security controls.
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swap would satisfy their reporting
requirements under part 43. The SEF or
DCM would then report the swap
transaction data for public
dissemination.
With respect to proposed § 43.3(a)(3),
the Commission has considered
comments that DCOs should be
authorized to act as reporting parties
when an off-facility swap is cleared. The
Commission has also noted
commenters’ contention that the
reporting party should be able to
contract with any third party, including
SEFs and existing confirmation/
matching service providers, to satisfy its
reporting obligation. The Commission
agrees that the reporting party to an offfacility swap which is cleared should be
able to contract with third parties
(including DCOs or confirmation/
matching service providers) to meet its
reporting obligations under part 43.148
The Commission believes that
competition among third-party
providers may foster the development of
innovative and cost effective
technological solutions that would
create efficiencies for market
participants that do not have the
resources to develop such solutions.
The use of third parties in reporting
swap transaction and pricing data could
reduce costs to market participants. For
example, third parties may be able to
develop low-cost and readily accessible
web-based solutions to enable financial
and non-financial end-users to comply
with their reporting obligations when
entering into transactions with other
end-users.149
The Commission acknowledges that
its Proposing Release and the SEC’s
proposed Regulation SBSR differ with
respect to end-users’ reporting
obligations.150 The Commission
148 In this circumstance, the Commission notes
that the obligation to report remains with the
reporting party.
149 It is important to note that DCOs may provide
reporting services; however, real-time reporting and
public dissemination must occur ‘‘as soon as
technologically practicable’’ after execution unless
subject to an appropriate time delay as described in
§ 43.5.
150 Proposed Regulation SBSR provided,
‘‘[P]roposed Rule 901(a) would not prevent a
reporting party to a SBS from entering into an
agreement with a third party to report the
transaction on behalf of the reporting party. For
example, for a SBS executed on a security-based
swap execution facility (‘‘SB SEF’’) or a national
securities exchange, the SB SEF or national
securities exchange could transmit a transaction
report for the SBS to a registered SDR. By specifying
the reporting party with the duty to report SBS
information under proposed Regulation SBSR, the
Commission does not intend to inhibit the
development of commercial ventures to provide
trade processing services to SBS counterparties.
Nevertheless, a SBS counterparty that is a reporting
party would retain the obligation to ensure that
information is provided to a registered SDR in the
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explicitly permits end-users, SEFs and
DCMs to utilize third parties to comply
with reporting obligations described in
§ 43.3 in a manner similar to that
described in the SEC’s proposed
Regulation SBSR. However, unlike
proposed Regulation SBSR, the
Proposing Release provided that a
reporting party’s reporting obligation is
satisfied by executing a publicly
reportable swap transaction on or
pursuant to the rules of a SEF or DCM.
SEFs and DCMs then have the
obligation to report swaps that are
executed on or pursuant to their trading
system or platform to an SDR pursuant
to § 43.3(b)(1), discussed below. A
reporting party, SEF or DCM would
retain the obligation to ensure that the
appropriate information is provided in
the appropriate timeframe to an SDR for
public dissemination.151
The Commission has also considered
comments addressing the allocation of
reporting obligations when
counterparties fall within the same
market participant category. The
Commission agrees that market
conventions may determine which party
will be obligated to report to an SDR
when both parties to an off-facility swap
are within the same category. However,
the Commission favors a flexible
approach and believes the swap
counterparties should decide whether a
market convention is used for
determining the reporting party. In asset
classes where market conventions
currently exist, the Commission believes
that parties to an off-facility swap
should still have the same ability to
agree on which party will serve as the
reporting party.
In response to these comments, the
Commission has added the language
‘‘[u]nless otherwise agreed to by the
parties prior to the execution of the
publicly reportable swap transaction,
the following persons shall be reporting
parties for off-facility swaps * * *’’
before the listing of reporting parties for
off-facility swaps. The Commission
concurs with commenters that there
may be circumstances in which it makes
greater economic or practical sense for
a party other than the one described in
the hierarchy in § 43.3(a)(3) to be the
reporting party. This additional
language will give the parties flexibility
to agree on the reporting party in
manner and form required by proposed Regulation
SBSR, even if the reporting party has entered into
an agreement with a third party to report on its
behalf.’’ 75 FR 75211–75212.
151 Thus, a reporting party, SEF or DCM would be
liable for a violation of § 43.3 if, for example, a third
party acting on behalf of a reporting party did not
report the appropriate swap transaction and pricing
data to an SDR for public dissemination.
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situations described in § 43.3(a)(3)(i)
and (ii) as long as such agreement
occurs prior to the execution of the
publicly reportable swap transaction.152
And the Commission believes that in
the situations described in
§§ 43.3(a)(3)(iii), (iv) and (v), the
designation of the reporting party for an
off-facility swap provided for in the rule
should be agreed to prior to execution
of such swap in order to ensure
compliance with the requirements of
part 43. The requirement serves to
ensure that reporting after execution is
not hampered by the parties’ inability to
agree.
The Commission disagrees that the
reporting framework in proposed
§ 43.3(a)(3) was inflexible and would
create disproportionate burdens on endusers which do not have the capability
to report swap transaction and pricing
data in real-time.153 In the
Commission’s view, the approach taken
in the Proposing Release created a
balanced framework by placing a greater
burden on SDs and MSPs, but not
mandating which party must report if
two parties are of the same category.
Further, the Commission is adding to
this provision the flexibility to
determine the reporting party for a
particular transaction if both parties
agree prior to execution of the swap. As
discussed above, the Commission
believes such an approach is preferable
to a prescriptive rule governing
reporting.
The reporting framework in
§ 43.3(a)(3) strikes an appropriate
balance from a cost-benefit perspective.
Avoiding a more prescriptive regime for
assigning the reporting responsibility in
transactions between parties of the same
category should allow the parties to
determine which party can report the
transaction at a lower cost.154 In the
Commission’s view, it is appropriate to
assign a greater cost burden to SDs and
MSPs than to the buy-side (including
end-users), as SDs and MSPs are likely
152 To the extent that the parties have not agreed
to the reporting party prior to the execution of the
swap, the reporting party would be the SD or the
MSP as applicable.
153 See CL–FSR; CL–ICI; and CL–SIFMA AMG.
154 The Commission recognizes that a publicly
reportable swap transaction may be a multi-asset or
hybrid instrument (e.g., a commodity-linked
interest rate swap), meaning that each leg of such
swap falls in a different asset class. The
Commission believes that with respect to reporting
such multi-asset or hybrid swaps pursuant to part
43, absent an agreement by the swap counterparties
stating otherwise, the reporting party, SEF or DCM
shall choose the SDR to which the real-time swap
transaction and pricing data is reported for public
dissemination. The Commission expects that if an
SDR is available for only one leg of a hybrid swap,
the reporting party, SEF or DCM will send the realtime swap transaction and pricing data to such SDR
for public dissemination.
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1199
to be larger, more sophisticated and
more active in swap markets and thus
more able to realize economies of scale
in carrying out reporting
responsibilities. In addition, allowing
reporting parties to contract with third
parties should allay concerns regarding
the potential disproportionate cost
burden placed on end-users. Moreover,
the Commission’s definition of ‘‘as soon
as technologically practicable’’ provides
additional flexibility as its application
includes consideration of the
‘‘prevalence, implementation and use of
technology by comparable market
participants.’’ 155 The hierarchy of
reporting parties described in
§ 43.3(a)(3) for off-facility swaps would
not apply to counterparties to block
trades.
Commenters have asserted that, to
avoid ambiguity, the Commission
should explicitly state in part 43 that
only data relating to swap transactions
where at least one party is a U.S.-based
person are required to be reported and
publicly disseminated in real-time.156
The Commission believes that both
U.S.-based and non-U.S.-based
counterparties that transact on or
pursuant to the rules of a SEF or DCM
should be subject to all of the real-time
reporting requirements.
Proposed § 43.3(a)(4) provided a
process for reporting off-facility swaps
when no SDR was available. As
discussed below, under the
Commission’s phase in and compliance
date schedule, an SDR must be
registered or provisionally registered for
a particular asset class in order to
comply with the part 43
requirements.157 The Commission
believes that coordinating the real-time
reporting obligations with the regulatory
reporting obligations will enable market
participants to reduce reporting costs.
Therefore, the Commission is not
adopting § 43.3(a)(4) at this time.
2. Public Dissemination of Swap
Transaction and Pricing Data (§ 43.3(b))
CEA section 2(a)(13)(D) authorizes the
Commission to require registered
entities to publicly disseminate the
swap transaction and pricing data
required to be reported under CEA
section 2(a)(13). Accordingly, proposed
§ 43.3(b) specified the method and
timeliness of public dissemination of
155 See supra § 43.2 and related discussion in
section II.B.2.
156 See CL–ISDA/SIFMA; CL–GFXD; CL–Foreign
Headquartered Banks; and CL–TriOptima.
157 The Commission notes that until such time as
an SDR is registered or provisionally registered for
an asset class, reporting parties, SEFs and DCMs are
permitted to publicly disseminate real-time swap
transaction and pricing data.
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swap transaction and pricing data for
swaps that are executed on a SEF or
DCM.
Proposed § 43.3(b)(1)(i) provided that
a SEF or DCM must send or otherwise
electronically transmit swap transaction
and pricing data ‘‘as soon as
technologically practicable’’ to: (1) An
SDR that accepts swaps for the
particular asset class of ‘‘reportable
swap transactions;’’ or (2) a third-party
service provider operating on behalf of
the SEF or DCM. Such data would then
be publicly disseminated in the same
manner described in proposed
§ 43.3(a)(3) for swaps that are executed
off-facility (i.e., the SDR publicly
disseminates such data ‘‘as soon as
technologically practicable’’). The
Proposing Release specified that if a SEF
or DCM chose to use a third-party
service provider for public
dissemination, the obligation to ensure
that such data was publicly
disseminated would remain with the
SEF or DCM, since the third-party
service provider would be an
unregulated entity.158 Accordingly,
proposed § 43.3(b)(1)(i) required a SEF
or DCM to remain vigilant in monitoring
the timeliness and accuracy of the
public dissemination if it chooses to use
a third-party service provider.
Proposed § 43.3(b)(2)(i) prohibited
SEFs, DCMs or any reporting party to a
swap from disclosing transaction and
pricing data for a particular swap before
an SDR or third-party service provider
has disseminated data for that swap to
the public. This prohibition—sometimes
referred to as the ‘‘embargo rule’’—is
intended to ensure that swap
transaction and pricing data is
disseminated uniformly and is not
published in a manner that creates an
unfair advantage for any segment of
market participants. At the same time,
however, proposed § 43.3(b)(2)(ii)
permitted a SEF or DCM to make swap
transaction and pricing data available to
participants on its market prior to
public dissemination of such data.
Similarly, proposed § 43.3(b)(2)(iii)
permitted an SD to share swap
transaction and pricing data with its
158 While proposed § 43.3(c) generally required
SDRs to register and comply with the requirements
set forth in proposed part 49, neither the
Commission’s proposal nor the Commission itself
has the authority to require third-party service
providers to comply with the same requirements.
Instead, proposed § 43.3(d) attempted an indirect
approach at requiring third-party service providers
to comply with proposed part 49’s requirements. In
particular, proposed § 43.3(d) provided that a [SEF
or DCM] must ensure that the third-party service
provider maintains standards for public reporting of
swap transaction and pricing data that are, at a
minimum, equal to those standards for registered
SDRs as described in proposed § 43.3(c) and
proposed part 49 of the Commission’s regulations.
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customers prior to public dissemination
of such data. These sections were
intended to give SEFs, DCMs and SDs
the flexibility to share swap transaction
and pricing data with their market
participants or customers, respectively,
concurrent with the transmission of
such data to an SDR or third-party
service provider for public
dissemination.
Various interested parties commented
on the method of dissemination of swap
transaction and pricing data to the
public.159 These commenters raised a
number of issues including: (1) The use
of SDRs for public dissemination; (2) the
use of third-party service providers for
public dissemination; (3) the
requirement that SDRs accept all swaps
in a particular asset class; (4) the
embargo rule; and (5) the consolidation
of data.
Two commenters asserted that SDRs
should not be used to real-time report
swap transaction and pricing data.160
One urged that SDRs not be used
because they are the last party to receive
the swap data; 161 the other suggested
that SDRs may have an unfair
competitive advantage over third-party
real-time disseminators.162 Conversely,
four commenters argued that only SDRs
should be used for dissemination of
real-time data.163 One commenter
requested that the Commission clarify
the responsibilities of an SDR under
part 43.164
Commenters expressed varying
opinions with respect to the use of
third-party service providers in public
dissemination. One commenter
supported the Commission’s proposal to
give SEFs and DCMs the option to use
third-party service providers to satisfy
their public dissemination obligation.165
Five commenters opposed the use of
potentially unregistered third-party
service providers to satisfy the public
dissemination obligation.166 Several
commenters expressly supported the
use of DCOs to disseminate real-time
159 The commenters include: GFXD; Working
Group of Commercial Energy Firms; Coalition of
Energy End-Users; WFE/IOMA; ICI; NFPEEU; ISDA/
SIFMA; Better Markets, Inc.; Coalition for
Derivative End-Users; Reval; Tradeweb; DTCC;
CME; Argus; Markit; MarkitSERV; BlackRock;
FINRA; and NGX.
160 See CL–Reval; CL–Argus.
161 See CL–Reval.
162 See Meeting with Argus (December 15, 2010).
163 See CL–Markit; CL–NFPEEU; CL–MarkitSERV;
and CL–DTCC.
164 See CL–MarkitSERV.
165 See CL–ISDA/SIFMA.
166 See CL–Coalition of Energy End-Users; CL–
MarkitSERV; CL–Tradeweb; CL–NFPEEU; and CL–
DTCC.
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data.167 Specifically, one commenter
stated that DCOs should publicly
disseminate data for real-time purposes,
because they currently have the
infrastructure to support such
operations.168 One commenter
questioned the Commission’s statutory
authority to introduce the third-party
service provider concept. Indeed, this
commenter argued that terms not in
section 727 of the Dodd-Frank Act, such
as third-party service provider, are
unnecessary complications to an already
complex statutory mandate and are not
required by the Dodd-Frank Act.169
Commenters also offered solutions to
the circumstance in which no SDR is
available to disseminate swap
transaction data. One commenter
asserted that in those circumstances, if
both counterparties are end-users, the
reporting party should not be obligated
to report at all.170 Another
recommended that if no SDR is
available to accept swap transaction and
pricing data for a specific asset class, the
swap transaction and pricing data
should be reported to the Commission
by the end of the day.171
Commenters also questioned the
‘‘embargo rule.’’ One commenter stated
that permitting SEFs, DCMs and
reporting parties to disclose data prior
to public dissemination would afford
them an unfair competitive advantage
over the general public.172 Another
argued that any information embargo
should be eliminated entirely.173
Another commenter, however, argued
that if data were publicly disseminated
later, it would cause confusion because
‘‘[the] data, if disseminated after the fact
* * * will not be representative of
current market data when it is made
public.’’ 174 One commenter argued that
the role of ‘‘work-up’’ in the interdealer
markets is important and data should
not be reported to an SDR until the
work-up process is completed.175
Similarly, this commenter argued that
with regard to the ‘‘work-up’’ process,
trading platforms should be able to
share the last trade information to
market participants prior to reporting
such data to an SDR.
Several commenters urged the
Commission to require the
consolidation of swap transaction and
167 See CL–Working Group of Commercial Energy
Firms; CL–Reval; CL–BlackRock; CL–CME; and CL–
NFPEEU.
168 See CL–CME.
169 See CL–NFPEEU.
170 See CL–Coalition of Energy End-Users.
171 See CL–GFXD.
172 See CL–ICI.
173 See CL–Better Markets.
174 See CL–Coalition of Energy End-Users.
175 See CL–WMBAA.
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pricing data.176 One commenter
recommended that the Commission and
the SEC jointly establish a single
consolidator for the public
dissemination of swap and securitybased swap transaction and pricing
data.177 As the Commission noted in the
Proposing Release, neither the CEA nor
the Dodd-Frank Act grants the
Commission explicit statutory authority
to establish a real-time reporting
consolidator.178 The SEC’s proposed
Regulation SBSR similarly would
require public dissemination of realtime swap data by SDRs and does not
establish a consolidator.179
With respect to proposed
§ 43.3(b)(1)(i) and comments addressing
the use of SDRs for public
dissemination, the Commission agrees
with the majority of the commenters
that third party service providers should
not be used for public dissemination.
Accordingly, the Commission is
modifying the proposed rule to require
that SEFs and DCMs satisfy the
requirements of this subparagraph by
transmitting swap transaction and
pricing data to an SDR for public
dissemination ‘‘as soon as
technologically practicable’’ after such
swap has been executed on the SEF or
DCM.180 The Commission expects that
‘‘transmittal’’ of such data would mean,
at a minimum, some form of electronic
conveyance. This change removes the
requirement in proposed § 43.3(b)(1)(i)
that SEFs and DCMs must publicly
disseminate by sending data either to an
SDR or to a third-party service provider.
SEFs and DCMs may enter into a
contractual relationship with a third
party service provider to transmit the
swap transaction and pricing data to an
SDR; however, the SEF or DCM will
remain responsible for such reporting
requirement pursuant to part 43.
In its Proposing Release, the
Commission imposed public
dissemination obligations on SDRs that
accept and publicly disseminate swap
transaction and pricing data in realtime. Further, CEA section 2(a)(13)(D)
provides the Commission with the
authority to require registered entities to
publicly disseminate swap data. The
Commission is further clarifying
§ 43.3(b) by adding § 43.3(b)(2) to
176 See CL–Coalition for Derivatives End-Users;
CL–Better Markets; CL–Markit; CL–MarkitSERV;
and CL–FINRA.
177 See CL–FINRA.
178 See 75 FR 76149.
179 See 75 FR 75208.
180 The Commission notes that, pursuant to
§ 48.8(a)(9)(i), registered foreign boards of trade
must ensure that swap transaction data be sent to
an SDR that is either registered with the
Commission or has an information sharing
arrangement with the Commission.
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provide that SDRs must then ensure that
such data is publicly disseminated as
soon as technologically practicable’’
pursuant to part 43 for SEF and DCM
executed swaps as well as off-facility
swaps, unless a time delay described in
§ 43.5 is applicable. The Commission
believes that this approach addresses
various commenters’ suggestions and
concerns and is consistent with the
SEC’s approach in proposed Regulation
SBSR. The Commission further believes
that eliminating the option to use a
third-party service provider will reduce
(i) fragmentation in the market; (ii)
search costs for market participants; and
(iii) inconsistencies in data formats
reported to various disseminators.
Additionally, SDRs will be registered
entities subject to the Commission’s
jurisdiction, whereas third-party service
providers are unregistered entities over
which the Commission has no authority.
The Commission notes that the rule
does not prohibit an SDR from
contracting with a third party which
may perform the public dissemination
function. Should an SDR choose to enter
into such a contractual relationship, it
will remain responsible to ensure public
dissemination under CFTC regulations.
With respect to proposed
§ 43.3(b)(1)(ii), the Commission has
considered the comments and, as
discussed, believes that reporting
parties (including SEFs and DCMs)
should be permitted to transmit their
swap transaction and pricing data only
to SDRs for public dissemination.
Consistent with this determination, the
Commission is eliminating in the final
rule the option for SEFs, DCMs and
reporting parties to send or otherwise
electronically transmit their swap
transaction and pricing data to a thirdparty service provider. However, the
Commission believes that an SDR may
ensure public dissemination by
contracting with a third-party service
provider to assist in the public
dissemination of swap transaction and
pricing data in real-time. Finally, in
requiring that the reporting parties
transmit the real-time swap transaction
and pricing data only to SDRs, the
Commission notes that nothing in part
43 would prohibit DCOs, SEFs or DCMs
from registering as SDRs.
The Commission has considered the
comments addressing the embargo rule
and has determined to modify proposed
§ 43.3(b)(3) to provide further clarity.181
Three clarifying criteria are established
in the final rule: (1) Disclosure is made
181 The Commission does not intend that
§ 43.3(b)(3) apply to risk management activities,
post-trade processing or regulatory reporting where
it would be necessary to transmit the full swap
details to comply with such activities.
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only to market participants on such SEF
or DCM (changed from ‘‘participants on
its market’’); 182 (2) market participants
are provided advance notice of such
disclosure; and (3) any disclosure must
be non-discriminatory.183 A SEF or
DCM that wishes to disclose swap data
prior to the public dissemination by an
SDR must provide advance notice to its
market participants of any disclosure of
such swap transaction and pricing
data.184 The Commission also notes that
this policy is consistent with the
practice of public dissemination in the
futures markets. Further, pursuant to
§ 43.3(b)(3)(i)(A), SEFs and DCMs must
not disclose such data prior to sending
such data to an SDR for public
dissemination.
Section 43.3(b)(3)(ii) replaces
proposed § 43.3(b)(2)(iii) and establishes
data reporting requirements for SDs and
MSPs reporting to their customer bases
that are substantially similar to part 43’s
data reporting requirements for SEFs
and DCMs providing such information
to their market participants. Section
43.3(b)(3)(ii)(B) establishes that an SD’s
or MSP’s ‘‘customer base’’ includes
parties that maintain accounts with or
have been swap counterparties with
such SD or MSP. This provision also
expands the scope of parties that can
share such swap data to include MSPs,
as the Proposing Release permitted only
SDs to share such data. Section
43.3(b)(3)(ii)(C) requires an SD or MSP
to provide a swap counterparty to a
publicly reportable swap transaction
with advance notice of any disclosure
by the SD or MSP of such swap
transaction and pricing data.185 Further,
SDs and MSPs must ensure that the data
shared with their customer bases is not
shared prior to sending such data to an
SDR for public dissemination and that
any disclosure is non-discriminatory.
There are several advantages to this
approach. Allowing participants to see
last trade information for the particular
markets on which they are trading, in
many cases prior to the data being
disseminated to the public, will
182 For the purposes of § 43.3(b)(3)(i), the
Commission believes that market participants on a
SEF or DCM include those persons with trading
privileges on such platform, as well as others
without trading privileges that subscribe to the SEF
or DCM for information services.
183 The Commission seeks to avoid a situation
that would permit discrimination among those
market participants of a SEF or DCM.
184 For example, a SEF or DCM may provide
advance notice by including a provision in its
rulebook describing the disclosure of swap
transaction and pricing data to market participants.
185 For example, advance notice is sufficiently
given when an SD or MSP, prior to the execution
of such publicly reportable swap transaction,
informs a swap counterparty that it will disclose the
relevant swap transaction and pricing data.
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enhance price discovery. Information is
not delayed to market participants on a
particular SEF or DCM. This approach
does not allow the sharing of
information by a trading facility or
platform immediately upon execution,
as one commenter suggested. However,
the Commission believes that the
requirement to send swap transaction
and pricing data to an SDR
simultaneously with or prior to sharing
such information with persons with
trading privileges will reduce potential
inequities while incentivizing faster
reporting by SEFs, DCMs, SDs and
MSPs that wish to share such data. If
real-time reporting is delayed as part of
a phase in, or if no SDR is registered or
provisionally registered in an asset
class, the individual markets could
share the information to allow for last
trade information and post-trade price
discovery on a particular SEF or DCM,
until such time as compliance is
required.
The Commission notes that its part 49
rules governing SDRs do not permit
SDRs to use real-time data between the
time they receive the data from SEFs,
DCMs and reporting parties and the
time they publicly disseminate the
data.186
3. Requirements for Registered Swap
Data Repositories in Providing the
Public Dissemination of Swap
Transaction and Pricing Data (§ 43.3(c))
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As proposed, § 43.3(c) required that:
(1) SDRs register and comply with the
requirements set forth in proposed part
49; (2) SDRs that accept and publicly
disseminate real-time data for swaps in
selected asset classes shall accept and
publicly disseminate real-time data for
all swaps within such asset classes; and
(3) any SDR that accepts and publicly
disseminates real-time data perform an
annual independent compliance review.
The Commission is adopting
§ 43.3(c)(1) substantially as proposed
with certain technical and conforming
changes.187 For example, the phrase
‘‘unless the data is subject to a time
delay in accordance with § 43.5’’ was
changed to state, ‘‘except as otherwise
provided in this part.’’ Additionally, the
186 See 76 FR 54550; See also 76 FR 54582.
Section 43.3(d), discussed below, does not prohibit
an SDR from transmitting real-time swap
transaction and pricing data to market participants
at the same time that such data is publicly
disseminated pursuant to part 43. However, as
prescribed in § 49.17(g) of the Commission’s
regulations, the distribution of such data prior to
the public dissemination pursuant to part 43 would
constitute a ‘‘commercial use’’ of such data.
187 The Commission received no comments on
proposed § 43.3(c)(1).
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language ‘‘in accordance with this part’’
was added as a clarification.
Proposed § 43.3(c)(2) provided that if
an SDR chose to publicly disseminate
swap transaction and pricing data in
real-time for a specific asset class, the
SDR must accept all swaps within such
asset class. The Commission received
three comments 188 supporting this
proposal; these commenters contended
that such a provision would help avoid
fragmentation of the SDR landscape.
The Commission agrees that this
provision will reduce fragmentation and
is adopting § 43.3(c)(2) as proposed with
some minor technical and conforming
changes. For example, the phrase ‘‘and
public dissemination’’ was added to the
title of (c)(2), and the phrase ‘‘unless
otherwise prescribed by the
Commission’’ was added to the end of
the text. The Commission also notes that
the definition of ‘‘asset class’’ was
revised in § 43.2.189
The Commission is adopting
§ 43.3(c)(3) as proposed with one
conforming change: ‘‘43’’ was added to
the end of the text.190
4. Requirements for Third-Party Service
Providers—Proposed § 43.3(d)
Proposed § 43.3(d) established
requirements for SEFs and DCMs that
publicly disseminate through a thirdparty service provider. As discussed
above, the Commission is requiring that
public dissemination of swap
transaction and pricing data for the
purposes of part 43 occur through an
SDR. This new requirement obviates
proposed § 43.3(d), and the Commission
is not adopting the provision.
5. Availability of Swap Transaction and
Pricing Data to the Public (§ 43.3(d))
Proposed § 43.3(e) required SDRs that
report swap transaction and pricing data
to the public in real-time to make the
data available and accessible in an
electronic format that is capable of being
downloaded, saved and/or analyzed.
Requiring that SDRs make swap
transaction and pricing data available to
market participants and the public
ensures equal access such data.191
188 See CL–GFXD; CL–DTCC; and CL–
MarkitSERV.
189 See § 49.10(b) of the Commission’s regulations
regarding SDRs which is identical to § 43.3(c)(2).
190 The Commission received no comments
addressing proposed § 43.3(c)(3).
191 In addition to the comments discussing the
definitions of ‘‘as soon as technologically
practicable’’ and ‘‘public dissemination or publicly
disseminate,’’ one commenter stated that the
Commission should consider the additional
requirement that an SDR make available any realtime reporting data to all market participants,
including SEFs, DCMs and DCOs on a nondiscriminatory basis. See CL-Tradeweb at 5
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The Commission believes that
additional clarity is needed with regard
to proposed § 43.3(e)—which has been
renumbered as § 43.3(d) in the final
rules—and therefore is adopting
§ 43.3(d)(1)–(3). Section 43.3(d)(1) is
similar in substance to proposed
§ 43.3(e); however, the Commission has
clarified that the data must be in ‘‘a
consistent, usable and machine-readable
electronic’’ format that ‘‘allows the data
to be downloaded, saved and analyzed.’’
These modifications address several
comments relating to the definitions of
‘‘public dissemination or publicly
disseminate’’ by providing clarity with
respect to the format in which publicly
disseminated data must be made
available.
Section 43.3(d)(2) reflects the
Commission’s belief that data must be
made freely available to market
participants and the public, on a nondiscriminatory basis. Finally,
§ 43.3(d)(3) requires that SDRs provide
the Commission with a hyperlink to a
Web site where the public can access
the publicly-disseminated swap
transaction and pricing data. The
Commission anticipates that it will
make these links available to the public
on its own Web site. In this manner, the
Commission will provide a centralized
location where market participants and
the public can find all available swap
transaction and pricing data, thus
enhancing price discovery.
6. Errors or Omissions (§ 43.3(e))
As proposed, § 43.3(f) outlined the
process for correcting or cancelling any
errors or omissions in swap transaction
and pricing data that are publicly
disseminated in real-time. Proposed
§ 43.3(f)(1) established the process by
which such errors or omissions must be
corrected or cancelled, depending on
whether the data error or omission was
discovered by the reporting party to the
swap or the non-reporting party. The
Proposing Release also sought to
prevent fraudulent dissemination for the
purpose of distorting market pricing.
Specifically, pursuant to proposed
§ 43.3(f)(2) reporting parties, SEFs,
DCMs and SDRs that accept and
publicly disseminate swap transaction
and pricing data in real-time were
prohibited from submitting or agreeing
to submit a cancellation or correction
for the purpose of re-reporting swap
transaction and pricing data in order to
gain or extend a delay in publication or
(‘‘Without such requirements, the Commission is
effectively taking away from market participants,
including swaps markets and DCOs, a potentially
significant and valuable component of their market
data services.’’).
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to otherwise evade the reporting
requirements of proposed part 43.
Proposed § 43.3(f)(3) specified the
appropriate method of canceling
incorrectly published swap transaction
and pricing data, providing that a realtime disseminator must cancel incorrect
data that has been disseminated to the
public by publishing a cancellation in
the format and manner described in
appendix A to proposed part 43. As
proposed, the rule would have required
a real-time disseminator to correct any
erroneous or omitted data disseminated
by (i) first publicly disseminating a
cancellation of the incorrect data; and
(ii) then publicly disseminating the
correct data pursuant to the format
described in appendix A to proposed
part 43. In addition to the substantive
changes discussed below, the
Commission has determined to make
minor technical and conforming
changes to § 43.3. In that regard,
proposed § 43.3(f) is redesignated as
§ 43.3(e) in the final rule and will be
referred to accordingly below.
The Commission received five
comments addressing the proposed
treatment of errors and omissions in
real-time reporting of swap transaction
and pricing data. The commenters—
industry groups and a non-financial
end-user—generally supported the
Proposing Release that errors and
omissions should be reported ‘‘as soon
as technologically practicable.’’
However, one commenter suggested that
in the event of a dispute between
counterparties regarding the reported
data, the reporting party would control
the public record regarding the swap
and thus would always prevail. The
commenter further urged that the nonreporting party should be permitted to
report the disputed data to the SEF,
DCM or ‘‘real-time disseminator,’’ who
would then be obliged by rule to review
the disputed data.192 Two commenters
contended that the proposed
requirement that the cause of the error
or omission be included in any
correction was unnecessary. These
commenters suggested that reporting
parties should not be responsible for
data that is inaccurately transcribed or
corrupted after it has been submitted to
an SDR or for correcting data errors of
which they are unaware.193
One commenter recommended that
cancellations not due to an error in the
primary economic terms should not be
required to be reported in real time, but
should instead be reported in
192 See
193 See
CL–MFA.
CL–GFXD; CL–ISDA/SIFMA.
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accordance with requirements specified
in the general reporting rule.194
Two commenters noted that longer
reporting times would reduce errors. In
this regard, they asserted that the
proposed reporting times are more
‘‘aggressive’’ than those that the
industry has committed to in the past,
and may lead to an increase in reporting
errors.195 One commenter suggested a
reporting time of T+1,196 while another
suggested that the Commission balance
the sometimes competing needs of
reporting speed and data accuracy in
proposing timeframes for regulatory
reporting.197 Another recommended
that the Commission explicitly state in
the final rule that it will not prosecute,
penalize or otherwise impose
‘‘remedies’’ on parties for inadvertent
errors in reporting under any new
standardized information collection
system required by the final rules.198
In response to comments suggesting
that the non-reporting party should be
permitted to submit errors or corrections
in the case of a dispute between the
non-reporting party and the reporting
party, the Commission believes that
dispute resolution mechanisms should
be exercised before the data is sent back
to an SDR for public dissemination. In
its view, the execution platform or the
parties to the swap are in the best
position to determine whether an error
has been made in public dissemination
and to agree upon the corrected swap
transaction and pricing data. The
Commission is deleting in final
§ 43.3(e)(1)(i) references to the
‘‘reporting party’’ and is requiring
instead that one party to a swap must
notify the other party if it becomes
aware of an error or omission. As
described in § 43.3(e)(1)(ii), the
reporting party remains responsible for
submitting corrections and
cancellations.
The Commission is adopting
§ 43.3(e)(1)(ii) with clarifications to
certain terminology changed in the rule
(e.g., references to real-time
disseminator are eliminated). This
provision requires that the reporting
party submit corrections to the same
SEF, DCM or SDR to which that data
was originally submitted for the
purposes of reporting. The reporting
party may report corrections to a SEF or
DCM if it becomes aware that the SEF
or DCM submitted incorrect data to an
SDR for public dissemination for a swap
194 See CL-ISDA/SIFMA; CL–Working Group of
Commercial Energy Firms.
195 See CL–ISDA/SIFMA.
196 See CL–MFA.
197 See CL–GFXD; CL–ISDA/SIFMA.
198 See CL–AGA.
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1203
executed on the platform or if the
reporting party submitted the data to a
SEF or DCM with respect to a block
trade. The Commission notes that
pursuant to CEA section 21(c)(2), an
SDR has a duty to ‘‘confirm with both
counterparties to a swap the accuracy of
the data that was submitted.’’
The Commission is adopting
§ 43.3(e)(1)(iii)–(iv) and § 43.3(e)(2)–(4)
with technical and clarifying changes.
For example, in § 43.3(e)(3), a
clarification has been added that
cancellations must be publicly
disseminated by an SDR ‘‘as soon as
technologically practicable’’ to mirror
the requirements for corrections in
§ 43.3(e)(4).
Several comments suggested that the
Commission omit from the final rule the
requirement that the reason for any
amendment to swap transaction and
pricing data be reported during the
correction process. The Commission
notes that there is no requirement in
§ 43.3(e) that such information be
included in any type of correction or
cancellation report. The Commission
requires that any correction of incorrect
data that has been publicly
disseminated must be reported in the
same format as all other data reported
under part 43, ‘‘as soon as
technologically practicable’’ and as set
forth in appendix A to part 43.
The Commission agrees that the
reporting parties should not be
responsible for data that is inaccurately
transcribed or corrupted after it has
been submitted to an SDR. However, the
Commission expects that reporting
parties will take due care to ensure that
the data submitted to an SDR is accurate
and complete. Under § 43.3(a)(2), a
reporting party has satisfied its
reporting requirement ‘‘by executing a
publicly reportable swap transaction on
or pursuant to the rules of a registered
swap execution facility or designated
contract market.’’ For off-facility swaps,
§ 43.3(a)(3) provides that a reporting
party has satisfied its reporting
requirement when the swap has been
‘‘reported to a registered swap data
repository for the appropriate asset
class.’’ Once the data have been
reported in accordance with the relevant
provision, the reporting party has
satisfied its reporting requirement under
this section and will not be responsible
for correction of subsequent
inaccuracies in said data; no additional
modification is necessary.
The Commission considered the
comment that cancellations not due to
an error in the primary economic terms
need not be reported in real time. The
Commission does not agree with the
suggestion that the correction of errors
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in data reported under part 43 should be
reported pursuant to a periodic
reporting schedule. The correction of
errors or omissions in real time is
necessary to fulfill the price discovery
mandate of Section 727 of the DoddFrank Act. In addition, depending on
the circumstance, a cancellation may or
may not be followed by a correction. For
example, a cancellation may occur
where a clearinghouse does not accept
a particular swap for clearing: Such a
swap may be busted and would not
require a correction. In another
situation, one or more terms to a swap
may be incorrectly reported by the
reporting party, and the error would be
realized upon confirmation of the swap.
Under the final rules, such a
circumstance would require a
cancellation of the original—incorrectly
reported—data, followed by a correction
with accurate swap transaction and
pricing data. When reporting a
cancellation or correction, the SDR must
report the data in the same form and
manner in which it was originally
reported and include a date stamp
reflecting the time of the original
transaction, so that market participants
and the public are aware of which swap
has been canceled or corrected.
The Commission agrees that a longer
reporting time would reduce reporting
errors. Section 43.5 (‘‘Time delays for
public dissemination of swap
transaction and pricing data’’) provides
initial timeframes for reporting swap
transaction and pricing data during an
initial interim period. These timeframes
will provide additional time for
reporting. The Commission believes that
longer reporting times during the phase
in period should allay concerns about
errors resulting from speed of reporting
and should also provide market
participants and registered entities with
the necessary time to develop
appropriate systems to reduce errors in
the reporting process.
One commenter requested an explicit
undertaking from the Commission that
it will not prosecute, penalize or
otherwise impose ‘‘remedies’’ on parties
for inadvertent errors in reporting under
any new standardized information
collection system required by the final
rules. Such relief is not appropriately
part of a rulemaking. Parties seeking
such relief may do so pursuant to the
no-action procedures of § 140.99.199
199 The Commission has the ability to review all
error and omission reports and is authorized under
the CEA and Commission regulations to investigate
and prosecute false reports.
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7. Hours of Operation of Registered
Swap Data Repositories (§ 43.3(f))
Proposed § 43.3(g)(1) specified that an
SDR that accepts and publicly
disseminates real-time data must be able
to do so twenty-four hours a day.
However, proposed § 43.3(g)(2)
permitted an SDR to declare special
closing hours to perform maintenance
on an ad hoc basis. Such closing would
require advance notice by the SDR to
market participants and the public.
Proposed § 43.3(g)(3) further provided
that special closing hours should not be
scheduled during periods when the U.S.
markets and major foreign swap markets
are most active. Proposed § 43.3(h)
provided that during special closing
hours, an SDR that is a real-time
disseminator must have the capability to
receive and hold in queue information
regarding ‘‘reportable swap
transactions.’’
The Commission received three
comments regarding an SDR’s hours of
operation. One commenter suggested
that the real-time disseminator should
operate continuously in light of the
global nature of derivatives markets and
participation by non-U.S. persons.200
Another stated that SDRs should operate
24 hours a day, six days a week to
permit continuous access to data by
regulators (including during periods
where individual exchanges or other
trading platforms are closed). Requiring
such operating hours recognizes the
global nature of trading in derivatives
markets and the round-the-clock
participation in these markets by U.S.
persons.201 The third commenter
suggested that scheduled downtime
should be permitted so that the ‘‘realtime disseminator’’ could perform
routine maintenance and to mark the
beginning and end of the trading day.
This commenter also stated that the
downtime periods should extend for no
less than 30 minutes and should be
scheduled for time periods that are least
disruptive (i.e., when market activity is
at low levels).202
The Commission agrees that the
global nature of the swaps market
requires that an SDR be able to publicly
disseminate swap transaction and
pricing data at all times and believes
that SDRs that publicly disseminate
swap transaction and pricing data
should be fully operational 24 hours a
day, 7 days a week.203 Accordingly, in
addition to minor technical changes—
including the redesignation of proposed
§ 43.3(g)(1) as § 43.3(f) in the final rule—
the Commission has amended the
proposed rule to add: ‘‘Unless otherwise
provided in this subsection,’’ a
registered swap data repository ‘‘shall
have systems in place to continuously
receive and publicly disseminate swap
transaction and pricing data in real time
pursuant to this part.’’
The Commission also agrees that
scheduled downtime should be
permitted to allow the SDR to perform
routine maintenance and that these
periods should be scheduled during
time periods that are least disruptive
(i.e., when market activity for the asset
class of the SDR is low). Accordingly,
the Commission is adopting in
§ 43.3(f)(2) a provision that the SDR
should, to the extent reasonably
possible, avoid scheduling closing hours
when, in its estimation, the U.S. market
and major foreign markets are most
active. However, the Commission does
not believe it is necessary to close an
SDR daily to mark the beginning and
end of the trading day. The Commission
also disagrees that SDRs should operate
24/6 and believes that such continuous
operating hours are appropriate given
the global nature of trading
derivatives.204
In addition to minor technical
changes, the Commission is deleting the
reference to closing ‘‘on an ad hoc
basis’’ with regard to ‘‘special closing
hours.’’ Instead, § 43.3(f)(1) refers only
to ‘‘closing hours.’’ These changes allow
SDRs to properly maintain their systems
while also providing advance notice of
scheduled downtime to market
participants and the public.
During these downtimes, SDRs must
hold the data for public dissemination
in queue and release the information
with the appropriate execution
timestamp upon re-opening. Any
downtime by an SDR should be publicly
announced, with adequate notice to the
market, and should occur at a time
when there is anticipated low market
activity, which may vary based on asset
class. Further, the Commission strongly
encourages SDRs to adopt redundant
systems to allow public reporting during
closing hours.
The Commission intends to ensure
that SDRs will provide market
participants and the public with
sufficient notice of closing hours. To
that end, the Commission is adopting
new § 43.3(f)(3) to provide that: ‘‘A
200 See CL–Working Group of Commercial Energy
Firms.
201 See CL–DTCC.
202 See CL–CME.
203 The Commission notes that the CEA does not
require SDRs to have any scheduled down time.
204 By requiring SDRs to operate continuously for
the purposes of the real-time public reporting
requirements of part 43, market participants will be
less likely to execute during SDR downtimes in
order to delay public dissemination of swap
transaction and pricing data.
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registered SDR shall comply with the
requirements under part 40 of the
Commission’s regulations in setting
closing hours and shall provide advance
notice of its closing hours to market
participants and the public.’’
The Commission previously has
deemed policies such as trading hours
to be ‘‘rules’’ as that term is defined in
§ 40.1(i) of the Commission’s
regulations.205 Accordingly, an SDR is
required under part 40 to self-certify its
rules, including the establishment and
modification of trading hours.206 The
self-certification process under § 40.6
includes posting notice on the SDR’s
Web site.207 However, compliance with
the part 40 provisions alone may not
suffice to meet the notice requirement
under § 43.3(f)(3), which requires an
SDR to provide reasonable advance
notice to participants and the public of
its closing hours.208
8. Acceptance of Data During Closing
Hours (§ 43.3(g))
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Proposed § 43.3(h) required that an
SDR have the capability to receive and
hold in queue information regarding
‘‘reportable swap transactions’’ during
special closing hours. Consistent with
comments addressing hours of
operation, the Commission is adopting
§ 43.3(g) and adding §§ 43.3(g)(1) and (2)
to an SDR’s responsibilities to accept
data during closing hours.209
The Commission is adopting
§ 43.3(g)(1) to clarify that an SDR must
publicly disseminate the data that it has
held in queue during closing hours
promptly upon reopening after closing
hours. The Commission anticipates that
there may be circumstances in which an
SDR is unable to receive and/or hold
swap transaction and pricing data in
queue during downtime. To ensure that
market participants and the public
receive timely notice of any failure to
hold data in queue, the Commission is
adding § 43.3(g)(2) which requires the
205 Section 40.1(i) includes in the definition of
‘‘rule’’ both ‘‘stated policy’’ and ‘‘terms and
conditions.’’ Further, § 40.1(j)(1)(iv) defines ‘‘terms
and conditions’’ to include trading hours. 76 FR
44776 at 44791 (July 27, 2011).
206 Section 40.4(b)(3) provides that changes in
trading hours may be implemented without prior
approval of the Commission, as long as such
changes have been submitted for self-certification as
required under the procedures of § 40.6(a). See 76
FR 44776, 44793 (July 27, 2011).
207 The Commission’s part 40 regulations include
a process by which registered entities may certify
rules or rule amendments that establish standards
for responding to an emergency.
208 For example, an SDR could provide notices to
its participants or publicize its closing hours in a
conspicuous place on its Web site.
209 As previously noted, the Commission is not
required to provide schedule closing times for
SDRs.
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SDR, upon reopening, to issue notice
that it has resumed normal operations in
such cases where data was not held in
queue. The Commission believes that
such notice should be provided for all
market participants. Such notice must
state that the SDR resumed normal
operations but was unable, while closed
or for some other reason, to receive and
hold in queue such transaction
information. Further, § 43.3(g)(2)
requires that upon receiving such
notice, any SEFs, DCMs or reporting
parties whose data was so ‘‘lost’’ shall
re-report the data to the SDR
immediately.210
9. Timestamp Requirements (§ 43.3(h))
Proposed § 43.3(i) required that all
data related to a ‘‘reportable swap
transaction’’ be maintained for a period
of not less than five years following the
time at which the transaction data is
publicly disseminated pursuant to part
43. Specifically, proposed § 43.3(i)(1)
required that SEFs and DCMs retain all
swap transaction information received
from reporting parties for the purposes
of public dissemination, including block
trade and large notional swap data. As
proposed, § 43.3(i)(2) directed that SDs
and MSPs retain swap transaction and
pricing information in accordance with
proposed part 43 and proposed part 23.
The Commission received seven
comments from various interested
parties, including industry associations
and a potential SDR, with respect to
proposed § 43.3(i).211 Two commenters
asserted that recordkeeping standards
should be coordinated internally
between Commission rulemakings as
well as externally with the SEC and
international regulators.212 Some
commenters focused on perceived
burdens to end-users, asserting that that
the costs and burdens of recordkeeping
for end-users would be very high for
less-technologically-sophisticated endusers, and that further clarification is
necessary with respect to the precise
data that should be retained by endusers.213 One commenter recommended
that this clarification should be written
in clear, easy-to-understand terms, and
that the final rules should provide for a
‘‘CFTC-lite’’ regulatory scheme for
commercial end-users.214
A commenter stated that § 1.31 of the
Commission’s regulations is outdated
and should not be applied to the
proposed recordkeeping rules under this
part.215 This commenter further
recommended that data retention
should be triggered by the execution of
the swap transaction, as proposed in the
part 45 rules, and not upon public
dissemination.216
The Commission does not believe that
§ 1.31 of the Commission’s regulations
is outdated and inappropriate to the
proposed recordkeeping rules. On the
contrary, § 1.31 provides that books and
records be kept for a period of five years
from the date such records are created.
In addition, this section provides that
records must be readily accessible
during the first two years of the five year
period. Adopting proposed § 43.3(i)
would duplicate the existing
recordkeeping requirements of § 1.31.
217 Further, in response to other
commenters, the Commission does not
believe that a ‘‘CFTC-lite’’ regulatory
scheme for commercial end-users is
contemplated by the Dodd-Frank Act.
The Commission also disagrees that
data retention should be triggered by
termination of the publicly reportable
swap transaction. Real-time data will
have been publicly disseminated upon
affirmation and there would be no
requirement to maintain the data in the
interim period. However, the
Commission does see merit in the
comment that real-time data should be
retained for an appropriate period from
the date of the price-forming event to
allow re-publication of historic price
data and support the error correction
process.218 Proposed § 45.2(c) explicitly
states that all records required to be kept
for a swap shall be kept ‘‘from the date
of the creation of the swap 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.’’
Therefore, as required by § 1.31 and
proposed part 45, real-time swap
transaction and pricing data will be
214 See
210 In
addition to these changes, the Commission
has made minor technical and conforming changes
to this section. For example, proposed § 43.3(g)
(‘‘Hours of Operation’’) is renumbered as § 43.3(f) in
the final rules; proposed § 43.3(h) (‘‘Acceptance of
data during special hours) is redesignated as
§ 43.3(g).
211 See, e.g., CL–FSR.
212 See CL–WFE; CL–Working Group of
Commercial Energy Firms.
213 See CL–Working Group of Commercial Energy
Firms; CL–NFPEEU.
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215 See
CL–NFPEEU.
CL–Working Group of Commercial Energy
Firms.
216 See id.; See also 75 FR 76574.
217 In addition, registered entities are also subject
to the swap recordkeeping provisions of proposed
§ 45.2. Proposed § 45.2 sets forth the swap
transaction records that shall be kept by all parties
subject to the Commission’s jurisdiction and the
manner and form in which such records should be
kept, including relevant timeframes for retention
and access.
218 See CL–DTCC.
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retained for a period of five years after
the termination of the swap.
After considering comments and the
recordkeeping requirements in both the
Commission’s existing regulations and
proposed part 45 rules, the Commission
has determined to limit the
recordkeeping requirements in part 43
to timestamps. The Commission agrees
that the recordkeeping and data
retention requirements should be
coordinated between CFTC
rulemakings, particularly the data
recordkeeping and reporting rules. The
Commission believes that the
recordkeeping provision in proposed
§ 43.3(i) is duplicative of recordkeeping
requirements found in other proposed
Commission regulations (e.g., proposed
part 45 and proposed part 23
recordkeeping requirements) and is
therefore not adopting proposed
§ 43.3(i). The Commission believes that
eliminating this provision addresses
commenters’ concerns relating to the
cost burden of maintaining data beyond
the data retained in the ordinary course
of business and eliminates duplicative
recordkeeping requirements.
