Proposal To Amend the Definition of “Material Terms” for Purposes of Swap Portfolio Reconciliation, 57129-57136 [2015-24021]
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[FR Doc. 2015–21730 Filed 9–21–15; 8:45 am]
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 23
RIN 3038–AE17
Proposal To Amend the Definition of
‘‘Material Terms’’ for Purposes of
Swap Portfolio Reconciliation
Commodity Futures Trading
Commission.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) proposes to amend a provision
of the Commission’s regulations in
connection with the material terms for
which counterparties must resolve
discrepancies when engaging in
portfolio reconciliation.
DATES: Comments must be received on
or before November 23, 2015.
ADDRESSES: You may submit comments,
identified by RIN 3038–AE17, and
Proposal to Amend the Definition of
‘‘Material Terms’’ for Purposes of Swap
Portfolio Reconciliation by any of the
following methods:
• The agency’s Web site, at https://
comments.cftc.gov. Follow the
instructions for submitting comments
through the Web site.
• Mail: Christopher Kirkpatrick,
Secretary of the Commission,
Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street NW., Washington, DC
20581.
• Hand Delivery/Courier: Same as
Mail above.
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Please submit your comments using
only one method.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to https://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that you believe is exempt from
disclosure under the Freedom of
Information Act, a petition for
confidential treatment of the exempt
information may be submitted according
to the procedures established in § 145.9
of the Commission’s regulations.1
The Commission reserves the right,
but shall have no obligation, to review,
pre-screen, filter, redact, refuse or
remove any or all of your submission
SUMMARY:
BILLING CODE 4910–13–P
1 17 CFR 145.9. Commission regulations referred
to herein are found at 17 CFR Chapter I.
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from https://www.cftc.gov that it may
deem to be inappropriate for
publication, such as obscene language.
All submissions that have been redacted
or removed that contain comments on
the merits of the rulemaking will be
retained in the public comment file and
will be considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
Frank N. Fisanich, Chief Counsel, 202–
418–5949, ffisanich@cftc.gov; Katherine
S. Driscoll, Associate Chief Counsel,
202–418–5544, kdriscoll@cftc.gov;
Gregory Scopino, Special Counsel, 202–
418–5175, gscopino@cftc.gov, Division
of Swap Dealer and Intermediary
Oversight, Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street NW., Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
I. Background
On September 11, 2012, the
Commission published in the Federal
Register final rules § 23.500 through
§ 23.505 2 establishing requirements for
the timely and accurate confirmation of
swaps, the reconciliation and
compression of swap portfolios, and
documentation of swap trading
relationships between swap dealers
(‘‘SDs’’),3 major swap participants
(‘‘MSPs’’),4 and their counterparties.
These regulations were promulgated by
the Commission pursuant to the
authority granted under Sections
4s(h)(1)(D), 4s(h)(3)(D), and 4s(i) of the
Commodity Exchange Act (the ‘‘CEA’’),5
2 Confirmation, Portfolio Reconciliation, Portfolio
Compression, and Swap Trading Relationship
Documentation Requirements for Swap Dealers and
Major Swap Participants, 77 FR 55904 (Sept. 11,
2012) (hereinafter, ‘‘Portfolio Reconciliation Final
Rule’’).
3 Generally, an SD is any person who, in addition
to transacting in a notional amount of swaps in
excess of specified de minimis thresholds, holds
itself out as a dealer in swaps, makes a market in
swaps, regularly enters into swaps with
counterparties as an ordinary course of business for
its own account, or engages in any activity causing
it to be commonly known in the trade as a dealer
or market maker in swaps. See 7 U.S.C. 1a(49); 17
CFR 1.3(ggg).
4 Generally, an MSP is any non-dealer that
maintains a substantial position in swaps for any
of the specified major swap categories, whose
outstanding swaps create substantial counterparty
exposure that could have serious adverse effects on
the financial stability of the United States banking
system or financial markets, or any financial entity
that is highly leveraged relative to the amount of
capital such entity holds and that is not subject to
capital requirements established by an appropriate
Federal banking agency and maintains a substantial
position in outstanding swaps in any major swap
category. See 7 U.S.C. 1a(33); 17 CFR 1.3(hhh).
5 7 U.S.C. 6s(h)(1)(D), 6s(h)(3)(D) and 6s(i).
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as amended by Section 731 of the DoddFrank Wall Street Reform and Consumer
Protection Act (the ‘‘Dodd-Frank Act’’),6
which, among other things, directed the
Commission to prescribe regulations for
the timely and accurate confirmation,
processing, netting, documentation and
valuation of all swaps entered into by
SDs and MSPs,7 and the Commission’s
general rulemaking authority under
Section 8a(5) of the CEA.8
Under § 23.502,9 SDs and MSPs must
reconcile their swap portfolios with one
another and provide non-SD and nonMSP counterparties with regular
opportunities for portfolio
reconciliation.10 Section 23.500(i) 11
defines the term, ‘‘portfolio
reconciliation,’’ as ‘‘any process by
which the two parties to one or more
swaps: (1) Exchange the terms of all
swaps in the swap portfolio between the
counterparties; (2) exchange each
counterparty’s valuation of each swap in
the swap portfolio between the
counterparties as of the close of
business on the immediately preceding
business day; and (3) resolve any
discrepancy in material terms and
valuations.’’ Section 23.500(g) defines
‘‘material terms’’ to mean ‘‘all terms of
a swap required to be reported in
accordance with part 45 of this
chapter.’’ 12 Thus, portfolio
reconciliation seeks to enable ‘‘the swap
market to operate efficiently and to
reduce systemic risk’’ 13 by requiring
6 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. 111–203, 124 Stat. 1376
(July 21, 2010).
7 Portfolio Reconciliation Final Rule, 77 FR at
55926 (‘‘[P]ortfolio reconciliation involves both
confirmation and valuation and serves as a
mechanism to ensure accurate documentation.’’).
8 7 U.S.C. 12a(5).
9 17 CFR 23.502.
10 17 CFR 23.502; see Portfolio Reconciliation
Final Rule, 77 FR at 55926.
11 17 CFR 23.500(i).
12 17 CFR 23.500(g). Part 45 of the Commission
regulations govern swap data recordkeeping and
reporting requirements. The swap terms that must
be reported under part 45 are found in appendix 1
to part 45. See 17 CFR part 45, App. 1; see also 17
CFR 45.1 (defining ‘‘primary economic terms’’ as
‘‘all of the terms of a swap matched or affirmed by
the counterparties in verifying the swap,’’ including
‘‘at a minimum each of the terms included in the
most recent Federal Register release by the
Commission listing minimum primary economic
terms for swaps in the swap asset class in question’’
and stating that the current list of minimum
primary economic terms is in appendix 1); Swap
Data Recordkeeping and Reporting Requirements,
77 FR 2197 (Jan. 13, 2012) (promulgating the list of
primary economic terms). Examples of primary
economic terms include the price of the swap,
payment frequency, type of contract (e.g., a ‘‘vanilla
option’’ or ‘‘complex exotic option’’), execution
timestamp, and, if the swap is a multi-asset class
swap, the primary and secondary asset classes. 17
CFR part 45, App. 1.
13 Portfolio Reconciliation Final Rule, 77 FR at
55926.
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counterparties periodically to (1)
exchange the terms of their mutual
swaps, and (2) locate and resolve
discrepancies in material terms of
mutual swaps. In particular, the
Commission recognized that ‘‘portfolio
reconciliation [would] facilitate the
identification and resolution of
discrepancies between the
counterparties with regard to valuations
of collateral held as margin.’’ 14 The
Commission also has described portfolio
reconciliation, generally, as follows:
Portfolio reconciliation is a post-execution
processing and risk management technique
that is designed to (i) identify and resolve
discrepancies between the counterparties
with regard to the terms of a swap either
immediately after execution or during the life
of the swap; (ii) ensure effective confirmation
of terms of the swap; and (iii) identify and
resolve discrepancies between the
counterparties regarding the valuation of the
swap.15
In adopting § 23.502, the Commission
intended to require that SDs, MSPs, and
their counterparties engage in portfolio
reconciliation at regular intervals.
Explaining the rationale for § 23.502, the
Commission noted that portfolio
reconciliation can identify and reduce
overall risk ‘‘[b]y identifying and
managing mismatches in key economic
terms and valuation for individual
transactions across an entire
portfolio.’’ 16 Portfolio reconciliation is
not required for cleared swaps where a
derivatives clearing organization
(‘‘DCO’’) holds the definitive record of
the trades and determines binding daily
valuations for the swaps.17
II. Proposed Regulation
In 2013, the International Swaps and
Derivatives Association, Inc. (‘‘ISDA’’)
requested interpretive guidance from
Commission staff that would permit
certain swap data elements to be
excluded from portfolio reconciliation
as required under § 23.502.18
Specifically, ISDA requested that ‘‘the
terms’’ of a swap that counterparties
must exchange during portfolio
reconciliation exercises be limited to the
‘‘material terms’’ of a swap, and that
14 Id. In response to comments that industry
practice was only to resolve swap terms that lead
to material collateral disputes, the Commission, in
promulgating the final § 23.502, emphasized the
importance of both (1) resolving disputes related to
the material terms of swaps and (2) resolving
valuation disputes impacting margin payments. Id.
at 55926–27, 55929–31.
15 Portfolio Reconciliation Final Rule, 77 FR at
55926.
16 Id.
17 Id. at 55927.
18 See CFTC Staff Letter No. 13–31 (June 26,
2013), available at https://www.cftc.gov/ucm/
groups/public/@lrlettergeneral/documents/letter/
13-31.pdf.
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‘‘material terms’’ have the same
meaning as ‘‘primary economic terms’’
in § 45.1. ISDA further asked that the
following data fields (hereinafter
referred to as the ‘‘No-Action Excluded
Data Fields’’) be excluded from the
definition of ‘‘material terms’’ for
purposes of compliance with § 23.502:
1. An indication that the swap will be
allocated;
2. If the swap will be allocated, or is a
post-allocation swap, the legal
entity identifier 19 of the agent;
3. An indication that the swap is a postallocation swap;
4. If the swap is a post-allocation swap,
the unique swap identifier; 20
5. Block trade indicator;
6. Execution timestamp;
7. Timestamp for submission to swap
data repository (‘‘SDR’’); 21
8. Clearing indicator;
9. Clearing venue;
10. If the swap will not be cleared, an
indication of whether the clearing
requirement exception in CEA
Section 2(h)(7) 22 has been elected;
and
11. The identity of the counterparty
electing the clearing requirement
exception in CEA Section 2(h)(7).23
ISDA contended generally that the
definition of ‘‘material terms’’ in
§ 23.500(g) is too broad to guide market
participants in the construction of a
reconciliation process, and with regard
to the No-Action Excluded Data Fields
specifically, ISDA argued that these
fields are not relevant to the portfolio
reconciliation process because they
pertain to the circumstances
19 A legal entity identifier is ‘‘a 20-digit, alphanumeric code, to uniquely identify legally distinct
entities that engage in financial transactions.’’ See
Legal Entity Identifier Regulatory Oversight
Committee, https://www.leiroc.org/; 17 CFR 45.6.
20 A unique swap identifier is a unique identifier
assigned to all swap transactions which identifies
the transaction (the swap and its counterparties)
uniquely throughout the duration of the swap’s
existence. See 17 CFR 45.5.
21 A swap data repository is any person that
collects and maintains information or records with
respect to transactions or positions in, or the terms
and conditions of, swaps entered into by third
parties for the purpose of providing a centralized
recordkeeping facility for swaps. 7 U.S.C. 1a(48); 17
CFR 1.3(qqqq).
