Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps, 41735-41786 [2016-14414]

Download as PDF Vol. 81 Monday, No. 123 June 27, 2016 Part III Commodity Futures Trading Commission mstockstill on DSK3G9T082PROD with RULES2 17 CFR Part 45 Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps; Final Rule VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\27JNR2.SGM 27JNR2 41736 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations Advisor, Division of Market Oversight, 202–418–5360, okopon@cftc.gov; Benjamin DeMaria, Special Counsel, Division of Market Oversight, 202–418– 5988, bdemaria@cftc.gov; Aaron Brodsky, Special Counsel, Division of Market Oversight, 202–418–5349, abrodsky@cftc.gov; or Esen Onur, Economist, Office of the Chief Economist, 202–418–6146, eonur@ cftc.gov. SUPPLEMENTARY INFORMATION: COMMODITY FUTURES TRADING COMMISSION 17 CFR Part 45 RIN 3038–AE12 Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps Commodity Futures Trading Commission. ACTION: Final rule. AGENCY: The Commodity Futures Trading Commission (‘‘Commission’’ or ‘‘CFTC’’) is adopting final regulations relating to swap data reporting in connection with cleared swaps for swap data repositories (‘‘SDRs’’), derivatives clearing organizations (‘‘DCOs’’), designated contract markets (‘‘DCMs’’), swap execution facilities (‘‘SEFs’’), swap dealers (‘‘SDs’’), major swap participants (‘‘MSPs’’), and swap counterparties who are neither SDs nor MSPs. Commodity Exchange Act (‘‘CEA’’ or ‘‘Act’’) provisions relating to swap data recordkeeping and reporting were added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank Act’’). These regulations adopt without change revisions to the Commission regulations as proposed in the Notice of Proposed Rulemaking (‘‘NPRM’’) issued August 31, 2015. These revisions clarify regulations to clearly delineate the swap data reporting requirements associated with each of the swaps involved in a cleared swap transaction. Additionally, these revisions leave the choice of SDR for each swap in a cleared swap transaction to the entity submitting the first report on such swap. DATES: This rule is effective July 27, 2016 except for the removal of § 45.4(b)(2)(ii) which is effective June 27, 2016. Compliance Date: The compliance date for all revisions and additions to part 45 of the Commission’s regulations under this final rule is December 27, 2016. Until such date, all existing reporting obligations under part 45 (other than those contained in removed paragraph (b)(2)(ii) of § 45.4), including existing obligations on reporting continuation data on original swaps and creation and continuation data on clearing swaps, shall remain in effect. FOR FURTHER INFORMATION CONTACT: Daniel Bucsa, Deputy Director, Division of Market Oversight, 202–418–5435, dbucsa@cftc.gov; Andrew Ridenour, Special Counsel, Division of Market Oversight, 202–418–5438, aridenour@ cftc.gov; Owen J. Kopon, AttorneySUMMARY: mstockstill on DSK3G9T082PROD with RULES2 Table of Contents VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 I. Background A. Introduction B. Statutory Authority C. Regulatory History—Final Part 45 Rulemaking D. Consultation With Other U.S. Financial Regulators E. Summary of Proposed Revisions and Additions to Part 45 II. Revised and New Regulations A. Definitions—Amendments to § 45.1 B. Swap Data Reporting: Creation Data— Amendments to § 45.3 C. Swap Data Reporting: Continuation Data—Amendments to § 45.4 D. Unique Swap Identifiers—Amendments to § 45.5 E. Determination of Which Counterparty Must Report—Amendments to § 45.8 F. Reporting to a Single Swap Data Repository—Amendments to § 45.10 G. Examples of Cleared Swap Reporting Workflows Under the Adopted Revisions H. Primary Economic Terms Data— Amendments to Appendix 1 to Part 45— Tables of Minimum Primary Economic Terms III. Related Matters A. Regulatory Flexibility Act B. Paperwork Reduction Act C. Cost-Benefit Considerations D. Antitrust Considerations IV. Compliance Dates I. Background A. Introduction On July 21, 2010, President Obama signed into law the Dodd-Frank Act.1 Title VII of the Dodd-Frank Act amended the CEA 2 to establish a comprehensive new regulatory framework for swaps and security-based swaps. The legislation was enacted to reduce systemic risk, increase transparency, and promote market integrity within the financial system by, among other things: Providing for the registration and comprehensive regulation of SDs and MSPs; imposing clearing and trade execution requirements on standardized derivative 1 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, 124 Stat. 1376 (2010). The text of the Dodd-Frank Act may be accessed at http://www.cftc.gov/ LawRegulation/DoddFrankAct/index.htm. 2 7 U.S.C. 1, et seq. PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 products; creating rigorous recordkeeping and data reporting regimes with respect to swaps, including real time reporting; and enhancing the Commission’s rulemaking and enforcement authorities with respect to, among others, all registered entities, intermediaries, and swap counterparties subject to the Commission’s oversight. B. Statutory Authority To enhance transparency, promote standardization, and reduce systemic risk, section 727 of the Dodd-Frank Act added to the CEA section 2(a)(13)(G),3 which requires all swaps, whether cleared or uncleared, to be reported to SDRs.4 SDRs are registered entities created by section 728 of the DoddFrank Act to collect and maintain data related to swap transactions as prescribed by the Commission, and to make such data available to the Commission and other regulators.5 Section 21(b) of the CEA,6 added by section 728 of the Dodd-Frank Act, directs the Commission to prescribe standards for swap data recordkeeping and reporting, which are to apply to both registered entities and counterparties involved with swaps,7 and which are to be comparable to standards for clearing organizations in connection with their clearing of swaps.8 C. Regulatory History—Final Part 45 Rulemaking On December 20, 2011, the Commission adopted part 45 of the Commission’s regulations (‘‘Final Part 45 Rulemaking’’).9 Part 45 implements the requirements of section 21 of the CEA by setting forth the manner and content of reporting to SDRs, and requires electronic reporting both when a swap is initially executed, referred to as ‘‘creation’’ data,10 and over the course 37 U.S.C. 2(a)(13)(G). also 7 U.S.C. 1a(40)(E), 1a(48). 5 Regulations governing core principles and registration requirements for, and the duties of, SDRs are the subject of part 49 of this chapter. 6 7 U.S.C. 24a(b). 7 7 U.S.C. 24a(b)(1)(A). 8 7 U.S.C. 24a(b)(3). 9 See Swap Data Recordkeeping and Reporting Requirements, Final Rule, 77 FR 2136 (Jan. 13, 2012). 10 See 17 CFR 45.1 (defining ‘‘required swap creation data’’ as all primary economic terms data for a swap in the swap asset class in question, and all confirmation data for the swap.). ‘‘Primary economic terms data’’ is defined as all of the data elements necessary to fully report all of the primary economic terms of a swap in the swap asset class of the swap in question, while ‘‘confirmation data’’ is defined as all of the terms of a swap matched and agreed upon by the counterparties in confirming the swap. Id. For cleared swaps, confirmation data also 4 See E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 of the swap’s existence, referred to as ‘‘continuation’’ data.11 Additionally, part 45 sets forth varying reporting timeframes depending on the type of reporting, counterparty, execution, or product.12 As part of the Commission’s ongoing efforts to improve swap transaction data quality and to improve the Commission’s ability to utilize the data for regulatory purposes, Commission staff has continued to evaluate issues in connection with reporting under part 45, including those related to cleared swaps in particular. To this end, Commission staff formed an interdivisional staff working group (‘‘IDWG’’) to identify, and to recommend resolutions to, reporting challenges associated with certain swaps transaction data recordkeeping and reporting provisions, including the provisions adopted in the Final Part 45 Rulemaking.13 Based in large part on those efforts, the Commission published a request for comment on a variety of swap data reporting and recordkeeping provisions to help determine how such provisions were being applied, and to determine whether or what clarifications or enhancements to these provisions may be appropriate (the ‘‘IDWG Request for Comment’’).14 One of the subjects of the IDWG Request for Comment was the reporting of cleared swaps, and, in particular, the manner in which the swap data reporting rules should address cleared swaps.15 After considering the comments submitted in response to the IDWG Request for Comment relating to the reporting of includes the internal identifiers assigned by the automated systems of the DCO to the two transactions resulting from novation to the clearing house. Id. See also 17 CFR 45.3. 11 See 17 CFR 45.1 (defining ‘‘required swap continuation data’’ as all of the data elements that must be reported during the existence of a swap to ensure that all data concerning the swap in the swap data repository remains current and accurate, and includes all changes to the primary economic terms of the swap occurring during the existence of the swap). See also 17 CFR 45.4. 12 See 17 CFR 45.3(a), 45.3(b), 45.3(c), and 45.3(d). 13 See Press Release, CFTC to Form an Interdivisional Working Group to Review Regulatory Reporting (Jan. 21, 2014), available at http://www.cftc.gov/PressRoom/PressReleases/ pr6837-14. 14 See Review of Swap Data Recordkeeping and Reporting Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014). The IDWG Request for Comment was referred to simply as the ‘‘Request for Comment’’ in the NPRM. The Commission has changed the short form citation for that document in the final release to distinguish it from the subsequent request for comment related to draft technical specifications, referenced throughout this release. 15 79 FR 16689, 16694. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 cleared swaps,16 the Commission issued a Notice of Proposed Rulemaking (the ‘‘NPRM’’) in which it proposed changes to part 45 as they relate to the reporting of cleared swaps transactions.17 In response to the NPRM, the Commission received 17 comments letters addressing its proposed revisions to part 45.18 This release will address the comments received on specific aspects of the NPRM, and on specific issues raised in the IDWG Request for Comment, in 16 The comment file for responses to the IDWG Request for Comment is available at http:// comments.cftc.gov/PublicComments/ CommentList.aspx?id=1484. Commenters responding to the IDWG Request for Comment included: The American Gas Association, May 27, 2014; American Petroleum Institute, May 27, 2014; Americans for Financial Reform, May 27, 2014 (‘‘AFR’’); Australian Bankers’ Association, May 27, 2014 (‘‘ABA’’); Better Markets, Inc., May 27, 2014, (‘‘Better Markets’’); B&F Capital Markets, Inc., May 27, 2014; CME Group, May 27, 2014 (‘‘CME’’); Coalition for Derivatives End-Users, May 27, 2014 (‘‘CDEU’’); Coalition of Physical Energy Companies, May 27, 2014; Commercial Energy Working Group, May 27, 2014 (‘‘CEWG’’); Commodity Markets Council, May 27, 2014 (‘‘CMC’’); The Depository Trust & Clearing Corporation, May 27, 2014 (‘‘DTCC’’); EDF Trading North America, LLC, May 27, 2014; Edison Electric Institute, May 27, 2014 (‘‘EEI’’); Financial InterGroup Holdings Ltd, May 27, 2014; Financial Services Roundtable (‘‘FSR’’), May 27, 2014; Fix Trading Community, May 27, 2014; The Global Foreign Exchange Division of the Global Financial Markets Association, May 27, 2014 (‘‘GFMA’’); HSBC, May 27, 2014; Interactive Data Corporation, May 27, 2014; ICE Trade Vault, LLC, May 27, 2014 (‘‘ITV’’); International Energy Credit Association, May 27, 2014; International Swaps and Derivatives Association, Inc., May 23, 2014 (‘‘ISDA’’); Japanese Bankers Association, May 27, 2014 (‘‘JBA’’); Just Energy Group Inc., May 27, 2014; LCH.Clearnet Group Limited, May 29, 2014 (‘‘LCH’’); Managed Funds Association, May 27, 2014 (‘‘MFA’’); Markit, May 27, 2014; Natural Gas Supply Association, May 27, 2014 (‘‘NGSA’’); NFP Electric Associations (National Rural Electric Cooperative Association, American Public Power Association, and Large Public Power Council), May 27, 2014 (‘‘NFPEA’’); OTC Clearing Hong Kong Limited, May 27, 2014 (‘‘OTC Hong Kong’’); Securities Industry and Financial Markets Association Asset Management Group, May 27, 2014 (‘‘SIFMA’’); SWIFT, May 27, 2014; Swiss Re, May 27, 2014; Thomson Reuters (SEF) LLC, May 27, 2014 (‘‘TR SEF’’); and TriOptima, May 27, 2014. Discussions of comments on reporting of cleared swaps received in response to the IDWG Request for Comment are included in the preamble to the NPRM. 17 See Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps, Notice of Proposed Rulemaking, 80 FR 52544 (Aug. 31, 2015). 18 The comment file for responses to the NPRM is available at http://comments.cftc.gov/ PublicComments/CommentList.aspx?id=1614. Commenters to the NPRM included: Better Markets, October 30, 2015; CME, October 30, 2015; COPE, October 30, 2015; CEWG, October 30, 2015; CMC, October 30, 2015; DTCC, October 30, 2015; EEI/ EPSA, October 30, 2015; Eurex Clearing AG (‘‘Eurex’’); FSR, October 30, 2015; ITV, October 30, 2015; ISDA, October 30, 2015; JBA, October 30, 2015; LCH, October 30, 2015; MFA and Alternative Investment Management Association (‘‘AIMA’’), October 30, 2015; Markit, October 30, 2015; and North American Derivatives Exchange, Inc., October 30, 2015 (‘‘Nadex’’). PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 41737 connection with explaining each of the amended regulations adopted herein.19 The swap data reporting framework adopted in the original Final Part 45 Rulemaking was largely based on the mechanisms for the trading and execution of uncleared swaps. Under such a regime, swap data reporting was premised upon the existence of one continuous swap for reporting and data representation purposes. The Commission has since had additional opportunities to consult with industry and has observed how the part 45 regulations function in practice with respect to swaps that are cleared, including how the implementation of part 45 interacts with the implementation of part 39 of the Commission’s regulations, which contains provisions applicable to DCOs. In particular, § 39.12(b)(6) provides that upon acceptance of a swap by a DCO for clearing, that original swap is extinguished and replaced by equal and opposite swaps, with the DCO as the counterparty to each resulting swap.20 The original swap that is extinguished upon acceptance for clearing is commonly referred to by market participants as the ‘‘alpha’’ swap and the equal and opposite swaps that replace the original swap are commonly referred to as ‘‘beta’’ and ‘‘gamma’’ swaps. The process of extinguishing the ‘‘alpha’’ swap and creating the ‘‘beta’’ and ‘‘gamma’’ swaps is generally referred to as a novation. The Commission has observed that certain provisions of part 45 could better accommodate the cleared swap framework set forth in § 39.12(b)(6). The new regulations in this release are intended to provide clarity to swap counterparties and registered entities of their part 45 reporting obligations with respect to the swaps involved in a cleared swap transaction. These amendments and new regulations are also intended to improve the efficiency of data collection and maintenance associated with the reporting of the 19 Unless otherwise noted, references to ‘‘commenters’’ throughout this release refer to those who submitted comment letters to the NPRM. 20 See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps to have rules providing that, upon acceptance of a swap by the DCO for clearing: (i) The original swap is extinguished; (ii) the original swap is replaced by an equal and opposite swap between the [DCO] and each clearing member acting as principal for a house trading or acting as agent for a customer trade). The Commission reaffirmed its position regarding the composition of a cleared swap in a statement regarding Chicago Mercantile Exchange (‘‘CME’’) Rule 1001. See Statement of the Commission on the Approval of CME Rule 1001 (Mar. 6, 2013), at 6, available at http://www.cftc.gov/ucm/groups/public/@ newsroom/documents/file/ statementofthecommission.pdf. E:\FR\FM\27JNR2.SGM 27JNR2 41738 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations swaps involved in a cleared swap transaction. D. Consultation With Other U.S. Financial Regulators In developing these rules, Commission staff has engaged in extensive consultations with other U.S. financial regulators, including the Securities and Exchange Commission (‘‘SEC’’), the Federal Reserve Board of Governors, the Federal Housing Finance Agency, the Federal Deposit Insurance Corporation, Office of Comptroller of the Currency, and the Farm Credit Administration. As noted in the NPRM,21 the Commission endeavored to harmonize the regulations in this release with the approach proposed by the SEC in its release proposing certain new rules and rule amendments to Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information (‘‘Regulation SBSR’’).22 mstockstill on DSK3G9T082PROD with RULES2 E. Summary of Revisions and Additions to Part 45 The Commission is making revisions and additions to §§ 45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order to provide clarity to swap counterparties as well as to registered entities regarding their respective part 45 reporting obligations in connection with each of the swaps involved in a cleared swap transaction.23 The Commission is adopting the following amendments, each of which is discussed in greater detail in Section II of this release: • Amendments to § 45.1 revise the definition of ‘‘derivatives clearing organization’’ to update a crossreference and to clarify that the definition covers only registered DCOs. Revised § 45.1 also adds new definitions for ‘‘original swaps’’ and ‘‘clearing swaps.’’ These terms are used throughout amended part 45 to help clarify reporting obligations for the swaps involved in a cleared swap transaction. • Amendments to § 45.3 modify and clarify DCO creation data reporting obligations for swaps that result from the clearing process; establish which entity has the obligation to choose the SDR to which creation data is reported; eliminate confirmation data reporting obligations for swaps that are intended to be submitted to a DCO for clearing at 21 80 FR 52544, 52545–46. Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015). 23 The Commission is also amending the part 45 authority citation to replace a reference to 7 U.S.C. 24 with a reference to 7 U.S.C. 24a. 22 See VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 the time of execution; and make conforming changes. • Amendments to § 45.4 modify and clarify continuation data reporting obligations for original swaps, including the obligation of a clearing DCO to report original swap terminations to the SDR to which the original swap was reported; modify and clarify the obligation to report data providing for the linking of original and clearing swaps and the original and clearing swap SDRs; remove the requirement for SD/MSP reporting counterparties to report daily valuation data for cleared swaps; and make conforming changes. • Amendments to § 45.5 set forth a DCO’s obligations to create, transmit, and use unique swap identifiers (‘‘USIs’’) to identify clearing swaps. • Amendments to § 45.8 provide that the DCO will be the reporting counterparty for clearing swaps. • Amendments to § 45.10 provide that all swap data for a given clearing swap, and all swap data for each clearing swap that replaces a particular original swap (and each equal and offsetting clearing swap that is created upon execution of the same transaction and that does not replace an original swap), must be reported to a single SDR. Amendments also make conforming changes. • Amendments to appendix 1 modify certain existing primary economic term (‘‘PET’’) data fields and certain explanatory notes in the Comment sections for existing PET data fields, and add several new PET data fields to account for the clarifications provided in this release for the reporting of clearing swaps. II. Revised and New Regulations Throughout Section II of this release, the Commission will discuss each amendment and the related comments. The Commission is also including several examples to demonstrate how cleared swap reporting workflows would function under the new regulations. The Commission received some general comments on the proposed amendments to part 45 relating to data quality. Better Markets was generally supportive of the proposals, and commented that the NPRM integrated many of the technical public comments on the concept release to address the small but important fixes on reporting of cleared swap transactions.24 COPE was also generally supportive of the NPRM on the ‘‘guiding principal’’ that endusers should not be unduly burdened by the Commission’s swap reporting 24 See PO 00000 Better Markets Oct. 30, 2015 Letter, at 2. Frm 00004 Fmt 4701 Sfmt 4700 regulations.25 COPE requested that the Commission clarify that, under the proposed amendments, end-users would not have reporting obligations on swaps executed pursuant to the rules of a SEF or DCM and then cleared by a DCO.26 A. Definitions—Amendments to § 45.1 1. Existing § 45.1 Existing § 45.1 defines ‘‘derivatives clearing organization’’ for purposes of part 45 by cross-referencing section 1a(9) of the CEA 27 and any Commission regulations implementing that section, including but not limited to § 39.5. Existing § 45.1 does not include definitions of either ‘‘original swap’’ or ‘‘clearing swap.’’ 2. Proposed Amendments and Additions to § 45.1 i. ‘‘Derivatives Clearing Organization’’ The Commission proposed to revise the definition of ‘‘derivatives clearing organization’’ in § 45.1 so that it crossreferences the definition provided in § 1.3(d) of the Commission’s regulations and so that it explicitly refers to a DCO registered with the Commission under section 5b(a) of the CEA.28 This modification redefines a ‘‘derivatives clearing organization’’ for purposes of part 45 to mean a derivatives clearing organization, as defined by § 1.3(d) of this chapter, that is registered with the Commission.29 ii. ‘‘Original Swap’’ and ‘‘Clearing Swap’’ The Commission proposed to add definitions of ‘‘original swap’’ and ‘‘clearing swap’’ to part 45 so that the part 45 reporting rules will be more consistent with the regulations 25 See COPE Oct. 30, 2015 Letter, at 2. COPE Oct. 30, 2015 Letter, at 2. In response to COPE’s request for clarification, the Commission notes that under the final rule being adopted, a nonSD/MSP would likely have no reporting obligations on a swap executed on a SEF or DCM that is intended to be cleared at the time of execution. However, the original swap reporting counterparty as determined by the reporting hierarchy under § 45.8 could have obligations to report any amendments or modifications of PET data fields, as well as any continuation data on a swap between the execution of the swap and its acceptance for clearing, such as a novation, allocation or termination. In such circumstances, the reporting counterparty on the original swap would have a reporting obligation under either § 45.3 or § 45.4, respectively. Separately, end-users may also have obligations to correct errors or omissions discovered in swap data for which the end-user is the reporting counterparty pursuant to § 45.14(a), or to notify the reporting counterparty of such errors or omissions if the end-user is not the reporting counterparty pursuant to § 45.14(b). 27 7 U.S.C. 1a(9). 28 7 U.S.C. 7a–1(a). 29 See 80 FR 52544, 52547. 26 See E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations applicable to DCOs set forth in § 39.12(b)(6).30 The Commission proposed to define ‘‘original swap’’ as a swap that has been accepted for clearing by a derivatives clearing organization and ‘‘clearing swap’’ as a swap created pursuant to the rules of a derivatives clearing organization that has a derivatives clearing organization as a counterparty, including any swap that replaces an original swap that was extinguished upon acceptance of such original swap by the derivatives clearing organization for clearing. As noted above, while original swaps are commonly referred to as ‘‘alpha’’ swaps and while the equal and opposite swaps that replace the original swap are commonly referred to as ‘‘beta’’ and ‘‘gamma’’ swaps, the Commission will use the proposed defined terms ‘‘original swap’’ and ‘‘clearing swap’’ throughout this section of the release. 3. Comments The Commission received comments on the proposed definitions from a variety of market participants. Many commenters were supportive of the proposed amendments to the definitions and the clarification that they provide. Other commenters supported clarification of the definitions, but suggested further modifications to the proposed definitions. i. Derivatives Clearing Organization Both ISDA and FSR commented that the proposed definition of ‘‘derivatives clearing organization’’ should be expanded to include derivatives clearing organizations that are exempt from registering with the Commission.31 These commenters suggested that the reporting obligations should apply to the central counterparty regardless of whether that counterparty is registered with the Commission. ISDA also commented that the reporting obligations should apply to those derivatives clearing organizations that are currently in the process of registering with the Commission.32 mstockstill on DSK3G9T082PROD with RULES2 With respect to the proposed definition of ‘‘clearing swap,’’ ISDA reiterated its comment that the definition should include all swaps that are cleared through registered derivatives clearing organizations as well as those that are cleared through derivatives clearing organizations that 30 See 80 FR 52544, 52547. ISDA Oct. 30, 2015 Letter, at 2–3; FSR Oct. 30, 2015 Letter, at 5. 32 See ISDA Oct. 30, 2015 Letter, at 2–3. 31 See 20:26 Jun 24, 2016 iii. Original Swap Regarding the definition of ‘‘original swap,’’ ISDA commented that it is supportive of the proposed definition and agrees that swaps submitted for clearing should be classified as original swaps.35 LCH commented that the definition of original swap is sufficiently clear and complete.36 ISDA requested clarification on guidance issued by the Commission’s Divisions of Clearing and Risk and Market Oversight,37 specifically as to whether there is an original swap associated with CDS Clearing-Related Swaps that are created through a firm or forced trade process.38 EEI/EPSA sought clarification from the Commission that the definition of original swap includes both offfacility swaps that are submitted for clearing, rejected, then resubmitted and accepted for clearing, and swaps that are not intended to be cleared when executed but are cleared at some point subsequent to execution.39 4. Final Rule Having reviewed all relevant comments, the Commission has determined to adopt the definitions as proposed in the NPRM. The Commission has noted the comments received from market participants on the limitation of ‘‘derivatives clearing organization’’ to DCOs registered with the Commission. The Commission notes that, as of the date of this release, it has granted exemptive relief to four nonU.S. central counterparties from registering as a DCO with the Commission, under section 5b(h) of the CEA, pursuant to Commission Orders (‘‘DCO Exemptive Orders’’).40 The DCO 33 See Id. at 3. LCH Oct. 30, 2015 Letter, at 2. 35 See ISDA Oct. 30, 2015 Letter, at 3. 36 See LCH Oct. 30, 2015 Letter, at 2. 37 See CFTC Letter No. 15–51 (Sept. 18, 2015). 38 ISDA also commented that it is not clear whether the associated clearing swaps are publicly reportable swap transactions for Part 43 purposes. See ISDA Oct. 30, 2015 Letter, at 3. 39 See EEI/EPSA Oct. 30, 2015 Letter, at 3. 40 As of the date of this final release, the Commission has issued DCO Exemptive Orders to ASX Clear (Futures) Pty Ltd. (‘‘ASX’’), Japan Securities Clearing Corp., Korea Exchange Inc., and OTC Clear Hong Kong Ltd. (‘‘OTC Clear’’). The Commission amended ASX’s DCO Exemptive Order on January 28, 2016 to require ASX to report the termination of any swap accepted for clearing by 34 See ii. Clearing Swap VerDate Sep<11>2014 are in the process of registering or are exempt from registration.33 LCH commented that the definition of clearing swap is incomplete as it may not capture cleared trades between a clearing member and its client in a principal clearing model, because the DCO is not a party to that transaction.34 Jkt 238001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 41739 Exemptive Orders include reporting obligations that are consistent with those imposed on registered DCOs under amended part 45.41 Therefore, the Commission believes that it is sufficient for the obligations on derivatives clearing organizations in part 45 to apply only to registered DCOs and, as a result, the definition of ‘‘derivatives clearing organization’’ under amended regulation 45.1 will cover only registered DCOs, as proposed. The Commission notes general support for the definition of ‘‘clearing swap.’’ The Commission notes that the newly-defined term ‘‘clearing swap’’ would include any swap to which the DCO is a counterparty, regardless of whether such swap is replacing an original swap.42 While a cleared swap transaction generally comprises an original swap that is terminated upon novation and the equal and opposite swaps that replace it, the Commission is aware of certain circumstances in which a cleared swap transaction may not involve the replacement of an original swap.43 Accordingly, the revised definition of ‘‘clearing swap’’ is intended to encompass: (1) Swaps to which the DCO is a counterparty and that replace an original swap (i.e., swaps commonly known as betas and gammas) and (2) all other swaps to which the DCO is a counterparty (even if such swap does not replace an original swap). ASX to the SDR to which the original swap was reported. 41 The Commission also notes ISDA’s comment concerning entities that are in the process of registering as a DCO. Because there is no temporary or provisional registration of DCOs, such entities should not be entering into swaps that must be reported under part 45 without full registration. 42 The Commission has noted LCH’s request for guidance concerning reporting clearing swaps under the principal model of clearing more commonly used outside of the United States. The Commission declines to include such guidance at this time, but would note that this issue of reporting principal versus agency model clearing swaps is under consideration as part of the Technical Specifications Request for Comment issued by the Commission’s Office of Data and Technology and the Division of Market Oversight on December 22, 2015 relating to draft technical specifications for certain swap data elements (‘‘Technical Specifications Request for Comment’’). See Draft Technical Specifications for Certain Swap Data Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/ @newsroom/documents/file/ specificationsswapdata122215.pdf. 43 For example, in the preamble to the part 39 adopting release, the Commission noted that ‘‘open offer’’ systems are acceptable under § 39.12(b)(6), stating that: Effectively, under an open offer system there is no ‘‘original’’ swap between executing parties that needs to be novated; the swap that is created upon execution is between the DCO and the clearing member, acting either as principal or agent. Derivatives Clearing Organization General Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov. 8, 2011). E:\FR\FM\27JNR2.SGM 27JNR2 41740 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations The Commission also notes the broad support for the newly-defined term ‘‘original swap.’’ 44 In addressing ISDA’s request for clarification on firm or forced trades at the DCO, the Commission notes that guidance from its Divisions of Clearing and Risk and Market Oversight states that swaps arising out of a DCO’s firm or forced trade process would constitute ‘‘clearing swaps.’’ 45 The Divisions’ guidance also states that DCOs should be the reporting counterparty of such swaps. The proposed definition of original swap will provide clarity with respect to certain continuation data reporting requirements for such swaps by tying such obligations to a specific point in time in the life of a swap that is either intended to be submitted to a DCO for clearing at the time of execution, or that is not intended to be cleared at the time of execution but is later submitted to a DCO for clearing. The Commission notes that under the proposed definition, a swap that is submitted to a DCO for clearing can become an original swap by virtue of the DCO’s acceptance of such swap for clearing, irrespective of: (1) Whether such swap is executed on or pursuant to the rules of a SEF or DCM or off-facility; (2) whether or not such swap is subject to the clearing requirement; and (3) whether such swap is intended to be cleared at the time of execution or not intended to be cleared at the time of execution, but subsequently submitted to a DCO for clearing.46 In addressing EEI/EPSA’s comment on whether the term ‘‘original swaps’’ would include off-facility swaps rejected and then resubmitted for clearing, or swaps not intended to be cleared at execution but subsequently submitted for clearing, the Commission notes that a swap becomes an ‘‘original swap’’ once it is accepted for clearing by a DCO. The definition would apply regardless of whether the swap had previously been rejected for clearing, or whether it was not intended to be cleared at the time of execution. mstockstill on DSK3G9T082PROD with RULES2 B. Swap Data Reporting: Creation Data—Amendments to § 45.3 1. Existing § 45.3 Regulation 45.3 requires reporting to an SDR of two types of ‘‘creation data’’ generated in connection with a swap’s creation: ‘‘primary economic terms 44 See ISDA Oct. 30, 2015 Letter, at 3; LCH Oct. 30, 2015 Letter, at 2. 45 CFTC Letter No. 15–51 (Sept. 18, 2015). 46 See 17 CFR 39.12(b)(6). Clearing swaps would not be executed on or pursuant to the rules of a SEF or DCM as such swaps are created pursuant to the rules of a DCO. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 data’’ (‘‘PET data’’) and ‘‘confirmation data.’’ Additionally, § 45.3 governs what creation data must be reported, who must report it, and deadlines for its reporting. The swap data reporting requirements under § 45.3 concerning both PET data and confirmation data differ for reporting counterparties and entities depending on whether the swap is executed on or pursuant to the rules of a SEF or DCM (§ 45.3(a)), is subject to mandatory clearing and executed offfacility (§ 45.3(b)), or is not subject to mandatory clearing and executed offfacility (§ 45.3(c) and (d)). Regulation 45.3 also addresses specific creation data reporting requirements in circumstances where a swap is accepted for clearing by a DCO,47 including the excusal of the reporting counterparty from reporting creation data in certain circumstances.48 2. Proposed Amendments to § 45.3 As noted above, the Commission has observed how the part 45 regulations function in practice with respect to swaps that are cleared. While CEA section 2(a)(13)(G) requires each swap (whether cleared or uncleared) to be reported to a registered SDR, the Commission believes that the interplay between the § 45.3 reporting requirements applicable to SEFs, DCMs and reporting counterparties, and the reporting requirements applicable to DCOs, should be clarified in the context of a cleared swap transaction. Accordingly, the Commission proposed several amendments to § 45.3 to better delineate the creation data reporting requirements associated with each swap involved in a cleared swap transaction. i. Proposed Revised References to Clearing Requirement Exceptions and Exemptions References to the end-user exception to the swap clearing requirement set forth in section 2(h)(7) of the CEA are included in existing §§ 45.3 and 45.8. Following the publication of the Final Part 45 Rulemaking, the Commission codified the end-user exception in § 50.50 and published two exemptions to the swap clearing requirement: The inter-affiliate exemption in § 50.52, and the financial cooperative exemption in § 50.51. Therefore, the Commission proposed revisions to the introductory language of § 45.3, §§ 45.3(b)–(d), and 45.8(h)(1)(vi) to reflect that exceptions to, and exemptions from, the clearing 47 See 17 CFR 45.3(a)(2), (b)(2), (c)(1)(ii), (c)(2)(ii), and (d)(2). 48 See 17 CFR 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1). PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 requirement are now codified in part 50 of the Commission’s regulations.49 ii. Proposed Addition of § 45.3(e)— Clearing Swaps Paragraphs (a)–(d) of § 45.3 govern creation data reporting in connection with swaps executed on or pursuant to the rules of a SEF or DCM and for offfacility swaps, but do not separately address creation data reporting for swaps created through the clearing process by a DCO (i.e., clearing swaps). Accordingly, the Commission proposed renumbering existing paragraph (e) (Allocations) of § 45.3 as paragraph (f), and adding new paragraph (e) to § 45.3, which will exclusively govern creation data reporting requirements for clearing swaps. The Commission also proposed revising the introductory language of § 45.3 to clarify that paragraphs (a)–(d) apply to all swaps except clearing swaps, while paragraph (e) applies to clearing swaps.50 The Commission did not propose to change the existing requirements for who reports creation data for those swaps that become original swaps. Creation data for such swaps will continue to be reported by the reporting counterparty, as determined pursuant to § 45.8, or by the SEF/DCM in the case of on-facility swaps. Under the proposed revisions to § 45.3(e), a DCO would be required as reporting counterparty under new § 45.8(i) 51 to report all required swap creation data for each clearing swap, either as soon as technologically practicable after an original swap is accepted by the DCO for clearing (in the event that the clearing swap replaced an original swap), or as soon as technologically practicable after execution of a clearing swap (in the event that the clearing swap does not replace an original swap). Additionally, under the proposed revisions to § 45.3(e), required swap creation data for clearing swaps must be provided to a registered SDR electronically by the DCO and must include all PET data and all confirmation data for each clearing swap. As noted above, CEA section 2(a)(13)(G) 52 requires each swap 49 See 80 FR 52544, 52548. 80 FR 52544, 52548–49. 51 The Commission proposed adding § 45.8(i), which establishes the DCO as the reporting counterparty for all clearing swaps. This change is discussed in greater detail in Section II.E. of this release. The Commission also proposed conforming amendments to § 45.4(b)(1) and (2) to add the phrase ‘‘as reporting counterparty’’ after ‘‘derivatives clearing organization’’ to make clear that the DCO will be the reporting counterparty for purposes of those provisions. See Section II.C. 52 7 U.S.C. 2(a)(13)(G). 