The Commission believes that there is
a need for SEFs, DCMs, SDRs, SDs and
MSPs to record and maintain certain
timestamps regarding the transmission
and dissemination of real-time swap
transaction and pricing data.
The Commission’s proposed block
trading rules included a requirement in
§ 43.5(f) that SEFs and DCMs timestamp
swap transaction and pricing data with
the date and the time to the nearest
second. Additionally, and as discussed
with respect to appendix A to part 43
below, the Commission proposed that
an ‘‘execution timestamp’’ be publicly
disseminated for all ‘‘reportable swap
transactions.’’ As discussed above, the
Commission has determined not to
adopt the proposed rules establishing
appropriate minimum size for block
trades at this time; proposed § 43.5(f)
has been redesignated as § 43.3(h)
(‘‘Timestamp Requirements’’). As
proposed, § 43.5(f)(1) and appendix A to
part 43 required SEFs and DCMs to
timestamp swap transaction and pricing
data with the date and time to the
nearest second.
The Commission received two
comments objecting to the timestamp
reporting requirement as unreasonable
and inconsistent with current market
practice. One commenter also suggested
that the value derived by moving the
industry to Coordinate Universal Time
(‘‘UTC’’) appears minimal when
compared to the costs involved.219 The
Commission recognizes that reporting
219 See
CL–ISDA/SIFMA.
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the timestamp to the second is not
current industry practice in some asset
classes and may incur some
technological and cost challenges.
However, a timestamp to the second is
necessary both for audit trail and
enforcement purposes and to provide
market participants and the public with
sufficient information to re-create a
trading day. The Commission will also
use the timestamps described in
§ 43.3(h) to determine whether swaps
are being reported ‘‘as soon as
technologically practicable’’ and to
compare the speed at which similar
market participants report swap
transaction and pricing data to an SDR
for public dissemination. Additionally,
the Commission will be able to
determine how quickly SDRs are
publicly disseminating the information
that they receive for public
dissemination.
The execution timestamp, described
in appendix A to part 43, is critical for
SDRs in determining when to publicly
disseminate swap transaction and
pricing data that is subject to a time
delay pursuant to § 43.5. Different
market participants and different types
of execution may be assigned different
time delays, so the execution timestamp
that is publicly disseminated will be an
important aid in following the order of
execution of transactions within a
particular market.
Notwithstanding potential costs to the
industry, the Commission believes that
movement to UTC will facilitate the
ability for market participants and the
public to harmonize swap transactions
across the global market. The
Commission notes that use of UTC in
the part 43 rules refers only to the
execution timestamp that is publicly
disseminated. Consistency across the
global swaps market will better enhance
price discovery, and the Commission
believes that requiring UTC will allow
market participants and reporting
parties to recreate the order of trades,
provide consistency across all publicly
disseminated swap transaction and
pricing data and reduce the need for
market participants to convert different
transaction times to understand the
order of trades in a particular market.
For the reasons discussed above, the
Commission is adopting the timestamp
requirements as proposed in § 43.5(f),
with certain modifications, as § 43.3(h).
First, the Commission has clarified that
the timestamps in § 43.3(h) are in
addition to the execution times in
appendix A to part 43. Further, the
Commission is not limiting these
timestamp requirements to block trades
and large notional off-facility swaps, as
in the Proposing Release, but rather is
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requiring such timestamps for all
publicly reportable swap transactions.
The Commission has also made
conforming changes to proposed
§ 43.5(f)(1)–(3) which are reflected in
§ 43.3(h)(1), (2) and (4).220 In
§ 43.3(h)(1)(i), the Commission has
changed the term ‘‘reporting party’’ to
‘‘swap counterparty’’ since block trades
must be reported pursuant to the rules
of a SEF or DCM.221
The Commission has added
§ 43.3(h)(3) and (4) to require that SDs
and MSPs record and maintain for a
period of at least five years a timestamp
reflecting when data is sent to an SDR
for public dissemination.222
The commenters’ concerns with
respect to the costs and burdens of
recordkeeping on end-users also have
merit. Accordingly, the Commission has
determined that, other than the
timestamp requirements of § 43.3(h), no
additional recordkeeping burdens will
be placed upon end-users under part 43.
The Commission agrees that the
recordkeeping requirements should be
harmonized with the SEC. Many
registered entities, SDs and MSPs will
be dually registered with the
Commission and the SEC, and they will
comply with the agency regime that has
more robust recordkeeping standards.
Finally, the Commission acknowledges
that coordination with international
regulators will also be necessary in their
rulemaking processes and commits that
it will continue to do so.
10. Fees Charged by SDRs (§ 43.3(i))
The Commission interprets CEA
sections 2(a)(13) and 21 to require that
SDRs ensure open and equal access to
their data collection services for the
purpose of real-time reporting.
Consistent with this interpretation, the
Commission proposed in § 43.3(j) that
fees charged by a real-time disseminator
to reporting parties, SEFs or DCMs
should be equitable and nondiscriminatory, and that volume
220 The conforming changes to these sections
include changing the phrases ‘‘a swap market and
a registered swap data repository’’ to ‘‘a registered
swap execution facility or designated contract
market’’; ‘‘real-time disseminator’’ to ‘‘registered
swap data repository’’; and ‘‘swap market or
reporting party’’ to ‘‘registered swap execution
facility, designated contract market or reporting
party’’ to more accurately reflect the terms as
defined in § 43.2.
221 The circumstance described in § 43.3(h)(1)(i)
may occur when a block trade is executed away
from a SEF or DCM, but pursuant to the rules of
a SEF or DCM. The SEF or DCM would need to
record a timestamp of when it received such data
from a swap counterparty pursuant to its rules.
222 The Commission anticipates that the
timestamp requirements in § 43.3(h)(3) would likely
apply only in the case of off-facility swaps and
price-forming continuation data in which the SD or
MSP is the reporting party.
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discounts for data collection shall not be
offered, unless available to all reporting
parties.
The Commission received ten
comments related to fees charged by an
SDR for their public dissemination
services. A market data vendor
suggested that the Commission permit
SDRs to employ the sell-side-pays
model, or alternatively, a structure that
requires only the reporting party to pay
SDR fees.223 Another commenter
criticized proposed § 43.3(j) for
permitting volume discounts; 224 while
others urged that the Commission
monitor what is ‘‘fair and
reasonable.’’ 225 A commenter
recommended that the Commission
clarify that nothing in its rules is
intended to impose or imply any limit
on the ability of market participants—
including parties to the transaction,
SEFs and DCOs—to use and/or
commercialize data they create or
receive in connection with the
execution or reporting of swap data, so
long as it is consistent with their
confidentiality obligations.226 Two
commenters stated that the final rules
should clarify that ownership of data is
retained by the counterparties to the
swap and does not transfer to a SEF,
DCM or SDR.227 Another requested
clarification that market participants
may use and/or commercialize real-time
swap transaction and pricing data.228
Finally, several commenters stated that
SDRs should not charge reporting
parties since they will receive fees from
the sale of such data to the public.229
A commenter stated that it currently
provides data to the public free of
charge and expects to continue to do so
when satisfying its part 43
obligations.230 Another commenter
urged that SDRs be allowed to charge
commercially reasonable fees to
disseminate data, because otherwise
there would be no incentive to improve
systems to the detriment of
transparency.231 A commenter urged
that the Commission monitor the fee
setting of entities under its jurisdiction
to ensure that fees are fair and
reasonable and do not favor any class of
participant at the expense of others.232
Some commenters suggested that the
fees collected by SDRs relating to public
dissemination of swap transaction and
pricing data should be redistributed to
reporting parties; 233 other commenters
stated that such fees should be remitted
to the Commission to offset the costs of
implementing the Dodd-Frank Act. 234
The Commission emphasizes that
section 727 of the Dodd-Frank Act
explicitly requires public dissemination
of such data. The Commission believes
that implicit in this mandate is the
requirement that the data be made
available to the public at no cost. On the
other hand, however, the Commission
believes it is reasonable to permit an
SDR that publicly disseminates swap
transaction and pricing data to charge
fair and reasonable fees to providers of
swap transaction and pricing data to
offset the costs associated with public
dissemination of those data. Further,
nothing in these rules would prohibit
SDRs responsible for the public
dissemination of real-time swap data
from making commercial use of such
data subsequent to public dissemination
of those data.235
With regard to specific fee
arrangements, the Commission believes
such matters are business decisions best
left to the parties. Further, the
Commission believes that issues of data
ownership are outside the scope of this
rulemaking.
For these reasons, the Commission is
adopting proposed § 43.3(j) with minor
technical amendments 236 and
additional language to clarify that
volume-based discounts offered to any
reporting party must be made available
to all reporting parties.
D. Section 43.4—Swap Transaction and
Pricing Data To Be PubliclyDisseminated in Real-Time
1. In General (§ 43.4(a))
Proposed § 43.4(a) provided that swap
transaction information must be
reported to a real-time disseminator so
that the real-time disseminator could
publish swap transaction and pricing
data in accordance with part 43. As
explained more fully in the discussion
of § 43.3(b), the Commission has
concluded that third party service
providers should not be used for public
233 See
223 See
CL–MarkitSERV.
CL–Better Markets.
225 See CL–BlackRock; CL–MarkitSERV.
226 See CL–Tradeweb.
227 See CL–Markit; CL–DTCC.
228 See CL–Tradeweb.
229 See CL–Working Group of Commercial Energy
Firms.
230 See CL–DTCC.
231 See CL–ICE.
232 See CL–BlackRock.
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224 See
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CL–Tradeweb.
234 See CL–Working Group of Commercial Energy
Firms.
235 Section 49.17(g) of the Commission’s
regulations governs the commercial use by SDRs of
both core regulatory data and real-time publicly
reported data; § 49.17(g)(3) explicitly prohibits the
commercialization by SDRs of publicly
disseminated swap transaction and pricing data
prior to the public dissemination of such data
pursuant to part 43.
236 The Commission notes that the rule has been
redesignated as § 43.3(i).
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1207
dissemination and that instead real-time
swap transaction and pricing data
should be reported to SDRs for public
dissemination. Accordingly, § 43.4(a) is
amended to eliminate the reference to
‘‘real-time disseminator’’ and replace it
with ‘‘registered swap data repository’’
and to remove the phrase ‘‘and format
requirements.’’
2. Public Dissemination of Data Fields
(§ 43.4(b))
The Commission is adopting this
section as proposed, with minor
conforming changes.237
3. Additional Swap Information
(§ 43.4(c))
The Commission is adopting this
section as proposed, with minor
technical and conforming changes. For
example, ‘‘match’’ is changed to
‘‘compare’’ and the phrase ‘‘that accepts
and publicly disseminates swap
transaction and pricing data in real-time
on a transactional or aggregate basis’’ is
removed from the end of the text.
4. Amendments to Data Fields
(Proposed § 43.4(d))
Two commenters questioned the
Commission’s authority to summarily
modify the data fields described in
appendix A to proposed part 43 without
the opportunity for notice and
comment.238 One commenter indicated
that any changes to data fields should
not include the publication of
identifying information.239
The Commission agrees that any
changes to the data fields should reflect
careful consideration and should not
result in the publication of identifying
information. Accordingly, the
Commission is not adopting proposed
§ 43.4(d) (‘‘Amendments to data
fields’’).240
5. Anonymity of the Parties to a Publicly
Reportable Swap Transaction (§ 43.4(d))
CEA section 2(a)(13)(E)(i) requires the
Commission to protect the identities of
counterparties to mandatorily cleared
swaps, swaps excepted from the
mandatory clearing requirement and
voluntarily cleared swaps.241 Similarly,
237 One commenter recognized that § 43.4(b) does
not require the public dissemination of any
counterparty-identifying information. See CL–MFA.
238 See CL–MFA; CL–ABC/CIEBA.
239 See CL–MFA.
240 Proposed § 43.4(d) stated that the
‘‘Commission may determine from time to time to
amend the data fields described in appendix A to
this part.’’
241 As noted, Congress required that such rules
‘‘ensure that the public reporting of swap
transaction and pricing data does not disclose the
names or identities of the parties to the
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CEA section 2(a)(13)(C)(iii) requires that
the Commission’s rules maintain the
confidentiality of business transactions
and market positions of the
counterparties to an uncleared swap.242
Proposed § 43.4(e)(1) prohibited the
public dissemination of real-time swap
transaction and pricing data that would
identify or facilitate the identification of
a party to a swap and further specified
that an SDR may not publicly report
such data in a manner that discloses or
otherwise facilitates the identification of
a party to a swap. Proposed § 43.4(e)(2)
directed that a SEF, DCM or reporting
party must provide an SDR with a
specific description of the underlying
asset and tenor of a swap. Proposed
§ 43.4(e)(2) further provided that ‘‘this
description must be general enough to
provide anonymity but specific enough
to provide for a meaningful
understanding of the economic
characteristics of the swap.’’ Proposed
§ 43.4(i) established a rounding
convention for all swaps, including a
‘‘notional cap’’ providing that if the
notional size of a swap is greater than
$250 million, only ‘‘$250+’’ would be
publicly disseminated.243
The Commission recognized that the
public dissemination of the underlying
asset and tenor of a swap executed offfacility with a specific underlying asset
may be more susceptible to an inference
as to the identity, business transactions
or market positions of the parties to the
swap, particularly in the ‘‘other
commodity’’ asset class.244 In contrast,
the Commission acknowledged that
swaps executed on or pursuant to the
rules of a SEF or DCM would likely not
be subject to the same disclosure risk.245
To avoid the former result and comply
with the statutory mandate, the
Commission determined that a more
general description than the specific
underlying asset and tenor should be
publicly disseminated.246 The
Commission provided an example in the
Proposing Release of how such a
standard could be applied, but did not
propose specific guidelines because it
transactions.’’ See Statement of Sen. Blanche
Lincoln supra note 15.
242 Such provision does not cover swaps that are
determined to be required to be cleared but are not
cleared.
243 Given the importance of protecting the
identities of the parties to a swap and the business
transactions and market positions of market
participants, and pursuant to its authority under
CEA section 2(a)(13)(B), the Commission in
adopting part 43 has considered the protection of
the anonymity for all swaps, both cleared and
uncleared.
244 Real-Time NPRM supra note 6, at 76150—
76151.
245 Real-Time NPRM supra note 6, at 76151.
246 Id.
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recognized that SEFs or DCMs may
differ and that new types of swaps may
emerge.247 Proposed § 43.4(e)(2) made
clear that its requirement was separate
from the requirement that a reporting
party report swap data to an SDR
pursuant to CEA section 2(a)(13)(G).248
As proposed in § 43.4(e)(2), the
standard that swap data be ‘‘general
enough to provide anonymity but
specific enough to provide for a
meaningful understanding of the
economic characteristics of the swap’’
applied to all swaps. However, in the
preamble to the Proposing Release, the
Commission recognized that SEFs or
DCMs differ and sought to clarify that
the standard would be applied
differently depending on asset class and
place of execution. Even if the specific
underlying asset and tenor of a swap
executed on or pursuant to the rules of
a SEF or DCM were publicly
disseminated, it would be difficult for
market participants to ascertain the
identity, business transactions or market
positions of the counterparties. Swaps
executed on or pursuant to the rules of
a SEF or DCM would generally lack the
kind of customization that would permit
reverse engineering; therefore,
identities, business transactions and
market positions and of counterparties
could not be inferred from the
underlying asset and tenor.
The Commission received 25
comments addressing anonymity in the
public dissemination of swap
transaction and pricing data. The
commenters included industry
associations representing financial
market participants; potential SDs; endusers (both financial and non-financial);
potential SDRs; an asset manager; and a
data vendor to the OTC derivatives
industry. Some commenters expressed a
general concern that the provisions in
the Proposing Release would not
sufficiently protect the anonymity of the
market participants. Within this group,
some commenters believed that
anonymity would not be sufficiently
protected by the proposed provisions
because of the structure of the swap (i.e.,
bilateral swap where at least one
counterparty is an end-user; bespoke
transaction; 249 uncleared bespoke
transaction).250 Others argued that
anonymity would be compromised
because of the underlying asset (i.e.,
energy products); 251 still others focused
on the liquidity in the market.252 In
247 See
Real-Time NPRM supra note 6.
NPRM supra note 6, at 76174.
249 See CL–Coalition of Energy End-Users.
250 See CL–FHLBanks.
251 See CL–Dominion; CL–ATA; and CL–EMUS.
252 See CL–MS; CL–EMUS; CL–Argus.
248 Real-Time
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addition to general concerns, one
commenter asserted that the information
that would be publicly disseminated
under the proposed rule would fail to
enhance price discovery, and thus its
disclosure would not further the
statutory purpose embodied in CEA
section 2(a)(13)(B).253
One commenter stated that the
anonymity provisions of proposed
§ 43.4(e)(2) should be applied to all
asset classes and to all swaps, regardless
of whether the swap is executed on or
pursuant to the rules of a SEF or DCM
or off-facility.254 Another requested that
the Commission clarify in the final rule
‘‘that the information required to be
publicly disseminated cannot identify
the participants to a swap or provide
information specific to the
participants.’’ 255
One commenter asserted that whether
a swap is liquid enough to clear at a
DCO is not determinative of whether the
swap exists in a liquid market.256 The
commenter stated that cleared swaps
may exist in illiquid markets and the
real-time reporting of such swap
transaction and pricing data may both
negatively impact the price, and
disclose the identity, business
transactions or market positions of one
or more counterparties.257 The same
commenter suggested that the
Commission define an ‘‘illiquid market’’
and require that swaps traded in such
markets receive special treatment for
purposes of public dissemination.258
Similarly, commenters suggested that
the Commission begin phasing in realtime public reporting with more liquid
contracts and phase in less liquid
contracts as it gains more information
on markets with less liquidity.259
A common belief expressed by many
commenters is that special
accommodations should be made for
off-facility swaps based upon an
underlying physical commodity because
of the increased risk that the identities
of the parties and their business
transactions or market positions may be
revealed.260 Some commenters focused
on the illiquid markets that exist for
253 See
CL–Dominion.
CL–Coalition of Derivatives End-Users.
The commenter stated that often, after a bond is
issued to raise debt in the capital markets, the
issuer will enter into an interest rate swap to hedge
the interest rate risk.
255 CL–ISDA/SIFMA at 15.
256 See CL–MS.
257 The commenter stated that a market in which
products that are illiquid are cleared exists for highyield single name CDS. The Commission notes,
however that such single name CDS are not under
the Commission’s jurisdiction. CL–MS at 3, fn. 4.
258 See CL–MS.
259 See CL–MS; CL–Barclays.
260 See CL–ISDA/SIFMA.
254 See
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some swaps that fall within the ‘‘other
commodity’’ asset class with specific
pricing points or delivery points, grade
level or tenor, specifically for swaps
with an underlying asset in the energy
space (e.g., natural gas, electricity, jet
fuel, etc.).261 The commenters explained
these markets are very illiquid with few
transactions and/or few market
participants. They argued that trades
executed in illiquid markets are more
susceptible to reverse engineering,
thereby increasing the likelihood that
the counterparties’ identities, business
transactions or market positions could
be discovered.262
One commenter suggested that the
Commission ‘‘allow for an exclusion
[from the requirements of part 43] for
any transaction between either two endusers or an end-user and a regulated
entity with respect to any class of swaps
that does not serve a significant price
discovery function.’’ 263 The commenter
stated that in such situations,
particularly when the entity is hedging
an energy asset, the public
dissemination of the swap transaction
and pricing data would serve no price
discovery function and may reveal the
identity of the end-user, depending on
whether the underlying asset is in an
illiquid market with few market
participants.264 Another commenter
stated that the Commission should
ensure anonymity by not requiring the
public dissemination of swap
transaction and pricing data for any
bespoke off-facility swaps.265 Similarly,
a commenter suggested the Commission
should not require the public
dissemination of any swap which falls
under CEA section 2(a)(13)(C)(iii) and
any end-user swaps under CEA section
2(a)(13)(C)(i) that are clearable but not
cleared, until the Commission
determines that these swaps are
‘‘significant price discovery’’ swaps as
set forth in Section 737 of the DoddFrank Act.266 This commenter believed
that given the Commission’s anonymity
provisions, the public dissemination of
the underlying asset would not be
specific enough to enhance price
discovery.
Some commenters suggested that, to
ensure anonymity, the Commission
should limit the amount of data or the
data fields that are publicly
261 See
CL–ATA; and CL–Barclays.
CL–Dominion.
263 Id. at 7.
264 See id.
265 See CL–Working Group of Commercial Energy
Firms. As stated above in section II.A.1. (‘‘Scope’’)
discussion, the Commission has determined that
Section 2(a)(13)(C) requires all swaps to be publicly
reported.
266 See CL–Dominion.
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disseminated.267 In this regard, one
commenter observed that ‘‘[i]f the list of
data fields is extensive [and carries with
it substantial implementation costs], yet
not complete enough that pricing of
instruments can be reproduced easily,
then end-users would bear the
implementation costs without the
commensurate benefit of enhanced price
discovery.’’ 268 The commenter
emphasized the importance of
dissemination of the data fields that
allow market participants to deduce the
material incentives that SDs or MSPs
have in connection with a particular
swap.269 Another commenter noted that
credit support arrangements are often
privately negotiated; to ensure the
confidentiality of the business
transactions of the counterparties to an
uncleared, bespoke swap with a credit
support arrangement, a ‘‘credit’’ data
field should not be publicly
disseminated.270 Commenters suggested
that for swaps with a specific delivery
or pricing point, a broad geographic
region should be publicly disseminated
rather than a specific location.271
One commenter stated that the
‘‘Tenor’’ data field should allow parties
to report using a tenor ladder, rather
than the month and year, to protect the
anonymity of the parties.272 However,
another commenter suggested that tenor
should be reported according to the
current market convention for a
particular swap instrument.273 Another
commenter suggested a contrary
approach: Because the tenor of a swap
is a primary economic term, the specific
tenor of the swap should be reported.274
267 See CL–Coalition of Energy End-Users; CL–
Working Group of Commercial Energy Firms.
268 CL–Coalition of Derivatives End-Users at 8.
269 See id.
270 See CL–Working Group of Commercial Energy
Firms. In the Proposing Release, the Commission
asked about whether creditworthiness of
counterparty should be publicly disseminated.
Real-Time NPRM supra note 6, at 76158. See also
infra discussion in section II.F. (‘‘Appendix A to
Part 43 (‘‘Data Fields for Public Dissemination’’)’’).
271 Id.; See also CL–Argus.
272 ‘‘[T]he trade data should be mapped to a tenor
ladder for public dissemination with longer dated
products mapping to one-year or two-year, for
example, rather than specific month and year.’’ CL–
GFXD at 11.
273 See CL–Working Group of Commercial Energy
Firms. The commenter provided an example that
because energy products tend to trade in seasonal
strips except for short tenors, it may be beneficial
to report seasonal strips rather than month for such
transactions.
274 See CL–ISDA/SIFMA. The commenter stated:
‘‘The Commission requests comment on whether
date information for swaps should be rounded to
the nearest tenor/month. Many swaps meet specific
requirements for end-users. To limit or manipulate
data elements that are part of the Primary Economic
Terms in order to allow trades with differing terms
to be aggregated will reduce post trade
transparency. We recommend that this proposal not
be implemented.’’ Id. at 15.
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1209
Many commenters questioned how
the Commission intended to enforce the
provisions of proposed § 43,2(e)(2).275
Several commenters believed the
proposed standard lacked clarity in
terms of its application and requested
additional guidance.276 These
commenters noted that the Proposing
Release placed the burden to provide
the requisite description of the swap on
the reporting party and requested that
the Commission adopt explicit
guidelines as to what data should (and
should not) be reported to an SDR for
purposes of public dissemination.
Several other commenters believed that
the confidentiality provisions of
proposed § 43.2(e)—which includes the
rounding convention and notional cap—
would not adequately protect the
counterparties, particularly when at
least one party to the swap was an enduser or when there was an illiquid
market for the swap.277
Consistent with its statutory mandate,
the Commission is requiring real-time
reporting that will enhance price
discovery while ensuring the anonymity
of the swap counterparties and the
confidentiality of business transactions
and market positions. The Commission
agrees that the Proposing Release did
not provide sufficient certainty as to
what data was required to be reported
by the reporting party to the swap.
Accordingly, in adopting § 43.4(d), the
Commission is not requiring the
reporting party, SEF or DCM, to apply
the ‘‘general enough but specific
enough’’ standard in proposed
§ 43.4(e)(2). Rather, § 43.4(d)(2) requires
that the actual underlying asset be
reported and publicly disseminated for
all swaps in the interest rate, credit,
foreign exchange and equity asset
classes (‘‘financial swaps’’) and for those
swaps described in § 43.4(d)(4) with
respect to the ‘‘other commodity’’ asset
class.
As discussed above, one commenter
urged that the final rule make clear that
publicly disseminated data cannot
identify the participants to the swap or
information specific to the participants.
The Commission believes that proposed
§ 43.4(e)(1) adequately addresses this
concern. Accordingly, § 43.4(d)(1)
incorporates the rule text of proposed
275 See CL–ABC/CIEBA; CL–MFA; and CL–ISDA/
SIFMA.
276 Id.
277 See, e.g., CL–Dominion; CL–Encana; CL–
FHLBanks; CL–Coalition for Derivatives End-Users;
CL–Argus; and Meeting with NFPEEU (January 19,
2011).
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§ 43.4(e)(1) with non-substantive
clarifying changes.278
As adopted, § 43.4(d)(2) requires that
reporting parties, SEFs and DCMs report
the actual description of the underlying
assets and tenor to the SDR.279 The SDR
must then publicly disseminate the
swap transaction and pricing data
related to the swap pursuant to
appendix A to part 43. The SDR is
responsible for applying the appropriate
time delay, rounding convention, and
notional cap prior to the public
dissemination of the swap transaction
and pricing data. Section 43.4(d)
eliminates the need for the reporting
party to report a generalized description
of the underlying asset to the SDR.
Further, the Commission anticipates
that reporting parties will utilize the
data connections that will be required to
report regulatory data to an SDR, as
described in proposed part 45, and that
requiring additional fields may create
confusion. However, although reporting
parties may use the same data stream for
reporting regulatory data and real-time
data, § 43.4(d)(2) clarifies the intent of
the Proposing Release: The reporting
requirements for SEFs, DCMs and
reporting parties for real-time reporting
purposes are separate from the
requirement to report to an SDR for
regulatory reporting purposes.280
In response to commenters who
contended that swaps involving endusers should be treated differently to
protect anonymity, the Commission
acknowledges that end-users may enter
bespoke or customized swaps more
often than non-end-users. The
Commission nonetheless believes it is
unnecessary to differentiate by swap
counterparties in promulgating a rule to
protect anonymity.281 Rather, as
explained below, it is more appropriate
to focus on the asset class, the liquidity
of certain types of swaps and the
execution venue (i.e., SEF, DCM, off278 Due to the deletion of proposed § 43.4(d), the
anonymity provisions in proposed § 43.4(e) are
being moved to final § 43.4(d). Final § 43.4(d)(1)
states that ‘‘[s]wap transaction and pricing data that
is publicly disseminated in real-time may not
disclose the identities of the parties to the swap or
otherwise facilitate the identification of a party to
a swap. A registered swap data repository that
accepts and publicly disseminates swap transaction
and pricing data in real-time may not publicly
disseminate such data in a manner that discloses or
otherwise facilitates the identification of a party to
a swap.’’
279 Sections 43.4(d)(2)–(4) replace proposed
§ 43.4(e)(2).
280 Certain clarifying language was added to the
provision found in proposed § 43.4(e)(2).
281 Further, the statute requires that all swaps,
including bespoke swaps, be publicly disseminated
so long as the identity, business transactions and
market positions of the parties to the swap are not
disclosed. See CEA sections 2(a)(13)(C) and
2(a)(13)(E)(i).
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facility) in determining whether a
specific description of the underlying
asset should be publicly
disseminated.282 In response to
commenters who claimed that the
public dissemination of swap
transaction and pricing data for certain
swaps entered into by end-users serves
no price discovery function, the
Commission disagrees; there is price
discovery value in publicly
disseminating all arm’s-length
transactions. Publicly disseminating
such data will provide market
participants and the public with a
clearer understanding of the depth of a
particular market, the frequency of
trading in the market and the pricing of
transactions with the same or similar
underlying assets.
With respect to financial swaps, the
Commission has considered comments
and discussions with market
participants, and does not believe that
disclosure of information relating to the
underlying asset, reference price or
index will compromise anonymity.
Financial swaps do not have underlying
assets with specific delivery or pricing
points (such as swaps with underlying
physical commodities). Further, the
liquidity to hedge such financial swaps,
either in the swaps markets or in
alternative markets (i.e., futures, cash
markets, etc.), reduces concerns that the
public dissemination of such swap
transaction and pricing data pursuant to
part 43 will reveal specific information
about market participants.
One commenter asserted that the
public dissemination of an interest rate
swap in connection with a bond
issuance could identify the end-user to
the swap.283 This commenter contended
that because bond issuances are a matter
of public record, real-time reporting
would enable market participants to
identify the end-user to the swap by
matching the terms of the swap with the
bond issuance that is being hedged. In
the circumstance described by the
commenter, the hedge of interest rate
risk after a bond issuance is a routine
transaction that market participants
expect. The Commission believes that
there is sufficient liquidity in the
interest rate, credit, equity and foreign
exchange asset classes to protect the
anonymity of market participants in
such asset classes. Further, in the
Commission’s view, the rounding
convention and notional caps provided
in §§ 43.4(g) and (h) will help to protect
the counterparties’ identities, business
282 In determining the appropriate time delay, the
Commission also focuses on asset class and place
of execution.
283 See CL–Coalition for Derivatives End-Users.
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transactions and market positions for all
swaps, regardless of asset class.
Therefore, the Commission believes that
the public dissemination of the full
information relating to financial swaps,
such as swaps executed in connection
with a bond issuance, will enhance
price discovery and will not
compromise the anonymity of market
participants.
Accordingly, § 43.4(d)(3), as adopted,
requires that the actual underlying asset
and tenor be publicly disseminated for
all swaps in the interest rate, credit,
foreign exchange and equity asset
classes, regardless of whether a swap is
executed on or pursuant to the rules of
a SEF or DCM or is an off-facility swap.
The rounding convention and notional
caps provide sufficient protection to
ensure the anonymity of the identities,
business transactions and market
positions of market participants with
respect to financial swaps.
Some commenters asserted that to
protect the identities of the
counterparties, the actual tenor of the
swap should not be publicly
disseminated (i.e., use of a tenor ladder
or use of current market convention).
The Commission has considered the
implications of publicly disseminating
the various data fields on disclosing the
anonymity, business transactions and
market positions of swap counterparties.
As further explained in the discussion
of appendix A to part 43, the
Commission is clarifying the data fields
in order to protect the identities,
business transactions and market
positions of market participants while
enhancing price discovery to market
participants and the public. The
Commission agrees with the commenter
who stated that the tenor of a financial
swap is a primary economic term of the
swap. Because the tenor is material to
the pricing of a swap, the Commission
is requiring that the actual tenor for all
swaps be publicly disseminated.284
The Commission agrees that there are
bespoke, off-facility transactions in
which the underlying asset is a physical
commodity; these transactions carry a
significantly increased likelihood that
the public dissemination of the
underlying asset may disclose the
identity, business transactions or market
positions of a counterparty. Several
commenters focused on the lack of
liquidity in certain ‘‘other commodity’’
markets, expressing the view that the
public dissemination of the underlying
asset or delivery point would reveal
information about market participants.
284 See infra discussion in section II.F.
(‘‘Appendix A to Part 43 (‘‘Data Fields for Public
Dissemination’’)’’).
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Commenters’ concerns about illiquid
swaps in the ‘‘other commodity’’ asset
class may be valid; however, the
Commission believes that for certain
bilateral ‘‘other commodity’’ swaps,
adequate liquidity exists such that the
counterparty’s identity, business
transactions and market positions will
not be disclosed by the public
dissemination of such swap transaction
and pricing data.285
As discussed above, commenters
recommended phasing in public
reporting and dissemination based on
liquidity, and the Commission agrees
that, given the anonymity concerns,
such an approach is appropriate. The
Commission is phasing in the public
dissemination requirements for ‘‘other
commodity’’ swaps, as discussed
directly below.
As adopted, §§ 43.4(d)(4)(ii)(A) and
(B) provide that for any publicly
reportable swap transaction in the
‘‘other commodity’’ asset class that
references any of the 28 ‘‘Enumerated
Physical Commodity Contracts’’
including ‘‘other commodity’’ swaps
that are economically-related to such
contracts,286 the actual underlying
physical commodity or referenced price
or index must be publicly disseminated
by the SDR, regardless of execution
method. Additionally, the Commission
believes that the public dissemination of
any swap that references Brent Crude
Oil (ICE) (and any swaps that are
economically-related thereto) must
reference the actual underlying asset,
regardless of execution method.
The 28 Enumerated Physical
Commodity Contracts have been
identified by the Commission as (i)
having high levels of open interest and
significant cash flow; and (ii) serving as
a reference price for a significant
number of cash market transactions.287
285 Additionally, one commenter urged that the
fact that a swap may be cleared is not determinative
of whether a swap is trading in an ‘‘illiquid’’
market. See CL–MS. The Commission believes that
the interim time delays described in § 43.5(c)
adequately address this commenter’s concerns, and
the Commission intends to further address this
comment in the block trade re-proposal.
286 Similar contracts are described in the Position
Limits final rulemaking. See 76 FR 71626 (final rule
available at https://www.cftc.gov/ucm/groups/
public/@lrfederalregister/documents/file/201128809a.pdf, last visited Nov. 30, 2011).
287 The 28 Enumerated Physical Commodity
Contracts are: ICE Futures U.S. Cocoa, ICE Futures
U.S. Coffee C, Chicago Board of Trade Corn, ICE
Futures U.S. Cotton No. 2, ICE Futures U.S. FCOJ–
A, Chicago Mercantile Exchange Live Cattle,
Chicago Board of Trade Oats, Chicago Board of
Trade Rough Rice, Chicago Board of Trade
Soybeans, Chicago Board of Trade Soybean Meal,
Chicago Board of Trade Soybean Oil, ICE Futures
U.S. Sugar No. 11, ICE Futures U.S. Sugar No. 16,
Chicago Board of Trade Wheat, Minneapolis Grain
Exchange Hard Red Spring Wheat, Kansas City
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These 28 Enumerated Physical
Commodity Contracts are identical to
those that will have federallyadministered limits imposed on them by
the Commission’s part 151 rules
(Position Limits) generally covering
contracts based on the agricultural,
metals and energy commodities.
Additionally, using the same criteria
enumerated above, the Commission is
requiring that any swap that references
Brent Crude Oil (ICE), or economicallyrelated to Brent Crude Oil (ICE), be
reported and publicly disseminated by
an SDR.288 The Commission has
determined that these contracts and
economically related contracts have
sufficient liquidity to ensure that the
public dissemination of swap
transaction and pricing data for swaps
based on these reference assets poses
little risk of disclosing identities of
parties, business transactions or market
positions.
Appendix B to part 43 (‘‘Enumerated
Physical Commodity Contracts and
Other Contracts’’) lists the 28
Enumerated Physical Commodity
Contracts and Other Contracts (i.e.,
Brent Crude Oil (ICE)) for which the
actual underlying asset must be publicly
disseminated. For the purposes of part
43, swaps are economically related, as
described in § 43.4(d)(4)(ii)(B), if such
contract utilizes as its sole floating
reference price the prices generated
directly or indirectly 289 from the price
of a single contract described in
appendix B to part 43.
For all off-facility swaps that
reference an underlying asset(s) in the
‘‘other commodity’’ asset class which
Board of Trade Hard Winter Wheat, Chicago
Mercantile Exchange Class III Milk, Chicago
Mercantile Exchange Feeder Cattle, Chicago
Mercantile Exchange Lean Hogs, Commodity
Exchange, Inc. Copper, New York Mercantile
Exchange Palladium, New York Mercantile
Exchange Platinum, Commodity Exchange, Inc.
Gold, Commodity Exchange, Inc. Silver, New York
Mercantile Exchange Light Sweet Crude Oil, New
York Mercantile Exchange New York Harbor
Gasoline Blendstock, New York Mercantile
Exchange Henry Hub Natural Gas, New York
Mercantile Exchange New York Harbor Heating Oil.
288 The 28 Enumerated Physical Commodity
Contracts are traded on U.S. DCMs, while Brent
Crude Oil (ICE) futures contracts are primarily
traded in Europe. Nonetheless, Commission has
determined that swaps that utilize a reference price
based on Brent Crude Oil (ICE) futures have
sufficient trading activity such that public
dissemination of the actual underlying asset would
not disclose the identities of counterparties or the
business transactions and market positions of any
person.
289 An ‘‘indirect’’ price link to an Enumerated
Physical Commodity Contract or an Other Contract
described in appendix B to part 43 includes
situations where the swap reference price is linked
to prices of a cash-settled contract described in
appendix B to part 43 that itself is cash-settled
based on a physical-delivery settlement price to
such contract.
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1211
are not listed on appendix B to part 43,
the Commission intends to propose
special accommodations for the public
dissemination of transaction and pricing
data in a future Commission release to
be published for comment in the
Federal Register. Until such time as the
Commission adopts these special
accommodations, those off-facility
swaps not listed in appendix B to part
43 will not be required to comply with
the real-time reporting and public
dissemination requirements under this
part. However, such swaps will be
subject to the regulatory reporting
requirements, described in proposed
part 45, when adopted.290 The
Commission believes that the phasing in
of these illiquid, off-facility swaps in the
‘‘other commodity’’ asset class
addresses commenters’ concerns that
public dissemination of such
information would disclose the
identities of the parties, market
positions or business transactions.291
The Commission is not persuaded by
commenters’ concerns that public
disclosure of ‘‘other commodity’’ swaps
executed on or pursuant to the rules of
a SEF or DCM could disclose the
identities of the parties. Parties will
execute swaps on or pursuant to the
rules of a SEF or DCM because either (i)
the swap is subject to the trade
execution mandate of CEA section
2(h)(8) and therefore must be traded on
a SEF or DCM; or (ii) the swap is not
subject to the trade execution mandate
but the parties voluntarily execute the
swap on or pursuant to the rules of a
SEF or DCM.292 When counterparties
voluntarily execute on or pursuant to
the rules of a SEF or DCM, the parties’
choice to execute such swap evidences
their belief that the market is
sufficiently liquid and has a sufficient
number of participants that the identity
of the parties cannot be reverse
engineered; thus counterparties’
business transactions or market
positions would not be discernible.293
290 See
75 FR 76574.
one commenter noted: ‘‘A strict set of realtime reporting rules could apply to all ‘‘benchmark’’
instruments that have significant price-discovery
functions, while non-benchmark instruments could
fall under a different set of real-time reporting
requirements. In so doing, the Commission would
achieve the majority of the price-discovery benefits
without the danger of damaging the market
structure for the non-benchmark transactions that
do not have a meaningful price discovery function.’’
CL–Coalition for Derivatives End-Users at 4.
292 The Commission notes that a swap which is
voluntarily executed on or pursuant the rules of a
SEF or DCM may or may not be cleared at a DCO.
293 To the extent that counterparties avail
themselves to the rules of a SEF or DCM, they will
typically choose to do for the purpose of taking
advantage of the liquidity of the SEF or DCM.
291 As
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The Commission believes that by
voluntarily executing a swap on a SEF
or DCM, the swap counterparties are
already consenting to price
transparency, regardless of the manner
in which such transaction is executed.
If the parties believed that their
identities, market positions and
business transactions could be exposed,
they may choose to enter into an offfacility swap. Accordingly, the
Commission is adopting
§ 43.4(d)(4)(ii)(C) which requires that
the actual underlying physical
commodity or referenced price or index
must be publicly disseminated by an
SDR for any swap that is executed on or
pursuant to the rules of a SEF or
DCM.294
The Commission’s Proposing Release
did not address the manner in which a
basis swap should be publicly
disseminated and the Commission
received no comments addressing the
issue. Basis swaps are swaps that are
cash-settled based on the difference in
pricing of the same (or substantially the
same) commodity at different delivery
points. Since the parties to a basis swap
price the difference between the same
(or substantially the same) commodity
in two different locations and not the
underlying commodity itself, the
Commission has not yet determined
how such swaps that reference
commodities with specific delivery
points should be publicly disseminated.
Accordingly, for this initial phase in
period, the Commission is not requiring
the public dissemination of basis swaps
when such swap is not executed on or
pursuant to the rules of a SEF or DCM
and when at least one leg is not based
on one of the 28 Enumerated Physical
Commodity Contracts or Other
Contracts listed in appendix B to part
43.
The Commission agrees that the
Proposing Release did not provide
adequate certainty as to the reporting
requirements applicable to the reporting
party to the swap. Accordingly, as
described above, § 43.4 does not require
the reporting party to a swap or a SEF
or DCM to apply a standard which
would ensure that transaction data
would remain anonymous. Section
43.4(d)(2) provides that for all swaps,
the reporting party must report the
actual underlying asset and tenor to an
SDR. The SDR is responsible for
applying the appropriate time delay,
294 Section 43.4(d)(4)(ii)(C) includes the public
dissemination of the actual underlying physical
commodity or referenced price or index for all
swaps executed on a SEF or DCM, not just those
that are made available for trading, and any block
trades executed pursuant to the rules of a SEF or
DCM.
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rounding convention and notional cap
prior to the public dissemination of the
swap transaction and pricing data.
Furthermore, if the underlying asset of
the swap reported is an ‘‘other
commodity’’ which does not reference
one of the Enumerated Physical
Commodity Contracts or Other
Contracts described in appendix B to
part 43, and is not economically related
to one of the 28 Enumerated Physical
Commodity Contracts or Other
Contracts, the SDR which receives such
data shall not publicly disseminate such
swap’s transaction and pricing data at
this time.
6. Unique Product Identifier (§ 43.4(e))
Proposed § 43.4(f) provided that if a
unique product identifier is developed
that sufficiently describes one or more
data fields as set forth in appendix A to
part 43, then the unique product
identifier may be used in lieu of the data
fields that it describes. An SDR could
determine whether to publicly
disseminate the UPI and may ask
reporting parties, SEFs and DCMs to
provide the UPI as part of the swap
transaction and pricing data that must
be reported to the SDR for public
dissemination.
Several commenters questioned this
provision. One commenter stated that
multiple unique identifiers could be
assigned by different regulators to the
same financial entity for the products
traded by such entity, unnecessarily
creating compliance burdens,
operational difficulties, and
opportunities for confusion.295 Another
contended that any rule regarding
product identifiers should require that
they be made available on a
‘‘commercially reasonable basis.’’ 296
Yet another stated that unique product
identifiers should be in place before
real-time public reporting begins.297 The
commenter argued that it would be
expensive to begin real-time public
reporting without unique product
identifiers and then have to change
systems to account for new unique
product identifiers.
The Commission acknowledges that
multiple unique identifiers could be
assigned by different regulators to the
same financial entity but notes as well
that the industry, the Commission and
prudential regulators are currently
working to develop unique product
identifiers for the industry.298 The
295 See
CL–ICI.
CL–MarkitSERV.
297 See Meeting with Credit Suisse (April 15,
2011).
298 The Technology Advisory Committee
Subcommittee on Data Standards is one such group
Commission continues to work with
other regulators and market participants
to provide support during the
development process for unique product
identifiers. However, discussion of the
assignment process for unique product
identifiers is outside the scope of this
rulemaking and the Commission does
not find it appropriate to make
compliance with the part 43 rules
contingent upon the existence of unique
product identifiers.
For the reasons discussed above, the
Commission has determined that no
substantial modifications are necessary
to proposed § 43.4(f). The Commission
has made only technical and
conforming changes to § 43.4(f). For
example, the section was renumbered as
§ 43.4(e), and the ‘‘43’’ was inserted
after ‘‘of this part.’’
7. Reporting of Notional or Principal
Amounts to a Registered Swap Data
Repository (§ 43.4(f))
The information related to the ‘‘priceforming continuation data’’ that must be
publicly disseminated is included in the
definition for ‘‘publicly reportable swap
transaction.’’ Accordingly, because such
provision is redundant, the Commission
is not adopting proposed § 43.4(g).
8. Public Dissemination of Rounded
Notional or Principal Amounts
(§ 43.4(g))
Proposed § 43.4(i) established a
rounding convention for the public
dissemination of all swaps, as follows:
The notional or principal amount data
fields described in appendix A to this part
shall be publicly disseminated as follows:
(1) If the notional or principal amount is
less than 1 million, round to nearest 100
thousand;
(2) If the notional or principal amount is
less than 50 million but greater than 1
million, round to the nearest million;
(3) If the notional or principal amount is
less than 100 million but greater than 50
million, round to nearest 5 million;
(4) If the notional or principal amount is
less than 250 million but greater than 100
million, round to the nearest 10 million;
(5) If the notional or principal amount is
greater than 250 million, round to ‘‘250+.
Several commenters supported the
rounding convention as an effective way
to protect the anonymity of swap
counterparties and recognized that
rounding would provide a degree of
protection against the front-running of
larger transactions.299 Some
commenters contended that because
markets vary, so too should the
296 See
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that is working to develop unique product
identifiers.
299 See CL–Coalition for Derivatives End-Users;
CL–WMBAA; and CL–MFA.
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rounding convention and notional caps
in order to account for the differences in
trade sizes and liquidities in different
markets.300 These commenters asserted
that these considerations would ensure
that material information is not
disclosed.301
One commenter supported the use of
a rounding convention but did not
believe the Proposing Release
considered the particularity of specific
categories of swaps.302 The commenter
suggested that the Commission adopt a
more nuanced and granular rounding
convention that recognizes that various
categories of swaps and their
markets.303 Another commenter argued
that the Proposing Release’s perceived
failure to consider the liquidity, type
and tenor of swaps would lead to
increased costs for market participants
who transact in bespoke swaps in
illiquid markets.304 This commenter
further stated that SDs’ concerns about
the front-running of large transactions
would cause them to include an
additional premium in their swaps
pricing, which ultimately would lead to
increased costs of hedging in illiquid
markets, and that such costs would, in
turn, be passed on to end-users. In
contrast, one commenter argued that a
rounding convention should not be used
and that the notional or principal
amounts for all swaps should be
publicly disseminated.305
The Commission believes that the
actual notional or principal amount
should be reported to an SDR by
reporting parties, SEFs and DCMs.
Accordingly, the Commission is
adopting § 43.4(f), to assign
responsibilities to reporting parties,
SEFs and DCMs for reporting the
notional or principal amount of a swap
to an SDR. As adopted, § 43.4(f)(1) and
(2) are similar to the provisions in
proposed § 43.4(h)(1) and (2); however,
certain conforming and clarifying
changes have been made to these rules
in light of changes to other provisions
of the part 43 regulations.306
The Commission agrees that the
rounding convention should be more
nuanced to take into account the various
types of swaps in different asset classes.
300 See CL–WMBAA; CL–MFA; CL–MetLife; and
CL–ISDA/SIFMA.
301 Id. If market participants in an illiquid market
know that a large swap has been executed, they may
be able to identify at least one counterparty, as well
as certain market positions or business transactions.
302 See CL–Coalition for Derivatives End-Users.
303 Id.
304 See CL–ABC/CIEBA.
305 See CL–Chris Barnard.
306 Similarly, proposed part 45 requires that the
actual notional or principal amount be reported for
the purposes of regulatory reporting to registered
swap data repositories.
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However, the Commission does not
believe it is necessary to have a different
rounding convention for each asset class
and sub-asset class. Rather, as explained
below, the Commission is adopting
different notional caps based on asset
class as defined in § 43.2 and is
separating the notional caps from the
rounding convention.307 The rounding
convention is intended to protect the
anonymity of swap counterparties. In
addition, the rounding convention,
combined with the notional caps
discussed below and adopted in
§ 43.4(h), will inhibit parties who may
seek to front-run a swap transaction,
especially for large swap transactions.
The Commission does not believe the
actual notional or principal amounts
should be publicly disseminated. The
public dissemination of the exact
notional or principal amount presents a
risk that confidential information would
be disclosed in violation of CEA section
2(a)(13). In the Adopting Release, the
Commission has revised its proposed
rounding convention to adopt a more
granular rounding convention in
§ 43.4(g). This rounding convention will
apply to all swaps and should be read
in conjunction with the notional caps
provided in § 43.4(h), which are asset
class specific.308 The Commission
believes that even with the rounding
convention, price discovery will be
enhanced, as market participants and
the public will gain an understanding of
the sizes of swaps in particular asset
classes while the identities of the
307 The term ‘‘asset class’’ is defined in § 43.2 and
discussed in section II.B.2. (‘‘Defined Terms’’).