22 Generally speaking, Section 2(h)(1)(A) of the
CEA establishes a clearing requirement for swaps,
providing that ‘‘[i]t shall be unlawful for any person
to engage in a swap unless that person submits such
swap for clearing to a derivatives clearing
organization that is registered under [the CEA] or
a derivatives clearing organization that is exempt
from registration under [the CEA] if the swap is
required to be cleared.’’ 7 U.S.C. 2(h)(1)(A). CEA
Section 2(h)(7), however, provides for several
limited exceptions to the clearing requirement of
Section 2(h)(1)(A). Id. at 2(h)(7); see also End-User
Exception to the Clearing Requirement for Swaps,
77 FR 42560, 42560–61 (July 19, 2012).
23 CFTC Staff Letter No. 13–31 at 2–3.
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surrounding entry into a transaction,
and whether a transaction was intended
to be cleared, and are not relevant to
ongoing rights and obligations under
swaps in a swap portfolio existing
bilaterally between an SD and a
counterparty.
After considering ISDA’s request, the
Commission’s Division of Swap Dealer
and Intermediary Oversight (the
‘‘Division’’) provided SDs and MSPs
with no-action relief on June 26, 2013,
pursuant to CFTC Staff Letter 13–31.24
In such letter, the Division chose not to
interpret the reference to ‘‘the terms’’ of
a swap in § 23.500(i)(1) as meaning the
‘‘material terms’’ or to define ‘‘material
terms’’ to mean the ‘‘primary economic
terms’’ of a swap minus the No-Action
Excluded Data Fields. Rather, the
Division merely stated that it would not
recommend an enforcement action
against an SD or MSP that omits the NoAction Excluded Data Fields from the
portfolio reconciliation process required
under § 23.502.25 Thus, it appears that
following the issuance of CFTC Staff
Letter 13–31, an SD that chose to take
advantage of the relief could consider
the No-Action Excluded Data Fields not
to be terms of a swap required to be
exchanged with a counterparty in a
portfolio reconciliation exercise.
Against this background, the
Commission is now proposing to amend
the definition of ‘‘material terms’’ in
§ 23.500(g) to specifically exclude a
modified version of the No-Action
Excluded Data Fields. As amended,
§ 23.500(g) would exclude the following
data fields from the definition of
‘‘material terms’’ (hereinafter referred to
as the ‘‘Proposed Excluded Data
Fields’’):
1. An indication that the swap will be
allocated;
2. If the swap will be allocated, or is a
post-allocation swap, the legal
entity identifier 26 of the agent;
3. An indication that the swap is a postallocation swap;
4. If the swap is a post-allocation swap,
the unique swap identifier; 27
5. Block trade indicator;
6. With respect to a cleared swap, the
execution timestamp;
7. With respect to a cleared swap, the
timestamp for submission to SDR;
24 See
id.
at 3.
26 A legal entity identifier is ‘‘a 20-digit, alphanumeric code, to uniquely identify legally distinct
entities that engage in financial transactions.’’ See
Legal Entity Identifier Regulatory Oversight
Committee, https://www.leiroc.org/; 17 CFR 45.6.
27 A unique swap identifier is a unique identifier
assigned to all swap transactions which identifies
the transaction (the swap and its counterparties)
uniquely throughout the duration of the swap’s
existence. See 17 CFR 45.5.
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25 Id.
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8. Clearing indicator; and
9. Clearing venue.
The Proposed Excluded Data Fields
modify the No-Action Excluded Data
Fields by: (1) Amending the execution
timestamp data field to be specific to
cleared swaps; (2) amending the
timestamp for submission to an SDR
data field to be specific to cleared
swaps; (3) removing the data field
containing an indication of whether the
clearing requirement exception in CEA
Section 2(h)(7) has been elected with
respect to an uncleared swap; and (4)
removing the data field containing the
identity of the counterparty electing the
clearing requirement exception in CEA
Section 2(h)(7). The Commission is
proposing to retain these data fields for
uncleared swaps as ‘‘material terms’’
because a discrepancy in this
information in the records of the
counterparties could mean that the
related information is erroneous in the
records of an SDR, which could have an
impact on the Commission’s regulatory
mission.
The time of execution of an uncleared
swap and the time of submission to an
SDR is of regulatory value to the
Commission for purposes of
determining the compliance of SDs and
MSPs with Commission regulations.28
Similarly, the identity of a counterparty
electing the end-user exception to
clearing is important to the
Commission’s enforcement of the
clearing requirement and its monitoring
of systemic risk in the OTC markets
under its jurisdiction. Thus, the
Commission believes it is reasonable to
require SDs, MSPs, and their
counterparties to resolve any
discrepancy in these data fields and, if
necessary, correct the information
reported to an SDR.29
The Commission intends that, if and
when the proposed amendment to the
definition of ‘‘material terms’’ is
adopted, it will direct the Division to
withdraw the no-action relief provided
pursuant to CFTC Letter 13–31.
Accordingly, under this proposal, the
Commission is maintaining the status
quo of § 23.502 in that SDs and MSPs
and their counterparties would be
required to exchange ‘‘the terms’’ of a
swap as required under § 23.500(i)(1)
28 For example, among other things, the time of
execution of a swap between an SD and a
counterparty may be relevant to determining the
SD’s compliance with the deadlines for
confirmation of the swap set forth in § 23.501.
Likewise, the time of execution and the time of
reporting to an SDR may be relevant to determining
the SD’s compliance with the reporting deadlines
set forth in part 45 of the Commission’s regulations.
29 Reporting counterparties are required to correct
errors and omissions in data previously reported to
an SDR pursuant to § 45.14.
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and would have to resolve discrepancies
in ‘‘material terms’’ of swaps pursuant
to § 23.502(a)(4) and (b)(4). However,
‘‘material terms’’ would not include the
Proposed Excluded Data Fields. This
requirement differs from what may be
the current practice of SDs and MSPs
that have chosen to take advantage of
the relief provided in CFTC Staff Letter
13–31. Such SDs and MSPs may be
omitting the No-Action Excluded Data
Fields from the portfolio reconciliation
process altogether and not exchanging
such terms at all, or if exchanging them,
choosing not to resolve discrepancies
that may be discovered. If the
Commission’s proposal is adopted, such
SDs and MSPs would be required to
resume exchanging the terms included
in the Proposed Excluded Data Fields,
although they could continue the
practice of choosing not to resolve
discrepancies in such terms. In
addition, SDs and MSPs would have to
resolve discrepancies in execution and
SDR submission timestamps for cleared
swaps, and discrepancies in the
identities of counterparties electing the
end-user exception from clearing, which
may not be the practice for SDs and
MSPs that have been relying on CFTC
Staff Letter 13–31.
It is the intention of the Commission’s
proposal to alleviate the burden of
resolving discrepancies in terms of a
swap that are not relevant to the
ongoing rights and obligations of the
parties and the valuation of the swap, or
to the Commission’s regulatory mission.
However, with respect to at least some
of the No-Action Excluded Data Fields
and the corresponding information that
is included in the Proposed Excluded
Data Fields, the Commission questions
whether such data is actually required
to be included in any ongoing portfolio
reconciliation exercise. For example, the
‘‘clearing indicator’’ and ‘‘clearing
venue’’ items included in the Proposed
Excluded Data Fields pertain to a swap
only until it is extinguished when
accepted for clearing by a DCO.30 When
extinguished, the original swap would
no longer be subject to portfolio
reconciliation,31 and, as explained
30 See 17 CFR 23.504(b)(6) (’’ . . . upon
acceptance of a swap by a derivatives clearing
organization: (i) The original swap is extinguished;
(ii) The original swap is replaced by equal and
opposite swaps with the derivatives clearing
organization; and (iii) All terms of the swap shall
conform to the product specifications of the cleared
swap established under the derivative clearing
organization’s rules.’’).
31 The Commission notes that portfolio
reconciliation only applies to swaps currently in
effect between an SD or MSP and a particular
counterparty, not to expired or terminated swaps.
See Definition of ‘‘swap portfolio,’’ 17 CFR
23.500(k).
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above, portfolio reconciliation is not
required for cleared swaps.32 As noted
below, the Commission seeks comment
on whether such terms should be
included in the Proposed Excluded Data
Fields.
Finally, the Commission notes that it
is not proposing an amendment to
§ 23.500(i)(1) that would exclude the
Proposed Excluded Data Fields from
portfolio reconciliation altogether. Thus
the Commission is not proposing to
change the existing requirement under
§ 23.502 that parties must exchange
terms of all swaps in a mutual portfolio,
but need only resolve discrepancies
over material terms and valuations. As
stated above, the Commission
recognizes that the proposed
amendment would not have the same
effect as the no-action relief provided by
the Division in CFTC Staff Letter 13–31.
Nevertheless, the Commission has
determined that it would be premature
to propose to codify the staff relief
without considering comments from the
public on the nature of the post-DoddFrank-Act portfolio reconciliation
process and how the Proposed Excluded
Data Fields relate to that process.
III. Request for Comment
To ensure that the proposed rule
would, if adopted, achieve its stated
purpose, the Commission requests
comment generally on all aspects of the
proposed rule. Specifically, the
Commission requests comment on the
following:
• Should the Commission amend its
regulations to provide relief identical to
that granted in CFTC Letter No. 13–31?
Alternatively, should the Commission
amend § 23.500(i)(1) so that
counterparties only have to exchange
the ‘‘material terms’’ (which would not
include the Proposed Excluded Data
Fields) of swaps? Or, lastly, should the
Commission adopt its current proposal
which is to only remove the Proposed
Excluded Data Fields from the
definition of ‘‘material terms’’ that
counterparties must resolve for
discrepancies pursuant to § 23.500(i)(3)?
• Should the Commission’s Proposed
Excluded Data Fields not include the
execution and SDR submission
timestamps for uncleared swaps? Please
explain why or why not.
• Should the Commission’s Proposed
Excluded Data Fields include an
indication of the election of the clearing
exception in CEA Section 2(h)(7) and/or
the identity of the counterparty electing
such clearing requirement exception?
Please explain why or why not.
32 Portfolio Reconciliation Final Rule, 77 FR at
55927.
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• Are there other items in the
Proposed Excluded Data Fields that may
have material regulatory value to the
Commission or that may be relevant to
the ongoing rights and obligations of the
parties and the valuation of the swap
and, thus, should not be included in the
Proposed Excluded Data Fields? Please
explain why or why not.
• Is each of the Proposed Excluded
Data Fields actually required to be
included in any ongoing portfolio
reconciliation exercise, and, if not,
should any such term be removed from
the list of Proposed Excluded Data
Fields? Please explain why or why not.
• Should any other ‘‘material term’’
as defined in § 23.500(g) be included in
the list of Proposed Excluded Data
Fields? Please explain why or why not.
• Should the Commission amend
§ 23.500(g) so that the term, ‘‘material
terms,’’ is defined as all terms of a swap
required to be reported in accordance
with part 45 of the Commission
regulations other than the Proposed
Excluded Data Fields, as proposed?
Please explain why or why not.
• To what extent does the proposed
amendment facilitate (or fail to
facilitate) the policy objectives of
portfolio reconciliation? Feel free to
reference specific terms listed in the
Proposed Excluded Data Fields in your
answer.
• Where are the cost savings realized
by not having to resolve discrepancies
in the Proposed Excluded Data Fields?
If any other alternative approach should
be considered, what cost savings would
be realized by such alternative
approach? Commenters are encouraged
to quantify these cost savings.
IV. Related Matters
A. Regulatory Flexibility Act.
The Regulatory Flexibility Act 33
requires that agencies consider whether
the rules they propose will have a
significant economic impact on a
substantial number of small entities
and, if so, provide a regulatory
flexibility analysis reflecting the impact.