50 See E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations (whether cleared or uncleared) to be reported to a registered SDR. Proposed revisions to paragraphs (a)–(d) and new paragraph (e) of § 45.3 will thus cover creation data reporting requirements for all swaps: Revised § 45.3(a) applies to each swap executed on or pursuant to the rules of a SEF or DCM, revised § 45.3(b)–(d) applies to ‘‘all off-facility swaps,’’ and proposed new § 45.3(e) would apply to clearing swaps. The proposed amendments to § 45.3(a)–(d) would thus exclude clearing swaps. Under the proposed amendments to § 45.3, a SEF/DCM or counterparty other than the DCO will not have swap data reporting obligations with respect to clearing swaps. Additionally, revised § 45.3(a)–(d) will govern the creation data reporting requirements for swaps, including swaps commonly known as ‘‘alpha’’ swaps, regardless of whether they later become original swaps by virtue of their acceptance for clearing.53 mstockstill on DSK3G9T082PROD with RULES2 iii. Proposed Removal of Provisions As noted above, several provisions of existing § 45.3 impose certain creation data reporting requirements on a DCO in circumstances where a swap is accepted for clearing by a DCO. To ensure consistency with § 39.12(b)(6), the Commission proposed to remove these creation data reporting provisions (current §§ 45.3(a)(2),54 (b)(2), (c)(1)(ii), (c)(2)(ii), and (d)(2)), and replacing them with new proposed § 45.3(e), as described above.55 Additionally, the Commission proposed to remove portions of §§ 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).56 Previously, where both a DCO and reporting counterparty had obligations under § 45.3 for reporting creation data for the same swap, the reporting counterparty would be excused from reporting creation data if the swap is accepted for clearing before any PET data is reported by the 53 Swaps created by a DCO under § 39.12(b)(6) are a type of clearing swap as defined in this release, and thus could not be executed on or pursuant to the rules of a SEF or DCM. Additionally, a DCO would not report creation data for a swap that was executed on or pursuant to the rules of a SEF or DCM, or for an off-facility swap that is submitted to the DCO for clearing, because, under § 45.3(a)– (d), the SEF/DCM or reporting counterparty would be responsible for reporting creation data for such swaps after execution. Under the revisions to § 45.3, a DCO will not have creation data reporting obligations for swaps that are not clearing swaps. The Commission notes that the revisions to § 45.3 in this release are consistent with the prior no action relief and guidance issued by Commission staff relating to firm or forced trades at DCOs. See CFTC Letter No. 15–51 (Sept. 18, 2015); CFTC NoAction Letter No. 14–119 (Sept. 29, 2014). 54 The Commission is also renumbering § 45.3(a)(1) as § 45.3(a). 55 See 80 FR 52544, 52548–49. 56 See 80 FR 52544, 52549. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 reporting counterparty. Under the proposed regulation, these excusal provisions are no longer necessary because the proposed rules require DCOs to report creation data only for clearing swaps, and not for swaps accepted for clearing (i.e., original swaps). iv. Proposed Removal of Certain Confirmation Data Reporting Requirements Existing §§ 45.3(a)–(d) requires the SEF/DCM (under § 45.3(a)) or the reporting counterparty (under §§ 45.3(b)–(d)) to report both PET and confirmation data in order to comply with creation data reporting obligations. The Commission believes that the confirmation data requirements for clearing swaps in new § 45.3(e) will provide the Commission with a sufficient representation of the confirmation data for a cleared swap transaction, because the original swap is extinguished upon acceptance for clearing and replaced by equal and opposite clearing swaps. Accordingly, for swaps that are intended to be submitted to a DCO for clearing at the time of execution, the Commission proposed to amend §§ 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove the existing confirmation data reporting requirements.57 v. Proposed Revisions to § 45.3(f)— Allocations The Commission proposed renumbering existing § 45.3(e), which governs creation data reporting for swaps involving allocation, as § 45.3(f).58 The Commission also proposed replacing the phrase ‘‘original swap transaction’’ in §§ 45.3(f)(2) and 45.8(h)(1)(vii)(D), and in the PET data tables found in appendix 1 to part 45, with ‘‘initial swap transaction’’ to avoid confusion with the term ‘‘original swap,’’ which is defined in § 45.1.59 vi. Proposed Addition of § 45.3(j): Choice of SDR The Commission proposed adding § 45.3(j) in order to explicitly establish which entity has the obligation to choose the SDR to which the required swap creation data is reported.60 New § 45.3(j) provides that: For swaps executed on or pursuant to the rules of a SEF or DCM (including swaps that may later become original swaps), the 57 See 80 FR 52544, 52549–50. Commission also proposed renumbering § 45.3 paragraphs (f), (g), and (h) as paragraphs (g), (h), and (i), respectively. 59 See 80 FR 52544, 52550. 60 See 80 FR 52544, 52550. 58 The PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 41741 SEF or DCM has the obligation to choose the SDR; for all other swaps (including off-facility swaps and/or clearing swaps) the reporting counterparty (as determined in § 45.8) will have the obligation to choose the SDR.61 Under the proposed addition of § 45.3(j) and the proposed revisions to § 45.10,62 the entity with the obligation to report the initial required swap creation data will select the SDR to which all subsequent swap creation and continuation data for that swap will be reported by choosing the SDR to which such initial required swap creation data is reported. Thereafter, all required swap creation data and all required swap continuation data for a given swap will be reported to the same SDR used by the registered entity or counterparty.63 Finally, the Commission notes that it is aware of certain situations wherein SEFs, DCMs and reporting counterparties for off-facility swap transactions may report the part 43 data for a swap to an SDR prior to reporting the part 45 required creation data for the same swap. In such situations, the registered entity or reporting counterparty has effectively chosen the SDR for the swap prior to submitting the part 45 data, since, pursuant to revisions to § 45.10 adopted in this release, all swap data reported pursuant to parts 43 and 45 for a given swap is required to be reported to a single SDR.64 For example, if a swap is executed on or pursuant to the rules of SEF A, and SEF A immediately upon execution reports the part 43 data to SDR B, prior to reporting part 45 data, SEF A has effectively chosen SDR B as the SDR for all required creation data for the swap, because revised § 45.10 requires that all part 43 and 45 swap data for a given swap must be reported to a single SDR.65 Accordingly, in this example, 61 Regulation 45.3(j) generally reflects the language included in the preamble to the original Final Part 45 Rulemaking, which provides that the SEF or DCM would select the SDR for platformexecuted swaps, and the reporting counterparty would choose the SDR for off-facility swaps. See 77 FR 2136, 2146 (Jan. 13, 2012). Under the new rule, the DCO will have the obligation to choose the SDR for clearing swaps. 62 Revisions to § 45.10 are discussed in Section II.F below. As will be discussed in Section II.F below, by operation of § 45.10, DCOs will be obligated to report all required continuation data for original swaps to the registered SDR (as selected by the SEF, DCM, or reporting counterparty pursuant to proposed § 45.3(j)) to which required creation data for the swap was reported pursuant to §§ 45.3(a)–(d). 63 See Proposed § 45.10. See also Section II.F.2, infra. 64 Id. 65 Id. E:\FR\FM\27JNR2.SGM 27JNR2 41742 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations part 45 required creation data must be reported to SDR B. vii. Proposed Removal of Expired Compliance Date References The Commission proposed to remove the references to the expired compliance dates in §§ 45.3(b)(1)(i), (b)(1)(ii), (b)(2), (b)(2)(ii), (c)(1)(i)(A), (c)(1)(i)(B), (c)(2)(i)(A), (c)(2)(i)(B), (d)(1), and (d)(3), and in the introductory language to § 45.3.66 These references to phase-in compliance dates are no longer necessary as they have expired. 3. Comments The Commission received a number of comments in response to its proposed revisions to § 45.3. Many of these comments focused on the proposed reporting of creation data associated with clearing swaps and related reporting obligations concerning original swaps. Other comments addressed the new choice of SDR provision set out in § 45.3(j). And, finally, some commenters discussed the new clearing swaps rules in the context of principal model clearing.67 i. Creation Data Reporting for Clearing Swaps With respect to the reporting of clearing swaps, commenters generally supported the Commission’s proposal to require DCOs to report creation data for clearing swaps.68 FSR and CMC agreed that the DCO is in the best position to report creation data for clearing swaps.69 ISDA,70 DTCC, and LCH also noted support for requiring DCOs to 66 See 80 FR 52544, 52550. requested that the Commission codify no action relief issued by the Division of Clearing and Risk and the Division of Market Oversight on April 5, 2013, providing relief to non-SD/MSPs from reporting requirements for swaps between whollyowned affiliates. See FSR Oct. 30, 2015 Letter, at 5 (referencing CFTC No-Action Letter No. 13–09 (Apr. 5, 2013)). This request is beyond the scope of the NPRM and will not be addressed in this release. 68 See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015 Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 Letter, at 2; DTCC Oct. 30, 2015 Letter, at 3. 69 See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015 Letter, at 2. 70 ISDA also commented that currently not all DCOs report clearing swaps in a consistent manner in instances where an affiliate of a clearing member enters into a swap that is subsequently cleared through its affiliated clearing member. ISDA suggested that the Commission make clear that the submission of a swap for clearing should not result in a change in the name of the counterparty that is reported to an SDR and that the report submitted by the DCO for the clearing swap has to reflect the relevant affiliate and not the clearing member as the legal counterparty to the clearing swap with the derivatives clearing organization. See ISDA Oct. 30, 2015 Letter, at 12. While noting this comment, the Commission declines to address this as beyond the scope of the NPRM. mstockstill on DSK3G9T082PROD with RULES2 67 FSR VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 report data for clearing swaps.71 CME likewise supported the requirement for DCOs to report creation data for clearing swaps, recommending that the DCO be assigned all reporting obligations for original and clearing swaps.72 Markit recommended an alternative approach whereby the reporting counterparty to the original swap would be permitted to choose whether it reports creation data for the clearing swaps, while allowing the reporting counterparty to delegate the reporting responsibilities to a DCO.73 LCH requested that the Commission change references to ‘‘execution of a clearing swap’’ in proposed § 45.3(e) to ‘‘creation of a clearing swap’’ in order to more clearly address compression events. LCH also suggested crossreferencing re-numbered § 45.3(f) to new § 45.3(e), to cover situations where block trades are allocated postclearing.74 ii. Removal of Confirmation Data Reporting Requirements for Intended To Be Cleared Swaps With respect to swaps that become original swaps, commenters were generally supportive of the Commission’s proposal to eliminate the requirement for reporting confirmation data on intended to be cleared swaps.75 FSR commented that the reporting of confirmation data for clearing swaps should provide sufficient confirmation data for a cleared swap transaction.76 Markit, on the other hand, commented that eliminating the requirement for reporting confirmation data for swaps that are intended to be cleared, while still maintaining the requirement to report primary economic terms data, will not benefit reporting workflows and that there is little incremental cost to report confirmation data as reporting systems are set up to capture that information already.77 iii. Creation Data Reporting for Swaps That Become Original Swaps While the proposed amendments to part 45, aside from the removal of the excusal provisions noted above, do not change creation data reporting requirements for swaps that become 71 See ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015 Letter, at 3 (distinguishing between reporting obligations and the ability to select the SDR to which data related to clearing swaps is reported); LCH Oct. 30, 2015 Letter, at 2. 72 See CME Oct. 30 2015 Letter, at 3. 73 See Markit Oct. 30 2015 Letter, at 5. 74 See LCH Oct. 30, 2015 Letter, at 2. 75 See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015 Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3. 76 See FSR Oct. 30, 2015 Letter, at 3. 77 See Markit Oct. 30, 2015 Letter, at 2–3. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 original swaps, several commenters commented on which entity should be responsible for reporting creation data for swaps that will become original swaps. Some commenters suggested that if reporting of creation data for swaps that become original swaps continues, the DCO, rather than the reporting counterparty, should be responsible for reporting the creation data for that swap.78 CME commented that assigning all the reporting obligations for original and clearing swaps to the DCO is a better and simpler way to address alpha swap reporting, and would eliminate the need to reconcile original and clearing swaps across SDRs.79 CMC similarly commented that DCOs are best positioned to report on swaps that they accept or reject for clearing and should assume all reporting obligations for cleared swaps, including all reporting of swaps that are intended to be cleared.80 AIMA likewise suggested that if the Commission continues to require the reporting of original swaps, assigning the reporting obligations to the DCO will remove reporting burdens and the risk of data fragmentation across SDRs.81 Other commenters recommended that the Commission continue requiring the reporting counterparty to report creation data for those swaps that will become original swaps.82 LCH commented that the reporting counterparty should always be a party to the transaction and therefore, in the case of a swap that will become an original swap, the DCO would not be better suited than the SEF, DCM, or reporting counterparty to report the creation data.83 Eurex suggested that assigning the reporting obligation of original swap creation data to the DCO may present a timeliness issue depending on when the DCO receives the necessary information from the counterparties.84 ISDA likewise agreed that the obligation to report swaps that become original swaps should remain with the reporting counterparty for that swap.85 78 See e.g., CME Oct. 30, 2015 Letter, at 2–3; CMC Oct. 30, 2015 Letter, at 2–3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015 Letter, at 3. 79 See CME Oct. 30, 2015 Letter, at 3. 80 See CMC Oct. 30, 2015 Letter, at 2. 81 See AIMA Oct. 30, 2015 Letter, at 6. 82 See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4. 83 See LCH Oct. 30, 2015 Letter, at 2. 84 See Eurex Oct. 30, 2015 Letter, at 4. 85 ISDA also commented in support of the Commission’s proposal to remove the provisions in § 45.3 that excused a reporting counterparty from reporting creation data for a swap accepted for clearing before the primary economic terms reporting deadline. See ISDA Oct. 30, 2015 Letter, at 4. E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations Some commenters suggested that the reporting of any creation data for swaps that will become original swaps is unnecessary.86 AIMA commented that eliminating reporting for swaps that are intended to be cleared at the time of execution will significantly reduce complexity in the reporting regime and streamline the reported data.87 AIMA also commented that the Commission’s proposed reporting approach for original swaps will not reduce data fragmentation.88 Similarly, EEI/EPSA suggested that there is little to no benefit to original swap reporting for swaps that are intended to be cleared at the time of execution and that counterparties should not be required to report any creation data for such swaps.89 Other commenters, in response to the IDWG Request for Comment, supported the continued reporting of creation data for swaps that will become original swaps.90 iv. Choice of SDR Provisions mstockstill on DSK3G9T082PROD with RULES2 The Commission received a number of comments on its proposal regarding the selection of the SDR to which the required swap creation data should be reported. Some commenters were supportive of the Commission’s proposed addition of § 45.3(j) and proposed modifications to § 45.10 relating to the choice of the SDR for a particular swap. As discussed below, other commenters suggested modifications to the Commission’s proposal and changes to the manner in which the SDR is selected for a particular swap. With respect to clearing swaps, commenters were divided as to which entity should have the ability to select the SDR. FSR, LCH, and ISDA all supported allowing the DCO to select the SDR for purposes of reporting creation data for clearing swaps, as the DCO has the sole obligation to report clearing swaps.91 CME and LedgerX similarly supported the proposal to allow DCOs to select the SDR for 86 See AIMA Oct. 30, 2015 Letter, at 2–6; EEI/ EPSA Oct. 30, 2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2. 87 See AIMA Oct. 30, 2015 Letter, at 3. 88 See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting original swap creation data to one SDR and reporting clearing swap data to a different SDR may undermine data quality for the Commission’s supervisory purposes). 89 See EEI/EPSA Oct. 30, 2015 Letter, at 3. 90 See NPRM, 80 FR 52544, 52549 at nn. 37–39 (citing DTCC May 27, 2014 Letter at 17–18; AFR May 27, 2014 Letter at 5; Markit May 27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10). 91 See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 clearing swaps.92 CME supports the Commission’s proposal to assign all clearing swap reporting obligations, and the right to select the SDR to which it reports, to the DCO. CME also recommended that the Commission assign all original swap reporting obligations, and associated SDR selection rights, to the DCO, which would, in CME’s opinion, ensure that all data for a cleared swap transaction is housed in the same SDR, thereby avoiding data fragmentation.93 Other commenters suggested that the reporting counterparty to the swap that becomes the original swap should select the SDR to which the clearing swaps are reported. DTCC commented that the DCO for a clearing swap should have the obligation to report the clearing swap to the SDR selected by the reporting counterparty to the swap that became the original swap, or selected by the SEF or DCM for on-facility swaps.94 DTCC commented that this ‘‘single SDR approach’’ would be vital for providing a full audit trail and the ability to efficiently aggregate data.95 DTCC also commented that allowing the DCO to select the SDR for clearing swaps creates a competition problem due to vertically integrated SDRs and DCOs.96 DTCC explained that permitting a DCO to report to an affiliated SDR when the original swap data had been reported to another SDR, allows DCOs to bundle services and further entrenches DCOs’ vertical integration of trade execution, clearing, and data reporting.97 Markit recommended that the Commission allow the reporting counterparty to the swap that becomes the original swap to select the SDR to which the clearing swap is reported, while also allowing that reporting counterparty to delegate the selection of the swap data repository to the DCO. Markit commented that this counterparty choice approach would result in a more competitive DCO marketplace.98 Other commenters suggested that, for on-facility swaps that are not cleared by a DCO, the party responsible for reporting continuation data for the swap should not be bound by the SEF or DCM’s choice of SDR for the reporting of creation data.99 ISDA commented that in such cases the selection of the SDR should not be assigned to the entity that 92 See CME Oct. 30, 2015 Letter, at 1–2; LedgerX Oct. 30, 2015 Letter, at 1. 93 See CME Oct. 30, 2015 Letter, at 2–3. 94 See DTCC Oct. 30, 2015 Letter, at 3. 95 See id. at 4. 96 See id. at 7. 97 See id. 98 See Markit Oct. 30, 2015 Letter, at 5. 99 See ISDA Oct. 30, 2015 Letter, at 4–5; JBA Oct. 30, 2015 Letter, at 1. PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 41743 has the first obligation to report, but rather should be assigned to the entity that has the longest, recurring, or most frequent obligation to report.100 v. Reporting of Principal Model Cleared Swaps Finally, a few comments focused on swaps that are cleared through a principal, rather than agency, model. Eurex commented that it is not clear under the proposal which entity is to be reported as the counterparty to the DCO with regard to a clearing swap in the principal model.101 4. Final Rule The Commission has considered the comments that it received in response to the proposed changes to § 45.3. As discussed above, some of the proposed changes to § 45.3 received widespread support among commenters, while other proposed changes received both support and objection from commenters. The Commission has decided to adopt the changes to § 45.3 as proposed in the NPRM for the following reasons.102 i. Creation Data Reporting for Clearing Swaps As discussed above, the Commission’s proposal to require DCOs to report creation data for clearing swaps received support from commenters.103 The Commission agrees with these commenters that the DCO is in the best position to report creation data for clearing swaps. As for Markit’s proposed counterparty choice alternative, the Commission recognizes the flexibility that Markit’s proposal could offer parties to the clearing swap. However, the Commission believes Markit’s proposal would likely result in additional complexity in the reporting process and could obscure, to the Commission, which entity has the ultimate responsibility for reporting the clearing swap. After considering the comments received, the Commission continues to believe that the DCO is the entity with the easiest and quickest access to full information with respect to PET data and confirmation data for clearing swaps. Commission regulation 100 See ISDA Oct. 30, 2015 Letter, at 4–5. See Eurex Oct. 30, 2015 Letter, at 9; see also FSR Oct. 30, 2015 Letter, at 5. 102 The Commission has made one nonsubstantive conforming change to final § 45.3(b), changing the phrase ‘‘exception or exemption from the clearing requirement’’ to ‘‘exception to, or exemption from, the clearing requirement,’’ to make this provision consistent with other uses of the phrase throughout § 45.3. 103 See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015 Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015 Letter, at 3; LCH Oct. 30, 2015 Letter, at 2. 101 E:\FR\FM\27JNR2.SGM 27JNR2 41744 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations § 39.12(b)(6) requires DCOs to have rules providing that, upon acceptance of a swap by the DCO for clearing, the original swap is extinguished and replaced by an equal and opposite swap between the DCO and each clearing member acting as either principal for a house trade or agent for a customer trade.104 Because the DCO must replace an original swap with clearing swaps when accepting the original swap for clearing, the Commission believes that the DCO should be the entity that reports creation data for clearing swaps, and adopts its proposal to require DCOs to report creation data for clearing swaps. The Commission notes LCH’s comments that, when establishing the timing requirement for reporting clearing swaps that do not replace original swaps in § 45.3(e), the term ‘‘creation of a clearing swap’’ may better capture compression events than ‘‘execution of a clearing swap.’’ The Commission believes that the phrase ‘‘execution of a clearing swap,’’ for purposes of part 45, is sufficiently clear to cover reporting obligations for all clearing swaps that do not replace original swaps. The Commission also believes that the adopted reporting requirements for clearing swaps would cover post-clearing allocations of block trades raised by LCH. If a block trade is allocated after clearing, then any allocations of that block would have a DCO as one counterparty. Thus, such post-allocation swaps would be clearing swaps and must be reported by the DCO pursuant to § 45.3(e). mstockstill on DSK3G9T082PROD with RULES2 ii. Removal of Confirmation Data Reporting Requirements for Intended To Be Cleared Swaps Under the new rules, SEFs/DCMs and reporting counterparties will continue to be required to report PET data as part of their creation data reporting, but will be required to report confirmation data only for swaps that, at the time of execution, are not intended to be submitted to a DCO for clearing. For swaps that, at the time of execution, are intended to be submitted to a DCO for clearing, SEFs/DCMs and reporting counterparties will not be required to report confirmation data. If the swap is accepted for clearing by a DCO, the DCO will be required to report confirmation data for the clearing swaps pursuant to proposed § 45.3(e).105 104 See 17 CFR 39.12(b)(6). 105 The Commission notes that this change only impacts certain confirmation data reporting and recordkeeping requirements in § 45.3, and does not alter existing obligations to generate or exchange confirmations under other Commission regulations. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 With respect to swaps that will become original swaps, the Commission received widespread support of the proposed elimination of the requirement to report confirmation data associated with these swaps.106 One commenter did suggest that there is little incremental cost to continuing to require reporting of confirmation data for swaps that will become original swaps.107 However, the Commission continues to believe that the confirmation data requirements for clearing swaps provide the Commission with a sufficient representation of the confirmation data for a cleared swap transaction, as the original swap is extinguished upon acceptance for clearing and replaced by equal and opposite clearing swaps. Accordingly, the Commission is adopting its proposal to remove the confirmation data reporting requirement for swaps that are intended to be cleared at the time of execution. iii. Creation Data Reporting for Swaps That Become Original Swaps With the exception of the removal of excusal provisions, the Commission has not proposed to change the existing requirement to report creation data for swaps that will become original swaps. As noted in the NPRM, CEA section 2(a)(13)(G) requires each swap, whether cleared or uncleared, to be reported to a registered SDR.108 The Commission did, however, receive some comments urging the Commission to eliminate the existing requirement to report swaps that will become original swaps. The Commission also received, in response to the IDWG Request for Comment, comments in support of continued reporting of creation data for swaps that will become original swaps.109 Having reviewed the comments regarding reporting of swaps that become original swaps, the Commission continues to interpret CEA section 2(a)(13)(G) as requiring all swaps to be reported, which would include swaps that become original swaps as distinct swaps from resulting clearing swaps under § 39.12(b)(6). Further, the Commission continues to believe that original swaps contain essential information regarding the origins of cleared swap transactions for market surveillance and audit-trail purposes, 106 See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015 Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3. 107 See Markit Oct. 30, 2015 Letter, at 2–3. 108 See 80 FR 52544, 52548. 109 See NPRM, 80 FR 52544, 52549, nn. 37–39 (citing DTCC May 27, 2014 Letter at 17–18; AFR May 27, 2014 Letter at 5; Markit May 27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10). PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 including but not limited to the identity of the original counterparties, the execution venue, and the timestamp of the original transaction between the original counterparties. Such essential information could not be easily determined if only resulting clearing swaps were to be reported. The Commission’s ability to trace the history of a cleared swap transaction from execution between the original counterparties to clearing novation relies on this information. The Commission also notes that the continued reporting of swaps that become original swaps is consistent with the SEC’s proposed Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information.110 Finally, the continued reporting of original swaps, including original swap terminations, will aid the Commission’s ability to analyze cleared swap activity and review swap activity for compliance with the clearing requirement. For these reasons the Commission, in this final rule, continues to require reporting of swaps that will become original swaps. The Commission received divided comments as to which entity should be responsible for reporting creation data for those swaps that will become original swaps. Some commenters suggested that the DCO should be the reporting counterparty,111 while other commenters recommended that the reporting counterparty report creation data for those swaps that will become original swaps.112 After careful consideration of the comments received on this issue, the Commission believes that the creation data reporting requirements for those swaps that will become original swaps should remain as they currently exist, aside from the removal of excusal provisions noted above. The Commission recognizes that reporting counterparties and registered entities have invested substantial time and resources to report swaps (both cleared and not cleared) to SDRs and that DCOs have invested substantial resources to report clearing swaps. The Commission believes that maintaining the existing requirement for the reporting counterparty, rather than for the DCO, to report creation data of the swap that will become an original swap will help to prevent disruption of established industry workflows. The Commission also continues to believe that the SEF/DCM or reporting 110 See Regulation SBSR, 80 FR 14740. CME Oct. 30, 2015 Letter, at 2–3; CMC Oct. 30, 2015 Letter, at 2–3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015 Letter, at 2. 112 See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4. 111 See E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations counterparty has the easiest and fastest access to initial creation data for swaps that become original swaps. As discussed in its Final Part 45 Rulemaking, the Commission believes that requiring all swaps that become original swaps to be reported only to SDRs chosen by the DCO of the resulting clearing swaps could create an uneven playing field between DCO affiliated SDRs and non-DCO affiliated SDRs.113 Likewise, if the reporting counterparty or SEF/DCM were to report creation data, or select the SDR to which such data is reported, an SDR in which swap dealers have an ownership interest may obtain a dominant market position. This Final Rule avoids injecting the Commission into a market decision by maintaining the requirement that creation data for swaps that become original swaps is reported by the reporting counterparty for that swap, or the SEF/DCM, and the resulting clearing swaps are reported by the DCO. The Commission acknowledges the data fragmentation concerns raised by those that recommend DCOs report original swap creation data, however, the Commission also recognizes that requiring the DCOs, rather than the original reporting counterparty, to report original swap creation data may also present challenges. For example, Eurex noted that there could be a timeliness issue depending on when the DCO receives necessary information from counterparties to report creation data.114 The Commission also is concerned that, should DCOs report original swaps, potential delays in clearing could delay real-time swaps reporting pursuant to part 43. The Commission believes that accurate and timely reporting of the required data fields by all parties, in particular the clearing swap PET fields and data elements specific to terminations of original swaps, will alleviate data fragmentation concerns for those situations where the original swap and clearing swaps are reported to different SDRs. mstockstill on DSK3G9T082PROD with RULES2 iv. Choice of SDR Provisions The Commission received a variety of comments on its proposed addition of § 45.3(j) and modifications to § 45.10 regarding the choice of the SDR for a particular swap. With respect to clearing swaps, some commenters recommended that the DCO should select the SDR,115 113 See 77 FR 2136, 2149. Eurex Oct. 30, 2015 Letter, at 4. 115 See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; CME Oct. 30, 2015 Letter, at 2–3 (CME also suggested that the DCO select the SDR to which 114 See VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 while other commenters suggested the reporting counterparty to the original swap should select the SDR to which the clearing swap must be reported.116 The Commission has considered these comments and continues to believe, as discussed above, that placing the obligation to choose the SDR on the registered entity or counterparty that is required to first report the required swap creation data, rather than on another entity, will result in more efficient data reporting. Allowing the first entity to report data on a swap to choose the SDR will allow reporting entities to select an SDR to which they have established connections; giving another entity the ability to choose the SDR could require the first reporting entities to connect to multiple SDRs. The Commission also believes allowing the first reporting registered entity or counterparty to choose the SDR will also promote competition among SDRs to provide SDR services to a broad array of reporting entities. Requiring this method of SDR selection also avoids inserting anyone other than a party to the swap (or facility where the transaction is executed) into the decision as to how a registered entity or counterparty fulfills its regulatory obligation to report initial required swap creation data. As with the ‘‘first-touch’’ approach taken with respect to the creation of USIs in part 45,117 the Commission believes that the entity with the first reporting obligation should select the SDR for that report. The Commission believes that this method of SDR selection will avoid delays in real-time reporting for part 43 purposes. If DCOs were to select the SDR for an original swap, the DCO would not be in a position to make such selection until after a swap was accepted for clearing. Any delays in clearing would translate into delays in reporting for both part 43 real-time reporting and part 45 reporting. The registered entity or counterparty that is required to report a swap pursuant to § 45.8 may select an SDR to which its technological systems are most suited or to which it already has an established relationship, providing for the efficient and accurate reporting of swap data. The Commission notes that this Final Rule does not prohibit a registered entity or counterparty from choosing an SDR based on consideration original swaps are reported); LedgerX Oct. 30, 2015 Letter, at 1. 116 See DTCC Oct. 30, 2015 Letter, at 3; Markit Oct. 30, 2015 Letter, at 5 (Markit also suggested the counterparty have the option to delegate the selection of the SDR to the DCO). 117 See Final Part 45 Rulemaking, 77 FR 2136, 2158. PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 41745 of market preference or other factors, however, the obligation to choose the SDR will rest solely with the registered entity or counterparty set forth in amended § 45.8. The Commission recognizes that this may result in original swaps and clearing swaps being reported to different SDRs, however, the Commission believes that the required data fields, such as original swap USI included in clearing swap reporting, and clearing swap USIs included in original swap reporting, will allow the Commission to efficiently and accurately link data across SDRs and perform its regulatory mandate. The Commission has also noted ISDA’s proposed alternative that the entity with the ‘‘longest, recurring, or most frequent obligation to report’’ be given choice of SDR. In particular, ISDA expressed concern that market participants would be required, due to the made available to trade mandate, to trade certain swaps at a particular SEF, and therefore be required to report to that SEF’s chosen SDR. However, the Commission notes that any swaps made available to trade would be subject to the clearing mandate. As discussed above, counterparties to cleared, onfacility swaps would likely have no reporting obligations.118 Therefore, the concern raised by ISDA would not likely impact a large percentage of onfacility swaps. Moreover, ISDA notes that its proposed alternative would require amending various other provisions in part 45, including assignment of reporting counterparty designation and USI creation. Additionally, the Commission notes that the ‘‘longest, recurring, or most frequent obligation to report’’ may be difficult to determine at the outset of a swap, creating potential confusion as to who could select the SDR. Because amended § 45.3(j) codifies current industry practice,119 the Commission believes the choice of SDR provisions adopted in this final rule create the least disruption in the market while achieving the goal of consistent and timely swaps reporting. v. Reporting of Principal Model Clearing Swaps The Commission has noted comments from Eurex on reporting of clearing swaps under the principal clearing model. The Commission is aware of issues surrounding the reporting of principal model clearing swaps, but is 118 See supra, n. 26, discussing reporting obligations for counterparties to cleared, on-facility swaps. 119 See NPRM, 80 FR 52544, 52550. E:\FR\FM\27JNR2.SGM 27JNR2 41746 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations not providing further guidance at this time. C. Swap Data Reporting: Continuation Data—Amendments to § 45.4 1. Existing § 45.4 Regulation 45.4 governs the reporting of swap continuation data to an SDR during a swap’s existence through its final termination or expiration. This provision establishes the manner in which continuation data, including life cycle event data or state data, and valuation data,120 must be reported (§ 45.4(a)), and sets forth specific continuation data reporting requirements for both cleared (§ 45.4(b)) and uncleared (§ 45.4(c)) swaps. For cleared swaps, § 45.4(b) currently requires that life cycle event data or state data be reported by the DCO, and that valuation data be reported by both the DCO and by the reporting counterparty (if the reporting counterparty is an SD or MSP). For uncleared swaps, § 45.4(c) requires the reporting counterparty to report all required swap continuation data, including life cycle event data or state data, and valuation data. 2. Proposed Amendments to § 45.4 The Commission understands that § 45.4 could be clarified regarding continuation data reporting responsibilities for each of the swaps involved in a cleared swap transaction. Accordingly, the Commission proposed several amendments to § 45.4 to better delineate the continuation data reporting requirements associated with each swap involved in a cleared swap transaction.121 In particular, the Commission proposed conforming changes to existing § 45.4(a), revisions to existing § 45.4(b) and to existing § 45.4(c) (proposed to be renumbered as § 45.4(d)), and the addition of new § 45.4(c). Each proposed amendment is discussed in detail below. mstockstill on DSK3G9T082PROD with RULES2 i. Proposed Conforming Changes to § 45.4(a) The Commission proposed to revise the heading of § 45.4(a) to read 120 ‘‘Required swap continuation data’’ is defined in § 45.1 and includes ‘‘life cycle event data’’ or ‘‘state data’’ (depending on which reporting method is used) and ‘‘valuation data.’’ Each of these data types is defined in § 45.1. ‘‘Life cycle event data’’ means all of the data elements necessary to fully report any life cycle event. ‘‘State data’’ means all of the data elements necessary to provide a snapshot view, on a daily basis of all of the primary economic terms of a swap. ‘‘Valuation data’’ means all of the data elements necessary to fully describe the daily mark of the transaction, pursuant to CEA section 4s(h)(3)(B)(iii), and to § 23.431 if applicable. 17 CFR 45.1. 121 See 80 FR 52544, 52551. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 ‘‘Continuation data reporting method generally’’ to reflect that the continuation data reporting method requirements in § 45.4(a) apply to all swaps, regardless of asset class or whether the swap is an original swap, clearing swap or uncleared swap, whereas the continuation data reporting requirements in proposed § 45.4(b), (c), and (d) would apply to clearing swaps, original swaps, and uncleared swaps, respectively.122 ii. Proposed Revisions to § 45.4(b) Regulation 45.4(b) currently governs continuation data reporting obligations for ‘‘cleared swaps,’’ but does not distinguish among the different swaps involved in a cleared swap transaction (i.e. original and clearing swaps). The Commission thus proposed to revise the introductory language of § 45.4(b) to replace the terms ‘‘cleared swaps’’ and ‘‘swaps cleared by a derivatives clearing organization,’’ which were not defined in the Final Part 45 Rulemaking, with the defined term ‘‘clearing swaps.’’ 123 The Commission proposed to remove existing § 45.4(b)(2)(ii), which requires a reporting counterparty that is an SD or MSP to report valuation data for cleared swaps daily, in addition to the valuation data that is required to be reported by the DCO pursuant to § 45.4(b)(2)(i). For clearing swaps, the DCO would be the only swap counterparty required to report continuation data, including valuation data.124 iii. Proposed Addition of § 45.4(c): Continuation Data Reporting for Original Swaps Existing § 45.4(c) governs continuation data reporting for uncleared swaps. The Commission proposed renumbering § 45.4(c) as § 45.4(d) (for reasons discussed below), and proposed the addition of a new § 45.4(c), which would set forth the continuation data reporting requirements for original swaps.125 Specifically, proposed § 45.4(c) would require a DCO to report all required continuation data for original swaps, including original swap terminations, to the original swap SDR pursuant to 122 See 80 FR 52544, 52551. 80 FR 52544, 52551–52. 124 This proposal would codify certain no-action letters issued by the Commission’s Division of Market Oversight. See CFTC No-Action Letter No. 12–55 (Dec. 17, 2012); CFTC No-Action Letter No. 13–34 (Jun. 26, 2013); and CFTC No-Action Letter No. 14–90 (Jun. 30, 2014). Staff no-action relief from the requirements of § 45.4(b)(2)(ii) has been in effect since the initial compliance date for part 45 reporting. 125 See 80 FR 52544, 52552. 123 See PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 § 45.3(a) through (d).126 As proposed, § 45.4(c) would also reference the existing requirement that all continuation data must be reported in the manner provided in § 45.13(b), and that the SDR, in order to comply with § 49.10, must also ‘‘accept and record’’ such data, including original swap terminations.127 The proposed addition of a reference to § 49.10 is consistent with an IDWG commenter’s request for clarification regarding the obligation of the SDR to accept and process the termination message from the DCO.128 As proposed, § 45.4(c)(1) would require a DCO to report all life cycle event data for an original swap on the same day that any life cycle event occurs, or to report all state data for the original swap, daily. The continuation data reporting requirements of proposed § 45.4(c) 126 As discussed above, under the proposed revisions to §§ 45.3(a)–(d), a SEF/DCM or reporting counterparty would be required to report creation data for all swaps except clearing swaps (including for swaps that later become original swaps by virtue of their acceptance for clearing by a DCO). See Section II.B.4., supra. See also §§ 45.10 (a)–(c) (providing that all required swap continuation data reported for a swap must be reported to the same SDR to which required swap creation data was first reported pursuant to § 45.3). The Commission notes that pursuant to existing regulation § 45.13, each reporting entity and/or counterparty is required to use the facilities, methods, or data standards provided or required by the SDR to which the entity or counterparty reports the data. 17 CFR 45.13. 127 SDR regulation § 49.10(a) provides that an SDR shall accept and promptly record all swap data in its selected asset class and other regulatory information that is required to be reported pursuant to part 45 and part 43 by DCMs, DCOs, SEFs, SDs, MSPs and/or non-swap dealer/non-major swap participant counterparties. Section 49.10(a)(1) further provides that for purposes of accepting all swap data as required by part 45 and part 43, the registered SDR shall adopt policies and procedures, including technological protocols, which provide for electronic connectivity between the SDR and DCMs, DCOs, SEFs, SDs, MSPs and/or certain other non-swap dealer/non-major swap participant counterparties who report such data. It further states that the technological protocols established by a SDR shall provide for the receipt of swap creation data, swap continuation data, real-time public reporting data, and all other data and information required to be reported to such SDR. Additionally, § 49.10(a)(1) provides that the SDR shall ensure that its mechanisms for swap data acceptance are reliable and secure. 17 CFR 49.10. The Commission also proposed conforming changes to the introductory language of § 45.3 and § 45.4 to make clear that all required swap creation and continuation data must be reported to the relevant SDR in the manner provided in § 45.13, and pursuant to § 49.10, which sets forth rules governing the acceptance and recording of such data. 128 See ITV May 27, 2014 Letter, at 4 (noting that failure to accept the termination message can produce inaccurate swap data due to double reporting and that the rejection of the termination message could distort notional amounts and market risks, and stating that amending the reporting rules to place the reporting obligation on the DCO for intended to be cleared swaps simplifies the reporting flows and places the responsibility on the party best-suited to accurately report cleared swap data). E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations would apply to a swap that has been submitted to a DCO for clearing and that becomes an original swap by virtue of the DCO’s acceptance of such swap for clearing. The DCO’s continuation data reporting obligations for a swap to which it is not a counterparty (i.e., for swaps other than clearing swaps) will only be triggered if a swap is accepted for clearing (and thus becomes an original swap). If a swap is submitted to a DCO for clearing and is not accepted for clearing, then the DCO will not have continuation data reporting obligations for the swap, because the swap is not an original swap or a clearing swap. iv. Proposed Additional Continuation Data Fields To Be Reported by DCOs Proposed § 45.4(c) would require DCOs to report additional data fields when reporting continuation data on original swaps.129 These fields would be the LEI of the SDR to which the DCO reported clearing swaps replacing the original swap; the USI of the original swap being replaced; and the USIs of each clearing swap that is replacing the original swap. As discussed in the NPRM,130 the Commission proposed these additional data fields to enable the Commission to track the complete life of a cleared swap transaction. Inclusion of these data fields in continuation data on the original swap, taken in conjunction with existing requirements to reporting original swap information in reports clearing swaps, will aid the Commission in linking the original swap and all clearing swaps replacing it. mstockstill on DSK3G9T082PROD with RULES2 v. Proposed Revisions to § 45.4(d) As mentioned above, the Commission proposed to renumber § 45.4(c) (Continuation data reporting for uncleared swaps) as § 45.4(d). The Commission also proposed to amend § 45.4(d), which applies to all swaps that are not cleared by a derivatives clearing organization, to add the phrase ‘‘including swaps executed on or pursuant to the rules of a swap execution facility or designated contract market.’’131 This proposed change would clarify the existing requirement that reporting counterparties report all required swap continuation data for an uncleared swap, irrespective of whether the swap was executed off-facility (in which case the reporting counterparty must report required swap creation data), or whether the swap was executed on or pursuant to the rules of a SEF or DCM (in which case the SEF or DCM 129 See 80 FR 52544, 52552–53. 80 FR 52544, 52532–33. 131 See 80 FR 52544, 52553. 130 See VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 must report the required swap creation data).132 Finally, the Commission proposed to modify the introductory language to § 45.4 and § 45.4(d)(1)(ii)(A) to remove outdated references to compliance dates that have already expired.133 3. Comments Received The Commission received numerous comments on its proposed revisions to § 45.4.134 Below is a summary of comments for each of the primary revisions and additions to § 45.4. i. Comments on Proposed Revisions to § 45.4(b) The proposed amendment to § 45.4(b)(2), requiring only DCOs to submit valuation data for clearing swaps, was widely supported in the comment letters. Although one commenter contended that valuation data from SD/MSP swap counterparties is valuable information and that the Commission should require such information from SD/MSP counterparties for all swaps, cleared or uncleared,135 many commenters to the IDWG Request for Comment and NPRM stated that only the DCO should have the responsibility to report valuation data for cleared swaps, and that the Commission should eliminate the requirement for an SD or MSP to report valuation data for cleared swaps.136 One commenter noted that valuation data and mark-to-market value data provided by DCOs are sufficient for the Commission to understand clearing swap valuations, particularly because the DCO’s valuation method is the industry standard.137 132 See 17 CFR 45.3(b)–(d) (creation data reporting requirements for off-facility swaps) and 17 CFR 45.3(a) (creation data reporting requirements for swaps executed on or pursuant to the rules of a SEF or DCM). See also Section II.B.4.iii supra. 133 See 80 FR 52544, 52553. 134 The Commission did not receive any comment directly addressing the conforming changes to § 45.4(a) or renumber and amended § 45.4(d). The Commission received a comment from FSR on continuation data for amortizing swaps. See FSR Oct. 30, 2015 Letter, at 4. Because the NPRM was limited to revisions of § 45.4 as it relates to clearing swaps, FSR’s request is beyond the scope of this rulemaking. 135 See Markit May 27, 2014 Letter, at 10–11 (arguing that the Commission might receive valuable information from valuations reported by counterparties). 136 See ABA May 27, 2014 Letter, at 2; CME May 27, 2014 Letter, at 9–10; FSR May 27, 2014 Letter, at 2; ITV May 27, 2014 Letter, at 2, 10, 15; ISDA May 27, 2014 Letter, at 13–14; JBA May 27, 2014 Letter, at 2–3; MFA May 27, 2014 Letter, at 2, 4; NGSA May 27, 2014 Letter, at 4–5; AIMA Oct. 30, 2015 Letter, at 6; ISDA Oct. 30, 2015 Letter, at 5; JBA Oct. 30, 2015 Letter, at 2; FSR Oct. 30, 2015 Letter, at 3. 137 See Eurex Oct. 30, 2015 Letter, at 6. Eurex also stated that information on posted collateral could PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 41747 ii. Comments on Proposed Revisions to § 45.4(c) Commenters were split on support of proposed § 45.4(c), which would require the DCO to report continuation data on the original swaps once they are accepted for clearing to the SDR to which the original swap was originally reported. ISDA strongly supported the revision, stating that it would eliminate the issue of cleared ‘‘alpha’’ swaps that had not been terminated, which negatively affects data quality. ISDA commented that DCOs should be allowed to report continuation data as either lifecycle event data or state data.138 DTCC, in its response to the IDWG Request for Comment, also supported requiring DCOs to report terminations of original swaps.139 However, DTCC commented that some DCOs fail to submit termination of original swaps to DTCC according to DTCC’s technical standards.140 CEWG commented that DCOs were in the best position to report all data on original and clearing swaps, although it believes the original swap should not be reported.141 CME commented that under the proposed division of reporting obligations for original swaps and clearing swaps, DCOs are dependent on original swap counterparties providing sufficient information on the original swaps to fulfill reporting obligations on terminations of the original swap.142 CME noted that counterparties rarely provided this information, meaning that DCOs cannot effectively terminate original swaps. As an alternative, CME proposed that DCOs should be the reporting party for creation and continuation data for both original and clearing swaps.143 In contrast, some commenters recommended that the clearing member, and not the DCO, should report termination of the original swap to the be a useful data point for the Commission, but the original counterparties would be in a better position than the DCO to report such information. Eurex also stated that DCOs could provide information on margin, but that such data would require more effort. 138 See ISDA Oct. 30, 2015 Letter, at 5. 139 See DTCC May 27, 2014 Letter, at 7 (stating that when an alpha swap is novated, the Commission should require a DCO to submit information about the beta and gamma swaps in addition to the termination notice for the alpha swap). 140 See DTCC Oct. 30, 2015 Letter, at 8. 141 See CEWG Oct. 30, 2015 Letter, at 3. See Section II.B.3, above, for discussion of CEWG’s and other commenters’ positions on reporting of creation data for an original swap. 142 See CME Oct. 30, 2015 Letter, at 3. 143 See CME Oct. 30, 2015 Letter, at 3. E:\FR\FM\27JNR2.SGM 27JNR2 41748 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 SDR.144 Eurex stated that the clearing member would already have information on the original swap and a connection to the SDR where the original swap was reported, putting the original reporting party in the best position to report a termination.145 LCH commented that having the original reporting party report any continuation events would avoid reporting gaps on events occurring between creation and clearing.146 LCH commented that requiring DCOs to submit cancelations of original swaps would be inconsistent with reporting obligations under the European Markets Infrastructure Regulation (‘‘EMIR’’).147 LCH also commented that the choice of original swap SDR could become an eligibility criterion for clearing, and that DCOs could potentially reject swaps from clearing based on the original swap SDR.148 Eurex and LCH both noted that the requirement would force DCOs to connect to all registered SDRs and report terminations according to the technical requirements of each SDR.149 As an alternative, Eurex proposed that DCOs be allowed to select the SDR to which they report the termination of the original swap.150 Regarding timing of reporting continuation data for original swaps, ISDA supported the provision in new § 45.4(c) allowing DCOs to report continuation data on original swaps daily and via either lifecycle event data or state data.151 The Japanese Bankers Association commented that original swaps should be terminated as soon as technologically practicable, to align 144 See OTC Hong Kong May 27, 2014 Letter, at 2–3. OTC Hong Kong stated that requiring the original counterparty to report termination of the alpha would be more cost-effective because the original reporting counterparty is already required to report creation data and life cycle event data of such alpha to an SDR, and thus would already have in place a technical and operational interface with the SDR of its choice. The commenter also stated that imposing an additional requirement on a DCO to report termination of the alpha does not appear to increase or improve the quantity and quality of information already available to the Commission, and that the burden on DCOs of the additional reporting requirement appears to outweigh the benefits to the Commission. See also LCH May 29, 2014 Letter, at 8 (stating that reporting entities should already report terminations under the obligation to report continuation data); LedgerX Oct. 30, 2015 Letter, at 3. 145 See Eurex Oct. 30, 2015 Letter, at 3. 146 See LCH Oct. 30, 2015 Letter, at 3. 147 See id. 148 See id. 149 Eurex Oct. 30, 2015 Letter, at 4–5; LCH Oct. 30, 2015 Letter, at 3. 150 Eurex also suggested that reporting of terminations could be foregone entirely, as an original swap, by definition, has been accepted for clearing and ceases to exist. See Eurex Oct. 30, 2015 Letter, at 5. 151 ISDA Oct. 30, 2015 Letter, at 5. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 reporting on clearing swaps with reporting on cleared futures transactions under § 1.74.152 Eurex commented that terminations were the only lifecycle events for original swaps that would need to be reported as continuation data.153 DTCC requested that the Commission offer guidance on how SDRs, DCOs, and any other affected entities should address previously reported cleared swaps for which the original swap had not been terminated.154 iii. Comments on Proposed Additional Continuation Data Fields To Be Reported by DCOs Several commenters asserted that the most cost-effective method for establishing a link between the original swaps and the swaps that replace the original swap upon acceptance for clearing is to include the USI of the original swap as a prior USI for the beta and gamma swaps.155 Several commenters to the IDWG Request for Comment supported the concept of requiring that the DCO provide USIs for clearing swaps to the counterparties to those swaps under proposed Section 45.5(d)(2).156 ISDA, DTCC and Markit 152 JBA Oct. 30, 2015 Letter, at 2; see also LedgerX Oct. 30, 2015 Letter, at 3 (commenting that termination of original swap should be reported as soon as technologically practicable, but commenting that reporting party of original swap should have obligation to report termination). 153 Eurex Oct. 30, 2015 Letter, at 6. ISDA noted that bunched orders may be cleared either pre- or post-allocation, potentially creating multiple clearing swaps for a single original swap. See ISDA Oct. 30, 2015 Letter, at 6. ISDA commented that, where allocation is done after clearing, DCOs should report the USI of the pre-allocation swap as the ‘‘prior ISO’’ on clearing swaps for the allocations. Eurex commented that, in the event of default by a clearing member, it attempts to auction off the clearing swap. See Eurex Oct. 30, 2015 Letter, at 3. Eurex commented that it was unclear whether the novation of an auctioned clearing swap should be reported to the original swap SDR. 154 See DTCC Oct. 30, 2015 Letter, at 9. 155 See CME May 27, 2014 Letter, at 10 (‘‘The most effective and efficient method for achieving linkage for all such events that have a one-to-one relationship (i.e., assignment or exercise) or a oneto-many relationship (i.e., clearing, novation, allocation) is by the inclusion of a prior USI(s).)’’; DTCC letter appendix at 3 (stating that a new swap can generally be linked to an existing swaps through the use of a ‘‘prior USI’’ data field); ISDA May 23, 2014 Letter, at 11 (‘‘Related swaps sent to different SDRs can also be linked via use of the USI. . . .’’); Markit May 27, 2014 Letter, at 8 (arguing that the most effective method to establish a link between new and existing swaps is to store the USI of the original swap as a prior USI). 156 See AIMA Oct. 30, 2015 Letter, at 7; Eurex Oct. 30, 2015 Letter, at 7; ISDA Oct. 30, 2015 Letter, at 7. ITV also commented on requirements for SDRs to transmit USIs to non-reporting counterparties for swaps between non-swap dealers or major swap participants, not executed on a DCM or SEF under existing Section 45.5(c)(2). ITV Oct. 30, 2015 Letter, at 4. Because the NPRM did not propose to amend § 45.5(c)(2), this comment is beyond the scope of the proposed rule. PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 generally supported the requirement that DCOs include the USI of the original swap when reporting clearing swaps, but objected to requiring additional fields linking original and clearing swaps as redundant.157 LCH suggested that there should be a standardized format for reporting terminations of original swaps that must be accepted by all SDRs.158 4. Final Rule Text Having considered the comments received, the Commission has decided to adopt the amendments to § 45.4 as proposed. i. Conforming Changes to § 45.4(a) Receiving no comments on the conforming changes to § 45.4(a), the Commission adopts these changes as proposed. The changes clarify that the standards for reporting continuation data in § 45.4(a) apply to all continuation events regardless of asset class or whether the swap is uncleared, an original swap, or a clearing swap. ii. Revisions to § 45.4(b) The Commission notes support among market participants for the amendment to § 45.4 removing the requirement that SDs and MSPs report valuation data for clearing swaps. The Commission adopts this revision, codifying existing noaction relief,159 as proposed. iii. Addition of § 45.4(c)—Continuation Data Reporting for Original Swaps The Commission notes the different opinions offered by commenters on the proposed addition of § 45.4(c), which would require DCOs to report continuation data, including terminations, of original swaps. The Commission has considered the alternative approaches to reporting original swap terminations that were proposed by commenters, such as requiring original swap reporting parties to report terminations; requiring DCOs to report both original and clearing swaps; and allowing DCOs to select the SDR for original swap terminations. The Commission believes that its proposed method best incorporates existing industry practice, whereby DCOs generally report clearing swaps as well as submitting termination messages on original swaps, thereby limiting additional costs. It may be more burdensome for the counterparties to the original swaps to report terminations because they would have 157 See ISDA Oct. 30, 2015 Letter, at 6; DTCC Oct. 30, 2015 Letter, at 8; Markit Oct. 30, 2015 Letter, at 3. 158 See LCH Oct. 30, 2015 Letter, at 4. 159 See CFTC Letter 15–38 (Jun. 12, 2015). E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations to receive messages from the DCO confirming that the original swap was accepted for clearing, then translate that message from the DCO into a termination message to the SDR. This may be particularly burdensome for commercial end-users executing swaps on SEFs or DCMs who might otherwise have no reporting obligations and who may not have the infrastructure in place to report as quickly or as efficiently as DCOs.160 On the other hand, requiring DCOs to report creation and continuation data for both original and clearing swaps could slow the reporting of original swaps for part 43 and part 45 purposes. DCOs would need to receive messages from the counterparties, or from the SEF or DCM where executed on-facility, with all information necessary to report the swap that becomes an original swap. The DCO would then need to transmit such information to the SDR of its choice. Introducing an extra step in reporting would inherently slow reporting, which must be done as soon as technologically practicable particularly for transparency reasons. At the same time, requiring DCOs to report original swaps for part 43 and part 45 purposes would require DCOs to obtain information beyond what would be needed for clearing purposes, thus increasing the burden on DCOs. Finally, the Commission has considered the alternative proposal that DCOs be allowed to report an original swap termination to an SDR other than that where the original swap was reported. Adoption of this alternative approach could result in significant data fragmentation, as data on a single swap could be housed at more than one SDR. Additionally, this alternative approach would render useless any position reports generated by an SDR, as the SDR (or market participant accessing its own data on an SDR) could not determine if the swaps it housed are still in effect, thereby removing a potential validation tool for market participants.161 Having considered these alternatives as suggested by commenters, the mstockstill on DSK3G9T082PROD with RULES2 160 See supra, n. 26, for discussion of reporting obligations for on-facility cleared swaps. 161 The Commission notes that the approach adopted could generate some degree of data fragmentation, as reports on the original swaps may be housed at a different SDR from reports on its clearing swaps. However, the Commission believes this issue can be overcome for its regulatory purposes—namely risk analysis and market surveillance—if the Commission is able to pull accurate data on individual swaps from each of the registered SDRs. Moreover, accurate reporting of original swap USIs and SDR identities in clearing swaps reporting, and accurate clearing swaps USIs and SDR identities in original swaps terminations, would allow for easy tracking of the lifecycle of a cleared swap transaction. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 Commission has determined to adopt the amendments to § 45.4 as it has proposed. The Commission believes that DCOs are in the best position to report the termination of an original swap because the DCO, through the clearing process, has all information needed to report such terminations. By virtue of its decision to accept a swap for clearing and to extinguish the swap upon acceptance,162 a DCO will be the first entity to know that clearing occurred and that the original swap should be terminated, putting the DCO in the best position to report terminations quickly. DCOs can build original swap terminations into their systems architecture, allowing for fast, consistent, and accurate terminations.163 DCOs will also have all information needed to terminate the original swap based on the swap submitted for clearing. Data required for such termination messages would either be generated by the DCO itself (such as clearing swap USIs and clearing swap SDR LEIs) or could be included in any message submitting a swap for clearing (such as the USI of the original swap and the LEI of the original swap SDR). While CME commented that clearing members have not consistently included original swap USI and LEI of the original swap SDR in messages transmitted to the DCO for clearing, the Commission notes that DCOs could require their clearing members to provide such information. As proposed, § 45.4(c) would require DCOs to report these fields. DCOs must obtain the relevant information from their clearing members. iv. Addition of Continuation Data Fields To Be Reported by DCOs The Commission has considered the comments opposing the creation of required continuation data fields to be reported by DCOs for original swaps. The Commission has also considered ISDA’s comment regarding the potential redundancy of having USIs of clearing swaps transmitted in the termination message for the original swap, as well as 162 See 17 CFR 39.12(b)(6). Through its rules, the DCO determines whether or not a swap that is submitted for clearing becomes an original swap. 163 The Commission has also considered LCH’s comment that EMIR puts the original swap termination obligation on the original swap parties. Placing reporting obligations on one party under CFTC regulations, and on another party under EMIR, would not create a direct conflict as both parties would be able to satisfy their respective regulatory obligations. The Commission recognizes that this situation could result in two termination messages for the same original swap, but this should not have a negative impact on the quality of SDR data. PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 41749 having the USI of the original swap in the creation data for the clearing swaps. The Commission believes that reporting the clearing swaps USIs as continuation data for the original swap is an efficient mechanism for linking clearing swaps to the original swap that they replace and should be used for this purpose. New § 45.4(c)(2) will thus require DCOs to include the following additional enumerated data elements when reporting continuation data for original swaps pursuant to proposed § 45.4(c)(1): (i) The legal entity identifier (‘‘LEI’’) of the SDR to which each clearing swap for a particular original swap was reported by the DCO pursuant to new § 45.3(e); (ii) the USI of the original swap that was replaced by the clearing swaps; 164 and (iii) the USI for the clearing swaps that replace the original swap. As adopted, these data fields will enable the DCO to fulfill its continuation data reporting obligations, enable the SDR to maintain the accuracy and completeness of swap transaction data, enable the Commission to track the life of a cleared swap transaction, and enable the Commission to monitor compliance with the clearing mandate. In particular, inclusion within an original swap termination message the LEI of the clearing swap SDR will permit the Commission and other regulators to ascertain the SDR where the clearing swaps associated with a particular original swap reside, which will enable the Commission and other regulators to review and more effectively associate data available at multiple SDRs in circumstances where the reporting entity or counterparty selects one SDR for the original swap and the DCO selects a different SDR for the clearing swaps under § 45.3. Inclusion of the original swap’s USI is necessary to enable the original swap SDR to associate continuation data reported by the DCO with the initial creation data reported by a SEF/DCM or reporting counterparty pursuant to § 45.3(a) through (d).165 These data will 164 See existing §§ 45.5(a)(2)(iii), (b)(2)(iii), & (c)(2)(ii) (requiring the entity that created the USI to transmit the USI of a swap to the DCO, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the derivatives clearing organization for clearing purposes). Proposed revisions to § 45.5 are described in Section II.D of this release. 165 For instance, inclusion of the USI of the original swap in DCO continuation data reporting will permit the SDR receiving such continuation data to associate data regarding a life cycle event such as termination with the existing data maintained for the swap. This will help ensure that data in the SDR remains current and accurate and will enable the Commission and other regulators to ascertain whether a swap remains in existence or E:\FR\FM\27JNR2.SGM Continued 27JNR2 mstockstill on DSK3G9T082PROD with RULES2 41750 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations allow SDRs to validate termination messages reported by DCOs by ensuring that the termination message has the same USI as the original report. Similarly, in the case of clearing swaps that replace an original swap, inclusion of the USIs of the clearing swaps will permit the Commission and other regulators to identify the specific clearing swaps that replaced an original swap, thereby presenting a full history of the cleared swap transaction. Together, the revisions to § 45.4(b) and the addition of § 45.4(c) will require the reporting of continuation data for original swaps and clearing swaps. Accordingly, the Commission expects that records of original swaps that have been terminated would include the USIs for the clearing swaps that replaced the original swap and the LEI of the clearing swap SDR, such that review of an original swap would permit the identification of the resulting clearing swaps and the SDR where they resides. These provisions will reflect the regulations applicable to DCOs outlined in part 39 of the Commission’s regulations and will clearly delineate the continuation data reporting obligations associated with each swap involved in a cleared swap transaction.166 The Commission is mindful of LCH’s suggestion that there be an industrywide standard for original swap termination messages and DTCC’s comment that termination reports often do not comply with SDR specifications. To help DCOs comply with the requirements of amended § 45.4, the Commission encourages DCOs and SDRs to develop an industry-wide standard for original swap termination messages. The Commission anticipates that original swap termination messages could be standardized given the limited number of data elements that must be transmitted, such as clearing swap USIs, DCO LEIs, and clearing swap SDR LEIs. Standardization also would alleviate LCH’s concern that the original swap’s SDR would become a factor in determining whether a swap was eligible for clearing. The Commission has also considered conflicting comments on whether original swap terminations should be reported at the end of the day or as soon as technologically practicable. The Commission has determined to adopt the amendment as proposed and require reporting original swap terminations at the end of the day, as this would be consistent with reporting other types of continuation data under § 45.4. v. Revisions to § 45.4(d) The Commission received no comments on the proposed revisions to § 45.4(d), and is adopting those revision as proposed. D. Unique Swap Identifiers— Amendments to Section 45.5 1. Existing § 45.5 Existing § 45.5 requires that each swap subject to the Commission’s jurisdiction be identified in all recordkeeping and all swap data reporting by the use of a USI. The rule establishes different requirements for the creation and transmission of USIs depending on whether the swap is executed on a SEF or DCM (§ 45.5(a)), executed off-facility with an SD or MSP reporting counterparty (§ 45.5(b)), or executed off-facility with a non-SD/MSP reporting counterparty (§ 45.5(c)). Existing § 45.5 provides that for swaps executed on a SEF or DCM, the SEF or DCM creates the USI, and for swaps not executed on a SEF or DCM, the USI is created by an SD or MSP reporting counterparty, or by the SDR if the reporting counterparty is not an SD or MSP.167 With the exception of swaps with a non-SD/MSP reporting counterparty, the existing rule generally requires USI creation and transmission to be carried out by the entity or counterparty required to report all required swap creation data for the swap. Existing § 45.5 thus does not distinguish between original and clearing swaps, does not provide USI creation and transmission requirements specifically for DCOs, and consequently does not provide for the issuance to DCOs of a USI ‘‘namespace,’’ which is one of two component parts of a USI.168 The Commission understands that, in practice, SEFs/DCMs and reporting counterparties, or SDRs in the case of non-SD/MSP reporting counterparties, generate and assign USIs for swaps that would become original swaps under the proposed rules, and that DCOs generate and assign USIs to swaps that would qualify as clearing swaps in connection with reporting required swap creation data for clearing swaps to SDRs. 167 See has been extinguished upon acceptance for clearing by a DCO. 166 See 17 CFR 39.12(b)(6). Part 45 currently requires all swap data and information reported to and maintained by an SDR regarding a given swap to be ‘‘current and accurate’’ and to include ‘‘all changes’’ to a swap. See 17 CFR 45.4(a). VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 17 CFR 45.5(a)–(c). 168 See, e.g., 17 CFR 45.5(a)(1)(i), (b)(1)(i) and (c)(1)(i) (the data component of a USI commonly referred to as a namespace is the unique alphanumeric code assigned to the registered entity responsible for generating the USI for the purpose of identifying such registered entity with respect to USI creation). PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 2. Proposed Amendments to § 45.5 The Commission proposed to renumber existing § 45.5(d) as § 45.5(e), and to create a new § 45.5(d) that would set forth requirements regarding the creation and transmission of USIs for clearing swaps.169 As proposed, § 45.5(d)(1) would require a DCO to generate and assign a USI for each clearing swap upon, or as soon as technologically practicable after, acceptance of an original swap by the DCO for clearing (or execution of a clearing swap that does not replace an original swap), and prior to reporting the required swap creation data for each clearing swap.170 Proposed § 45.5(d)(1) would also require that the USI for each clearing swap consist of two data components: A unique alphanumeric code assigned to the DCO by the Commission for the purpose of identifying the DCO with respect to USI creation, and an alphanumeric code generated and assigned to that clearing swap by the automated systems of the DCO. These proposed USI creation requirements and data components for DCOs and clearing swaps are consistent with those currently required by part 45 for other registered entities such as SEFs, DCMs, and SDRs.171 As proposed, § 45.5(d)(2) would require a DCO to transmit the USI for a clearing swap electronically to the SDR to which the DCO reports required swap creation data for the clearing swap, as part of that report, and to the DCO’s counterparty with respect to that clearing swap, as soon as technologically practicable after either acceptance of the original swap by the DCO for clearing or execution of a clearing swap that does not replace an original swap.172 Finally, the Commission proposed to amend §§ 45.5(a), 45.8(f), and 45.10(a) to incorporate the language ‘‘or pursuant to the rules of’’ to the phrase ‘‘swaps executed on a swap execution facility or designated contract market’’ to make clear that those provisions currently apply to all swaps executed on or pursuant to the rules of a SEF or DCM.173 3. Comments Received The Commission received several comments regarding its proposed amendments to § 45.5.174 All comments 169 The Commission also proposes conforming amendments to renumber existing § 45.5(e) as § 45.5(f). 170 See 80 FR 52544, 52554. 171 See, e.g., 17 CFR 45.5(a), 45.5(c). 172 See 80 FR 52544, 52554. 173 See 80 FR 52544, 52554. 174 ITV requested that the Commission remove the obligation for SDRs, when a swap is executed E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations received were supportive of the amendment to § 45.5(d)(1), which requires DCOs to generate USIs for clearing swaps.175 FSR requested that the Commission adopt ISDA best practices for identifying international swaps, including allowing for the use of a USI as a unique transaction identifier (‘‘UTI’’) for reporting swaps in other jurisdictions.176 FSR commented that adopting the ISDA best practice concerning USIs would avoid potential double-counting when an international swap is reported to two separate SDRs in two jurisdictions.177 ISDA commented that, in principal model clearing, the DCO should ensure that both the DCO’s clearing member and the ultimate counterparty (if not the clearing member) receive the clearing swap USIs.178 ISDA further noted that the current Orders of Exemption issued to foreign DCOs do not include an obligation for those exempt DCOs to generate the USIs for reportable clearing swaps.179 mstockstill on DSK3G9T082PROD with RULES2 4. Final Rule Text of § 45.5 Having considered the comments relating to the purpose and scope of the proposed amendments to § 45.5, the Commission is adopting amended § 45.5 as proposed. The proposed § 45.5(d) provisions that would govern creation and assignment of USIs by the DCO with respect to clearing swaps would be consistent with the Commission’s ‘‘firsttouch’’ approach to USI creation for SEFs, DCMs, SDs, MSPs, and SDRs.180 The Commission notes ISDA’s request for guidance on whether DCOs must ensure, in the principal clearing mode, that the ultimate counterparty (when not the clearing member) receive the USI of the clearing swaps. As noted between two non-SD/MSPs and the SDR is obligated to create the USI, to transmit the USI to the counterparties. ITV commented that this could create obligations for SDRs to transmit information to parties not enrolled with the SDR. The Commission has noted this comment, but it is beyond the scope of the NPRM. 175 See ITV Oct. 30, 2015 Letter, at 3 (but noting that generation of the USI for a clearing swap by the SDR would slow acceptance of swaps in the clearing process); ISDA Oct. 30, 2015 Letter, at 7 (also suggesting that the Commission require the namespace component of USIs for each DCO be made publicly available); AIMA Oct. 30, 2015 Letter, at 7. 176 See FSR Oct. 30, 2015 Letter, at 4. 177 See id. 178 See ISDA Oct. 30, 2015 Letter, at 6. 179 See ISDA Oct. 30, 2015 Letter, at 6. 180 See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13, 2012). The Commission’s approach with respect to SEFs, DCMs, SDs, MSPs, and SDRs was designed to foster efficiency by taking advantage of the technological sophistication and capabilities of such entities, while ensuring that a swap is identified by a USI from its inception. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 above, the Commission is aware of various issues relating to reporting of principal model clearing but will not offer further guidance at this time. The Commission notes ISDA’s comment that the current Orders of Exemption for foreign DCOs do not include a requirement that the DCO generate USIs for reportable clearing swaps. Finally, the Commission notes FSR’s request for the Commission to align the use of USIs and UTIs for reporting international swaps. While the Commission declines to address the issue in this release as it is beyond the scope of the NPRM, the Commission is cognizant of the need to harmonize reporting across jurisdictions and will continue to work with other regulators to address this and other issues. E. Determination of Which Counterparty Must Report—Amendments to § 45.8 1. Existing § 45.8 Existing § 45.8 sets forth a hierarchy under which the reporting counterparty for a particular swap depends on the nature of the counterparties involved in the transaction. Regulation 45.8 assigns a reporting counterparty for off-facility swaps, for which the reporting counterparty must report all required swap creation data, as well as for swaps executed on or pursuant to the rules of a SEF or DCM, for which the SEF or DCM must report all required swap creation data. 2. Proposed Amendments to § 45.8 The Commission proposed to add paragraph (i) to § 45.8 in order to explicitly provide that the DCO will be the reporting counterparty for clearing swaps.181 The Commission also proposed to amend the introductory language of § 45.8 to make clear that the reporting counterparty for all swaps except clearing swaps will be made as provided in paragraphs (a) through (h) of § 45.8, while the reporting counterparty for clearing swaps will be made as provided in paragraph (i) of § 45.8. The Commission further proposed to remove the language ‘‘if available’’ from § 45.8(h)(1)(i) to ensure consistency with proposed changes to appendix 1 to part 45. As discussed below in addressing changes to the PET data fields in appendix 1, the ‘‘if available’’ language was only relevant prior to availability of the LEI system.182 The Commission proposed to further amend § 45.8 to remove part of paragraphs (d)(1) and (f)(1) and to remove part of paragraph (h)(2) and all of paragraphs (h)(2)(i) and (ii), which 181 See 80 FR 52544, 52554–55. infra, Section II.H.1.i. 182 See, PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 41751 require SEFs to notify counterparties to a swap if it cannot determine who would be the reporting counterparty. Finally, the Commission proposed conforming changes to explanatory notes in the PET data tables in appendix 1 to part 45 that reference the situation described in § 45.8(h)(2). 3. Comments Received The Commission received six comments in connection with its proposed amendments to § 45.8. One commenter supported proposed § 45.8(i) as it would promote efficiency in reporting by explicitly designating the DCO as the reporting party for clearing swaps.183 ISDA noted a potential inconsistency between reporting obligations under parts 43 and 45 for clearing swaps, as DCOs are not included in the hierarchy under § 43.3 for determining reporting party of real-time reporting.184 ISDA suggested that this could result in duplicative reporting obligations for DCOs and clearing members in situations where a clearing swap does not replace an original swap. EEI/EPSA requested that the Commission not remove, as proposed, the provisions in §§ 45.8(d)(1) and (f)(1), which currently require the counterparties to select the reporting party, where the swap is executed on a SEF or DCM and both counterparties have the same SD, MSP or financial entity status.185 The commenter requested that the provisions be left in place because the proposed rule did not set out how the reporting party would be determined. ITV argued that the reporting hierarchy in existing §§ 45.8(c) and (e), when applied to uncleared swaps between end-users, particularly in the commodity asset class, can preclude end-users from negotiating between themselves who the reporting party would be.186 This may result in the selection of a reporting party who has less technical infrastructure than the non-reporting counterparty.187 ISDA recommended that the Commission encourage SEFs to adopt the ISDA asset class tie-breaker logic (the ‘‘ISDA RCP’’) for determining reporting party for onSEF swaps.188 Two commenters noted that, with the addition of proposed § 45.8(i) 183 See AIMA Oct. 30, 2015 Letter, at 6. ISDA Oct. 30, 2015 Letter, at 7. 185 See EEI/EPSA Oct. 30, 2015 Letter, at 4. 186 See ITV Oct. 30, 2015 Letter, at 4 and 6. 187 ITV also commented that it believes counterparties should be permit to select the reporting party for a swap when both counterparties are non-SD/MSPs, regardless of financial entity status or U.S. person status. See ITV Oct. 30, 2015 Letter, at 4. 188 See ISDA Oct. 30, 2015 Letter, at 7. 184 See E:\FR\FM\27JNR2.SGM 27JNR2 41752 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 addressing the reporting of clearing swaps, the phrase ‘‘or is cleared by a derivatives clearing organization’’ in § 45.8(f) would become inapplicable.189 The commenters recommended that the Commission remove this clause from existing § 45.8(f). 4. Final Rule Text of § 45.8 For the reasons expressed more fully below, the Commission has decided to adopt the amendments to § 45.8 as proposed. The Commission has considered ISDA’s comment that the inclusion of DCOs in the part 45 reporting hierarchy could create inconsistencies between part 43 and part 45 reporting obligations for clearing swaps that do not replace original swaps. Existing § 43.3(a)(3) sets out the reporting hierarchy for real-time reporting of off-facility swaps. DCOs are not included in this hierarchy, but the hierarchy is applicable unless otherwise agreed to by the parties prior to the execution of the publicly reportable swap transaction.190 To the extent that clearing swaps are reportable events under part 43, the Commission notes that DCOs and their clearing members could agree that the DCO should be the reporting party for part 43 purposes pursuant to the ‘‘unless otherwise agreed’’ clause of § 43.3(a)(3). It is only if the DCO and its clearing member did not so agree would the clearing member have part 43 reporting obligations for some clearing swaps pursuant to the reporting hierarchy under § 43.3. The Commission therefore declines in this rule release to include DCOs in the part 43 real-time reporting hierarchy. The Commission has also considered comments from EEI/EPSA and ITV regarding the removal of provisions in §§ 45.8(d)(1) and (f)(1) governing the selection of reporting parties for swaps executed on SEFs and DCMs. As was explained in the preamble to the NPRM, the Commission proposed to remove these provisions to help preserve parties’ anonymity on SEFs and DCMs, in particular for swaps cleared through a straight-through-processing mechanism.191 SEFs have adopted various formulas to determine who will be the reporting party when both counterparties have the same SD, MSP, financial entity, and U.S. Person status. These formulas will ensure that reporting parties are selected consistently. Therefore, the Commission is adopting amendments to §§ 45.9(d)(1) and (f)(1) as proposed. In addressing 189 See EEI/EPSA Oct. 30, 2015 Letter, at 4; CMC Oct. 30, 2015 Letter, at 3. 190 17 CFR 43.3(a)(3). 191 See 80 FR 52544, 52555. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 ISDA’s comment regarding the ISDA RCP, the Commission declines to adopt or impose any particular formula at this time for selecting the reporting party, instead leaving such determinations to the SEFs. The Commission has also considered EEI/EPSA’s and CMC’s comments regarding the continued inclusion of the phrase ‘‘or is cleared by a derivatives clearing organization’’ in § 45.8(f). The Commission notes that existing § 45.8(f) addresses reporting hierarchy for certain categories of reportable swaps executed between two non-U.S. Persons; one category of such reportable swaps is a swap cleared through a DCO. The Commission notes that the swap ‘‘cleared by a derivatives clearing organization’’ in this provision relates to the original swap between the original counterparties, and not the clearing swaps with the DCO. The Commission is adopting § 45.8(f) as proposed, with the continued inclusion of the phrase ‘‘cleared by a derivatives clearing organization.’’ F. Reporting to a Single Swap Data Repository—Amendments to § 45.10 1. Existing § 45.10 Existing § 45.10 requires ‘‘all swap data for a given swap’’ to be reported to a single SDR, which must be the same SDR to which creation data for that swap is first reported. The time and manner in which such data must be reported to a single SDR depends on whether the swap is executed on a SEF or DCM,192 executed off-facility with an SD/MSP reporting counterparty,193 or executed off-facility with a non-SD/MSP reporting counterparty.194 Currently, § 45.10(b) and (c) also provide circumstances in which a reporting counterparty is excused from reporting PET data to an SDR because the swap is accepted for clearing by a DCO before the applicable reporting deadline. 2. Proposed Amendments to § 45.10 In order to further clarify that ‘‘all swap data for a given swap’’ encompasses all swap data required to be reported pursuant to parts 43 and 45 of the Commission’s regulations, the Commission proposed to add language to this effect to paragraphs (a) through (c) and to the introductory language of § 45.10.195 This proposed additional language would clarify the existing requirement that registered entities and reporting counterparties must provide all swap data required under parts 43 192 See 17 CFR 45.10(a). 17 CFR 45.10(b) 194 See 17 CFR 45.10(c). 195 See 80 FR 52544, 52555–56. 193 See PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 and 45 to a single SDR for a given swap.196 The Commission also proposed to remove § 45.10(b)(2) and (c)(2),197 which are no longer applicable because they reference provisions in § 45.3(b)(1), (c)(1)(i), and (c)(2)(i) that, as discussed above, the Commission proposed to remove.198 Additionally, the Commission proposed to add new § 45.10(d), which would govern clearing swaps and would establish explicit requirements that DCOs report all required swap creation data and all required swap continuation data for each clearing swap to a single SDR.199 Specifically, proposed § 45.10(d)(1) would require a DCO to report all required swap creation data for a particular clearing swap to a single SDR. As proposed, § 45.10(d)(1) would also require the DCO to transmit the LEI of the SDR to which it reported the required swap creation data for each clearing swap to the counterparty of each clearing swap, as soon as technologically practicable after either acceptance of the original swap by the DCO for clearing or execution of a clearing swap that does not replace an original swap.200 As proposed, § 45.10(d)(2) would require a DCO to report all required swap creation data and all required swap continuation data for a particular clearing swap to the same SDR that received the initial swap creation data for the clearing swap required by § 45.10(d)(1). In the event there are two or more clearing swaps that replace a particular original swap, and in the event there are equal and opposite clearing swaps that are created upon execution of the same transaction and that do not replace an original swap, proposed § 45.10(d)(3) would require the DCO to report all required swap creation and continuation data for each such clearing swap to a single SDR.201 196 The Commission also proposed to repeat the language ‘‘Off-facility swaps with a swap dealer or major swap participant reporting counterparty’’ from the title of § 45.10(b) in the body of that regulation to make clear that the requirement pertains to off-facility swaps with an SD or MSP. 197 The Commission also proposed conforming amendments to § 45.10 to renumber paragraph (b)(3) as (b)(2), paragraph (c)(3) as (c)(2), and paragraph (c)(4) as (c)(3). The Commission also proposed to remove a reference to § 45.10(c)(2) from existing § 45.10(c)(4) because the Commission proposed to remove § 45.10(c)(2). 198 See Section II.B.2.ii, supra. 199 See 80 FR 52544, 52555–56. 200 See 80 FR 52544, 52555–56. 201 The Commission notes that proposed § 45.10(d)(3) would require any equal and opposite clearing swaps, including those resulting from the operation of § 39.12(b)(6) of the Commission’s regulations, to be reported to a single SDR, regardless of whether such clearing swaps replaced an original swap. E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations Accordingly, all required creation and continuation data for all clearing swaps that can be traced back to the same original swap (and for all equal and opposite clearing swaps that are created upon execution of the same transaction but that do not replace an original swap) will be reported to a single SDR. The Commission noted in its proposal that by operation of proposed new § 45.8(i) and (j) and proposed § 45.3(e), there may be scenarios in which the SEF/DCM or reporting counterparty reports required swap creation data for the swap that became the original swap to one SDR, and the DCO reports required swap creation data for the clearing swaps that replace the original swap to a different SDR.202 The Commission proposed to require that all swap data for the clearing swaps that can be traced back to the same original swap be reported to the same SDR, but did not require that the clearing swaps be reported to the same SDR as the original swap.203 The Commission included in the NPRM the following example to illustrate the application of proposed § 45.10: 204 Swap 1 is intended to be submitted to a DCO for clearing and executed on or pursuant to the rules of a SEF. The SEF reports all required creation data for such swap to registered SDR A pursuant to § 45.3(a), which was selected by the SEF pursuant to proposed § 45.3(j)(1), and submits the swap to the DCO for clearing. Upon acceptance of Swap 1 for clearing, the DCO extinguishes Swap 1 and replaces it with Swap 2 and Swap 3, both of which are clearing swaps. Swap 1 is now an original swap. Proposed § 45.4(c) would require the DCO to report the termination of Swap 1 to SDR A,205 reflecting that Swap 1, now an original swap, has been terminated through clearing novation.206 The DCO would also report all required swap creation data for clearing Swap 2 to a single SDR of its choice (say, for example, SDR B) pursuant to proposed §§ 45.3(e) and (j)(2), and 45.10(d).207 Similarly, the DCO would be required to report all required swap creation data for clearing Swap 3 to a single SDR, in this case SDR 202 See 80 FR 52556. id. 204 See 80 FR 52544, 52556. 205 Pursuant to proposed § 45.10(a)(2), (b)(2), and (c)(3), continuation data for original swaps must be reported to the SDR where the first report of required swap creation data was made for the swap. 206 Pursuant to existing § 45.13(b), the DCO shall use the facilities, methods, or data standards provided or required by SDR A. 17 CFR 45.13(b). 207 The Commission notes that pursuant to proposed §§ 45.10(a)–(d), the DCO in this example could select an SDR other than SDR A. mstockstill on DSK3G9T082PROD with RULES2 203 See VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 B. Pursuant to proposed § 45.10(d)(3), the DCO would be required to report all required swap creation data for clearing Swap 2 and clearing Swap 3 to the same SDR (SDR B) because Swap 2 and Swap 3 replaced Swap 1. Thereafter, proposed § 45.10(d)(2) would require the DCO to report all required swap creation data and continuation data to the SDR where the first report of required swap creation data for both clearing Swap 2 and clearing Swap 3 was made (SDR B). 3. Comments Received The Commission received three comments addressing its proposed amendments to § 45.10.208 AIMA supported the Commission’s proposal clarifying that the DCO is obligated to report creation and continuation data for clearing swaps to a single SDR.209 ISDA opposed the requirement in proposed § 45.10(d)(1) that a DCO transmit to the counterparties of clearing swaps the LEI of the SDR to which the clearing swaps were reported.210 ISDA doubted the value of such information for the clearing swap counterparties, and opined that counterparties are unlikely to build mechanisms to retain such information on a transactional basis.211 ISDA also noted that a DCO would be separately required to send a termination of the original swap to the original swap’s SDR, and this report would include the LEI of the SDR to which the clearing swaps are reported, making a report of such data to the counterparties redundant.212 DTCC opposed the provision in proposed § 45.10(d)(1) that would allow a DCO to select the SDR for reporting clearing swaps, instead arguing that clearing swaps should be reported to the same SDR as the original swap.213 DTCC argued that such reporting would create data fragmentation between the original swap and related clearing swaps. 4. Final Rule Text of § 45.10 Having considered all of the comments relating to the purpose and scope of the proposed amendments to § 45.10, including amendments to §§ 45.10(a) through (c) and new § 45.10(d), the Commission is adopting amended § 45.10 as proposed. The requirements for DCOs demonstrated in the above example and contained in 208 An additional comment letter addressed the issue of ‘‘portability’’ of swaps reporting between SDRs. See ITV Oct. 30, 2015 Letter, at 3–4. The portability issue is beyond the scope of the NPRM. 209 See AIMA Oct. 30, 2015 Letter, at 7. 210 See ISDA Oct. 30, 2015 Letter, at 8. 211 Id. 212 Id. 213 See DTCC Oct. 30, 2015 Letter, at 6. PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 41753 proposed § 45.10(d)(1) and (2) are consistent with the existing requirements for SEFs, DCMs, and other reporting counterparties under current § 45.10. By requiring that all swap data for each clearing swap be reported to a single SDR, proposed §§ 45.10(d)(1) and (2) further the Commission’s stated purpose in creating § 45.10, and part 45 generally, of reducing fragmentation of data for a given swap across multiple SDRs.214 The proposed requirement in §§ 45.10(d)(3) that the DCO report to a single SDR all swap data for each clearing swap that can be traced back to the same original swap also supports the goal of avoiding fragmentation of swap data. Though clearing swaps are new individual swaps, all clearing swaps that issue from the same original swap are component parts of a cleared swap transaction. Fragmentation among clearing swaps would needlessly impair the ability of the Commission and other regulators to view or aggregate all the data concerning the related clearing swaps. While proposed § 45.10 ensures that each swap comprising a cleared swap transaction is reported to a single SDR, the Commission notes DTCC’s comments on data fragmentation where original swaps are reported to different SDRs than their resulting clearing swaps. However, as long as DCOs properly identify the original swap’s USI and SDR in reports on clearing swaps, and report clearing swaps’ USIs and SDR in terminations of the original swaps, the Commission believes it will be able to reconcile those transactions when performing risk and other analysis. As discussed in Section II.C.4.iii above, the Commission has considered various alternatives to the adopted rules. The Commission believes that the adopted amendments will provide the Commission with the information it needs to perform its regulatory obligations while minimizing 214 See, e.g., Final Part 45 Rulemaking, 77 FR 2136, 2139 (‘‘To avoid fragmentation of data for a given swap across multiple SDRs, the [Notice of Proposed Rulemaking] [for part 45] would require that all data for a particular swap must be reported to the same SDR.’’); at 2143 (‘‘First, in order to prevent fragmentation of data for a single swap across multiple SDRs, which would seriously impair the ability of the Commission and other regulators to view or aggregate all of the data concerning the swap, the proposed rule provided that, once an initial data report concerning a swap is made to an SDR, all data reported for that swap thereafter must be reported to the same SDR.’’); and at 2168 (‘‘The Commission believes the important regulatory purposes of the Dodd-Frank Act would be frustrated, and that regulators’ ability to see necessary information concerning swaps could be impeded, if data concerning a given swap was spread over multiple SDRs.’’). E:\FR\FM\27JNR2.SGM 27JNR2 41754 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations costs to market participants, SDRs, and DCOs. In response to ISDA’s comment that counterparties were unlikely to build mechanisms to retain information on the SDR to which clearing swaps were reported, the Commission believes that all swaps counterparties should be aware of the SDR to which their swaps are reported. The Commission notes that under existing § 45.14(b) non-reporting parties to swaps have obligations to correct any errors or omissions in swaps data of which they become aware. G. Examples of Cleared Swap Reporting Workflows Under the Adopted Revisions The following examples demonstrate the manner in which the adopted revisions and additions to part 45 rules would operate in hypothetical scenarios involving: (1) An off-facility swap not subject to the clearing requirement with an SD/MSP reporting counterparty; and (2) a swap executed on or pursuant to the rules of a SEF or DCM. All references to part 45 appearing in the following examples refer to the rules as adopted in this release. These examples are provided only for illustrative purposes to demonstrate the applicability of certain rules adopted in this release in hypothetical scenarios. The examples are not intended to dictate any aspect of compliance, reporting or other related processes and are not intended to cover all possible reporting circumstances. mstockstill on DSK3G9T082PROD with RULES2 1. Off-Facility Swap Not Subject to the Clearing Requirement With SD/MSP Reporting Counterparty An off-facility swap that is not subject to the clearing requirement is executed with an SD reporting counterparty. The SD generates and assigns a USI for the swap pursuant to § 45.5(b) and reports all required swap creation data for the swap to SDR A pursuant to § 45.3(c). The SD submits the swap to a DCO for clearing and, pursuant to § 45.10(b), transmits to the DCO, at the time the swap is submitted for clearing, the identity of SDR A and the USI for the swap. The DCO accepts the swap for clearing, extinguishing it and replacing it with clearing swaps; the swap that was submitted for clearing is now an original swap. The DCO generates and assigns a USI to each clearing swap pursuant to § 45.5(d) and, pursuant to § 45.3(e), reports all required swap creation data for the clearing swaps, including the original swap USI and all additional data fields applicable to VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 clearing swaps,215 to SDR B, which the DCO in this example selected pursuant to § 45.3(j)(2). Pursuant to § 45.4(c), the DCO would report continuation data for the original swap, including the original swap termination notice, to SDR A using either the life cycle or state data methods, and using the facilities, methods, or data standards provided or required by SDR A.216 In addition to all other necessary continuation data, original swap continuation data reported by the DCO, including the original swap termination notice, would also include: The LEI of SDR B (the SDR to which creation data for each clearing swap that replaced the particular original swap was reported); 217 the USI of the original swap as transmitted to the DCO by the SD at the time the swap was submitted for clearing; and the USI for each clearing swap. The DCO would also transmit to each counterparty to the clearing swaps, as soon as technologically practicable after acceptance for clearing, the USI of each clearing swap pursuant to § 45.5(d)(2) and the LEI of the SDR to which the clearing swap was reported pursuant to § 45.10(d)(1). The DCO would have no further continuation data reporting obligations with respect to the original swap thereafter. However, the Commission notes that pursuant to § 45.14, registered entities and counterparties required to report swap data to an SDR must report any known errors and omissions in the data reported.218 Additionally, non215 Modifications to appendix 1 would require that PET data include the original swap USI and all data categories and fields applicable to clearing swaps. See infra, Section II.H.3. 216 See 17 CFR 45.13(b). 217 The Commission notes that the amended § 45.4(c)(2)(i) requirement that the DCO include the LEI of the SDR to which all required swap creation data for each clearing swap was reported by the DCO applies whether or not swap data for the original and clearing swaps is reported to the same SDR or to different SDRs. The Commission expects that this information will be useful for regulators with respect to their review of data pertaining to cleared swap transactions, and to SDRs with respect to their processing of swap data received, even when the original and clearing swaps reside in the same SDR. 218 While the DCO would have no additional continuation data reporting requirement with respect to the original swap after reporting the termination upon acceptance for clearing, the DCO remains obligated under § 45.14 to correct errors and omissions in the data reported by the DCO, including the termination notice. For example, if a swap is submitted to, and accepted by, a DCO for clearing, the DCO would report the termination notice of the original swap to the SDR to which the creation data for the original swap was reported. After submission of the termination notice to the SDR, if the DCO should become aware of an error or omission in the termination notice, the DCO is required, pursuant to § 45.14, to correct any errors and omissions in the data so reported as soon as PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 reporting counterparties are required to notify the reporting counterparty of such errors or omissions.219 Finally, pursuant to § 49.10(a), SDR A would be required to accept and record any original swap continuation data, including the original swap termination. 2. Swaps Executed on or Pursuant to the Rules of a SEF or DCM A swap is executed on or pursuant to the rules of a SEF or DCM. The SEF/ DCM generates and assigns a USI for the swap pursuant to § 45.5(a) and reports all required swap creation data to SDR A pursuant to § 45.3(a). The SEF/DCM submits the swap to a DCO for clearing and, pursuant to § 45.10(a), transmits to the DCO, at the time the swap is submitted for clearing, the identity of SDR A and the USI for the swap. The DCO accepts the swap for clearing, extinguishing it and replacing it with clearing swaps; the swap that was submitted for clearing is now an original swap. Under §§ 45.5(d) and 45.3(e), the DCO would generate and assign a USI to each clearing swap and report all required swap creation data, including the original swap USI and all additional data fields applicable to clearing swaps, for the clearing swaps to registered SDR A, which, in this example, the DCO selected pursuant to § 45.3(j)(2).220 Pursuant to § 45.4(c), the DCO would report continuation data for the original swap, including the original swap termination notice, to SDR A using either the life cycle or state data methods, and using the facilities, methods, or data standards provided or required by SDR A. Such continuation data would include the LEI of SDR A (the SDR to which creation data for each clearing swap that replaced the particular original swap was reported), the USI of the original swap as transmitted to the DCO by the SEF/DCM at the time the swap was submitted for clearing, and the USI for each clearing swap. The DCO would also transmit to each counterparty to the clearing swaps, as soon as technologically practicable after is technologically practicable after discovery of such errors or omissions. Likewise, all reporting entities and swap counterparties also remain obligated under § 45.14 to correct errors and omissions in all data reported by or on behalf of each entity and swap counterparty to an SDR. 219 Pursuant to § 45.14(b), if a counterparty to a swap that is not the reporting counterparty as determined by § 45.8 discovers any error or omission with respect to the continuation data, including termination notice of the original swap, such non-reporting counterparty is required to notify the DCO of each such error or omission. 220 Pursuant to § 45.3(j)(2), the DCO could have selected SDR B. E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations acceptance for clearing, the USI of each clearing swap pursuant to § 45.5(d)(2) and the LEI of the SDR to which the clearing swap was reported pursuant to § 45.10(d)(1). The DCO would have no further continuation data reporting obligations with respect to the original swap thereafter. However, the Commission notes that pursuant to § 45.14, registered entities and counterparties required to report swap data to an SDR must report any known errors and omissions in the data reported. Additionally, nonreporting counterparties are also required to notify the reporting counterparty of such errors or omissions.221 Finally, pursuant to § 49.10(a), SDR A would be required to accept and record the original swap termination. H. Primary Economic Terms Data— Amendments to Appendix 1 to Part 45—Tables of Minimum Primary Economic Terms The Commission’s existing lists of minimum primary economic terms for swaps in each swap asset class are found in tables in Exhibits A–D of appendix 1 to part 45. Those tables include data elements that reflect generic economic terms and conditions common to most standardized products. They reflect the fact that PET data captures a swap’s basic nature and essential economic terms, and are provided in order to ensure to the extent possible that all such essential terms, where applicable, are included when required primary economic terms are reported for each swap. 1. Proposed Amendments and Additions to Primary Economic Data Fields The Commission proposed the following revisions to Exhibits A–D of appendix 1, each of which is discussed in greater detail below: (1) Modifications to existing PET data fields; (2) the addition of three new PET data fields applicable to all reporting entities for all swaps; and (3) the addition of a number of new data fields that must be reported by DCOs for clearing swaps.222 221 See notes 220–221, supra. Commission also proposes to revise each of the data categories and fields that reference the clearing requirement exception in CEA section 2(h)(7) to reflect that exceptions to, and exemptions from, the clearing requirement, including the clearing requirement exception in CEA section 2(h)(7), are set forth under part 50 of the Commission’s regulations. Additionally, the Commission is making non-substantive edits to the following fields in Exhibits A–D: Asset class; For a multi-asset class swap, an indication of the primary asset class; For a multi-asset class swap, an mstockstill on DSK3G9T082PROD with RULES2 222 The VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 i. Proposed Modifications to Existing PET Data Fields The Commission proposed clarifying and conforming changes and minor corrective modifications to the following existing PET data fields: 223 • The Unique Swap Identifier for the swap—The Commission proposed to remove the explanatory note in the Comment section to this data field in Exhibits A–D. The explanatory note is no longer necessary because under proposed § 45.5(d), the DCO would create the USI for each clearing swap. • PET data fields that utilize a LEI 224—The Commission proposed conforming changes to the Comment sections to data fields in Exhibits A–D that utilize the LEI to reflect that the CFTC has designated an LEI system 225 and to reflect that a substitute identifier may be reported for natural person swap counterparties. • If no CFTC-approved LEI for the non-reporting counterparty is yet available, the internal identifier for the non-reporting counterparty used by the swap data repository—The Commission proposed to remove this data field in each of the Exhibits. As noted above, the CFTC has designated an LEI, and these PET data fields are no longer applicable. • For a mixed swap reported to two non-dually-registered swap data repositories, the identity of the other swap data repository (if any) to which the swap is or will be reported—The Commission proposed to add an explanatory note to the Comment section for this data field in Exhibits A– D providing that the field value is the LEI of the other SDR to which the swap is or will be reported. • Block trade indicator—The Commission proposed to modify the Comment section to this data field in indication of the secondary asset class(es); and to the Clearing member client account field in Exhibits C and D. 223 See 80 FR 52544, 52558. 224 These include the following fields in Exhibits A–D: The Legal Entity Identifier of the reporting counterparty; If the swap will be allocated, or is a post-allocation swap, the Legal Entity Identifier of the agent; The Legal Entity Identifier of the nonreporting party; Clearing venue; The identity of the counterparty electing an exception or exemption to the clearing requirement under Part 50 of this chapter (formerly The identity of the counterparty electing the clearing requirement exception in CEA section 2(h)(7)); Exhibit A: An indication of the counterparty purchasing protection; An indication of the counterparty selling protection; Information identifying the reference entity; Exhibit D: Buyer, Seller. 225 The explanatory notes discussing a situation where no CFTC designated LEI is yet available are no longer applicable. See generally Order Extending the Designation of the Provider of Legal Entity Identifiers To Be Used in Recordkeeping and Swap Data Reporting Pursuant to the Commission’s Regulations, 80 FR 44078 (Jul. 24, 2015). PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 41755 Exhibits A–D to reflect that the CFTC has issued a final rulemaking regarding Procedures To Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades.226 • Execution venue—The Commission proposed to modify the explanatory note in the Comment section to this data field in Exhibits A–D to reflect that the CFTC has designated an LEI system and to require the reporting of only the LEI of the SEF or DCM for swaps executed on or pursuant to the rules of a SEF or DCM. • Clearing indicator—The Commission proposed modifications to the explanatory note in the Comment section to this data field in Exhibits A– D to provide for the reporting of a Yes/ No indication of whether the swap will be submitted for clearing to a DCO. • Clearing venue—The Commission proposed modifications to the Comment section of this data field in Exhibits A– D to provide for the reporting of only the LEI of the derivatives clearing organization. ii. Proposed Addition of New PET Data Fields Applicable to All Reporting Entities for All Swaps The Commission proposed to add to Exhibits A–D the following new PET fields which would be applicable to all reporting entities for all swaps: 227 • Asset class—This data field would provide the specific asset class for the swap. Field values: Credit, equity, FX, interest rates and other commodities. • An indication of whether the reporting counterparty is a derivatives clearing organization with respect to the swap. • Clearing exception or exemption type—This field would provide the type of clearing exception or exemption being claimed. Field values: End user, Inter-affiliate or Cooperative. iii. Proposed Addition of New PET Data Fields Applicable to DCOs for Clearing Swaps The Commission also proposed to modify Exhibits A–D in order to add new PET fields specifically to be reported by DCOs for clearing swaps.228 The proposed data fields that must be reported by DCOs for clearing swaps include the following: • Clearing swap USIs—This data field would provide the USI for each clearing swap that replaces the original swap, 226 See, generally, Procedures To Establish Appropriate Minimum Block Sizes for Large Notional Off-Facility Swaps and Block Trades, Final Rule, 78 FR 32866 (May 31, 2013). 227 See 80 FR 52544, 52558–59. 228 See 80 FR 52544, 52559. E:\FR\FM\27JNR2.SGM 27JNR2 41756 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations other than the USI for which the PET data is currently being reported. • Original swap USI—This data field would provide the USI for the original swap that was replaced by clearing swaps.229 • Original swap SDR—This data field would provide the LEI of the SDR to which the original swap was reported.230 • Clearing member LEI—This data field would provide the LEI of the clearing member. • Clearing member client account— This data field would provide the account number for the client, if applicable, of the clearing member. • Origin (house or customer)—This data field would provide information regarding whether the clearing member acted as principal for a house trade or agent for a customer trade. • Clearing receipt timestamp—This data field would provide the date and time at which the DCO received the original swap that was submitted for clearing. • Clearing acceptance timestamp— This data field would provide the date and time at which the DCO accepted the original swap that was submitted for clearing. 3. Comments Received i. General Comments mstockstill on DSK3G9T082PROD with RULES2 Eurex commented that there are no additional fields for clearing swaps beyond those proposed which are necessary to understand a clearing swap or the mechanics of the clearing process.231 JBA cautioned that the definitions used in the markets are not always consistent with those proposed by the NPRM, which places a significant burden on small-sized market participants.232 JBA also noted potential difficulties in reporting hybrid instruments because swaps with multiple underlying assets may have their own market conventions that do not fall under the categories in the proposed rules.233 Several commenters addressed how PET data fields can operate in the context of agency and principal clearing models. LCH recommended that the Commission require a PET data field indicating if a swap is cleared following 229 See also §§ 45.10(a)(1), (b)(1)(iii), (b)(2)(ii), (c)(1)(iii), (c)(2)(ii), and (c)(3) (requiring entities with reporting obligations to transmit to the DCO for swaps submitted for clearing ‘‘the identity of the swap data repository to which required swap creation data is reported’’ and the USI for the swap). 230 Id. 231 See Eurex Oct. 30, 2015 Letter, at 8. 232 See JBA Oct. 30, 2015 Letter, at 2–3. 233 See JBA Oct. 30, 2015 Letter, at 3. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 an agency or principal model.234 ISDA recommended combining the ‘‘Clearing indicator’’ and ‘‘Origin (house or customer)’’ fields into a single ‘‘Cleared’’ field with four possible values—not cleared, intended to be cleared, cleared (principal), and cleared (agency).235 ISDA commented that the current reporting system results in DCOs reporting principal cleared trades in a manner designed for agency clearing model. ISDA commented that this is at odds with European Union requirements and may result in data reported to multiple jurisdictions that is not reconcilable.236 Eurex commented that, in the principal model, the DCO may not know the identity of the clearing member’s client; if the DCO is required to report that client’s identity, it would be necessary for anyone trading part 45 reportable swaps to possess an LEI.237 LCH commented that the ‘‘Original swap USI,’’ ‘‘Original swap SDR,’’ and ‘‘Clearing member client account’’ PET fields for clearing swaps should only be required ‘‘if applicable.’’ 238 ii. Comments on Specific Proposed PET Fields 239 ISDA supported the proposed modification of the clearing venue and execution venue PET fields to require the submission of an LEI for such venues.240 ISDA also supported the addition of the ‘‘Asset class’’ PET data field for all swaps.241 ISDA also commented on the removal of internal counterparty identifiers as a valid submission for various counterparty identification fields, noting that not all global regulators require swap counterparties to obtain LEIs.242 ISDA requested that the Commission continue to work with global regulators to ensure uniform adoption of the LEI standard across jurisdictions. ISDA commented that the PET field for ‘‘Block trade indicator’’ should be removed rather than amended because block trade status only affects part 43 reporting.243 ISDA questioned the value that block trade status would provide the Commission when evaluating swap 234 See LCH Oct. 30, 2015 Letter, at 4. ISDA Oct. 30, 2015 Letter, at 9–10. 