308 Section 43.4(g) provides:
‘‘Rounding of notional or principal amount. The
notional or principal amount data fields, as
described in appendix A to this part, shall be
rounded as follows:
(1) If the notional or principal amount is less than
1,000, round to nearest five, but in no case shall a
publicly disseminated notional or principal amount
be less than five;
(2) If the notional or principal amount is less than
10 thousand but equal to or greater than 1 thousand,
round to nearest 1 hundred;
(3) If the notional or principal amount is less than
100 thousand but equal to or greater than 10
thousand, round to nearest 1 thousand;
(4) If the notional or principal amount is less than
1 million but equal to or greater than 100 thousand,
round to nearest 10 thousand;
(5) If the notional or principal amount is less than
100 million but equal to or greater than 1 million,
round to the nearest 1 million;
(6) If the notional or principal amount is less than
500 million but equal to or greater than 100 million,
round to the nearest 10 million;
(7) If the notional or principal amount is less than
1 billion but equal to or greater than 500 million,
round to the nearest 50 million;
(8) If the notional or principal amount is less than
100 billion but equal to or greater than 1 billion,
round to the nearest 1 billion;
(9) If the notional or principal amount is greater
than 100 billion, round to the nearest 50 billion.’’
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1213
parties, market positions and business
transactions are protected.
9. Public Dissemination Caps on
Notional or Principal Amounts
(§ 43.4(h))
Proposed § 43.4(h)(2)(i) established a
cap on the public dissemination of
notional or principal amounts that were
embedded in the proposed rounding
convention. The notional caps in the
Proposing Release provided that, for all
swaps, regardless of asset class or place
of execution, ‘‘[i]f the notional or
principal amount is greater than 250
million, round to ‘250+’’’ for public
dissemination purposes.309 The
Commission proposed the notional cap
to ensure the anonymity of the parties
to a large swap and maintain the
confidentiality of business transactions
and market positions.
The majority of comments addressing
notional caps supported their use. Many
commenters suggested modifications to
the Proposing Release based on the
belief that notional caps should be more
granular to account for the differences
in tenor, asset class, types of swaps and
liquidity of different markets.310
Many commenters criticized the
proposed cap of $250 million as too
high and contended that the
Commission failed to consider market
liquidity, duration and type of swap.
One commenter stated that the notional
cap was sufficient to permit the most
liquid interest rate derivative products
to be executed in very large sizes and to
enable dealers to offset risk, confident
that the market does not know the
actual size of the transaction.311
Another believed that the proposed
notional cap unfairly disadvantaged the
natural hedgers in the marketplace.
These market participants may have
specific portfolio needs that require
trading swaps with longer tenors, which
are less standardized and are more
illiquid.312
Others suggested that the Commission
set the notional cap at the
309 Real-Time
NPRM supra note 6, at 76174.
CL–ABC/CIEBA. (‘‘For instance, an
interest rate swap with a 2 year duration may be
highly liquid and thus the threshold of $250 million
as the highest rounding threshold might be
appropriate. However, an interest rate swap with a
35 year duration may be off-market and illiquid,
and typical trades may be significantly less than
$250 million, and as such, a lower rounding
threshold would be appropriate.’’). Id. at 9. See also
CL–ISDA/SIFMA; CL–MetLife.
311 See CL–Coalition of Derivatives End-Users.
312 See CL–SIFMA AMG (‘‘For instance, for a low
duration, plain vanilla, highly liquid swap, $250
million as the highest rounding threshold might be
appropriate. For a higher duration, less
standardized and more illiquid swap, a large trade
is typically significantly less than $250 million in
notional amount, and a much lower rounding
threshold would be appropriate.’’). Id. at 5.
310 See
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predetermined, appropriate minimum
block trade size.313 Several commenters
agreed that the Commission should use
FINRA’s Trade Reporting and
Compliance Engine (‘‘TRACE’’)
framework to establish caps for public
dissemination of the notional or
principal amounts of swaps.314 One
commenter believed that a TRACE-like
approach, whereby full trade
information is provided to regulators
and publicly disseminated within a size
range, would sufficiently protect
counterparty anonymity and preserve
liquidity and price competition in the
markets.315 Another commenter opined
that the use of a TRACE-type volume
dissemination cap would ensure endusers have sufficient sources of
liquidity.316 Another wrote that if the
Commission extended the TRACE
masking framework to swaps, the
masking thresholds for plain vanilla
fixed-floating interest rate swaps would
be: $8 Million for 2 year interest rate
swaps; $3 million for 5 year interest rate
swaps; and $1 million for 10-year and
30-year interest rate swaps.317 However,
this commenter recognized these
notional caps were extremely low and
suggested, as an alternative, that the
Commission set the notional cap at the
social size (as defined in proposed
§ 43.2(x)).318
One commenter recommended that
the Commission create a tiered system
for different categories of swaps.319 This
commenter suggested the following
notional cap thresholds for interest rate
swaps: $250 Million for swaps with 0–
2 year tenors; $200 million for swaps
with 2–5 year tenors; $100 million for
swaps with 6–10 year tenors; $75
million for interest rate swaps with 11–
20 year tenors; and $50 million for
swaps with tenors over 20 years.320 The
commenter also suggested three to five
year tenor buckets and differentiating
313 See
CL–UBS; CL–SDMA; and CL–WMBAA.
Real-Time NPRM supra note 6, at 76161;
CL–WMBAA.
315 See CL–WMBAA.
316 See CL–ISDA/SIFMA.
317 See CL–JPM. The commenter calculated the
suggested masking thresholds by ‘‘computing how
much market risk is represented by the TRACE
masking thresholds and using those numbers to
map the masking thresholds into other asset
classes.’’ Id. at 13. This commenter also suggested
that the Commission should set masking levels near
the level that represents the dividing line between
retail and institutional trades.
318 Id. In the Proposing Release, ‘‘social size’’ was
defined to mean ‘‘the greatest of the mode, median
and mean transaction sizes for a particular swap
contract or swap instrument, as commonly observed
in the marketplace.’’ Real-Time NPRM supra note
6, at 76172.
319 See CL–PIMCO.
320 Id.
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314 See
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between high yield and investment
grade for credit index swaps.321
Another commenter advocated that
notional amounts for commodity swaps
be reported and disseminated by units
of measure (e.g., MMBtus for gas, MWh
for power, etc.) rather than in dollar
amounts.322 This commenter asserted
that the sizes of commodity trades are
typically smaller than interest rate swap
trades, and therefore the notional cap
should be smaller to take into account
this difference.323
One commenter suggested that the
Commission could require end of day
reporting of swap notional size to
regulators until an appropriate
minimum block size can be
appropriately set, provided that all
trades above a certain notional
threshold would be reported as ‘‘$X or
above.’’ This commenter recommended
that the Commission revisit the
threshold amounts periodically and that
the effects on market liquidity be
studied.324
Another commenter believed the
Commission should set notional caps
(embedded in the rounding convention)
only after the Commission has had the
opportunity to analyze data from an
SDR.325 Two commenters objected to
the Commission’s proposal to use
notional caps on the ground that failure
to report the actual notional or principal
amount would result in underreporting
and would fail to enhance price
discovery.326 Another, citing the
substantial volume of trading in the FX
markets, suggested that the Commission
set a notional floor threshold of $1
million whereby all FX swaps which are
smaller than the threshold would not be
reported.327
A commenter stated that accurate
aggregate trade volumes by instrument
should be computed and disseminated
by the end of the day, independent of
the choice of masking threshold, and
that un-masked trade-by-trade notional
amounts should eventually be
disseminated after the application of
both the masking rule and timing delays
in order to facilitate analysis of market
trends by market participants and
academics.328
The Commission agrees with many of
the comments and has, for some asset
classes, adjusted the notional caps to
take into account the differences
321 See
322 See
Meeting with PIMCO (February 4, 2011).
CL–ISDA/SIFMA.
323 Id.
324 See
CL–FIA/FSF/ISDA/SIFMA.
CL–ABC/CIEBA.
326 See CL–Chris Barnard; CL–SDMA.
327 See CL–GFXD.
328 See CL–JPM.
325 See
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between various types of swaps.329 In
§ 43.4(h), the Commission proposed
notional caps for public dissemination
purposes. The Commission agrees that a
‘‘one-size-fits-all’’ notional cap was
inappropriate, and accordingly has
established notional caps according to
each asset class. Additionally, the
Commission extracted the notional caps
from the rounding convention and made
it a stand-alone section in the final rule
to provide the flexibility to adjust the
notional caps—as the Commission may
determine is appropriate or when an
appropriate minimum block size is
determined—without having to also
change the rounding convention.
The notional caps provided in
§ 43.4(h) will apply until an appropriate
minimum block size is established for a
particular group of swaps. However,
when an appropriate minimum block
size is established for a particular asset
class, the notional cap will be adjusted
to align with the appropriate minimum
block size.330 The Commission also
agrees with commenters that the
appropriate minimum block size should
have a direct relationship to the
notional cap. The Commission believes
that the notional cap for a publicly
reportable swap transaction should
never be less than the appropriate
minimum block size for such swap.
The Commission has provided
notional caps because it believes that
market participants’ anonymity should
be protected during the period before
appropriate minimum block trade sizes
are established as well as after the
establishment of appropriate minimum
block sizes. The notional caps should be
read in conjunction with the rounding
convention of § 43.4(g) and the publicly
reportable data fields provided in
appendix A to part 43. The Commission
believes that the notional caps, the
rounding convention and the data fields
required to be publicly disseminated
will adequately protect counterparties’
identities, business transactions and
market positions. The Commission
further believes that the public
dissemination of the capped notional
amount, as opposed to the actual
notional or principal amount, will help
to prevent front-running of very large
trades. In turn, the Commission expects
329 The Commission notes that many comments
discussed ‘‘block trades’’ as being the only trades
which would be able to avail themselves of the
notional cap. The Commission did not intend the
notional cap to be available only to swaps which
would be considered ‘‘block trades’’ under the
proposed rule, but rather intended that the notional
cap be available to all swaps which were greater
than a notional or principal amount of $250 MM.
330 The Commission’s block trade re-proposal will
address the notional caps as they align with the
appropriate minimum block sizes.
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that the public dissemination of a
notional cap for large trades will not
adversely impact market liquidity
because market participants will not
have to exit the market over concerns
that they will be unable to adequately
offset their risk without being front
run.331
The Commission has considered the
specific examples and data provided by
the commenters for interest rate swaps
and agrees that interest rate swaps with
different tenors should be provided with
different notional caps. The differences
take into account the fact that interest
rate swaps with longer-dated tenors
tend to have smaller notional amounts
than those with shorter dated tenors.
The difference in notional amounts
between longer tenor interest rate swaps
(e.g., 30 year) and shorter dated interest
rate swaps (e.g., three months) can be
attributed to the risk exposure that
counterparties are willing to assume for
such swaps. Because market
participants are willing to assume larger
notional sizes based on the durationadjusted risk of the swap, large trade
sizes are more frequently executed for
interest rate swaps with a short tenor, as
compared to those interest rate swaps
with a longer tenor. Therefore, the
Commission believes that the notional
cap for short term interest rate swaps
should be greater than the notional cap
for interest rate swaps with longer
tenors.
Accordingly, the Commission is
providing the following ‘‘interim’’
notional caps until such time as an
appropriate minimum block size is
established. These notional caps are
required to be applied by an SDR prior
to the public dissemination of the swap
transaction and pricing data.332
• For Short Term (0–2 year (including
2 year)) interest swaps: $250 MM;
• For Intermediate Term (2–10 year
(including 10 year)) interest rate swaps:
$100 MM; and
• For Long Term (Greater than 10
year): $75 MM.
For credit swaps (broad-based group
or index), pursuant to § 43.4(h)(2), the
Commission considered specific
examples provided by the commenters
in establishing the notional caps for
credit index swaps. In the Commission’s
view, the proposed cap of $250 MM was
331 Commenters’ concerns about front running are
substantially mitigated by the time delays for public
dissemination. See Time Delays discussion and
§ 43.5.
332 As discussed above, pursuant to § 43.3(f)(1)
and (2), reporting parties, SEFs and DCMs are
required to send the actual notional or principal
amount of a publicly reportable swap transaction to
a SDR. The SDR is then responsible for publicly
disseminating the rounded (and capped, if
applicable) amount.
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too high as an interim cap for credit
swaps. The Commission recognizes that
while certain credit indices may trade at
larger notional values than other
indices, one cap for the asset class is
appropriate for an interim notional cap.
Accordingly, the Commission is setting
the notional cap for all credit swaps
(broad-based group or index) at $100
MM.
The Commission is retaining the $250
MM notional cap for both the equity
(broad-based group or index) and FX
asset classes. The Commission is
confident that a $250 MM notional cap,
along with the rounding convention
discussed above, will sufficiently
protect the anonymity, business
transactions and market positions of the
counterparties who engage in trades of
a large size in these markets.333
The Commission agrees that the
notional cap for commodity swaps
should be lower than for other swaps
and is setting the interim notional cap
for ‘‘other commodities’’ at $25 MM.
The Commission made this
determination after reviewing block
trade sizes for various commodities in
the futures markets, exchange of futures
for swaps (‘‘EFS’’) data on futures, and
net position change data in futures.334
The Commission believes that setting
the interim notional cap at such a low
notional or principal amount will allow
traders entering into very large swaps in
the various ‘‘other commodity’’ markets
a sufficient opportunity to hedge a swap
transaction in the market, and will
protect the identities, business
transactions and market positions of
those counterparties who enter into
large commodity swaps.
For the ‘‘other commodity’’ asset
class, the Commission agrees that ‘‘other
commodity’’ swaps are typically smaller
than interest rate swaps. However, the
Commission does not agree that it is
appropriate to determine the notional
cap according to units for each
particular ‘‘other commodity;’’ such a
rule is unnecessarily complicated and
will lead to inconsistency across the
various types of commodities and across
all asset classes. Thus, the Commission
believes that, at this time, the notional
cap should be expressed as a dollar
amount that will apply to all ‘‘other
commodities’’ and not by different units
of measurement (e.g., barrels, MWh,
etc.). The Commission anticipates that a
determination of whether a swap is
capped will depend on whether the
price of the underlying commodity as
333 No commenters addressed this proposal with
respect to notional caps for the equity and FX asset
classes.
334 See § 43.4(h)(5).
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1215
multiplied by the number of units is
above the notional cap. Further, the
Commission anticipates that the
publicly disseminated information for a
particular underlying asset may be in
units that are adjusted based on the $25
MM cap described below. For example,
if crude oil is priced at $100 a barrel and
two parties enter into a swap with a
notional value of 260,000 barrels, the
SDR may publicly disseminate ‘‘$25
MM+’’ or may publicly disseminate
‘‘250,000 bbl+.’’
E. Section 43.5—Time Delays for Public
Dissemination of Swap Transaction and
Pricing Data
CEA section 2(a)(13)(E)(iii) provides
that, with respect to cleared swaps, the
rule promulgated by the Commission
shall contain provisions ‘‘to specify the
appropriate time delay for reporting
large notional swap transactions (block
trades) to the public.’’ In exercising its
authority under CEA section 2(a)(13)(B)
to ‘‘make swap transaction and pricing
data available to the public in such form
and at such times as the Commission
determines appropriate to enhance price
discovery,’’ the Commission is
authorized to prescribe rules reflecting
those provisions in CEA section
2(a)(13)(E)(iii) for uncleared swap
transactions described in CEA sections
2(a)(13)(C)(iii) and (iv). Consistent with
the Commission’s statutory obligations,
proposed § 43.5(k)(1) specified that the
time delay for the public dissemination
of swap transaction and pricing data for
a block trade or large notional swap
shall commence at the time of execution
of such block trade or large notional
swap.335
Proposed § 43.5(k)(2) set the time
delay for public reporting of
standardized block trades and large
notional swaps 336 at 15 minutes from
the time of execution. The Proposing
Release did not provide specific time
delays for customized large notional offfacility swaps. Instead, proposed
§ 43.5(k)(3) provided that public
dissemination of ‘‘customized’’ large
notional swaps would be subject to a
time delay that may be prescribed by the
Commission. The Commission also
noted in the preamble to the Proposing
Release a presumption that large
notional swaps in the equity, credit,
335 Proposed § 43.2(l) defined the term ‘‘large
notional swap.’’ This term has been modified in
final § 43.2 to be called ‘‘large notional off-facility
swap.’’ Accordingly, all references to ‘‘large
notional swap’’ shall be interchangeable with the
term ‘‘large notional off-facility swap’’ for the
purposes of this final rule.
336 For example, those swaps that fall under CEA
section 2(a)(13)(C)(i) and (iv)—swaps subject to the
mandatory clearing requirement or otherwise
required to be cleared.
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foreign exchange and interest rate asset
classes (i.e., financial swaps) would be
subject to the same 15 minute time
delay proposed for block trades. The
Commission solicited comments
addressing whether 15 minutes would
be an appropriate time delay for large
notional swaps in the ‘‘other
commodity’’ asset class, but
acknowledged that longer time delays
for the ‘‘other commodity’’ asset class
may be appropriate.337
Twenty-three commenters expressed
the view that the time delays for
publicly disseminating block trades and
large notional off-facility swaps should
be longer than those described in the
Proposing Release. The commenters
recommended several alternatives for
various types of swaps. Specifically,
commenters recommended a range of
time delays for public dissemination of
block trades and large notional offfacility swaps, including end-of-day, 24
hours, T+1, T+2 for large notional
swaps,338 a minimum of four hours and
180 days.339 One commenter
recommended beginning with a time
delay for block trades of 75 minutes and
then decreasing the time delay to
between 15 minutes and 45 minutes.340
The approach described by this
commenter would be similar to the
method for reducing time delays
utilized by TRACE. The same
commenter recommended that the time
delay for large notional swaps should be
at least 24 hours.341 Five commenters
advised the Commission to adopt tiered
time delays based on average daily
trading volume or appropriate minimum
block size.342 One recommended that
the time delay should be set at the lesser
of time it takes a dealer to cover its risk
and 24 hours after execution.343
Another commenter recommended that
illiquid trades be allowed to report
weekly; the same commenter
recommended that the Commission
conduct an exhaustive study of illiquid
337 The Commission asked specific questions
regarding time delays for large notional off-facility
swaps. See Real-Time NPRM supra note 6, at 76167.
338 See supra note 97.
339 See CL–BlackRock; CL–Coalition for
Derivatives End-Users; CL–Chesapeake Energy; CL–
PIMCO; CL–SIFMA AMG; CL–ATA; CL–Freddie
Mac; CL–ICI; CL–Vanguard; CL–Working Group of
Commercial Energy End-users; CL–MFA; CL–
MetLife; CL–Fannie Mae; CL–Jackson; CL–Eris; and
CL–Encana.
340 See CL–FHLBanks.
341 The Commission notes that although these
commenters are suggesting time delays for block
trades and large notional off-facility swaps, the
Commission is not considering appropriate
minimum block sizes in this Adopting Release.
342 See CL–JPM; CL–WMBAA; CL–Barclays; CL–
MetLife; and CL–GS.
343 See CL–ATA.
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bilateral contracts before deciding on an
appropriate time delay.344
A commenter recommended that the
time delay for financial swaps should be
one minute or, alternatively, that there
should be no delay. This commenter
argued that a time delay must be
directly related to the market in which
the block trade or large notional swap is
executed.345
Several commenters cautioned that
the Commission needs more data before
it can set time delays for block trades
and large notional swaps.346 For
example, one commenter noted that
there is currently insufficient trading
data available on which to base the
determinations for block trades and
public dissemination delays.347 This
commenter suggested waiting until
SDRs have collected the relevant data
for the Commission to analyze.
In its Proposing Release, the
Commission solicited comments on the
appropriate time delays for
‘‘customized’’ large notional swaps,
particularly for commodity swaps with
physical underlying assets. Several
commenters stated that different
markets should have different time
delays for public dissemination of block
trades and large notional swaps.
Specifically, one commenter stated that
time delays should be based on asset
class, two commenters advised that
longer time delays are appropriate for
swaps with underlying physical risk
(e.g., large notional customized
commodities trades); two commenters
argued that reporting should be tailored
for illiquid markets; and one commenter
stated that time delays should be
tailored within the foreign exchange
asset class.348 Another commenter
stated that time delays should initially
be based on current market practices.349
One commenter contended that time
delays should not be based on the
method of execution or market
participant and that a 15 minute time
delay is adequate.350 This commenter
expressed concern that the voice or
hybrid systems would be allowed a
longer delay over their electronic
competitors and recommended that
there be one universal time delay.
344 See
CL–MS.
CL–Better Markets.
346 See, e.g., CL–JPM; CL–Barclays; CL–Coalition
for Derivatives End-Users; CL–FHLBanks; CL–
ISDA/SIFMA; CL–SIFMA AMG; CL–Freddie Mac;
CL–GFXD; CL–ABC/CIEBA; CL–ATA; CL–Cleary;
CL–ICI; and CL–MFA.
347 See CL–SIFMA AMG.
348 See CL–ATA; CL–Barclays; CL–MS; CL–
GFXD; CL–ISDA/SIFMA; and CL–BlackRock.
349 See CL–Committee on Capital Markets
Regulation.
350 See CL–SDMA.
345 See
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A commenter argued that smaller
transactions in illiquid markets should
be handled similarly to block trades
with respect to time delay.351 This
commenter stated that, in illiquid
markets, the notional or principal size of
a swap may be lower and therefore may
not qualify as a block trade or large
notional swap. The commenter further
explained that time delays for swaps
with lower notional or principal
amounts in illiquid markets may be just
as important as the time delays for very
large trades in more liquid markets.
Commenters addressed harmonization
between the CFTC and SEC time delay
provisions. Some of these commenters
asserted that the failure to harmonize
the two Commissions’ rules could create
arbitrage opportunities.352 One
commenter asserted that differences in
market structure for swaps and SBS,
particularly with regard to end-user
participation in the commodity swap
markets, should be reflected in the
rules.353
After considering the comments
discussed above, the Commission is
adopting § 43.5 to address time delays
for the public dissemination of swap
data as described below. As adopted,
§ 43.5 incorporates the language from
proposed § 43.5(k)(1) and replaces the
language in proposed § 43.5(k)(2) and
(3) in order to address commenters’
concerns and recommendations and to
clarify the time delays for public
dissemination of real-time data in
consideration of the type of market
participant, method of execution and
asset class. Additionally, § 43.5 adopts
interim time delays for all swaps until
such time as appropriate minimum
block sizes are finalized in a
forthcoming Commission release.
One commenter indicated that SEFs
and DCMs should have the
technological capability to
electronically report the data fields
described in proposed part 45.354 To
ensure consistency and reduce reporting
costs to market participants, the
Commission has coordinated the time
delays in this rule with the timeframes
for regulatory reporting in the proposed
part 45 (‘‘Swap Data Recordkeeping and
351 See
CL–ATA.
e.g., CL–Tradeweb; CL–CME; CL–Markit.
353 See CL–NFPEEU.
354 See CL–Tradeweb. The Commission notes
that, since the data that is being required to be
publicly disseminated under part 43 and reported
for regulatory purposes (as described in proposed
part 45) are substantially similar, the ability for
SEFs and DCMs to report the data fields required
for regulatory purposes indicates that SEFs and
DCMs should be able to report the data to an SDR
that is required for public dissemination under part
43.
352 See,
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Reporting Requirements’’) rules.355 The
Commission anticipates that reporting
parties may use one data reporting
stream for both regulatory and real-time
reporting to reduce costs and optimize
efficiency.356 Accordingly, § 43.5, as
adopted, harmonizes the time delays
between the two regulatory
requirements.
The Commission has added § 43.5(b)
to clarify the SDR’s responsibilities to
publicly disseminate swap transaction
and pricing data that is subject to a time
delay. Section 43.5(b) provides that,
with respect to any time delay that is
associated with a particular swap, the
SDR shall publicly disseminate the
swap transaction and pricing data upon
the precise expiration of the time delay
specified in § 43.5 and as further
described in appendix C to part 43
(‘‘Time Delays for Public
Dissemination’’). The time delay period
is measured from the time of execution
of the swap transaction; in this regard,
all publicly reportable swap
transactions are required to have an
execution timestamp. An SDR must
hold the data for public dissemination
for the precise amount of time specified
in § 43.5, as measured from the
execution timestamp.357 For any
publicly reportable swap transaction
that is not subject to a time delay
pursuant to § 43.5 or that is received by
an SDR after a time delay has expired,
such publicly reportable swap
transactions shall be publicly
disseminated by the SDR ‘‘as soon as
technologically practicable’’ after the
SDR receives the swap transaction and
pricing data.
One commenter recommended that
the Commission require end of day
reporting of aggregate trade volumes in
order to facilitate analysis of market
trends by market participants and the
academic community.358 Several other
commenters recommended that the
Commission phase in the real-time
public reporting of swap transaction and
pricing data.359 The Commission
acknowledges the commenter’s concern
that certain swaps in illiquid markets
may have small notional sizes, but may
still need a time delay. In response, the
355 See
75 FR 76574.
the Commission notes that although
the same data stream for reporting may be utilized
by reporting parties, SEFs and DCMs, real-time data
for public dissemination and regulatory data
required to be sent to an SDR are viewed as separate
regulatory requirements.
357 Appendix A to part 43 describes the
‘‘execution timestamp’’ requirement for public
dissemination. See discussion, infra.
358 See CL–JPM.
359 See comments relating to Implementation and
Phase in discussed in section IV (‘‘Effectiveness/
Implementation and Interim Period’’) below.
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356 However,
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Commission in adopting § 43.5(c) which
provides interim time delays for all
swaps, not just block trades and large
notional off-facility swaps, but only to
the extent that such swaps do not have
an appropriate minimum block size.360
As previously discussed, the
Commission intends to address
appropriate minimum block sizes in its
block trade re-proposal. Accordingly, it
is possible that compliance with part 43
may be required before the
establishment of appropriate minimum
block sizes for certain asset classes and/
or groupings of swaps within an asset
class. In order to address this situation,
§ 43.5(c) allows all swaps that do not
have established appropriate minimum
block sizes to utilize the time delays set
forth in final § 43.5(d)–(h). As
appropriate minimum block sizes are
established for a particular category of
swap, all swaps in such category that
are below the appropriate minimum
block size must be publicly
disseminated ‘‘as soon as
technologically practicable’’ after
execution.361 Those swaps that are at or
above the appropriate minimum block
size will continue to receive the time
delays set forth in § 43.5(d)–(h).
In response to commenters’ arguments
that the time delays for public
dissemination of block trades and large
notional off-facility swaps should be
longer than 15 minutes, the Commission
is phasing in the time delays for public
dissemination. The Commission
recognizes that it may take time for
SEFs, DCMs and SDRs to ensure that the
appropriate technology is in place; and
market participants may need some
phase in time to modify trading
strategies to accommodate the new realtime public reporting rules. Thus, the
Commission believes that providing
longer time delays for public
dissemination during the first year or
years of real-time reporting will enable
market participants to perfect and
develop technology and to adjust
hedging and trading strategies in
360 In addition to the initial temporary time
delays for all swaps without appropriate minimum
block sizes, as provided in final § 43.5(c), § 43.4(g)
and (h) provide a rounding convention and caps on
the public dissemination of notional or principal
amounts to be applied to all swaps in order to help
protect counterparties’ anonymity and the parties’
ability to hedge very large transactions. See
discussion above.
361 The Commission recognizes that the
establishment of appropriate minimum block sizes
may be an ongoing process. Swaps that do not have
appropriate minimum block sizes would continue
to receive time delays pursuant to § 43.5(c),
however once a swap has an appropriate minimum
block size, only block trades and large notional offfacility swaps will receive the time delays § 43.5.
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1217
connection with the introduction posttrade transparency.362
As adopted, § 43.5(d) describes the
time delays for the public dissemination
of swap transaction and pricing data
relating to block trades executed
pursuant to the rules of a SEF or DCM.
With respect to such swaps, the
Commission is imposing an initial time
delay of 30 minutes for the one year
beginning on the compliance date 363
(‘‘Year 1’’) and a 15-minute delay
beginning on the first anniversary of the
compliance date. These time delays will
be assigned to all block trades executed
pursuant to the rules of a SEF or DCM
regardless of asset class or whether such
trade was made available for trading on
the SEF or DCM. The Commission
believes that SEFs and DCMs will have
the technology available to ensure
compliance to report data to SDRs
within the time delays for public
dissemination described in this
section.364
Further, until the Commission
establishes an appropriate minimum
block size for a swap or group of swaps,
the time delays set forth in § 43.5(d)
shall apply to all swaps executed on or
pursuant to the rules of a SEF or DCM
that do not have an appropriate
minimum block size (including swaps
that are not made available for trading
on the SEF or DCM, but are executed on
or pursuant to the rules of a SEF or
DCM), so that all such swaps will be
subject to a 30 minute time delay for
public dissemination for Year 1 and a 15
minute time delay beginning on the first
anniversary of the compliance date, as
described in § 43.5(c)(2). When an
appropriate minimum block size is set
for a swap or group of swaps, and such
swap is executed on or pursuant to the
rules of a SEF or DCM, swap
transactions that fall below the
appropriate minimum block size are
required to be publicly disseminated ‘‘as
soon as technologically practicable’’ and
only block trades would be subject to a
30- or 15-minute time delay.365 The
362 TRACE, which introduced post-trade
transparency into the corporate bond market,
followed a similar approach by reducing the
amount of time delay for public dissemination over
time. See CL–JPM.
363 Compliance dates are described below in
section III (‘‘Effectiveness/Implementation and
Interim Period’’).
364 See CL–Tradeweb.
365 To the extent that an appropriate minimum
block trade size is established after the compliance
date of the rule, the time delays for the block trades
(and large notional off-facility swaps, as described
immediately below) would be reduced after the one
year period expires. For example, if the compliance
date for an interest rate swap is July 1, 2012 and
an appropriate minimum block size for interest rate
swaps is effective on September 15, 2012, from June
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Commission believes that parties that
choose to execute on or pursuant to the
rules of a SEF or DCM consent to such
price transparency; 366 therefore shorter
time delays for public dissemination
(i.e., post-trade transparency) are
appropriate as compared to certain offfacility swaps.
The Commission agrees that swaps in
less liquid markets, as well as large
notional off-facility swaps, may be
subject to longer time delays, while
shorter time delays are appropriate for
swaps in more liquid markets. Swaps in
the ‘‘other commodity’’ asset class and
swaps in which non-SDs/non-MSPs are
counterparties tend to be less liquid
(particularly when such parties are endusers) and may require additional time
to offset risk. The Commission also
believes that large notional off-facility
swaps that are subject to the mandatory
clearing requirement (i.e., swaps that are
not executed on or pursuant to the rules
of a SEF or DCM but are required to be
cleared pursuant to CEA section 2(h)(1)
and Commission action) will tend to be
more liquid than other large notional
off-facility swaps.367
For large notional off-facility swaps
subject to the mandatory clearing
requirement, the Commission believes
that a distinction should be made
between different classes of reporting
parties for the purposes of time delays
for public dissemination.368 Large
notional off-facility swaps that are
subject to mandatory clearing and that
have at least one SD or MSP as a
1, 2012—September 14, 2012, all swaps in the
interest rate asset class would receive the time
delays for ‘‘Year 1.’’ From September 15, 2012—
June 30, 2013 only block trades and large notional
off-facility swaps in the interest rate asset class will
receive the time delays described under ‘‘Year 1,’’
while any swap in the interest rate asset class that
is not a block trade or large notional off-facility
swap must be reported and publicly disseminated
‘‘as soon as technologically practicable.’’ In this
example, beginning on July 1, 2013 block trades and
large notional off-facility swaps in interest rates will
receive the time delay described for beginning on
the first or second anniversary (depending on the
type of execution and market participants) and nonblock trades/non-large notional off-facility swaps in
the interest rate asset class would be required to be
reported and publicly disseminated ‘‘as soon as
technologically practicable’’ after execution.
366 The price transparency with respect to SEFs
and DCMs may be in the form of pre-trade price
transparency (depending on the execution method)
and post-trade price transparency (through sharing
swap execution data with those that have trading
privileges on the SEF or DCM).
367 Such large notional off-facility swaps will only
be executed when there is an exception to the
mandatory clearing requirement and to the trade
execution mandate.
368 Additionally, the Commission believes that
off-facility swaps that are excepted from the
mandatory clearing requirement pursuant to CEA
section 2(h)(7) and those swaps that are determined
to be required to be cleared under CEA section
2(h)(2) but are not cleared should not be included.
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counterparty, should have the same
time delays as block trades executed
pursuant to the rules of a SEF or DCM.
The Commission believes that SDs and
MSPs will have the ability to report realtime data to SDRs within the time delay
periods. Further, the Commission
believes that a difference in the time
delay between swaps executed offfacility that are subject to the mandatory
clearing requirement and those executed
on or pursuant to the rules a SEF or
DCM could discourage SDs and MSPs
from executing such swaps on or
pursuant to the rules of a trading
platform, which would inhibit the
enhancement of price discovery.
As adopted, § 43.5(e) provides time
delays for large notional off-facility
swaps that are subject to the mandatory
clearing requirement. Section 43.5(e)(1)
provides that the time delays in § 43.5(e)
do not apply to (i) off-facility swaps that
are excepted from the mandatory
clearing requirement in accordance with
CEA section 2(h)(7) and the
Commission’s regulations; and (ii) those
swaps that are subject to the clearing
mandate under CEA section 2(h)(2) but
which are not cleared.369 The swaps
that are not covered by § 43.5(e) are
subject to the longer time delays
described in final § 43.5(f)–(h).
Section 43.5(e)(2) applies to large
notional off-facility swaps that are
subject to the mandatory clearing
requirement, in which at least one party
to such swap is an SD or MSP. Real-time
data relating to such swaps shall be
subject to a time delay for public
dissemination of 30 minutes for the first
year beginning on the compliance date.
Section 43.5(e)(2)(B) specifies that the
time delay shall be reduced to 15
minutes beginning on the first
anniversary of the compliance date of
part 43. These time delays correspond to
the time delays established in § 43.5(d)
for block trades. The Commission
believes that SDs and MSPs will have
the technology to ensure these swaps
are reported to an SDR prior to the
expiration of the time delays for public
dissemination.370
With respect to large notional offfacility swaps subject to the clearing
mandate in which neither party is an SD
or MSP, such swaps will receive a
longer time delay for public
dissemination than those swaps in
which an SD or MSP is a counterparty.
The Commission believes that reporting
369 The description of these two scenarios is
derived from the language in CEA Section
2(a)(13)(C).
370 Accordingly, the Commission has sought to
substantially align the time delays for public
dissemination with the timeframes for regulatory
reporting.
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parties that are not SDs or MSPs and
that do not invoke the end-user
exception pursuant to CEA section
2(h)(7) and Commission regulations,371
may not have the same level of
infrastructure or reporting technology as
SDs and MSPs. Large notional offfacility swaps that are subject to the
mandatory clearing requirement will
tend to be liquid and generally should
be reported sooner than those not
subject to the mandatory clearing
requirement. Making such swap
transaction and pricing data available to
market participants quickly and
efficiently will enhance price discovery
in these markets, while the longer time
delays for public dissemination in less
liquid markets will provide market
participants with a longer period in
which to hedge the risk associated with
their liquid large notional off-facility
swaps.
Accordingly, § 43.5(e)(3), as adopted,
provides longer time delays for large
notional off-facility swaps that are
subject to mandatory clearing and in
which neither party is an SD or MSP.
Specifically, § 43.5(e)(3)(A) provides
that for Year 1, which begins on the
compliance date, such large notional
off-facility swaps shall be subject to a
four hour time delay from the time of
execution to the time of public
dissemination by the SDR. Section
43.5(e)(3)(B) provides that beginning on
the first anniversary of the compliance
date of part 43 and for the year
following (‘‘Year 2’’), the time delay for
public dissemination will be reduced to
two hours from the time of execution;
§ 43.5(e)(3)(C) provides that beginning
on the second anniversary of the
compliance date and thereafter, the time
delay for large notional off-facility
swaps will be reduced to one hour after
execution.
Additionally, § 43.5(c)(3) provides
that, until the Commission establishes
an appropriate minimum block size for
a particular swap or group of swaps, the
time delays set forth in § 43.5(e) shall
apply to publicly reportable swap
transactions that do not have
appropriate minimum block sizes, with
respect to (i) off-facility swaps that are
subject to the mandatory clearing
requirement, excluding those off-facility
swaps that are excepted from the
mandatory clearing requirement
pursuant to CEA section 2(h)(7); and (ii)
those swaps that are determined to be
required to be cleared under CEA
371 As mentioned above, § 43.5(e)(1) excludes
such swaps from this category of time delays for
public dissemination. § 43.5(e)(1) also excludes
swaps that are required to be cleared under CEA
section 2(h)(2) but are not cleared because no DCO
is available to clear.
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section 2(h)(2) but which are not
cleared. Those off-facility swaps that are
subject to (i) and (ii), immediately
above, will follow the time delay set
forth in § 43.5(e)(2) (i.e., 30 minutes for
the year beginning on the compliance
date and 15 minutes beginning on the
first anniversary of the compliance
date). Those off-facility swaps that are
subject to the mandatory clearing
requirement in which neither party is an
SD or MSP will follow the time delay
set forth in § 43.5(e)(3) (i.e., four hours
for the year beginning on the
compliance date, two hours for the year
beginning on the first anniversary of the
compliance date and one hour
beginning on the second anniversary of
the compliance date). Once an
appropriate minimum block size is
established for a particular swap or
group of swaps, all swaps described in
§ 43.5(e) that are below the appropriate
minimum block size shall be reported
‘‘as soon as technologically practicable’’
and only large notional off-facility
swaps shall receive the time delays for
public dissemination described in
§ 43.5(e).
The Proposing Release stated a
presumption that the time delay for
financial bilateral swaps would be
shorter than the time delay for nonfinancial bilateral swaps. In this regard,
two commenters asserted that
commodity swaps should have longer
time delays for public dissemination
than swaps in other asset classes; one
stated that financial swaps should have
shorter time delays than ‘‘other
commodity’’ swaps. The Commission
agrees and believes that a distinction
should be made between swaps that are
in the interest rates, equity, credit and
foreign exchange asset classes (i.e.,
financial swaps) and swaps in the
‘‘other commodity’’ asset class, since
such ‘‘other commodity’’ swaps
generally have physical commodities as
the underlying asset or reference price/
index. The Commission believes a
longer time delay for the ‘‘other
commodity’’ swaps is necessary because
(i) such swaps reference underlying
physical commodities; and (ii) the
hedging strategies for swaps in the
‘‘other commodity’’ asset class are
generally more complex and may take
longer than financial swaps (e.g.,
interest rate swaps, which can be
quickly hedged in the swaps, futures or
treasury markets).
As adopted, § 43.5(f) provides the
time delays for public dissemination of
large notional off-facility swaps in the
interest rate, credit, foreign exchange
and equity asset classes, that are not
subject to the mandatory clearing
requirement (or are excepted from such
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requirement pursuant to CEA section
2(h)(7)), in which at least one party is
an SD or MSP. Section 43.5(f)(1)
provides that the time delay for such
large notional off-facility swaps for Year
1 shall last for one hour following
execution of such large notional offfacility swap. However, § 43.5(f)(1)
includes a provision applicable to those
large notional off-facility swaps in the
interest rate, credit, foreign exchange
and equity asset classes in which the
non-SD/non-MSP counterparty is not a
financial entity, as defined in CEA
section 2(h)(7)(C) and Commission
regulations.372 Under this provision, for
situations where real-time swap
transaction and pricing data is received
by the SDR later than one hour after the
time of execution, the SDR must
publicly disseminate such data ‘‘as soon
as technologically practicable’’ after it
receives such data. The purpose of this
accommodation is to align the time
delays for public dissemination with the
timeframes provided in the regulatory
reporting requirements in order to
reduce reporting costs to market
participants and to avoid
inconsistencies between the reporting
rules.373
372 CEA section 2(h)(7)(C)(i) provides the
financial entity definition as it relates to Section
723 of the Dodd-Frank Act. Specifically, the
definition states that for the purposes of paragraph
2(h), the term ‘‘financial entity’’ means: ‘‘(I) a swap
dealer; (II) a security-based swap dealer; (III) a
major swap participant; (IV) a major security-based
swap participant; (V) a commodity pool; (VI) a
private fund as defined in section 202(a) of the
Investment Advisers Act of 1940 (15 U.S.C. 80–b–
2(a)); (VII) an employee benefit plan as defined in
paragraphs (3) and (32) of section 3 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1002); (VIII) a person predominantly engaged in
activities that are in the business of banking, or in
activities that are financial in nature, as defined in
section 4(k) of the Bank Holding Company Act of
1956.’’ Additionally, CEA section 2(h)(7)(C)(ii)
provides exclusions to the definition by stating that
‘‘the Commission shall consider whether to exempt
small banks, savings associations, farm credit
system institutions, and credit unions, including—
(I) depository institutions with total assets of
$10,000,000,000 or less; (II) farm credit system
institutions with total assets of $10,000,000,000 or
less; or credit unions with total assets of
$10,000,000,000 or less.’’ CEA section 2(h)(7)(C)(iii)
further provides an important limitation to the
definition of financial entity by stating that ‘‘such
definition shall not include an entity whose
primary business is providing financing, and uses
derivatives for the purpose of hedging underlying
commercial risks related to interest rate and foreign
currency exposures, 90 percent or more of which
arise from financing that facilitates the purchase or
lease of products, 90 percent or more of which are
manufactured by the parent company or another
subsidiary of the parent company.’’
373 Proposed part 45 recognizes that certain endusers may not have an ability to verify trade
information electronically which may increase the
time for the reporting party to verify the primary
economic terms and real-time data and
consequently, the time for the reporting party to
report such data to an SDR pursuant to proposed
part 45. See 75 FR 76574.
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1219
Section 43.5(f)(2) establishes a time
delay for public dissemination of such
large notional off-facility swaps in the
interest rate, credit, foreign exchange
and equity asset classes of 30 minutes
following the execution such swap for
Year 2. Section 43.5(f)(2) provides the
same accommodation for large notional
off-facility swaps in the interest rate,
credit, foreign exchange and equity asset
classes in which the non-SD/non-MSP
counterparty is not a financial entity, as
defined in CEA section 2(h)(7)(C) and
Commission regulations. Section
43.5(f)(3) states that beginning on the
second anniversary of the compliance
date, the time delay for public
dissemination for all large notional offfacility swaps in the interest rate, credit,
foreign exchange and equity asset
classes in which at least one
counterparty is an SD or MSP shall be
30 minutes, regardless of the status of
any non-SD/non-MSP counterparty.
Section 43.5(c)(4) provides that until
the Commission establishes an
appropriate minimum block size for a
particular swap or group of swaps, the
time delays set forth in § 43.5(f) shall
apply to publicly reportable swap
transactions that do not have
appropriate minimum block sizes, with
respect to off-facility swaps in the
interest rate, credit, foreign exchange
and equity asset classes that are not
subject to the mandatory clearing
requirement, and in which at least one
counterparty is an SD or MSP. These
time delays shall be one hour for Year
1 and reduced to 30 minutes beginning
on the first anniversary of the
compliance date. However, those offfacility swaps in the interest rate, credit,
foreign exchange and equity asset
classes, in which the non-SD/non-MSP
counterparty is not a financial entity as
defined in CEA section 2(h)(7)(C) and
Commission regulations, shall receive
the same accommodation to the time
delay for public dissemination for Year
1 and Year 2, as described in § 43.5(f)(1)
and (2). Once an appropriate minimum
block size is established for a particular
swap or group of swaps, all swaps
described in § 43.5(f) that are below the
appropriate minimum block size shall
be publicly disseminated ‘‘as soon as
technologically practicable’’ and only
large notional off-facility swaps shall
receive the time delays for public
dissemination described in § 43.5(f).
As previously noted, the Commission
believes that large notional off-facility
swaps in the ‘‘other commodity’’ asset
class should receive longer time delays
for public dissemination, as it may take
longer to hedge such swap transactions
involving physical underlying assets.
The Commission believes that the
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‘‘other commodity’’ asset class will
likely have more non-SDs/non-MSPs
that are excepted pursuant to CEA
section 2(h)(7) (i.e., non-financial endusers) than the other defined asset
classes. Market participants and
commenters have expressed concern
about the ability to hedge physical
commodity swaps and suggested that
longer time delays may be appropriate
for such swaps. Accordingly, in
§ 43.5(g), the Commission has
established longer time delays for large
notional off-facility swaps in the ‘‘other
commodity’’ asset class.
Section 43.5(g) establishes the time
delays for the public dissemination of
large notional off-facility swaps in the
‘‘other commodity’’ asset class that are
not subject to the mandatory clearing
requirement (or are excepted from such
requirement pursuant to CEA section
2(h)(7)), in which at least one party is
an SD or MSP. Specifically, § 43.5(g)(1)
provides that for Year 1, the time delay
for public dissemination is four hours
following the execution of the large
notional off-facility swap. However,
final § 43.5(g)(1) includes a provision
similar to that in § 43.5(f)(1) and (2), for
those large notional off-facility swaps in
the ‘‘other commodity’’ asset class that
are not subject to the mandatory
clearing requirement and in which the
non-SD/non-MSP counterparty is not a
financial entity as defined in CEA
section 2(h)(7)(C) and Commission
regulations. For such swaps, where the
real-time swap transaction and pricing
data is received by the SDR more than
four hours after execution, the SDR
must publicly disseminate such data ‘‘as
soon as technologically practicable’’
after it receives such data. As noted
above with respect to § 43.5(f)(1) and
(2), the purpose of the provision in
§ 43.5(g)(1) is to align the time delays for
public dissemination with the
timeframes for regulatory reporting in
order to reduce reporting costs to market
participants and to avoid
inconsistencies between the reporting
rules.
Section 43.5(g)(2) provides a two-hour
time delay for the public dissemination
of large notional off-facility swaps in the
‘‘other commodity’’ asset class, in which
at least one party is an SD or MSP, for
Year 2. Section 43.5(g)(2) provides a
similar accommodation to § 43.5(f)(1)
and (2) for large notional off-facility
swaps in the ‘‘other commodity’’ asset
class in which the non-SD/non-MSP
counterparty is not a financial entity, as
defined in CEA section 2(h)(7)(C) and
Commission regulations. Section
43.5(g)(3) specifies that the time delay
for public dissemination, beginning on
the second anniversary of the
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compliance date, for all large notional
off-facility swaps in the ‘‘other
commodity’’ asset class, in which at
least one counterparty is an SD or MSP,
shall be two hours, regardless of the
status of any non-SD/non-MSP
counterparty.
Section 43.5(c)(5) additionally
provides that until the Commission
establishes an appropriate minimum
block size for a particular swap or group
of swaps, the time delays set forth in
§ 43.5(g) shall apply to publicly
reportable swap transactions that do not
have appropriate minimum block sizes,
with respect to off-facility swaps in the
‘‘other commodity’’ asset class that are
not subject to the mandatory clearing
requirement and in which at least one
counterparty is an SD or MSP.
Specifically, the time delays shall be
four hours for Year 1 and two hours
beginning on the first anniversary of the
compliance date. However, those offfacility swaps in the ‘‘other commodity’’
asset class in which the non-SD/nonMSP counterparty is not a financial
entity, as defined in CEA section
2(h)(7)(C) and Commission regulations,
shall receive the same accommodation
to the time delay for public
dissemination during Year 1 and Year 2,
as described in § 43.5(g)(1) and (2). Once
an appropriate minimum block size is
established for a particular swap or
group of swaps, all swaps described in
§ 43.5(g) that are below the appropriate
minimum block size shall be reported
‘‘as soon as technologically practicable’’
and only large notional off-facility
swaps shall receive the time delays for
public dissemination described in
§ 43.5(g).
Several commenters recommended
that end-user to end-user large notional
swaps have longer time delays. The
Commission agrees: Such swaps tend to
be customized and the reporting party
for such swaps may be less
sophisticated and have less ability to
leverage existing and new technology as
compared to an SD or MSP. The longer
time delays for public dissemination
ensures consistency to allow the
reporting party to mitigate reporting
costs by sending real-time swap data at
the same time that regulatory data is
sent to an SDR.