For purposes of resolving any
discrepancy in material terms and
valuations, the proposed regulation
would amend the definition in
§ 23.500(g) of the Commission
regulations so that the term ‘‘material
terms’’ (which is used in § 23.500(i)(3))
is defined as all terms of a swap
required to be reported in accordance
with part 45 of the Commission’s
regulations other than the Proposed
Excluded Data Fields. As noted above,
clause (3) of the definition of ‘‘portfolio
33 5
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reconciliation’’ in § 23.500(i) requires
the parties to resolve any discrepancy in
‘‘material terms’’ and valuations. As a
result of the proposed change to the
definition of ‘‘material terms’’ in
§ 23.500(g) of the Commission
regulations, SDs and MSPs would not
need to include the Proposed Excluded
Data Fields 34 in any resolution of
discrepancies of material terms or
valuations when engaging in portfolio
reconciliation. The Commission has
previously determined that SDs and
MSPs are not small entities for purposes
of the Regulatory Flexibility Act.35
Furthermore, any financial end users
that may be indirectly 36 impacted by
the proposed rule are likely to be
eligible contract participants, and, as
such, they would not be small entities.37
Thus, for the reasons stated above, the
Commission preliminarily believes that
the proposal will not have a significant
economic impact on a substantial
number of small entities. Accordingly,
the Chairman, on behalf of the
Commission, hereby certifies, pursuant
to 5 U.S.C. 605(b), that the proposed
regulations in this Federal Register
release would not have a significant
economic impact on a substantial
number of small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(‘‘PRA’’) 38 imposes certain
requirements on Federal agencies,
including the Commission, in
connection with their conducting or
sponsoring any collection of
information, as defined by the PRA. 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. This proposed rulemaking
would result in an amendment to
existing collection of information OMB
Control Number 3038–0068 with respect
to the collection of information entitled
‘‘Confirmation, Portfolio Reconciliation,
and Portfolio Compression
Requirements for Swap Dealers and
34 See section II above for a list of ‘‘Proposed
Excluded Data Fields’’ and proposed § 23.500(g) of
the Commission regulations.
35 Policy Statement and Establishment of
Definitions of ‘‘Small Entities’’ for Purposes of the
Regulatory Flexibility Act, 47 FR 18618, 18619
(Apr. 30, 1982).
36 The Regulatory Flexibility Act focuses on direct
impact to small entities and not on indirect impacts
on these businesses, which may be tenuous and
difficult to discern. See Mid-Tex Elec. Coop., Inc.
v. FERC, 773 F.2d 327, 340 (D.C. Cir. 1985); Am.
Trucking Assns. v. EPA, 175 F.3d 1027, 1043 (D.C.
Cir. 1985).
37 See Opting Out of Segregation, 66 FR 20740,
20743 (Apr. 25, 2001).
38 44 U.S.C. 3501 et seq.
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Major Swap Participants.’’ 39 The
Commission is therefore submitting this
proposal to the Office of Management
and Budget (OMB) for review. The
Commission previously discussed, for
purposes of the PRA, the burden 40 that
the regulation mandating, inter alia,
portfolio reconciliation would impose
on market participants.41 In particular,
the Commission estimated the burden to
be 1,282.5 hours for each SD and MSP,
and the aggregate burden for
registrants—based on a then-projected
125 registrants—was 160,312.5 burden
hours.42 Since the Commission finalized
the rules for SDs and MSPs, 104 entities
have provisionally registered as SDs and
two entities have provisionally
registered as MSPs, for a total of 106
registrants.43 Accordingly, based on the
original estimate of 1,282.5 burden
hours for each SD and MSP, the
aggregate burden for all registrants is
estimated at 135,945 burden hours.
The proposed regulation would
amend the definition in § 23.500(g) of
the Commission regulations so that the
term ‘‘material terms’’ (which is used in
§ 23.500(i)(3)) is defined as all terms of
a swap required to be reported in
accordance with part 45 of the
Commission’s regulations other than the
Proposed Excluded Data Fields.44 As
noted above, clause (3) of the definition
of ‘‘portfolio reconciliation’’ in
§ 23.500(i) requires the parties to resolve
any discrepancy in ‘‘material terms’’
and valuations. The proposed change
would clarify that SDs and MSPs would
not need to include the Proposed
Excluded Data Fields in any resolution
of discrepancies of material terms or
valuations.
As discussed above, the rule change
proposed herein would reduce the
number of ‘‘material terms’’ that
counterparties would need to resolve for
discrepancies in portfolio reconciliation
39 See OMB Control No. 3038–0068, https://
www.reginfo.gov/public/do/
PRAOMBHistory?ombControlNumber=3038-0068.
40 ‘‘For purposes of the PRA, the term ‘burden’
means the ‘time, effort, or financial resources
expended by persons to generate, maintain, or
provide information to or for a Federal Agency.’ ’’
Portfolio Reconciliation Final Rule, 77 FR at 55959.
41 Portfolio Reconciliation Final Rule, 77 FR at
55958–60.
42 Portfolio Reconciliation Final Rule, 77 FR at
55959.
43 Provisionally Registered Swap Dealers as of
June 17, 2015, https://www.cftc.gov/LawRegulation/
DoddFrankAct/registerswapdealer; Provisionally
Registered Major Swap Participants as of March 1,
2013, https://www.cftc.gov/LawRegulation/
DoddFrankAct/registermajorswappart.
44 As noted earlier, the proposed rule is amending
the definition of the term ‘‘material terms’’ at
§ 23.500(g) to exclude nine data fields that would
not be considered ‘‘material terms’’ in the definition
of the term ‘‘portfolio reconciliation’’ of
§ 23.500(i)(3).
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exercises, but would not eliminate the
portfolio reconciliation requirement
itself. However, the Commission
believes that the changes proposed to
the regulatory definition of ‘‘material
terms’’ described herein would reduce
the time burden for portfolio
reconciliation by one burden hour for
each SD and MSP, which would reduce
the annual burden to 1,281.5 hours per
SD and MSP. The Commission believes
that the proposed rule would result in
one hour of less work for computer
programmers for SDs and MSPs because
the programmers who have to match the
needed data fields from two different
databases would have fewer data fields
to obtain and resolve for discrepancies.
Given that there are 106 provisionally
registered SDs and MSPs, the proposed
rule, if adopted, would result in an
aggregate burden of 135,839 burden
hours. The Commission welcomes
comments about the potential impact
that this proposal would have on the
time and cost burden associated with
portfolio reconciliation.
between 30 and 60 days after
publication of this document in the
Federal Register. Therefore, a comment
is best assured of having its full effect
if OMB receives it within 30 days of
publication.
1. Information Collection Comments
The Commission invites the public
and other Federal agencies to comment
on any aspect of the reporting burdens
discussed above. Pursuant to 44 U.S.C.
3506(c)(2)(B), the Commission solicits
comments in order to: (1) Evaluate
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information will have practical utility;
(2) evaluate the accuracy of the
Commission’s estimate of the burden of
the proposed collection of information;
(3) determine whether there are ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(4) mitigate the burden of the collection
of information on those who are to
respond, including through the use of
automated collection techniques or
other forms of information technology.
Comments may be submitted directly
to the Office of Information and
Regulatory Affairs, by fax at (202) 395–
6566 or by email at
OIRAsubmissions@omb.eop.gov. Please
provide the Commission with a copy of
submitted comments so that all
comments can be summarized and
addressed in the final rule preamble.
Refer to the ADDRESSES section of this
notice of proposed rulemaking for
comment submission instructions to the
Commission. A copy of the supporting
statement for the collection of
information discussed above may be
obtained by visiting https://reginfo.gov/.
OMB is required to make a decision
concerning the collection of information
1. Background
The Commission believes that, while
portfolio reconciliation generally helps
counterparties to manage risk by
facilitating the resolution of
discrepancies in material terms of
swaps, forcing entities to resolve
discrepancies in the Proposed Excluded
Data Fields does not improve the
management of risks in swaps
portfolios. By eliminating the need to
resolve discrepancies over material
swap terms that remain constant (and
that do not impact the valuation of the
swap or the payment obligations of the
counterparties) and thereby reducing
the number of data fields that parties
must resolve for differences in portfolio
reconciliation exercises, the
Commission believes this proposal will
slightly decrease the costs that its
regulations impose on SDs and MSPs
(and their counterparties) without a
concomitant reduction in the benefits
obtained from portfolio reconciliation
exercises under the existing regulatory
framework, as described below.
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C. Considerations of Costs and Benefits
Section 15(a) of the CEA requires the
Commission to consider the costs and
benefits of its actions before
promulgating a regulation under the
CEA or issuing an order. Section 15(a)
further specifies that the costs and
benefits shall be evaluated in light of the
following 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. The
Commission considers the costs and
benefits resulting from its discretionary
determinations with respect to the
section 15(a) factors.
2. Costs
The Commission believes this
proposal will slightly decrease the costs
that its regulations impose on SDs and
MSPs (and their counterparties) because
it would eliminate the need to verify
and resolve discrepancies in swap terms
that remain constant (or that do not
impact the valuation of swaps or the
payment obligations of the
counterparties) and thereby reduce the
number of data fields requiring
particular attention in portfolio
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reconciliation exercises.45 As
mentioned previously, the Commission
believes that this change will reduce the
annual burden hours for each SD and
MSP by one hour, resulting in a total of
1,281.5 hours, which leads to an
aggregate number, based on 106
registrants, of 135,839 burden hours.
The Commission previously estimated
that, assuming 1,282.5 annual burden
hours per SD and MSP, the financial
cost of its regulations on each SD and
MSP would be $128,250.46 Therefore,
based on those prior estimates, a onehour reduction in the annual burden
hours for each SD and MSP would
result in a financial cost of $128,150 per
registrant. Accordingly, the Commission
estimates that, if the proposed rule is
adopted, the aggregate financial burden
of its regulations on SDs and MSPs
would be $13,583,900.47
The Commission does not believe the
proposed regulation would increase the
Commission’s costs or impair the
Commission’s ability to oversee and
regulate the swaps markets. Portfolio
reconciliation is designed to enable
counterparties to understand the current
status or value of swap terms. As
mentioned above, the Commission is
proposing to amend the definition of
‘‘material terms’’ in § 23.500(g) so as to
exclude the Proposed Excluded Data
Fields because it preliminarily agrees
with market participants that the
Proposed Excluded Data Fields are not
material to the ongoing rights and
obligations of the counterparties to a
swap. Because the Commission’s
proposal would only remove terms from
the discrepancy resolution process for
material terms, as opposed to the
general portfolio reconciliation process
or swaps reporting requirements, it will
not negatively impact the amount of
information available to the
Commission about swaps. While the
Commission believes that this proposal
would reduce SDs’, MSPs’, or their
counterparties’ costs of complying with
Commission regulations (because it
would reduce the number of terms that
counterparties must periodically resolve
for discrepancies during portfolio
reconciliations), the Commission seeks
specific comment on the following, and
encourages commenters to provide
45 The Commission notes the existence of CFTC
Staff Letter No. 13–31 and that the Proposal, if
finalized, could increase the burden for SDs, MSPs,
and their counterparties relying on the relief in that
letter.
46 Portfolio Reconciliation Final Rule, 77 FR at
55959.
47 The Commission had estimated that, if 125
entities had registered as SDs and MSPs, the
aggregate burden would be $16,031,250. Id.
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quantitative information in their
comments where practical):
• How will the proposed regulation
affect the costs of portfolio
reconciliation for swap counterparties?
Is the Commission’s estimate of cost
reductions that would result from the
proposed rule a reasonable estimate of
cost savings that would be realized from
adopting the proposal?
• Will the proposed regulation make
the portfolio reconciliation process
more or less expensive? How so?
• How would the proposed rule affect
the ongoing costs of compliance with
Commission regulations?
• Are there other costs that the
Commission should consider?
Commenters are strongly encouraged
to include quantitative information in
their comment on this rulemaking
where practical.
3. Benefits
The Commission believes that this
proposal would benefit SDs, MSPs, and
their counterparties because it will not
require them to expend the resources
necessary to resolve discrepancies over
swap terms that are included in the
Proposed Excluded Data Fields in
accordance with tight regulatory
timeframes.48 The Commission requests
comment on all aspects of its
preliminary consideration of benefits
and encourages commenters to provide
quantitative information where
practical. Has the Commission
accurately identified the benefits of this
proposed regulation? Are there other
benefits to the Commission, market
participants, and/or the public that may
result from the adoption of the proposed
regulation that the Commission should
consider?