236 See ISDA Oct. 30, 2015 Letter, at 11. 237 See Eurex Oct. 30, 2015 Letter, at 8. 238 See LCH Oct. 30, 2015 Letter, at 4. 239 DTCC also commented on the proposed PET field for ‘‘Clearing swap USIs,’’ ‘‘Original swap USIs,’’ and ‘‘Original swap SDRs.’’ See DTCC Oct. 30, 2015 Letter, at 8–9. These comments are addressed in the discussions on proposed revisions to §§ 45.5 and 45.8, supra Sections II.D and II.E. 240 See ISDA Oct. 30, 2015 Letter, at 8. 241 See id. at 9. 242 See id., at 8. 243 See id. at 8. 235 See PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 data.244 Further, block trade status may change over the life of a swap and there is no guidance in part 43 or part 45 on how to deal with such changes.245 Finally, ISDA commented on the proposed ‘‘Clearing exception or exemption type’’ PET field, which would require the reporting party to identify the clearing exception or exemption exercised for a particular swap.246 ISDA commented that it could be challenging and costly for firms to implement this change, while providing duplicative information because exemption elections must already be provided to SDRs.247 ISDA recommended that the ‘‘Clearing exception or exemption type’’ PET field acceptable values be limited to ‘‘interaffiliate’’ and ‘‘other,’’ because interaffiliate trades can be identified under existing reporting standards. 4. Final Rule Text Having considered the comments provided in response to the NPRM, the Commission is adopting the revisions to Appendix 1 of part 45 as proposed.248 In response to the IDWG Request for Comment, some commenters argued that the Commission should not require additional data fields for reporting and should reduce the number of fields currently required.249 The Commission explained in the NPRM that the proposed modifications to existing PET data fields will add clarity to the current reporting requirements. In regards to the additional fields, the NPRM explained that the new fields will require the reporting of information that is essential to the efficient operation of reporting of 244 See id. at 8. id. at 8. 246 See id. at 9. 247 See id. at 9. 248 The Commission has also noted ITV’s comment requesting the addition of an indicator that a swap was part of a package transaction. See ITV Oct. 30, 2015 Letter, at 3. While this comment is beyond the scope of the NPRM, the Commission would note that the Technical Specifications Request for Comment solicits input on this topic. 249 See CMC May 27, 2014 Letter, at 3 (recommending that the Commission reduce the number and complexity of data fields required to improve data reporting); CME letter at 17–19 (providing recommendations on modification for specific data fields and arguing against requiring certain additional reporting); DTCC May 27, 2014 Letter, at 3, appendix at 15 (suggesting that the Commission consider whether requiring fewer data elements would better enable the Commission and other regulators to fulfill their regulatory obligations); International Energy Credit Association May 27, 2014 Letter, at 5–6 (arguing that existing swap data reporting requirements do not need to be expanded and that data reporting would be improved by reducing the current reporting burden); Swiss Re May 27, 2014 Letter, at 5 (describing reporting difficulties for specific data fields). 245 See E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 the swaps involved in a cleared swap transaction.250 Regarding the proposed PET fields for clearing swaps, as noted in the NPRM, the Commission believes such data elements would more accurately capture the additional, unique features of clearing swaps that are not relevant to uncleared swaps.251 The Commission has noted the number of comments addressing the issue of reporting swaps cleared under the principal, as opposed to agency, model of clearing. In particular, the Commission has reviewed ISDA’s comment on combining the ‘‘Clearing indicator’’ and ‘‘Origin (house or customer)’’ fields. While the Commission is adopting those fields as proposed, the Commission would note that in the Technical Specifications Request for Comment, the Commission solicited input on a potential data element indicating agency versus principal clearing model, and on reporting package transactions.252 The Commission notes LCH’s comment that certain PET data elements should only be reported ‘‘if applicable.’’ The Commission notes that appendix 1 to part 45 states that reporting parties should ‘‘[e]nter N/A for fields that are not applicable,’’ which is repeated in the header to every column in appendix 1. To ensure that reported swap data is complete, the Commission would reiterate that any PET data field that is not applicable to a particular swap should be marked ‘‘N/A’’ and not left blank. Otherwise, the Commission cannot determine if a field is inapplicable or if an applicable data element is missing. The Commission declines to remove the ‘‘Block trade indicator’’ as requested by ISDA because this indicator is necessary for a proper review of market activity for surveillance and enforcement purposes. The Commission would note that block trade status is most relevant for part 43 real-time reporting purposes. Therefore, in response to ISDA’s request for guidance, the Commission would note that a swap’s block trade status should be determined as of the time of execution; subsequent changes to notional amounts should not impact whether the swap met the block trade threshold originally. As for the ‘‘Clearing exception or exemption type’’ PET field, the Commission has noted ISDA’s comment 250 See 80 FR 52544, 52559. 80 FR 52544, 52559. 252 See Draft Technical Specifications for Certain Swap Data Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/ groups/public/@newsroom/documents/file/ specificationsswapdata122215.pdf. (‘‘Technical Specifications Request for Comment’’). 251 See VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 that this field may be difficult to implement. However, the Commission believes that additional PET fields indicating clearing exception and exemption type are necessary for the Commission to track compliance with Commission regulation § 50.50. While reporting counterparties are required under existing § 50.50(b) to provide clearing exemption election forms with SDRs, the existing swaps data reporting rules do not require that the reporting counterparty indicate that such clearing exemption was elected for a particular swap. Without such information provided as part of transaction-specific swaps data, the Commission is unable to determine which counterparties are relying on an exemption and how often such elections are being made.253 This additional PET field will aid the Commission in tracking compliance with the clearing mandate by providing transaction specific information on why certain swaps were uncleared. The asset class data field will assist the Commission in identifying the asset class for swaps reported to registered SDRs pursuant to part 45. The indication of whether the reporting counterparty is a DCO with respect to the swap data field is consistent with proposed § 45.8(i), which designates the DCO as the reporting counterparty for clearing swaps, and the existing PET data fields that require certain information related to the registration status of the counterparties to be included in PET data reporting. III. Related Matters A. Regulatory Flexibility Act The Regulatory Flexibility Act (‘‘RFA’’) requires federal agencies, in promulgating rules, to consider the impact of those rules on small entities.254 The rules proposed herein will have a direct effect on SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/ MSP counterparties who are counterparties to one or more swaps and subject to the Commission’s jurisdiction. The Commission has previously established certain definitions of ‘‘small entities’’ to be used by the Commission in evaluating the impact of its rules on small entities in accordance with the RFA.255 The Commission has previously determined that DCMs 256 and DCOs 257 are not small entities for the purpose of the RFA. The Commission has also previously proposed that SDRs, SEFs, SDs, and MSPs should not be considered to be small entities.258 The Final Part 45 Rulemaking and preceding proposal discussed how certain non-SD/MSP counterparties could be considered small entities in certain limited situations, but concluded that part 45 does not have a significant impact on a substantial number of small entities.259 The modifications to part 45 adopted herein do not affect that conclusion, or the reasoning behind it, and therefore the Commission does not believe that these adopted rules will have a significant economic impact on a substantial number of small entities. To the extent that this rulemaking has any significant impact on small entities, it removes some reporting obligations by explicitly putting the obligation to terminate original swaps on DCOs accepting those swaps. Therefore, the Chairman, on behalf of the Commission, pursuant to 5 U.S.C. 605(b), hereby certifies that the adopted rules will not have a significant economic impact on a substantial number of small entities. B. Paperwork Reduction Act The purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq. (‘‘PRA’’) are, among other things, to minimize the paperwork burden to the private sector, to ensure that any collection of information by a government agency is put to the greatest possible uses, and to minimize duplicative information collections across the government.260 The PRA applies to all information, regardless of form or format, whenever the government is obtaining, causing to be obtained, or soliciting information, and includes required disclosure to third parties or the public, of facts or opinions, when the information collection calls for answers to identical questions posed to, or identical reporting or recordkeeping requirements imposed on, ten or more persons.261 The 256 Id. 257 66 FR 45604, 45609, Aug. 29, 2001. Data Recordkeeping and Reporting, Notice of Proposed Rulemaking, (‘‘Part 45 NPRM’’) 75 FR 76574, 76595 (Dec. 8, 2010) (discussing why SDRs, SEFs, SDs, and MSPs should not be considered small entities). 259 Final Part 45 Rulemaking, 77 FR 2136, 2170– 71 (discussion for non-SD/MSP counterparties); Part 45 NPRM, 75 FR 76574, 76595 (discussion for non-SD/MSP counterparties). 260 See 44 U.S.C. 3501. 261 See 44 U.S.C. 3502. 258 Swap 253 As noted above, in addition to the end-user exception to the swap clearing requirement set forth in section 2(h)(7) of the CEA and codified in part 50 of the Commission’s regulations, the Commission has published two exemptions to the swap clearing requirement: The inter-affiliate exemption (§ 50.52) and the financial cooperative exemption (§ 50.51). 254 See 5 U.S.C. 601 et seq. 255 47 FR 18618, 18618–21, Apr. 30, 1982. PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 41757 E:\FR\FM\27JNR2.SGM 27JNR2 41758 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations PRA requirements have been determined to include not only mandatory but also voluntary information collections, and include both written and oral communications.262 Under 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 from the Office of Management and Budget (‘‘OMB’’). The OMB control number for the information collection associated with part 45 swaps reporting is 3038–0096.263 Because reporting entities under part 45 would also be required to report swaps pursuant to part 43, where applicable, some of the burden associated with swaps reporting under part 45 is covered in the information collection covering realtime swaps reporting pursuant to part 43.264 The Commission intends to amend existing collection 3038–0096 to account for adjustments to reporting entities’ swaps data reporting systems necessitated by this release. Information collection 3038–0096 265 includes an estimate of burden hours and costs associated with various requirements of part 45 swaps reporting and recordkeeping,266 including the reporting of creation data under § 45.3 and continuation data under § 45.4,267 262 See 5 CFR 1320.3(c)(1). NPRM improperly cited information collection 3038–0089, rather than 3038–0096, as the collection relating to swaps reporting under part 45. However, the NPRM’s discussion of what information is collected and the burden estimates for swaps reporting under part 45 correctly described collection 3038–0096, which is the basis of this PRA discussion. 264 See Information Collection 3038–0070; see also 77 FR 2136, 2174. (‘‘The Commission notes, however, that these burdens should not be considered additional to the costs of compliance with part 43, because the basic data reporting technology, processes, and personnel hours and expertise needed to fulfill the requirements of part 43 encompass both the data stream necessary for real-time public reporting and the creation data stream necessary for regulatory reporting.’’). 265 The Commission issued a notice of intent to renew information collection 3038–0096 on August 7, 2015. See Notice of Intent to Renew Collection 3038–0096, 80 FR 47477 (Aug. 7, 2015). The Commission received no comments on this notice of intent to renew. The comment file is available at http://comments.cftc.gov/PublicComments/ CommentList.aspx?id=1608. The Office of Management and Budget approved without change the renewal of this information collection on December 21, 2015. 266 Supporting documentation for the renewal of information collection 3038–0096 is available at http://www.reginfo.gov/public/do/ PRAViewDocument?ref_nbr=201508-3038-002. 267 ‘‘Creation data’’ under § 45.3 includes all PET data fields listed in appendix 1 to part 45, as well as all ‘‘confirmation data,’’ which includes all terms of the swap matched and agreed upon by the parties. ‘‘Continuation data’’ reporting under § 45.4 requires a reporting entity to ensure that all data on mstockstill on DSK3G9T082PROD with RULES2 263 The VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 the maintenance of an internal order management system (‘‘OMS’’), and personnel needed to maintain a compliance program in support of an OMS system. The intended amendment to the collection will add an estimate for the burden associated (a) with changing reporting systems to comply with changes to the required data to be reported under § 45.3 and § 45.4, and (b) with requirements that DCOs potentially connect to all registered SDRs. The Commission will be filing to update this information collection with OMB prior to the effective date of this release. This update will be publicly noticed and made available for comment in the Federal Register. The Commission received several comments on the costs associated with part 45 swaps reporting that could implicate PRA burdens.268 Regarding the addition of PET fields applicable to all swaps, ISDA commented that the PET field for ‘‘clearing exception or exemption type’’ would be ‘‘very challenging and costly’’ to implement.269 However, neither ISDA nor any other commenter provided information quantifying the cost to update reporting systems to account for the modified and additional PET fields. As discussed more extensively in Section III.C.9, the information required to be reported in the modified ‘‘clearing exception or exemption type’’ is also already in the possession of the reporting entity; changes to reporting systems required to report this field would involve adding a known piece of information to the message reported to an SDR. Regarding new PET fields for clearing swaps, Eurex commented that DCOs would need to collect data from the original swap counterparties or trading venue to be able to report these fields.270 The information required to report these PET fields is either a swap is kept current and accurate, including any changes to primary economic terms. 268 In addition, FSR requested that the Commission promulgate rules to standardize data elements. See FSR Oct. 30, 2015 Letter, at 4. While this comment would relate to the burden of reporting for part 45 purposes, it is beyond the scope of the NPRM. The Commission would note Commission staff’s efforts in connection with the Technical Specifications Request for Comment, discussed in n. 42. The Commission also received some comments suggesting that the Commission not require the reporting of intended-to-be-cleared original swaps, or require DCOs to report such swaps. See, e.g., CEWG Oct. 30, 2015 Letter, at 2– 3; CMC Oct. 30, 2015 Letter, at 2. While not requiring such reporting would reduce the burden on original swap reporting entities, the NPRM and adopted amendments to part 45 do not change the existing requirement to report such swaps. Therefore, this comment is beyond the scope of the NPRM. See, supra, Section II.B.4.iii. 269 ISDA Oct. 30, 2015 Letter, at 9. 270 See Eurex Oct. 30, 2015 Letter, at 5. PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 generated by the DCO itself (such as clearing swap USI, clearing member LEI, clearing member internal identifier, house/customer account flag, and receipt and clearing timestamps) or should be included in the clearing member’s submission of a swap to the DCO for clearing (such as the original swap USI and original swap SDR). While the Commission believes that reporting entities already possess information required to report the added and amended PET fields, the Commission intends to amend collection 3038–0096 to account for changes that reporting entities must make to their reporting systems to comply with these new and amended fields. Some commenters raised concerns that requiring DCOs to report continuation data for original swaps to the SDR to which the original swap was reported could increase costs for DCOs as they may need to connect to SDRs to which they do not currently have a connection.271 The Commission understands that DCOs already may report terminations to the original SDR, and to the extent these reporting systems are already implemented the new rules will not introduce additional costs for these DCOs. Moreover, the costs of additional SDR connections that may not yet be in place are addressed by the Commission more fully below at III.C.5. However, the Commission recognizes that requiring DCOs to potentially connect to more than one SDR in order to report continuation data for original swaps may require an update to the existing information collection 3038–0096. The Commission will be filing to update this information collection with OMB prior to the effective date of this release. This update will be publicly noticed and made available for comment in the Federal Register. C. Cost-Benefit Considerations 1. Introduction 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 certain orders.272 Section 15(a) further specifies that the costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market 271 See e.g., Eurex Oct. 30, 2015 Letter, at 5, 9; LedgerX Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 Letter, at 3. The Commission notes that another commenter stated that ‘‘DCOs have already made connections with the major CFTC-registered SDRs.’’ (DTCC Oct. 30, 2015, Letter at 5). 272 7 U.S.C. 19(a). E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations 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. The Commission is amending and making additions to §§ 45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order to provide clarity to counterparties to a swap and registered entities regarding their part 45 reporting obligations with respect to cleared swap transactions and to improve the efficiency of data collection and maintenance associated with the reporting of the swaps involved in a cleared swap transaction. The final rule adopts revisions to part 45 as proposed in the NPRM. 2. Background The swap data reporting framework adopted in the Final Part 45 Rulemaking 273 was largely based on the mechanisms for the trading and execution of uncleared swaps. The plain language of the existing part 45 rules presumes the existence of a single, continuous swap both prior to and after acceptance of a swap for clearing by a DCO. Under that framework, registered entities and counterparties would each report data with respect to a single swap when such swap is initially executed, referred to as ‘‘creation data,’’ and over the course of the swap’s existence, referred to as ‘‘continuation data.’’ 274 The Commission has since had additional opportunities to consult with industry and with other regulators, including the SEC,275 and to observe how the part 45 regulations function in practice with respect to swaps that are cleared, including how the implementation of part 45 interacts with the implementation of part 39 of the 273 See 77 FR 2136. 45.1 defines ‘‘required swap creation data’’ as primary economic terms data and confirmation data. Section 45.1 defines ‘‘primary economic terms data’’ as all of the data elements necessary to fully report all of the primary economic terms of a swap in the swap asset class of the swap in question and defines ‘‘confirmation data’’ as all of the terms of a swap matched and agreed upon by the counterparties in confirming the swap. 17 CFR 45.1. For cleared swaps, confirmation data also includes the internal identifiers assigned by the automated systems of the derivatives clearing organization to the two transactions resulting from novation to the clearing house. Id. 275 The SEC proposed certain new rules and rule amendments to Regulation SBSR governing reporting in the context of security-based swaps. See Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015). mstockstill on DSK3G9T082PROD with RULES2 274 Section VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 Commission’s regulations, which contains provisions applicable to DCOs. In particular, § 39.12(b)(6) provides that upon acceptance of a swap by a DCO for clearing, the original swap is extinguished and replaced by equal and opposite swaps, with the DCO as the counterparty to each such swap.276 The original swap that is extinguished upon acceptance for clearing is commonly referred to as the ‘‘alpha’’ swap and the equal and opposite swaps that replace the original swap are commonly referred to as ‘‘beta’’ and ‘‘gamma’’ swaps. The Commission is of the view that the existing part 45 regulations should be amended to better accommodate the multi-swap framework of § 39.12(b)(6) by explicitly addressing beta and gamma swaps as distinct swaps for purposes of part 45 reporting.277 The existing part 45 regulations do not explicitly address the reporting of ‘‘alpha,’’ ‘‘beta,’’ and ‘‘gamma’’ swaps; however, industry practice has evolved to address such reporting. The Commission understands that market participants generally report part 45 data for cleared swap transactions in conformance with the framework described in § 39.12(b)(6), where separate swaps (alphas, betas, and gammas) are represented individually in reported swap data. The Commission understands that under existing market practice: SEFs, DCMs and reporting counterparties generally report required swap creation data for alpha swaps to the SDR of their choice; DCOs that accept alpha swaps for clearing generally report required swap creation data for the beta and gamma swaps that result from clearing novation of the alpha swap to the SDR of their choice 276 See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps to have rules providing that, upon acceptance of a swap by the [DCO] for clearing: (i) The original swap is extinguished; (ii) the original swap is replaced by an equal and opposite swap between the [DCO] and each clearing member acting as principal for a house trading or acting as agent for a customer trade). Subsequent to adoption of the Final Part 45 Rulemaking, the Commission affirmed that the multi-swap framework (comprising separate and unique original and resulting swaps) should apply for part 45 reporting purposes. See Statement of the Commission on the Approval of Chicago Mercantile Exchange Rule 1001 (Mar. 6, 2013), at 6, available at: http:// www.cftc.gov/ucm/groups/public/@newsroom/ documents/file/statementofthecommission.pdf. 277 The Commission also notes that a single swap reporting framework for cleared swaps, as opposed to a multi-swap framework like the one contemplated by § 39.12(b)(6), would likely not be consistent with the approach proposed by the SEC in its release proposing certain new rules and rule amendments to Regulation SBSR. See Regulation SBSR—Reporting and Dissemination of SecurityBased Swap Information, 80 FR 14740 (Mar. 19, 2015). The Commission discusses the benefits associated with harmonizing its approach with that of other regulators later in this release. PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 41759 (which may be different than the SDR to which the alpha swap was reported); such DCOs do not in all cases include the USI of the alpha swap in creation data reported for the beta and gamma swaps; and that DCOs may inconsistently report, and SDRs may inconsistently accept and process, alpha swap terminations.278 The gaps between the existing part 45 regulations, § 39.12(b)(6), and certain industry practices, including those outlined above, have likely contributed to a lack of certainty regarding the applicability of the part 45 regulations to beta and gamma swaps, including which registered entity or counterparty is required to report creation data and/ or continuation data for such swaps, and the manner in which such swaps must be reported. The Commission understands that this uncertainty presents compliance challenges for registered entities and reporting counterparties. Additionally, the lack of clarity regarding existing part 45 obligations with respect to beta and gamma swaps has impacted the accuracy, quality, and usefulness of data that is reported for cleared swaps. For instance, inconsistent DCO reporting of alpha swap USIs in creation data for beta and gamma swaps hinders the Commission’s ability to trace the history of a cleared swap transaction from execution between the original counterparties to clearing novation. Even in cases where the Commission can ascertain the USI of a specific alpha swap that was replaced by beta and gamma swaps, SDR data available to the Commission at times misleadingly shows some alpha swaps as remaining open between the original counterparties, when in actuality such swaps have been extinguished through clearing novation. The inability to determine whether an alpha swap has been terminated impedes the Commission’s ability to analyze cleared swap activity and to review swap activity for compliance with the clearing 278 While the above reflects the Commission’s general understanding of industry practice with respect to the reporting of component parts of a cleared swap transaction, the Commission does not possess complete information regarding certain details and nuances of the reporting practices of different registered entities and reporting counterparties. For instance, in some cases, the Commission generally does not possess sufficient information to ascertain the period of time between the DCO’s acceptance of an alpha swap for clearing and the DCO’s report of creation data for beta and gamma swaps. The Commission posed questions eliciting specific details or nuances of industry practice that are likely to have cost/benefit implications in the relevant sections of the NPRM. E:\FR\FM\27JNR2.SGM 27JNR2 41760 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 requirement.279 If alpha swaps have been terminated, yet appear to remain open, then a risk of double counting swap notional exposures can result, which would impede the Commission’s ability to analyze and study swaps market activity using accurate information. The inability to link the different swaps in a cleared swap transaction also impedes the Commission’s ability to assess exposures of market participants in the uncleared and cleared swaps markets. Additionally, certain creation data fields that are currently populated for beta and gamma swaps prove difficult to interpret by the Commission, and thus can result in inconsistencies in their application and reporting among alpha, beta, and gamma swaps, hindering the Commission’s ability to interpret and analyze data regarding beta and gamma swaps. The revisions and additions that are being adopted in this final rulemaking would amend part 45 to differentiate reporting requirements for cleared and uncleared swap transactions, and which explicitly address swap counterparty and registered entity reporting requirements for each component (e.g., alpha, beta, and gamma) of a cleared swap transaction. This rulemaking will remove uncertainty as to which counterparty to a swap is responsible for reporting creation data for each of the various components of a cleared swap transaction. The final rule makes clear whose obligation it is to report the termination of the original swap upon acceptance of a swap by a DCO for clearing. These additional details include where, when, and how to report the swap data pertaining to the establishment of the beta and gamma swaps and the reporting of the termination message to the SDR that originally received the swap data for the alpha swap. This final rule is also intended to improve the efficiency of data collection and maintenance associated with the reporting of the swaps involved in a cleared swap transaction and to improve the accuracy, quality, and usefulness of data that is reported for cleared swaps and 279 Commission staff recently noted difficulty in evaluating the proper de minimis level of activity for swap dealer registration under Commission regulation 1.3(ggg), in part due to difficulties linking alpha swaps with resulting beta and gamma swaps. See Swap Dealer De Minimis Exception Preliminary Report (Nov. 18, 2015), at 13–14, available at http://www.cftc.gov/idc/groups/public/ @swaps/documents/file/dfreport_sddeminis_ 1115.pdf. In the report, Staff noted that the finalization and implementation of this final rule release for reporting of cleared swaps should help to mitigate this issue going forward. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 alpha swaps that have been extinguished due to clearing novation. The Commission believes that the baseline for this consideration of costs and benefits is generally the existing part 45 regulations, which were adopted in 2011.280 However, as described above, in certain circumstances, industry practice has been informed by certain provisions of part 39 and by subsequent industry developments, and thus does not necessarily reflect the plain language of the existing part 45 regulations. In those circumstances, the baseline for this consideration of costs and benefits will be industry practice. The following consideration of costs and benefits is organized according to the rules and rule amendments put forth in this final rulemaking. For each rule, the Commission summarizes the amendments 281 and identifies and discusses the costs and benefits attributable to them, including a discussion of the commenters’ suggestions with regards to the costs and benefits of the amendments present in the IDWG Request for Comment and the NPRM.282 The Commission then considers the costs and benefits of certain alternatives to the rules put forth in this final rulemaking, as well as the costs and benefits of all of the rules jointly in light of the five public interest considerations set out in section 15(a) of the CEA. The Commission notes that this consideration of costs and benefits is based on the understanding that the swaps market functions internationally, with many transactions involving U.S. firms taking place across international boundaries, with some Commission registrants being organized outside of the United States, with leading industry members typically conducting operations both within and outside the United States, and with industry members commonly following substantially similar business practices wherever located. Where the Commission does not specifically refer to matters of location, the below discussion of costs and benefits refers to the effects of the proposed rules on all 280 See Swap Data Recordkeeping and Reporting Requirements, Final Rule, 77 FR 2136 (Jan. 13, 2012). 281 As described in detail throughout Section II of this final release, the Commission is also adopting a number of non-substantive, conforming rule amendments in this release, such as renumbering certain provisions and modifying the wording of existing provisions to ensure consistency with the wording in newly proposed definitions. Nonsubstantive amendments of this nature will not be discussed in the cost-benefit portion of this final release. 282 See IDWG Request for Comment, 79 FR 16689 (Mar. 26, 2014); NPRM, 80 FR 52544, 52570 (Aug. 31, 2015). PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 swaps activity subject to the amended regulations, whether by virtue of the activity’s physical location in the United States or by virtue of the activity’s connection with or effect on U.S. commerce under CEA section 2(i).283 The Commission also notes that the existing part 45 regulations generally contemplate situations where a swap may be required to be reported pursuant to U.S. law and the law of another jurisdiction.284 3. Definitions—Amendments to § 45.1 The adopted amendments to § 45.1 revise the definition of ‘‘derivatives clearing organization’’ for purposes of part 45 to update a reference to an existing definition of ‘‘derivatives clearing organization’’ and make clear that part 45 applies to DCOs registered with the Commission. The adopted amendments to § 45.1 will also add new definitions for ‘‘original swaps’’ (swaps that have been accepted for clearing by a DCO, commonly referred to as ‘‘alpha’’ swaps) and ‘‘clearing swaps’’ (swaps created pursuant to the rules of a DCO that have a DCO as a counterparty, including, but not limited to, any swap that replaces an original swap that was extinguished upon acceptance for clearing, commonly referred to as ‘‘beta’’ and ‘‘gamma’’ swaps). The terms original swap and clearing swaps will be used throughout amended part 45 to help clarify reporting obligations for each swap involved in a cleared swap transaction. Likewise, the Commission will use the defined terms ‘‘original swaps’’ and ‘‘clearing swaps’’ throughout this consideration of costs and benefits. Given that these terms are a product of this release and are not yet part of industry nomenclature, the Commission will also use the terms ‘‘alpha, beta, and gamma’’ throughout this consideration of costs and benefits when discussing existing industry 283 7 U.S.C. 2(i). Section 2(i)(1) makes the swaps provisions of the Dodd-Frank Act, and Commission regulations promulgated under those provisions, applicable to activities outside the United States that ‘‘have a direct and significant connection activities in, or effect on, commerce of the United States;’’ while section 2(i)(2) makes them applicable to activities outside the United States that contravene Commission rules promulgated to prevent evasion of Dodd-Frank. Application of section 2(i)(1) to the existing part 45 regulations with respect to SDs/MSPs and non-SD/non-MSP counterparties is discussed in the Commission’s non-binding Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations, 78 FR 45292 (July 26, 2013). 284 See 17 CFR 45.1 (defining ‘‘International swap’’ to mean a swap required by U.S. law and the law of another jurisdiction to be reported both to a swap data repository and to a different trade repository registered with the other jurisdiction.); see also 17 CFR 45.3(h) (prescribing requirements with respect to international swaps). E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations practice and when helpful for purposes of clarification.285 The Commission notes that commenters did not submit any comments relevant to the costs and benefits of the proposed amendments to § 45.1. i. Costs The Commission does not anticipate that these definitions, in and of themselves, impose additional costs on DCOs or market participants. However, these definitions will be referenced in other proposed substantive provisions and the costs and benefits of those substantive requirements will be discussed in the relevant sections below. ii. Benefits As discussed earlier in this release, the plain language of the existing part 45 regulations presumes the existence of one continuous swap and does not explicitly acknowledge distinct reporting requirements for the individual components (i.e., alphas, betas, and gammas) of a cleared swap transaction. However, industry practice is generally to report part 45 data for cleared swap transactions in conformance with the multi-swap framework described in § 39.12(b)(6) (i.e., to report alphas, betas, and gammas separately). The definitions of original and clearing swaps, along with the other revisions to part 45 covered in this release, will help align the part 45 regulations with part 39 and with certain industry practices and will explicitly delineate the swap data reporting obligations associated with each of the swaps involved in a cleared swap transaction.286 mstockstill on DSK3G9T082PROD with RULES2 4. Creation Data Reporting by DCOs— Amendments to § 45.3 Existing § 45.3 requires reporting to an SDR of two types of ‘‘creation data’’ 285 The Commission determined to utilize the proposed to be defined terms ‘‘original swap’’ and ‘‘clearing swaps’’ in this release rather than the industry terms ‘‘alpha, beta, and gamma’’ because while a cleared-swap transaction generally comprises an original swap that is terminated upon novation and the equal and opposite swaps that replace it, the Commission is aware of certain circumstances in which a clearing swap may not involve the replacement of an original swap (e.g., an open offer swap, as discussed earlier in this release). See supra, Section II.A. 286 The Commission acknowledges that the alternative approaches to the reporting of cleared swap transactions separately discussed in Section III.C.10, Consideration of Alternatives, later in this release could also provide these benefits for registered entities and swap counterparties. However, for the reasons explained in that section, the Commission is of the view that the proposed approach is more consistent with industry practice than the alternatives. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 generated in connection with a swap’s creation: ‘‘primary economic terms data’’ and ‘‘confirmation data.’’ 287 Regulation 45.3 governs what creation data must be reported, who must report it, and deadlines for its reporting. Amended § 45.3(e) will govern creation data reporting requirements for swaps that fall under the proposed definition of clearing swaps. Amended § 45.3(e) will also require a DCO, as reporting counterparty under adopted § 45.8(i),288 to report all required swap creation data for each clearing swap as soon as technologically practicable after acceptance of an original swap by a DCO for clearing (in the event that the clearing swap replaces an original swap) or as soon as technologically practicable after execution of the clearing swap (in the event that the clearing swap does not replace an original swap).289 Swaps other than clearing swaps, including swaps that later become original swaps by virtue of their acceptance for clearing by a DCO, will continue to be reported as currently required under existing § 45.3(a)–(d). The Commission is thus following an approach to creation data reporting that will require reporting counterparties or SEFs/DCMs to report creation data for swaps commonly known as alpha swaps, and that will require DCOs to report creation data for swaps commonly known as beta and gamma 287 Section 45.1 defines ‘‘required swap creation data’’ as primary economic terms data and confirmation data. Section 45.1 defines ‘‘primary economic terms data’’ as all of the data elements necessary to fully report all of the primary economic terms of a swap in the swap asset class of the swap in question and defines ‘‘confirmation data’’ as all of the terms of a swap matched and agreed upon by the counterparties in confirming the swap. 17 CFR 45.1. For cleared swaps, confirmation data also includes the internal identifiers assigned by the automated systems of the derivatives clearing organization to the two transactions resulting from novation to the clearing house.’’ Id. 288 As discussed in greater detail below, adopted § 45.8(i) will designate the DCO as the reporting counterparty for clearing swaps. 289 As noted earlier in this release, the amended definition of ‘‘clearing swap’’ is intended to encompass: (1) Swaps that replace an original swap and to which the DCO is a counterparty (i.e., swaps commonly known as betas and gammas) and (2) all other swaps to which the DCO is a counterparty (even if such swap does not replace an original swap). The Commission understands that there may be instances in which a clearing swap does not replace an original swap. For example, in the preamble to the part 39 adopting release, the Commission noted that ‘‘open offer’’ systems are acceptable under § 39.12(b)(6), stating that ‘‘Effectively, under an open offer system there is no ‘original’ swap between executing parties that needs to be novated; the swap that is created upon execution is between the DCO and the clearing member, acting either as principal or agent.’’). See Derivatives Clearing Organization General Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov. 8, 2011). PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 41761 swaps, and for any other swaps to which the DCO is a counterparty.290 With respect to confirmation data reporting, for swaps that are intended to be cleared at the time of execution, the Commission is amending § 45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove certain existing confirmation data reporting requirements. Under the modified rules, SEFs/DCMs and reporting counterparties will continue to be required to report PET data as part of their creation data reporting, but will not be required to report confirmation data for swaps that are intended to be submitted to a DCO for clearing at the time of execution. Instead, the DCO will be required to report confirmation data for clearing swaps pursuant to proposed § 45.3(e). The Commission is also amending § 45.3(j), which will provide that: for swaps executed on or pursuant to the rules of a SEF or DCM (including swaps that become original swaps), the SEF or DCM will have the obligation to choose the SDR for such swaps; for all other swaps (including for off-facility swaps and/or clearing swaps) the reporting counterparty (as determined under § 45.8) will have the obligation to choose the SDR. The Commission has considered the letters sent by commenters to the costbenefit considerations of proposed amendments to § 45.3. Several comments were received on the elimination of the requirement for reporting confirmation data for swaps that are intended to be cleared. On the cost-benefit considerations front, Markit commented that eliminating the requirement for reporting confirmation data for swaps that are intended to be cleared, while still maintaining the requirement to report primary economic terms data, will not benefit reporting workflows and that there is little incremental cost to report confirmation data as reporting systems are set-up to capture that information already.291 With regards to eliminating the requirement for reporting confirmation data, the Commission acknowledges that there might be incremental cost savings due to the elimination of this requirement, as suggested by commenters. Nevertheless, the Commission believes that there is no cost associated with the elimination of 290 Because the reporting counterparty or SEF/ DCM are currently required under Part 45 to report a swap that would become an original swap under this final release, there is no need to conduct a costbenefit consideration of this requirement. Alternatives to the current reporting approach for original swaps are discussed in the Consideration of Alternatives section, Section III.C.10, below. 291 See Markit Oct. 30, 2015 Letter, at 2–3. E:\FR\FM\27JNR2.SGM 27JNR2 41762 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 this requirement and that confirmation data requirements for clearing swaps provide the Commission with a sufficient representation of the confirmation data for a cleared swap transaction. As a result, the Commission believes that there are benefits in the form of cost savings that need to be considered in the elimination of this requirement. Other commenters responded to the question of which entity should be responsible for reporting creation data for swaps that will become original swaps. Commenters were split on this question. Some commenters suggested that the DCO, rather than the reporting counterparty, should be responsible for reporting the creation data for that swap.292 CME commented that assigning all the reporting obligations for original and clearing swaps to the DCO is a better and simpler way to address alpha swap reporting, and will eliminate the need to reconcile original and clearing swaps across SDRs.293 CMC similarly commented that DCOs are in the best position to report on swaps that are accepted or rejected for clearing and should assume all reporting obligations for cleared swaps, including all reporting of swaps that are intended to be cleared.294 AIMA likewise suggested that if the Commission continues the reporting requirements associated with original swaps, assigning the reporting obligations to the DCOs will remove reporting burdens and the risk of data fragmentation across SDRs.295 Other commenters recommended that the Commission continue to require the reporting counterparty to report creation data for those swaps that will become original swaps.296 LCH commented that the reporting counterparty of a trade should always be a party to the transaction and therefore, in the case of a swap that will become an original swap, the DCO would not be better suited than the SEF, DCM, or reporting counterparty to report the creation data.297 Eurex suggested that assigning the reporting obligation of original swap creation data to the DCO may present a timeliness issue depending on when the DCO receives the necessary information from the counterparties.298 ISDA 292 See e.g., CME Oct. 30, 2015 Letter, at 2–3; CMC Oct. 30, 2015 Letter, at 2–3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015 Letter, at 3. 293 See CME Oct. 30, 2015 Letter, at 3. 294 See CMC Oct. 30, 2015 Letter, at 2. 295 See AIMA Oct. 30, 2015 Letter, at 6. 296 See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4. 297 See LCH Oct. 30, 2015 Letter, at 2. 298 See Eurex Oct. 30, 2015 Letter, at 4. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 likewise agreed that the obligation to report swaps that become original swaps should remain with the reporting counterparty for that swap.299 Furthermore, certain commenters suggested that the reporting of any creation data for swaps that will become original swaps is unnecessary.300 AIMA commented that eliminating reporting for swaps that are intended to be cleared at the time of execution will significantly reduce complexity in the reporting regime and streamline the reported data.301 AIMA also commented that the proposed reporting approach for original swaps will not reduce data fragmentation.302 Similarly, EEI/EPSA suggested that there is little to no benefit to original swap reporting for swaps that are intended to be cleared at the time of execution and that counterparties should not be required to report any creation data for such swaps.303 While the NPRM did not propose changing the existing obligation to report swaps that become original swaps, and is therefore beyond the scope of the NPRM, the Commission continues to believe that original swaps contain essential information regarding the origins of cleared swap transactions for market surveillance and audit-trail purposes. The Commission’s ability to trace the history of a cleared swap transaction from execution between the original counterparties to clearing novation relies on this information and this is a significant benefit to the Commission in terms of understanding the market structure as well as for surveillance purposes. With respect to the issue of who reports creation data for those swaps that will become original swaps, the Commission believes that the requirement that the reporting counterparty report creation data for those swaps that will become original swaps should remain. The Commission believes there are significant benefits associated with maintaining established industry workflows. Reporting counterparties and registered entities have invested substantial time and 299 ISDA also commented in support of the Commission’s proposal to remove the provisions in § 45.3 that excused a reporting counterparty from reporting creation data for a swap accepted for clearing before the primary economic terms reporting deadline. See ISDA Oct. 30, 2015 Letter, at 4. 300 See AIMA Oct. 30, 2015 Letter, at 2–6; EEI/ EPSA Oct. 30, 2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2. 301 See AIMA Oct. 30, 2015 Letter, at 3. 302 See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting original swap creation data to one SDR and reporting clearing swap data to a different SDR may undermine data quality for the Commission’s supervisory purposes). 303 See EEI/EPSA Oct. 30, 2015 Letter, at 3. PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 resources to report swaps (both cleared and not cleared) to SDRs, and DCOs have invested substantial resources to report clearing swaps. The Commission believes it would be efficient to make use of this existing infrastructure and asking market participants to make changes to this established workflow might be costly. The Commission acknowledges the data fragmentation concerns raised by those that recommend DCOs report original swap creation data. However, the Commission also recognizes that requiring the DCOs, rather than the original reporting counterparty, to report original swap creation data may present challenges of its own.304 The Commission also believes that there are significant benefits associated with maintaining accurate and timely reporting of the required data fields and that this will outweigh data fragmentation concerns for those situations where the original swap and clearing swaps are reported to different SDRs. The Commission has considered arguments made by the commenters with respect to choice of SDR and believes that placing the obligation to choose the SDR on the registered entity or counterparty that is required to report the swap, rather than on another entity, will result in more efficient data reporting. Allowing the first entity to report data on a swap to choose the SDR will allow reporting entities to select an SDR to which they have established connections; giving another entity the ability to choose the SDR could require the first reporting entities to connect to multiple SDRs. The Commission also believes allowing the first reporting registered entity or counterparty to choose the SDR will also promote competition among SDRs to provide SDR services to a broad array of reporting entities. This method of SDR selection also avoids the insertion of any entity other than a party to the swap or facility where the transaction is executed, into the decision as to how a registered entity or counterparty fulfills its regulatory obligation to report initial required swap creation data. As with the ‘‘first-touch’’ approach taken with respect to the creation of USIs in part 45,305 the Commission believes that the entity with the first reporting obligation should select the SDR for that report. The Commission believes that such a 304 See e.g., Eurex Oct. 30, 2015 Letter, at 4 (suggesting there could be timeliness issue depending on when the DCO receives necessary information from counterparties to report creation data). 305 See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13, 2012). E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 method of SDR selection will avoid delays in real-time reporting for part 43 purposes. If DCOs were to select the SDR for an original swap, the DCO would not be in a position to make such selection until after a swap was accepted for clearing. Any delays in clearing would translate into delays in reporting for both part 43 real-time reporting and part 45 reporting. Additionally, the registered entity or counterparty that is required to report a swap pursuant to § 45.8 may select an SDR to which its technological systems are most suited or to which it already has an established relationship, providing for the efficient and accurate reporting of swap data. As a result, the Commission believes that amendments to § 45.3(j) simply codify existing practice and will not impose any additional connection costs for DCOs or SDRs. In addition, the Commission believes that allowing DCOs to choose the SDRs to which they report creation and continuation data is costminimizing for DCOs because it allows them to select the SDR which is most cost effective. i. Costs The Commission understands that under current industry practice, DCOs commonly report to SDRs creation data for swaps that would fall under the definition of clearing swaps. Accordingly, to the extent that DCOs already have been reporting in conformance with adopted § 45.3(e), the Commission does not expect the final rule to result in any additional costs. With respect to registered DCOs organized outside of the United States, its territories, and possessions, that are subject to supervision and regulation in a foreign jurisdiction, a home country trade reporting regulatory regime may require the DCO to report swap data to a trade repository in the home country jurisdiction. For clearing swaps that a DCO would be required to report both to a registered SDR pursuant to the amendments to part 45, and to a foreign trade repository pursuant to a home country trade reporting regulatory regime, the Commission acknowledged in the NPRM that a DCO could be expected to incur some additional costs in satisfying both its CFTC and home country reporting obligations, relative to a DCO that would only be subject to part 45 reporting requirements. As also indicated in the NPRM, DCOs are not currently required to provide such cost information to the Commission, the Commission lacks access to the information needed to assess the magnitude of the costs relating to compliance with reporting obligations VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 in multiple jurisdictions. In addition, the Commission did not receive any comments on, nor estimates of, the costs relating to compliance with reporting obligations in multiple jurisdictions. In terms of any potential costs, the Commission expects that industry technological innovations may effectively allow for satisfaction of swap data reporting requirements across more than one jurisdiction by means of a single data submission, and that a streamlined reporting process or other technology and operational enhancements could mitigate the cost of satisfying reporting requirements for swaps that may be required to be reported to a foreign trade repository under a home country regulatory regime as well as to a registered SDR pursuant to amendments to part 45.306 Additionally, the Commission anticipates that adopting an approach to the reporting of cleared swaps in the United States that is, to the extent possible, consistent with the approaches adopted in other jurisdictions may also minimize compliance costs for entities operating in multiple jurisdictions.307 The Commission also notes that any costs arising from reporting swap data with respect to more than one jurisdiction could already have been realized, to the extent that DCOs located outside the United States are already reporting swap data to a registered SDR in addition to reporting swap data to a trade repository pursuant to a home country regulatory regime. Finally, with respect to choice of SDR, the Commission believes that amendments to § 45.3(j) will not impose any additional costs because the amendments simply codify existing practice—the Commission understands that the workflows that apply the proposed choice of SDR obligations are already in place. The Commission believes that allowing DCOs to choose the SDRs to which they report creation and continuation data is cost-minimizing for DCOs because it allows them to select the SDR which is most cost effective. As discussed in greater detail below, the Commission anticipates that DCOs that have affiliated SDRs will continue their 306 As noted in the NPRM, the part 45 regulations contemplate situations where a swap may be required to be reported pursuant to U.S. law and the law of another jurisdiction. See 80 FR 52544, 52564 n. 138. 307 The Commission understands that the approach followed in this final release for the reporting of cleared swaps (e.g., requiring separate reporting of alphas, betas, and gammas) is largely consistent with the multi-swap approach adopted by a number of jurisdictions, including, for example, the European Union, Singapore, and Australia. PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 41763 current practice of reporting clearing swaps to their affiliated SDRs.308 ii. Benefits Amended § 45.3(e) will explicitly articulate DCO part 45 reporting obligations with respect to clearing swaps (e.g., betas and gammas).309 As explained above, existing § 45.3 does not explicitly acknowledge distinct reporting requirements for swaps commonly known as alphas, betas, and gammas. The amendments explicitly delineate creation data reporting obligations for each component of a cleared swap transaction, which will improve the Commission’s ability to analyze data associated with such transactions. Requiring DCOs to report required swap creation data for clearing swaps to SDRs in the manner outlined in this release is expected to result in uniform protocols and consistent reporting of the individual components of a cleared swap transaction. The Commission believes that the adopted reporting framework for cleared swaps will result in more consistent reporting of all components of a cleared swap transaction, including linkages between the related swaps, thereby increasing the efficiency of the SDR data collection function and enhancing the Commission’s ability to utilize the data for regulatory purposes, including for systemic risk mitigation, market monitoring, and market abuse prevention. With respect to confirmation data reporting, the Commission anticipates that the removal of certain confirmation data reporting requirements will result in decreased costs for swap counterparties and/or registered entities that are currently gathering and conveying electronically the information necessary to report 308 The Commission acknowledges several commenters at both the IDWG Request for Comment and NPRM stages who commented on the costs to reporting counterparties when reporting original swaps. See, e.g., CME Oct. 30, 2015 Letter, at 6–7; CMC Oct. 30, 2015 Letter, at 2. However, the Commission has noted that the revisions to part 45 adopted in this release do not change the existing obligation of those entities to report original swaps. Therefore, the costs currently incurred by such reporting counterparties are not a factor when considering the costs and benefits of the revisions adopted in this release. The Commission does discuss those costs in the Consideration of Alternatives, below at Section III.C.10. 309 The Commission acknowledges that the alternatives separately discussed in the Consideration of Alternatives section later in this release could also provide these benefits for registered entities and swap counterparties. However, for the reasons explained in that section, the Commission is of the view that the proposed approach is more consistent with industry practice than the alternatives. E:\FR\FM\27JNR2.SGM 27JNR2 41764 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 confirmation data for swaps that are intended to be submitted to a DCO for clearing at the time of execution.310 With respect to the adopted rule allowing the removal of certain confirmation data reporting requirements for swaps that are intended to be submitted to a DCO for clearing at the time of execution, the Commission is of the view that the adopted confirmation data reporting requirements for clearing swaps should provide the necessary confirmation data with respect to cleared swap transactions. Given that the adopted rules will require the DCO to report confirmation data for clearing swaps, requiring an additional set of confirmation data reporting for the nowterminated original swap, in addition to PET data, would be duplicative and therefore unnecessary. Finally, with respect to choice of SDR, under adopted § 45.3(j), the party with the obligation to report the first data for a swap has the discretion to select the SDR of its choice. This can be an SDR with which the party already has a working relationship, an SDR which is, in the registered entity or reporting counterparty’s estimation, most costeffective, or an SDR that provides the best overall service and product. The Commission believes that this flexibility to select SDRs will minimize reporting errors and improve reporting efficiencies by allowing the reporting entity to select an SDR with which it has a connection and reporting systems in place. The Commission also believes this approach will foster competition between SDRs, as reporting entities such as SEFs/DCMs, SDs/MSPs, DCOs, and non-SD/MSPs can select the SDR to which they will report. Further, allowing the reporting entity to select the SDR will reduce costs, as reporting counterparties and registered entities (other than DCOs) should not have to establish a connection to more than one SDR unless they prefer to do so. The Commission understands that § 45.3(j) is consistent with industry practice,311 310 See CEWG May 27, 2014 Letter, at 4–5 (stating that reporting confirmation data in addition to PET data is highly redundant because confirmation data simply includes all of the PET data matched and agreed to by the counterparties); ISDA May 27, 2014 Letter, at 6–8 (noting that ‘‘Confirmation data should not be required for an alpha trade that is intended for clearing at point of execution, whether due to the clearing mandate or bilateral agreement. Confirmation data for alpha swaps is not meaningful since they will be terminated and replaced with cleared swaps simultaneously or shortly after execution for which confirmation data will be reported by the DCO.’’). 311 The Commission notes that industry practice with respect to choice of SDR has likely been influenced in part by a variety of factors, including, among others, the Commission’s statement VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 and thus that the benefits described above are already being realized. 5. Continuation Data Reporting by DCOs—Adopted Amendments to § 45.4 The Commission’s amendments to § 45.4, which governs the reporting of swap continuation data to an SDR during a swap’s existence through its final termination or expiration, incorporate the distinction between original swaps and clearing swaps. The Commission is removing § 45.4(b)(2)(ii), which requires a reporting counterparty that is an SD or MSP to report valuation data for cleared swaps daily; instead, the DCO will be the only swap counterparty required to report swap continuation data, including valuation data, for clearing swaps. Notably, amended § 45.4(c) will require a DCO to report all required continuation data for original swaps, including original swap terminations, to the SDR to which such original swap was reported. Finally, adopted § 45.4(c)(2) will require that continuation data reported by DCOs include the following data fields as life cycle event data or state data for original swaps pursuant to adopted § 45.4(c)(1): (i) The LEI of the SDR to which each clearing swap that replaced a particular original swap was reported by the DCO pursuant to new § 45.3(e); (ii) the USI of the original swap that was replaced by the clearing swaps; and (iii) the USIs for each of the clearing swaps that replace the original swap. The Commission has considered the costs and benefits raised by commenters on the proposed addition of § 45.4(c) and its requirement that DCOs report continuation data for original swaps, including terminations. The Commission believes that the adopted revisions to § 45.4(c) are broadly in line with existing industry practice, and set out specific obligations that will ensure continuation data is properly reported and reflected in the data that the Commission uses to fulfill its regulatory obligations. The Commission notes that it may be more burdensome for the counterparties to the original swaps, rather than the DCO, to report terminations, as the counterparty would have to receive a message from the DCO confirming that the original swap was accepted for clearing and then translate that message from the DCO into a termination message to the SDR. Particularly, this may be most burdensome to commercial end-users regarding CME Rule 1001. See Statement of the Commission on the Approval of CME Rule 1001 (Mar. 6, 2013), at 6. The Commission notes that other DCOs have adopted similar rules. See, e.g., ICE Clear Credit Rule 211. PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 executing swaps on SEFs or DCMs who might otherwise have no reporting obligations and who may not have the infrastructure in place to report as quickly or as efficiently as DCOs.312 The Commission’s proposed rules largely avoid these costs for commercial endusers. i. Costs Existing § 45.4(b)(2) requires that both SDs/MSPs and DCOs report daily valuation data for cleared swaps. The removal of § 45.4(b)(2)(ii) will eliminate the existing valuation data reporting requirement for SDs/MSPs, leaving DCOs as the sole entity responsible for daily valuation data reporting. As DCOs are currently required to report valuation data for cleared swaps, they will not bear any additional costs as a result of this proposed amendment. While DCOs are currently required to report continuation data on ‘‘cleared swaps,’’ including terminations, to SDRs under existing § 45.4,313 the adopted rule clarifies reporting obligations as they relate to swaps that become original swaps. The Commission understands that DCOs frequently assume responsibility to report the termination of swaps that become alpha swaps, but that DCOs do not consistently report such alpha swap terminations or do not report them in the form required by the alpha swap SDR. Some DCOs that do not currently have connectivity to the SDR where the SEF/DCM or original counterparties first reported the swap will incur costs associated with establishing such connectivity. DCOs will also realize costs associated with the termination notice and submissions correcting previously erroneously reported or omitted data. However, DCO reporting of alpha swap terminations has not been uniform and may vary by DCO and SDR. The Commission is aware that, in some instances, DCOs currently report alpha swap terminations to the original SDR that received the original submission of the intended to be cleared swap. To the extent that DCOs have implemented systems to report alpha swap terminations to the original swap SDR, the amended rules thus will not introduce any new costs for those DCOs. The Commission received three comments concerning the costs and benefits of the proposed amendments to 312 See, supra, n. 26, discussing reporting obligations for end-users trading on-facility cleared swaps. 313 Section 45.4(b) as effective prior to this rule release, required DCOs to report continuation data on all swaps cleared by the derivatives clearing organization, including life cycle event data or state data. E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 § 45.4 in two different contexts. In commenting on the NPRM, LCH and Eurex expressed concerns with the infrastructure required to have the DCO connected to every SDR chosen by the SD/MSP for which the DCO clears and report terminations according to the technical requirements of each SDR.314 Eurex specifically indicated that the cost of implementing the required infrastructure would have significant time and financial costs. In commenting on the IDWG Request for Comment, one foreign central counterparty now acting pursuant to a DCO Exemptive Order cited a specific cost for connecting to a new SDR as involving at least 150 mandays.315 Based on the most recent industry compensation reports, the median cost to a firm for 150 working days by a computer programmer in the finance industry would be $61,000 per DCO to SDR connection.316 Considering that each DCO must have a connection to at least one registered SDR currently to report beta and gamma swaps under current industry practice, and considering that there are only four registered SDRs, each DCO could be expected to incur at most $183,000 to connect to all registered SDRs. This cost would be reduced to the extent that the DCO has existing connections to more than one SDR or if it clears swaps for clearing members whose original swaps are reported to a limited number of SDRs. With respect to additional data fields, as discussed above, adopted § 45.4(c)(2) will add three data fields (the LEI of the SDR to which creation data for the clearing swaps was reported, the USI of the original swap, and USIs of the clearing swaps) to the life cycle event data or to state data reported by DCOs as continuation data for original 314 See Eurex Oct. 30, 2015 Letter, at 4–5; LCH Oct. 30, 2015 Letter, at 3. 315 See OTC Hong Kong May 27, 2014 Letter, at 2–3 (contending that setup, application development, and testing to interface with each SDR is likely to require at least 150 man-days, and that a more cost-effective framework would be to require the original counterparty to report termination of the alpha once it receives confirmation that the alpha has been accepted for clearing, and that the original counterparty would already have in place technical and operational interfaces with the SDR of its choice. The commenter also contended that the burden on DCOs of additional reporting outweighs the benefits to the CFTC). 316 See SIFMA Report, Management & Professional Earnings in the Securities Industry 2013 (October 2013), available at http:// www.sifma.org/research/item.aspx?id=8589940603. This estimate is based on the median total compensation for a Programmer (Code 1604) ($91,050), on an hourly basis assuming 1,800 hours worked per year ($50.83) and an eight hour work day. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 swaps.317 All three of these data fields are either already in use or can be created by the SDR and reported by the DCO. While requiring the reporting of additional fields imposes costs, DCOs should already possess the information needed for these fields, and the Commission believes that the extra costs to DCOs associated with adopted § 45.4(c)(2) would be minimal. The Commission requested relevant information and quantitative estimates regarding the costs associated with creating and using these fields but did not receive any. As discussed in Section II.C.4.iv above, the Commission would encourage SDRs and DCOs to standardize messages for terminating original swap, which should alleviate some of the burden on DCOs. ii. Benefits Adopted § 45.4(c) will ensure that data concerning original swaps remains current and accurate, allowing the Commission to ascertain whether an original swap was terminated through clearing novation. Original swap data that does not reflect the current state of the swap frustrates the use of swap data for regulatory purposes, including, but not limited to, assessing market exposures between counterparties and evaluating compliance with the clearing mandate.318 The Commission is of the view that, to the extent that DCOs’ current practices are not currently in conformance with the adopted rule, requiring the DCO to report continuation data for original swaps is the most efficient and effective method to ensure that data concerning original swaps remains current and accurate as the DCO, through its rules, determines when an original swap is terminated and thus has the quickest and easiest access to authoritative information concerning termination of the original swap. Adopted § 45.4(c) will ensure that part 45 explicitly addresses DCO part 45 continuation data reporting obligations with respect to original swaps (i.e., alphas).319 Existing § 45.4(b), which 317 ‘‘Required swap continuation data’’ is defined in § 45.1 and includes ‘‘life cycle event data’’ or ‘‘state data’’ (depending on which reporting method is used) and ‘‘valuation data.’’ Each of these data types is defined in § 45.1. ‘‘Life cycle event data’’ means all of the data elements necessary to fully report any life cycle event. ‘‘State data’’ means all of the data elements necessary to provide a snapshot view, on a daily basis of all of the primary economic terms of a swap. 17 CFR 45.1. 318 See Swap Dealer De Minimis Exception Preliminary Report, (Nov. 18, 2015), at 13–14, available at http://www.cftc.gov/idc/groups/public/ @swaps/documents/file/dfreport_sddeminis_ 1115.pdf. 319 The Commission acknowledges that the alternatives separately discussed in the PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 41765 addresses ‘‘continuation data reporting for cleared swaps,’’ requires DCOs to report continuation data for ‘‘all swaps cleared by a [DCO],’’ but does not explicitly address the multi-swap framework provided in § 39.12(b)(6).320 Therefore, uncertainty persists as to whether, under existing § 45.4(b) the DCO must report continuation data for the alpha, beta and gamma swaps. The inconsistent interpretation of this reporting requirement leads to substantial differences in reporting of cleared swaps and presents challenges for regulatory oversight. The continuation data reporting requirements adopted in this rule will make explicit that the DCO has the obligation to report continuation data for original swaps that have been terminated and the clearing swaps that replace a terminated original swap. The Commission believes that the removal of the requirement that SDs and MSPs report daily valuation data for cleared swaps from § 45.4(b)(2) can result in cost savings to the extent that any SDs and MSPs are not currently relying on no-action relief.321 In addition, because there are fewer DCOs than non-DCO reporting counterparties, placing the responsibility to report valuation data solely on the DCO will result in a more consistent and standardized valuation reporting scheme, as there would be a dramatic decrease in the number of potential valuation data submitters to SDRs. This will benefit SDRs, regulators, and the public because it would facilitate data aggregation and improve the Commission’s ability to analyze SDR data and to satisfy its risk and market oversight responsibilities, including measurement of the notional amount of outstanding swaps in the market. Adopted § 45.4(c)(2) will require DCOs to report three important continuation data fields for original swaps which will assist regulators in tracing the history of, and associating Consideration of Alternatives, Section III.C.10, could also provide these benefits for registered entities and swap counterparties. However, for the reasons explained in that section, the Commission is of the view that the proposed approach is superior to the alternatives. 320 As discussed earlier in this release, § 39.12(b)(6) provides that upon acceptance of a swap by a DCO for clearing, the original swap is extinguished and replaced by equal and opposite swaps, with the DCO as the counterparty to each such swap. See 17 CFR 39.12(b)(6). 321 See CFTC No-Action Letter No. 12–55 (Dec. 17, 2012); CFTC No-Action Letter No. 13–34 (Jun. 26, 2013); CFTC No-Action Letter No. 14–90 (Jun. 30, 2014); and CFTC No-Action Letter No.15–38 (Jun. 15, 2015). Staff no-action relief from the requirements of § 45.4(b)(2)(ii) has been in effect since the initial compliance date for part 45 reporting. E:\FR\FM\27JNR2.SGM 27JNR2 41766 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 the individual swaps involved in, a cleared swap transaction, from execution of the original swap through the life of each clearing swap that replaces an original swap, regardless of the SDR(s) to which the original and clearing swaps are reported. The newly required continuation data elements to be reported by the DCOs for original swaps will ensure that original swap continuation data includes sufficient information to identify, by USI, any clearing swaps created from the same original swap, as well as the SDR where those clearing swaps reside. As such, the Commission expects that review of any particular swap in a registered SDR will include a listing of all other relevant USIs with respect to that swap (e.g., original swap and clearing swaps). The Commission believes that this requirement will help ensure the availability of information necessary to link original swaps and clearing swaps, even if those swaps are reported to different SDRs. The ability to link original and clearing swaps across multiple SDRs will decrease data fragmentation and will increase the ability of the Commission to accurately aggregate cleared swap data across various SDRs. As a result, adopted § 45.4(c)(2) will improve the ease of use for cleared swaps data, which will enhance the Commission’s ability to perform its regulatory duties, including to protect market participants and the public. 6. USI Creation by DCOs—§ 45.5(d) Existing § 45.5 requires that each swap subject to the Commission’s jurisdiction be identified in all swap recordkeeping and data reporting by a USI. The rule establishes different requirements for the creation and transmission of USIs depending on whether the swap is executed on a SEF or DCM or executed off-facility with or without an SD or MSP reporting counterparty. Existing § 45.5 also provides that for swaps executed on or pursuant to the rules of a SEF or DCM, the SEF or DCM creates the USI, and for swaps not executed on or pursuant to the rules of a SEF or DCM, the USI is created by an SD or MSP reporting counterparty, or by the SDR if the reporting counterparty is not an SD or MSP. Amended rule § 45.5(d) will require a DCO to generate and assign a USI for a clearing swap upon, or as soon as technologically practicable after, acceptance of an original swap by the DCO for clearing (in the event the clearing swap replaces an original swap) or execution of a clearing swap (in the event that the clearing swap does not VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 replace an original swap), and prior to reporting the required swap creation data for the swap. Amended § 45.5(d) contains provisions governing creation and assignment of USIs by the DCO that are consistent with analogous provisions governing creation and assignment of USIs by SEFs, DCMs, SDs, MSPs, and SDRs. All comments received with respect to amended § 45.5(d) were supportive of the change and there were no comments with regards to the costs and benefits of this amendment. i. Costs The Commission believes that adopted § 45.5(d) is largely consistent with industry practice and will not result in any additional costs for DCOs. Any DCOs that will not be in complete conformance with the adopted rule may need to enhance their existing technological protocols in order to create USIs in house, but these marginal costs would likely be lower than the costs associated with obtaining a USI with a separate USI-creating entity. The Commission believes that creating USIs in-house, rather than with a different USI creating entity, is less costly for DCOs and the Commission did not receive any data on that comparison or on any other quantifiable cost structures associated with § 45.5(d). ii. Benefits As noted above, the existing part 45 regulations do not explicitly address the assignment of USIs to swaps that fall within the adopted definition of clearing swaps. Explicitly requiring DCOs to generate, assign, and transmit USIs for clearing swaps will provide regulatory certainty with respect to the generation and assignment of USIs for clearing swaps. The adopted rule will also help ensure consistent and uniform USI creation and assignment for such swaps and will allow regulators to better identify and trace the swaps generally involved in cleared swap transactions, from execution of the original swap through the life of each clearing swap. 7. Determination of the Reporting Counterparty for Clearing Swaps—§ 45.8 Current § 45.8 establishes a hierarchy under which the reporting counterparty for a particular swap depends on the nature of the counterparties involved in the transaction. DCOs are not included in the existing § 45.8 hierarchy. The Commission is adopting § 45.8(i) in order to identify DCOs in the hierarchy as the reporting counterparty for clearing swaps. One commenter supported proposed § 45.8(i) as it promoted efficiency in PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 reporting by explicitly designating the DCO as the reporting party for clearing swaps.322 There were no other comments with respect to the costs and benefits of this amendment. i. Costs The Commission believes that the adopted amendments to § 45.8, in and of themselves, will not impose any additional costs on registered entities or reporting counterparties. The Commission believes that the rule simply reflects established reporting arrangements, which, to the Commission’s understanding, is for the DCO to submit data to the SDR for swaps that would fall within the definition of clearing swaps. ii. Benefits As noted above, clearing swaps are not explicitly acknowledged in existing § 45.3, and DCOs are not identified as reporting counterparties in the reporting counterparty hierarchy of § 45.8. The Commission acknowledges the comment by AIMA that one benefit of proposed § 45.8(i) is that it improves efficiency in reporting by explicitly designating the DCO as the reporting party for clearing swaps. In addition, the Commission expects that modifications to the § 45.8 reporting counterparty hierarchy will eliminate ambiguity regarding which registered entity or swap counterparty is required to report required creation data for clearing swaps, explicitly delineating the nature and extent of DCO reporting obligations, and affording market participants and SDRs a more precise and accurate understanding of reporting obligations under part 45. 