Section 43.5(h) prescribes the time
delay for the public dissemination of
large notional off-facility swaps in
which neither counterparty is an SD or
MSP. Pursuant to § 43.5(h)(1), for Year
1, the time delay for public
dissemination of swap transaction and
pricing data for such swaps shall be 48
business hours after execution of the
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swap.374 Pursuant to § 43.5(h)(2) the
time delay for such swaps will reduce
to 36 business hours for Year 2. Finally,
pursuant to § 43.5(h)(3), beginning on
the second anniversary of the
compliance date for part 43, the time
delay for such swaps will be 24 business
hours.
Additionally, § 43.5(c)(6) provides
that until the Commission establishes an
appropriate minimum block size for a
particular swap or group of swaps, the
time delays set forth in § 43.5(h) shall
apply to publicly reportable swap
transactions that do not have
appropriate minimum block sizes, with
respect to off-facility swaps in which
neither counterparty is an SD or MSP.
Once an appropriate minimum block
size is established for a particular swap
or group of swaps, all swaps described
in § 43.5(h) that are below the
appropriate minimum block size shall
be reported ‘‘as soon as technologically
practicable’’ and only large notional offfacility swaps shall receive the time
delays for public dissemination
described in § 43.5(h).
With respect to the comment that 15
minutes is a sufficient time delay for all
swaps, the Commission believes 15
minutes is a sufficient time delay for
swaps executed on or pursuant to the
rules of a SEF or DCM and those swaps
subject to mandatory clearing in which
at least one party is an SD or MSP.
However, the Commission has
determined to phase in time delays over
a two year period and, consistent with
comments received and in order to
minimize implementation costs, has
adopted § 43.5(d) and (e)(2). Further, as
discussed above, the Commission
believes that large notional off-facility
swaps should be provided longer time
delays based on market participant and
asset class.
The Commission is also adopting
§ 43.5(c)(7), which provides that, upon
the establishment of an appropriate
minimum block size for a particular
swap or category of swaps, all publicly
reportable swap transactions that are
below the appropriate minimum block
size shall be publicly disseminated ‘‘as
soon as technologically practicable’’
after execution pursuant to § 43.3. The
Commission believes that § 43.5(c)(7)
clarifies that, as an appropriate
minimum block size becomes effective
for a swap or group of swaps, registered
entities, market participants and swap
374 Section 43.2 defines ‘‘business hours’’ to mean
consecutive hours during on one or more business
days. Section 43.2 also defines ‘‘Business day’’ to
mean the twenty-four hour day, on all days except
Saturdays, Sundays and legal holidays, in the
location of the reporting party or registered entity
reporting data for the swap.
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counterparties should anticipate that
public dissemination of swap data for
transactions below the appropriate
minimum block size will occur
significantly sooner (i.e., ‘‘as soon as
technologically practicable’’) following
execution of a publicly reportable swap
transaction.
With respect to the contention that
shorter or no time delays are
appropriate, the Commission notes that
CEA section 2(a)(13)(E)(iii) explicitly
requires the Commission to promulgate
rules establishing time delays for
reporting large notional swaps (block
trades). While the Commission agrees
that financial swaps should have shorter
time delays, the Commission believes
that one minute—as suggested by one
commenter—is insufficient for many
large trades, particularly where
transparency is being introduced into
the swaps market for the first time.375
As noted above, the appropriate
minimum block size for swaps will be
addressed in the block trade re-proposal
that will be published for comment in
the Federal Register. Until an
appropriate minimum block size is set
for a swap or grouping of swaps, all
such swaps will receive time delays for
public dissemination. As explained
above, the Commission is initially
adopting longer time delays and is
reducing those time delays over time in
an effort to allow market participants to
become accustomed to reporting and
publicly disseminating, to minimize
costs to market participants and
registered entities and to ensure that
market participants have adequate time
to hedge their large swap transactions.
Several commenters advised that the
Commission needs more data before it
can set appropriate minimum block
sizes and time delays for public
dissemination of block trades and large
notional off-facility swaps. The
Commission agrees that these concerns
are valid with respect to the
determination of appropriate minimum
block sizes, but does not believe that
additional data is needed for setting
time delays for public dissemination.
The Commission has considered all
comments relating to the time delays for
public dissemination, and as discussed
above, § 43.5 takes into account the
liquidity of swaps; the ability for certain
reporting parties to report to SDRs; the
cost-benefit considerations of reporting
real-time swap pricing and transaction
data; the cost-benefit considerations of
publicly disseminating swap pricing
and transaction data; and the statutory
mandate to provide post-trade
375 See
CL–Better Markets.
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transparency and enhance price
discovery in the swaps markets.
In its final rule, the Commission has
added appendix C to part 43 to further
clarify the time delays discussed in
§ 43.5(d)–(h) as well as the interim time
delays described in § 43.5(c); appendix
C to part 43 provides Tables C1–C6,
each of which represent the time delays
for a particular type of swap or swaps
described in § 43.5.
Several commenters requested that
the SEC’s and the Commission’s
respective public dissemination time
delay rules be harmonized. The
Commission has routinely coordinated
with the SEC regarding the time delays
for public dissemination of certain swap
transaction and pricing data; however,
the two Commissions have jurisdiction
over different types of swaps and, as a
result, a different concentration of
market participants. For example, the
‘‘other commodity’’ asset class will tend
to have significantly more non-SD/nonMSP counterparties than the credit or
equity asset classes.
By initially providing time delays for
the public dissemination of all swaps,
the Commission will ensure that some
public dissemination occurs from the
outset, prior to the adoption of rules for
appropriate minimum block sizes. Once
the appropriate minimum block sizes
for particular swaps or swap categories
are adopted, only swaps that have a
notional or principal amount at or above
the appropriate minimum block size
threshold will receive a time delay for
public dissemination, and all other
swaps in the asset class (or sub-asset
class or grouping of swaps) must be
publicly disseminated by an SDR ‘‘as
soon as technologically practicable.’’
Providing post-trade price transparency
in the swaps markets, even if initially
delayed during an interim period, will
enhance price discovery and increase
transparency. Additionally, as
appropriate minimum block sizes are
finalized, transparency and price
discovery in the swaps markets will be
further enhanced as swap transaction
and pricing data for swaps below the
appropriate minimum block size is
publicly disseminated ‘‘as soon as
technologically practicable.’’
F. Appendix A to Part 43
CEA section 2(a)(13)(B) ‘‘authorizes
the Commission to make swap
transaction and pricing data available to
the public in such form and at such
times as the Commission determines
appropriate to enhance price
discovery.’’ Consistent with this
authorization, the Commission
proposed appendix A to proposed part
43. That provision established the
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1221
appropriate form and manner in which
swap transaction and pricing data shall
be publicly disseminated. Specifically,
appendix A to proposed part 43
included: (1) Data fields to be publicly
disseminated; (2) a description of the
type of information to be captured in the
data fields; (3) an example of how the
data fields may be reported; and (4) the
application of the data fields.
To account for the differences in
publicly reportable swap transactions
among asset classes, the descriptions of
the data fields in the Proposing Release
were not intended to be prescriptive;
rather, the data fields were intended to
provide flexibility to report various
types of swaps while achieving
consistency in the data. Further, certain
data fields described in the Proposing
Release may not be relevant to certain
types of transactions; for such
transactions, such data fields would not
be publicly disseminated. For example,
the swap transaction and pricing data
that is publicly disseminated with
respect to an uncleared off-facility swap
will likely be different than those swaps
that are executed on a SEF or DCM.
Appendix A to proposed part 43 was
intended to ensure that the swap
transaction and pricing data that is
publicly disseminated is sufficient to
give meaning to the price of the publicly
reportable swap transaction, while
protecting the anonymity of the
counterparties and considering both the
potential effects of the proposal on
market liquidity and the cost burden of
reporting.
The Commission requested general
comments regarding all aspects of the
data fields, and asked specific questions
related to specific data field including
(i) whether to add or delete data fields;
(ii) effects on market liquidity; and (iii)
the appropriate format for data and
manner of public dissemination.
Twenty-six commenters addressed
various issues related to the data
fields.376 These commenters focused on
specific data fields, the value of
reporting data, the Commission’s ability
to modify data fields, pricing
information for customized swaps, enduser to end-user reporting of data and
harmonization with the SEC with regard
to data fields that must be publicly
disseminated.
Two commenters asserted that endusers will face a greater burden in
376 Commenters include: FHL Banks; IPAA; IECA;
MFA; Working Group of Commercial Energy Firms;
ISDA/SIFMA; ABC/CIEBA; GFXD; Better Markets;
Committee on Capital Markets Regulation; COPE;
Coalition of Energy End-Users; NFPEEU; Markit;
Tradeweb; DTCC; TriOptima; Reval; MarkitSERV;
Cleary; Argus; Professor Darrell Duffie; Coalition for
Derivatives End-Users; Barclays; API; and AGA.
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reporting the real-time data for public
dissemination since end-users only
maintain trading capabilities and
associated information technology to
meet their current commercial needs.377
These commenters argue that the
burden placed on end-users for
reporting end-user to end-user trades
(i.e., neither party is an SD or MSP) is
not justified by the limited value of the
data. These commenters argued that
under the Proposing Release end-users
would be required to create systems,
hire additional personnel and purchase
technology, which may compel such
end-users to only enter into transactions
with SDs and MSPs. According to the
commenters, these requirements would
hinder the ability of end-users to
manage commercial risk and increase
their costs, which they would then pass
on to their consumers.
Similarly, two commenters argued
that data for off-facility swaps involving
end-users do not have value for the
purposes of price discovery; in their
view, the cost burdens to send the swap
transaction and pricing data for public
dissemination would be substantial.378
They contend that off-facility end-user
swaps should not be subject to Section
727 of the Dodd-Frank Act. One
commenter contended that if the
Commission were to subject off-facility
end-user swaps to real-time reporting
requirements, end-users should be
allowed to utilize a number of options
for compliance with the real-time
reporting requirements and only core
commercial terms applicable to the
swap should be reported.379
Two additional commenters similarly
argued that until certain other
definitions are finalized (e.g., swap, SD,
MSP, non-financial commodity), it is
premature to comment on the data fields
described in appendix A with respect to
energy commodity swaps.380
One commenter argued that the
Commission should follow the approach
taken by the SEC in its proposal to allow
SDRs to define the relevant fields based
on general guidelines so that real-time
reporting can be flexible enough to track
market trends.381 Another commenter
expressed concern that the SDR may not
have sufficient knowledge to identify all
information in its possession and could
inadvertently disclose the identity of a
swap counterparty; the commenter
therefore requested more guidance on
377 See
378 See
CL–COPE; CL–IECA.
CL–Coalition of Energy End-Users; CL–
IPAA.
379 See CL–Coalition of Energy End-Users.
380 See CL–NFPEEU; CL–Coalition of Energy EndUsers.
381 See CL–MarkitSERV.
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what should and what should not be
publicly disseminated.382
Three commenters asserted that credit
terms should not be publicly
disseminated. One of these commenters
contended that the public dissemination
of such terms could cause confusion,
while the other commenters wrote that
public dissemination could have a
negative impact since market
participants could determine a
counterparty’s view on the
creditworthiness of another
counterparty.383
Three commenters argued that the
public dissemination of an indication
that a swap is bespoke could confuse
the market since all of the other terms
of the bespoke swap that make up the
price would not be publicly
disseminated.384 The commenters stated
that since the public dissemination of
bespoke swaps does not enhance price
discovery, such swap transaction and
pricing data should not be required to
be reported. One commenter suggested
that condition flags may be needed in
the swaps markets to provide
indications of established
conventions.385
Several commenters addressed
specific data fields set forth in appendix
A to proposed part 43. The comments
on these specific data fields are
summarized as follows:
• Additional Price Notation—One
commenter indicated that the
‘‘Additional Price Notation’’ field
should not be publicly disseminated
since it will provide information on one
party’s creditworthiness to another
party.386 Another commenter argued
that the ‘‘Additional Price Notation’’
data field is likely to have little
application for most commodity
transactions and that it will be
challenging to compute and populate
such field in real-time.387 Another
commenter stated that the pricing and
separate display of an ‘‘Additional Price
Notation’’ data field could make the
price of publicly reported swaps more
meaningful; however, the commenter
cautioned that the implementation of a
standardized approach for calculating
the amount in the ‘‘Additional Price
382 See
CL–ABC/CIEBA.
CL–Coalition for Derivatives End-Users;
CL–Working Group of Commercial Energy Firms;
and CL–ISDA/SIFMA.
384 See CL–DTCC; CL–FHLBanks; and CL–Reval.
385 See CL–MarkitSERV.
386 See CL–ISDA/SIFMA. The ISDA and SIFMA
joint comment letter further argued that bilaterally
executed trades may contain a premium over
market which would also need to be excluded from
public dissemination to prevent the price from
being misinterpreted by market observers.
387 See CL–Working Group of Commercial Energy
Firms.
383 See
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Notation’’ data field would be
challenging, would take time and could
confuse the market if parties took
different approaches toward calculating
this data field.388
• Tenor—Three commenters
responded to the Commission’s request
for specific comment regarding whether
date information (i.e., tenor information)
should be rounded to the nearest
month.389 One of the commenters stated
that in illiquid markets, the rounding of
tenor would be necessary to protect
anonymity of parties to a trade. The
commenter further suggested that with
respect to illiquid foreign exchange
markets, the tenor could map to one or
two years, rather than to a specific
month and year. Another commenter
argued that public dissemination should
follow market conventions for reporting.
Yet another commenter stated that by
not reporting the actual tenor of the
swap, one of the primary economic
terms of the swap would be
manipulated and would therefore
reduce post-trade price transparency.
• Timestamp—Commenters argued
that requiring that the timestamp be
reported to the second is not reasonable
and not consistent with current market
practice.390 One commenter argued that
the value derived of moving the
industry to UTC appears minimal when
compared to the costs involved.391
• Notional Amount—One commenter
stated that reporting the notional
amount in total dollar value for
commodities provides little value in
terms of price discovery value in the
market.392 Therefore, the commenter
recommended that the reporting of
notional quantity in the units of the
underlying quantity would provide
more relevant information. Similarly,
another commenter suggested that since
there is not a universal definition of
notional amount, the Commission
should provide guidelines on how to
publicly disseminate notional amount
similar to the guidelines provided by
the Federal Reserve Bank of New York
(‘‘FRBNY’’).393 Another commenter
388 See
CL–MarkitSERV.
CL–Working Group of Commercial Energy
Firms; CL–GFXD; and CL–ISDA/SIFMA.
390 See, e.g., CL–ISDA/SIFMA; CL–Working
Group of Commercial Energy Firms.
391 See CL–ISDA/SIFMA.
392 See CL–Working Group of Commercial Energy
Firms.
393 See CL–ISDA/SIFMA. The FRBNY’s
guidelines are included under ‘‘Line Item
Instructions for Derivatives and Off-Balance Sheet
Items Schedule HC–L’’ in the Board of Governors
of the Federal Reserve System’s ‘‘Instructions for
Preparation of Consolidated Financial Statements
for Bank Holding Companies Reporting Form FR Y–
9C,’’ available at https://www.federalreserve.gov/
reportforms/forms/FR_Y-9C20110630_i.pdf (last
visited Nov. 9, 2011).
389 See
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argued that the notional amount field
should not be publicly disseminated for
non-standardized swaps.394
• Indication of Other Price Affecting
Terms—One commenter argued that this
field, which applies only to nonstandardized or bespoke ‘‘reportable
swap transactions,’’ should be deleted
and only price and volume should be
required, if anything, for bespoke swaps.
The commenter further argued that
there would be little price discovery
value in reporting this field.395 Another
commenter suggested that the
Commission require that certain
condition flags be publicly disseminated
with respect to bespoke transactions
that would provide market participants
and the public with more information
about the bespoke swap.396
• Price-Forming Continuation Data—
Commenters stated that novations and
partial novations should not be
‘‘reportable swap transactions’’ since
they do not have a material impact on
the primary economic terms of the
transaction.397
• Contract Type—One commenter
suggested that the ‘‘Contract Type’’ data
field be modified to delete ‘‘options’’ (to
the extent the Commission is referring
to physical options) and ‘‘forwards’’
given that the Commission has no
jurisdiction over physical
transactions.398
One commenter emphasized the
importance of maintaining flexibility in
the data fields described in appendix A
to proposed part 43, which may mean
that no information at all may be
reported for certain fields.399 In
contrast, another commenter
recommended that the data elements be
made more specific to provide clarity
and avoid the risk of inconsistencies
when specifying the data elements.400
Four commenters recommended that a
standardized data format be required for
the reporting and public dissemination
of swap transaction and pricing data.
These four commenters argued that a
single data format would maximize
efficient and cost-effective access to the
information by the greatest number of
users.401
Several commenters also requested
that the Commission and the SEC
394 See
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395 See
CL–MFA.
CL–Working Group of Commercial Energy
Firms.
396 See Meeting with Markit (June 26, 2011).
397 See Meeting with Barclays (January 24, 2011);
CL–Working Group of Commercial Energy Firms.
398 See CL–Working Group of Commercial Energy
Firms.
399 See CL–GFXD.
400 See CL–ISDA/SIFMA.
401 See CL–Barclays; CL–DTCC; CL–TriOptima;
and CL–Better Markets.
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harmonize the data fields that are
required to be publicly disseminated so
that there can be an accurate depiction
of prices within the same asset
classes.402
The Commission received comments
discussing the ‘‘Swap Instrument’’ data
field. The Commission is not including
this data field in appendix A to part 43,
as it intends to address this concept in
the block trade re-proposal.
Additionally, one commenter
interpreted that Table A2 would only
relate to embedded options and as a
result the primary economic terms for
options were not covered by appendix
A to part 43.403
After considering the comments, the
Commission has determined to adopt
appendix A to proposed part 43 as
described below.
The Commission agrees with concerns
expressed by some commenters
regarding the costs and burdens that
end-users will face in reporting the data
fields described in appendix A to
proposed part 43. Accordingly, the
Commission is adopting data fields in
appendix A to part 43 that provide
sufficient flexibility for reporting both
standardized and bespoke swap
transactions in all asset classes. While
the Commission recognizes that there
will be costs associated with reporting
the data fields described in appendix A
to part 43, the Commission does not
believe that a distinction should be
made for swaps in which an end-user is
a reporting party. The Commission
believes that swaps with similar
characteristics must have the same
standards for public dissemination,
regardless of the type of reporting party,
so that identical data fields will be
publicly disseminated for similar swaps.
Such consistency in public
dissemination will provide market
participants and the public with
uniform public reporting and enhanced
transparency and price discovery. To
the extent that non-SD/non-MSPs are
reporting parties, these parties may use
industry solutions, such as third-party
reporting agents or web-based data
reporting, to assist in reporting such
swap transaction and pricing data to an
SDR.404 The Commission believes that
402 See CL–ISDA/SIFMA; CL–DTCC; CL–
Committee on Capital Markets Regulation; and CL–
MarkitSERV.
403 See CL–GFXD.
404 The Commission notes that CEA section
2(a)(13)(F) explicitly permits that agents to the
parties to a swap may report swap transaction and
pricing information: ‘‘Parties to a swap (including
agents of the parties to a swap) shall be responsible
for reporting swap transaction information to the
appropriate registered entity in a timely manner as
may be prescribed by the Commission.’’ See supra
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industry solutions, combined with the
longer initial time delays for public
dissemination,405 the flexibility of the
data fields and the flexibility of the
meaning of ‘‘as soon as technologically
practicable’’ 406 will mitigate the costs
that may be incurred by non-SD/nonMSP reporting parties.
The Commission disagrees with
commenters that stated that off-facility
end-user swaps should not be publicly
disseminated or alternatively should be
permitted to report less information
than the data fields required in
appendix A to part 43. As noted in the
previous discussion related to the scope
of part 43,407 the Commission interprets
CEA section 2(a)(13)(C) to cover all
swap transactions, including bespoke
swaps. The Commission nonetheless
recognizes that there are differences
among various types of swap
transactions based on asset class and
whether a swap is subject to mandatory
clearing, standardized or bespoke. As
further discussed below, the
Commission believes that the reporting
of swap transaction and pricing data for
bespoke transactions, including offfacility end-user transactions, enhances
price discovery by bringing
transparency to the market. Requiring
that certain data fields be reported—
such as ‘‘Indication of Other Price
Affecting Term’’ and ‘‘Additional Price
Notation’’—adds value to the swap
transaction and pricing data that is
publicly disseminated without
compromising the anonymity of the
swap counterparties. It is possible that
some of the data fields listed in Tables
A1 and A2 in appendix A to part 43
may not be relevant to the terms of a
particular publicly reportable swap
transaction and therefore need not be
publicly disseminated. However, to the
extent that a data field for a particular
swap is a relevant term of the publicly
reportable swap transaction, the
reporting party, SEF or DCM must
provide the SDR with sufficient
information to publicly disseminate
such swap transaction and pricing data.
The Commission notes that the data
fields described in appendix A to part
43 only reflect data that is to be publicly
disseminated by an SDR. The
Commission has added introductory
language to appendix A to part 43 to
clarify that reporting parties, SEFs and
§ 43.3 discussion, which discusses the use of third
parties for reporting and public dissemination.
405 See supra discussion in section II.E (‘‘Section
43.5—Time Delays for Public Dissemination of
Swap Transaction and Pricing Data’’).
406 See supra discussion in section II.B.2
(‘‘Defined Terms’’).
407 See supra discussion in section II.A, regarding
the scope of part 43.
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DCMs must report to an SDR ‘‘as soon
as technologically practicable’’ after
execution of the publicly reportable
swap transaction, the swap transaction
and pricing data that is needed to
publicly disseminate the relevant data
fields described in Tables A1 and A2.
The Commission acknowledges the
comment that it is premature to
comment on the data fields described in
appendix A to proposed part 43 since
certain definitions have not been
finalized; however, the Commission
disagrees that the absence of such
definitions would preclude an
interested party from commenting on
the data fields in appendix A to
proposed part 43. Further, in response
to similar comments, the Commission
previously re-opened the comment
period for the Proposing Release so that
market participants and interested
parties would have an opportunity to
comment after seeing the entire mosaic
of proposed rules.408 The Commission
did not receive any additional
comments on the proposed data fields
during the re-opened comment period.
The Commission sees merit in the
suggestion that SDRs have discretion to
determine how to publicly disseminate
data fields. As discussed, § 43.3(a)
requires that all swap transaction and
pricing data be reported by reporting
parties, SEFs and DCMs to an SDR for
public dissemination. Accordingly, the
Commission anticipates that the SDRs
will have discretion to publicly
disseminate the swap transaction and
pricing data in a form and manner that
covers all of the information described
in appendix A to part 43. The
introductory language to appendix A to
part 43 now makes clear that the form
and manner in which an SDR publicly
disseminates information should be
consistent for swaps within a particular
asset class. Such consistency will better
enable market participants to compare
prices for swaps within the same asset
class. The data fields listed in appendix
A to part 43 are intended to be
informative and flexible to
accommodate all types of publicly
reportable swap transactions.
Additionally, appendix A to part 43
provides examples of how each data
element may be publicly disseminated.
These examples are not meant to be
prescriptive and may not be applicable
to certain types of swaps. The
Commission believes that part 43 and
appendix A to part 43 provide sufficient
guidance to SDRs regarding information
408 See Commission, Reopening and Extension of
Comment Periods for Rulemakings Implementing
the Dodd-Frank Wall Street Reform and Consumer
Protection Act, 76 FR 25274 (May 4, 2011).
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that should and should not be publicly
disseminated. With respect to the public
dissemination of swap transaction and
pricing data related to certain off-facility
swaps in the ‘‘other commodity’’ asset
class, the Commission intends to
provide further guidance in its block
trade re-proposal.409
The Commission agrees with
commenters that separate data fields
that represent creditworthiness should
not be publicly disseminated. The
Commission does not agree, however,
that reporting the value of
creditworthiness as part of the
‘‘Additional Price Notation’’ data field,
as stated in the Proposing Release, will
disclose the business transactions or
market positions of any person.
Creditworthiness is one of several
factors that would comprise the amount
set forth in the ‘‘Additional Price
Notation’’ field. In the description of the
‘‘Additional Price Notation’’ data field
in the Proposing Release, the
Commission stated that the field should
include any premiums associated with,
among other things, margin, collateral
and independent amounts. To clarify,
the actual amounts of variation margin
and initial margin would not be
included in this field; rather, any
premiums associated with the presence
of collateral that are factored into the
price of the publicly reportable swap
transaction would be included. The
Commission believes that an indication
whether an uncleared swap is
collateralized should be publicly
disseminated to provide greater
meaning to the price of the swap in lieu
of a separate field for creditworthiness.
The Commission is therefore requiring
that the margin, collateral and
independent amount terms be reported
as a separate field entitled ‘‘Indication
of Collateralization.’’ The ‘‘Indication of
Collateralization’’ field is only required
for uncleared swaps, as, unlike cleared
swaps, uncleared swaps have collateral
arrangements. The inclusion of the
‘‘Indication of Collateralization’’ data
field in the final rule requires that
reporting parties for uncleared swaps
must provide the SDR with the
appropriate information so that the SDR
can publicly disseminate one of four
descriptions of the terms of the swap
relating to the collateral arrangement for
such swap. The four descriptions to be
publicly disseminated are as follows:
(1) ‘‘Uncollateralized’’—An uncleared
swap shall be described as
‘‘Uncollateralized’’ when there is no
credit arrangement between the parties
409 See supra discussion in section II.D.5
(‘‘Anonymity of Parties to a Publicly Reportable
Swap Transaction (§ 43.4(d)’’).
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to the swap or when the agreement
between the parties states that no
collateral (neither initial margin nor
variation margin) is to be posted at any
time.
(2) ‘‘Partially Collateralized’’—An
uncleared swap shall be described as
‘‘Partially Collateralized’’ when the
agreement between the parties states
that both parties will regularly post
variation margin. The word ‘‘regularly’’
is used to exclude situations where the
parties may set a threshold amount(s)
that is so high that one or both parties
will rarely post variation margin, if at
all.
(3) ‘‘One-way Collateralized’’—An
uncleared swap shall be described as
‘‘One-way Collateralized’’ when the
agreement between the parties states
that only one party to such swap agrees
to post initial margin, regularly post
variation margin or both with respect to
the swap. The word ‘‘regularly’’ is used
to exclude situations where the parties
may set a threshold amount(s) that is so
high that one or both parties will rarely
post variation margin, if at all.
(4) ‘‘Fully Collateralized’’—An
uncleared swap shall be described as
‘‘Fully Collateralized’’ when the
agreement between the parties states
that initial margin must be posted and
variation margin must regularly be
posted by both parties. The word
‘‘regularly’’ is used to exclude situations
where the parties may set a threshold
amount(s) that is so high that one or
both parties will rarely post variation
margin, if at all.
The Commission does not agree that
the public dissemination of bespoke
swaps will confuse the market or fail to
enhance price discovery. The public
dissemination of bespoke swaps
provides the public with the full scope
of publicly reportable swap transactions
that are being transacted in an asset
class, which will inform market
participants and the public of market
depth and the execution of swaps with
similar underlying assets. In the
Commission’s opinion, the designation
of such swaps as ‘‘bespoke’’ in the
‘‘Indication of Other Price Affecting
Term’’ data field (and the ‘‘Additional
Price Notation’’ and ‘‘Indication of
Collateralization’’ data fields) will
provide information that enhances price
discovery. While the Commission agrees
with the comment that condition flags
may provide greater clarity to the
market as to the pricing of a bespoke
swap, such indications may also
disclose the identities, business
transactions and/or market positions of
the parties. Further, the Commission
believes that the ‘‘Additional Price
Notation,’’ ‘‘Indication of
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Collateralization’’ and the ‘‘Indication of
Other Price Affecting Term’’ data fields
will provide sufficient information to
the market to enhance price discovery
with respect to these types of publicly
reportable swap transactions.
The Commission is modifying or
adding certain data fields in response to
comments received.
• Additional Price Notation—The
Commission believes that the
Additional Price Notation field will not
disclose the creditworthiness of the
counterparty as one commenter
suggested. This data field provides a
single number that accounts for the
combined premiums associated with the
publicly reportable swap transaction.
The actual content of what constitutes
this number will not be publicly
disseminated. As discussed earlier, the
references to margin, collateral and
independent amount are being replaced
in the description of this field with the
term ‘‘presence of collateral.’’
Additionally, the description of this
data field in the final rule makes clear
that ‘‘counterparty credit risk’’ would be
included as part of the number. With
respect to the comment that the
Additional Price Notation field will
have little application to commodity
transactions, the final rule provides that
to the extent that this data field does not
apply, the data field would not need to
be publicly disseminated.
The Commission does not anticipate
that computing this field should be
difficult, even for transactions in the
‘‘other commodity’’ asset class. The
price of the swap should be known and
the premium or spread is generally
negotiated outside of the actual price of
the swap. The Commission believes that
the comment that a standardized
approach for calculating the amount in
the Additional Price Notation field
would be challenging to achieve has
merit. The Commission acknowledges
that this field may be calculated slightly
differently in different asset classes, by
different swap counterparties, and even
within the same asset class.
Notwithstanding these potential
discrepancies in the calculation of the
‘‘Additional Price Notation’’ data field,
the Commission believes that breaking
out the premiums for a swap would
enhance price discovery and allow for
better comparison for all swaps within
an asset class—both platform executed
swaps and off-facility swaps.
• Tenor—In response to comments
regarding whether tenor should be
reported as month and year, the
Commission agrees with the commenter
who stated that to not report the exact
tenor of a swap would essentially mean
not reporting a primary economic term
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of the swap. To not require the exact
end date of swap would detract from the
meaning of the price and therefore the
Commission is requiring that the actual
end date be required to be publicly
disseminated for all swaps. The field
that was called ‘‘Tenor’’ in the
Proposing Release will be called ‘‘End
Date’’ and the time between the
‘‘Effective or Start Date’’ and the ‘‘End
Date’’ will provide market participants
and the public with the exact tenor of
the swap. Similarly, the ‘‘Option
Expiration Date’’ field should be
reported as an actual date and not the
month and year, as described in the
Proposing Release.
• Execution Timestamp—While the
Commission understands that the
reporting of the timestamp to the second
is a shift from the standard practice in
the previous OTC derivatives market,
the Commission does not believe that
this historical practice is persuasive on
the point of whether swaps under the
new regulatory regime established by
the Dodd-Frank Act should receive
execution timestamps to the second. A
timestamp to the second is necessary for
both audit trail and enforcement
purposes, as well as to allow market
participants and the public an
opportunity to re-create a trading day.
Different market participants and
different types of execution may receive
different time delays, so the timestamp
will become critical in determining the
order of execution of transactions
within a particular market. The
Commission will also use the
timestamps to determine whether swaps
are being reported by reporting parties,
SEFs and DCMs ‘‘as soon as
technologically practicable’’ and to
compare the speed at which similar
market participants report swap
transaction and pricing data to an SDR
for public dissemination. Additionally,
the Commission can use the timestamp
to determine how quickly SDRs are
publicly disseminating the information
that they receive for public
dissemination. Further, SDRs will use
the Execution Timestamp to measure
the time delays for public dissemination
to be applied to publicly reportable
swap transactions, as described in § 43.5
and appendix C to part 43.
A commenter suggested that the
benefit of moving the industry to UTC
appears minimal when compared to the
costs involved. The Commission
believes that consistency across the
global swaps market is important and
requiring public dissemination in UTC
will allow market participants and
reporting parties to re-create the order of
trades and will reduce the need for
market participants to convert different
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1225
times to understand the order of trades
in a particular market.410 Further, the
appendix A to part 43 combines the
‘‘Execution Date’’ field to be included in
the ‘‘Execution Timestamp’’ field so that
both a time and date will be publicly
disseminated to assist market
participants and the public with
understanding the trading of publicly
reportable swap transactions.
• Notional or Principal Amount—The
Commission agrees with the comment
that the notional quantity should be
reported and publicly disseminated in
the units of the underlying quantity, as
it would provide more relevant
information to enhance price discovery.
The Commission, however, does not
believe that the Commission needs to
provide guidelines on how to publicly
disseminate the notional or principal
amount. The Commission believes that
the SDR should have the discretion on
how to publicly disseminate the
notional amounts for certain types of
commodity transactions that are traded
in units. The Commission does not
agree with the comment that the
notional amount should not be
disseminated for non-standardized
swaps, as such public dissemination
will enhance price discovery and
provide information on market depth.
The final rules provide for the rounding
of the notional or principal amount as
well as caps on the public
dissemination of notional or principal
amounts.411 Accordingly, the data fields
in appendix A to part 43 indicate that
it is the ‘‘Rounded Notional or Principal
Amount’’ that is to be publicly
disseminated.
• Indication of Other Price Affecting
Term—One commenter argued that the
‘‘Indication of Other Price Affecting
Term’’ data field should not be reported
and only price and volume information
should be reported for bespoke
‘‘reportable swap transactions.’’ The
Commission intends that this data field
will merely serve as an indication that
a swap is not standardized (i.e.,
bespoke). The Commission believes that
such indication will provide market
participants and the public with an
opportunity to more easily discern the
differences in prices of bespoke swaps
with those swaps that are standardized
(e.g., executed on a SEF or DCM and
subject to the clearing mandate). An
indication of other price affecting terms
will allow market participants and the
410 The use of UTC with regard to part 43 only
refers to the execution timestamps that are publicly
disseminated; reporting parties, SEFs and DCMs
can agree to report different timestamps to the SDR
that can then convert the time to UTC for public
dissemination.
411 See § 43.4(g) and (h).
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public to look to other fields such as
‘‘Indication of Collateralization,’’
‘‘Additional Price Notation’’ and ‘‘Day
Count Convention’’ to better understand
the price of the swap. The Commission
has deleted the reference to common
material price affecting terms to avoid
confusion and has added a description
under the example to indicate that the
field should be utilized if there is a
material price affecting term that is not
otherwise publicly disseminated.
• Price-Forming Continuation Data—
The Commission agrees that novations
and partial novations should not be
publicly reportable swap transactions,
but only to the extent that such swaps
do not have a material effect on the
price of the swap. To the extent there is
any price effect from the novation (e.g.,
payments associated with the novation,
changes to material terms of the swap,
etc.), such novations would be publicly
reportable swap transactions and an
indication of the type of price forming
continuation data would need to be
publicly disseminated pursuant to part
43. The final rule clarifies the types of
transactions that may be included in the
price forming continuation data field to
match with the types of transactions in
the definition of publicly reportable
swap transaction.412
• Contract Type—In response to the
comment that options and forwards
should be deleted to the extent they
relate to physical transactions, the
Commission does not believe that any
action is necessary regarding the data
field. The extent to which certain
products fall under the Commission’s
jurisdiction will be defined in another
Commission rulemaking. To that end,
the list is meant to be illustrative and to
ensure that all publicly reportable swap
transactions would be included to the
extent that they are under the
Commission’s jurisdiction.
In response to the comment that Table
A2 only applies to embedded options,
the Commission notes that Table A2
applies to options, swaptions and
embedded options; the Commission has
added clarifying language to the
description.413
412 See entry for ‘‘price forming continuation
data’’ in Table A1 (‘‘Data Fields and Suggested
Form and Order for Real-Time Public Reporting of
Swap Transaction and Pricing Data’’) in appendix
A to this part. See Real-Time NPRM supra note 6,
at 76179. Such price-forming continuation data may
include: terminations, assignments, novations,
exchanges, transfers, amendments and conveyances
of extinguishing of rights that change the price of
the swap.
413 The Commission notes that the title of Table
A2 in the Proposing Release was ‘‘Additional realtime public reporting data fields for options,
swaptions and swaps with embedded options.’’
Real-Time NPRM supra note 6, at 76181.
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It is the Commission’s intent to ensure
harmonization between the data fields
in appendix A to proposed part 43 and
the data fields required to be reported to
an SDR for regulatory purposes. In light
of the changes to proposed § 43.3 that
require reporting to an SDR, which in
turn must publicly disseminate the data
fields described in appendix A to part
43, the Commission believes that
reporting parties, SEFs and DCMs may
report the data elements for real-time
reporting and regulatory reporting in the
same data stream. Accordingly, it is
important that the data fields for both
the real-time and regulatory reporting
requirements work together. Further,
certain changes to the final rules make
the public dissemination of additional
data fields important to provide market
participants and the public with an
understanding of the swap. For these
reasons, the Commission is adding to
appendix A the following data fields
that were not included in the Proposing
Release:
• Indication of End-User Exception—
Given the other changes in the final
rules regarding the time delays for
public dissemination, such indication is
necessary to provide market participants
and the public with information as to
why such swap received a time delay
for public dissemination as compared to
other swaps with substantially similar
terms. Additionally, such information
would be required to be reported
pursuant to the regulatory reporting
requirements described in proposed part
45, thus reducing the cost for reporting
parties to provide such information.414
• Day Count Convention—The day
count convention is a description of
how interest accrues over time and is a
material term that is necessary for
pricing certain swaps. Common day
count convention methods include the
30/360 method and the Actual method.
The day count convention is necessary
to be publicly disseminated so that the
public can better understand the price
and the terms for how to value the
swap.
• Settlement Currency—The
settlement currency is a necessary data
field for foreign exchange transactions
that physically settle. To the extent that
such transactions are subject to the realtime reporting requirements of part 43,
this field should be publicly
disseminated to give meaning to the
price of a publicly reportable swap
transaction. The field would be required
to be reported pursuant to the regulatory
reporting requirements in proposed part
414 See
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45, thus reducing the cost for reporting
parties to provide such information.415
All other data fields in appendix A to
part 43 that are not discussed above are
adopted as proposed with certain
clarifying or conforming changes and
certain changes to ensure that the
language in the description is not
unduly prescriptive. Some of the
conforming or clarifying changes
include matching changes to definitions
and section numbers, describing the
examples with a parenthetical and
clarifying certain names of fields (e.g.,
‘‘Notional or principal amount 1’’ has
been changed to ‘‘Rounded notional or
principal amount 1’’ since only the
rounded notional amount will be
publicly disseminated, and changed the
name of ‘‘Start Date’’ to ‘‘Effective or
Start Date’’ for clarity). Additionally, the
Commission has removed certain
language from the descriptions of the
data fields that might have been
construed as prescriptive. For example,
the final rule removed ‘‘[s]uch letter
convention may be reported as follows:
D (daily), W (weekly), M (monthly), Y
(yearly)’’ from the payment frequency
data fields to make clear that payment
frequency may be publicly disseminated
in a different manner as long as an SDR
is consistent in the way that data fields
are publicly disseminated. With respect
to the ‘‘Execution Venue’’ data field, the
Commission has made clear that the
actual SEF or DCM name need not be
reported. Further, the Commission has
modified the ‘‘Price Notation’’ field to
clarify that this field indicates the price
(and not the premium), and the
language relating to netting to a present
value of zero at execution was removed
since it might not be true in all cases.
The Commission has also added
clarification to the examples described
for each data element. These examples
are meant to provide guidance with
respect to the public dissemination of
swap transaction and pricing data.
In response to commenters who
recommended that the Commission
harmonize the data fields with the SEC,
the Commission notes that it has
consulted with the SEC regarding the
data fields for public dissemination. The
Commission believes that the data fields
described in appendix A to part 43 are
sufficiently flexible to cover swaps in all
asset classes. The Commission has
determined that the data elements
described in Tables A1 and A2 of
appendix A to part 43 are necessary to
enhance price discovery.
415 Id.
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III. Effectiveness/Implementation and
Interim Period
In its Proposing Release the
Commission solicited responses to
specific questions regarding the
implementation of real-time public
reporting, including whether (i)
different reporting parties should have
different implementation timeframes;
(ii) different types of execution should
have different reporting phase in
timeframes; (iii) different asset classes,
markets, or contracts should have
different timeframes; and (iv) public
dissemination of block trades should be
implemented according to a different
schedule than non-block trades.
The Commission received responsive
comments from 47 market participants,
including SDs, non-financial end-users,
financial end-users, industry groups/
associations, asset managers, trading
platforms and data vendors.416
Commenters discussed the following
issues relating to implementation: (1)
Timing for real-time reporting vis-a-vis
other rules; (2) a phase in approach
based on liquidity/standardization/asset
class; (3) harmonization with the SEC
and foreign regulators; (4)
implementation schedules; (5) a testing
phase; (6) technology challenges; (7)
comparison to TRACE phase in; (8) large
notional swaps/customized swaps; (9)
end-users should be phased in last; and
(10) re-proposal and re-open comment
period.
Twenty-seven comments supported a
phase in approach with regard to realtime reporting requirements for the
rules set forth in the Proposing Release.
Commenters’ proposed approaches to
phasing in the rules varied in timing
and scope. One commenter further
suggested that a phase in be adopted
similar to that proposed in the SD/MSP
Recordkeeping NPRM.417 Five
commenters recommended that in
implementing the part 43 rules the
Commission follow the manner in
which FINRA phased in TRACE; 418
some supported a testing phase in
period during which compliance would
not be required.419 These commenters
further suggested that such a phase in
period would provide an opportunity to
both address anticipated technology
416 The Commission received comments
specifically addressing the implementation of part
43 and additionally received general
implementation comments in response to the Public
Roundtable Discussion on Dodd-Frank
Implementation.
417 See CL–ISDA/SIFMA.
418 See CL–ISDA/SIFMA; CL–DTCC; CL–GFXD;
CL–WMBAA; and CL–Cleary.
419 See CL–Barclays; CL–Committee on Capital
Markets Regulation; CL–DTCC; CL–Cleary; and CL–
Working Group of Commercial Energy Firms.
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challenges and allow parties to become
familiar with the reporting process.
Other comments advised the
Commission to subject more liquid/
standardized contracts to public realtime reporting first and phase in less
liquid contracts later.420 Still others
recommended beginning with reporting
of more advanced asset classes with
established infrastructure for reporting
(e.g., credit) or by entity/market
participants.421 In addition, commenters
stated that real-time reporting for large
notional swaps should be phased in.422
Twenty-six commenters contended
that the Commission must first collect
and analyze data per the Commission’s
data recordkeeping and reporting and
SDR registration rules, before adopting
final rules addressing certain aspects of
the block trade rules (e.g., calculations
and time delay).423 Consistent with this
approach, four commenters asserted that
the entire rulemaking should be reproposed after the Commission has had
the opportunity to review and analyze
the data collected by SDRs. One
commenter requested that the
Commission wait until it publishes the
standardized computer-readable
algorithmic study before developing
real-time reporting rules.424 One
commenter urged the Commission to repropose this rule, and all other rules
establishing the new framework for
swaps regulation, in the order in which
they will be implemented—preferably
starting with data gathering in order to
capture most effectively the appropriate
products and market participants. This
commenter recommended a minimum
sixty-day comment period for each of
the re-proposed rules. While this
process would delay implementation by
some months, the commenter believed
that the desire for an accelerated and/or
premature regulatory certainty should
not outweigh the need for
comprehensive consideration of the
market impact and potential market
disruptions prior to finalizing the
regulatory requirements.425
Several commenters stated that the
Commission should adopt an
420 See
CL–UBS; CL–Barclays; and CL–DTCC.
CL–Barclays; CL–AIMA; and CL–
MarkitSERV.
422 See CL–JPM; CL–MS.
423 Commenters include: Barclays; GS; UBS;
Cleary; Freddie Mac; FHL Banks; MFA; GFXD;
ISDA/SIFMA; Better Markets; ABC/CIEBA; SIFMA
AMG; WMBAA; Coalition for Derivatives EndUsers; FIA/SIFMA/ISDA/FSR; AII; Vanguard;
MarkitSERV; JPM; ATA; MFA; WMBAA; Vanguard;
MS; and SIFMA AMG.
424 See CL–Cleary.
425 See CL–ABA. As discussed throughout this
Adopting Release, the Commission has determined
not to adopt certain rules relating to block trades
and other off-facility swaps in the ‘‘other
commodity’’ asset class in this Adopting Release.
1227
implementation timeline similar to
those of other federal regulators,
including the SEC.426 One commenter
observed that inconsistencies between
the Commissions’ proposals would, if
adopted, significantly complicate
implementation.427 Two additional
commenters recommended that the
Commissions harmonize their phase in
approaches.428
The Commission received comments
from several commenters that
recommended specific implementation
schedules for the Commission’s
consideration.429
One of these comments supported reproposing the rule after data are
collected.430 As discussed throughout
this Adopting Release, the Commission
has determined not to adopt certain
aspects of the block trade rules pending
further collection and analysis of data.
One commenter stated that the
Commission’s implementation period
and process should be broadly
consistent with the proposed European
implementation; in its view such
consistency would foster consistency
across regions and minimize regulatory
arbitrage.431
The Commission also received several
comments asserting that end-user swap
data reporting should be delayed. For
example, one of these commenters
commented that non-bank SDs and endusers should be able to establish
information technology systems related
to business process for approximately
one year before reporting is required.432
Another commenter stated that endusers should not begin reporting until
an SDR has been registered and the
systems between the SDR and end-user
can be set up and tested.433 Other
comments contended that end-users
should be phased in last.434
A number of other commenters
responded, directly or indirectly, to the
Commission’s decision to reopen the
comment periods for all Dodd-Frank Act
rulemakings and specific request for
comment on the order in which the
Commission should consider final
rulemakings under the Dodd-Frank
421 See
PO 00000
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426 See CL–MFA; CL–UBS; CL–Reval; and
Meeting with Markit (Jan. 13, 2011).
427 See CL–Cleary.
428 See CL–Commodity Markets Council; and CL–
MarkitSERV.
429 See CL–DTCC; CL–ABC–CIEBA; and CL–
Working Group of Commercial Energy Firms.
430 See CL–ABC/CIEBA.
431 See CL–MarkitSERV.
432 See CL–Working Group of Commercial Energy
Firms.
433 See CL–Dominion.
434 See CL–Dominion; CL–DTCC; and CL–
Working Group of Commercial Energy Firms.
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Act.435 Six commenters challenged the
sequencing and timing of the Proposing
Release in relation to the publication of
the final entity and/or product
definitions rulemakings published after
the Proposing Release. These
commenters contended that the
Commission’s failure to sequence the
proposals deprived them of the
opportunity for meaningful, informed
comment on the Proposing Release; they
suggested that the Commission extend
the comment periods on all
rulemakings.
Consistent with section 754 of the
Dodd-Frank Act, part 43 of the
Commission’s Regulation will be
effective on March 9, 2012 (‘‘Effective
Date’’). In that regard, however, the
Commission wishes to emphasize that
implementation or compliance dates for
various regulatory requirements in part
43 are contingent upon the adoption
and effective dates of other, related,
regulatory provisions and definitions. In
consideration of these contingencies
and in response to commenters, the
Commission is adopting a three-phase
schedule for compliance with part 43,
along with several new procedures.
Compliance Date 1
On the first compliance date
(‘‘Compliance Date 1’’), all SEFs, DCMs,
SDs and MSPs will be required to
comply with all part 43 requirements
with respect to publicly reportable swap
transactions in the interest rate and
credit asset classes, including reporting
such transactions to an SDR pursuant to
the rules of part 43. On Compliance
Date 1, all publicly reportable swap
transactions in the interest rate and
credit asset classes that are either (1)
executed on or pursuant to the rules of
a SEF or DCM, or (2) ‘‘off-facility
swaps’’ in which at least one party to
the swap is an SD or MSP (collectively,
‘‘Compliance Date 1 transactions’’),
must be reported to an SDR for public
dissemination, pursuant to part 43. In
addition, on Compliance Date 1, all
SDRs for the interest rate and credit
asset classes will be required to accept
and publicly disseminate real-time swap
transaction and pricing data for the
Compliance Date 1 transactions
pursuant to part 43 and appendix A to
part 43. With respect to swaps in the
interest rate and credit asset classes that
are executed on or pursuant to the rules
of a SEF or DCM, Compliance Date 1
will be the date that is the later of (1)
435 See CL–ABA; CL–ABC/CIEBA; CL–COPE; CL–
Citadel; CL–DC Energy; CL–BP; CL–Alice; CL–
FHLBanks; CL–Cleary; CL–GFXD; CL–NFPEEU;
CL–Working Group of Commercial Energy Firms;
CL–FIA/FSR/IIB/IRI/ISDA/SIFMA/Chamber; and
Meeting with Citi, MS and JPM (May 17, 2011).
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July 16, 2012, or (2) 60 calendar days
after the publication in the Federal
Register of Commission regulations
defining the term ‘‘swap’’ pursuant to
sections 721 and 712(d)(1) of the DoddFrank Act. With respect to swaps in the
interest rate and credit asset classes that
are not executed on or pursuant to the
rules of a SEF or DCM and that have at
least one party that is an SD or MSP,
Compliance Date 1 will be the date that
is the later of (1) July 16, 2012 of this
Adopting Release in the Federal
Register, or (2) 60 calendar days after
the publication in the Federal Register
of the last Commission regulations
defining the terms ‘‘swap,’’ ‘‘swap
dealer’’ and ‘‘major swap participant’’
pursuant to sections 721 and 712(d)(1)
of the Dodd-Frank Act.