4. Section 15(a)
Section 15(a) of the CEA requires the
Commission to consider the effects of its
actions in light of the following five
factors:
a. Protection of Market Participants and
the Public
The Commission believes that,
notwithstanding its proposal to remove
the Proposed Excluded Data Fields from
the list of material terms that
counterparties must periodically
scrutinize to resolve any discrepancies,
its regulations will continue to protect
market participants and the public. The
48 See § 23.502(a)(4) requiring SDs and MSPs to
resolve discrepancies in material terms immediately
with counterparties that are also SDs or MSPs. See
also § 23.502(b)(4) (requiring SDs and MSPs to
resolve discrepancies in material terms and
valuations in a timely fashion with counterparties
that are not SDs or MSPs).
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Commission, however, welcomes
comment as to how market participants
and the public may be protected or
harmed by the proposed regulation.
b. Efficiency, Competitiveness, and
Financial Integrity of Markets
The Commission believes that its
proposal, which will ensure that the
parties resolving discrepancies in
material terms and valuations in
portfolio reconciliation exercises need
not concern themselves with terms in
the Proposed Excluded Data Fields may
increase resource allocation efficiency
of market participants engaging in
reconciliation exercises without
increasing the risk of harm to the
financial integrity of markets.
The Commission seeks comment as to
how the proposed regulation may
promote or hinder the efficiency,
competitiveness, and financial integrity
of markets.
c. Price Discovery
The Commission has not identified an
impact on price discovery as a result of
the proposed regulation, but seeks
comment as to any potential impact.
Will the proposed regulation impact,
positively or negatively, the price
discovery process?
d. Sound Risk Management
The Commission believes that its
proposal is consistent with sound risk
management practices because the
proposed regulatory change would not
impair an entity’s ability to conduct
portfolio reconciliations. The
Commission solicits comments on
whether market participants believe the
proposal will impact, positively or
negatively, the risk management
procedures or actions of SDs, MSPs, or
their counterparties.
e. Other Public Interest Considerations
The Commission has not identified
any other public interest considerations,
but welcomes comment on whether this
proposal would promote public
confidence in the integrity of derivatives
markets by ensuring meaningful
regulation and oversight of all SDs and
MSPs. Will this proposal impact,
positively or negatively, any heretofore
unidentified matter of interest to the
public?
List of Subjects in 17 CFR Part 23
Authority delegations (Government
agencies), Commodity futures,
Reporting and recordkeeping
requirements.
For the reasons stated in the
preamble, the Commodity Futures
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Trading Commission proposes to amend
17 CFR part 23 as set forth below:
PART 23—SWAP DEALERS AND
MAJOR SWAP PARTICIPANTS
1. The authority citation for part 23
continues to read as follows:
■
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b–
1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c,
16a, 18, 19, 21.
2. Revise § 23.500(g) to read as
follows:
■
§ 23.500
Definitions.
*
*
*
*
*
(g) Material terms means all terms of
a swap required to be reported in
accordance with part 45 of this chapter
other than the following:
(1) An indication that the swap will
be allocated;
(2) If the swap will be allocated, or is
a post-allocation swap, the legal entity
identifier of the agent;
(3) An indication that the swap is a
post-allocation swap;
(4) If the swap is a post-allocation
swap, the unique swap identifier;
(5) Block trade indicator;
(6) With respect to a cleared swap,
execution timestamp;
(7) With respect to a cleared swap,
timestamp for submission to a swap
data repository;
(8) Clearing indicator; and
(9) Clearing venue.
*
*
*
*
*
Issued in Washington, DC, on September
17, 2015, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendices will not
appear in the Code of Federal Regulations.
Appendices to Proposal To Amend the
Definition of ‘‘Material Terms’’ for
Purposes of Swap Portfolio
Reconciliation—Commission Voting
Summary, Chairman’s Statement, and
Commissioner’s Statement
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Appendix 1—Commission Voting Summary
On this matter, Chairman Massad and
Commissioners Bowen and Giancarlo voted
in the affirmative. No Commissioner voted in
the negative.
Appendix 2—Statement of Chairman
Timothy G. Massad
I support issuing this proposal to amend
the definition of ‘‘material terms’’ for
purposes of portfolio reconciliation
performed by swap dealers and major swap
participants.
The proposed amendment would replace
an existing ‘‘no-action’’ letter issued during
the implementation of the Dodd-Frank Act.
This gives greater certainty to affected
registrants and furthers the Commission’s
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ongoing process of simplifying, fine-tuning,
and harmonizing our rules.
The proposal not only seeks comment on
the technical aspects of reconciling specific
data fields excluded under the staff no-action
letter, but also seeks answers to important
questions regarding the experience of swap
dealers and major swap participants in
complying with the portfolio reconciliation
requirement more generally. Further, it seeks
comment on the relationship of portfolio
reconciliation to the integrity of data reported
to swap data repositories.
The feedback of knowledgeable market
participants on this proposal will allow the
Commission to further its goal of
continuously improving our recordkeeping,
reporting, and data quality rules and
practices. I encourage all market participants
to join in this effort by examining the
proposal and providing detailed comments. I
look forward to reviewing them.
Appendix 3—Statement of Commissioner J.
Christopher Giancarlo
In its rush to implement the Dodd-Frank
Act over the past few years, the Commission
issued multiple rules that proved to be
confusing, impracticable or unworkable,
which in turn necessitated the
unprecedented issuance of no-action relief,
either due to unrealistic compliance
deadlines, problematic elements of the rules
or both. I trust that today’s proposal from the
Commission signals that the epoch of
heedless rule production is drawing to a
close.
The Commission is seeking comment on a
proposed rule that would codify a modified
version of no-action relief issued in 2013 (the
‘‘No-Action Relief’’) by the Division of Swap
Dealer and Intermediary Oversight (‘‘DSIO’’)
pursuant to a request for an interpretive letter
from the International Swaps and Derivatives
Association (‘‘ISDA’’). The No-Action Relief
allows Swap Dealers (‘‘SDs’’) and Major
Swap Participants (‘‘MSPs’’) to treat certain
Part 45 data fields as non-material for
purposes of portfolio reconciliation under
Commission Regulation 23.502.1
I commend the Chairman and DSIO staff
for taking steps to replace the No-Action
Relief with a rulemaking subject to a costbenefit analysis and the notice and comment
requirements of the Administrative
Procedure Act. Reasonable people
understood at the height of the Dodd-Frank
rulemaking frenzy that the Commission
would and could not get everything right.
That is why actions like today’s rule proposal
are necessary and appropriate.
I urge the CFTC staff to continue down the
path of bringing to the Commission for
consideration amendments to flawed DoddFrank rulesets. It is appropriate as a matter
of good government that we replace the
hundreds of no-action, exemptive and
interpretive letters, guidance, advisories and
other communications, both written and
unwritten, issued without a Commission vote
in the wake of the Dodd-Frank Act with
proper administrative rulemakings.
I support issuing for public comment the
proposed amendments to the definition of
1 See
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Frm 00030
Fmt 4702
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57135
‘‘material terms’’ for purposes of portfolio
reconciliation. As the public reviews this
rule change and formulates comments, I
would like to draw its attention to several
aspects of the proposal. Commission
Regulation 23.502 requires SDs and MSPs to
engage in portfolio reconciliation once each
day, week or calendar quarter, depending on
the size of the swap portfolio, and to resolve
immediately any discrepancy in a material
term. It is unclear why the Commission
needs a daily, weekly, or quarterly
reconciliation of data fields that will not
change over time once established. In
particular, I note that the proposed rule
would continue to treat as material terms the
execution timestamp and timestamp for
submission to a swap data repository for
uncleared swaps, an indication of whether
the clearing requirement exception in section
2(h)(7) of the Commodity Exchange Act has
been elected and the identity of the
counterparty electing the clearing
requirement exception. I am aware of the
staff’s concern that a discrepancy in these
terms could negatively impact the
Commission’s regulatory mission, but
question whether these terms will ever need
to be reconciled after an initial verification.
On the other hand, I also question what
additional burden will be placed on market
participants by including these terms in the
portfolio reconciliation process. I note that in
its request for an interpretive letter ISDA
stated that requiring reconciliation of data
fields that are not relevant to the ongoing
rights and obligations of the parties to a swap
unnecessarily adds to the costs and
complexity associated with implementing
and managing the portfolio reconciliation
process.2 It would be most helpful if parties
affected by the rule would submit detailed
comments regarding these costs.
It is also unclear why the Commission is
proposing to retain the requirement that SDs
and MSPs exchange non-material terms
throughout the life of a swap as part of a
portfolio reconciliation exercise. Commission
Regulation 23.500(i) defines portfolio
reconciliation as the process by which two
parties to one or more swaps: (1) Exchange
‘‘terms’’ (meaning all terms) of all swaps
between the counterparties; (2) exchange
each counterparty’s valuation of each swap
as of the close of business on the
immediately preceding business day; and (3)
resolve any discrepancy in ‘‘material’’ terms
and valuations. I note that ISDA requested
that the Commission narrow the definition of
‘‘terms’’ in Rule 23.500(i)(1) to mean
‘‘material terms,’’ but the Commission is not
proposing to do so. Thus, counterparties will
be required to exchange all terms of each
swap on a daily, weekly, or quarterly basis
throughout the life of a swap, but will be
required to reconcile only ‘‘material terms.’’
As with treating the terms relating to
timestamps and the clearing exception as
‘‘material terms’’ discussed above, I question
the utility of including non-material terms
that are not required to be reconciled as part
of the portfolio reconciliation process. It
would be most helpful if parties affected by
2 See ISDA Request for Interpretive Letter—Part
23 dated May 31, 2013.
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Federal Register / Vol. 80, No. 183 / Tuesday, September 22, 2015 / Proposed Rules
the rule would submit detailed comments
weighing the burdens against benefits of
continuing to include such non-material
terms.
I look forward to thoughtful comments on
all aspects of the proposal.
[FR Doc. 2015–24021 Filed 9–21–15; 8:45 am]
BILLING CODE 6351–01–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
21 CFR Parts 1, 11, 16, 106, 110, 114,
117, 120, 123, 129, 179, 211, 225, 500,
507, and 579
[Docket No. FDA–2015–N–001]
RIN 0910–AG10 and 0910–AG36
The Food and Drug Administration
Food Safety Modernization Act: Final
Rules To Establish Requirements for
Current Good Manufacturing Practice,
Hazard Analysis, and Risk-Based
Preventive Controls for Human and
Animal Food; Public Meeting
AGENCY:
Food and Drug Administration,
HHS.
ACTION:
Notification of public meeting.
The Food and Drug
Administration (FDA or we) is
announcing a public meeting entitled
‘‘FDA Food Safety Modernization Act:
Final Rules to Establish Requirements
for Current Good Manufacturing
Practice, Hazard Analysis, and RiskBased Preventive Controls for Human
and Animal Food.’’ The public meeting
will provide interested persons an
opportunity to discuss the final rules for
current good manufacturing practice,
hazard analysis, and risk-based
preventive controls for human and
animal food (the preventive controls
final rules) and FDA’s comprehensive
planning effort for the next phase of the
FDA Food Safety Modernization Act
(FSMA) implementation, which
involves putting in place the new public
health prevention measures and the
risk-based industry oversight framework
that is at the core of FSMA. The purpose
of the public meeting is to brief
stakeholders and interested persons on
the key components of the preventive
controls final rules, respond to
questions, and discuss the next phase of
FSMA implementation with respect to
human and animal food preventive
controls requirements.
DATES: See section III, ‘‘How to
Participate in the Public Meeting’’ in the
SUPPLEMENTARY INFORMATION section of
this document for dates and times of the
Lhorne on DSK5TPTVN1PROD with PROPOSALS
SUMMARY:
VerDate Sep<11>2014
14:51 Sep 21, 2015
Jkt 235001
public meeting, closing dates for
advance registration, and requesting
special accommodations due to
disability.
ADDRESSES: See section III, ‘‘How to
Participate in the Public Meeting’’ in the
SUPPLEMENTARY INFORMATION section of
this document.