8. Reporting to a Single Swap Data Repository—§ 45.10 Existing § 45.10 requires that all swap data for a given swap must be reported to a single SDR, which must be the same SDR to which creation data for that swap is first reported. The time and manner in which such data must be reported to a single SDR depends on whether the swap is executed on a SEF or DCM or executed off-facility with or without an SD/MSP reporting counterparty. The Commission is amending § 45.10 to require DCOs to report all data for a particular clearing swap to a single SDR. Moreover, consistent with current industry practice, amended § 45.10(d)(3) will require the DCO to report all required swap creation data for each clearing swap that replaces a particular original swap (i.e., the beta and gamma that 322 See E:\FR\FM\27JNR2.SGM AIMA Oct. 30, 2015 Letter, at 6. 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations replace a particular alpha) to a single SDR, such that all required creation data and all required continuation data for all clearing swaps that can be traced back to the same original swap will be reported to the same SDR (although not necessarily the same SDR as the original swap). i. Costs The Commission does not expect DCOs to incur any new costs associated with ensuring that clearing swap data is reported to a single SDR because the requirements of the adopted rule are, to the Commission’s understanding, consistent with current DCO reporting practice. mstockstill on DSK3G9T082PROD with RULES2 ii. Benefits The Commission believes that the benefit of reporting data associated with each clearing swap to a single SDR is that all required creation data, all required continuation data for related clearing swaps and, by extension, USIs linking clearing swaps to the original swap, will be stored with the same SDR. This will minimize confusion on the part of SDRs and regulators regarding which swaps are still active and which ones have been terminated. The Commission notes that the benefits of reporting all data for clearing swaps to the same SDR are currently being realized, as it is current industry practice for DCOs to report swaps that will fall under the amended definition of clearing swaps in conformance with adopted § 45.10(d)(3). 9. PET Data—Adopted Amendments to the Primary Economic Terms Data Tables The Commission’s current lists of minimum (required) primary economic terms for swaps in each swap asset class are found in tables in Exhibits A–D of appendix 1 to part 45. With this final release, the Commission has modified the descriptions of some PET fields applicable to all swaps, added some PET fields applicable to all swaps, and added some PET fields applicable only to clearing swaps. For PET fields applicable to clearing swaps, the Commission is adding several new data elements under the heading ‘‘Additional Data Categories and Fields for Clearing Swaps’’ to Exhibits A–D in order to more accurately capture the additional, unique features of clearing swaps that are not relevant to original swaps or uncleared swaps. The newly proposed data fields include: The USI for the clearing swap; the USI for the original swap; the SDR to which the original swap was reported; clearing member LEI, clearing member client account VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 origin, house or customer account; clearing receipt timestamp; and clearing acceptance timestamp. As for PET field modifications and additions relevant for all swaps, the Commission is also adding several new required data elements, which will be applicable to all swaps, and making conforming changes to some existing data elements. The newly added fields include: Asset class, an indication of whether the reporting counterparty is a DCO with respect to the swap, and clearing exception or exemption types. The Commission has received various comments with respect to the proposed changes to the primary economic terms data but few that address the cost and benefits of the changes are summarized below.323 ISDA commented on the proposed ‘‘Clearing exception or exemption type’’ PET field, which would require the reporting party to identify the clearing exemption exercised for a particular swap.324 ISDA commented that it could be challenging and costly for firms to implement this change, while providing no new information because exception and exemption elections must already be provided to SDRs. Because existing reporting standards can identify interaffiliate trades, ISDA recommended that the ‘‘Clearing exception or exemption type’’ PET field acceptable values be limited to ‘‘inter-affiliate’’ and ‘‘other.’’ With respect to ISDA’s comment, SDs are already required already to submit to SDRs information on any clearing exception or exemption elections made by their counterparties pursuant to part 50. The Commission believes that reporting information on clearing exception or exemption elections on a transactional basis, in the manner described in the proposed changes to the primary economic terms, should not substantially increase costs on reporting counterparties. i. Costs The Commission emphasizes that, as a result of the amendments to the PET data tables for clearing swaps, the newly added data fields for clearing swaps will be reported exclusively by DCOs. While 323 One commenter cautioned that the definitions used in the markets are not always consistent with those proposed by the NPRM, which places a significant burden on small-sized market participants. See JBA Oct. 30, 2015 Letter, at 2–3. Because the only new fields either relate solely to clearing swap reporting (and therefore affect only DCOs), reference terms defined in the Regulations (such as ‘‘Asset class’’), or reference the application of certain provisions of the Regulations (such as ‘‘Clearing Exception or Exemption Type’’), the Commission believes the terms in the new PET data fields are sufficiently clear to avoid any costs or burden cited by this commenter. 324 See ISDA Oct. 30, 2015 Letter, at 9. PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 41767 there might be costs associated with reporting newly added data fields, the Commission believes that DCOs are better situated than swap counterparties to report the additional fields for clearing swaps without the substantial costs and operational burdens because DCOs already possess certain information, or other registered entities and swap counterparties are required to transmit the information to DCOs, regarding those fields. For example, the data necessary to report the adopted ‘‘original swap SDR’’ field is currently required to be transmitted to the DCO under existing § 45.5, and the Commission understands that data required by the amended ‘‘clearing receipt timestamp’’ and ‘‘clearing acceptance timestamp’’ fields may already be generated and present in DCO systems—such DCOs would just have to transfer those timestamps to the reporting system for each clearing swap. Similarly, the Commission understands that house or customer account designations are already collected and maintained in relation to certain part 39 reporting obligations. Hence, there will be no additional cost in collecting the information necessary to report the ‘‘origin (house or customer)’’ field, and marginal costs might stem from conveying the information in part 45 swap data reports. The Commission solicited comments on the extent to which DCOs may already possess the information required by the amended additional fields and the costs associated with obtaining and/or reporting such information but did not receive any comments or estimates on this topic. While the Commission requested the data needed to quantify the cost of the addition of three data fields applicable to all reporting entities (asset class, DCO indicator, and clearing exception or exemption type), the Commission did not receive any quantifiable estimates of costs associated with creating and using these fields from commenters. The Commission believes that the costs associated with these additional fields will not be substantial since the information necessary to report these data elements is likely to be readily available in connection with the execution of swaps, with some marginal costs stemming from the requirement to include the information in PET data reported to an SDR (to the extent that such information is not already reported). The Commission understands that in at least some cases, market practice is to report some of the information required by the proposed E:\FR\FM\27JNR2.SGM 27JNR2 41768 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations three new data fields applicable to all reporting entities for all swaps. ii. Benefits The Commission believes that the additions to the list of minimum primary economic terms will result in a variety of benefits. Clearing swap PET fields, such as USI for the original swap or the SDR to which the original swap was reported, can facilitate the monitoring of each original swap by SDRs and regulators. Clearing swap PET fields can also prevent potential doublecounting of swap transactions or notional amounts, thus improving the accuracy of SDR data for use by the Commission in such activities as evaluating swap dealer de minimis thresholds. Other proposed fields such as clearing member LEI or clearing member client account information will facilitate the Commission’s assessment of risk management of market participants, promoting the protection of the financial integrity of the markets and the protection of market participants and the public. The new PET fields for all swaps also will benefit the Commission in performing its regulatory obligations. The asset class data field will assist the Commission in determining the asset class for swaps reported to SDRs, enhancing the Commission’s ability to identify swaps activity in each asset class as well as the capability to use the data for regulatory purposes. The indication of whether the reporting counterparty is a DCO with respect to the swap data field will help the Commission monitor DCOs’ compliance with reporting of clearing swap data elements, and improve the Commission’s ability to analyze swap data relating to cleared swap transactions. The clearing exception or exemption types data field will enable the Commission to ascertain the specific exception or exemption from the clearing requirement that was elected and will assist in the evaluation of compliance with the clearing requirement, as well as assessing market activity in uncleared swaps. mstockstill on DSK3G9T082PROD with RULES2 10. Consideration of Alternatives The Commission considered the costs and benefits of certain alternatives raised by commenters in response to the IDWG Request for Comment and the NPRM, including whether part 45 should require intended to be cleared swaps (original swaps) to be reported to registered SDRs. Some commenters noted that reporting of alpha swaps is beneficial and should continue to be VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 required,325 while other commenters contended that alpha swaps should not be required to be reported to an SDR and questioned the benefits of requiring the reporting of alpha swaps.326 Some commenters stated that the Commission should require clearing swaps to be reported to the same SDR as original swaps, so that the entire history of a swap would reside at the same SDR.327 A number of commenters suggested that part 45 should place swap data reporting obligations solely on DCOs, including with respect to swaps that are intended to be cleared at the time of execution and accepted for clearing by a DCO (swaps commonly known as ‘‘alpha’’ swaps) and swaps resulting from clearing (swaps commonly known as ‘‘beta’’ and ‘‘gamma’’ swaps).328 However, other commenters noted that it would not be appropriate to require a DCO to report information related to the execution of an alpha swap.329 In light of these comments, the Commission considered the costs and benefits of six alternatives in comparison to the costs and benefits of the proposed rule: (1) Requiring original and clearing swaps to be reported to the same SDR chosen by the reporting counterparty or SEF/DCM; (2) requiring original and clearing swaps to be reported to the same SDR chosen by the DCO accepting the swap for clearing; (3) requiring only one report for each swap intended for clearing, that is, not requiring original (alpha) swaps to be reported separately from clearing swaps, with the SDR chosen by the reporting counterparty or SEF/DCM; (4) requiring only one report for each swap intended for clearing as in (3), but with the SDR chosen by the DCO accepting the swap for clearing; (5) requiring the DCO to 325 See TR SEF May 27, 2014 Letter, at 10; AFR May 27, 2014 Letter, at 5; Markit May 27, 2014 Letter, at 25; and DTCC May 27, 2014 Letter, at 17– 18. 326 See AIMA Oct. 30, 2015 Letter, at 2–6; EEI/ EPSA Oct. 30, 2015 Letter, at 3; CEWG Oct. 30, 2015 Letter. At 2; SIFMA May 27, 2014 Letter, at 4; CEWG May 27, 2014 Letter, at 15; CME May 27, 2014 Letter, at 2–3 327 See DTCC Oct. 30, 2015 Letter, at 3; DTCC May 27, 2014 Letter, at 2–3, appendix at 4, 21 (arguing that the Commission should adopt a ‘‘single SDR’’ rule to ensure that all of the data for a swap is available in one SDR); ISDA May 27, 2014 Letter, at 44. 328 See CMC Oct. 30, 2015 Letter, at 2–3; CME Oct. 30, 2015 Letter, at 2–3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015 Letter, at 3; CMC May 27, 2014 Letter, at 1, 3, 6; NFPEA May 27, 2014 Letter, at 12; EEI/EPSA May 27, 2014 Letter, at 3, 14; ITV May 27, 2014 Letter, at 3, 17; CEWG May 27, 2014 Letter, at 16; CME May 27, 2014 Letter, at 20; and NFP Electric Associations May 27, 2014 Letter, at 4. 329 See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4; LCH May 29, 2014 Letter, at 10. PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 report both the original swap and all resulting clearing swaps, to the SDR of its choosing; and (6) requiring the original swap reporting counterparty to report the creation and the termination of the original swap.330 The first two alternatives each require swaps that become original swaps and the resulting clearing swaps to be reported to the same SDR. If such swaps were reported to the same SDR, there would be no need for certain requirements in proposed § 45.4(c) that extra fields, such as clearing swap SDR, be included in the report to the SDR for the clearing swap to link the clearing swap to an original swap on a different SDR. Similarly, the need for certain clearing swap PET data fields, such as the identity of the original SDR, intended to be used for linking purposes, might not be necessary. This would reduce costs to the extent that certain PET data fields would not be required to link the original and clearing swaps. The first approach would require DCOs to connect to multiple SDRs to the same extent as the adopted rules. However, the second approach could require reporting counterparties or SEFs/DCMs to connect to multiple SDRs, which could increase costs for a larger number of market participants. Because the adopted rule more closely reflects current industry practice relative to the alternative, there would be some potentially significant one-time costs, including the costs of changes to existing systems, associated with changing practices to conform to the alternatives. Additionally, a substantial portion of aggregation costs for regulators, and, likely, market participants, arises from the current landscape, which includes multiple SDRs. The adopted requirements to link original and clearing swaps at multiple SDRs is a relatively minor burden compared with the existing burden on the Commission, and potentially other regulators, in reconciling swap data for a cleared swap transaction across multiple SDRs without data elements linking the original and clearing swaps. Additionally, costs associated with monitoring and aggregation would likely be mitigated by the continuation data fields of adopted § 45.4(c)(2), which would enable regulators to more effectively connect original swaps at one SDR with clearing swaps at another SDR. Also, as noted in Section II.B.4.iv, above, these options could also introduce delays in reporting under 330 The Commission highlighted the first four alternatives in its NPRM, and added the last two in light of comments provided in response to the NPRM. E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 both part 43 and part 45, which could undermine the price discovery function of real-time reporting. Regarding who would choose the single SDR, the SDR could be chosen by the reporting counterparty (or DCM or SEF) or by the DCO. Under either of the first two alternatives, one registered entity or counterparty’s choice of SDR would bind a second registered entity or counterparty to also report to that SDR, which could be an SDR that the second registered entity or counterparty would not otherwise select. Allowing the reporting counterparty or SEF/DCM to choose the SDR would enable the reporting party to choose the SDR with the best combination of prices and service, and thus may promote competition among SDRs. Allowing the DCO to choose the SDR for both original and clearing swaps would likely result in the DCO always choosing the same SDR, which may be the SDR that is affiliated with the DCO (that is, shares the same parent company). This would reduce costs for DCOs since they would need to maintain connectivity with only one SDR, but would limit the ability of SDRs to compete since DCOs could choose to report only to SDRs with which they are affiliated.331 Under the third and fourth alternatives, there would be no requirement to report intended to be cleared swaps (original swaps) separately from the resulting clearing swaps. Rather, there would only be one report for each cleared swap transaction. This would be a change from current swap market practice. As with the first two alternatives, the choice of SDR could be made by the reporting counterparty as determined under current § 45.8, or by the DCO as under adopted § 45.8(i). If there is only one report for each cleared swap transaction, there would be ongoing cost savings associated with the need to make fewer reports to SDRs. As with the first two alternatives, there would be no need for the requirement in adopted § 45.4(c) that extra fields, such as clearing swap SDR, be included in the report to the SDR to link the clearing swap to an original swap on a different SDR, and market participants and the Commission could access all information about a single cleared swap transaction at a single SDR. This would also reduce costs relative to the adopted rule. 331 The Commission requested comment on the extent to which SDRs compete on the basis of price or service and the extent to which SDRs are chosen on the basis of relationships with registered entities and reporting counterparties. Markit commented on DCOs using affiliated SDRs for reporting, which is addressed in the Antitrust Considerations, Section III.D, below. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 However, the benefits of separate reports for original and clearing swaps would be foregone and there may be a less complete record of the history of each cleared swap. Moreover, it would be more difficult for the Commission to determine the original counterparties, original execution time, and other vital information on the original swap for market surveillance or enforcement purposes. It may be possible to reclaim these benefits through requiring additional fields in each cleared swap report, although this would also increase costs and would require DCOs to receive and report information beyond what is otherwise required for clearing purposes. Additionally, because the adopted rule more closely reflects current industry practice relative to these alternatives, there would be some potentially significant one-time costs, including the costs of changes to existing systems, associated with changing practices to conform to the alternatives. The effects of who chooses the SDR are similar to the effects described for the first two alternatives. Under the fifth alternative, the DCO would report both the swap that becomes the original swap (including creation data and termination) and all clearing swaps resulting from clearing of the original swap. While one DCO and some end-users supported this alternative as simplifying work flows and reducing costs to original swaps counterparties,332 other DCOs opposed requiring DCOs to report original and clearing swaps because DCOs would not have all information required to report original swaps.333 While recognizing that this alternative could reduce costs for reporting counterparties, the Commission declined to adopt this alternative as DCOs would not have all information necessary to submit such reports. Further, the Commission declined to adopt this alternative because of negative impacts on the timeliness of reporting real-time pricing information under part 43. Finally, under the sixth alternative, the reporting counterparty to the original swap would be required to report the termination of that swap upon acceptance for clearing. As addressed above in the discussion of final § 45.4, the Commission believes that DCOs would be in a better position to report the termination of the original swap, and would have all information necessary to report such terminations. 332 See CME Oct. 30, 2015 Letter, at 6–7; CMC Oct. 30, 2015 Letter, at 2–3. 333 See LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4. PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 41769 The Commission has determined not to adopt the alternatives listed above because the final rule is more consistent with current industry practice than such alternatives. The Commission understands that reporting counterparties and registered entities are already set up to report alpha swaps to registered SDRs (whether or not such swaps are intended to be cleared at the time of execution) and that DCOs are already set up to report beta and gamma swaps that result from acceptance of a swap for clearing, and have been making such reports. Accordingly, the industry has already incurred the costs of setting up a system for reporting cleared swap transactions to SDRs (including separate reports for swaps that would fall within the proposed definitions of original and clearing swaps). Changing this system to conform to an alternative rule would have certain costs to reporting entities. The Commission also believes that clarifying distinct reporting requirements in part 45 for alphas (swaps that become original swaps) and betas and gammas (clearing swaps that replace original swaps) presents a full history of each cleared swap transaction and permits the Commission and other regulators to identify and analyze each component part of such transactions. The Commission also continues to believe that placing the part 45 reporting obligation on the counterparty or registered entity closest to the source of, and with the easiest and fastest access to, complete and accurate data regarding a swap fosters accuracy and completeness in swap data reporting. In light of these benefits, the Commission will maintain the current industry practice of separately reporting both alpha swaps (i.e., swaps that would become original swaps under the proposed rules) and beta and gamma swaps (i.e., clearing swaps as defined under the proposed rules). Additionally, the multi-swap reporting approach adopted in this rule is largely consistent with the approach proposed by the SEC in its release proposing certain new rules and rule amendments to Regulation SBSR,334 and is also largely consistent with the approach adopted by several foreign regulators.335 Given that the swaps market is global in nature, the Commission anticipates that adopting 334 See Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015). 335 The Commission’s understanding is that a number of jurisdictions, including the European Union, Singapore, and Australia, for example, also account for a multi-swap approach to the reporting of cleared swaps. E:\FR\FM\27JNR2.SGM 27JNR2 41770 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 an approach to the reporting of cleared swaps in the United States that is consistent with the approaches adopted in other jurisdictions may minimize compliance costs for entities operating in multiple jurisdictions. 11. Section 15(a) Factors Section 15(a) of the CEA requires the Commission to consider the effects of its actions in light of the following five factors: (1) Protection of market participants and the public. In the Final Part 45 Rulemaking, the Commission stated that the data reporting requirements of part 45 provided for protection of market participants and the public by providing regulatory agencies with a wealth of previously unavailable data in a unified format, greatly enhancing the ability of market and systemic risk regulators to perform their oversight and enforcement functions.336 The Commission believes that the adopted amendments outlined in this final release will enhance these protections by explicitly providing how and by whom each of the swaps involved in a cleared swap transaction should be reported. In particular, by requiring DCOs to electronically report the creation data and continuation data for clearing swaps, the Commission believes that data on all clearing swaps associated with a specific original swap will be aggregated at the same SDR, provided by a single entity and readily available for accurate and complete analysis. This will also allow the Commission and other regulators to access all data pertaining to related clearing swaps from a single SDR. These enhancements should allow for efficiencies in oversight and enforcement functions, resulting in improved protection of market participants and the public. (2) The efficiency, competitiveness and financial integrity of the markets. In the Final Part 45 Rulemaking, the Commission stated that the swap data reporting requirements of part 45 would enhance the financial integrity of swap markets.337 The Commission also stated that part 45’s streamlined reporting regime, including the counterparty hierarchy used to select the reporting counterparty, could be considered efficient in that it assigns greater reporting responsibility to more sophisticated entities more likely to be able to realize economies of scale and scope in reporting costs.338 The Commission believes that the amendments in this final release will 336 77 337 Id. FR 2136, 2188. at 2189. 338 Id. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 further enhance this efficiency by requiring DCOs to report where they are the party best equipped to do so.339 In addition, by explicitly delineating reporting responsibilities associated with each component of a cleared swap transaction, the adopted rules should result in improved reliability and consistency of the swaps data reported, further enhancing the financial integrity of the swap markets. The rule confirming that the reporting counterparty or SEF/DCM has the right to choose the SDR for the original swap can promote competition among SDRs. However, the Commission also acknowledges that by allowing DCOs to choose the SDR to which they report, competition for SDR services can be impacted as a result of DCOs reporting to their affiliated SDR, that is, an SDR that shares the same parent company as the DCO. Any such impact on competition will be a consequence of business decisions designed to realize costs savings associated with the affiliations between DCOs and SDRs. The Commission notes that section 21 of the CEA permits a DCO to register as an SDR. (3) Price Discovery. In the Final Part 45 Rulemaking, the Commission stated that the swap data reporting requirements of part 45 did not have a material effect on the price discovery process.340 The Commission believes that the adopted amendments also will not have a material effect on price discovery. (4) Risk Management. In the Final Part 45 Rulemaking, the Commission stated that the data reporting requirements of part 45 did not have a material effect on sound risk management practices.341 The Commission believes that the adopted amendments also will not have a material effect on sound risk management practices. (5) Other Public Interest Considerations. In the Final Part 45 Rulemaking, the Commission stated that the data reporting requirements will allow regulators to readily acquire and analyze market data, thus streamlining the surveillance process.342 The Commission preliminarily believes that the amendments outlined in this release will enhance this consideration by providing certainty about how and by whom each of the swaps involved in a 339 As noted earlier in this release, the Commission’s understanding is that the DCO is the entity that should have the easiest and quickest access to full information with respect to PET data and confirmation data for clearing swaps, as well with respect to terminations of original swaps. 340 77 FR 2136, 2189 (Jan. 13, 2012). 341 Id. at 2189. 342 Id. PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 cleared swap transaction should be reported. As noted earlier in this release, the multi-swap reporting approach proposed in this final release is largely consistent with the approaches proposed by the SEC and adopted by several foreign regulators. Given that the swaps market is global in nature, the Commission anticipates that adopting an approach that is consistent with the approaches adopted by other regulators may further other public interest considerations by reducing compliance costs for entities operating in multiple jurisdictions. D. Antitrust Considerations Section 15(b) of the CEA requires the Commission to take into consideration the public interest to be protected by the antitrust laws, and endeavor to take the least anticompetitive means of achieving the objectives of the CEA, in issuing any order or adopting any Commission rule or Regulation. The Commission evaluated the amendments to Part 45 in the context of 7 U.S.C. 2(a)(13)(G) and 7 U.S.C. 24a, which were adopted by Congress as part of the Dodd-Frank Act. These provisions require each swap, whether cleared or uncleared, to be reported to a registered SDR. The Dodd-Frank Act was enacted to reduce systemic risk, increase transparency, and promote market integrity by, among other things, creating rigorous data reporting regimes with respect to swaps, including real time reporting.343 As noted in this release, the Commission has adopted these amendments to help ensure that cleared swaps transactions are reported to SDRs in a consistent and accurate way to allow the Commission to evaluate market risk and monitor for abusive trading practices. In the Final Part 45 Rulemaking, the Commission identified choice of SDR as one area of the rules that could potentially have an impact on competition.344 In that release, the Commission stated that the adopted rule governing who makes the initial creation data report and selects the SDR ‘‘favors market competition, avoids injecting the Commission into a market decision, and leaves the choice of SDR to be influenced by market forces and possible market innovations.’’ 345 In the NPRM proposing amendments on cleared swap reporting, the Commission asked for comments on any anticompetitive impacts of the proposed 343 77 FR 2136, 2137. FR 2136, 2149. 345 77 FR 2136, 2149. 344 77 E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations cleared swaps reporting rules.346 In response to the NPRM, the Commission received two comments directly addressing competitive concerns. DTCC and Markit both commented that allowing a DCO to select the SDR for clearing swaps will impact competition as some DCOs have affiliated SDRs, which may allow DCOs to bundle clearing services with SDR services.347 DTCC commented that allowing the DCO to report to an affiliated SDR, particularly after the original swap has already been reported to a different SDR, will further entrench DCOs’ vertical integration in trade execution, clearing, and data reporting.348 DTCC argued that this would, in turn, increase barriers to entry for exchanges, clearinghouses, and independent SDRs that are unaffiliated with DCOs.349 As an alternative, DTCC proposed to grant the registered entity or reporting counterparty that is obligated to report the original swap the ability to select the SDR to which the clearing swaps must be reported by the DCO.350 Markit argued that allowing the DCO to select the SDR to which clearing swaps are reported would provide regulatory approval for anticompetitive tying of clearing and reporting services.351 Markit contrasted the current marketplace for clearing services with what existed in March 2013 when the Commission approved CME Rule 1001, and alleged that concentration has increased since 2013.352 In support, Markit argued that one DCO—which is affiliated with an SDR—clears 87 percent of global credit index swaps.353 As an alternative to the Commission’s proposal, Markit proposed that the reporting counterparty for an original swap be permitted, at its discretion, to both report the resulting clearing swaps and select the SDR to which the clearing swaps are reported. Under Markit’s proposal, the reporting counterparty to the original swap would also be permitted to delegate this reporting and SDR selection responsibility to the DCO.354 The Commission has taken into consideration the public interest to be protected by the antitrust laws, and endeavored to take the least anticompetitive means of achieving the objectives of the CEA in adopting this mstockstill on DSK3G9T082PROD with RULES2 346 80 FR 52571. Markit Oct. 30, 2015 Letter, at 3–5; DTCC Oct. 30, 2015 Letter, at 7. 348 See DTCC Oct. 30, 2015 Letter, at 7. 349 See DTCC Oct. 30, 2015 Letter, at 7. 350 See DTCC Oct. 30, 2015 Letter, at 7. 351 See Markit Oct. 30, 2015 Letter, at 4. 352 See Markit Oct. 30, 2015 Letter, at 4. 353 See Markit Oct. 30, 2015 Letter, at 4–5. 354 See Markit Oct. 30, 2015 Letter, at 5. 347 See VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 final rule. Having considered the comments raised by DTCC and Markit, the Commission believes that the amendments to part 45 concerning choice of SDR announced in this release meet this least-anticompetitive-means standard. The mix of entities reporting swaps to the various SDRs illustrates how the choice of SDR currently operates in the marketplace. Presently there are four registered SDRs to which swaps may be reported. Two of the SDRs (CME and ICE Trade Vault) are affiliated with DCOs and contain swaps data reported by those DCOs, as well as data reported by SEFs, SDs, and non-SD/MSP market participants. These SDRs receive swap data on uncleared swaps, as well as both the original swaps and clearing swaps from cleared swap transactions. One SDR (DTCC) is a subsidiary of a large financial services utility and has ownership and governance ties to a number of swap dealers. DTCC receives swap data from a number of those swap dealers, as well as SEFs, non-SD/MSP market participants, and at least one DCO. DTCC receives swaps reporting for a large number of uncleared swaps, as well as original swaps whose associated clearing swaps are reported at either DTCC or a DCO-affiliated SDR. The fourth SDR (Bloomberg) is corporately affiliated with a SEF and available to accept data from, among others, SEFs/ DCMs, DCOs, and reporting counterparties. Also relevant to this discussion, some SD/MSPs and SEFs report swaps to multiple SDRs. Some SDs and SEFs, even those with corporate affiliations or ownership links to SDRs, report some swaps to SDRs to which they have no such connections. The mix of swaps reported to each SDR (uncleared, original and clearing swaps) and the mix of reporting entities using each SDR are the result of market participants’ decisions on how to fulfill reporting obligations. Consumers of SDR services under these amendments are the entities with the first reporting obligation on a swap: SEFs/DCMs for uncleared or original swaps executed on-facility; reporting counterparties (primarily swap dealers, but also non-SD/MSP market participants) for uncleared or original swaps executed off-facility; and DCOs for clearing swaps. The amendments place the choice of SDR for each individual swap with the entity first required to report data on that swap. The amendments do not place the choice of SDR with a single entity or counterparty with respect to more than one swap. In other words, the choice of SDR will be made as to a particular swap when a registered entity or PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 41771 reporting counterparty that is required to report the swap makes the first report of all creation data on a particular swap.355 Because each reporting entity responsible for the first report of a swap would have its choice of SDR, the Commission does not believe that the amendments to Part 45 in this release will significantly impact the mix of swaps reported to each SDR and the mix of reporting entities using each SDR, as described above. In determining which entity may select the SDR for the original and separately for clearing swap components of a cleared swap transaction, the Commission considered three alternatives that potentially could achieve the objectives of the CEA: (a) Allowing the entity initially reporting an original swap to select the SDR for both the original and clearing swaps, by requiring clearing swaps to be reported to the same SDR as the original swaps they replace; (b) allowing the DCO to select the SDR for both the original and clearing swaps; or (c) allowing the entity first reporting a swap to select the SDR, specifically by allowing the original swap reporting entity to select the SDR for the original swap and the DCO to select the SDR for the clearing swaps. Of the three, the Commission considers its ultimate decision—option (c)—to be the least anticompetitive to satisfy its regulatory objectives. Both option (a) and (b) hold significant potential for a particular constituency group—namely swap dealers or DCOs, respectively— to assume an outsized role in shaping the evolving SDR landscape to favor the competitive interests of particular SDRs to which they have financial ties.356 In contrast, option (c) minimizes this potential by diffusing the SDR selection role across different categories of reporting entities. No reporting entity (such as an individual DCO) or group of similarly situated reporting entities 355 As discussed in section III.C.4. above, § 45.3(j) provides that the registered entity or counterparty required to report swap creation data has the choice of SDR when fulfilling its obligations under §§ 45.3(a)–(e). 