Compliance Date 2
On the second compliance date
(‘‘Compliance Date 2’’), all SEFs, DCMs,
SDs and MSPs will be required to
comply with all part 43 requirements
with respect to publicly reportable swap
transactions in the foreign exchange,
equity and ‘‘other commodity’’ asset
classes, including reporting such
transactions to an SDR pursuant to the
rules of part 43. On Compliance Date 2,
all publicly reportable swap
transactions in the foreign exchange,
equity and ‘‘other commodity’’ asset
classes that are either (1) executed on or
pursuant to the rules of a SEF or DCM,
or (2) off-facility swaps in which at least
one party to the swap is an SD or MSP
(collectively, ‘‘Compliance Date 2
transactions’’), must be reported to an
SDR for public dissemination, pursuant
to part 43. Consequently, on
Compliance Date 2, all SDRs for the
interest rate, credit, equity, foreign
exchange and ‘‘other commodity’’ asset
classes will be required to accept and
publicly disseminate the Compliance
Date 2 transactions pursuant to part 43.
Compliance Date 2 shall begin 90
calendar days after the commencement
of Compliance Date 1.
Compliance Date 3
On the third compliance date
(‘‘Compliance Date 3’’) all publicly
reportable swap transactions in all asset
classes will be required to comply with
all part 43 requirements. Compliance
Date 3 will require, among other part 43
requirements, the reporting and public
dissemination of all publicly reportable
swap transactions in all asset classes by
all SEFs, DCMs and reporting parties,
including reporting parties that are nonSDs or non-MSPs. Compliance Date 3
shall begin 90 calendar days after the
commencement of Compliance Date 2.
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If no SDR for a particular asset class
is registered or provisionally registered
at the commencement of one or more
compliance dates, compliance for swaps
in such asset class shall not be required
until registration or provisional
registration of an SDR occurs in the
asset class. Reporting parties, SEFs and
DCMs may share and publicly
disseminate swap transaction and
pricing data without restriction until an
SDR is registered or provisionally
registered in an asset class. Further, the
Commission notes that the compliance
dates relating to the implementation of
part 43 are not contingent on the
publication of Commission regulations
implementing Section 733 of the Dodd
Frank Act relating to registration and
compliance with core principles for
SEFs.
In addition to the compliance dates,
the Commission is adopting a number of
phasing procedures in response to
commenters’ concerns. As discussed
above, the Commission expects to repropose for comment a rulemaking to
address the appropriate minimum block
size criteria and determination.
Consequently, until such time as an
appropriate minimum block size is
established for particular swaps, the
Commission is providing initial time
delays for all swaps subject to the
reporting requirement in § 43.5. Further,
the Commission will be phasing in the
time delays over time so that market
participants can adjust hedging
strategies and secure the technology or
make arrangements necessary to comply
with part 43. The Commission has
provided longer time delays for the
‘‘other commodity’’ asset class, since
such parties using such swaps tend to
follow more complex hedging strategies
to lay off risk. In response to comments
regarding end-users, the Commission is
providing longer time delays for public
dissemination of swaps in which a nonSD/non-MSP is the reporting party since
such parties may not have the
technology available to report swap
transaction and pricing data.
Additionally, the Commission expects
to address in the block trade re-proposal
the reporting of publicly reportable
swap transactions in the ‘‘other
commodity’’ asset class that are not
executed on or pursuant to a SEF or
DCM and that do not reference one of
the contracts listed in appendix B to
part 43 or a swap that is economically
related to such contracts. Until rules
regarding such ‘‘other commodity’’
swaps are adopted, such swaps will not
be subject to the real-time reporting
requirements of part 43.
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IV. Paperwork Reduction Act
The Paperwork Reduction Act
(‘‘PRA’’) imposes certain requirements
on federal agencies in connection with
their conducting or sponsoring any
collection of information as defined by
the PRA.436 This final rulemaking
contains information collection
requirements. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid control number issued
by the Office of Management and
Budget (‘‘OMB’’). The Commission
submitted its proposing release and
supporting documentation to OMB for
review, and requested that OMB
approve, and assign a new control
number for, the collections of
information covered by the Proposing
Release, both in an information
collection request associated with this
rulemaking and the part 49 rulemaking
that would establish requirements for
SDRs. The Commission invited the
public and other federal agencies to
comment on any aspect of the
information collection requirements
discussed in the Proposing Release.
The Commission received comments
from two interested parties on its
burden estimates or on other aspects of
the information collection requirements
contained in its Proposing Release. One
commenter asserted that the actual
burden imposed on end-users to report
swap data was significantly higher than
the Proposing Release’s estimate, and
suggested that the actual burden would
be several orders of magnitude higher
than the Commission estimated.437 This
same commenter said that the
Commission failed to estimate the
financial impact that would be imposed
on the swap industry because of this
rule, particularly those costs associated
with end-users.438 Another commenter
stated that when promulgating rules and
estimating costs, the Commission
should take into consideration ‘‘issues
of scale in participants and
volumes.’’ 439
OMB issued a notice of action
providing that the Commission should
examine the comments received and
submit a revised supporting statement,
436 44
U.S.C. 3501 et seq.
CL–Dominion.
438 Id.; The Commission notes that its estimates
regarding the costs related to ‘‘collections of
information’’ required by the Proposing Release can
be found in the supporting statement and form 83–
I posted on the Office of Management and Budget’s
Web site, which can be found at https://
www.reginfo.gov/public/do/PRAMain. The revised
supporting statement and form 83–I can be found
at the same Web site.
439 See CL–GXFD.
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including ‘‘a description of how the
agency has responded to any public
comment on the [information collection
request], including comments on
maximizing the practical utility of the
collection and minimizing the
burden.’’ 440
The title for the collection of
information under part 43 is ‘‘Real-Time
Public Reporting of Swap Transaction
Data.’’ OMB has assigned OMB control
number 3038–0070 to this collection of
information, but OMB is withholding its
approval of this collection of
information pending the submission of
the revised supporting statement. The
Commission has revised some of its
assumptions and estimates as a result of
changes in the requirements imposed by
part 43 and after considering the
comments received. The revised
estimates are being submitted to OMB
and can be found in the updated form
83–I and supporting statement, which
can be found at https://www.reginfo.gov/
public/do/PRAMain.
The Proposing Release described the
new collections of information in terms
of four broad categories of requirements:
Reporting, public dissemination,
recordkeeping and determining
appropriate minimum block size. As
further described below, the
Commission revised some of its
estimates regarding the reporting, public
dissemination and recordkeeping
estimates from the Proposing Release.
The Commission notes that part 43 does
not require an SDR to determine an
appropriate minimum block size.441
Additionally, part 43 no longer permits
a SEF, DCM or reporting party to report
swap transaction and pricing data to a
third-party service provider for
purposes of satisfying the public
dissemination obligations under part 43
(i.e., all real-time swap data must be
reported to an SDR for public
dissemination).
A. Burden Estimates for Reporting
Requirements
The Commission estimated in the
Proposing Release that annual hourly
burdens for SEFs and DCMs to report
swap transaction and pricing data to a
real-time disseminator would be
approximately 2,080 hours per SEF and
DCM. In addition, the Commission
anticipated there would be 40 SEFs and
17 DCMs who may be required to report
pursuant to part 43’s obligations.442
440 CL–OMB
Notice of Action (received 04/01/11).
related to block trades and large
notional off-facility swaps will be addressed in a
separate rulemaking.
442 At the time of the Proposing Release there
were 17 DCMs; there are now 18 DCMs.
441 Rules
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1229
For those swaps executed off-facility,
the Proposing Release estimated the
reporting burdens associated with SDs
and MSPs to be approximately 2,080
annual burden hours. In the Proposing
Release, the Commission took ‘‘a
conservative approach’’ to calculating
the burden hours for this information
collection by estimating that as many as
250 SDs and 50 MSPs would register.443
Since publication of the Proposing
Release in November 2010, the
Commission has had ample opportunity
to meet with industry participants and
trade groups, to discuss extensively the
universe of potential registrants with the
National Futures Association (‘‘NFA’’),
and to review public market information
about dealers active in the market and
certain trade groups. Over time, and as
the Commission has gathered more
information on the swaps market and its
participants, the estimated number of
SDs and MSPs has decreased. In its FY
2012 budget drafted in February 2011,
the Commission estimated that 140 SDs
might register with the Commission.444
After recently receiving additional
specific information from NFA on the
regulatory program it is developing for
SDs and MSPs,445 however, the
Commission believes that
approximately 125 Swaps Entities,
including only a handful of MSPs, will
register. Therefore, the information
collection’s proposed total burden hour
estimate of 624,000 burden hours for
SDs and MSPs will decrease to 260,000
burden hours, assuming there are 125
respondents and no adjustments to the
response times for the registration
forms.
When an off-facility swap is executed
and neither an SD nor MSP is a
counterparty (e.g., an end-user to enduser swap), the reporting responsibility
would fall on one of the end-users to the
swap.446 For that reason, the
Commission estimated that the total
number of swap end-users that would
be required to report their swap
443 75
FR 76169.
President’s Budget and Performance
Plan Fiscal Year 2012 (Feb. 2011), p. 13–14,
available at https://www.cftc.gov/ucm/groups/
public/@newsroom/documents/file/
cftcbudget2012.pdf. The estimated 140 SDs
includes ‘‘[a]pproximately 80 global and regional
banks currently known to offer swaps in the United
States;’’ ‘‘[a]pproximately 40 non-bank swap dealers
currently offering commodity and other swaps;’’
and ‘‘[a]pproximately 20 new potential market
makers that wish to become swap dealers.’’ Id.
445 Letter from Thomas W. Sexton, Senior Vice
President and General Counsel, NFA to Gary
Barnett, Director, Division of Swap Dealer and
Intermediary Oversight, CFTC (Oct. 20, 2011) (NFA
Cost Estimates Letter).
446 Part 43 no longer uses the term end-user, but
uses the term ‘‘non-SD/non-MSP’’ to represent a
reporting party who is not an SD or MSP.
444 CFTC,
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transaction and pricing data would be
1,500 entities or persons.447 The
Commission estimated that swap endusers (i.e., non-SD/non-MSPs) would
expend four (4) annual burden hours
per reporting party or person, for a total
of 6,000 aggregate annual burden
hours.448
In the Proposing Release, the
Commission assumed that end-users
who would be required to report
pursuant to part 43 would contract with
a third party to satisfy their obligations.
However, as one commenter indicated,
some end-users may choose not to
contract with a third party, but will
build infrastructure and hire personnel
for purposes of reporting swap
transaction and pricing data to an
SDR.449
After consideration of the comments
received and further discussions with
the Commission’s technology experts,
the Commission is retaining its
estimates related to SEFs, DCMs, SDs
and MSPs reporting burdens, but is
revising its estimates as they relate to
non-SDs/non-MSPs reporting burdens.
The Commission cannot estimate with
precision the number of non-SDs/nonMSPs that will be obligated to report
under this rule, how many will conduct
their own reporting or contract with a
third party, or how many transactions
they will have to report. Moreover, there
will be significant deviations in
reporting burdens on a reporting partyby-reporting party basis, based upon the
type and transactional activity of each
individual reporting party.
Consequently, of the estimated 30,000
non-SDs/non-MSPs who will transact in
the swaps markets, the Commission is
estimating that only 1,000 non-SDs/nonMSPs will be required to report in a
year.450 Of those 1,000 non-SDs/nonMSPs, the Commission continues to
believe a majority, estimated now at
75%, will contract with third parties to
satisfy their reporting obligations. For
447 In the Proposing Release, the Commission
requested comment on the number of swap endusers that would be required to report their swap
transaction and pricing data pursuant to proposed
Section 43.3. The Commission estimated that there
would be a total of 30,000 swap market participants
and that 1,500 of those participants would engage
in end-user-to-end-user swap transactions (5% of
30,000) requiring at least one of those participants
to report such swap transaction and pricing data.
448 This estimate included the expectation that
end users who participate in end-user-to-end-user
swaps will contract with other entities to report the
swap transaction and pricing data to an SDR or
third-party service provider.
449 See CL–Dominion.
450 This is a change from the Proposing Release
which estimated that 1,500 end-users (5% of
30,000) would be required to report swap
transaction and pricing data to an SDR or thirdparty service provider.
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those non-SDs/non-MSPs who are
required to report swap transaction and
pricing data to an SDR and contract
with a third party, the Commission
estimates that such non-SDs/non-MSPs
will expend 22 annual burden hours per
reporting party or entity for reporting
errors and omissions. Thus, the
Commission estimates that 750 nonSDs/non-MSPs that will contract with a
third party will expend a total of 16,500
aggregate annual burden hours
complying with the reporting
requirements.451
Conversely, for the 250 non-SDs/nonMSPs that the Commission estimates
will not contract with a third party, the
Commission estimates such non-SDs/
non-MSPs will expend 676 annual
burden hours per reporting party or
entity, for a total of 169,000 aggregate
annual burden hours.
B. Burden Estimates for Public
Dissemination Requirements
Proposed § 43.3 required an SDR to
publish, through an electronic medium,
swap transaction and pricing data
received from reporting parties as soon
as technologically practicable, unless
such publicly reportable swap
transaction is subject to a time delay.
Moreover, SDRs would be required to
receive and publicly disseminate realtime swap transaction and pricing data
at all times, 24-hours a day. The
Commission estimated that there would
be approximately 15 SDRs.452 In its
Proposing Release, the Commission
estimated that compliance with the
public dissemination requirements
would cause an SDR to expend 6,900
annual burden hours, resulting in
estimated aggregate annual burden
hours of 103,500 for all SDRs. The
Commission received no comments on
its proposed public dissemination
estimates, and the Commission is not
revising them.
C. Burden Estimates for Recordkeeping
Requirements
Under proposed § 43.3(i), SEFs and
DCMs (an estimated 57 entities or
persons),453 SDRs (an estimated 15
entities or persons) and reporting parties
would be required to retain all data
relating to a reportable swap transaction
451 Non-SDs/non-MSPs reporting parties that
contract with a third party to report swap
transaction and pricing data to an SDR may still be
required to submit corrected data to a SEF, DCM or
SDR when they become aware of an error or
omission.
452 Because the Commission has not regulated the
swap market, the Commission was unable to collect
data relevant to the Proposing Release’s estimates.
For that reason, the Commission requested
comment on these estimates.
453 See supra note 442.
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for a period of not less than five years
following the time at which such
reportable swap transaction is publicly
disseminated in real-time. With respect
to SEFs, DCMs and real-time
disseminators, the Commission
estimated in the Proposing Release that
the proposed recordkeeping
requirement would be 250 annual
burden hours per SEF, DCM and SDR.
The Commission anticipated that 1,500
swap end-users would be reporting
parties for the purposes of this part of
the Commission’s regulations. Since the
Commission anticipated that there
would be lower levels of activity
relating to the requirement for swap
end-users, the Commission estimated
that there would be two (2) annual
burden hours per swap end-user.
Commenters on the substantive
aspects of the proposed rulemaking
argued that these recordkeeping
requirements were duplicative of
existing Commission regulations and
provisions of other proposed
rulemakings. In consequence, these
recordkeeping requirements have been
omitted from the final rulemaking, and
thus the Commission will be
withdrawing the burden estimates
associated with them.
The only remaining recordkeeping
requirements retained from the Proposal
Release are the timestamping
requirements in § 43.3(h). Specifically,
timestamps will be required for all
publicly reportable swap transactions
and must be applied by SEFs, DCMs,
SDRs, SDs and MSPs. Non-SDs/nonMSPs who are required to report will
not be obligated to comply with the
timestamping requirements.
Accordingly, the Commission is revising
downward the estimated burden
associated with recordkeeping.
For the estimated 57 SEFs and DCMs
who must comply with the
timestamping requirements with respect
to receipt of certain swap transactions
and transmission of all transactions,
which the Commission expects will be
conducted electronically, the
Commission estimates 25 annual burden
hours per entity, which accounts for any
system programming that may be
required and periodic maintenance, for
an aggregate of 1,425 annual burden
hours. For the estimated 300 SDs and
MSPs who must comply with the
timestamping requirements only on
transmission, which the Commission
also expects to be conducted
electronically, the Commission
estimates that such entities will expend
20 annual burden hours per entity, for
an aggregate of 6,000 annual burden
hours. Finally, for the estimated 15
SDRs who must comply with the
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timestamping requirements on the
receipt of transaction data as well as on
its public dissemination, the
Commission estimates that such entities
will have 76 annual burden hours per
entity, for an aggregate of 1140 annual
burden hours.
D. Cost Burden
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In addition to the hour burdens
identified above, reporting parties, SEFs
or DCMs where swaps are executed, and
SDRs that must accept and ensure the
public dissemination of real-time swap
transaction and pricing data in their
selected asset class will incur cost
burdens in connection with reporting,
public dissemination and recordkeeping
obligations.454 The direct, quantifiable
costs imposed on reporting parties, SEFs
and DCMs will take the forms of (i) nonrecurring expenditures in technology
and personnel; and (ii) recurring
expenses associated with systems
maintenance, support, and compliance.
Although the Commission is retaining
the cost burden estimates described in
connection with the Proposing Release
in substantial part, after reviewing
comments received and consulting with
market participants, the Commission
has revised some of these estimates.455
Specifically, the Commission has
revised its wage rate calculation from
the wage rate used to calculate cost
burdens in the Proposing Release.456
454 SDRs may pass on costs of public
dissemination through equitable and nondiscriminatory fees to the real-time reporting
market participants. See § 43.3(i).
455 As the Commission noted in the Proposing
Release, the supporting statement submitted in
connection with the proposal may be obtained by
visiting RegInfor.gov. See Real-Time NPRM supra
note 6, at 76170.
456 In so doing, the Commission at times has
utilized wage rate estimates based on salary
information for the securities industry compiled by
the Securities Industry and Financial Markets
Association (‘‘SIFMA’’). These wage estimates are
derived from an industry-wide survey of
participants and thus reflect an average across
entities; the Commission notes that the actual costs
for any individual company or sector may vary from
the average.
The Commission estimated the dollar costs of
hourly burdens for each type of professional using
the following calculations:
[(2009 salary + bonus) * (salary growth per
professional type, 2009–2010)] = Estimated 2010
total annual compensation.] The most recent data
provided by the SIFMA report describe the 2009
total compensation (salary + bonus) by professional
type, the growth in base salary from 2009 to 2010
for each professional type, and the 2010 base salary
for each professional type; thus, the Commission
estimated the 2010 total compensation for each
professional type, but, in the absence of similarly
granular data on salary growth or compensation
from 2010 to 2011 and beyond, did not estimate
dollar costs beyond 2010.
[(Estimated 2010 total annual compensation)/
(1,800 annual work hours)] = Hourly wage per
professional type.]
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Additionally, the Commission has
revised its cost burden estimates with
respect to non-SD/non-MSP reporting
parties. With respect to the cost burden
estimates related to such non-SD/nonMSP reporting parties, the Commission
has assumed a non-financial end-user
lacking the technical capability and
other infrastructure to comply with the
part 43 requirements as the reference
point for its cost burden estimates—in
other words, a new market entrant with
no prior swaps market participation or
infrastructure. Further, the Commission
has revised its estimates with respect to
recordkeeping requirements, since part
43 now only requires recordkeeping
with respect to timestamps. SDs, MSPs,
non-SDs/non-MSPs, SEFs, DCMs and
SDRs will incur initial and recurring
costs, including capital and start-up
costs related to reporting and public
dissemination of swap transaction and
pricing data pursuant to part 43. The
Commission did not receive comments
regarding the cost burden estimates for
initial non-recurring costs for reporting
with respect to SDs, MSPs, SEFs, DCMs
and SDRs. The Commission is therefore
retaining its estimates that the initial
non-recurring costs for each SD, MSP,
SD, SEF and DCM to be $300,000;
however, the Commission has estimated
that, annualized over a useful life of 6
years, and accounting for the total
operational cost per year associated
with these initial non-recurring costs,
the annual total cost of these initial nonrecurring costs will be $200,000.457
With respect to non-SDs/non-MSPs,
the Commission estimates that the
initial non-recurring costs for its
reference point, a non-financial enduser that does not contract with a third
party to report swap data (‘‘nonfinancial end-user’’), will likely consist
of (i) developing an internal Order
Management System (‘‘OMS’’) capable
of capturing all relevant swap data in
real-time; (ii) establishing connectivity
with an SDR that accepts data; (iii)
developing written policies and
procedures to ensure compliance with
[Hourly wage) * (Adjustment factor for overhead
and other benefits, which the Commission has
estimated to be 1.3)] = Adjusted hourly wage per
professional type.]
[(Adjusted hourly wage) * (Estimated hour
burden for compliance)] = Dollar cost of compliance
for each hour burden estimate per professional
type.]
The sum of each of these calculations for all
professional types involved in compliance with a
given element of part 43 represents the total cost
for each reporting party, SD/MSP, SEF, DCM or
SDR, as applicable to that element of part 43.
457 The capital and start-up costs for part 43’s
reporting requirements for high activity
respondents is estimated as 5% of the entity’s
estimated average total capital and start-up cost of
$6 million.
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1231
part 43; and (iv) compliance with error
correction procedures. Based on
comments received and meetings with
market participants, the Commission
estimates that many non-financial endusers will likely engage in swap
transactions in only one asset class.458
Accordingly, for purposes of estimating
relevant cost burdens, the Commission
estimates that a non-financial end-user
will establish connectivity with one
SDR.459 The Commission estimates that
the total initial non-recurring costs to
each non-financial end-user to be
$56,369.460 Further, if non-SDs/nonMSPs utilize a third party to assist in
reporting real-time swap transaction and
pricing data to an SDR, the Commission
estimates the initial non-recurring costs
per non-SD/non-MSP to be $2,063.
The recurring cost burden estimates
with respect to reporting and public
dissemination of real-time swap
transaction and pricing data have been
revised from the estimates provided in
connection with the Proposing Release,
with respect to SDRs, SDs, MSPs, SEFs,
DCMs and non-SDs/non-MSPs. The
revisions to the cost burden estimate for
recurring costs associated with reporting
and public dissemination for SDRs have
been adjusted to take into account the
changes to the wage rate calculation.
Accordingly, the Commission estimates
the aggregate annual recurring costs for
reporting and public dissemination for
SDRs to be $23,255,210.461
The Commission has also revised its
cost burden estimate for recurring costs
for SEFs, DCMs, SDs and MSPs with
respect to reporting and public
dissemination. These estimates have
been revised to take into account
changes in the estimates for the number
of entities, as well as changes to the
wage rate calculation. Accordingly, the
458 See,
e.g., CL–NFPEEU.
on the number of swap asset
classes in which a reporting party transacts (or that
a SEF or DCM lists), and the number of SDRs that
accept the resulting swap transaction and pricing
data in such asset class, multiple connections to
different SDRs may be necessary or desirable. As
the regulatory structure develops and the swap
markets evolve, the average number of SDR
connections established and maintained by each
reporting party, registered SEF and DCM may be
different and fluid.
460 The aggregate estimate represents the sum
total of the following initial non-recurring costs:
[$26,689 for 355 personnel hours to develop an
internal order management system] + [$12,824 for
172 burden hours to establish connectivity with an
SDR] + [$14,793 for 180 burden hours to develop
written policies and procedures to comply with
reporting requirements of part 43] + [$2,063 for 26
burden hours to establish a program for reporting
errors and omissions] = $56,369.
461 This estimate is the aggregate annual cost
burden for 15 SDRs, including the costs for burden
hours, operational costs and annualized capital and
start-up costs.
459 Depending
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Commission estimates the aggregate
annual recurring costs for reporting and
public dissemination for SEFs to be
$17,245,242.462 Additionally, the
Commission estimates the aggregate
annual recurring costs for reporting and
public dissemination for DCMs to be
$7,760,359.463 Further, the Commission
estimates the aggregate annual recurring
costs for reporting and public
dissemination for SDs/MSPs to be
$28,891,383.464
With respect to non-SDs/non-MSPs,
the Commission estimates that the
recurring cost burdens for a nonfinancial end-user will likely consist of
(i) capturing swap transaction and
pricing data in a manner sufficient to
comply with part 43; (ii) maintaining
connectivity to an SDR; (iii) maintaining
compliance and operational support
programs; and (iv) reporting of errors
and omissions. The Commission
estimates the aggregate annual recurring
costs for reporting and public
dissemination for a non-financial enduser to be $45,159,000.465 Further, if
non-SDs/non-MSPs utilize a third party
to assist in reporting real-time swap
transaction and pricing data to an SDR,
the Commission estimates the aggregate
annual recurring costs for reporting and
public dissemination for such non-SD/
non-MSP reporting parties to be
$2,056,500.466
462 This estimate is the aggregate annual cost
burden for 40 SEFs, including $100,000 per DCM
to maintain connectivity to an SDR, costs for
burden hours, operational costs and annualized
capital and start-up costs.
463 This estimate is the aggregate annual cost
burden for 18 DCMs, including $100,000 per DCM
to maintain connectivity to an SDR, costs for
burden hours, operational costs and annualized
capital and start-up costs. The number of DCMs was
changed from 17 to 18 to reflect the designation of
an additional contract market since the publication
of the NPRM in the Federal Register. As of
December 13, 2011. See https://sirt.cftc.gov/SIRT/
SIRT.aspx?Topic=TradingOrganizations&
implicit=true&type=DCM&CustomColumn
Display=TTTTTTTT.
464 This estimate is the aggregate annual cost
burden for 125 SDs/MSPs, including $100,000 per
SD/MSP to maintain connectivity to an SDR, costs
for burden hours, operational costs and annualized
capital and start-up costs.
465 The cost burden estimate represents the
aggregate recurring costs relating to reporting and
public dissemination for 250 non-SDs/non-MSPs
that do not utilize third parties at a total estimated
cost of $180,636 per non-SD/non-MSP. The
estimated cost per non-SD/non-MSP represents the
sum total of [$27,943 for 436 burden hours for
capturing swap transaction and pricing data] +
[$13,747 for 218 burden hours for maintenance of
compliance and operational support programs] +
[$1,366 for 22 burden hours to report errors and
omissions] + [$100,000 to maintain connectivity to
an SDR] + [$28,185 for operational costs] + [$9,395
for annualized capital and start up costs].
466 This cost burden estimate represents the
aggregate recurring costs relating for reporting and
public dissemination requirements for 750 nonSDs/non-MSPs that utilize a third party for
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In addition to the costs burdens
associated with reporting and public
dissemination, part 43 imposes costs on
SDRs, SDs, MSPs, SEFs and DCMs with
respect to recordkeeping.467 These
estimated cost burdens have been
adjusted downward from the estimates
associated with the Proposing Release
since the part 43 rules only require
recordkeeping in connection with
timestamps. The Commission estimates
the total aggregate non-recurring and
recurring costs for recordkeeping as
follows:468 $93,855 for SDRs; $328,000
for SDs/MSPs; $157,440 for SEFs; and
$70,848 for DCMs.
Accordingly, the estimated aggregate
cost burden for all market participants
to comply with part 43 is
$150,017,837.00.469
For further information relating to the
revised cost burden estimates, please
refer to the updated form 83–I and
supporting statement submitted to
OMB, which can be found at https://
www.reginfo.gov/public/do/PRAMain.
V. Cost-Benefit Considerations
A. Introduction
The swaps markets, which have
grown exponentially in recent years, are
now an integral part of the nation’s
financial system. As the financial crisis
of 2008 demonstrated, the absence of
transparency in the swaps markets can
pose systemic risk to this system.470 In
reporting requirements pursuant to part 43. The
Commission recognizes that these costs may vary
based on the level of swap activity by a non-SD/
non-MSP.
467 Non-SDs/non-MSPs do not have any
recordkeeping obligations pursuant to part 43.
468 The Commission estimates 15 SDRs, 125 SDs/
MSPs, 40 SEFs and 18 DCMs.
469 $150,017,837.00 (total) = $23,349,065 (SDRs) +
$54,219,383 (SDs and MSPs) + $17,402,682. (SEFs)
+ $7,831,207. (DCMs) + $45,159,000 (RP Non-SD/
non-MSP) + $2,056,500 (RP non-SD/non-MSP that
contracts with a third party).
470 As the U.S. Senate Committee on Banking,
Housing, and Urban Affairs explained concerning
the 2008 financial crisis:
Information on prices and quantities [in ‘‘overthe-counter,’’ or ‘‘OTC,’’ derivatives contracts] is
opaque. This can lead to inefficient pricing and risk
assessment for derivatives users and leave
regulators ill-informed about risks building up
throughout the financial system. Lack of
transparency in the massive OTC market intensified
systemic fears during the crisis about interrelated
derivatives exposures from counterparty risk. These
counterparty risk concerns played an important role
in freezing up credit markets around the failures of
Bear Stearns, AIG, and Lehman Brothers.
S. Rep. No. 111–176, at 30 (2010). More
specifically with respect to credit default swaps
(‘‘CDSs’’), the Government Accountability Office
found that ‘‘comprehensive and consistent data on
the overall market have not been readily available,’’
that ‘‘authoritative information about the actual size
of the CDS market is generally not available,’’ and
that regulators currently are unable ‘‘to monitor
activities across the market.’’ Government
Accountability Office, Systemic Risk: Regulatory
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part, the Dodd-Frank Act seeks to
promote the financial stability of the
United States by improving financial
system accountability and transparency.
More specifically, Title VII of the DoddFrank Act directs the Commission to
promulgate regulations to increase
swaps markets’ transparency and
thereby reduce the potential for
counterparty and systemic risk.471
Transaction reporting is a
fundamental component of the
legislation’s objective to reduce risk,
increase transparency, and promote
market integrity within the financial
system generally, and the swaps market
in particular. Title VII designates the
Commission to oversee the swaps
markets and develop appropriate
regulations. Specifically, section 727 of
the Dodd-Frank Act amends the
Commodity Exchange Act by inserting
new section 2(a)(13), which requires
that swap transaction and pricing data
be made publicly available. The DoddFrank Act specifies that swap price and
volume data be reported to the public as
soon as technologically practicable after
the swap has been executed, i.e., realtime public reporting, and at the same
time requires that public dissemination
not identify the participants to the swap
transaction.472
Oversight and Recent Initiatives to Address Risk
Posed by Credit Default Swaps, GAO–09–397T
(March 2009) at 2, 5, 27.
471 See Congressional Research Service Report for
Congress, The Dodd-Frank Wall Street Reform and
Consumer Protection Act: Title VII, Derivatives, by
Mark Jickling and Kathleen Ann Ruane (August 30,
2010); Dep’t of the Treasury, Financial Regulatory
Reform: A New Foundation: Rebuilding Financial
Supervision and Regulation 1 (June 17, 2009) at 47–
48.
472 CEA section 2(a)(13)(B) authorizes the
Commission to ‘‘make swap transaction and pricing
data available to the public in such form and at
such times as the Commission determines
appropriate to enhance price discovery.’’ CEA
sections 2(a)(13)(C) and (E) authorize and require
the Commission ‘‘to provide by rule for the public
availability of swap transaction and pricing data.’’
These provisions specify that the rules shall, with
respect to the swaps that are subject to the clearing
mandate (or excepted from such mandate pursuant
to CEA section 2(h)(7)) or that are voluntarily
cleared, provide for the ‘‘real-time public reporting’’
of such transactions in a manner that: (1) Preserves
swap counterparty anonymity; (2) takes into
account whether the public dissemination will
materially reduce market liquidity; and (3) specifies
the appropriate criteria and time delays for
reporting large notional swaps (block trades). With
respect to certain uncleared swaps, CEA section
2(a)(13)(C)(iii) requires that the rules require realtime public reporting for such transactions in a
manner that does not disclose the business
transactions and market positions or any person.
CEA section 2(a)(13)(A) defines ‘‘real-time public
reporting’’ as ‘‘to report data relating to a swap
transaction, including price and volume, as soon as
technologically practicable after the time at which
the swap transaction has been executed.’’ In
addition, section 721(b) of the Dodd-Frank Act
authorizes the Commission to define certain terms
added to the CEA by the Dodd-Frank Act, including
the term ‘‘as soon as technologically practicable.’’
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In promulgating part 43 of its
regulations, the Commission
implements Congress’ mandate that
swap transaction and pricing data be
made available to the public in realtime. Together, the statute and
Commission’s rules promote
transparency and enhance price
discovery while protecting the
anonymity of market participants.473
Part 43 achieves the statutory objectives
of transparency and enhanced price
discovery by, inter alia, requiring that
market participants ultimately report
swap transaction and pricing data to an
SDR 474 and by requiring SDRs to ensure
the public dissemination of such data in
real time.475 The Commission expects
that the increased transparency
achieved by the increased availability of
pricing information will enhance the
price discovery process and improve
financial market systemic risk
management. In the sections that follow,
the Commission considers the costs and
benefits of part 43 as required by CEA
section 15(a).
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1. Background
CEA section 15(a) requires the
Commission to consider the costs and
benefits of its actions in light of five
broad areas of market and public
concern: (1) Protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of futures markets; (3)
price discovery; (4) sound risk
management practices; and (5) other
public interest considerations.476 The
Commission, in its discretion, may give
greater weight to any one of the five
enumerated areas and may determine
that, notwithstanding costs, a particular
rule protects the public interest.
To the extent that these new rules
reflect the statutory requirements of the
Dodd-Frank Act, they will not create
costs and benefits beyond those
mandated by Congress in passing the
legislation. However, the rules may
473 Part 43 covers all swaps under the
Commission’s jurisdiction (i.e., interest rate, foreign
exchange, equity, credit and ‘‘other commodity’’),
cleared and uncleared, regardless of the method of
execution (e.g., executed on a SEF, DCM or
bilaterally negotiated).
474 Section 43.3(a)(1) states that for purposes of
part 43, a ‘‘registered swap data repository’’ shall
include swap data repositories that are
provisionally registered pursuant to the
Commission’s part 49 rules.
475 Section 43.4 and appendix A to part 43 specify
the data an SDR is required to publicly disseminate.
Consistent with its obligations under the statute, the
Commission considered whether the public
dissemination of such data would compromise the
anonymity of the parties to a swap, or would
disclose the business transactions and market
positions of any party to an uncleared swap.
476 7 U.S.C. 19(a).
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generate costs and benefits attributable
to the Commission’s determinations
regarding implementation of the DoddFrank Act’s statutory requirements.
Moreover, as this rulemaking is a
reporting rule, many of the costs of the
rulemaking are associated with
collections of information. The
Commission is obligated to estimate the
burden of and provide supporting
statements for any collections of
information it seeks to establish under
considerations contained in the PRA, 44
U.S.C. 3501 et seq., and to seek approval
of those requirements from the OMB.
Therefore, the estimated burden and
support for the collections of
information in this this rulemaking, as
well as the consideration of comments
thereto, are discussed in the PRA
section of this rulemaking and the
information collection requests filed
with OMB as required by that statute.
Otherwise, the costs and benefits of the
Commission’s determinations are
considered in light of the five factors set
forth in CEA section 15(a).
To aid in fulfilling its statutory
responsibility to consider the costs and
benefits of its proposed rules, the
Commission sought comment on its
proposed rulemaking for a period of 60
days, and specifically requested that
commenters submit any data or other
information quantifying or qualifying
the costs and benefits of the proposal
with their comment letters. The
Commission received approximately 60
comments addressing the costs and
benefit considerations of the proposed
rule, which addressed primarily
regulatory alternatives and the costs
associated with the proposed
information collection requirements,
which are covered in the PRA section of
this rulemaking and in the supporting
statements that were filed and will be
filed with OMB, as required under that
statute. Nevertheless, wherever
reasonably feasible, the Commission has
endeavored to quantify the costs and
benefits of the final rules, and did so in
the proposed rule to the extent that the
costs of the rulemaking were related to
collections of information for which the
Commission must account under the
PRA. In a number of instances, however,
it is not reasonably feasible to quantify,
particularly with regard to the benefits
of the final rules. Where quantification
is not feasible, the Commission has
considered the costs and benefits of the
final rule in qualitative terms.
In the paragraphs the follow, the
Commission, after explaining its cost
estimation methodology, discusses the
economic effects of part 43 along the
two major drivers of the costs and
benefits of the rulemaking: (1) Reporting
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and public dissemination; and (2)
recordkeeping and timestamping.
2. Cost Estimation Methodology
The Commission recognizes that the
costs of complying with part 43 are
largely attributable to reporting, the
costs for which are covered in the
Commission’s PRA analysis, as required
by that statute. With respect specifically
to SDRs, the Commission has estimated
their incremental costs to comply with
the real-time reporting and public
dissemination requirements of this
rulemaking above the base operating
costs reflected in a separate rulemaking
and the PRA analysis associated with
it.477 The Commission expects SDRs to
recover these incremental costs in the
form of fees assessed on reporting
parties, SEFs and DCMs for use of the
SDRs’ public dissemination services.478
B. Reporting and Public Dissemination
Requirements of Part 43
CEA section 2(a)(13)(F) provides the
Commission with the authority to
determine the reporting requirements
for parties to a swap. Consistent with
this authority, § 43.3(a)(2) provides that
a reporting party satisfies its obligation
to report real-time swap transaction and
pricing data when it executes a swap on
or pursuant to the rules of a SEF or
DCM. In turn, § 43.3(b)(1) requires SEFs
and DCMs to report data related to
publicly reportable swap transactions to
an SDR for public dissemination. For
‘‘off-facility swaps,’’479 § 43.3(a)(3)
establishes a protocol for determining
counterparty responsibility to report
real-time swap transaction and pricing
data to an SDR.480 Further, § 43.3(c)(2)
specifies that an SDR must accept and
publicly disseminate swap transaction
and pricing data in real-time for all
swaps in its selected asset class, unless
otherwise prescribed by the
Commission.481 Thus, depending on the
place of execution and the
counterparties to a swap, the reporting
obligation may fall on a SEF, DCM, SD,
MSP, or a non-SD/non-MSP.
CEA section 2(a)(13)(D) provides that
‘‘[t]he Commission may require
registered entities to publicly
disseminate the swap transaction and
pricing data required to be reported
under this paragraph.’’ Pursuant to this
authority, the Commission is adopting
477 See
SDR Final Rule. 76 FR 54538 at 54572.
43.3(i) authorizes an SDR to charge
fees to persons reporting the real-time data, so long
as such fees are equitable and non-discriminatory.
479 The term ‘‘off-facility swap’’ is defined in
§ 43.2.
480 Such responsible counterparty would be the
‘‘reporting party,’’ as defined in § 43.2.
481 See discussion regarding § 43.3(c)(2).
478 Section
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rules requiring an SDR to ensure the
public dissemination of all swap
transaction and pricing data it accepts
pursuant to part 43. Specifically,
§ 43.3(b)(2) requires an SDR to ensure
that swap transaction and pricing data
for all publicly reportable swap
transactions within an asset class are
publicly disseminated as soon as
technologically practicable, unless the
transaction is subject to a time delay
described in § 43.5. In addition,
§ 43.4(b) prescribes the manner in
which an SDR must publicly
disseminate the data to comply with
part 43.482
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1. Benefits of the Reporting and Public
Dissemination Requirements
The Commission anticipates that part
43 will generate several overarching, if
presently unquantifiable, benefits to
swaps market participants and the
public generally. These include:
Improvements in market quality; price
discovery; improved risk management;
economies of scale and greater
efficiencies; and improved regulatory
oversight.
The Commission believes these
benefits, made possible by the public
dissemination of comprehensive and
timely swap transaction data, will
accrue to market participants in a
number of ways:
• Enhanced price discovery made
possible by the comprehensive and
timely swap transaction data that the
part 43 requires be reported and
publicly disseminated.
• Enhanced ability to manage risk as
a result of the greater visibility into
swap market risk pricing, made possible
by the comprehensive and timely swap
transaction data that the part 43 requires
be reported and publicly disseminated.
• Enhanced swap market price
competition made possible by the
comprehensive and timely swap
transaction data that the part 43 requires
be reported and publicly
disseminated.483
• Market price transparency provides
a check against SDs or other market
participants trading at noncompetitive
prices; provides post-trade information
market participants may use to negotiate
482 Section 43.4(b) provides ‘‘Any registered swap
data repository that accepts and publicly
disseminates swap transaction and pricing data in
real-time shall publicly disseminate the information
described in appendix A to this part.’’
483 Congress recognized the competitive pricing
benefit of real-time information in the related
context of swap exchange trading. See S.Rep. No.
111–176, at 34 (2010) (‘‘‘the relative opaqueness of
the OTC market implies that bid/ask spreads are in
many cases not being set as competitive as they
would be on exchanges’’’) (quoting Stanford
University Professor Darrel Duffie).
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lower transaction costs; and facilitates
price competition between swap
dealers.
• More robust risk monitoring and
management capabilities as a result of
the systems required under part 43
which, concurrent with real-time
reporting capability, will monitor the
participant’s current swap market
position.
• New tools to process transactions at
a lower expense per transaction
attributable to the systems required
under part 43. These tools will enable
participants to handle increased
volumes of swaps with less marginal
expense, or existing volumes of swaps
with greater efficiency.
• Furthers the development of
internationally recognized standards for
the financial services industry by
utilizing UTC.
Transaction reporting and public
dissemination under part 43 also
benefits the public generally by
supporting the Commission’s
supervisory function over the swaps
market, as well as the broader
supervisory responsibilities of U.S.
financial regulators to protect against
financial market systemic risk. Realtime public reporting provides a means
for the Commission to gain a better
understanding of the swaps market—
including the pricing patterns of certain
commodities. The public dissemination
of swap transaction and pricing data
will further enable the Commission,
market participants and the public to
observe the effects of transparency on
the swaps markets.
Public dissemination of swap
transaction and pricing data will
enhance the Commission’s ability to
detect anomalies in the market. For
example, the availability of such data in
real-time will help Commission monitor
the markets subject to its jurisdiction.
Transparency facilitated by real-time
transaction reporting also will help
provide a check against a reoccurrence
of the type of systemic risk build-up that
occurred in 2008, when ‘‘the market
permitted enormous exposure to risk to
grow out of the sight of regulators and
other traders [and d]erivatives
exposures that could not be readily
quantified exacerbated panic and
uncertainty about the true financial
condition of other market participants,
contributing to the freezing of credit
markets.’’ 484
While the Commission believes that
part 43 will yield significant benefits to
484 Congressional Research Service Report for
Congress, The Dodd-Frank Wall Street Reform and
Consumer Protection Act: Title VII, Derivatives, by
Mark Jickling and Kathleen Ann Ruane (August 30,
2010).
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the public and swaps market
participants, the Commission
acknowledges that the final rules will
entail costs. As discussed more fully
below, the Commission is mindful of
the costs of its rules and has carefully
considered comments regarding the
same. To the extent possible and
consistent with the statutory and
regulatory objectives of this rulemaking,
the Commission has incorporated
comments presenting cost-mitigating
alternatives.
2. Costs of the Reporting and Public
Dissemination Requirements
The Commission has not identified
quantifiable costs of data collection that
are not associated with an information
collection subject to the PRA. These
costs therefore have been accounted for
in the PRA section of this rulemaking
and the information collection requests
filed with OMB, as required by the PRA.
3. Reporting and Public Dissemination:
Consideration of Studies, Alternatives
and Cost-Mitigation
i. Studies
Several commenters cited economic
or academic studies in their comment
letters or submitted studies relating to
the introduction of transparency
resulting from the public reporting of
trade data.485 The comments and
studies generally discussed the effects of
transparency on liquidity and the costs
to market participants.
None of these studies explicitly
address the issue of market transparency
as it pertains to the real-time public
dissemination of swap transaction and
pricing data and as adopted in part 43.
Five of the studies cited by commenters
addressed issues that were tangential to
the issue of market transparency as it
relates to part 43, since they did not
analyze the effects of market
transparency directly. One study
identified, and differentiated among, a
number of related concepts of market
quality that fall under the umbrella of
‘‘liquidity.’’ 486 One commenter
analogized the benefits of transparency
to the financial sector and the reticence
of market participants to acknowledge
those benefits to the energy and
industrial sector of the early 1970s,
citing a study that addressed the
485 At least six commenters cited at least 13
studies by institutional, academic and industry
professionals. See, e.g., CL–JPM; CL–Better Markets;
CL–ATA; CL–FINRA; CL–Cleary; and CL–ISDA/
SIFMA.
486 See Kyle, Albert S., Continuous Auctions and
Insider Trading, Econometrica 53, no. 6 (1985):
1315–1335. This study is also cited in
Bessembinder et al. (2008). See infra note 497. See
also, CL–JPM.
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benefits of environmental regulation to
the energy and industrial sectors.487
One cited study addressed the manner
in which airlines use jet fuel swaps to
hedge risk.488 Another addressed the
impacts of high-frequency trading on
the marketplace, which the commenter
cited in a discussion of high frequency
and algorithmic trading.489 Another
commenter cited a study that addressed
differences in reporting obligations in
domestic and foreign jurisdictions when
discussing the real-time public reporting
of cross-border transactions.490 The
remaining studies cited by commenters
addressed the general effects of
transparency on the marketplace.
One commenter 491 cited five studies
that addressed the benefits of the
introduction of transparency through
the Transaction Reporting and
Compliance Engine (‘‘TRACE’’) system,
which provides the real-time transaction
reporting and public dissemination in
the corporate bond market.492
Acknowledged differences between the
swaps market and the corporate bond
market notwithstanding, the
Commission believes that to the extent
the study discusses the benefits of
transparency in the corporate bond
market, such benefits may be relevant to
the discussion of transparency in the
swaps market. One study of TRACE
cited by the commenter suggests that,
according to transaction data, the
transaction costs of bonds fell following
the introduction of transparency to the
corporate bond market.493 Another
study suggests that the implementation
487 See Porter, Michael E., and Claas van der
Linde, Green and Competitive: Ending the
Stalemate, Harvard Business Review 73, no. 5
(1995): 120–134. See also CL–Better Markets.
488 See Cobbs, Richard, and Alex Wolf, Jet Fuel
Hedging Strategies: Options Available for Airlines
and a Survey of Industry Practices (2004). See also
CL–ATA.
489 See Kirilenko, Andrei, Kyle, Albert S., Samadi,
Mehrdad, and Tugkan Tuzun, The Flash Crash: The
Impact of High Frequency Trading on an Electronic
Market (2011). See also CL–Better Markets.
490 See CFTC staff, Derivatives Reform:
Comparison of Title VII of the Dodd-Frank Act to
International Legislation (2010). See also CL–
Cleary.
491 See CL–FINRA.
492 TRACE enables real-time reporting and public
dissemination in the corporate bond market.
Currently, TRACE requires public dissemination to
occur within 15 minutes of the time of execution
for most trades. Congress was cognizant of TRACE
in passing the Dodd-Frank Act. See S. Rep. No.
111–176, at 34 (2010) (‘‘‘empirical evidence
appearing in the academic literature has not given
much support’’’ to claims of resistant bond dealers
that ‘‘‘more price transparency would reduce the
incentives of dealers to make markets and in the
end reduce market liquidity’’’) (quoting Stanford
University Professor Darrell Duffie).
493 See Edwards, Amy K., Harris, Lawrence E.,
and Michael S. Piwowar, Corporate Bond Market
Transaction Costs and Transparency, The Journal of
Finance 62, no. 3 (2007): 1421–1451.
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of TRACE played a part along with other
factors in reducing the dispersion of the
valuation of corporate bonds.494 The
commenter cited another study that
suggests that post-trade transparency
alone, while less beneficial than the full
transparency (pre-trade and post-trade)
offered by exchanges, could serve as a
partial substitute for the price
transparency offered by exchanges. This
study further stated that the
implementation of a TRACE-like price
reporting system could ‘‘offer
substantial improvements in market
efficiency’’ for many actively-traded
derivative products.495
Another study implied that the
implementation of TRACE had either no
effect or a positive effect on liquidity for
BBB corporate bonds, and that spreads
on newly transparent bonds declined
relative to bonds that did not experience
a change in transparency. The study
further implied that additional
transparency is not associated with
greater trading volume.496
Another study discussing TRACE
indicated that TRACE presented a
number of important benefits to the
corporate bond marketplace.497 As the
authors note:
The results * * * are important because
they verify that market design, and in
particular decisions as to whether to make
the market transparent to the public, have
first-order effects on the costs that customers
pay to complete trades. Further, since the
sample employed * * * consists of
institutional trades, these results indicate
that public trade reporting is important not
only to relatively unsophisticated small
traders, but also to professional investors
who make multi-million dollar
transactions.498
In examining the effects of
introducing transparency through
TRACE, the same authors identify a
‘‘remarkable’’ average decrease in
execution costs of 50% for TRACEeligible bonds.499 Bessembinder et al.