FOR FURTHER INFORMATION CONTACT: For
questions about registering for the
meeting or to register by phone:
Courtney Treece, Planning Professionals
Ltd., 1210 West McDermott St., Suite
111, Allen, TX 75013, 704–258–4983,
FAX: 469–854–6992, email: ctreece@
planningprofessionals.com.
For general questions about the
meeting or for special accommodations
due to a disability: Juanita Yates, Center
for Food Safety and Applied Nutrition
(HFS–009), Food and Drug
Administration, 5100 Paint Branch
Pkwy., College Park, MD 20740, 240–
402–1731, email: Juanita.yates@
fda.hhs.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The FDA Food Safety Modernization
Act (FSMA) (Pub. L.111–353), signed
into law by President Obama on January
4, 2011, enables FDA to better protect
public health by helping to ensure the
safety and security of the food supply.
FSMA amends the Federal Food, Drug,
and Cosmetic Act (the FD&C Act) to
establish the foundation of a
modernized, prevention-based food
safety system. Among other things,
FSMA requires FDA to issue regulations
requiring preventive controls for human
food and animal food, setting standards
for produce safety, and requiring
importers to perform certain activities to
help ensure that the food they bring into
the United States is produced in a
manner consistent with U.S. standards.
FSMA was the first major legislative
reform of FDA’s food safety authorities
in more than 70 years. In the Federal
Register of January 16, 2013 (78 FR
3646), we proposed to amend our
regulations for Current Good
Manufacturing Practice In
Manufacturing, Packing, or Holding
Human Food to modernize it and to add
requirements for domestic and foreign
facilities that are required to register
under the FD&C Act to establish and
implement hazard analysis and riskbased preventive controls for human
food. We also proposed to revise certain
definitions in our current regulation for
Registration of Food Facilities to clarify
the scope of the exemption from
registration requirements provided by
the FD&C Act for ‘‘farms.’’ In the
Federal Register of October 29, 2013 (78
PO 00000
Frm 00031
Fmt 4702
Sfmt 4702
FR 64735), we proposed regulations for
domestic and foreign facilities that are
required to register under the FD&C Act
to establish requirements for current
good manufacturing practice in
manufacturing, processing, packing, and
holding of animal food. We proposed to
require that certain facilities establish
and implement hazard analysis and
risk-based preventive controls for food
for animals to provide greater assurance
that animal food is safe and will not
cause illness or injury to animals or
humans.
Based on input we received from
public comments, in the Federal
Register of September 29, 2014 (79 FR
58476 and 79 FR 58524), we proposed
to amend our 2013 proposed rules for
Current Good Manufacturing Practice
and Hazard Analysis and Risk-Based
Preventive Controls for Human and
Animal Food and reopened the
comment period only with respect to
specific issues identified in
supplemental proposed rules.
In the Federal Register of September
17, 2015 (80 FR 55908), we issued a
final rule to establish the requirements
for Current Good Manufacturing
Practice, Hazard Analysis, and RiskBase Preventive Controls for Human
Food. In the Federal Register of
September 17, 2015 (80 FR 56170), we
issued a final rule to establish
requirements for Current Good
Manufacturing Practice, Hazard
Analysis, and Risk-Based Preventive
Controls for Food for Animals. The
preventive controls final rules apply to
human and animal food and require
domestic and foreign facilities that are
required to register under the FD&C Act
to have written plans that identify
hazards, specify the preventive controls
that will be put in place to significantly
minimize or prevent those hazards,
include procedures to monitor the
implementation of the preventive
controls, and include corrective action
procedures for use when preventive
controls are not properly implemented.
We also revised certain definitions in
the regulation for Registration of Food
Facilities to clarify the scope of the
exemption from registration
requirements provided for ‘‘farms’’ and,
in so doing, to clarify which domestic
and foreign facilities are subject to the
requirements for hazard analysis and
risk-based preventive controls for food.
The preventive controls final rules and
related fact sheets are available on
FDA’s FSMA Web page located at
https://www.fda.gov/FSMA.
E:\FR\FM\22SEP1.SGM
22SEP1
]]>Agencies
[Federal Register Volume 80, Number 183 (Tuesday, September 22, 2015)]
[Proposed Rules]
[Pages 57129-57136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24021]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 23
RIN 3038-AE17
Proposal To Amend the Definition of ``Material Terms'' for
Purposes of Swap Portfolio Reconciliation
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') proposes to amend a provision of the Commission's regulations
in connection with the material terms for which counterparties must
resolve discrepancies when engaging in portfolio reconciliation.
DATES: Comments must be received on or before November 23, 2015.
ADDRESSES: You may submit comments, identified by RIN 3038-AE17, and
Proposal to Amend the Definition of ``Material Terms'' for Purposes of
Swap Portfolio Reconciliation by any of the following methods:
The agency's Web site, at https://comments.cftc.gov. Follow
the instructions for submitting comments through the Web site.
Mail: Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW., Washington, DC 20581.
Hand Delivery/Courier: Same as Mail above.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Please submit your comments using only one method.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
https://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that you believe is exempt from disclosure under the
Freedom of Information Act, a petition for confidential treatment of
the exempt information may be submitted according to the procedures
established in Sec. 145.9 of the Commission's regulations.\1\
---------------------------------------------------------------------------
\1\ 17 CFR 145.9. Commission regulations referred to herein are
found at 17 CFR Chapter I.
---------------------------------------------------------------------------
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from https://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT: Frank N. Fisanich, Chief Counsel, 202-
418-5949, ffisanich@cftc.gov; Katherine S. Driscoll, Associate Chief
Counsel, 202-418-5544, kdriscoll@cftc.gov; Gregory Scopino, Special
Counsel, 202-418-5175, gscopino@cftc.gov, Division of Swap Dealer and
Intermediary Oversight, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
On September 11, 2012, the Commission published in the Federal
Register final rules Sec. 23.500 through Sec. 23.505 \2\ establishing
requirements for the timely and accurate confirmation of swaps, the
reconciliation and compression of swap portfolios, and documentation of
swap trading relationships between swap dealers (``SDs''),\3\ major
swap participants (``MSPs''),\4\ and their counterparties. These
regulations were promulgated by the Commission pursuant to the
authority granted under Sections 4s(h)(1)(D), 4s(h)(3)(D), and 4s(i) of
the Commodity Exchange Act (the ``CEA''),\5\
[[Page 57130]]
as amended by Section 731 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the ``Dodd-Frank Act''),\6\ which, among other
things, directed the Commission to prescribe regulations for the timely
and accurate confirmation, processing, netting, documentation and
valuation of all swaps entered into by SDs and MSPs,\7\ and the
Commission's general rulemaking authority under Section 8a(5) of the
CEA.\8\
---------------------------------------------------------------------------
\2\ Confirmation, Portfolio Reconciliation, Portfolio
Compression, and Swap Trading Relationship Documentation
Requirements for Swap Dealers and Major Swap Participants, 77 FR
55904 (Sept. 11, 2012) (hereinafter, ``Portfolio Reconciliation
Final Rule'').
\3\ Generally, an SD is any person who, in addition to
transacting in a notional amount of swaps in excess of specified de
minimis thresholds, holds itself out as a dealer in swaps, makes a
market in swaps, regularly enters into swaps with counterparties as
an ordinary course of business for its own account, or engages in
any activity causing it to be commonly known in the trade as a
dealer or market maker in swaps. See 7 U.S.C. 1a(49); 17 CFR
1.3(ggg).
\4\ Generally, an MSP is any non-dealer that maintains a
substantial position in swaps for any of the specified major swap
categories, whose outstanding swaps create substantial counterparty
exposure that could have serious adverse effects on the financial
stability of the United States banking system or financial markets,
or any financial entity that is highly leveraged relative to the
amount of capital such entity holds and that is not subject to
capital requirements established by an appropriate Federal banking
agency and maintains a substantial position in outstanding swaps in
any major swap category. See 7 U.S.C. 1a(33); 17 CFR 1.3(hhh).
\5\ 7 U.S.C. 6s(h)(1)(D), 6s(h)(3)(D) and 6s(i).
\6\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Pub. L. 111-203, 124 Stat. 1376 (July 21, 2010).
\7\ Portfolio Reconciliation Final Rule, 77 FR at 55926
(``[P]ortfolio reconciliation involves both confirmation and
valuation and serves as a mechanism to ensure accurate
documentation.'').
\8\ 7 U.S.C. 12a(5).
---------------------------------------------------------------------------
Under Sec. 23.502,\9\ SDs and MSPs must reconcile their swap
portfolios with one another and provide non-SD and non-MSP
counterparties with regular opportunities for portfolio
reconciliation.\10\ Section 23.500(i) \11\ defines the term,
``portfolio reconciliation,'' as ``any process by which the two parties
to one or more swaps: (1) Exchange the terms of all swaps in the swap
portfolio between the counterparties; (2) exchange each counterparty's
valuation of each swap in the swap portfolio between the counterparties
as of the close of business on the immediately preceding business day;
and (3) resolve any discrepancy in material terms and valuations.''
Section 23.500(g) defines ``material terms'' to mean ``all terms of a
swap required to be reported in accordance with part 45 of this
chapter.'' \12\ Thus, portfolio reconciliation seeks to enable ``the
swap market to operate efficiently and to reduce systemic risk'' \13\
by requiring counterparties periodically to (1) exchange the terms of
their mutual swaps, and (2) locate and resolve discrepancies in
material terms of mutual swaps. In particular, the Commission
recognized that ``portfolio reconciliation [would] facilitate the
identification and resolution of discrepancies between the
counterparties with regard to valuations of collateral held as
margin.'' \14\ The Commission also has described portfolio
reconciliation, generally, as follows:
---------------------------------------------------------------------------
\9\ 17 CFR 23.502.
\10\ 17 CFR 23.502; see Portfolio Reconciliation Final Rule, 77
FR at 55926.
\11\ 17 CFR 23.500(i).
\12\ 17 CFR 23.500(g). Part 45 of the Commission regulations
govern swap data recordkeeping and reporting requirements. The swap
terms that must be reported under part 45 are found in appendix 1 to
part 45. See 17 CFR part 45, App. 1; see also 17 CFR 45.1 (defining
``primary economic terms'' as ``all of the terms of a swap matched
or affirmed by the counterparties in verifying the swap,'' including
``at a minimum each of the terms included in the most recent Federal
Register release by the Commission listing minimum primary economic
terms for swaps in the swap asset class in question'' and stating
that the current list of minimum primary economic terms is in
appendix 1); Swap Data Recordkeeping and Reporting Requirements, 77
FR 2197 (Jan. 13, 2012) (promulgating the list of primary economic
terms). Examples of primary economic terms include the price of the
swap, payment frequency, type of contract (e.g., a ``vanilla
option'' or ``complex exotic option''), execution timestamp, and, if
the swap is a multi-asset class swap, the primary and secondary
asset classes. 17 CFR part 45, App. 1.
\13\ Portfolio Reconciliation Final Rule, 77 FR at 55926.
\14\ Id. In response to comments that industry practice was only
to resolve swap terms that lead to material collateral disputes, the
Commission, in promulgating the final Sec. 23.502, emphasized the
importance of both (1) resolving disputes related to the material
terms of swaps and (2) resolving valuation disputes impacting margin
payments. Id. at 55926-27, 55929-31.
Portfolio reconciliation is a post-execution processing and risk
management technique that is designed to (i) identify and resolve
discrepancies between the counterparties with regard to the terms of
a swap either immediately after execution or during the life of the
swap; (ii) ensure effective confirmation of terms of the swap; and
(iii) identify and resolve discrepancies between the counterparties
regarding the valuation of the swap.\15\
---------------------------------------------------------------------------
\15\ Portfolio Reconciliation Final Rule, 77 FR at 55926.
In adopting Sec. 23.502, the Commission intended to require that
SDs, MSPs, and their counterparties engage in portfolio reconciliation
at regular intervals. Explaining the rationale for Sec. 23.502, the
Commission noted that portfolio reconciliation can identify and reduce
overall risk ``[b]y identifying and managing mismatches in key economic
terms and valuation for individual transactions across an entire
portfolio.'' \16\ Portfolio reconciliation is not required for cleared
swaps where a derivatives clearing organization (``DCO'') holds the
definitive record of the trades and determines binding daily valuations
for the swaps.\17\
---------------------------------------------------------------------------
\16\ Id.
\17\ Id. at 55927.
---------------------------------------------------------------------------
II. Proposed Regulation
In 2013, the International Swaps and Derivatives Association, Inc.
(``ISDA'') requested interpretive guidance from Commission staff that
would permit certain swap data elements to be excluded from portfolio
reconciliation as required under Sec. 23.502.\18\ Specifically, ISDA
requested that ``the terms'' of a swap that counterparties must
exchange during portfolio reconciliation exercises be limited to the
``material terms'' of a swap, and that ``material terms'' have the same
meaning as ``primary economic terms'' in Sec. 45.1. ISDA further asked
that the following data fields (hereinafter referred to as the ``No-
Action Excluded Data Fields'') be excluded from the definition of
``material terms'' for purposes of compliance with Sec. 23.502:
---------------------------------------------------------------------------
\18\ See CFTC Staff Letter No. 13-31 (June 26, 2013), available
at https://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-31.pdf.
1. An indication that the swap will be allocated;
2. If the swap will be allocated, or is a post-allocation swap, the
legal entity identifier \19\ of the agent;
---------------------------------------------------------------------------
\19\ A legal entity identifier is ``a 20-digit, alpha-numeric
code, to uniquely identify legally distinct entities that engage in
financial transactions.'' See Legal Entity Identifier Regulatory
Oversight Committee, https://www.leiroc.org/; 17 CFR 45.6.
---------------------------------------------------------------------------
3. An indication that the swap is a post-allocation swap;
4. If the swap is a post-allocation swap, the unique swap identifier;
\20\
---------------------------------------------------------------------------
\20\ A unique swap identifier is a unique identifier assigned to
all swap transactions which identifies the transaction (the swap and
its counterparties) uniquely throughout the duration of the swap's
existence. See 17 CFR 45.5.
---------------------------------------------------------------------------
5. Block trade indicator;
6. Execution timestamp;
7. Timestamp for submission to swap data repository (``SDR''); \21\
---------------------------------------------------------------------------
\21\ A swap data repository is any person that collects and
maintains information or records with respect to transactions or
positions in, or the terms and conditions of, swaps entered into by
third parties for the purpose of providing a centralized
recordkeeping facility for swaps. 7 U.S.C. 1a(48); 17 CFR 1.3(qqqq).
---------------------------------------------------------------------------
8. Clearing indicator;
9. Clearing venue;
10. If the swap will not be cleared, an indication of whether the
clearing requirement exception in CEA Section 2(h)(7) \22\ has been
elected; and
---------------------------------------------------------------------------
\22\ Generally speaking, Section 2(h)(1)(A) of the CEA
establishes a clearing requirement for swaps, providing that ``[i]t
shall be unlawful for any person to engage in a swap unless that
person submits such swap for clearing to a derivatives clearing
organization that is registered under [the CEA] or a derivatives
clearing organization that is exempt from registration under [the
CEA] if the swap is required to be cleared.'' 7 U.S.C. 2(h)(1)(A).
CEA Section 2(h)(7), however, provides for several limited
exceptions to the clearing requirement of Section 2(h)(1)(A). Id. at
2(h)(7); see also End-User Exception to the Clearing Requirement for
Swaps, 77 FR 42560, 42560-61 (July 19, 2012).
---------------------------------------------------------------------------
11. The identity of the counterparty electing the clearing requirement
exception in CEA Section 2(h)(7).\23\
---------------------------------------------------------------------------
\23\ CFTC Staff Letter No. 13-31 at 2-3.
---------------------------------------------------------------------------
ISDA contended generally that the definition of ``material terms''
in Sec. 23.500(g) is too broad to guide market participants in the
construction of a reconciliation process, and with regard to the No-
Action Excluded Data Fields specifically, ISDA argued that these fields
are not relevant to the portfolio reconciliation process because they
pertain to the circumstances
[[Page 57131]]
surrounding entry into a transaction, and whether a transaction was
intended to be cleared, and are not relevant to ongoing rights and
obligations under swaps in a swap portfolio existing bilaterally
between an SD and a counterparty.
After considering ISDA's request, the Commission's Division of Swap
Dealer and Intermediary Oversight (the ``Division'') provided SDs and
MSPs with no-action relief on June 26, 2013, pursuant to CFTC Staff
Letter 13-31.\24\ In such letter, the Division chose not to interpret
the reference to ``the terms'' of a swap in Sec. 23.500(i)(1) as
meaning the ``material terms'' or to define ``material terms'' to mean
the ``primary economic terms'' of a swap minus the No-Action Excluded
Data Fields. Rather, the Division merely stated that it would not
recommend an enforcement action against an SD or MSP that omits the No-
Action Excluded Data Fields from the portfolio reconciliation process
required under Sec. 23.502.\25\ Thus, it appears that following the
issuance of CFTC Staff Letter 13-31, an SD that chose to take advantage
of the relief could consider the No-Action Excluded Data Fields not to
be terms of a swap required to be exchanged with a counterparty in a
portfolio reconciliation exercise.
---------------------------------------------------------------------------
\24\ See id.
\25\ Id. at 3.
---------------------------------------------------------------------------
Against this background, the Commission is now proposing to amend
the definition of ``material terms'' in Sec. 23.500(g) to specifically
exclude a modified version of the No-Action Excluded Data Fields. As
amended, Sec. 23.500(g) would exclude the following data fields from
the definition of ``material terms'' (hereinafter referred to as the
``Proposed Excluded Data Fields''):
1. An indication that the swap will be allocated;
2. If the swap will be allocated, or is a post-allocation swap, the
legal entity identifier \26\ of the agent;
---------------------------------------------------------------------------
\26\ A legal entity identifier is ``a 20-digit, alpha-numeric
code, to uniquely identify legally distinct entities that engage in
financial transactions.'' See Legal Entity Identifier Regulatory
Oversight Committee, https://www.leiroc.org/; 17 CFR 45.6.
---------------------------------------------------------------------------
3. An indication that the swap is a post-allocation swap;
4. If the swap is a post-allocation swap, the unique swap identifier;
\27\
---------------------------------------------------------------------------
\27\ A unique swap identifier is a unique identifier assigned to
all swap transactions which identifies the transaction (the swap and
its counterparties) uniquely throughout the duration of the swap's
existence. See 17 CFR 45.5.
---------------------------------------------------------------------------
5. Block trade indicator;
6. With respect to a cleared swap, the execution timestamp;
7. With respect to a cleared swap, the timestamp for submission to SDR;
8. Clearing indicator; and
9. Clearing venue.
The Proposed Excluded Data Fields modify the No-Action Excluded
Data Fields by: (1) Amending the execution timestamp data field to be
specific to cleared swaps; (2) amending the timestamp for submission to
an SDR data field to be specific to cleared swaps; (3) removing the
data field containing an indication of whether the clearing requirement
exception in CEA Section 2(h)(7) has been elected with respect to an
uncleared swap; and (4) removing the data field containing the identity
of the counterparty electing the clearing requirement exception in CEA
Section 2(h)(7). The Commission is proposing to retain these data
fields for uncleared swaps as ``material terms'' because a discrepancy
in this information in the records of the counterparties could mean
that the related information is erroneous in the records of an SDR,
which could have an impact on the Commission's regulatory mission.
The time of execution of an uncleared swap and the time of
submission to an SDR is of regulatory value to the Commission for
purposes of determining the compliance of SDs and MSPs with Commission
regulations.\28\ Similarly, the identity of a counterparty electing the
end-user exception to clearing is important to the Commission's
enforcement of the clearing requirement and its monitoring of systemic
risk in the OTC markets under its jurisdiction. Thus, the Commission
believes it is reasonable to require SDs, MSPs, and their
counterparties to resolve any discrepancy in these data fields and, if
necessary, correct the information reported to an SDR.\29\
---------------------------------------------------------------------------
\28\ For example, among other things, the time of execution of a
swap between an SD and a counterparty may be relevant to determining
the SD's compliance with the deadlines for confirmation of the swap
set forth in Sec. 23.501. Likewise, the time of execution and the
time of reporting to an SDR may be relevant to determining the SD's
compliance with the reporting deadlines set forth in part 45 of the
Commission's regulations.
\29\ Reporting counterparties are required to correct errors and
omissions in data previously reported to an SDR pursuant to Sec.
45.14.
---------------------------------------------------------------------------
The Commission intends that, if and when the proposed amendment to
the definition of ``material terms'' is adopted, it will direct the
Division to withdraw the no-action relief provided pursuant to CFTC
Letter 13-31. Accordingly, under this proposal, the Commission is
maintaining the status quo of Sec. 23.502 in that SDs and MSPs and
their counterparties would be required to exchange ``the terms'' of a
swap as required under Sec. 23.500(i)(1) and would have to resolve
discrepancies in ``material terms'' of swaps pursuant to Sec.
23.502(a)(4) and (b)(4). However, ``material terms'' would not include
the Proposed Excluded Data Fields. This requirement differs from what
may be the current practice of SDs and MSPs that have chosen to take
advantage of the relief provided in CFTC Staff Letter 13-31. Such SDs
and MSPs may be omitting the No-Action Excluded Data Fields from the
portfolio reconciliation process altogether and not exchanging such
terms at all, or if exchanging them, choosing not to resolve
discrepancies that may be discovered. If the Commission's proposal is
adopted, such SDs and MSPs would be required to resume exchanging the
terms included in the Proposed Excluded Data Fields, although they
could continue the practice of choosing not to resolve discrepancies in
such terms. In addition, SDs and MSPs would have to resolve
discrepancies in execution and SDR submission timestamps for cleared
swaps, and discrepancies in the identities of counterparties electing
the end-user exception from clearing, which may not be the practice for
SDs and MSPs that have been relying on CFTC Staff Letter 13-31.
It is the intention of the Commission's proposal to alleviate the
burden of resolving discrepancies in terms of a swap that are not
relevant to the ongoing rights and obligations of the parties and the
valuation of the swap, or to the Commission's regulatory mission.
However, with respect to at least some of the No-Action Excluded Data
Fields and the corresponding information that is included in the
Proposed Excluded Data Fields, the Commission questions whether such
data is actually required to be included in any ongoing portfolio
reconciliation exercise. For example, the ``clearing indicator'' and
``clearing venue'' items included in the Proposed Excluded Data Fields
pertain to a swap only until it is extinguished when accepted for
clearing by a DCO.\30\ When extinguished, the original swap would no
longer be subject to portfolio reconciliation,\31\ and, as explained
[[Page 57132]]
above, portfolio reconciliation is not required for cleared swaps.\32\
As noted below, the Commission seeks comment on whether such terms
should be included in the Proposed Excluded Data Fields.
---------------------------------------------------------------------------
\30\ See 17 CFR 23.504(b)(6) ('' . . . upon acceptance of a swap
by a derivatives clearing organization: (i) The original swap is
extinguished; (ii) The original swap is replaced by equal and
opposite swaps with the derivatives clearing organization; and (iii)
All terms of the swap shall conform to the product specifications of
the cleared swap established under the derivative clearing
organization's rules.'').
\31\ The Commission notes that portfolio reconciliation only
applies to swaps currently in effect between an SD or MSP and a
particular counterparty, not to expired or terminated swaps. See
Definition of ``swap portfolio,'' 17 CFR 23.500(k).
\32\ Portfolio Reconciliation Final Rule, 77 FR at 55927.
---------------------------------------------------------------------------
Finally, the Commission notes that it is not proposing an amendment
to Sec. 23.500(i)(1) that would exclude the Proposed Excluded Data
Fields from portfolio reconciliation altogether. Thus the Commission is
not proposing to change the existing requirement under Sec. 23.502
that parties must exchange terms of all swaps in a mutual portfolio,
but need only resolve discrepancies over material terms and valuations.