494 See Cici. Gjergji, Gibson, Scott, and John J.
Merrick, Working Paper, Missing the Marks?
Dispersion in Corporate Bond Valuations Across
Mutual Funds (2010).
495 See Duffie, Darrell, Li, Ada, and Theo Lubke,
Federal Reserve Bank of New York Staff Reports,
Policy Perspectives on OTC Derivatives Market
Infrastructure (2010).
496 See Goldstein, Michael A., Hotchkiss, Edith S.,
and Erik R. Sirri, Transparency and liquidity: A
controlled experiment on corporate bonds, The
Review of Financial Studies 20, no. 2 (2007): 235–
273.
497 See Hendrik Bessembinder, William Maxwell,
and Kumar Venkataraman, Market transparency,
liquidity externalities, and institutional trading
costs in corporate bonds, Journal of Financial
Economics 82 (2006): 251–288. See also, CL–Cleary,
CL–FINRA, CL–ISDA/SIFMA, and CL–JPM.
498 Id. at 284.
499 The study indicates that this can be
extrapolated by calculating a trading cost reduction
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1235
state that the magnitude of that estimate,
which reflects the impact of
implementing transparency in the
corporate bond market through TRACE,
‘‘emphasizes the potential economic
importance of designing market
mechanisms optimally.’’ 500 Indeed, it is
entirely plausible that, should a similar
savings effect be realized in the swaps
markets as a result of real-time public
reporting required under part 43, such
savings would ultimately be passed on
to the end-users of the swaps.
Bessembinder et al. further identify a
decrease of 20% in the execution costs
of non-TRACE-eligible bonds. The
authors state that this ‘‘likely reflects a
liquidity externality by which better
pricing information regarding a subset
of bonds improves valuation and
execution cost monitoring for related
bonds.’’ 501 The Commission believes it
is entirely plausible that a similar
savings effect could be realized in the
swaps markets as a result of part 43’s
requirements. Improved pricing
information for standardized swaps
could improve the pricing of swaps, and
thus reduce the transaction costs of nonstandardized swaps whose prices could
be sufficiently and reliably correlated
with the prices of the standardized
swaps by market participants.
In a subsequent work,502
Bessembinder and Maxwell
acknowledge that liquidity can refer to
a number of related but distinct
concepts, but the literature regarding
TRACE’s effects on the corporate bond
market have focused primarily on a
single one of these concepts: Customers’
trading costs.503 The study states that
‘‘the cost of trading corporate bonds
decreased [following the introduction of
TRACE], but so did the quality and
quantity of the services formerly
provided by bond dealers.’’ 504 One
commenter also stated that this study
suggests that the implementation of
TRACE reduced the market depth
available to institutional customers.505
Bessembinder et al. state that
‘‘consistent with the reasoning that
market makers earned economic rents in
of approximately $1 billion across the entire market
for TRACE-eligible bonds.
500 Bessembinder et al. at 283.
501 Id.
502 See Bessembinder, Hendrik and Maxwell,
William F., Transparency and the Corporate Bond
Market, Journal of Economic Perspectives, 22, no.
2 (2008): 217–234.
503 As one commenter noted, ‘‘most studies of
TRACE have focused only on its effect on spreads
(particularly in smaller transaction sizes) and have
not examined its effect on either market depth or
resiliency, particularly in the case of large-sized
transactions.’’ CL–Cleary. See also supra note 492.
504 Bessembinder and Maxwell at 232.
505 See CL–JPM.
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the opaque market, or that the costs of
market making are lower in the more
transparent environment,’’ trading costs
were reduced for large institutional
traders after the implementation of
TRACE.506 With regard to the economic
rents earned by market makers in the
‘‘opaque market,’’ the authors’ findings
imply that in an opaque marketplace,
dealers are able to extract economic
rents from customers, especially lessinformed customers, and that these
rents are reduced after the introduction
of transparency because customers are
able to view more pricing information.
In addition, the study suggests that
introducing transparency could improve
the ability of dealers to share risks,
which may result in a decrease in
inventory carry costs, translating into
reduced costs of trading for customers.
The Commission anticipates that, just
as trading costs were reduced in the
corporate bond market following the
implementation of TRACE, the
requirements of part 43 will similarly
result in reduced trading costs and
increased efficiency in the swaps
market.
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ii. Alternatives and Cost Mitigation
In response to the Commission’s
Proposing Release, several commenters
presented reasonable alternatives. The
Commission carefully considered—and
where reasonable, adopted—those in an
effort to reduce the burden of its
regulations while achieving the desired
regulatory objective. Other alternatives
presented, however, were not accepted
because, in the Commission’s judgment
they would not have achieved the
regulatory objectives discussed
throughout this rulemaking.
The comments and alternatives
presented can be classified along several
broad themes: (1) Who reports; (2) what
is (and is not) to be reported; (3) when
the data is to be reported and made
public; (4) how the data is to be reported
(i.e., data fields); and (5) phasing of
compliance. These categories are
discussed in the paragraphs that follow.
Who Reports
Commenters requested that the
Commission allow parties to negotiate
independently who will report rather
than follow the reporting hierarchy for
off-facility swaps discussed in the
Proposing Release.507 The Commission
accepted this alternative and as adopted
§ 43.3(a)(3) permits independent
negotiation between counterparties of
off-facility swaps to determine the
reporting party for such swap. The
506 Bessembinder
507 See
et al. at 283.
CL–FSR.
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Commission anticipates that the party
with the most cost-effective means for
reporting will take that role.
The reporting protocol established in
§ 43.3(a)(3), which requires the SD to
report an off-facility swap with a nonSD counterparty when the reporting
responsibility is not negotiated, is also
cost-mitigating.508 Section 43.3(a)(2)
requires that for any swap executed on
or pursuant to the rules509 of a SEF or
DCM, the SEF or DCM—not the
transacting party—must report the
transaction and pricing data to an SDR
for public dissemination.510 The
Commission anticipates that SEFs and
DCMs, as part of their registration and
ongoing compliance requirements, will
be required to have the technological
capability to transmit real-time swap
transaction and pricing data to SDRs,
thus reducing the costs of transmission
for persons that execute publicly
reportable swap transactions on the SEF
or DCM. The Commission further
anticipates that SDs and MSPs will be
more capable than financial and nonfinancial end-users of implementing the
necessary infrastructure and personnel
to comply with part 43, thus reducing
the costs of reporting amongst the
parties to the transaction.
To further reduce the financial burden
of complying with part 43, particularly
for end-users, the Commission is
allowing reporting parties to contract
with a third party—including a DCO
that clears the swap—to report the data
to an SDR. The Commission recognizes
that the use of a third party service
provider will likely result in costs to the
reporting party. However, the
Commission anticipates that the costs to
the reporting party will be less
burdensome than those that would be
incurred by certain non-SD/non-MSP
counterparties to establish infrastructure
and hire personnel to comply with the
part 43 real-time reporting
requirements. The Commission does not
agree, however, that reporting for all
swaps should be required to be
processed through a SEF or DCM.
Rather, the Commission believes it more
efficient to allow flexibility for those
capable of directly reporting real-time
508 As one commenter noted: ‘‘[D]ue to their
commercial interests, technological know-how and
business relationships, swap dealers and MSPs are
more appropriate reporting counterparties than U.S.
end-users and are just as, if not more, capable of
complying with reporting obligations. * * * In
addition, swap dealers and MSPs will be best
positioned to develop at the lowest cost the
technological infrastructure or relationships with
third-party service providers necessary to meet the
reporting obligation.’’ CL–SIFMA AMG at 2.
509 Swaps executed ‘‘pursuant to the rules’’ of a
SEF or DCM would include block trades.
510 See CL–Tradeweb.
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swap transaction and pricing data to an
SDR.
The proposed rule permitted public
dissemination to occur through either
an SDR or a third-party service
provider.511 The Commission received
several comments regarding this aspect
of its proposal: Some commenters
agreed with the Proposing Release and
others thought it would be more
appropriate to permit only registered
entities to publicly disseminate swap
data. One commenter stated that
because many DCOs already have the
necessary infrastructure and will
establish connectivity with SEFs and
DCMs, the Commission should require
that public dissemination occur through
DCOs.512 There is nothing in part 43
that would prevent a DCO from
registering as an SDR513 and ensuring
that swap transaction and pricing data
is publicly disseminated, or from
operating as a third party; however, the
Commission is not requiring that such
dissemination occur through DCOs.
What Is (and Is Not) To Be Reported
Commenters expressed concern that
the costs of reporting swaps between
affiliates would be high.514 Many of
these same commenters asserted that the
benefits to reporting swaps between
affiliates are minimal or non-existent.515
Others contended that the public
dissemination of swaps between
affiliates would distort, rather than
enhance, price discovery.516 To address
these concerns, and as discussed
previously in sections II.A.2 and II.B.2
of this Adopting Release, the
Commission’s definition of ‘‘publicly
reportable swap transaction’’ does not,
at this time, include certain swaps that
are not arm’s length transactions.517 The
Commission further clarified in an
example that internal swaps518 between
511 See
Proposed § 43.4(a). 75 FR 76174.
CL–CME.
513 See CEA section 21(a)(1)(B), added by section
728 of the Dodd-Frank Act: ‘‘A derivatives clearing
organization may register as a swap data
repository.’’
514 See CL–Cleary.
515 Id.
516 See CL–Shell.
517 See supra section II.B.2 for a discussion of
definition of ‘‘publicly reportable swap transaction’’
in § 43.2 and section II.A.1 for a discussion of
§ 43.1.
518 As discussed and referenced in this rule,
internal swaps between wholly-owned subsidiaries
of the same parent entity may include back-to-back
swap transactions which are a combination of two
or more swap transactions between or among
affiliates to help manage the risks associated with
a market-facing swap transaction. In general, a backto-back swap transaction effectively transfers the
risks associated with a market-facing swap
transaction to an affiliate that was not an original
party to such transaction. Back-to-back swap
transactions may occur in a number of different
512 See
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wholly-owned subsidiaries of the same
parent entity and portfolio compression
exercises are not subject to part 43
because they fail to meet the definition
of ‘‘publicly reportable swap
transaction.’’ 519
When the Data Is To Be Reported and
Made Public
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Section 43.5 provides the time delays
for public dissemination of swap
transactions and pricing data for (i)
publicly reportable swap transactions
that have notional or principal amounts
that are equal to or greater than the
appropriate minimum block sizes for
such swaps; and (ii) publicly reportable
swap transactions that do not have
established appropriate minimum block
sizes. The Commission anticipates there
will be technology costs associated with
ensuring that the correct time delay is
applied to a swap that is publicly
disseminated by the SDR, including the
cost to an SDR in holding swap data
until the appropriate time delay expires
and costs associated with adjusting the
time delay in accordance with § 43.5. In
an effort to mitigate these costs, the
Commission is phasing in the time
delays for public dissemination. These
time delays will reduce the potential for
lost market liquidity by providing
market participants adequate time to
hedge prior to public dissemination.
The Commission believes the phasing in
of shorter time delays will support posttrade transparency in the swaps markets
and will preserve market liquidity while
enabling market participants to adjust
trading strategies.
Commenters offered numerous
suggestions with respect to time delays
for particular asset classes.520 However,
the Commission does not believe that
the direct costs associated with the
various suggestions would be
quantitatively significant (i.e., all the
suggested time delays would require
technological systems and operating
systems). The Commission chose the
ways. For example, an affiliate immediately may
enter into a mirror swap transaction with its
affiliate on the same terms as the marketing-facing
swap transaction. By way of further example, a
market-facing affiliate may enter into multiple
transactions with affiliates that are not at arm’s
length in order to transfer the risks associated with
an arm’s length, market-facing transaction.
519 See CL–TriOptima. The definition of ‘‘publicly
reportable swap transaction’’ also states that
portfolio compression exercises would be excluded
from the definition. The Commission agrees with
those commenters who asserted the reporting of
portfolio compression exercises would be costly
without the public dissemination of such swap
transaction and pricing data enhancing price
discovery.
520 See section II.E. (‘‘Section 43.5—Time Delays
for Public Dissemination of Swap Transaction and
Pricing Data’’).
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time delays and phase in schedule
adopted herein because it finds the
approach reasonable in ensuring that all
relevant swap data is eventually
publicly disseminated, while
minimizing the burden on the industry
at the outset.
How the Data Is To Be Reported (i.e.,
Coordinate Universal Time and Data
Fields)
Commenters suggested that the value
derived from moving the industry to
Coordinate Universal Time (‘‘UTC’’)
appears minimal when compared to the
costs involved.521 Notwithstanding the
comments regarding costs of requiring
UTC, the Commission anticipates that
the move to UTC will better facilitate
the efficient dissemination of pricing
data by eliminating the need to conduct
time conversions. The Commission
notes that use of UTC in the part 43
rules refers only to the execution
timestamp that is publicly
disseminated.522 Consistency across the
global swaps market is an important
goal, and the Commission believes that
requiring UTC will allow market
participants and reporting parties to
recreate the order of trades, reduce
fragmentation and reduce the need for
market participants to convert different
transaction times to understand the
order of trades in a particular market.
Commenters requested that the data
fields required to be reported for offfacility swaps pursuant to part 43 be the
same data fields that end-users typically
record in their spreadsheets or trade
capture systems.523 The Commission
believes all the applicable data fields
listed in Appendix A to part 43 are
necessary to enhance price discovery by
giving context and meaning to the price
and volume information required to be
publicly disseminated. The data
recorded in end-user spreadsheets and
trade capture systems typically are not
sufficiently comprehensive for purposes
of providing enhanced price discovery.
However, the Commission has reduced
the costs of reporting by coordinating
the data fields in Appendix A to part 43
with those data fields that are expected
to be required in part 45 for regulatory
reporting. This coordination is expected
to reduce costs by allowing reporting
parties, SEFs and DCMs to send one set
of data to an SDR for the purpose of
satisfying the requirements of both
rules.
521 See
CL–ISDA/SIFMA.
parties, SEFs and DCMs may agree
to report different timestamps to the SDR or to
record different timestamps pursuant to § 43.3(i).
523 See, e.g., CL–Coalition of Energy End-Users.
522 Reporting
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1237
Phasing of Compliance
In response to commenters’ requests
for a phased in implementation of the
part 43 real-time reporting
requirements,524 the Commission is
adopting a three-phase schedule for
compliance with part 43, in addition to
several other phase in procedures,
including the phasing in of time delays
for public dissemination. The
compliance schedule and additional
phase in procedures will ensure
efficient compliance with part 43 while
considering the costs of implementation
to market participants, registered
entities and the public. In developing
the part 43 compliance schedule and
time delays for public dissemination,
the Commission considered the
different market characteristics of swap
products and asset classes, differences
in market participants and available
technology and infrastructure.
Accordingly, the Commission provides
less developed markets and less
sophisticated market participants longer
lead time for compliance and public
dissemination.
C. Reporting and Public Dissemination
in Light of CEA Section 15(a)
As noted above, CEA section 15(a)
directs the Commission to consider
particular criteria in evaluating the costs
and benefits of a particular Commission
action. These are considered below.
1. Protection of Market Participants and
the Public
The reporting and public
dissemination requirements described
in part 43 will provide transparency and
enhanced price discovery in the swaps
market. The Commission anticipates
that the increase in transparency will
lead to greater competition for swap
market participants’ business and will
increase liquidity in the swaps markets.
Accordingly, the Commission
anticipates that compliance by market
participants and registered entities with
part 43’s reporting and public
dissemination requirements will lower
the cost of commodities, goods and
services to American businesses. This,
in turn, will support the overall
economy and the general public.
In deciding the manner in which to
facilitate real-time reporting, the
Commission was cognizant of how the
current swap market operates. Thus, for
example, the reporting requirements
remain flexible to account for
differences among market participants,
including differences based on asset
class, sophistication of swap
524 See supra section III. (‘‘Effectiveness/
Implementation and Interim Period’’).
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counterparties and differences based on
the methods of execution. Section 43.2
provides a flexible definition of ‘‘as
soon as technologically practicable’’ that
would enable certain market
participants, such as non-financial endusers, longer time periods for the
reporting of swap transaction and
pricing data to an SDR as compared to
reporting parties with greater
technological reporting capabilities (e.g.,
swap dealers). Further, the definition of
‘‘as soon as technologically practicable’’
aims to ensure that similarly situated
market participants are subject to the
same standards.
The Commission believes that certain
swaps in the ‘‘other commodity’’ asset
class require further analysis before
requiring public dissemination of such
swaps. Therefore, § 43.4(d) does not
subject certain swaps in the ‘‘other
commodity’’ asset class to part 43
requirements at this time.525
The Commission also believes that the
rounding convention and notional caps
that an SDR must apply on the publicly
disseminated notional or principal
amount will enable market participants
to effectively hedge risk without
disclosing the actual size of the trade to
the market. Such provisions will further
protect the identities of parties, business
transactions and market positions of
market participants. Additionally, the
Commission is providing time delays in
§ 43.5 which will protect market
participants by enabling them to enter
into swaps with limited concern about
other market participants trading ahead
of such information.
The definition of ‘‘publicly reportable
swap transaction’’ in § 43.2 does not
require that certain swaps that are not
executed at arm’s length be reported to
an SDR for public dissemination. The
Commission believes that public
dissemination of swaps between
affiliates may reveal the identities of the
parties or disclose information about the
business transactions or market
positions of market participants. By not
requiring the reporting and public
dissemination of such transactions, the
Commission is further protecting market
participants who may engage in swaps
between affiliates.
The Commission also believes that the
data fields in appendix A to part 43 will
provide market participants and the
public with the ability to analyze the
data for similar swaps while adequately
protecting the identities of market
participants. The data fields do not
525 The Commission has indicated that it will
address the public dissemination of such ‘‘other
commodity’’ swaps in a forthcoming Commission
release.
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require identifying information to be
publicly disseminated and the
Commission believes that the
‘‘Additional Price Notation,’’
‘‘Indication of Other Price Affecting
Term’’ and ‘‘Indication of
Collateralization’’ data fields, among
others, will enable market participants
and the public to more easily compare
bespoke transactions to standardized
transactions thereby enhancing the
usefulness of such data for market
participants and the public.
2. Efficiency, Competitiveness and
Financial Integrity of Markets 526
The Commission believes that part 43
promotes market efficiency in a number
of respects, including:
• Reduced trading cost potential. As
discussed above, the Commission
anticipates that, similar to the reduction
in corporate bond market trading costs
following the implementation of
TRACE, the requirements of part 43 will
likely result in reduced trading costs
and the lowering of economic rents
earned by dealers in swaps markets.
• Straight-through processing.
Sections 43.3(a)(2) and 43.3(b)(1)
establish a streamlined, straight-through
process for SEFs and DCMs to utilize
their technological expertise and ability
to report swap transaction and pricing
data ‘‘as soon as technologically
practicable’’ to an SDR. The
Commission believes this is the more
efficient approach compared to
alternatives that would interpose an
intermediary in the data reporting
chain.527
• Assignment of off-facility swap
reporting responsibilities to the
presumptively more capable party.
Section 43.3(a)(3) establishes a protocol
that assigns greater reporting
responsibility to counterparty categories
presumed to possess greater
technological capabilities and resources
as a result of their likely greater swap
transaction volume. For example, unless
otherwise agreed to by the swap
counterparties, SDs (and MSPs) are
required to serve as the reporting party
for off-facility swaps. The Commission
believes responsibility assignment on
this basis increases the potential to
realize reporting scale economies.
526 The Commission has identified no impact to
the financial integrity of futures markets from part
43 in its consideration of CEA section 15(a)(2)(B).
Although by its terms CEA section
15(a)(2)(B).applies to futures, not swaps, the
Commission finds this factor useful in analyzing the
costs and benefits of swaps regulations as well.
527 However, as the Commission has noted
previously, nothing would prevent a SEF or DCM
from contracting with a third party to assist with
reporting the real-time swap transaction and pricing
data to an SDR.
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• Choice of SDRs for real-time data
dissemination. The Commission
believes that § 43.3(a)(1)’s designation of
SDRs to receive real-time swap
transaction and pricing data ‘‘as soon as
technologically practicable’’ for public
dissemination also promotes potential
scale economy efficiencies. Under the
proposed part 45 rules, reporting
parties, SEFs and DCMs must transmit
a separate set of data to SDRs for
regulatory reporting purposes.
Accordingly, § 43.3(a)(1) may
accommodate SEFs’ and DCMs’ ability
to utilize technology and connections
with an SDR for both real-time and
regulatory reporting purposes.
• Reduction of data fragmentation.
The Commission believes that exercise
of its authority under CEA section
2(a)(13)(D) to designate SDRs as the
public disseminators of real-time
reported swap transaction and pricing
data will reduce fragmentation of swap
data available to the public. Greater data
consistency, in turn, will facilitate the
ability of market participants, and the
public generally, to efficiently access,
interpret, and compile a complete data
set.
The Commission believes that part 43
promotes market competitiveness in a
number of respects:
• Reduction of data fragmentation.
As noted above, the Commission
believes that exercise of its CEA section
2(a)(13)(D) authority to designate SDRs
as the public disseminators of real-time
reported swap transaction and pricing
data will reduce fragmentation of swap
data available to the public. Greater data
consistency, in turn, should guard
against information asymmetries that
market participants with superior
knowledge of, or access to, might
arbitrage for competitive advantage.
• Front running prevention via SDR
continuous receipt requirements.
Sections 43.3(f) and (g) require that
SDRs be able to accept real-time swap
transaction and pricing data for public
dissemination at all times, including
during closing hours. Specifically,
§ 43.3(g) provides that during closing
hours real-time swap transaction and
pricing data that is accepted by an SDR
be held in queue. As a result, these
provisions enable continuous reporting
of real-time swap transaction and
pricing data by reporting parties, SEFs
and DCMs, notwithstanding reporting
party or registered entity location and
time zone. In so doing, the Commission
believes the rules promote swaps market
competitiveness by foreclosing avenues
for market participants to arbitrage
reporting by execution location for
competitive advantage.
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• Time delay regime that protects
market liquidity and prevents frontrunning. The Commission believes that
the time delay regime established in
§ 43.5 will enhance the competitiveness
of swap markets by protecting market
liquidity until appropriate minimum
block sizes are adopted. Such time
delays, which initially apply until a
swap or group of swaps has an
appropriate minimum block size, reduce
the risk of large notional trade data
being exposed to the market before the
trade can be adequately hedged (e.g.,
front-running or trading ahead).528
The Commission believes that part 43
promotes market integrity in a number
of respects:
• Error correction. Section 43.3(e)
provides reporting parties and SDRs
with a clear process for addressing
errors in real-time swap transaction and
pricing data. These provisions will
foster financial market integrity by
ensuring that incorrectly disseminated
swap transaction and pricing data is
canceled and/or corrected. Further, this
section gives the Commission
enforcement powers, enhancing the
Commission’s ability to police market
integrity.
• Time delay phase in to prevent
front-running. The Commission believes
that the phase in regime for time delays
prescribed in § 43.5, discussed above,
will counter the possibility for frontrunning large block trades before they
can be adequately hedged.
• SDR tools to ensure data accuracy.
Section 43.4(c) enables SDRs to ensure
that they receive the data necessary to
process and publicly disseminate the
data fields described in appendix A to
part 43. Section 43.4(c) provides that
SDRs can ask reporting parties for
additional data to ensure the accuracy of
the real-time data (compared to
regulatory data) as well as to ensure that
the data is being reported in a timely
manner. Such provisions will improve
the integrity of the real-time reporting
process by allowing SDRs an additional
opportunity to ensure the accuracy of
the data they received for public
dissemination purposes.
3. Price Discovery
The Commission believes generally
that swaps market price discovery will
be enhanced by making useful, accurate
swaps transaction price and volume
data available to market participants
and the public within the shortest time
frame possible. The Commission further
believes that the reporting and public
528 See supra, section II.E (‘‘Time Delays for
Public Dissemination of Swap Transaction and
Pricing Data’’).
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dissemination requirements of part 43,
working in concert, promote the goal of
swaps market price discovery
enhancement. The components that
contribute to the attainment of this goal
are described below.
• The provisions in part 43, reflecting
the mandate of CEA section
2(a)(13)(A),529 generally require that
reporting of real-time data by reporting
parties—SEFs and DCMs and public
dissemination by SDRs—occur ‘‘as soon
as technologically practicable.’’ The
Commission believes that this approach
means that swap transaction and pricing
data is to be publicly disseminated at
the fastest rate allowable given a market
participant’s technological capability.
• The error correction provisions of
§ 43.3(e) assign swap counterparties and
registered entities responsibility to
correct erroneous or omitted swap data
and require the public dissemination of
cancellations and corrections to errors
and omissions. These provisions will
help ensure the accuracy of swap
transaction and pricing data, thereby
increasing the data’s price discovery
value to market participants and the
public. Absent this provision,
uncorrected erroneous data could
distort price discovery.
• Appendix A to part 43 specifies the
data fields an SDR must use in public
dissemination, and what each data field
represents. The Commission believes
that the values assigned to the data
fields are appropriately tailored to
facilitate price transparency and inform
price discovery. Moreover, data field
consistency will enhance price
discovery by ensuring the integrity of
the price and volume reflected in a
particular reported asset class.
• The definition of ‘‘publicly
reportable swap transaction’’ in § 43.2
does not, at this time, require the public
dissemination of swaps that are not
executed at arm’s length. Accordingly,
certain swaps between affiliates of a
corporate group and portfolio
compression exercises are not subject to
part 43. The Commission believes that
not requiring such transactions to be
publicly disseminated precludes the
public dissemination of transaction and
pricing data that could misinform the
market and create an inaccurate
appearance of market depth.
• Swap transaction and pricing data
is to be publicly disseminated in a
consistent, usable and machine-readable
electronic format that allows the data to
529 That is: ‘‘real-time public reporting means to
report data relating to a swap transaction, including
price and volume, as soon as technologically
practicable after the time at which the swap
transaction has been executed.’’
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1239
be downloaded, saved and analyzed, as
described in § 43.3(d)(1).
• SDRs are required pursuant to
§ 43.3(f) to continuously accept and
publicly disseminate swap transaction
and pricing data (with the exception of
certain closing hours). The Commission
believes this requirement enhances the
breadth of the swap data available and
the speed at which such data is
available to market participants and the
public.
• The requirements of §§ 43.4(d)(3)
and (4), require the public
dissemination of data that identifies the
underlying asset for the transaction,
except with respect to certain swaps in
the ‘‘other commodity’’ asset class
where dissemination could compromise
anonymity.
• The rounding convention and the
caps on the publicly disseminated
notional or principal amounts provided
for in §§ 43.4(g) and (h) allow for price
discovery for market participants and
the public while protecting swap
counterparty anonymity.
4. Sound Risk Management Practices
The Commission believes that the
enhanced price discovery afforded by
reporting and public dissemination of
swap transaction and pricing data will
better enable market participants to
measure risk. Accordingly, because
market participants will be better able to
manage their risk at an entity level, risk
will be better managed. Allowing
market participants and the public to
measure risk will reduce the risk of
another financial crisis.
Additionally, the Commission is not
requiring that portfolio compression
exercises, which market participants use
for risk management purposes, be
subject to part 43 at this time. In so
doing, the Commission is attempting to
tailor real-time public dissemination
requirements to accommodate, rather
than chill, prudent risk management by
market participants.
Finally, commenters asserted that the
costs of risk management to end-users
may increase if data relating to large
sized trades is publicly disseminated to
the market before swap counterparties
have an opportunity to hedge a publicly
reportable swap transaction.530 The
Commission believes that the provisions
in § 43.5 provide for adequate time
delays for public dissemination of swap
transaction and pricing data, providing
end-users and other market participants
the latitude necessary to manage their
risks.
530 See,
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5. Other Public Interest Considerations
The Commission does not believe that
the public dissemination requirements
of part 43 discussed above will have a
material effect on public interest
considerations other than those
previously identified.
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D. Recordkeeping and Timestamping
Requirements of Part 43
Proposed § 43.3(i) provided
recordkeeping requirements for data
related to part 43, including a general
provision that all data relating to a
‘‘reportable swap transaction’’ shall be
maintained for a period of not less than
five years after public dissemination of
such swap. The provision also provided
specific provision for the retention of
data by a SEF or DCM and a provision
for the retention of data by an SD or
MSP. Further, proposed § 43.5(f)
provided timestamp requirements for
block trades and large notional swaps,
which included a requirement to
maintain records of all timestamps.
Upon consideration of the comments
received and as discussed elsewhere in
this rulemaking, the utility of the
Commission’s existing regulations in
achieving the regulatory objective
proposed, and the recordkeeping
requirements proposed elsewhere,
including part 45, the Commission
significantly limited the recordkeeping
requirements of proposed Part 43. The
only recordkeeping requirements
imposed will be the timestamping
requirements as described in § 43.3(h).
Section 43.3(h) timestamps are
required for all publicly reportable swap
transactions and must be applied by
SEFs and DCMs, SDRs, and registrants
(SDs and MSPs). In consideration of a
commenter’s concerns regarding the
costs to end-users to comply with any
recordkeeping requirements, § 43.3(h) is
not applicable to non-SDs/MSPs.531
The Commission received multiple
comments addressing the timestamping
requirements of proposed § 43.5(f). As
proposed, the timestamping
requirements would have applied only
to swaps considered ‘‘block trades.’’
However, the Commission believes that
there is a need for SEFs, DCMs, SDRs
SDs and MSPs to record and maintain
certain timestamps regarding the
transmission and dissemination of all
real-time swap transaction and pricing
531 In other words, when an end-user has a
reporting obligation because it engaged in an offfacility swap, the end-user is not required to
timestamp the data pursuant to § 43.3(h). However,
the execution timestamps in appendix A to part 43
must be performed.
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data,532 notwithstanding that proposed
§ 43.5(f)’s timestamping requirement is
inconsistent with current industry
practice.
1. Benefits of the Recordkeeping and
Timestamping Requirements
The Commission believes a timestamp
remains necessary for two reasons: (1) It
establishes an audit trail that serves
enforcement purposes; and (2) it allows
market participants and the public to recreate the trading day, thereby
enhancing price discovery. Accordingly,
the Commission is adopting in § 43.3(h)
timestamp requirements for all
reportable swap transactions. However,
in response to commenters’ concerns
about the costs of timestamping and
retaining records for non-SDs/MSPs, the
Commission is not requiring non-SDs/
non-MSPs who engage in an off-facility
swap to retain similar timestamp.533
The Commission believes that requiring
non-SDs/MSPs to retain any timestamp
other than the execution timestamp
would be unduly burdensome to those
parties.
2. Costs of the Recordkeeping and
Timestamping Requirements
The Commission has not identified
quantifiable costs of timestamping that
are not associated with an information
collection subject to the PRA. These
costs therefore have been accounted for
in the PRA section of this rulemaking
and the information collection requests
filed with OMB, as required by the PRA.
E. Recordkeeping and Timestamping
Requirements in Light of CEA Section
15(a)
1. Protection of Market Participants and
the Public
The Commission believes that the
timestamp requirement of § 43.3(h) will
enable the Commission to ensure that
reporting parties, SEFs and DCMs are
reporting and that SDRs are publicly
disseminating swap transaction and
pricing data ‘‘as soon as technologically
practicable.’’ Absent a timestamp
requirement, the Commission would be
unable to create an audit trail to identify
potential inadequacies in reporting and
public dissemination. The
Commission’s oversight to ensure that
similarly situated SD, MSPs, SEFs and
DCMs are reporting in the same
timeframes, and that SDRs are publicly
disseminating in the same manner, is
532 This is swap transaction and pricing data
associated with ‘‘publicly reportable swap
transactions.’’
533 However, end-users must still submit a
timestamp of the execution time if they are the
reporting party to a swap.
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essential to protecting market
participants and the public.
2. Efficiency, Competitiveness and
Financial Integrity of Markets 534
The Commission believes that the
requirement to maintain timestamps
will enable it to ensure the integrity of
the data being disseminated. This in
turn promotes the operational
efficiency, competitiveness, and
integrity of the swaps market to which
the data pertains. Further, it provides a
basis for the Commission to perform
audit trail and compliance reviews with
respect to SDs, MSPs, SEFs, DCMs and
SDRs, thus bolstering the positive
market benefits.
3. Price Discovery
The Commission believes that the
requirement to maintain timestamps
will promote price discovery in an
important way. By providing a means
for the Commission to ensure that SDs,
MSPs, SEFs, DCMs and SDRs are
reporting and publicly disseminating
swap transaction and pricing data ‘‘as
soon as technologically practicable,’’
timestamp information will promote
price discovery because non-compliance
will be readily detectable through
timestamps and may be an effective
enforcement tool in an enforcement
action.
4. Sound Risk Management Practices
The Commission believes that the
requirement for SDs, MSPs, SEFs, DCMs
and SDRs to maintain the timestamps
described in § 43.3(h) will become part
of these entities’ risk management
policies and procedures in an effort to
ensure compliance with the part 43
rules.
5. Other Public Interest Considerations
The Commission does not believe that
the timestamp recordkeeping
requirements of part 43 discussed above
will have a material effect on public
interest considerations other than those
identified above.
VI. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) requires Federal agencies to
consider the impact of its rules on
‘‘small entities.’’ 535 A regulatory
flexibility analysis or certification
typically is required for ‘‘any rule for
which the agency publishes a general
notice of proposed rulemaking pursuant
to’’ the notice-and-comment provisions
of the Administrative Procedure Act, 5
U.S.C. 553(b).536
534 See
supra, note 526.
U.S.C. 601 et seq.
536 5 U.S.C. 601(2), 603, 604 and 605.
535 5
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With respect to the proposed real-time
public reporting rule, the Commission
provided in its RFA statement that the
proposed rule would have a direct effect
on numerous entities, specifically
DCMs, SDRs, SEFs, SDs, MSPs, and
certain single end-users.537 In the
proposal, the Chairman, on behalf of the
Commission, certified that the
rulemaking would not have a significant
economic effect on a substantial number
of small entities. Comments on that
certification were sought.
In the Proposing Release, the
Commission then provided that it
previously had established that certain
entities subject to its jurisdiction are not
small entities for purposes of the RFA.
Because of the central role they play in
the regulatory scheme concerning
futures trading, the importance of
futures trading in the national economy,
and the financial requirements needed
to comply with the regulatory
requirements imposed on them under
the CEA, DCMs have long been
determined not to be not small
entities.538
The Commission also provided that
certain entities that would be subject to
the proposed rule—namely SDRs, SEFs,
SDs, and MSPs—are entities for which
the Commission had not previously
made a size determination for RFA
purposes. It proposed that these entities
should not be considered to be small
entities based upon their size and other
characteristics.539
Finally, the Commission recognized
that the proposed rule could have an
economic effect on certain single end
users, in particular those end users that
enter into swap transactions with
another end-user. Unlike the other
parties to which the proposed
rulemaking would apply, these end
users are not subject to designation or
registration with or to comprehensive
regulation by the Commission. The
Commission recognized that some of
these end users may be small entities.
Notwithstanding that some small
entities may be subject to the real-time
reporting rules, the determination to
certify pursuant to section 605(b) of the
RFA that the proposed rule would not
have a significant economic effect on a
substantial number of small entities was
based upon the nature of the reporting
hierarchy that was set forth in the
proposal. The proposed rule was
structured so that most swaps that are
expected to be executed by an end user
would not be required to be reported by
the end user, but rather by a party that
537 See
is subject to Commission registration
and regulation.
The reporting obligations primarily
would fall on the trading facility on
which an end-user executes a swap or,
in the case of a swap executed ‘‘offfacility’’ with an SD or MSP, on the SD
or MSP. Under the proposed rules, end
users would only be required to report
swaps that are executed ‘‘off-facility’’
with another end user, and in such
circumstances, only one of the end users
subject to the transaction would be
required to report.
The Commission received one
comment respecting its RFA
certification. An association of not-forprofit electric end users provided that
its membership includes small entities
as that term is defined in the RFA.540
The association commented that the
Commission should conduct a
regulatory flexibility analysis for each of
its rulemakings individually, as well as
a regulatory flexibility analysis for all of
its rulemakings on a cumulative basis.
The association supported its comment
by providing that ‘‘[e]ach of the complex
and interrelated regulations currently
being proposed by the Commission has
both an individual, and a cumulative,
effect on such small entities.’’
Though the association asserted that
some of its members are small, it did not
provide any factual support to indicate
that the proposed real-time reporting
rule would have a significant economic
effect on a substantial number of small
entities, contrary to the Commission’s
certification. Nonetheless, in light of the
association’s comments, the
Commission has given further
consideration to the reporting hierarchy
that was proposed.
Critically, as noted above, the
reporting hierarchy was established in
order to ensure that any end users that
may be required to comply with these
real-time reporting rules would only
have to do so with respect to
transactions that are not conducted on
or pursuant to the rules of a DCM or SEF
or with a counterparty that is registered
with and regulated by the Commission.
Moreover, as the CEA as amended by
the Dodd-Frank Act provides, most of
the end users who will transact with
each other ‘‘off-facility’’, are not
expected to be small entities.
Section 2(e) of the CEA was amended
to provide that ‘‘it shall be unlawful for
any person, other than an eligible
contract participant, to enter into a swap
unless the swap is entered into on, or
subject to the rules of [a regulated
trading venue].’’ 541 Eligible Contract
75 FR at 76170.
538 Id.
540 See
539 Id.
541 7
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Participants (‘‘ECPs’’) were first defined
in section 1a(12) of the CEA in the
Commodity Futures Modernization Act
(‘‘CFMA’’) in 2000, creating a category
of individuals and entities that Congress
determined to be sufficiently
sophisticated in financial matters that
they should be permitted to trade overthe-counter swaps without the
protection of federal regulation.542 In
the Dodd-Frank Act, Congress made two
changes to the statutory ECP definition,
both of which increased the thresholds
to qualify as an ECP, making it harder
for some entities and individuals to
qualify.543 Thus, only entities that reach
a significant level of financial resources
or sophistication are eligible to transact
in swaps ‘‘off-facility.’’
We understand from the association’s
comments that some of their members
who qualify as ECPs under the CEA
have been determined to be ‘‘small
entities’’ by the SBA. A member will be
an SBA small entity if its total electric
output for the preceding fiscal year did
not exceed four million megawatt hours.
Notwithstanding that some members
that are ECPs may fall within the SBA
small entity determination, the
Commission understands this to be an
anomaly. As a general rule, there are
few small entities that will be eligible to
transact in swaps ‘‘off-facility’’ under
the CEA in light of the financial
resource and sophistication thresholds
established in the ECP definition.
Accordingly, for the reasons stated in
the proposal and foregoing discussion in
response to the comments received from
the association, the Commission
continues to believe that the rulemaking
will not have a significant impact on a
substantial number of small entities.
Therefore, the Chairman, on behalf of
the Commission, hereby certifies,
pursuant to 5 U.S.C. 605(b), that the
542 See ‘‘Report of the President’s Working Group
on Financial Markets’’ (Nov. 1999) at 16
(recommending that ‘‘sophisticated counterparties
that use OTC derivatives simply do not require the
same protections under the CEA as those required
by retail investors’’); H.R. Rep. No. 106–711 pt. 1,
at 28 (2000) (Committee on Agriculture reporting
that the CFMA ‘‘implements the PWG
recommendations,’’ including the exclusion for
‘‘bilateral swap agreements entered into by eligible
parties (large and/or sophisticated) and done on a
principal-to-principal basis)); and H.R. Rep. No.
106–711 pt. 2, at 212 (2000) (statement of
Representative John J. LaFalce, providing that the
‘‘rationale * * * is that swaps can be complex
instruments requiring a variety of protections for
financially unsophisticated consumers [and] come
in a great variety of tailored obligations, some of
which might, indeed, be so complex as to be
inappropriate for all but the most seasoned of
investors’’).
543 Compare section 1a(12) of the CEA, 7 U.S.C.
1a(12) (2009), with sections 721(a)(1) and (9) of the
Dodd-Frank Act, respectively redesignating section
1a(12) as section 1a(18) and increasing thresholds
for certain categories of ECP.
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real-time reporting requirements being
adopted herein will not have a
significant economic impact on a
substantial number of small entities.
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VII. List of Commenters
1. Markit
2. Asset Management Group of the
Securities Industry and Financial
Markets Association (‘‘SIFMA
AMG’’)
3. Managed Funds Association (‘‘MFA’’)
4. Lawrence Schultz
5. The Energy Authority
6. Argus Media, Inc. (‘‘Argus’’)
7. Professor Darrell Duffie, Stanford
University (‘‘Darrell Duffie’’)
8. Chesapeake Energy Corporation
(‘‘Chesapeake’’)
9. Members of Congress of the United
States (House Committee on
Financial Services—Congressman
Spencer Bachus and Congressman
Frank Lucas) (‘‘Members of
Congress’’)
10. Barclays Bank PLC, BNP Paribas
S.A., Deutsche Bank AG, Royal
Bank of Canada, The Royal Bank of
´ ´
Scotland Group PLC, Societe
´ ´
Generale, UBS AG (‘‘ Seven Foreign
Headquartered Banks’’)
11. J.P. Morgan (‘‘JPM’’)
12. Gibson Dunn on behalf of the
Coalition for Derivatives End-Users
(‘‘Coalition for Derivatives EndUsers’’)
13. Committee on Capital Markets
Regulation
14. Goldman Sachs & Co. (‘‘GS’’)
15. Not-For-Profit Energy End-User
Coalition (‘‘NFPEEU’’)
16. Barclays Capital, Inc. (‘‘Barclays’’)
17. Air Transport Association (‘‘ATA’’)
18. Pacific Investment Management
Company, LLC (‘‘PIMCO’’)
19. Committee on the Investment of
Employee Benefit Assets &
American Benefits Council (‘‘ABC/
CIEBA’’)
20. Commodity Markets Council
(‘‘CMC’’)
21. Better Markets, Inc. (‘‘Better
Markets’’)
22. Investment Company Institute
(‘‘ICI’’)
23. Intercontinental Exchange, Inc.
(‘‘ICE’’)
24. MarkitSERV
25. Coalition of Physical Energy
Companies (‘‘COPE’’)
26. International Options Markets
Association/World Federation of
Exchanges (‘‘WFE/IOMA’’)
27. UBS Securities LLC (‘‘UBS’’)
28. Global Foreign Exchange Division of
Association for Financial Markets
in Europe (‘‘AFME’’), the Securities
Industry and Financial Markets
Association (‘‘SIFMA’’) and the
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Asia Securities Industry and
Financial Markets Association
(‘‘ASIFMA’’) (collectively, ‘‘GFXD’’)
29. Edison Electrical Institute (‘‘EEI’’)
30. Encana Marketing (USA) Inc.
(‘‘Encana’’)
31. LCH.Clearnet Group Limited
(‘‘LCH.Clearnet’’)
32. CME Group, Inc. (‘‘CME’’)
33. Tradeweb Markets LLC
(‘‘Tradeweb’’)
34. Coalition of Energy End-Users
35. Federal National Mortgage
Association (‘‘FNMA’’)
36. Reval.com, Inc. (‘‘Reval’’)
37. Independent Petroleum Association
of America (‘‘IPAA’’)
38. PCS Nitrogen Fertilizer, L.P. (‘‘PCS
Nitrogen’’)
39. International Swaps and Derivatives
Association & Securities Industry
and Financial Markets Association
(‘‘ISDA/SIFMA’’)
40. International Energy Credit
Association (‘‘IE Credit
Association’’)
41. Morgan Stanley (‘‘MS’’)
42. Hunton & Williams LLP on behalf of
the Working Group of Commercial
Energy Firms (‘‘Working Group of
Commercial Energy Firms’’)
43. Freddie Mac
44. Financial Services Roundtable
(‘‘FSR’’)
45. Vanguard
46. TriOptima
47. BlackRock, Inc. (‘‘BlackRock’’)
48. Dominion Resources, Inc.
(‘‘Dominion’’)
49. Sadis & Goldberg LLP (‘‘Sadis &
Goldberg’’)
50. Metlife, Inc. (‘‘Metlife’’)
51. Federal Home Loan Banks
(‘‘FHLBanks’’)
52. Wholesale Markets Brokers’
Association, Americas (‘‘WMBAA’’)
53. Depository Trust & Clearing
Corporation (‘‘DTCC’’)
54. Cleary Gottlieb on behalf of Bank of
America Merrill Lynch, BNP
Paribas, Citi; Credit Agricole
Corporate and Investment Bank;
Credit Suisse Securities (USA),
Deutsche Bank AG, Morgan Stanley,
Nomura Securities International,
In., PNC Bank, National
´ ´ ´ ´
Association, Societe Generale, UBS
Securities LLC, Wells Fargo &
Company (‘‘Cleary’’)
55. Barclays Bank PLC; BNP Paribas
S.A.; Credit Suisse AG; Deutsche
Bank AG; HSBC; Nomura Securities
International, Inc.; Rabobank
Nederland; Royal Bank of Canada;
The Royal Bank of Scotland Group
´ ´ ´ ´
PLC; Societe Generale; The
Toronto-Dominion Bank; UBS AG
(‘‘12 Foreign Headquartered
Financial Institutions’’)
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56. Financial Industry Regulatory
Authority (‘‘FINRA’’)
´ ´ ´ ´
57. Societe Generale (‘‘Soc Gen’’)
58. European Parliament Rapporteur for
the Regulation on OTC Derivatives,
Central Counterparties and Trade
Repositories
59. European Industry Representatives
(Credit Suisse, Deutsche Bank, Citi,
JP Morgan, Barclays, Goldman
Sachs, UBS)
60. Rabobank Nederland
61. Insurance Groups (American
Council of Life Insurers, Genworth,
Manulife, John Hancock Life, New
York Life, Northwestern Mutual,
Prudential, MetLife, Allstate Life)
(‘‘Insurance Groups’’)
62. Fidelity Investments & Vanguard
63. Credit Suisse
64. ISDA & Kalorama Partners
65. ISDA
66. National Rural Electric Cooperative
Association, American Public
Power Association, Large Public
Power Council, Edison Electric
Institute, Electric Power Supply
Association
67. Futures Industry Association,
Financial Services Forum,
International Swaps and Derivatives
Association, Securities Industry and
Financial Markets Association
(‘‘FIA/FSF/ISDA/SIFMA’’)
68. The Bank of Tokyo-Mitsubishi UFJ,
Ltd.; Mizuho Corporate Bank, Ltd.;
Sumitomo Mitsui Banking
Corporation (‘‘Japanese Banks’’)
69. NextEra Energy, Inc. (‘‘NextEra’’)
70. Chris Barnard
71. Citi, Morgan Stanley, JP Morgan
72. BP
73. Industrial Energy Consumers of
America (‘‘IE Consumers of
America’’)
74. Alice Corporation (‘‘Alice’’)
75. Futures Industry Association, The
Financial Services Roundtable,
Institute of International Bankers,
Insured Retirement Institute,
International Swaps and Derivatives
Association, Securities Industry and
Financial Markets Association, U.S.
Chamber of Commerce (‘‘FIA/FSR/
IIB/IRI/ISDA/SIFMA/Chamber’’)
76. Association of Institutional Investors
(‘‘AII’’)
77. American Gas Association (‘‘AGA’’)
78. Natural Gas Exchange, Inc. (‘‘NGX’’)
79. Shell Trading (US) Company & Shell
Energy North America (‘‘Shell’’)
80. American Petroleum Institute
(‘‘API’’)
81. Swaps & Derivatives Market
Association (‘‘SDMA’’)
82. Jackson National Life Insurance
(‘‘Jackson’’)
83. Eris Exchange, LLC (‘‘Eris’’)
84. Citadel LLC (‘‘Citadel’’)
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85. American Bankers Association &
ABA Securities Association (‘‘ABA/
ABASA’’)
86. DC Energy, LLC (‘‘DC Energy’’)
87. The Alternative Investment
Management Association Ltd
(‘‘AIMA’’)
88. FXall
List of Subjects in 17 CFR Part 43
Real-time public reporting; Block
trades; Large notional off-facility swaps;
Reporting and recordkeeping
requirements.
In consideration of the foregoing, and
pursuant to the authority in the
Commodity Exchange Act, as amended,
and in particular Section 2(a)(13) of the
Act, the Commission hereby adopts an
amendment to Chapter I of Title 17 of
the Code of Federal Regulations by
adding part 43 to read as follows:
PART 43—REAL-TIME PUBLIC
REPORTING
Sec.
43.1
Purpose, scope, and rules of
construction.
43.2 Definitions.
43.3 Method and timing for real-time public
reporting.