As stated above, the Commission recognizes that the proposed amendment
would not have the same effect as the no-action relief provided by the
Division in CFTC Staff Letter 13-31. Nevertheless, the Commission has
determined that it would be premature to propose to codify the staff
relief without considering comments from the public on the nature of
the post-Dodd-Frank-Act portfolio reconciliation process and how the
Proposed Excluded Data Fields relate to that process.
III. Request for Comment
To ensure that the proposed rule would, if adopted, achieve its
stated purpose, the Commission requests comment generally on all
aspects of the proposed rule. Specifically, the Commission requests
comment on the following:
Should the Commission amend its regulations to provide
relief identical to that granted in CFTC Letter No. 13-31?
Alternatively, should the Commission amend Sec. 23.500(i)(1) so that
counterparties only have to exchange the ``material terms'' (which
would not include the Proposed Excluded Data Fields) of swaps? Or,
lastly, should the Commission adopt its current proposal which is to
only remove the Proposed Excluded Data Fields from the definition of
``material terms'' that counterparties must resolve for discrepancies
pursuant to Sec. 23.500(i)(3)?
Should the Commission's Proposed Excluded Data Fields not
include the execution and SDR submission timestamps for uncleared
swaps? Please explain why or why not.
Should the Commission's Proposed Excluded Data Fields
include an indication of the election of the clearing exception in CEA
Section 2(h)(7) and/or the identity of the counterparty electing such
clearing requirement exception? Please explain why or why not.
Are there other items in the Proposed Excluded Data Fields
that may have material regulatory value to the Commission or that may
be relevant to the ongoing rights and obligations of the parties and
the valuation of the swap and, thus, should not be included in the
Proposed Excluded Data Fields? Please explain why or why not.
Is each of the Proposed Excluded Data Fields actually
required to be included in any ongoing portfolio reconciliation
exercise, and, if not, should any such term be removed from the list of
Proposed Excluded Data Fields? Please explain why or why not.
Should any other ``material term'' as defined in Sec.
23.500(g) be included in the list of Proposed Excluded Data Fields?
Please explain why or why not.
Should the Commission amend Sec. 23.500(g) so that the
term, ``material terms,'' is defined as all terms of a swap required to
be reported in accordance with part 45 of the Commission regulations
other than the Proposed Excluded Data Fields, as proposed? Please
explain why or why not.
To what extent does the proposed amendment facilitate (or
fail to facilitate) the policy objectives of portfolio reconciliation?
Feel free to reference specific terms listed in the Proposed Excluded
Data Fields in your answer.
Where are the cost savings realized by not having to
resolve discrepancies in the Proposed Excluded Data Fields? If any
other alternative approach should be considered, what cost savings
would be realized by such alternative approach? Commenters are
encouraged to quantify these cost savings.
IV. Related Matters
A. Regulatory Flexibility Act.
The Regulatory Flexibility Act \33\ requires that agencies consider
whether the rules they propose will have a significant economic impact
on a substantial number of small entities and, if so, provide a
regulatory flexibility analysis reflecting the impact. For purposes of
resolving any discrepancy in material terms and valuations, the
proposed regulation would amend the definition in Sec. 23.500(g) of
the Commission regulations so that the term ``material terms'' (which
is used in Sec. 23.500(i)(3)) is defined as all terms of a swap
required to be reported in accordance with part 45 of the Commission's
regulations other than the Proposed Excluded Data Fields. As noted
above, clause (3) of the definition of ``portfolio reconciliation'' in
Sec. 23.500(i) requires the parties to resolve any discrepancy in
``material terms'' and valuations. As a result of the proposed change
to the definition of ``material terms'' in Sec. 23.500(g) of the
Commission regulations, SDs and MSPs would not need to include the
Proposed Excluded Data Fields \34\ in any resolution of discrepancies
of material terms or valuations when engaging in portfolio
reconciliation. The Commission has previously determined that SDs and
MSPs are not small entities for purposes of the Regulatory Flexibility
Act.\35\ Furthermore, any financial end users that may be indirectly
\36\ impacted by the proposed rule are likely to be eligible contract
participants, and, as such, they would not be small entities.\37\
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\33\ 5 U.S.C. 601 et seq.
\34\ See section II above for a list of ``Proposed Excluded Data
Fields'' and proposed Sec. 23.500(g) of the Commission regulations.
\35\ Policy Statement and Establishment of Definitions of
``Small Entities'' for Purposes of the Regulatory Flexibility Act,
47 FR 18618, 18619 (Apr. 30, 1982).
\36\ The Regulatory Flexibility Act focuses on direct impact to
small entities and not on indirect impacts on these businesses,
which may be tenuous and difficult to discern. See Mid-Tex Elec.
Coop., Inc. v. FERC, 773 F.2d 327, 340 (D.C. Cir. 1985); Am.
Trucking Assns. v. EPA, 175 F.3d 1027, 1043 (D.C. Cir. 1985).
\37\ See Opting Out of Segregation, 66 FR 20740, 20743 (Apr. 25,
2001).
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Thus, for the reasons stated above, the Commission preliminarily
believes that the proposal will not have a significant economic impact
on a substantial number of small entities. Accordingly, the Chairman,
on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.
605(b), that the proposed regulations in this Federal Register release
would not have a significant economic impact on a substantial number of
small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \38\ imposes certain
requirements on Federal agencies, including the Commission, in
connection with their conducting or sponsoring any collection of
information, as defined by the PRA. 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. This
proposed rulemaking would result in an amendment to existing collection
of information OMB Control Number 3038-0068 with respect to the
collection of information entitled ``Confirmation, Portfolio
Reconciliation, and Portfolio Compression Requirements for Swap Dealers
and
[[Page 57133]]
Major Swap Participants.'' \39\ The Commission is therefore submitting
this proposal to the Office of Management and Budget (OMB) for review.
The Commission previously discussed, for purposes of the PRA, the
burden \40\ that the regulation mandating, inter alia, portfolio
reconciliation would impose on market participants.\41\ In particular,
the Commission estimated the burden to be 1,282.5 hours for each SD and
MSP, and the aggregate burden for registrants--based on a then-
projected 125 registrants--was 160,312.5 burden hours.\42\ Since the
Commission finalized the rules for SDs and MSPs, 104 entities have
provisionally registered as SDs and two entities have provisionally
registered as MSPs, for a total of 106 registrants.\43\ Accordingly,
based on the original estimate of 1,282.5 burden hours for each SD and
MSP, the aggregate burden for all registrants is estimated at 135,945
burden hours.
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\38\ 44 U.S.C. 3501 et seq.
\39\ See OMB Control No. 3038-0068, https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0068.
\40\ ``For purposes of the PRA, the term `burden' means the
`time, effort, or financial resources expended by persons to
generate, maintain, or provide information to or for a Federal
Agency.' '' Portfolio Reconciliation Final Rule, 77 FR at 55959.
\41\ Portfolio Reconciliation Final Rule, 77 FR at 55958-60.
\42\ Portfolio Reconciliation Final Rule, 77 FR at 55959.
\43\ Provisionally Registered Swap Dealers as of June 17, 2015,
https://www.cftc.gov/LawRegulation/DoddFrankAct/registerswapdealer;
Provisionally Registered Major Swap Participants as of March 1,
2013, https://www.cftc.gov/LawRegulation/DoddFrankAct/registermajorswappart.
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The proposed regulation would amend the definition in Sec.
23.500(g) of the Commission regulations so that the term ``material
terms'' (which is used in Sec. 23.500(i)(3)) is defined as all terms
of a swap required to be reported in accordance with part 45 of the
Commission's regulations other than the Proposed Excluded Data
Fields.\44\ As noted above, clause (3) of the definition of ``portfolio
reconciliation'' in Sec. 23.500(i) requires the parties to resolve any
discrepancy in ``material terms'' and valuations. The proposed change
would clarify that SDs and MSPs would not need to include the Proposed
Excluded Data Fields in any resolution of discrepancies of material
terms or valuations.
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\44\ As noted earlier, the proposed rule is amending the
definition of the term ``material terms'' at Sec. 23.500(g) to
exclude nine data fields that would not be considered ``material
terms'' in the definition of the term ``portfolio reconciliation''
of Sec. 23.500(i)(3).
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As discussed above, the rule change proposed herein would reduce
the number of ``material terms'' that counterparties would need to
resolve for discrepancies in portfolio reconciliation exercises, but
would not eliminate the portfolio reconciliation requirement itself.
However, the Commission believes that the changes proposed to the
regulatory definition of ``material terms'' described herein would
reduce the time burden for portfolio reconciliation by one burden hour
for each SD and MSP, which would reduce the annual burden to 1,281.5
hours per SD and MSP. The Commission believes that the proposed rule
would result in one hour of less work for computer programmers for SDs
and MSPs because the programmers who have to match the needed data
fields from two different databases would have fewer data fields to
obtain and resolve for discrepancies. Given that there are 106
provisionally registered SDs and MSPs, the proposed rule, if adopted,
would result in an aggregate burden of 135,839 burden hours. The
Commission welcomes comments about the potential impact that this
proposal would have on the time and cost burden associated with
portfolio reconciliation.
1. Information Collection Comments
The Commission invites the public and other Federal agencies to
comment on any aspect of the reporting burdens discussed above.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments
in order to: (1) Evaluate whether the proposed collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information will have practical
utility; (2) evaluate the accuracy of the Commission's estimate of the
burden of the proposed collection of information; (3) determine whether
there are ways to enhance the quality, utility, and clarity of the
information to be collected; and (4) mitigate the burden of the
collection of information on those who are to respond, including
through the use of automated collection techniques or other forms of
information technology.
Comments may be submitted directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395-6566 or by email at
OIRAsubmissions@omb.eop.gov. Please provide the Commission with a copy
of submitted comments so that all comments can be summarized and
addressed in the final rule preamble. Refer to the ADDRESSES section of
this notice of proposed rulemaking for comment submission instructions
to the Commission. A copy of the supporting statement for the
collection of information discussed above may be obtained by visiting
https://reginfo.gov/. OMB is required to make a decision concerning the
collection of information between 30 and 60 days after publication of
this document in the Federal Register. Therefore, a comment is best
assured of having its full effect if OMB receives it within 30 days of
publication.
C. Considerations of Costs and Benefits
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA or issuing an order. Section 15(a) further specifies that
the costs and benefits shall be evaluated in light of the following
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. The Commission considers the costs and benefits
resulting from its discretionary determinations with respect to the
section 15(a) factors.
1. Background
The Commission believes that, while portfolio reconciliation
generally helps counterparties to manage risk by facilitating the
resolution of discrepancies in material terms of swaps, forcing
entities to resolve discrepancies in the Proposed Excluded Data Fields
does not improve the management of risks in swaps portfolios. By
eliminating the need to resolve discrepancies over material swap terms
that remain constant (and that do not impact the valuation of the swap
or the payment obligations of the counterparties) and thereby reducing
the number of data fields that parties must resolve for differences in
portfolio reconciliation exercises, the Commission believes this
proposal will slightly decrease the costs that its regulations impose
on SDs and MSPs (and their counterparties) without a concomitant
reduction in the benefits obtained from portfolio reconciliation
exercises under the existing regulatory framework, as described below.
2. Costs
The Commission believes this proposal will slightly decrease the
costs that its regulations impose on SDs and MSPs (and their
counterparties) because it would eliminate the need to verify and
resolve discrepancies in swap terms that remain constant (or that do
not impact the valuation of swaps or the payment obligations of the
counterparties) and thereby reduce the number of data fields requiring
particular attention in portfolio
[[Page 57134]]
reconciliation exercises.\45\ As mentioned previously, the Commission
believes that this change will reduce the annual burden hours for each
SD and MSP by one hour, resulting in a total of 1,281.5 hours, which
leads to an aggregate number, based on 106 registrants, of 135,839
burden hours. The Commission previously estimated that, assuming
1,282.5 annual burden hours per SD and MSP, the financial cost of its
regulations on each SD and MSP would be $128,250.\46\ Therefore, based
on those prior estimates, a one-hour reduction in the annual burden
hours for each SD and MSP would result in a financial cost of $128,150
per registrant. Accordingly, the Commission estimates that, if the
proposed rule is adopted, the aggregate financial burden of its
regulations on SDs and MSPs would be $13,583,900.\47\
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\45\ The Commission notes the existence of CFTC Staff Letter No.
13-31 and that the Proposal, if finalized, could increase the burden
for SDs, MSPs, and their counterparties relying on the relief in
that letter.
\46\ Portfolio Reconciliation Final Rule, 77 FR at 55959.
\47\ The Commission had estimated that, if 125 entities had
registered as SDs and MSPs, the aggregate burden would be
$16,031,250. Id.
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The Commission does not believe the proposed regulation would
increase the Commission's costs or impair the Commission's ability to
oversee and regulate the swaps markets. Portfolio reconciliation is
designed to enable counterparties to understand the current status or
value of swap terms. As mentioned above, the Commission is proposing to
amend the definition of ``material terms'' in Sec. 23.500(g) so as to
exclude the Proposed Excluded Data Fields because it preliminarily
agrees with market participants that the Proposed Excluded Data Fields
are not material to the ongoing rights and obligations of the
counterparties to a swap. Because the Commission's proposal would only
remove terms from the discrepancy resolution process for material
terms, as opposed to the general portfolio reconciliation process or
swaps reporting requirements, it will not negatively impact the amount
of information available to the Commission about swaps. While the
Commission believes that this proposal would reduce SDs', MSPs', or
their counterparties' costs of complying with Commission regulations
(because it would reduce the number of terms that counterparties must
periodically resolve for discrepancies during portfolio
reconciliations), the Commission seeks specific comment on the
following, and encourages commenters to provide quantitative
information in their comments where practical):
How will the proposed regulation affect the costs of
portfolio reconciliation for swap counterparties? Is the Commission's
estimate of cost reductions that would result from the proposed rule a
reasonable estimate of cost savings that would be realized from
adopting the proposal?
Will the proposed regulation make the portfolio
reconciliation process more or less expensive? How so?
How would the proposed rule affect the ongoing costs of
compliance with Commission regulations?
Are there other costs that the Commission should consider?
Commenters are strongly encouraged to include quantitative
information in their comment on this rulemaking where practical.
3. Benefits
The Commission believes that this proposal would benefit SDs, MSPs,
and their counterparties because it will not require them to expend the
resources necessary to resolve discrepancies over swap terms that are
included in the Proposed Excluded Data Fields in accordance with tight
regulatory timeframes.\48\ The Commission requests comment on all
aspects of its preliminary consideration of benefits and encourages
commenters to provide quantitative information where practical. Has the
Commission accurately identified the benefits of this proposed
regulation? Are there other benefits to the Commission, market
participants, and/or the public that may result from the adoption of
the proposed regulation that the Commission should consider?
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\48\ See Sec. 23.502(a)(4) requiring SDs and MSPs to resolve
discrepancies in material terms immediately with counterparties that
are also SDs or MSPs. See also Sec. 23.502(b)(4) (requiring SDs and
MSPs to resolve discrepancies in material terms and valuations in a
timely fashion with counterparties that are not SDs or MSPs).
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4. Section 15(a)
Section 15(a) of the CEA requires the Commission to consider the
effects of its actions in light of the following five factors:
a. Protection of Market Participants and the Public
The Commission believes that, notwithstanding its proposal to
remove the Proposed Excluded Data Fields from the list of material
terms that counterparties must periodically scrutinize to resolve any
discrepancies, its regulations will continue to protect market
participants and the public. The Commission, however, welcomes comment
as to how market participants and the public may be protected or harmed
by the proposed regulation.
b. Efficiency, Competitiveness, and Financial Integrity of Markets
The Commission believes that its proposal, which will ensure that
the parties resolving discrepancies in material terms and valuations in
portfolio reconciliation exercises need not concern themselves with
terms in the Proposed Excluded Data Fields may increase resource
allocation efficiency of market participants engaging in reconciliation
exercises without increasing the risk of harm to the financial
integrity of markets.
The Commission seeks comment as to how the proposed regulation may
promote or hinder the efficiency, competitiveness, and financial
integrity of markets.
c. Price Discovery
The Commission has not identified an impact on price discovery as a
result of the proposed regulation, but seeks comment as to any
potential impact. Will the proposed regulation impact, positively or
negatively, the price discovery process?
d. Sound Risk Management
The Commission believes that its proposal is consistent with sound
risk management practices because the proposed regulatory change would
not impair an entity's ability to conduct portfolio reconciliations.
The Commission solicits comments on whether market participants believe
the proposal will impact, positively or negatively, the risk management
procedures or actions of SDs, MSPs, or their counterparties.
e. Other Public Interest Considerations
The Commission has not identified any other public interest
considerations, but welcomes comment on whether this proposal would
promote public confidence in the integrity of derivatives markets by
ensuring meaningful regulation and oversight of all SDs and MSPs. Will
this proposal impact, positively or negatively, any heretofore
unidentified matter of interest to the public?
List of Subjects in 17 CFR Part 23
Authority delegations (Government agencies), Commodity futures,
Reporting and recordkeeping requirements.
For the reasons stated in the preamble, the Commodity Futures
[[Page 57135]]
Trading Commission proposes to amend 17 CFR part 23 as set forth below:
PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS
0
1. The authority citation for part 23 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t,
9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21.
0
2. Revise Sec. 23.500(g) to read as follows:
Sec. 23.500 Definitions.
* * * * *
(g) Material terms means all terms of a swap required to be
reported in accordance with part 45 of this chapter other than the
following:
(1) An indication that the swap will be allocated;
(2) If the swap will be allocated, or is a post-allocation swap,
the legal entity identifier of the agent;
(3) An indication that the swap is a post-allocation swap;
(4) If the swap is a post-allocation swap, the unique swap
identifier;
(5) Block trade indicator;
(6) With respect to a cleared swap, execution timestamp;
(7) With respect to a cleared swap, timestamp for submission to a
swap data repository;
(8) Clearing indicator; and
(9) Clearing venue.
* * * * *
Issued in Washington, DC, on September 17, 2015, by the
Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Proposal To Amend the Definition of ``Material Terms''
for Purposes of Swap Portfolio Reconciliation--Commission Voting
Summary, Chairman's Statement, and Commissioner's Statement
Appendix 1--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
Appendix 2--Statement of Chairman Timothy G. Massad
I support issuing this proposal to amend the definition of
``material terms'' for purposes of portfolio reconciliation
performed by swap dealers and major swap participants.
The proposed amendment would replace an existing ``no-action''
letter issued during the implementation of the Dodd-Frank Act. This
gives greater certainty to affected registrants and furthers the
Commission's ongoing process of simplifying, fine-tuning, and
harmonizing our rules.
The proposal not only seeks comment on the technical aspects of
reconciling specific data fields excluded under the staff no-action
letter, but also seeks answers to important questions regarding the
experience of swap dealers and major swap participants in complying
with the portfolio reconciliation requirement more generally.
Further, it seeks comment on the relationship of portfolio
reconciliation to the integrity of data reported to swap data
repositories.
The feedback of knowledgeable market participants on this
proposal will allow the Commission to further its goal of
continuously improving our recordkeeping, reporting, and data
quality rules and practices. I encourage all market participants to
join in this effort by examining the proposal and providing detailed
comments. I look forward to reviewing them.
Appendix 3--Statement of Commissioner J. Christopher Giancarlo
In its rush to implement the Dodd-Frank Act over the past few
years, the Commission issued multiple rules that proved to be
confusing, impracticable or unworkable, which in turn necessitated
the unprecedented issuance of no-action relief, either due to
unrealistic compliance deadlines, problematic elements of the rules
or both. I trust that today's proposal from the Commission signals
that the epoch of heedless rule production is drawing to a close.
The Commission is seeking comment on a proposed rule that would
codify a modified version of no-action relief issued in 2013 (the
``No-Action Relief'') by the Division of Swap Dealer and
Intermediary Oversight (``DSIO'') pursuant to a request for an
interpretive letter from the International Swaps and Derivatives
Association (``ISDA''). The No-Action Relief allows Swap Dealers
(``SDs'') and Major Swap Participants (``MSPs'') to treat certain
Part 45 data fields as non-material for purposes of portfolio
reconciliation under Commission Regulation 23.502.\1\
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\1\ See CFTC Letter No. 13-31 (June 26, 2013).
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I commend the Chairman and DSIO staff for taking steps to
replace the No-Action Relief with a rulemaking subject to a cost-
benefit analysis and the notice and comment requirements of the
Administrative Procedure Act. Reasonable people understood at the
height of the Dodd-Frank rulemaking frenzy that the Commission would
and could not get everything right. That is why actions like today's
rule proposal are necessary and appropriate.
I urge the CFTC staff to continue down the path of bringing to
the Commission for consideration amendments to flawed Dodd-Frank
rulesets. It is appropriate as a matter of good government that we
replace the hundreds of no-action, exemptive and interpretive
letters, guidance, advisories and other communications, both written
and unwritten, issued without a Commission vote in the wake of the
Dodd-Frank Act with proper administrative rulemakings.
I support issuing for public comment the proposed amendments to
the definition of ``material terms'' for purposes of portfolio
reconciliation. As the public reviews this rule change and
formulates comments, I would like to draw its attention to several
aspects of the proposal. Commission Regulation 23.502 requires SDs
and MSPs to engage in portfolio reconciliation once each day, week
or calendar quarter, depending on the size of the swap portfolio,
and to resolve immediately any discrepancy in a material term. It is
unclear why the Commission needs a daily, weekly, or quarterly
reconciliation of data fields that will not change over time once
established. In particular, I note that the proposed rule would
continue to treat as material terms the execution timestamp and
timestamp for submission to a swap data repository for uncleared
swaps, an indication of whether the clearing requirement exception
in section 2(h)(7) of the Commodity Exchange Act has been elected
and the identity of the counterparty electing the clearing
requirement exception. I am aware of the staff's concern that a
discrepancy in these terms could negatively impact the Commission's
regulatory mission, but question whether these terms will ever need
to be reconciled after an initial verification.
On the other hand, I also question what additional burden will
be placed on market participants by including these terms in the
portfolio reconciliation process. I note that in its request for an
interpretive letter ISDA stated that requiring reconciliation of
data fields that are not relevant to the ongoing rights and
obligations of the parties to a swap unnecessarily adds to the costs
and complexity associated with implementing and managing the
portfolio reconciliation process.\2\ It would be most helpful if
parties affected by the rule would submit detailed comments
regarding these costs.
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\2\ See ISDA Request for Interpretive Letter--Part 23 dated May
31, 2013.
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It is also unclear why the Commission is proposing to retain the
requirement that SDs and MSPs exchange non-material terms throughout
the life of a swap as part of a portfolio reconciliation exercise.
Commission Regulation 23.500(i) defines portfolio reconciliation as
the process by which two parties to one or more swaps: (1) Exchange
``terms'' (meaning all terms) of all swaps between the
counterparties; (2) exchange each counterparty's valuation of each
swap as of the close of business on the immediately preceding
business day; and (3) resolve any discrepancy in ``material'' terms
and valuations. I note that ISDA requested that the Commission
narrow the definition of ``terms'' in Rule 23.500(i)(1) to mean
``material terms,'' but the Commission is not proposing to do so.
Thus, counterparties will be required to exchange all terms of each
swap on a daily, weekly, or quarterly basis throughout the life of a
swap, but will be required to reconcile only ``material terms.'' As
with treating the terms relating to timestamps and the clearing
exception as ``material terms'' discussed above, I question the
utility of including non-material terms that are not required to be
reconciled as part of the portfolio reconciliation process. It would
be most helpful if parties affected by
[[Page 57136]]
the rule would submit detailed comments weighing the burdens against
benefits of continuing to include such non-material terms.
I look forward to thoughtful comments on all aspects of the
proposal.
[FR Doc. 2015-24021 Filed 9-21-15; 8:45 am]
BILLING CODE 6351-01-P