43.4 Swap transaction and pricing data to
be publicly disseminated in real-time.
43.5 Time delays for public dissemination
of swap transaction and pricing data.
43.6 [Reserved]
Appendix A to Part 43—Data Fields for
Public Dissemination
Appendix B to Part 43—Enumerated Physical
Commodity Contracts and Other
Contracts
Appendix C to Part 43—Time Delays for
Public Dissemination
Authority: 7 U.S.C. 2(a), 12a(5) and 24a,
as amended by Title VII of the Wall Street
Reform and Consumer Protection Act, Pub. L.
111–203, 124 Stat. 1376 (2010).
tkelley on DSK3SPTVN1PROD with RULES2
§ 43.1 Purpose, scope, and rules of
construction.
(a) Purpose. This part implements
rules relating to the reporting and public
dissemination of certain swap
transaction and pricing data to enhance
transparency and price discovery
pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act of
2010, Pub. L. 111–203, 124 Stat. 1376
(2010).
(b)(1) Scope. The provisions of this
part shall apply to all swaps as defined
in Section 1a(47) of the Act and any
implementing regulations thereunder,
including:
(i) Swaps subject to the mandatory
clearing requirement described in
Section 2(h)(1) of the Act, including
those swaps that are excepted from the
requirement pursuant to Section 2(h)(7)
of the Act;
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(ii) Swaps that are not subject to the
mandatory clearing requirement
described in Section 2(h)(1) of the Act,
but are cleared at a registered
derivatives clearing organization;
(iii) Swaps that are not cleared at a
registered derivatives clearing
organization and are reported to a
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in realtime; and
(iv) Swaps that are required to be
cleared under Section 2(h)(2) of the Act,
but are not cleared.
(2) This part also shall apply to
registered entities as defined in the Act,
as well as to parties to a swap including
swap dealers, major swap participants
and U.S.-based market participants in a
manner as the Commission may
determine.
(c) Rules of construction. The
examples in this part and in appendix
A to this part are not exclusive.
Compliance with a particular example
or application of a sample clause, to the
extent applicable, shall constitute
compliance with the particular portion
of the rule to which the example relates.
(d) Severability. If any provision of
this part, or the application thereof to
any person or circumstance, is held
invalid, such invalidity shall not affect
other provisions or application of such
provision to other persons or
circumstances which can be given effect
without the invalid provision or
application.
§ 43.2
Definitions.
As used in this part:
Act means the Commodity Exchange
Act, as amended, 7 U.S.C. 1 et seq.
Affirmation means the process by
which parties to a swap verify (orally,
in writing, electronically or otherwise)
that they agree on the primary economic
terms of a swap (but not necessarily all
terms of the swap). Affirmation may
constitute ‘‘execution’’ of the swap or
may provide evidence of execution of
the swap, but does not constitute
confirmation (or confirmation by
affirmation) of the swap.
Appropriate minimum block size
means the minimum notional or
principal amount for a category of
swaps that qualifies a swap within such
category as a block trade or large
notional off-facility swap.
As soon as technologically practicable
means as soon as possible, taking into
consideration the prevalence,
implementation and use of technology
by comparable market participants.
Asset class means a broad category of
commodities including, without
limitation, any ‘‘excluded commodity’’
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1243
as defined in Section 1a(19) of the Act,
with common characteristics underlying
a swap. The asset classes include
interest rate, foreign exchange, credit,
equity, other commodity and such other
asset classes as may be determined by
the Commission.
Block trade means a publicly
reportable swap transaction that:
(1) Involves a swap that is listed on
a registered swap execution facility or
designated contract market;
(2) Occurs away from the registered
swap execution facility’s or designated
contract market’s trading system or
platform and is executed pursuant to the
registered swap execution facility’s or
designated contract market’s rules and
procedures;
(3) Has a notional or principal amount
at or above the appropriate minimum
block size applicable to such swap; and
(4) Is reported subject to the rules and
procedures of the registered swap
execution facility or designated contract
market and the rules described in this
part, including the appropriate time
delay requirements set forth in § 43.5 of
this part.
Business day means the twenty-four
hour day, on all days except Saturdays,
Sundays and legal holidays, in the
location of the reporting party or
registered entity reporting data for the
swap.
Business hours means the consecutive
hours of one or more consecutive
business days.
Confirmation means the
consummation (electronic or otherwise)
of legally binding documentation
(electronic or otherwise) that
memorializes the agreement of the
parties to all terms of a swap. A
confirmation shall be in writing
(electronic or otherwise) and shall
legally supersede any previous
agreement (electronic or otherwise)
relating to the swap.
Confirmation by affirmation means
the process by which one party to a
swap acknowledges its assent to the
complete swap terms submitted by the
other party to the swap. If the parties to
a swap are using a confirmation service
vendor, complete swap terms may be
submitted electronically by a party to
such vendor’s platform and the other
party may affirm such terms on such
platform.
Embedded option means any right,
but not an obligation, provided to one
party of a swap by the other party to the
swap that provides the party holding the
option with the ability to change any
one or more of the economic terms of
the swap as those terms previously were
established at confirmation (or were in
effect on the start date).
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Executed means the completion of the
execution process.
Execution means an agreement by the
parties (whether orally, in writing,
electronically, or otherwise) to the terms
of a swap that legally binds the parties
to such swap terms under applicable
law. Execution occurs simultaneous
with or immediately following the
affirmation of the swap.
Large notional off-facility swap means
an off-facility swap that has a notional
or principal amount at or above the
appropriate minimum block size
applicable to such publicly reportable
swap transaction and is not a block
trade as defined in § 43.2 of the
Commission’s regulations.
Novation means the process by which
a party to a swap transfers all of its
rights, liabilities, duties and obligations
under the swap to a new legal party
other than the counterparty to the swap.
The transferee accepts all of the
transferor’s rights, liabilities, duties and
obligations under the swap. A novation
is valid as long as the transferor and the
remaining party to the swap are given
notice, and the transferor, transferee and
remaining party to the swap consent to
the transfer.
Off-facility swap means any publicly
reportable swap transaction that is not
executed on or pursuant to the rules of
a registered swap execution facility or
designated contract market.
Other commodity means any
commodity that is not categorized in the
other asset classes as may be determined
by the Commission.
Public dissemination and publicly
disseminate means to publish and make
available swap transaction and pricing
data in a non-discriminatory manner,
through the Internet or other electronic
data feed that is widely published and
in machine-readable electronic format.
Publicly reportable swap transaction
means:
(1) Unless otherwise provided in this
part—
(i) Any executed swap that is an
arm’s-length transaction between two
parties that results in a corresponding
change in the market risk position
between the two parties; or
(ii) Any termination, assignment,
novation, exchange, transfer,
amendment, conveyance, or
extinguishing of rights or obligations of
a swap that changes the pricing of the
swap.
(2) Examples of executed swaps that
do not fall within the definition of
publicly reportable swap may include:
(i) Internal swaps between onehundred percent owned subsidiaries of
the same parent entity; and
(ii) Portfolio compression exercises.
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(3) These examples represent swaps
that are not at arm’s length and thus are
not publicly reportable swap
transactions, notwithstanding that they
do result in a corresponding change in
the market risk position between two
parties.
Real-time public reporting means the
reporting of data relating to a swap
transaction, including price and
volume, as soon as technologically
practicable after the time at which the
swap transaction has been executed.
Remaining party means a party to a
swap that consents to a transferor’s
transfer by novation of all of the
transferor’s rights, liabilities, duties and
obligations under such swap to a
transferee.
Reporting party means the party to a
swap with the duty to report a publicly
reportable swap transaction in
accordance with this part and section
2(a)(13)(F) of the Act.
Transferee means a party to a swap
that accepts, by way of novation, all of
a transferor’s rights, liabilities, duties
and obligations under such swap with
respect to a remaining party.
Transferor means a party to a swap
that transfers, by way of novation, all of
its rights, liabilities, duties and
obligations under such swap, with
respect to a remaining party, to a
transferee.
Unique product identifier means a
unique identification of a particular
level of the taxonomy of the product in
an asset class or sub-asset class in
question, as further described in
§ 43.4(f) and appendix A to this part.
Such unique product identifier may
combine the information from one or
more of the data fields described in
appendix A.
Widely published means to publish
and make available through electronic
means in a manner that is freely
available and readily accessible to the
public.
§ 43.3 Method and timing for real-time
public reporting.
(a) Responsibilities of parties to a
swap to report swap transaction and
pricing data in real-time—(1) In general.
A reporting party shall report any
publicly reportable swap transaction to
a registered swap data repository as
soon as technologically practicable after
such publicly reportable swap
transaction is executed. For purposes of
this part, a registered swap data
repository includes any swap data
repository provisionally registered with
the Commission pursuant to part 49 of
this chapter.
(2) Swaps executed on or pursuant to
the rules of a registered swap execution
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facility or designated contract market. A
party to a publicly reportable swap
transaction shall satisfy its reporting
requirement under this section by
executing a publicly reportable swap
transaction on or pursuant to the rules
of a registered swap execution facility or
designated contract market.
(3) Off-facility swaps. All off-facility
swaps shall be reported by the reporting
party as soon as technologically
practicable following execution, to a
registered swap data repository for the
appropriate asset class in accordance
with the rules set forth in this part.
Unless otherwise agreed to by the
parties prior to the execution of the
publicly reportable swap transaction,
the following persons shall be reporting
parties for off-facility swaps:
(i) If only one party is a swap dealer
or major swap participant, then the
swap dealer or major swap participant
shall be the reporting party;
(ii) If one party is a swap dealer and
the other party is a major swap
participant, then the swap dealer shall
be the reporting party;
(iii) If both parties are swap dealers,
then the swap dealers shall designate
which party shall be the reporting party;
(iv) If both parties are major swap
participants, then the major swap
participants shall designate which party
shall be the reporting party;
(v) If neither party is a swap dealer or
a major swap participant, then the
parties shall designate which party (or
its agent) shall be the reporting party.
(b) Public dissemination of swap
transaction and pricing data—(1)
Publicly reportable swap transactions
executed on or pursuant to the rules of
a registered swap execution facility or
designated contract market. A registered
swap execution facility or designated
contract market shall satisfy the
requirements of this subparagraph by
transmitting swap transaction and
pricing data to a registered swap data
repository, as soon as technologically
practicable after the publicly reportable
swap transaction has been executed on
or pursuant to the rules of such trading
platform or facility.
(2) Public dissemination of swap
transaction and pricing data by
registered swap data repositories. A
registered swap data repository shall
ensure that swap transaction and
pricing data is publicly disseminated, as
soon as technologically practicable after
such data is received from a registered
swap execution facility, designated
contract market or reporting party,
unless such publicly reportable swap
transaction is subject to a time delay
described in § 43.5 of this part, in which
case the publicly reportable swap
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transaction shall be publicly
disseminated in the manner described
in § 43.5.
(3) Prohibitions on disclosure of data.
(i) If there is a registered swap data
repository for an asset class, a registered
swap execution facility or designated
contract market shall not disclose swap
transaction and pricing data relating to
publicly reportable swap transactions in
such asset class, prior to the public
dissemination of such data by a
registered swap data repository unless:
(A) Such disclosure is made no earlier
than the transmittal of such data to a
registered swap data repository for
public dissemination;
(B) Such disclosure is only made to
market participants on such registered
swap execution facility or designated
contract market;
(C) Market participants are provided
advance notice of such disclosure; and
(D) Any such disclosure by the
registered swap execution facility or
designated contract market is nondiscriminatory.
(ii) If there is a registered swap data
repository for an asset class, a swap
dealer or major swap participant shall
not disclose swap transaction and
pricing data relating to publicly
reportable swap transactions in such
asset class, prior to the public
dissemination of such data by a
registered swap data repository unless:
(A) Such disclosure is made no earlier
than the transmittal of such data to a
registered swap data repository for
public dissemination;
(B) Such disclosure is only made to
the customer base of such swap dealer
or major swap participant, including
parties who maintain accounts with or
have been swap counterparties with
such swap dealer or major swap
participant;
(C) Swap counterparties are provided
advance notice of such disclosure; and
(D) Any such disclosure by the swap
dealer or major swap participant is nondiscriminatory.
(c) Requirements for registered swap
data repositories in providing the public
dissemination of swap transaction and
pricing data in real-time—(1)
Compliance with 17 CFR part 49. Any
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall comply with part 49 of this
chapter and shall publicly disseminate
swap transaction and pricing data in
accordance with this part as soon as
technologically practicable upon receipt
of such data, except as otherwise
provided in this part.
(2) Acceptance and public
dissemination of all swaps in an asset
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class. Any registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time for swaps in its
selected asset class shall accept and
publicly disseminate swap transaction
and pricing data in real-time for all
publicly reportable swap transactions
within such asset class, unless
otherwise prescribed by the
Commission.
(3) Annual independent review. Any
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall perform, on an annual basis, an
independent review in accordance with
established audit procedures and
standards of the registered swap data
repository’s security and other system
controls for the purposes of ensuring
compliance with the requirements in
this part.
(d) Availability of swap transaction
and pricing data to the public. (1)
Registered swap data repositories shall
publicly disseminate swap transaction
and pricing data in a consistent, usable
and machine-readable electronic format
that allows the data to be downloaded,
saved and analyzed.
(2) Data that is publicly disseminated
pursuant to this part shall be available
from an Internet Web site in a format
that is freely available and readily
accessible to the public.
(3) Registered swap data repositories
shall provide to the Commission a
hyperlink to the Internet Web site where
publicly disseminated swap transaction
and pricing data can be accessed by the
public.
(e) Errors or omissions—(1) In general.
Any errors or omissions in swap
transaction and pricing data that were
publicly disseminated in real-time shall
be corrected or cancelled in the
following manner:
(i) If a party to the swap becomes
aware of an error or omission in the
swap transaction and pricing data
reported with respect to such swap,
such party shall promptly notify the
other party of the error and/or
correction.
(ii) If a reporting party to a swap
becomes aware of an error or omission
in the swap transaction or pricing data
which it reported to a registered swap
data repository or which was reported
by a registered swap execution facility
or designated contract market with
respect to such swap, either through its
own initiative or through notice by the
other party to the swap, the reporting
party shall promptly submit corrected
data to the same registered swap
execution facility, designated contract
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1245
market or registered swap data
repository.
(iii) If the registered swap execution
facility or designated contract market
becomes aware of an error or omission
in the swap transaction or pricing data
reported with respect to such swap, or
receives notification from the reporting
party, the registered swap execution
facility or designated contract market
shall promptly submit corrected data to
the same registered swap data
repository.
(iv) Any registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall publicly
disseminate any cancellations or
corrections to such data, as soon as
technologically practicable after receipt
or discovery of any such cancellation or
correction.
(2) Improper cancellation or
correction. Reporting parties, registered
swap execution facilities, designated
contract markets and registered swap
data repositories shall not submit or
agree to submit a cancellation or
correction for the purpose of rereporting swap transaction and pricing
data in order to gain or extend a delay
in public dissemination of accurate
swap transaction or pricing data or to
otherwise evade the reporting
requirements in this part.
(3) Cancellation. A registered swap
data repository shall cancel any
incorrect data that had been publicly
disseminated by publicly disseminating
a cancellation of such data, as soon as
technologically practicable, in the
manner described in appendix A to this
part.
(4) Correction. A registered swap data
repository shall correct any incorrect
data that had been publicly
disseminated by publicly disseminating
a cancellation of the incorrect swap
transaction and pricing data and then
publicly disseminating the correct data,
as soon as technologically practicable,
in the manner described in appendix A
to this part.
(f) Hours of operation of registered
swap data repositories. Unless
otherwise provided in this subsection, a
registered swap data repository shall
have systems in place to continuously
receive and publicly disseminate swap
transaction and pricing data in real-time
pursuant to this part.
(1) A registered swap data repository
may declare closing hours to perform
system maintenance.
(2) A registered swap data repository
shall, to the extent reasonably possible,
avoid scheduling closing hours when, in
its estimation, the U.S. market and
major foreign markets are most active.
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(3) A registered swap data repository
shall comply with the requirements
under part 40 of this chapter in setting
closing hours and shall provide advance
notice of its closing hours to market
participants and the public.
(g) Acceptance of data during closing
hours. During closing hours, a registered
swap data repository shall have the
capability to receive and hold in queue
any data regarding publicly reportable
swap transactions pursuant to this part.
(1) Upon any reopening after closing
hours, a registered swap data repository
shall promptly and publicly disseminate
the swap transaction and pricing data of
swaps held in queue, in accordance
with the requirements of this part.
(2) If at any time during closing hours
a registered swap data repository is
unable to receive and hold in queue
swap transaction and pricing data
pursuant to this part, then the registered
swap data repository shall immediately
upon reopening issue notice that it has
resumed normal operations. Any
registered swap execution facility,
designated contract market or reporting
party that is obligated under this section
to report data to the registered swap
data repository shall report the data to
the registered swap data repository
immediately after receiving such notice.
(h) Timestamp requirements. In
addition to the execution timestamp
described in appendix A to this part,
registered entities, swap dealers and
major swap participants shall have the
following timestamp requirements with
respect to real-time public reporting of
swap transaction and pricing data for all
publicly reportable swap transactions:
(1) A registered swap execution
facility or designated contract market
shall timestamp swap transaction and
pricing data relating to a publicly
reportable swap transaction with the
date and time, to the nearest second of
when such registered swap execution
facility or designated contract market:
(i) Receives data from a swap
counterparty (if applicable); and
(ii) Transmits such data to a registered
swap data repository for public
dissemination.
(2) A registered swap data repository
shall timestamp swap transaction and
pricing data relating to a publicly
reportable swap transaction with the
date and time, to the nearest second
when such registered swap data
repository:
(i) Receives data from a registered
swap execution facility, designated
contract market or reporting party; and
(ii) Publicly disseminates such data.
(3) A swap dealer or major swap
participant shall timestamp swap
transaction and pricing data relating to
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an off-facility swap with the date and
time, to the nearest second when such
swap dealer or major swap participant
transmits such data to a registered swap
data repository for public
dissemination.
(4) Records of all timestamps required
by this subsection shall be maintained
for a period of at least five years from
the execution of the publicly reportable
swap transaction.
(i) Fees. Any fees or charges assessed
on a reporting party, registered swap
execution facility or designated contract
market by a registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time for the
collection of such data shall be
equitable and non-discriminatory. If
such registered swap data repository
allows a fee discount based on the
volume of data reported to it for public
dissemination, then such discount shall
be made available to all reporting
parties, registered swap execution
facilities and designated contract
markets in an equitable and nondiscriminatory manner.
§ 43.4 Swap transaction and pricing data
to be publicly disseminated in real-time.
(a) In general. Swap transaction and
pricing information shall be reported to
a registered swap data repository so that
the registered swap data repository can
publicly disseminate swap transaction
and pricing data in real-time in
accordance with this part, including the
manner described in this section and
appendix A to this part.
(b) Public dissemination of data
fields. Any registered swap data
repository that accepts and publicly
disseminates swap transaction and
pricing data in real-time shall publicly
disseminate the information described
in appendix A to this part, as
applicable, for any publicly reportable
swap transaction.
(c) Additional swap information. A
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
may require reporting parties, registered
swap execution facilities and designated
contract markets to report to such
registered swap data repository, such
information that is necessary to compare
the swap transaction and pricing data
that was publicly disseminated in realtime to the data reported to a registered
swap data repository pursuant to
Section 2(a)(13)(G) of the Act or to
confirm that parties to a swap have
reported in a timely manner pursuant to
§ 43.3 of this part. Such additional
information shall not be publicly
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disseminated by the registered swap
data repository.
(d) Anonymity of the parties to a
publicly reportable swap transaction—
(1) In general. Swap transaction and
pricing data that is publicly
disseminated in real-time shall not
disclose the identities of the parties to
the swap or otherwise facilitate the
identification of a party to a swap. A
registered swap data repository that
accepts and publicly disseminates swap
transaction and pricing data in real-time
shall not publicly disseminate such data
in a manner that discloses or otherwise
facilitates the identification of a party to
a swap.
(2) Actual product description
reported to registered swap data
repository. Reporting parties, registered
swap execution facilities and designated
contract markets shall provide a
registered swap data repository with
swap transaction and pricing data that
includes an actual description of the
underlying asset(s). This requirement is
separate from the requirement that a
reporting party, registered swap
execution facility or designated contract
market shall report swap data to a
registered swap data repository
pursuant to Section 2(a)(13)(G) of the
Act and the Commission’s regulations.
(3) Public dissemination of the actual
description of underlying asset(s).
Notwithstanding the anonymity
protection for certain swaps in the other
commodity asset class in § 43.4(d)(4)(ii),
a registered swap data repository shall
publicly disseminate the actual
underlying asset(s) of all publicly
reportable swap transactions in the
interest rate, credit, equity and foreign
exchange asset classes.
(4) Public dissemination of the
underlying asset(s) for certain swaps in
the other commodity asset class. A
registered swap data repository shall
publicly disseminate swap transaction
and pricing data in the other commodity
asset class as described in this
subsection.
(i) A registered swap data repository
shall publicly disseminate swap
transaction and pricing data for publicly
reportable swap transactions in the
other commodity asset class in the
manner described in § 43.4(d)(4)(ii).
(ii) The actual underlying asset(s)
shall be publicly disseminated for the
following publicly reportable swap
transactions in the other commodity
asset class:
(A) Any publicly reportable swap
transaction that references one of the
contracts described in appendix B to
this part;
(B) Any publicly reportable swap
transaction that is economically related
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to one of the contracts described in
appendix B to this part; and
(C) Any publicly reportable swap
transaction executed on or pursuant to
the rules of a registered swap execution
facility or designated contract market.
(e) Unique product identifier. If a
unique product identifier is developed
that sufficiently describes one or more
of the swap transaction and pricing data
fields for real-time reporting described
in appendix A to this part, then such
unique product identifier may be
publicly disseminated in lieu of the data
fields that it describes.
(f) Reporting of notional or principal
amounts to a registered swap data
repository—(1) Off-facility swaps. The
reporting party shall report the actual
notional or principal amount of any offfacility swap to a registered swap data
repository that accepts and publicly
disseminates such data pursuant to part
43.
(2) Swaps executed on or pursuant to
the rules of a registered swap execution
facility or designated contract market.
(i) A registered swap execution facility
or designated contract market shall
transmit the actual notional or principal
amount for all swaps executed on or
pursuant to the rules of such registered
swap execution facility or designated
contract market, to a registered swap
data repository that accepts swaps in the
asset class.
(ii) The actual notional or principal
amount for any block trade executed
pursuant to the rules of a registered
swap execution facility or designated
contract market shall be reported to the
registered swap execution facility or
designated contract market pursuant to
the rules of the registered swap
execution facility or designated contract
market.
(g) Public dissemination of rounded
notional or principal amounts. The
notional or principal amount of a
publicly reportable swap transaction, as
described in appendix A to this part,
shall be rounded and publicly
disseminated by a registered swap data
repository as follows:
(1) If the notional or principal amount
is less than one thousand, round to
nearest five, but in no case shall a
publicly disseminated notional or
principal amount be less than five;
(2) If the notional or principal amount
is less than ten thousand but equal to or
greater than one thousand, round to
nearest one hundred;
(3) If the notional or principal amount
is less than 100 thousand but equal to
or greater than ten thousand, round to
nearest one thousand;
(4) If the notional or principal amount
is less than one million but equal to or
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greater than 100 thousand, round to
nearest ten thousand;
(5) If the notional or principal amount
is less than 100 million but equal to or
greater than one million, round to the
nearest one million;
(6) If the notional or principal amount
is less than 500 million but equal to or
greater than 100 million, round to the
nearest ten million;
(7) If the notional or principal amount
is less than one billion but equal to or
greater than 500 million, round to the
nearest 50 million;
(8) If the notional or principal amount
is less than 100 billion but equal to or
greater than one billion, round to the
nearest one billion;
(9) If the notional or principal amount
is greater than 100 billion, round to the
nearest 50 billion.
(h) Public dissemination caps on
notional or principal amounts. The
rounded notional or principal amount
that is publicly disseminated for a
publicly reportable swap transaction
shall be capped in a manner that adjusts
in accordance with the appropriate
minimum block size that corresponds to
such publicly reportable swap
transaction. If there is no appropriate
minimum block size applicable to a
publicly reportable swap transaction,
then the cap on the notional or principal
amount that is publicly disseminated
shall be applied in the following
manner:
(1) Interest rate swaps. (i) The
publicly disseminated notional or
principal amount for an interest rate
swap subject to the rules in this part
with a tenor greater than zero up to and
including two years shall be capped at
USD 250 million.
(ii) The publicly disseminated
notional or principal amount for an
interest rate swap subject to the rules in
this part with a tenor greater than two
years up to and including ten years shall
be capped at USD 100 million.
(iii) The publicly disseminated
notional or principal amount for an
interest rate swap subject to the rules in
this part with a tenor greater than ten
years shall be capped at USD 75 million.
(2) Credit swaps. The publicly
disseminated notional or principal
amount for a credit swap subject to the
rules in this part shall be capped at USD
100 million.
(3) Equity swaps. The publicly
disseminated notional or principal
amount for an equity swap subject to the
rules in this part shall be capped at USD
250 million.
(4) Foreign exchange swaps. The
publicly disseminated notional or
principal amount for a foreign exchange
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swap subject to the rules in this part
shall be capped at USD 250 million.
(5) Other commodity swaps. The
publicly disseminated notional or
principal amount for any other
commodity swap subject to the rules in
this part shall be capped at USD 25
million.
§ 43.5 Time delays for public
dissemination of swap transaction and
pricing data.
(a) In general. The time delay for the
real-time public reporting of a block
trade or large notional off-facility swap
begins upon execution, as defined in
§ 43.2 of this part. It is the responsibility
of the registered swap data repository
that accepts and publicly disseminates
swap transaction and pricing data in
real-time to ensure that the block trade
or large notional off-facility swap
transaction and pricing data is publicly
disseminated pursuant to this part upon
the expiration of the appropriate time
delay described in § 43.5(d) through (h).
(b) Public dissemination of publicly
reportable swap transactions subject to
a time delay. A registered swap data
repository shall publicly disseminate
swap transaction and pricing data that
is subject to a time delay pursuant to
this paragraph, as follows:
(1) No later than the prescribed time
delay period described in this
paragraph;
(2) No sooner than the prescribed time
delay period described in this
paragraph; and
(3) Precisely upon the expiration of
the time delay period described in this
paragraph.
(c) Interim time delay—(1) In general.
The public dissemination of swap
transaction and pricing data relating to
any publicly reportable swap
transaction shall receive the same time
delays for block trades and large
notional off-facility swaps, as described
in this subsection, until such time as an
appropriate minimum block size is
established with respect to such
publicly reportable swap transaction.
(2) Swaps executed on or pursuant to
the rules of a registered swap execution
facility or designated contract market.
Any publicly reportable swap
transaction that does not have an
appropriate minimum block size and
that is executed on or pursuant to the
rules of a registered swap execution
facility or designated contract market
shall follow the time delays set forth in
§ 43.5(d) until such time that an
appropriate minimum block size is
established for such publicly reportable
swap transaction.
(3) Off-facility swaps subject to the
mandatory clearing requirement. Any
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off-facility swap that does not have an
appropriate minimum block size and
that is subject to the mandatory clearing
requirement described in Section 2(h)(1)
of the Act and Commission regulations,
with the exception of those off-facility
swaps that are either excepted from the
mandatory clearing requirement
pursuant to Section 2(h)(7) of the Act
and Commission regulations or that are
required to be cleared under Section
2(h)(2) of the Act and Commission
regulations but are not cleared, shall
follow the time delays set forth in
§ 43.5(e) until such time that an
appropriate minimum block size is
established for such off-facility swap.
(4) Off-facility swaps in the interest
rate, credit, foreign exchange and equity
asset classes not subject to the
mandatory clearing requirement with at
least one swap dealer or major swap
participant counterparty. Any offfacility swap in the interest rate, credit,
foreign exchange or equity asset classes,
where at least one party is a swap dealer
or major swap participant, that is not
subject to the mandatory clearing
requirement or is excepted from such
mandatory clearing requirement and
that does not have an appropriate
minimum block size shall follow the
time delays set forth in § 43.5(f) until
such time that an appropriate minimum
block size is established for such offfacility swap.
(5) Off-facility swaps in the other
commodity asset class not subject to the
mandatory clearing requirement with at
least one swap dealer or major swap
participant counterparty. Any offfacility swap in the other commodity
asset class, where at least one party is
a swap dealer or major swap participant,
that is not subject to the mandatory
clearing requirement or is excepted from
such mandatory clearing requirement
and that does not have an appropriate
minimum block size shall follow the
time delays set forth in § 43.5(g) until
such time that an appropriate minimum
block size is established for such offfacility swap.
(6) Off-facility swaps in all asset
classes not subject to the mandatory
clearing requirement in which neither
counterparty is a swap dealer or major
swap participant. Any off-facility swap,
in all asset classes, where neither party
is a swap dealer or major swap
participant, that is not subject to the
mandatory clearing requirement or is
excepted from such mandatory clearing
requirement and that does not have an
appropriate minimum block size shall
follow the time delays set forth in
§ 43.5(h) until such time that an
appropriate minimum block size is
established for such off-facility swap.
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(7) Time delays for public
dissemination upon establishment of an
appropriate minimum block size. After
an appropriate minimum block size is
established for a particular swap or
category of swaps, all publicly
reportable swap transactions that are
below the appropriate minimum block
size shall be publicly disseminated as
soon as technologically practicable after
execution pursuant to § 43.3 of this part.
(d) Time delay for block trades
executed pursuant to the rules of a
registered swap execution facility or
designated contract market. Any block
trade that is executed pursuant to the
rules of a registered swap execution
facility or designated contract market
shall receive a time delay in the public
dissemination of swap transaction and
pricing data as follows:
(1) Time delay during Year 1. For one
year beginning on the compliance date
of this part, the time delay for public
dissemination of swap transaction and
pricing data for all publicly reportable
swap transactions described in § 43.5(d)
shall be 30 minutes immediately after
execution of such publicly reportable
swap transaction.
(2) Time delay after Year 1. Beginning
on the first anniversary of the
compliance date of this part, the time
delay for public dissemination of swap
transaction and pricing data for all
publicly reportable swap transactions
described in § 43.5(d) shall be 15
minutes immediately after execution of
such publicly reportable swap
transaction.
(e) Time delay for large notional offfacility swaps subject to the mandatory
clearing requirement—(1) In general.
This subsection shall not apply to offfacility swaps that are excepted from the
mandatory clearing requirement
pursuant to Section 2(h)(7) of the Act
and Commission regulations, and this
subsection shall not apply to those
swaps that are required to be cleared
under Section 2(h)(2) of the Act and
Commission regulations but are not
cleared.
(2) Swaps subject to the mandatory
clearing requirement where at least one
party is a swap dealer or major swap
participant. Any large notional offfacility swap that is subject to the
mandatory clearing requirement
described in Section 2(h)(1) of the Act
and Commission regulations, in which
at least one party is a swap dealer or
major swap participant, shall receive a
time delay as follows:
(i) Time delay during Year 1. For one
year beginning on the compliance date
of this part, the time delay for public
dissemination of swap transaction and
pricing data for all swaps described in
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§ 43.5(e)(2) shall be 30 minutes
immediately after execution of such
swap.
(ii) Time delay after Year 1. Beginning
on the first anniversary of the
compliance date of this part, the time
delay for public dissemination of swap
transaction and pricing data for all
swaps described in § 43.5(e)(2) shall be
15 minutes immediately after execution
of such swap.
(3) Swaps subject to the mandatory
clearing requirement where neither
party is a swap dealer or major swap
participant. Any large notional offfacility swap that is subject to the
mandatory clearing requirement
described in Section 2(h)(1) of the Act
and Commission regulations, in which
neither party is a swap dealer or major
swap participant, shall receive a time
delay as follows:
(i) Time delay during Year 1. For one
year beginning on the compliance date
of this part, the time delay for public
dissemination of swap transaction and
pricing data for all swaps described in
§ 43.5(e)(3) shall be four hours
immediately after execution of such
swap.
(ii) Time delay during Year 2. For one
year beginning on the first anniversary
of the compliance date of this part, the
time delay for public dissemination of
swap transaction and pricing data for all
swaps described in § 43.5(e)(3) shall be
two hours immediately after execution
of such swap.
(iii) Time delay after Year 2.
Beginning on the second anniversary of
the compliance date of this part, the
time delay for public dissemination of
swap transaction and pricing data for all
swaps described in § 43.5(e)(3) shall be
one hour immediately after execution of
such swap.
(f) Time delay for large notional offfacility swaps in the interest rate, credit,
foreign exchange or equity asset classes
not subject to the mandatory clearing
requirement with at least one swap
dealer or major swap participant
counterparty. Any large notional offfacility swap in the interest rate, credit,
foreign exchange or equity asset classes
where at least one party is a swap dealer
or major swap participant, that is not
subject to the mandatory clearing
requirement or is excepted from such
mandatory clearing requirement, shall
receive a time delay in the public
dissemination of swap transaction and
pricing data as follows:
(1) Time delay during Year 1. For one
year beginning on the compliance date
of this part, the time delay for public
dissemination of swap transaction and
pricing data for all swaps described in
§ 43.5(f) shall be one hour immediately
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after execution of such swap; however,
any large notional off-facility swap in
the interest rate, credit, foreign
exchange or equity asset classes in
which one party is not a swap dealer or
major swap participant and such party
is not a financial entity as defined in
Section 2(h)(7)(C) of the Act and
Commission regulations, shall receive a
time delay of one hour immediately
after execution of such swap; or if such
swap transaction or pricing data is
received by the registered swap data
repository later than one hour
immediately after execution, the
registered swap data repository shall
publicly disseminate such data as soon
as technologically practicable after the
data is received.
(2) Time delay during Year 2. For one
year beginning on the first anniversary
of the compliance date of this part, the
time delay for public dissemination of
swap transaction and pricing data for all
swaps described in § 43.5(f) shall be 30
minutes immediately after execution of
such swap; however, any large notional
off-facility swap in the interest rate,
credit, foreign exchange or equity asset
classes in which one party is not a swap
dealer or major swap participant and
such party is not a financial entity as
defined in Section 2(h)(7)(C) of the Act
and Commission regulations, shall
receive a time delay of 30 minutes
immediately after execution of such
swap; or if such swap transaction or
pricing data is received by the registered
swap data repository later than 30
minutes immediately after execution,
the registered swap data repository shall
publicly disseminate such data as soon
as technologically practicable after the
data is received.
(3) Time delay after Year 2. Beginning
on the second anniversary of the
compliance date of this part, the time
delay for public dissemination of swap
transaction and pricing data for all
swaps described in § 43.5(f) shall be 30
minutes immediately after execution of
such swap.
(g) Time delay for large notional offfacility swaps in the other commodity
asset class not subject to the mandatory
clearing requirement with at least one
swap dealer or major swap participant
counterparty. Any large notional offfacility swap in the other commodity
asset class where at least one party is a
swap dealer or major swap participant,
that is not subject to the mandatory
clearing requirement or is exempt from
such mandatory clearing requirement,
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shall receive a time delay in the public
dissemination of swap transaction and
pricing data as follows:
(1) Time delay during Year 1. For one
year beginning on the compliance date
of this part, the time delay for public
dissemination of swap transaction and
pricing data for all swaps described in
§ 43.5(g) shall be four hours
immediately after execution of such
swap; however, any large notional offfacility swap in the other commodity
asset class in which only one party is
not a swap dealer or major swap
participant and such party is not a
financial entity as defined in Section
2(h)(7)(C) of the Act and Commission
regulations, shall receive a time delay of
four hours immediately after execution
of such swap, or if such swap
transaction or pricing data is received
by the registered swap data repository
later than four hours immediately after
execution of such swap, the registered
swap data repository shall publicly
disseminate such data as soon as
technologically practicable after the data
is received.
(2) Time delay during Year 2. For one
year beginning on the first anniversary
of the compliance date of this part, the
time delay for public dissemination of
swap transaction and pricing data for all
swaps described in § 43.5(g) shall be
two hours immediately after execution
of such swap; however, any large
notional off-facility swap in the other
commodity asset class in which only
one party is not a swap dealer or major
swap participant and such party is not
a financial entity as defined in Section
2(h)(7)(C) of the Act and Commission
regulations, shall receive a time delay of
two hours immediately after execution
of such swap, or if such swap
transaction or pricing data is received
by the registered swap data repository
later than two hours immediately after
execution, the registered swap data
repository shall publicly disseminate
such data as soon as technologically
practicable after the data is received.
(3) Time delay after Year 2. Beginning
on the second anniversary of the
compliance date of this part, the time
delay for public dissemination of swap
transaction and pricing data for all
swaps described in § 43.5(g) shall be
two hours after the execution of such
swap.
(h) Time delay for large notional offfacility swaps in all asset classes not
subject to the mandatory clearing
requirement in which neither
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counterparty is a swap dealer or a major
swap participant. Any large notional
off-facility swap in which neither party
is a swap dealer or a major swap
participant, which is not subject to the
mandatory clearing requirement or is
exempt from such mandatory clearing
requirement, shall receive a time delay
in the public dissemination of swap
transaction and pricing data as follows:
(1) Time delay during Year 1. For one
year beginning on the compliance date
of this part, the time delay for public
dissemination of swap transaction and
pricing data for all swaps described in
§ 43.5(h) shall be 48 business hours
immediately after execution of such
swap.
(2) Time delay during Year 2. For one
year beginning on the first anniversary
of the compliance date of this part, the
time delay for public dissemination of
swap transaction and pricing data for all
swaps described in § 43.5(h) shall be 36
business hours immediately after the
execution of such swap.
(3) Time delay after Year 2. Beginning
on the second anniversary of the
compliance date of this part, the time
delay for public dissemination
transaction and pricing data for all
swaps described in § 43.5(h) shall be 24
business hours immediately after the
execution of such swap.
§ 43.6
[Reserved]
Appendix A to Part 43—Data Fields for
Public Dissemination
The data fields described in Table A1
and Table A2, to the extent applicable
for a particular publicly reportable swap
transaction, shall be publicly
disseminated pursuant to part 43. Table
A1 and Table A2 provide guidance for
compliance with the reporting and
public dissemination of each data field.
Reporting parties, registered swap
execution facilities and designated
contract markets shall report swap
transaction and pricing data necessary
to publicly disseminate such data,
pursuant to part 43 and this appendix
A to part 43, to a registered swap data
repository as soon as technologically
practicable after execution of the
publicly reportable swap transaction. A
registered swap data repository shall
publicly disseminate the information in
Table A1 and A2 in a consistent form
and manner for swaps within the same
asset class.
BILLING CODE 6351–01–P
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Appendix B to Part 43—Enumerated
Physical Commodity Contracts and
Other Contracts
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Enumerated Physical Commodity Contracts
Agriculture
ICE Futures U.S. Cocoa
ICE Futures U.S. Coffee C
Chicago Board of Trade Corn
ICE Futures U.S. Cotton No. 2
ICE Futures U.S. FCOJ–A
Chicago Mercantile Exchange Live Cattle
Chicago Board of Trade Oats
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Chicago Board of Trade Rough Rice
Chicago Board of Trade Soybeans
Chicago Board of Trade Soybean Meal
Chicago Board of Trade Soybean Oil
ICE Futures U.S. Sugar No. 11
ICE Futures U.S. Sugar No. 16
Chicago Board of Trade Wheat
Minneapolis Grain Exchange Hard Red
Spring Wheat
Kansas City Board of Trade Hard Winter
Wheat
Chicago Mercantile Exchange Class III Milk
Chicago Mercantile Exchange Feeder Cattle
Chicago Mercantile Exchange Lean Hogs
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Metals
Commodity Exchange, Inc. Copper
New York Mercantile Exchange Palladium
New York Mercantile Exchange Platinum
Commodity Exchange, Inc. Gold
Commodity Exchange, Inc. Silver
Energy
New York Mercantile Exchange Light Sweet
Crude Oil
New York Mercantile Exchange New York
Harbor Gasoline Blendstock
New York Mercantile Exchange Henry Hub
Natural Gas
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Federal Register / Vol. 77, No. 5 / Monday, January 9, 2012 / Rules and Regulations
forth in § 43.5. The first row of each table
describes the asset classes to which each
chart applies. The column entitled ‘‘Yearly
Phase-In’’ indicates the periods beginning on
the compliance date of this part and
beginning on the anniversary of the
compliance date thereafter. The column
entitled ‘‘Time Delay for Public
Dissemination’’ indicates the precise length
of time delay, starting upon execution, for the
New York Mercantile Exchange New York
Harbor Heating Oil
Other Contracts
Brent Crude Oil (ICE)
Appendix C to Part 43—Time Delays
for Public Dissemination
The tables below provide clarification of
the time delays for public dissemination set
public dissemination of such swap
transaction and pricing data by a registered
swap data repository.
Table C1. Block Trades Executed on or
Pursuant to the Rules of a Registered Swap
Execution Facility or Designated Contract
Market (Illustrating §§ 43.5(d)(1) and (d)(2))
Table C1 also designates the interim time
delays for swaps described in § 43.5(c)(2).
ALL ASSET CLASSES
Yearly phase-in
Time delay for public dissemination
Year 1 ........................................................
After Year 1 ...............................................
30 minutes.
15 minutes.
Table C2. Large Notional Off-Facility Swaps
Subject to the Mandatory Clearing
Requirement With at Least One Swap Dealer
or Major Swap Participant Counterparty
(Illustrating §§ 43.5(e)(2)(A) and (e)(2)(B))
Table C2 excludes off-facility swaps that
are excepted from the mandatory clearing
requirement pursuant to Section 2(h)(7) of
the Act and Commission regulations and
those off-facility swaps that are required to be
cleared under Section 2(h)(2) of the Act and
Commission regulations but are not cleared.
Table C2 also designates the interim time
delays for swaps described in § 43.5(c)(3).
ALL ASSET CLASSES
Yearly phase-in
Time delay for public dissemination
Year 1 ........................................................
After Year 1 ...............................................
30 minutes.
15 minutes.
Table C3. Large Notional Off-Facility Swaps
Subject to the Mandatory Clearing
Requirement in Which Neither Counterparty
Is a Swap Dealer or Major Swap Participant
(Illustrating §§ 43.5(e)(3)(A), (e)(3)(B), and
(e)(3)(C))
Table C3 excludes off-facility swaps that
are excepted from the mandatory clearing
requirement pursuant to Section 2(h)(7) of
the Act and Commission regulations and
those swaps that are required to be cleared
under Section 2(h)(2) of the Act and
Commission regulations but are not cleared.
Table C3 also designates the interim time
delays for swaps described in § 43.5(c)(3).
ALL ASSET CLASSES
Yearly phase-in
Time delay for public dissemination
Year 1 ........................................................
Year 2 ........................................................
After Year 2 ...............................................
4 hours.
2 hours.
1 hour.
Table C4. Large Notional Off-Facility Swaps
Not Subject to the Mandatory Clearing
Requirement With at Least One Swap Dealer
or Major Swap Participant Counterparty
(Illustrating §§ 43.5(f)(1), (f)(2) and (f)(3))
Table C4 includes large notional off-facility
swaps that are not subject to the mandatory
clearing requirement or are exempt from such
mandatory clearing requirement pursuant to
Section 2(h)(7) of the Act and Commission
regulations.
Table C4 also designates the interim time
delays for swaps described in § 43.5(c)(4).
INTEREST RATES, CREDIT, FOREIGN EXCHANGE, EQUITY ASSET CLASSES
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Yearly phase-in
Time delay for public dissemination
Year 1 ........................................................
1 hour.
However, if such swap includes a non-swap dealer/non-major swap participant counterparty that is
not a financial entity as defined in Section 2(h)(7)(C) of the Act and Commission regulations, then
one hour immediately after execution; or if received later than one hour by the registered swap
data repository, then public dissemination shall occur as soon as technologically practicable after
the data is received.
30 minutes.
Year 2 ........................................................
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1265
INTEREST RATES, CREDIT, FOREIGN EXCHANGE, EQUITY ASSET CLASSES—Continued
Yearly phase-in
Time delay for public dissemination
After Year 2 ...............................................
However, if such swap includes a non-swap dealer/non-major swap participant counterparty that is
not a financial entity as defined in Section 2(h)(7)(C) of the Act and Commission regulations, then
30 minutes immediately after execution; or if received later than 30 minutes by the registered
swap data repository, then public dissemination shall occur as soon as technologically practicable
after the data is received.
30 minutes.
Table C5. Large Notional Off-Facility Swaps
Not Subject to the Mandatory Clearing
Requirement With at Least One Swap Dealer
or Major Swap Participant Counterparty
(Illustrating §§ 43.5(g)(1), (g)(2), and (g)(3))
Table C5 includes large notional off-facility
swaps that are not subject to the mandatory
clearing requirement or are excepted from
such mandatory clearing requirement
pursuant to Section 2(h)(7) of the Act and
Commission regulations.
Table C5 also designates the interim time
delays for swaps described in § 43.5(c)(5).
OTHER COMMODITY ASSET CLASS
Yearly phase-in
Time delay for public dissemination
Year 1 ........................................................
4 hours.
However, if such swap includes a non-swap dealer/non-major swap participant counterparty that is
not a financial entity as defined in Section 2(h)(7)(C) of the Act and Commission regulations, then
four hours immediately after execution; or if received later than four hours by the registered swap
data repository, then public dissemination shall occur as soon as technologically practicable after
the data is received.
2 hours.
However, if such swap includes a non-swap dealer/non-major swap participant counterparty that is
not a financial entity as defined in Section 2(h)(7)(C) of the Act and Commission regulations, then
two hours immediately after execution; or if received later than two hours by the registered swap
data repository, then public dissemination shall occur as soon as technologically practicable after
the data is received.
2 hours.
Year 2 ........................................................
After Year 2 ...............................................
Table C6. Large Notional Off-Facility Swaps
Not Subject to the Mandatory Clearing
Requirement in Which Neither Counterparty
Is a Swap Dealer or Major Swap Participant
(Illustrating §§ 43.5(h)(1), (h)(2) and (h)(3))
Table C6 includes large notional off-facility
swaps that are not subject to the mandatory
clearing requirement or are exempt from such
mandatory clearing requirement pursuant to
Section 2(h)(7) of the Act and Commission
regulations.
Table C6 also designates the interim time
delays for swaps described in § 43.5(c)(6).
ALL ASSET CLASSES
Yearly phase-in
Time delay for public dissemination
Year 1 .......................................................
Year 2 .......................................................
After Year 2 ...............................................
48 business hours.
36 business hours.
24 business hours.
Appendices to Real-Time Public
Reporting of Swap Transaction Data—
Commission Voting Summary and
Statements of Commissioners
Note: The following appendices will not
appear in the Code of Federal Regulations
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Issued in Washington, DC, on December
20, 2011, by the Commission.
David A. Stawick,
Secretary of the Commission.
Appendix 1—Commission Voting
Summary
On this matter, Chairman Gensler and
Commissioners Sommers, Chilton,
O’Malia and Wetjen voted in the
affirmative; no Commissioner voted in
the negative.
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Appendix 2—Statement of Chairman
Gary Gensler
I support the final rule to implement
a real-time, public reporting regime for
swaps. This rule fulfills Congress’
direction under the Dodd-Frank Wall
Street Reform and Consumer Protection
Act to bring public transparency to the
entire swaps market for both cleared
and uncleared swaps. This rule will give
the public critical information on the
pricing of transactions—similar to what
has been working for decades in the
securities and futures markets.
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Real-time reporting introduces posttrade transparency to the swaps market,
which lowers costs for market
participants and consumers.
In response to commenters, the final
rule provides for the phasing in of
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compliance dates and time delays based
on market participant, place of
execution and underlying asset. As
directed by Congress, the final rule
protects the anonymity of counterparties
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to a swap and takes into account the
effect of the rule on market liquidity.
[FR Doc. 2011–33173 Filed 1–6–12; 8:45 am]
BILLING CODE 6351–01–P
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]]>Agencies
[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]
[Rules and Regulations]
[Pages 1182-1266]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33173]
[[Page 1181]]
Vol. 77
Monday,
No. 5
January 9, 2012
Part III
Commodity Futures Trading Commission
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17 CFR Part 43
Real-Time Public Reporting of Swap Transaction Data; Final Rule
Federal Register / Vol. 77 , No. 5 / Monday, January 9, 2012 / Rules
and Regulations
[[Page 1182]]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 43
RIN 3038-AD08
Real-Time Public Reporting of Swap Transaction Data
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') is adopting regulations to implement certain statutory
provisions enacted by the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act''). Specifically, in accordance with
the Dodd-Frank Act, the Commission is adopting rules to implement a
framework for the real-time public reporting of swap transaction and
pricing data for all swap transactions.
DATES: Effective date: March 9, 2012.
FOR FURTHER INFORMATION CONTACT: Thomas Leahy, Associate Director,
Division of Market Oversight (``DMO'') at (202) 418-5278 or
tleahy@cftc.gov; Jeffrey L. Steiner, Special Counsel, DMO at (202) 418-
5482 or jsteiner@cftc.gov; Susan Nathan, Senior Special Counsel, DMO at
(202) 418-5133 or snathan@cftc.gov; Jason Shafer, Attorney-Advisor,
Office of General Counsel at (202) 418-5097 or jshafer@cftc.gov; or
Laurie Gussow, Attorney-Advisor, DMO at (202) 418-7623 or
lgussow@cftc.gov; Commodity Futures Trading Commission, Three Lafayette
Center, 1155 21st Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Overview
B. Summary of the Proposed Part 43 Regulations
1. Proposed Sec. 43.3--Method and Timing for Real-Time Public
Reporting
2. Proposed Sec. 43.4--Swap Transaction and Pricing Data To Be
Publicly Disseminated in Real-Time
3. Proposed Sec. 43.5--Block Trades and Large Notional Swaps
for Particular Markets and Transactions
4. Proposed Appendix A to Part 43
C. Overview of Comments Received
D. Proposed Sec. 43.5--Block Trades and Large Notional Swaps
II. Part 43 of the Commission's Regulations--Final Rules
A. Section 43.1--Purpose, Scope and Rules of Construction
1. Scope--Generally
2. Swaps Between Affiliates and Portfolio Compression Exercises
3. Uncleared or Bespoke Swaps
4. Foreign Exchange (``FX'') Asset Class
5. Limitations and Special Accommodations
6. Liquidity
7. International Issues
8. Final Rule Text of Sec. 43.1
B. Section 43.2--Definitions
1. Harmonization
2. Defined Terms
3. Additional Issues Relating to Defined Terms
C. Section 43.3--Method and Timing for Real-Time Public
Reporting
1. Responsibilities of Parties to a Swap (Sec. 43.3(a))
2. Public Dissemination of Swap Transaction and Pricing Data
(Sec. 43.3(b))
3. Requirements for Registered Swap Data Repositories in
Providing the Public Dissemination of Swap Transaction and Pricing
Data (Sec. 43.3(c))
4. Requirements for Third-Party Service Providers (Proposed
Sec. 43.3(d))
5. Availability of Swap Transaction and Pricing Data to the
Public (Sec. 43.3(d))
6. Errors and Omissions (Sec. 43.3(e))
7. Hours of Operation of Registered Swap Data Repositories
(Sec. 43.3(f))
8. Acceptance of Data During Closing Hours (Sec. 43.3(g))
9. Timestamp Requirements (Sec. 43.3(h))
10. Fees Charged by SDRs (Sec. 43.3(i))
D. Section 43.4--Swap Transaction and Pricing Data to be
Publicly Disseminated in Real-Time
1. In General (Sec. 43.4(a))
2. Public Dissemination of Data Fields (Sec. 43.4(b))
3. Additional Swap Information (Sec. 43.4(c))
4. Amendments to Data Fields (Proposed Sec. 43.4(d))
5. Anonymity of the Parties to a Publicly Reportable Swap
Transaction (Sec. 43.4(d))
6. Unique Product Identifier (Sec. 43.4(e))
7. Reporting of Notional or Principal Amounts to a Registered
Swap Repository (Sec. 43.4(f))
8. Public Dissemination of Rounded Notional or Principal Amounts
(Sec. 43.4(g))
9. Public Dissemination Caps on Notional or Principal Amounts
(Sec. 43.4(h))
E. Section 43.5--Time Delays for Public Dissemination of Swap
Transaction and Pricing Data
F. Appendix A to Part 43 (``Data Fields for Public
Dissemination'')
III. Effectiveness/Implementation and Interim Period
IV. Paperwork Reduction Act
V. Cost-Benefit Considerations
VI. Regulatory Flexibility Act
VII. List of Commenters
I. Background
A. Overview
On July 21, 2010, President Obama signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the ``Dodd-Frank Act'')
\1\ Title VII of which amended the Commodity Exchange Act (``CEA'' or
the ``Act'') \2\ to establish a comprehensive new regulatory framework
for swaps and security-based swaps. The legislation was intended 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 (``SDs'') and
major swap participants (``MSPs''); (2) imposing clearing and trade
execution requirements on standardized derivative products; (3)
creating robust recordkeeping and real-time reporting regimes; and (4)
enhancing the Commission's rulemaking and enforcement authorities with
respect to, among others, all registered entities and intermediaries
subject to the Commission's oversight.
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\1\ Public Law 111-203, 124 Stat. 1376 (2010), available at
https://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm. Pursuant
to section 701 of the Dodd-Frank Act, Title VII may be cited as the
``Wall Street Transparency and Accountability Act of 2010.''
\2\ 7 U.S.C. 1, et seq.
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Section 727 of the Dodd-Frank Act added to the CEA new section
2(a)(13), which establishes standards and requirements related to real-
time reporting and the public availability of swap transaction and
pricing data. This section directs the Commission to promulgate rules
providing for the public availability of such data in real-time,\3\ in
such form and at such times as the Commission deems appropriate to
enhance price discovery.\4\ CEA section 2(a)(13)(C) establishes the
four types of swaps for which transaction and pricing data must be
reported to the public in real-time.\5\ Because these categories
together comprise all swaps, the real-time reporting requirements apply
to all swaps, including those swaps executed on or pursuant to the
rules of a registered swap execution facility (``SEF'') or a designated
contract market (``DCM''), and those swaps executed bilaterally between
counterparties and
[[Page 1183]]
not pursuant to the rules of a SEF or DCM (``off-facility swaps'').\6\
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\3\ New Section 2(a)(13)(A) of the CEA defines real-time public
reporting as reporting ``data relating to a swap transaction,
including price and volume, `as soon as technologically practicable'
after the time at which the swap transaction has been executed.''
\4\ CEA section 2(a)(13)(B) states that ``[t]he purpose of this
section is to authorize the Commission to make swap transaction and
pricing data available to the public in such form and at such times
as the Commission determines appropriate to enhance price
discovery.''
\5\ The four categories are: (i) Swaps that are subject to the
mandatory clearing requirement in CEA section 2(h)(1) [added by
Section 723(a)(3) of the Dodd-Frank Act]; (ii) swaps that are not
subject to the mandatory clearing requirement but are nonetheless
cleared at a registered derivatives clearing organization (``DCO'');
(iii) swaps that are not cleared at a registered DCO and which are
reported to a registered swap data repository (``SDR'') or to the
Commission pursuant to CEA section 2(h)(6); and (iv) swaps that are
``determined to be required to be cleared'' under CEA section
2(h)(2) but are not cleared.
\6\ As explained more fully in the Commission's Notice of
Proposed Rulemaking, the legislative history of the Dodd-Frank Act
suggests that the real-time reporting requirements of CEA section
2(a)(13) apply to all swaps. See Commission, Notice of Proposed
Rulemaking: Real-Time Public Reporting of Swap Transaction Data, 75
FR 76140 (Dec. 7, 2010) (``Real-Time NPRM'' or ``Proposing
Release'').
---------------------------------------------------------------------------
With regard to swaps that are subject to the mandatory clearing
requirement (or excepted from such requirement) and those that are not
required to be cleared by a registered DCO but are cleared, CEA section
2(a)(13)(E) directs the Commission to prescribe rules that (i) ensure
that publicly disclosed information does not identify the participants;
(ii) specify the criteria for determining what constitutes a large
notional swap transaction (block trade) for particular markets and
contracts; (iii) specify the appropriate time delay for reporting large
notional swap transactions (block trades) to the public; and (iv) take
into account whether public disclosure will materially reduce market
liquidity. CEA section 2(a)(13)(E) does not require explicitly that the
rules promulgated by the Commission contain similar provisions for the
uncleared swaps described in CEA section 2(a)(13)(C)(iii) and (iv).
However, in exercising its authority under CEA section 2(a)(13)(B) to
``make swap transaction and pricing data available to the public in
such form and at such times as the Commission determines appropriate to
enhance price discovery,'' the Commission is authorized to prescribe
rules similar to those provisions in CEA section 2(a)(13)(E) for
uncleared swaps described in CEA sections 2(a)(13)(C)(iii) and (iv).\7\
---------------------------------------------------------------------------
\7\ In addition, the Commission is required by CEA section
2(a)(13)(C)(iii) to prescribe real-time public reporting
requirements for uncleared swaps, other than those uncleared swaps
described in CEA section 2(a)(13)(C)(iv), ``in a manner that does
not disclose the business transactions and market positions of any
person.''
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B. Summary of the Proposed Part 43 Regulations
On December 7, 2010, the Commission published for comment proposed
part 43 of its regulations to implement the real-time reporting mandate
of the Dodd-Frank Act.\8\ At the foundation of these regulations was
the Commission's belief that real-time public dissemination of swap
transaction and pricing data supports the fairness and efficiency of
markets and increases transparency, which in turn improves price
discovery and decreases risk (e.g., liquidity risk). The Commission's
Proposing Release thus introduced, in addition to definitions of terms
and processes relevant to real-time public reporting, rules governing:
(1) The entities or persons that shall be responsible for reporting
swap transaction and pricing data; (2) the entities or persons that
shall be responsible for publicly disseminating such data; (3) the data
fields and guidance with respect to the appropriate format and manner
for data to be reported to the public in real time; (4) the appropriate
minimum size and time delay for block trades and large notional swaps;
and (5) the proposed effective date and implementation schedule for the
proposed rules.
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\8\ See Real-Time NPRM supra note 6. Interested persons are
directed to the Real-Time NPRM for a full discussion of each of the
proposed part 43 rules.
---------------------------------------------------------------------------
The Commission's proposed part 43 rules reflected consultation with
staff of both the Securities and Exchange Commission (the ``SEC'') \9\
and the Board of Governors of the Federal Reserve.\10\ The proposed
rules also were informed by discussions during a joint public
roundtable to discuss swap data, SDRs and real-time reporting conducted
by CFTC and SEC staff on September 14, 2010 (the ``Roundtable'');
public comments received and posted on the Commission's Internet Web
site; \11\ and meetings and discussions between CFTC staff and market
participants.
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\9\ Section 763 of the Dodd-Frank Act authorizes the SEC to
promulgate rules ``to provide for the public availability of
security-based swap transaction, volume, and pricing data * * *.''
The SEC is adopting rules related to the real-time reporting of
security-based swaps as required by Section 763 of the Dodd-Frank
Act.
\10\ Section 712(a)(1) of the Dodd-Frank Act requires staff to
consult with the SEC and other prudential regulators.
\11\ Comment letters received in response to the Proposing
Release may be found on the Commission's Web site at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=919.
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As proposed, part 43 applied to all swaps \12\ as defined in CEA
section 1a(47) and as may be further defined by Commission regulations.
The proposed rules applied real-time reporting requirements to
registered entities (SEFs, DCMs and registered swap data repositories
(``SDRs'')) and the swap counterparties--including registered or exempt
SDs, registered or exempt MSPs and U.S.-based end-users.
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\12\ As noted, the categories of swaps described in CEA section
2(a)(13)(C) account for all swaps, whether cleared or uncleared and
regardless of whether executed on or pursuant to the rules of a SEF
or DCM, or executed off-facility.
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1. Proposed Sec. 43.3--Method and Timing for Real-Time Public
Reporting
CEA section 2(a)(13) directed the Commission to prescribe rules
specifying the method and timing for real time public reporting.
Consistent with that mandate, the Commission proposed in Sec. 43.3 to
require: (1) The parties to a swap transaction (including agents of the
parties) to report swap transaction and pricing data to the appropriate
registered entity in a timely manner; \13\ and (2) registered entities
to publicly disseminate swap transaction and pricing data.\14\ To
implement its authority to make swap transaction and pricing data
available to the public in such form and at such times as it determines
appropriate to enhance price discovery, the Commission proposed in
Sec. 43.3 to establish the manner in which swap counterparties must
report the swap transaction and pricing data to the appropriate
registered entity, the manner in which registered entities must
publicly disseminate the data in real time and the responsibilities of
the reporting party to each swap. Proposed Sec. 43.3 also established
requirements for acceptance and public dissemination of swap
transaction and pricing data by SDRs and third-party service providers
and specified standards for data recordkeeping and retention as well as
availability and accessibility of real-time swap transaction and
pricing data. In addition, proposed Sec. 43.3 established the process
by which errors or omissions in publicly disseminated swap transaction
and pricing data would be cancelled and/or corrected, the hours of
operation for SDRs and the procedures for scheduling closing hours.
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\13\ See CEA section 2(a)(13)(F).
\14\ See CEA section 2(a)(13)(D).
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2. Proposed Sec. 43.4--Swap Transaction and Pricing Data To Be
Publicly Disseminated in Real-Time
CEA section 2(a)(13)(B) directs the Commission to make swap
transaction and pricing data available to the public in such form and
at such times as the Commission determines appropriate to enhance price
discovery. Proposed Sec. 43.4 required that swap transaction
information be reported to a real-time disseminator and established the
manner and format in which this data will be publicly disseminated. In
that regard, appendix A to proposed part 43 provides a list of data
fields which an SDR must publicly disseminate regarding swap
transactions, and pricing data, as well as guidance on an acceptable
public reporting format and order for the listed data fields.
CEA sections 2(a)(13)(C) and (E) reflect Congress' intent that
regulators ``ensure that the public reporting of swap transactions and
pricing data does not disclose the names or identities of
[[Page 1184]]
the parties to the transactions.'' \15\ In response, the Commission
proposed in Sec. 43.4(e)(1) to prohibit the public dissemination of
swap transaction and pricing information which identifies or otherwise
facilitates the identification of a party to a swap. This section
further provided that an SDR may not report such data in a manner that
discloses or otherwise facilitates the identification of a party to a
swap. The Commission recognized that the latter prohibition may result
in a loss of clarity with respect to the precise characteristics of
swaps in certain circumstances, and required in proposed Sec.
43.4(e)(2) that a reporting party or a swap market \16\ provide the
real-time disseminator with a specific description of the underlying
asset and tenor of a swap that is general enough to provide anonymity
but specific enough to permit a meaningful understanding of the swap.
For certain off-facility swaps--particularly ``other commodity'' swaps
that have underlying assets with specific delivery or pricing points--
market participants may be able to infer the identity of a party or
swap counterparties based on the description of an underlying asset.
Accordingly, proposed Sec. 43.4(e)(2) was intended to permit reporting
parties of off-facility swaps to publicly disseminate a description of
an underlying asset or tenor in a way that does not disclose a party to
a swap but nonetheless provides a meaningful understanding of the swap
for purposes of enhancing price discovery.\17\
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\15\ 156 Cong. Rec. S5921 (daily ed. July 15, 2010) (Statement
of Sen. Blanche Lincoln).
\16\ The term ``swap market'' was defined in proposed Sec.
43.2(z) as ``any registered swap execution facility or registered
designated contract market that makes swaps available for trading.''
As discussed below, the Commission is not adopting the term ``swap
market'' and is, for clarity, changing such references to
``registered swap execution facility or designated contract
market.''
\17\ The Commission described a hypothetical example in which
the underlying asset to an off-facility swap that has a specific
delivery point at Lake Charles, Louisiana--a contract commonly known
to be traded by only two companies. Disclosing the underlying asset
to the public would effectively disclose that one of those two
companies was entering into the trade. See Real-Time NPRM supra note
6, at 76150. Proposed Sec. 43.4(e)(2) would enable the reporting
party to use a broader geographic region in place of the specific
delivery point.
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In proposing Sec. 43.4(e), the Commission recognized that SEFs and
DCMs may differ and that new types of swaps may emerge. For that
reason, the Commission did not propose specific guidelines for
describing an underlying asset for the purposes of this rule. Because
the specificity of the description would vary based on particular
markets and contracts, the proposed rules were intended to provide
reporting parties with discretion in reporting swap transaction and
pricing data. Proposed Sec. 43.4(e)(2) and proposed part 23 of the
Commission's regulations \18\ would require SDs and MSPs who do not
specifically describe an underlying asset and/or tenor because such
disclosure would facilitate the identification of a counterparty, to
document why the specific information was not publicly disseminated.
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\18\ The Commission issued proposed part 23 which was published
in the Federal Register on November 23, 2010. 75 FR 71397. Proposed
part 23 provided, inter alia, the business conduct standards for SDs
and MSPs. Proposed Sec. 23 establishes reporting, recordkeeping,
and daily trading records requirements for SDs and MSPs.
Specifically, Sec. 23.201(d) provides that SDs and MSPs would be
required to maintain records of information required to be reported
on a real-time basis and records of information relating to large
notional swaps in accordance with proposed part 43 and CEA section
(2)(a)(13). When a less specific data field is reported in order to
protect anonymity of participants to such swap, then the record must
contain the rationale for reporting a less specific data field. The
comment period for proposed part 23 closed on June 3, 2011; however
the rule has not yet been adopted.
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The Commission anticipated that unique product identifiers may
develop for various swap products in various markets. Proposed Sec.
43.4(f) provided that if a unique product identifier is developed that
sufficiently describes the information in one or more of the data
fields for public dissemination, consistent with appendix A to proposed
part 43, the unique product identifier may be used in lieu of such data
fields. Absent a unique product identifier, the publicly disseminated
swap transaction and pricing data must contain all of the appropriate
product identification fields in appendix A to proposed part 43.
As proposed, Sec. 43.4(g) required public dissemination of any
swap-specific event \19\ that occurs during the life of a swap and
affects the price of the swap (a ``price forming continuation event'').
Proposed Sec. Sec. 43.4(h) and (i) would govern public reporting of
the notional or principal amount for all swaps. As proposed, these
rules would require (i) a reporting party to transmit to a SEF or DCM
the actual notional or principal size of any swap (including large
notional swaps) or any block trade; and (ii) a SEF or DCM to transmit
to a real-time disseminator the actual notional or principal size for
all swaps executed on or pursuant to its rules. Section 43.4(j)
proposed a rounding convention for notional or principal size and
provided that the rounding should be applied at the point of public
dissemination.
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\19\ Swap-specific events would include novations, swap unwinds,
partial novations and partial swap unwinds.
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3. Proposed Sec. 43.5--Block Trades and Large Notional Swaps for
Particular Markets and Transactions
CEA sections 2(a)(13)(E)(ii) and (iii) require the Commission to
prescribe rules ``to specify the criteria for determining what
constitutes a large notional swap transaction (block trade) for
particular markets and contracts'' and ``to specify the appropriate
time delay for reporting large notional swap transactions (block
trades) to the public,'' with respect to swaps subject to the clearing
mandate (including swaps that are excepted from the clearing mandate
pursuant to CEA section 2(h)(7)) and those swaps that are not subject
to the clearing mandate but are cleared. Similar provisions are not
explicitly required for uncleared swaps, however, the Commission is
authorized pursuant to its authority under CEA section 2(a)(13)(B) to
prescribe similar rules for uncleared swaps described in CEA sections
2(a)(13)(C)(iii) and (iv). Proposed Sec. 43.5 established: (1) The
procedures for determining the appropriate minimum sizes for block
trades and large notional swaps; and (2) the appropriate time delays
for the reporting of block trades and large notional swaps. In
describing the proposed block trade rules, the Commission noted that it
would continue to analyze and study the effects of increased
transparency on post-trade liquidity in the context of block trades and
large notional swaps.\20\ The Commission anticipated that new data
would continue to inform this discussion and could cause subsequent
revision of the Proposing Release.
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\20\ See 75 FR 76159 at note 67.
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As noted, CEA section 2(a)(13)(A) requires that all parties to swap
transactions, including parties to block trades and large notional
swaps, report data relating to swap transactions ``as soon as
technologically practicable after the time at which the swap
transaction has been executed.'' The Dodd-Frank Act also requires that
the Commission promulgate rules ``to specify the appropriate time delay
for reporting large notional swaps transactions (block trades) to the
public.'' \21\ In writing such rules, the Commission is charged to
``take into account whether public disclosure will materially reduce
market
[[Page 1185]]
liquidity.'' \22\ The Commission recognized that the potential market
impact of reporting a block trade or large notional swap is an
important consideration in the determination of an appropriate time
delay before public dissemination of block trade or large notional swap
transaction and pricing data. Proposed Sec. 43.5(k) specified the
appropriate time delays for public dissemination of block trades and
large notional swaps and established that the time delay for public
dissemination begins at execution of the swap.
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\21\ CEA section 2(a)(13)(E)(iii). As noted above, the
Commission is only required to prescribe rules relating to CEA
section 2(a)(13)(E) for swaps subject to the mandatory clearing
requirement (including those excepted from such requirement pursuant
to CEA section 2(h)(7)) and swaps that are not subject to the
mandatory clearing requirement but are cleared, as described in CEA
sections 2(a)(13)(C)(i) and (ii).
\22\ CEA section 2(a)(13)(E)(iv). As noted above, the Commission
is only required to prescribe rules relating to CEA section
2(a)(13)(E) for swaps subject to the mandatory clearing requirement
(including those excepted from such requirement pursuant to CEA
section 2(h)(7)) and swaps that are not subject to the mandatory
clearing requirement but are cleared, as described in CEA sections
2(a)(13)(C)(i) and (ii).
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4. Proposed Appendix A to Part 43
The Commission anticipated that real-time swap transaction and
pricing data may be publicly disseminated by multiple real-time
disseminators in the same asset class. In order to minimize the effects
of fragmentation and enhance consistency both within and among asset
classes, the Commission proposed in appendix A to part 43 a number of
data fields that should be publicly disseminated and provided guidance
on the format and manner of reporting. The Commission believes that the
public dissemination of standardized data should reduce the search
costs to the public and market participants while increasing
consolidation of real-time swap transaction and pricing data and
promoting post-trade transparency and price discovery.
C. Overview of Comments Received \23\
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\23\ In addition to the comments specifically discussed herein,
the Commission also received comments from various groups during the
course of external meetings. Those commenters include, among others:
Rabobank Nederland, Insurance Groups (American Counsel of Life
Insurers, Genworth, Manulife, John Hancock Life, New York Life,
Northwestern Mutual, Prudential, MetLife and Allstate Life);
Fidelity Investments; and Vanguard.
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The Commission received comments from 88 interested parties \24\
representing a cross-section of the global financial services industry,
including trade associations for both financial and non-financial end-
users, potential SDs and MSPs; law firms representing diverse
interests; exchanges; and numerous service and technology
providers.\25\ While many commenters expressed general support for the
proposed part 43 rules, they also offered recommendations for
clarification or modification of specific proposed regulations. Other
commenters objected to particular aspects of the Proposing Release.
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\24\ The initial comment period with respect to proposed part 43
closed on February 7, 2011. The comment periods for most proposed
rulemakings implementing the Dodd-Frank Act--including the proposed
part 43 rules--subsequently were reopened for the period of April 27
through June 2, 2011.
\25\ A complete list of the full names and abbreviations of
commenters is included in section VII at the end of this release;
comment letters are available through the Commission Web site at
https://comments.cftc.gov/PublicComments/CommentList.aspx?id=919.
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In addition to a general solicitation for comment on all aspects of
the Proposing Release, the Commission requested comment on a number of
specific, focused questions related to particular provisions. For
example, commenters were asked to address issues related to (i) the
appropriate implementation schedule for the final rules; (ii) which
swap counterparties should be covered by the reporting requirements of
part 43 in order to enhance price discovery; (iii) the responsibilities
of the swap counterparties to report swap transaction and pricing data
(including the advisability of establishing maximum timeframes in which
reporting parties must report data to an SDR); (iv) whether the final
rules should address the reporting and public dissemination of swap
transaction and pricing data for swaps transacted between two non-U.S.
persons; (v) the circumstances under which SEFs and DCMs are deemed to
have satisfied their public dissemination requirements; (vi)
recordkeeping and retention requirements, including the anticipated
costs associated with storing real-time swap transaction and pricing
data for an extended period of time; (vii) protection of the anonymity
of swap counterparties (including the utility of rounding notional
amounts); (viii) the utility of the proposed data fields (including
whether dissemination of additional data fields would enhance
transparency and price discovery); and (ix) whether there would be an
adverse price impact for traders and/or an impact on liquidity if all
market participants knew the swap transaction and pricing details of
all swaps in real-time.
As noted, the SEC is separately authorized by section 763 of the
Dodd-Frank Act to adopt real-time reporting rules for security-based
swaps (``SBSs''). Because the Commission and the SEC regulate different
products and markets and thus may have proposed differing regulatory
requirements, the Commission particularly requested comments on the
impact of any differences between the two regulatory approaches.
The Commission also requested comment with respect to its cost-
benefit considerations generally, and specifically asked whether there
are alternative ways it can meet its mandate under section 727 of the
Dodd-Frank Act in a less costly manner. Similarly, commenters were
invited to submit data or other information quantifying or qualifying
the costs and benefits of the Proposing Release.
The comments received will be addressed as appropriate throughout
the following discussion of the final rules.
D. Proposed Sec. 43.5--Block Trades and Large Notional Swaps
Several commenters urged that the Commission study additional data
before setting appropriate minimum block sizes and time delays \26\ for
public dissemination of block trades and large notional off-facility
swaps.\27\ The Commission recognized the merit in those concerns, and
subsequent to publication of the proposed part 43 rules, it continued
to receive and analyze swap data for various asset classes in order to
make informed decisions with respect to the appropriate criteria for
determining block trade sizes and the initial appropriate minimum block
trade sizes. The Commission agrees with the commenters that additional
analysis is necessary prior to issuance of final rules for appropriate
minimum block sizes, and accordingly has determined not to make final
its proposed Sec. 43.5 rules specifying the criteria for determining
block trade sizes. Instead, the Commission intends to issue a separate
notice of proposed rulemaking that will specifically address the
appropriate criteria for determining appropriate minimum block trade
sizes in light of data and comments received.\28\ Comments on these
issues received in connection with the instant rulemaking will be
considered by the Commission in its re-proposal of the block trade
rules.
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\26\ Commenters included: MFA; Barclays; AII; GS; UBS; GFXD;
Freddie Mac; ISDA/SIFMA; Better Markets; ABC/CIEBA; SIFMA AMG;
WMBAA; FHLBanks; Coalition for Derivatives End-Users; Cleary; and
Vanguard.
\27\ In light of clarifications in Sec. 43.2, the terms ``large
notional swap'' and ``large notional off-facility swap'' will be
used interchangeably throughout this Adopting Release. See infra
note 29.
\28\ The notice of proposed rulemaking regarding block trade
sizes and criteria is referenced throughout this release as the
``block trade re-proposal'' or ``re-proposal of the block trade
rules.''
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II. Part 43 of the Commission's Regulations--Final Rules
As proposed in the Real-Time NPRM, the provisions of part 43
governed the
[[Page 1186]]
method and timing of real-time public reporting; swap transaction and
pricing data to be publicly disseminated in real-time; and time delays
for public dissemination of swap transaction and pricing data. The
purpose, scope and rules of construction of part 43 were established in
proposed Sec. 43.1; proposed definitions of terms and processes
relevant to real-time public reporting were specified in proposed Sec.
43.2. Proposed Sec. 43.3 established the method and timing for real-
time public reporting and dissemination of swap transaction and pricing
data; this rule also delineated the responsibilities of swap
counterparties and SDRs, and established procedures for recordkeeping,
correction of errors and omissions, and hours of operation. Proposed
Sec. 43.4 specified the format in which swap transaction and pricing
data would be publicly disseminated and appendix A to proposed part 43
described the fields for which an SDR must publicly disseminate swap
transaction and pricing data. As proposed, Sec. 43.5 prescribed the
criteria for determining what constitutes a large notional swap
transaction (block trade) and specified the appropriate time delay for
reporting block trades to the public.
While the Commission has adopted the part 43 rules substantially as
proposed, there are several salient changes.\29\ As noted above, the
Commission is not adopting those elements of proposed Sec. 43.5
relating to the establishment of block trade sizes. The Commission
believes, in accordance with comments, that further study and analysis
of block trade data is necessary prior to establishing minimum block
trade size and for that reason has determined to make final only those
elements of proposed Sec. 43.5 relating to timestamp requirements and
time delays for the public dissemination of swap transaction and
pricing data. In that regard, Sec. 43.5 provides that until the
Commission establishes an appropriate minimum block size for a swap or
group of swaps, the time delays specified therein will apply to all
swaps that do not have an appropriate minimum block size. The anonymity
provisions in Sec. 43.4 have been clarified, and the Commission has
eliminated a provision in proposed Sec. 43.3 which would have
permitted dissemination of swap transaction and pricing data by third-
party service providers. Instead, the Commission will require that all
public dissemination of such data occur through an SDR. Unless
otherwise discussed in this section, the regulations are adopted as
proposed.
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\29\ This adopting release is referred to herein as the
``Adopting Release.''
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A. Section 43.1--Purpose, Scope and Rules of Construction
Proposed Sec. 43.1 applied to all swaps as defined in CEA section
1a(47) and as may be further defined by Commission regulation. The
provisions of part 43 also applied to the categories of swaps set forth
in CEA section 2(a)(13)(C); those categories account for the universe
of swaps subject to the Dodd-Frank Act's regulatory regime, whether
cleared or uncleared, and regardless of whether executed on a SEF, DCM
or off-facility. The proposed rules applied real-time reporting
requirements to SEFs, DCMs, SDRs and the swap counterparties, including
registered or exempt SDs, registered or exempt MSPs and U.S.-based end-
users. The Commission requested comment generally on the scope of
transactions covered by this part, and specifically with respect to
which swap counterparties should be subject to the reporting
requirements of this part.
1. Scope--Generally
Proposed Sec. 43.1(a) stated that the purpose of part 43 related
to ``the collection and public dissemination of certain swap
transaction and pricing data to enhance transparency and price
discovery.'' \30\ As proposed, Sec. 43.1(b)(1) stated that the
provisions of part 43 applied to all swaps as defined in CEA section
1(a)(47) and any implementing regulations therefrom, including the
categories of swaps set forth in section 2(a)(13)(C) of the Act.\31\
Further, proposed Sec. 43.1(b)(2) provided that the provisions of part
43 apply to all SEFs, DCMs, SDRs and swap counterparties (including
registered or exempt SDs, registered or exempt MSPs and U.S.-based end-
users). Proposed Sec. 43.1(c) specified the rules of construction for
part 43, and explained that although the examples in part 43 and the
related appendices are not exclusive, compliance with an example would
constitute compliance with such portions of the rule to which the
example relates.
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\30\ CEA section 2(a)(13)(B) provides that the purpose of
section 727 of the Dodd-Frank Act is ``to authorize the Commission
to make swap transaction and pricing data available to the public in
such form and at such times as the Commission determines appropriate
to enhance price discovery.''
\31\ CEA section 2(a)(13)(C) provides that ``[t]he Commission is
authorized and required to provide by rule for the public
availability of swap transaction and pricing data'' for four
categories of swaps: (1) Swaps subject to the mandatory clearing
requirement described in CEA section 2(h)(1) (including those swaps
that are excepted from the requirement pursuant to CEA section
2(h)(7)); (2) swaps that are not subject to the mandatory clearing
requirement described in CEA section 2(h)(1), but are cleared at a
registered DCO; (3) swaps that are not cleared at a registered DCO
and are reported to an SDR under CEA section 2(h)(6) (reporting for
this category of swaps must be done in a manner that does not
disclose the business transactions and market positions of any
person); and (4) swaps that are determined to be required to be
cleared under CEA section 2(h)(2) but are not cleared.
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Forty-six commenters addressed various aspects of the scope
provisions.\32\ Commenters expressed concerns related to swaps between
affiliates, portfolio compression exercises,\33\ uncleared and bespoke
\34\ swaps, end-user to end-user swaps, foreign exchange swaps,
international issues, distress scenarios and other scope-related
issues.\35\
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\32\ See supra note 23.
\33\ A separate proposed rulemaking under part 23 addresses
rules relating to portfolio compression. 75 FR 81519 (Dec. 18,
2010).
\34\ As used throughout this Adopting Release, ``bespoke''
indicates that a swap is off-facility and is not standardized.
\35\ In addition, one commenter stated that the reporting and
disclosure requirements could violate the First and Fifth Amendments
to the United States Constitution by purportedly compelling ``non-
commercial speech'' without satisfying a heightened standard and by
``taking'' protected private information without just compensation.
See CL-Sadis and Goldberg. The Commission has carefully considered
these comments and pertinent judicial precedent. It believes that
the data reporting and disclosure requirements at issue would not
violate the First Amendment because, among other reasons, the
information at issue is commercial speech subject to a lower,
reasonably-related standard. See, e.g., Zauderer v. Office of
Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 650-53
(1985) (state bar did not violate First Amendment by requiring
attorneys to fully disclose fee and cost arrangements in
advertisements; the speech was commercial because it pertained to
the economic interests of the parties, applicable standard was
therefore whether the disclosure requirement was reasonably related
to legitimate state interest, and the disclosure requirement at
issue was rationally related to the state's interest in preventing
deception of consumers). The Commission also believes that the
requirements at issue would not violate the Fifth Amendment. Among
other reasons, participants have no reasonable investment-backed
expectation that information they submit will be kept confidential
because they voluntarily submit it, knowing that it will be publicly
disclosed to the extent provided by statute and regulation. In
addition, the reporting and disclosure requirements are reasonably
related to the government's legitimate interests in transparency and
price discovery. See, e.g., Ruckelshaus v. Monsanto, 467 U.S. 986,
1006-07 (1984) (determining that there was no regulatory taking
where applicant for pesticide registration was required by federal
pesticide law to submit certain trade secret product data to EPA
that EPA could then publicly disclose; applicant knew at time of
submission that statute authorized EPA to do so, applicant therefore
could not have had a ``reasonable investment-backed expectation''
that data would be kept confidential, and the government's action
was reasonably related to legitimate government interest in an area
of public concern and regulation).
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[[Page 1187]]
2. Swaps Between Affiliates and Portfolio Compression Exercises
Several commenters questioned whether swaps between affiliates
should be subject to the real-time public reporting requirements of
part 43. Some commenters stated that swaps between affiliates have no
price discovery or transparency value and thus should not be publicly
reported.\36\ One commenter noted that the real time dissemination of
anonymous data regarding swaps between affiliates that price credit and
market risk at or near zero might distort price discovery, rather than
enhance it.\37\ Other commenters stated variously that inter-affiliate
trades and portfolio management exercises should not be considered
``reportable transactions,'' \38\ and that reporting swaps between
affiliates will add reporting requirements to end-users.\39\ A
commenter noted the reporting of data on physical gas and power
transactions between affiliates is excluded in other contexts.\40\
Another argued that the public reporting of inter-affiliate
transactions could seriously interfere with the internal risk
management practices of a corporate group, thereby prompting market
participants to act in a way that would prevent the corporate group
from following through with its risk management strategy. This
commenter suggested that such a result could raise the costs to
corporate groups of managing risk internally, in addition to confusing
market participants with irrelevant information.\41\
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\36\ See, e.g., CL-Cleary; CL-FSR; CL-Working Group of
Commercial Energy Firms; CL-Coalition of Energy End-Users; CL-ISDA/
SIFMA; CL-Japanese Banks; and CL-Coalition for Derivatives End-
Users.
\37\ The commenter stated that ``default risk among affiliated
entities within a corporate group is negligible,'' and ``an inter-
affiliate swap does not price hedging costs the same as a market-
facing swap because each inter-affiliate swap is entered into on the
general assumption that the market risk of all transactions within
the corporate group will be hedged by the centralized hedging
affiliate under a market-facing transaction.'' CL-Shell at 6.
\38\ See CL-TriOptima; CL-WMBAA.
\39\ See CL-Coalition for Derivatives End-Users.
\40\ See CL-Working Group of Commercial Energy Firms.
\41\ See CL-Cleary.
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The Commission agrees with the comments regarding the public
dissemination of certain swaps between affiliates and portfolio
compression exercises. The Commission concurs that publicly
disseminating swap transaction and pricing data related to certain
swaps between affiliates would not enhance price discovery, as such
swap transaction and pricing data would already have been publicly
disseminated in the form of the related market-facing swap. This
information may create an inaccurate appearance of market depth.
Notably, there is a very high volume of swaps between affiliates in
certain asset classes (e.g., foreign exchange).\42\ To require public
dissemination of all such transactions could be very costly for market
participants. Where there are no price discovery benefits to publicly
disseminating such transactions, the Commission has determined not to
require the public dissemination of these transactions at this time.
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\42\ See CL-GFXD. ``Many millions of trades occur daily between
different affiliates of the same institution which are not relevant
to the institution's external market positioning.'' Id. at p. 13.
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Accordingly, the Commission is adopting a definition in Sec. 43.2
for the term ``publicly reportable swap transaction'' that does not
presently require the public dissemination of internal swaps.\43\
Specifically, a publicly reportable swap transaction means, among other
things, any executed swap that is an arm's length transaction between
two parties that results in a corresponding change in the market risk
position between the two parties. As adopted, the definition of a
publicly reportable swap transaction also provides, by way of example,
that internal transactions to move risk between wholly-owned
subsidiaries of the same parent, without having credit exposure to the
other party \44\ would not presently require public dissemination
because such swaps are not arm's-length transactions.
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\43\ As discussed and referenced in this rule, internal swaps
between one-hundred percent owned subsidiaries of the same parent
entity may include back-to-back swap transactions between or among
such wholly-owned subsidiaries to help manage the risks associated
with a market-facing swap transaction. In general, a back-to-back
swap transaction effectively transfers the risks associated with a
market-facing swap transaction to an affiliate that was not an
original party to such transaction.
Back-to-back swap transactions may occur in a number of
different ways. For example, an affiliate immediately may enter into
a mirror swap transaction with its affiliate on the same terms as
the marketing-facing swap transaction. By way of further example, a
market-facing affiliate may enter into multiple transactions with
affiliates that are not at arm's-length in order to transfer the
risks associated with an arm's-length, market-facing transaction.
\44\ Section 608 of the Dodd-Frank Act adds to paragraph 7 of
the definition of ``covered transaction'' in Section 23A of the
Federal Reserve Act (12 U.S.C. 371(c)): ``(G) a derivative
transaction, as defined in paragraph (3) of section 5200(b) of the
Revised Statutes of the United States (12 U.S.C. 84(b)), with an
affiliate, to the extent that the transaction causes a member bank
or a subsidiary to have credit exposure to the affiliate.'' Hence,
all derivatives transactions will be subjected to Section 23A of the
Federal Reserve Act to the extent that they cause the bank to have
credit exposure to the affiliate. Section 23B of the Federal Reserve
Act contains an arm's-length requirement stating that a member bank
and its subsidiaries may engage in any covered transaction with an
affiliate only ``(A) on terms and under circumstances, including
credit standards, that are substantially the same, or at least as
favorable to such bank or its subsidiary, as those prevailing at the
time for comparable transactions with or involving other
nonaffiliated companies, or (B) in the absence of comparable
transactions, on terms and under circumstances, including credit
standards, that in good faith would be offered to, or would apply
to, nonaffiliated companies.'' The Commission considers any covered
transaction between affiliates as described in Sections 23A and 23B
of the Federal Reserve Act to be publicly reportable swap
transactions.
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Similarly, the Commission agrees that portfolio compression
exercises should not be publicly disseminated at this time.\45\ The
purpose of such transactions is to mitigate risk between counterparties
and any new swaps that were executed as a result of portfolio
compression exercises would be a result of the compression itself and
not an arm's-length transaction between the parties.\46\ As adopted,
the definition of a publicly reportable swap transaction also cites
portfolio compression exercises as an example that does not presently
require public dissemination.
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\45\ In its proposed part 23 release relating to ``Confirmation,
Portfolio Reconciliation, and Portfolio Compression Requirements for
Swap Dealers and Major Swap Participants,'' portfolio compression is
defined 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.'' 75 FR
81532.
\46\ See CL-TriOptima; CL-Shell.
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3. Uncleared or Bespoke Swaps
The Commission received comments from various market participants
relating to the scope of CEA section 2(a)(13) and proposed part 43, as
it applies to uncleared and bespoke swaps. Some commenters stated that
only standardized, cleared swaps should be real-time reported and
publicly disseminated. Others urged that uncleared trades be treated
differently than cleared trades and that the statute does not require
that non-standardized swaps be real-time reported (e.g., customized
trades should receive a greater time prior to public dissemination).
A commenter argued that only uncleared swaps that perform a
significant price discovery function should be publicly
disseminated.\47\ Another commenter argued that bespoke trade data has
little value and public dissemination of such information involves
complex technical issues.\48\
[[Page 1188]]
Still another commenter explained that the public dissemination of swap
transaction and pricing data should be phased in based on
liquidity.\49\ In contrast, two commenters said that the real-time
reporting requirements should apply to all swaps, both standard and
bespoke.\50\
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\47\ The commenter recommended that the Commission utilize a
process to identify swaps that perform a ``significant price
discovery'' function. See CL-Dominion.
\48\ See CL-TriOptima.
\49\ See CL-FINRA.
\50\ See CL-IECA; CL-Better Markets.
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Several commenters asserted that bespoke or customized swap
transactions are not subject to real-time reporting, citing a perceived
absence of authority under CEA section 2(a)(13)(C)(iii) to include
these transactions. Others commented that bespoke transactions should
not be subjected to real-time public reporting obligations because the
transactions do not enhance price discovery and may compromise
anonymity of the parties to the swap.
Some commenters focused on perceived burdens to end-users inherent
in the proposed rules; many stated that end-users should not be
required to report swaps.\51\ Additionally, certain commenters stated
that end-users do not have sufficient technology to report swaps; one
commenter stated that end-user to end-user swaps should have next
business day reporting.\52\ Others contended that end-users should be
treated differently because the public dissemination of swaps
information involving such parties does not enhance price
discovery.\53\ Two commenters questioned the value of disclosing
information relating to end-user to end-user power swaps compared to
the harm that disclosing such information would have to these end-users
and the public in general.\54\
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\51\ See CL-IPAA; CL-IECA; CL-COPE; CL-PCS Nitrogen Fertilizer;
CL-Coalition of Energy End-Users; CL-NFPEEU; CL-API; and Meeting
with EEI (Feb. 10, 2011).
\52\ See CL-IPAA.
\53\ See CL-COPE; CL-Coalition of Energy End-Users.
\54\ See CL-Coalition of Energy End-Users; CL-NFPEEU.
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The Commission interprets CEA section 2(a)(13)(C) to grant the
Commission the authority to require the real-time public reporting of
all swaps in order enhance price discovery.\55\ Accordingly, the
Commission does not believe that the transactions described above
(e.g., bespoke, end-user to end-user, etc.) should be excluded from
real-time reporting obligations. Such swap transactions, unlike
internal swaps between affiliates and portfolio compression exercises,
are executed at arm's length and result in a change in market risk
between the swap counterparties. Thus, the Commission believes that the
public dissemination of these transactions will provide price discovery
benefits and transparency to the swap markets.
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\55\ The Commission stated in in the Proposing Release that it
interprets CEA section 2(a)(13)(C) to apply to all swap
transactions. The Commission agrees with the overall concern
expressed by commenters regarding the statutory duty to ensure
confidentiality. CEA sections 2(a)(13)(C)(iii) and 2(a)(13)(E)(i)
emphasize the importance of not identifying swap counterparties. As
discussed more fully below, CEA section 2(a)(13)(C)(iii) explicitly
directs the Commission to require that real-time public reporting of
transactions occur in a manner that does not disclose a party's
business transactions and market position.
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However, the Commission agrees with commenters that the real-time
public dissemination of swap transaction and pricing data should be
phased in with longer initial time delays for public dissemination, as
well as phased in compliance dates, for different asset classes and
market participants within an asset class. Phasing in real-time
reporting for certain transactions by allowing for longer initial time
delays and phased compliance dates addresses concerns regarding bespoke
transactions, including market liquidity and the ability for parties to
report transactions. In particular, phasing in the public dissemination
of bespoke transactions will allow the Commission to ensure that the
public dissemination of such transactions will protect the identities
of swap participants, not disclose the business transactions and market
positions of any person involved in an uncleared swap and mitigate any
adverse impact on market liquidity.
4. Foreign Exchange (``FX'') Asset Class
Several commenters sought clarification as to which FX swaps will
be subject to the real-time public reporting requirements; some argued
that FX forwards and swaps should not be subject to real-time public
reporting rules. One commenter argued that the universe of FX market
participants is massive given that FX transactions are an integral part
of the global payment systems, presenting a practical challenge to
ensuring that all relevant reporting participants are able to report.
To the extent that FX swaps or forwards, or both, are excluded from
the definition of ``swap'' pursuant to a determination by United States
Department of the Treasury (``Treasury''), the requirements of CEA
section 2(a)(13) would not apply to those transactions, and such
transactions shall not be subject to the real-time public reporting
requirements of part 43. Treasury issued a proposed determination on
April 29, 2011, in which it stated that FX swaps and forwards that
would be excluded from the definition of ``swap,'' and thereby exempt
from certain requirements established in the Dodd-Frank Act, including
registration and clearing. However, the CEA provides that, even if
Treasury determines that FX swaps and forwards may be excluded from the
definition of ``swap,'' these transactions are not excluded from
regulatory reporting requirements to an SDR.\56\ Nonetheless, such
transactions would not be subject to the real-time reporting
requirements under part 43. Treasury has proposed to act pursuant to
the authority in Section 721 of the Dodd-Frank Act that permits a
determination that certain FX swaps and forwards should not be
regulated as swaps and are not structured to evade the Dodd-Frank Act.
The Commission has noted that, as proposed, Treasury's determination
would exclude FX swaps and forwards, as defined in CEA section 1a, but
would not apply to FX options or non-deliverable forwards
(``NDFs'').\57\ FX instruments that are not covered by Treasury's final
determination would still be subject to the real-time public reporting
rules described in part 43.\58\
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\56\ See CEA section 1(a)(47)(E).
\57\ See 76 FR 29818, 29835-29837 (May 23, 2011) (proposed
rulemaking issued jointly by Commission and SEC to further define,
among others, the term ``swap'').
\58\ See 76 FR 25774 (May 5, 2011). Treasury's proposed
determination may also be found at https://www.treasury.gov/initiatives/wsr/Documents/FX%20Swaps%20and%20Forwards%20NPD.pdf.
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Section 43.1 as adopted does not distinguish between transactions
within the FX asset class; such a decision to exclude FX forwards and
swaps will be determined by Treasury pursuant to CEA section 1(a)(47).
5. Limitations and Special Accommodations
Several scope-related comments focused on very specific issues.
Some commenters argued that novations should not be publicly reportable
swap transactions. Another commenter asserted that the Commission has
no statutory basis for requiring that post-swap events (e.g.,
novations, amendments, terminations, etc.) be subject to part 43. This
commenter stated that real-time reporting should be limited to trade
execution and that lifecycle events should not be reported.\59\
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\59\ See CL-NFPEEU.
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The Commission agrees that to the extent that novations or other
lifecycle events do not change the pricing of an initial execution of
the swap they would not be considered publicly reportable swap
transactions and therefore would not be publicly disseminated.\60\ As
two
[[Page 1189]]
commenters pointed out, the reporting of a novation that is just a
change in ownership could lead to duplication in reporting and
misrepresentative prices in the market.\61\ As discussed more fully
below, in the case of novations where there is no change in the
pricing, the novations would not be publicly reportable swap
transactions pursuant to Sec. 43.2.
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\60\ See the definition of ``publicly reportable swap
transaction'' in Sec. 43.2.
\61\ See CL-Barclays; CL-Working Group of Commercial Energy
Firms.
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The Commission recognizes that there are certain swap contract
amendments or other transactions that could enhance price discovery.
Those transactions that have a price impact should be subject to the
real-time reporting rules of part 43. If price-changing lifecycle
events were not required to be publicly disseminated, swap
counterparties could enter into a swap at one price and then
immediately enter into an amendment to change a material term of the
swap. The Commission is clarifying the definition of ``publicly
reportable swap transaction'' to ensure that only those lifecycle or
continuation events that have a price-changing impact should be
publicly disseminated. Requiring such price-forming continuation data
to be publicly disseminated eliminates the incentive for swap
counterparties to enter into a swap followed by an amendment in order
to disguise the price of a swap.
Commenters stated that illiquid markets should not be subject to
real-time reporting.\62\ The Commission believes that, consistent with
CEA section 2(a)(13), such swaps generally are subject to the public
dissemination requirements of part 43. Certain accommodations, however,
have been made for such swaps i