356 As noted, DTCC has ownership and governance ties to a number of swap dealers. Additionally, some swap dealers in the DTCC ownership consortium have ownership and/or governance ties to certain SEFs. Accordingly, the Commission sees a strong incentive for swap dealers and swap dealer-affiliated SEFs to select DTCC as the SDR to the extent this part 45 amendment grants them authority to do so. Conversely, the Commission foresees a strong likelihood that DCO’s that have affiliate SDRs, will select their respective SDR affiliates to the extent this part 45 amendment grants them authority to do so and doing so is consistent with their core principle obligations. As discussed below, the CME Group DCO currently has a rule providing that all swaps that it clears be reported to the CMEaffiliated SDR. E:\FR\FM\27JNR2.SGM 27JNR2 41772 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations mstockstill on DSK3G9T082PROD with RULES2 (such as SDs that have an ownership interest in an SDR) would be able to dictate where another reporting entity reports a swap. As a result, swaps reporting should not become concentrated in a single SDR associated with either DCOs or SDs. On the contrary, even assuming that all SDs choose to report all original and uncleared swaps to DTCC while ICE and CME report all clearing swaps to their affiliated SDRs, swaps reporting will be diffused across at least three SDRs. At the same time, the adopted amendments allow reporting entities to take advantage of costs savings and efficiencies by selecting an SDR with which the reporting entity has an existing relationship. In the context of this rulemaking, the Commission believes that the concerns of DTCC and Market are misdirected. The criticism of both commenters pivots on the fundamental view that ‘‘the proposed rule unnecessarily permits DCOs to bundle services’’ and that anticompetitive consequences flow from such bundling.357 The instant amendment, however, merely specifies who, in a particular circumstance, will select the SDR to which a particular swap will be reported; the amendment neither permits nor prohibits DCO/SDR bundling—it does not speak to the issue at all. To the extent that a particular DCO reports all of its swaps to a particular SDR (pursuant to a DCO rule or otherwise), it must do so consistent with its core principle obligations, including Core Principle N.358 This amendment does not alter or otherwise impact that obligation. DCO registration is contingent upon ongoing compliance with Core Principle N.359 Thus the question of whether a particular DCO may be restraining trade or imposing an anticompetitive burden through the manner in which it exercises its § 45.3(j) SDR-choice (including under a theory of anticompetitive tying) is properly addressed as a matter of DCO compliance with Core Principle N.360 357 DTCC Oct. 30, 2015 Letter, at, p. 7; see also, Markit Oct. 30, 2015 Letter, at 4 (‘‘proposed policy would provide regulatory approval for anticompetitive tying of clearing and regulatory reporting services’’). 358 CEA section 5b(c)(2)(N), 7 U.S.C.7a–1(c)(2)(N). DCO Core Principle N provides that unless necessary or appropriate to achieve the purposes of this Act, a derivatives clearing organization shall not—(i) adopt any rule or take any action that results in any unreasonable restraint of trade; or (ii) impose any material anticompetitive burden. 359 See CEA section 5b(c)(2)(A)(i), 7 U.S.C. 7a– 1(c)(2)(A)(i); 17 CFR 39.10(a). 360 Currently, CME Rule 1001 provides that the CME Group DCO will report all swaps resulting from its clearing to the CME Group SDR. After consideration pursuant to section 5c(c)(5) of the CEA and Commission regulation 40.5, the VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 IV. Compliance Dates Because some revisions and additions to part 45 create new reporting obligations or clarify existing reporting obligations, while some remove obligations presently covered by noaction or other relief, the Commission is adopting this release on a bifurcated basis. The deletion of former § 45.4(b)(2)(ii), requiring that SD/MSP counterparties to clearing swaps report valuation data on those swaps, shall be effective upon publication in the Federal Register. Compliance with all other revisions and additions to part 45 adopted in this release shall be required one hundred and eighty (180) days after this release is published in the Federal Register. The Commission has noted comments on the need for market participants, SDRs, DCOs, and other affected parties to update systems to comply with the proposed changes to part 45.361 Therefore, the Commission is adopting the revisions and additions to part 45 with compliance dates for new obligations that will provide sufficient time to update and test reporting systems. List of Subjects in 17 CFR Part 45 Data recordkeeping requirements and data reporting requirements, Swaps. Commission granted CME’s request for approval of Rule 1001 on March 6, 2013. See Statement of the Commission (‘‘Statement’’), available at http:// www.cftc.gov/idc/groups/public/@newsroom/ documents/file/statementofthecommission.pdf. In granting the request for approval, the Commission determined, among other things, that under the then-current facts and circumstances Rule 1001 was not inconsistent with DCO Core Principle N. As the Statement expressly stated, however, the Commission’s determination was based on the ‘‘present facts and circumstances,’’ and that ‘‘CME has a continuing obligation to implement its Rule 1001 in a manner consistent with the Commission’s regulations and the DCO Core Principles, including Core Principle N, based on the relevant facts and circumstances as they may change over time.’’ Statement at 12. The Commission expects that DCOs will continue to monitor industry circumstances and amend their rules and conduct as necessary to remain in statutory and regulatory compliance as industry conditions evolve. More specifically in the context of compliance with Core Principle N, the Commission expects such ongoing monitoring to include attention to the competitive impact of DCO rules and conduct in appropriately defined relevant antitrust product and geographic markets, and assessment of whether particular DCO rules or conduct transgress antitrust laws, including Sherman Act sections 1 and 2, 15 U.S.C. 1 and 2. 361 See JBA Oct. 30, 2015 Letter, at 2 (requesting delayed implementation); DTCC Oct. 30, 2015 Letter, at 9 (requesting that all changes to PET fields be required prospectively only, and not for existing swaps; requesting implementation time of 6 months); ISDA Oct. 30, 2015 Letter, at 12 (requesting delayed implementation, but deferring to SDRs and DCOs on timeline for such implementation); LCH Oct.30, 2015 Letter, at 2 (recommending at least 12 months for DCOs and SDRs to coordinate on solution for reporting). PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 For the reasons stated in the preamble, the Commodity Futures Trading Commission amends 17 CFR part 45 as set forth below: PART 45—SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS 1. The authority citation for part 45 is revised to read as follows: ■ Authority: 7 U.S.C. 6r, 7, 7a–1, 7b–3, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111–203, 124 Stat. 1376 (2010), unless otherwise noted. 2. Amend § 45.1 as follows: a. Add a definition for ‘‘clearing swap’’ in alphabetical order; ■ b. Revise the definition of ‘‘derivatives clearing organization’’; and ■ c. Add a definition for ‘‘original swap’’ in alphabetical order. The additions and revisions read as follows: ■ ■ § 45.1 Definitions. * * * * * Clearing swap means a swap created pursuant to the rules of a derivatives clearing organization that has a derivatives clearing organization as a counterparty, including any swap that replaces an original swap that was extinguished upon acceptance of such original swap by the derivatives clearing organization for clearing. * * * * * Derivatives clearing organization means a derivatives clearing organization, as defined by § 1.3(d) of this chapter, that is registered with the Commission. * * * * * Original swap means a swap that has been accepted for clearing by a derivatives clearing organization. * * * * * ■ 3. Revise § 45.3 to read as follows: § 45.3 Swap data reporting: Creation data. Registered entities and swap counterparties must report required swap creation data electronically to a swap data repository as set forth in this section and in the manner provided in § 45.13(b). The rules governing acceptance and recording of such data by a swap data repository are set forth in § 49.10 of this chapter. The reporting obligations of swap counterparties with respect to swaps executed prior to the applicable compliance date and in existence on or after July 21, 2010, the date of enactment of the Dodd-Frank Act, are set forth in part 46 of this chapter. This section and § 45.4 establish the general swap data E:\FR\FM\27JNR2.SGM 27JNR2 mstockstill on DSK3G9T082PROD with RULES2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations reporting obligations of swap dealers, major swap participants, non-SD/MSP counterparties, swap execution facilities, designated contract markets, and derivatives clearing organizations to report swap data to a swap data repository. In addition to the reporting obligations set forth in this section and in § 45.4, registered entities and swap counterparties are subject to other reporting obligations set forth in this chapter, including, without limitation, the following: Swap dealers, major swap participants, and non-SD/MSP counterparties are also subject to the reporting obligations with respect to corporate affiliations reporting set forth in § 45.6; swap execution facilities, designated contract markets, swap dealers, major swap participants, and non-SD/MSP counterparties are subject to the reporting obligations with respect to real time reporting of swap data set forth in part 43 of this chapter; counterparties to a swap for which an exception to, or an exemption from, the clearing requirement has been elected under part 50 of this chapter are subject to the reporting obligations set forth in part 50 of this chapter; and, where applicable, swap dealers, major swap participants, and non-SD/MSP counterparties are subject to the reporting obligations with respect to large traders set forth in parts 17 and 18 of this chapter. Paragraphs (a) through (d) of this section apply to all swaps except clearing swaps, while paragraph (e) applies only to clearing swaps. (a) Swaps executed on or pursuant to the rules of a swap execution facility or designated contract market. For each swap executed on or pursuant to the rules of a swap execution facility or designated contract market, the swap execution facility or designated contract market must report all primary economic terms data for the swap, as defined in § 45.1, as soon as technologically practicable after execution of the swap. If the swap is not intended to be submitted to a derivatives clearing organization for clearing at the time of execution, the swap execution facility or designated contract market must report all confirmation data for the swap, as defined in § 45.1, as soon as technologically practicable after execution of the swap. (b) Off-facility swaps subject to the clearing requirement. For all off-facility swaps subject to the clearing requirement under part 50 of this chapter, except for those off-facility swaps for which an exception to, or exemption from, the clearing requirement has been elected under part 50 of this chapter, and those off-facility VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 swaps covered by CEA section 2(a)(13)(C)(iv), required swap creation data must be reported as provided in paragraph (b) of this section. (1) The reporting counterparty, as determined pursuant to § 45.8, must report all primary economic terms data for the swap, within the applicable reporting deadline set forth in paragraph (b)(1)(i) or (ii) of this section. (i) If the reporting counterparty is a swap dealer or a major swap participant, the reporting counterparty must report all primary economic terms data for the swap as soon as technologically practicable after execution, but no later than 15 minutes after execution. (ii) If the reporting counterparty is a non-SD/MSP counterparty, the reporting counterparty must report all primary economic terms data for the swap as soon as technologically practicable after execution, but no later than one business hour after execution. (2) [Reserved] (c) Off-facility swaps not subject to the clearing requirement, with a swap dealer or major swap participant reporting counterparty. For all offfacility swaps not subject to the clearing requirement under part 50 of this chapter, all off-facility swaps for which an exception to, or an exemption from, the clearing requirement has been elected under part 50 of this chapter, and all off-facility swaps covered by CEA section 2(a)(13)(C)(iv), for which a swap dealer or major swap participant is the reporting counterparty, required swap creation data must be reported as provided in paragraph (c) of this section. (1) Credit, equity, foreign exchange, and interest rate swaps. For each such credit swap, equity swap, foreign exchange instrument, or interest rate swap: (i) The reporting counterparty, as determined pursuant to § 45.8, must report all primary economic terms data for the swap, within the applicable reporting deadline set forth in paragraph (c)(1)(i)(A) or (B) of this section. (A) If the non-reporting counterparty is a swap dealer, a major swap participant, or a non-SD/MSP counterparty that is a financial entity as defined in CEA section 2(h)(7)(C), or if the non-reporting counterparty is a nonSD/MSP counterparty that is not a financial entity as defined in CEA section 2(h)(7)(C) and verification of primary economic terms occurs electronically, then the reporting counterparty must report all primary economic terms data for the swap as soon as technologically practicable after execution, but no later than 30 minutes after execution. PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 41773 (B) If the non-reporting counterparty is a non-SD/MSP counterparty that is not a financial entity as defined in CEA section 2(h)(7)(C), and if verification of primary economic terms does not occur electronically, then the reporting counterparty must report all primary economic terms data for the swap as soon as technologically practicable after execution, but no later than 30 minutes after execution. (ii) If the swap is not intended to be submitted to a derivatives clearing organization for clearing at the time of execution, the reporting counterparty must report all confirmation data for the swap, as defined in § 45.1, as soon as technologically practicable after confirmation, but no later than: 30 minutes after confirmation if confirmation occurs electronically; or 24 business hours after confirmation if confirmation does not occur electronically. (2) Other commodity swaps. For each such other commodity swap: (i) The reporting counterparty, as determined pursuant to § 45.8, must report all primary economic terms data for the swap, within the applicable reporting deadline set forth in paragraph (c)(2)(i)(A) or (B) of this section. (A) If the non-reporting counterparty is a swap dealer, a major swap participant, or a non-SD/MSP counterparty that is a financial entity as defined in CEA section 2(h)(7)(C), or if the non-reporting counterparty is a nonSD/MSP counterparty that is not a financial entity as defined in CEA section 2(h)(7)(C) and verification of primary economic terms occurs electronically, then the reporting counterparty must report all primary economic terms data for the swap as soon as technologically practicable after execution, but no later than two hours after execution. (B) If the non-reporting counterparty is a non-SD/MSP counterparty that is not a financial entity as defined in CEA section 2(h)(7)(C), and if verification of primary economic terms does not occur electronically, then the reporting counterparty must report all primary economic terms data for the swap as soon as technologically practicable after execution, but no later than two hours after execution. (ii) If the swap is not intended to be submitted to a derivatives clearing organization for clearing at the time of execution, the reporting counterparty must report all confirmation data for the swap, as defined in § 45.1, as soon as technologically practicable after confirmation, but no later than: 30 Minutes after confirmation if confirmation occurs electronically; or 24 E:\FR\FM\27JNR2.SGM 27JNR2 mstockstill on DSK3G9T082PROD with RULES2 41774 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations business hours after confirmation if confirmation does not occur electronically. (d) Off-facility swaps not subject to the clearing requirement, with a nonSD/MSP reporting counterparty. For all off-facility swaps not subject to the clearing requirement under part 50 of this chapter, all off-facility swaps for which an exception to, or an exemption from, the clearing requirement has been elected under part 50 of this chapter, and all off-facility swaps covered by CEA section 2(a)(13)(C)(iv), in all asset classes, for which a non-SD/MSP counterparty is the reporting counterparty, required swap creation data must be reported as provided in paragraph (d) of this section. (1) The reporting counterparty, as determined pursuant to § 45.8, must report all primary economic terms data for the swap, as soon as technologically practicable after execution, but no later than 24 business hours after execution. (2) If the swap is not intended to be submitted to a derivatives clearing organization for clearing at the time of execution, the reporting counterparty must report all confirmation data for the swap, as defined in § 45.1, as soon as technologically practicable after confirmation, but no later than 24 business hours after confirmation. (e) Clearing swaps. As soon as technologically practicable after acceptance of an original swap by a derivatives clearing organization for clearing, or as soon as technologically practicable after execution of a clearing swap that does not replace an original swap, the derivatives clearing organization, as reporting counterparty, must report all required swap creation data for the clearing swap. Required swap creation data for clearing swaps must include all confirmation data and all primary economic terms data, as those terms are defined in § 45.1 and as included in appendix 1 to this part. (f) Allocations. For swaps involving allocation, required swap creation data shall be reported to a single swap data repository as follows. (1) Initial swap between reporting counterparty and agent. The initial swap transaction between the reporting counterparty and the agent shall be reported as required by § 45.3(a) through (d). A unique swap identifier for the initial swap transaction must be created as provided in § 45.5. (2) Post-allocation swaps—(i) Duties of the agent. In accordance with this section, the agent shall inform the reporting counterparty of the identities of the reporting counterparty’s actual counterparties resulting from allocation, as soon as technologically practicable VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 after execution, but not later than eight business hours after execution. (ii) Duties of the reporting counterparty. The reporting counterparty must report all required swap creation data for each swap resulting from allocation to the same swap data repository to which the initial swap transaction is reported as soon as technologically practicable after it is informed by the agent of the identities of its actual counterparties. The reporting counterparty must create a unique swap identifier for each such swap as required in § 45.5. (iii) Duties of the swap data repository. The swap data repository to which the initial swap transaction and the post-allocation swaps are reported must map together the unique swap identifiers of the initial swap transaction and of each of the postallocation swaps. (g) Multi-asset swaps. For each multiasset swap, required swap creation data and required swap continuation data shall be reported to a single swap data repository that accepts swaps in the asset class treated as the primary asset class involved in the swap by the swap execution facility, designated contract market, or reporting counterparty making the first report of required swap creation data pursuant to this section. The registered entity or reporting counterparty making the first report of required swap creation data pursuant to this section shall report all primary economic terms for each asset class involved in the swap. (h) Mixed swaps. (1) For each mixed swap, required swap creation data and required swap continuation data shall be reported to a swap data repository registered with the Commission and to a security-based swap data repository registered with the Securities and Exchange Commission. This requirement may be satisfied by reporting the mixed swap to a swap data repository or security-based swap data repository registered with both Commissions. (2) The registered entity or reporting counterparty making the first report of required swap creation data pursuant to this section shall ensure that the same unique swap identifier is recorded for the swap in both the swap data repository and the security-based swap data repository. (i) International swaps. For each international swap, the reporting counterparty shall report as soon as practicable to the swap data repository the identity of the non-U.S. trade repository not registered with the Commission to which the swap is also reported and the swap identifier used by PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 the non-U.S. trade repository to identify the swap. If necessary, the reporting counterparty shall obtain this information from the non-reporting counterparty. (j) Choice of SDR. The entity with the obligation to choose the swap data repository to which all required swap creation data for the swap is reported shall be the entity that is required to make the first report of all data pursuant to this section, as follows: (1) For swaps executed on or pursuant to the rules of a swap execution facility or designated contract market, the swap execution facility or designated contract market shall choose the swap data repository; (2) For all other swaps, the reporting counterparty, as determined in § 45.8, shall choose the swap data repository. § 45.4 [Amended] 4. Effective June 27, 2016, remove § 45.4 (b)(2)(ii). ■ 5. Effective July 27, 2016, revise § 45.4 to read as follows: ■ § 45.4 data. Swap data reporting: Continuation Registered entities and swap counterparties must report required swap continuation data electronically to a swap data repository as set forth in this section and in the manner provided in § 45.13(b). The rules governing acceptance and recording of such data by a swap data repository are set forth in § 49.10 of this chapter. The reporting obligations of registered entities and swap counterparties with respect to swaps executed prior to the applicable compliance date and in existence on or after July 21, 2010, the date of enactment of the Dodd-Frank Act, are set forth in part 46 of this chapter. This section and § 45.3 establish the general swap data reporting obligations of swap dealers, major swap participants, nonSD/MSP counterparties, swap execution facilities, designated contract markets, and derivatives clearing organizations to report swap data to a swap data repository. In addition to the reporting obligations set forth in this section and in § 45.3, registered entities and swap counterparties are subject to other reporting obligations set forth in this chapter, including, without limitation, the following: Swap dealers, major swap participants, and non-SD/MSP counterparties are also subject to the reporting obligations with respect to corporate affiliations reporting set forth in § 45.6; swap execution facilities, designated contract markets, swap dealers, major swap participants, and non-SD/MSP counterparties are subject to the reporting obligations with respect E:\FR\FM\27JNR2.SGM 27JNR2 mstockstill on DSK3G9T082PROD with RULES2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations to real time reporting of swap data set forth in part 43 of this chapter; and, where applicable, swap dealers, major swap participants, and non-SD/MSP counterparties are subject to the reporting obligations with respect to large traders set forth in parts 17 and 18 of this chapter. (a) Continuation data reporting method generally. For each swap, regardless of asset class, reporting counterparties and derivatives clearing organizations required to report swap continuation data must do so in a manner sufficient to ensure that all data in the swap data repository concerning the swap remains current and accurate, and includes all changes to the primary economic terms of the swap occurring during the existence of the swap. Reporting entities and counterparties fulfill this obligation by reporting either life cycle event data or state data for the swap within the applicable deadlines set forth in this section. Reporting counterparties and derivatives clearing organizations required to report swap continuation data for a swap may fulfill their obligation to report either life cycle event data or state data by reporting: (1) Life cycle event data to a swap data repository that accepts only life cycle event data reporting; (2) State data to a swap data repository that accepts only state data reporting; or (3) Either life cycle event data or state data to a swap data repository that accepts both life cycle event data and state data reporting. (b) Continuation data reporting for clearing swaps. For all clearing swaps, required continuation data must be reported as provided in this section. (1) Life cycle event data or state data reporting. The derivatives clearing organization, as reporting counterparty, must report to the swap data repository either: (i) All life cycle event data for the swap, reported on the same day that any life cycle event occurs with respect to the swap; or (ii) All state data for the swap, reported daily. (2) Valuation data reporting. Valuation data for the swap must be reported by the derivatives clearing organization, as reporting counterparty, daily. (c) Continuation data reporting for original swaps. For all original swaps, required continuation data, including terminations, must be reported to the swap data repository to which the swap that was accepted for clearing was reported pursuant to § 45.3(a) through (d) in the manner provided in § 45.13(b) and in this section, and must be VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 accepted and recorded by such swap data repository as provided in § 49.10 of this chapter. (1) Life cycle event data or state data reporting. The derivatives clearing organization that accepted the swap for clearing must report to the swap data repository either: (i) All life cycle event data for the swap, reported on the same day that any life cycle event occurs with respect to the swap; or (ii) All state data for the swap, reported daily. (2) In addition to all other necessary continuation data fields, life cycle event data and state data must include all of the following: (i) The legal entity identifier of the swap data repository to which all required swap creation data for each clearing swap was reported by the derivatives clearing organization pursuant to § 45.3(e); (ii) The unique swap identifier of the original swap that was replaced by the clearing swaps; and (iii) The unique swap identifier of each clearing swap that replaces a particular original swap. (d) Continuation data reporting for uncleared swaps. For all swaps that are not cleared by a derivatives clearing organization, including swaps executed on or pursuant to the rules of a swap execution facility or designated contract market, the reporting counterparty must report all required swap continuation data as provided in this section. (1) Life cycle event data or state data reporting. The reporting counterparty for the swap must report to the swap data repository either all life cycle event data for the swap or all state data for the swap, within the applicable deadline set forth in paragraphs (d)(1)(i) or (ii) of this section. (i) If the reporting counterparty is a swap dealer or major swap participant: (A) Life cycle event data must be reported on the same day that any life cycle event occurs, with the sole exception that life cycle event data relating to a corporate event of the nonreporting counterparty must be reported no later than the second business day after the day on which such event occurs. (B) State data must be reported daily. (ii) If the reporting counterparty is a non-SD/MSP counterparty: (A) Life cycle event data must be reported no later than the end of the first business day following the date of any life cycle event; with the sole exception that life cycle event data relating to a corporate event of the nonreporting counterparty must be reported PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 41775 no later than the end of the second business day following such event. (B) State data must be reported daily. (2) Valuation data reporting. Valuation data for the swap must be reported by the reporting counterparty for the swap as follows: (i) If the reporting counterparty is a swap dealer or major swap participant, the reporting counterparty must report all valuation data for the swap, daily. (ii) If the reporting counterparty is a non-SD/MSP counterparty, the reporting counterparty must report the current daily mark of the transaction as of the last day of each fiscal quarter. This report must be transmitted to the swap data repository within 30 calendar days of the end of each fiscal quarter. If a daily mark of the transaction is not available for the swap, the reporting counterparty satisfies this requirement by reporting the current valuation of the swap recorded on its books in accordance with applicable accounting standards. ■ 6. Revise § 45.5 to read as follows: § 45.5 Unique swap identifiers. Each swap subject to the jurisdiction of the Commission shall be identified in all recordkeeping and all swap data reporting pursuant to this part by the use of a unique swap identifier, which shall be created, transmitted, and used for each swap as provided in paragraphs (a) through (f) of this section. (a) Swaps executed on or pursuant to the rules of a swap execution facility or designated contract market. For each swap executed on or pursuant to the rules of a swap execution facility or designated contract market, the swap execution facility or designated contract market shall create and transmit a unique swap identifier as provided in paragraphs (a)(1) and (2) of this section. (1) Creation. The swap execution facility or designated contract market shall generate and assign a unique swap identifier at, or as soon as technologically practicable following, the time of execution of the swap, and prior to the reporting of required swap creation data. The unique swap identifier shall consist of a single data field that contains two components: (i) The unique alphanumeric code assigned to the swap execution facility or designated contract market by the Commission for the purpose of identifying the swap execution facility or designated contract market with respect to unique swap identifier creation; and (ii) An alphanumeric code generated and assigned to that swap by the automated systems of the swap execution facility or designated contract E:\FR\FM\27JNR2.SGM 27JNR2 mstockstill on DSK3G9T082PROD with RULES2 41776 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations market, which shall be unique with respect to all such codes generated and assigned by that swap execution facility or designated contract market. (2) Transmission. The swap execution facility or designated contract market shall transmit the unique swap identifier electronically as follows: (i) To the swap data repository to which the swap execution facility or designated contract market reports required swap creation data for the swap, as part of that report; (ii) To each counterparty to the swap, as soon as technologically practicable after execution of the swap; (iii) To the derivatives clearing organization, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the derivatives clearing organization for clearing purposes. (b) Off-facility swaps with a swap dealer or major swap participant reporting counterparty. For each offfacility swap where the reporting counterparty is a swap dealer or major swap participant, the reporting counterparty shall create and transmit a unique swap identifier as provided in paragraphs (b)(1) and (2) of this section. (1) Creation. The reporting counterparty shall generate and assign a unique swap identifier as soon as technologically practicable after execution of the swap and prior to both the reporting of required swap creation data and the transmission of data to a derivatives clearing organization if the swap is to be cleared. The unique swap identifier shall consist of a single data field that contains two components: (i) The unique alphanumeric code assigned to the swap dealer or major swap participant by the Commission at the time of its registration as such, for the purpose of identifying the swap dealer or major swap participant with respect to unique swap identifier creation; and (ii) An alphanumeric code generated and assigned to that swap by the automated systems of the swap dealer or major swap participant, which shall be unique with respect to all such codes generated and assigned by that swap dealer or major swap participant. (2) Transmission. The reporting counterparty shall transmit the unique swap identifier electronically as follows: (i) To the swap data repository to which the reporting counterparty reports required swap creation data for the swap, as part of that report; (ii) To the non-reporting counterparty to the swap, as soon as technologically practicable after execution of the swap; and VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 (iii) To the derivatives clearing organization, if any, to which the swap is submitted for clearing, as part of the required swap creation data transmitted to the derivatives clearing organization for clearing purposes. (c) Off-facility swaps with a non-SD/ MSP reporting counterparty. For each off-facility swap for which the reporting counterparty is a non-SD/MSP counterparty, the swap data repository to which primary economic terms data is reported shall create and transmit a unique swap identifier as provided in paragraphs (c)(1) and (2) of this section. (1) Creation. The swap data repository shall generate and assign a unique swap identifier as soon as technologically practicable following receipt of the first report of required swap creation data concerning the swap. The unique swap identifier shall consist of a single data field that contains two components: (i) The unique alphanumeric code assigned to the swap data repository by the Commission at the time of its registration as such, for the purpose of identifying the swap data repository with respect to unique swap identifier creation; and (ii) An alphanumeric code generated and assigned to that swap by the automated systems of the swap data repository, which shall be unique with respect to all such codes generated and assigned by that swap data repository. (2) Transmission. The swap data repository shall transmit the unique swap identifier electronically as follows: (i) To the counterparties to the swap, as soon as technologically practicable following creation of the unique swap identifier; and (ii) To the derivatives clearing organization, if any, to which the swap is submitted for clearing, as soon as technologically practicable following creation of the unique swap identifier. (d) Clearing swaps. For each clearing swap, the derivatives clearing organization that is a counterparty to such swap shall create and transmit a unique swap identifier as provided in paragraphs (d)(1) and (2) of this section. (1) Creation. The derivatives clearing organization shall generate and assign a unique swap identifier upon, or as soon as technologically practicable after, acceptance of an original swap by the derivatives clearing organization for clearing or execution of a clearing swap that does not replace an original swap, and prior to the reporting of required swap creation data for the clearing swap. The unique swap identifier shall consist of a single data field that contains two components: (i) The unique alphanumeric code assigned to the derivatives clearing PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 organization by the Commission for the purpose of identifying the derivatives clearing organization with respect to unique swap identifier creation; and (ii) An alphanumeric code generated and assigned to that clearing swap by the automated systems of the derivatives clearing organization, which shall be unique with respect to all such codes generated and assigned by that derivatives clearing organization. (2) Transmission. The derivatives clearing organization shall transmit the unique swap identifier electronically as follows: (i) To the swap data repository to which the derivatives clearing organization reports required swap creation data for the clearing swap, as part of that report; and (ii) To its counterparty to the clearing swap, as soon as technologically practicable after acceptance of a swap by the derivatives clearing organization for clearing or execution of a clearing swap that does not replace an original swap. (e) Allocations. For swaps involving allocation, unique swap identifiers shall be created and transmitted as follows. (1) Initial swap between reporting counterparty and agent. The unique swap identifier for the initial swap transaction between the reporting counterparty and the agent shall be created as required by paragraphs (a) through (c) of this section, and shall be transmitted as follows: (i) If the unique swap identifier is created by a swap execution facility or designated contract market, the swap execution facility or designated contract market must include the unique swap identifier in its swap creation data report to the swap data repository, and must transmit the unique identifier to the reporting counterparty and to the agent. (ii) If the unique swap identifier is created by the reporting counterparty, the reporting counterparty must include the unique swap identifier in its swap creation data report to the swap data repository, and must transmit the unique identifier to the agent. (2) Post-allocation swaps. The reporting counterparty must create a unique swap identifier for each of the individual swaps resulting from allocation, as soon as technologically practicable after it is informed by the agent of the identities of its actual counterparties, and must transmit each such unique swap identifier to: (i) The non-reporting counterparty for the swap in question. (ii) The agent. (iii) The derivatives clearing organization, if any, to which the swap E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations is submitted for clearing, as part of the required swap creation data transmitted to the derivatives clearing organization for clearing purposes. (f) Use. Each registered entity or swap counterparty subject to the jurisdiction of the Commission shall include the unique swap identifier for a swap in all of its records and all of its swap data reporting concerning that swap, from the time it creates or receives the unique swap identifier as provided in this section, throughout the existence of the swap and for as long as any records are required by the CEA or Commission regulations to be kept by that registered entity or counterparty concerning the swap, regardless of any life cycle events or any changes to state data concerning the swap, including, without limitation, any changes with respect to the counterparties to or the ownership of the swap. This requirement shall not prohibit the use by a registered entity or swap counterparty in its own records of any additional identifier or identifiers internally generated by the automated systems of the registered entity or swap counterparty, or the reporting to a swap data repository, the Commission, or another regulator of such internally generated identifiers in addition to the reporting of the unique swap identifier. ■ 7. Revise § 45.8 to read as follows: mstockstill on DSK3G9T082PROD with RULES2 § 45.8 Determination of which counterparty must report. The determination of which counterparty is the reporting counterparty for all swaps, except clearing swaps, shall be made as provided in paragraphs (a) through (h) of this section. The determination of which counterparty is the reporting counterparty for all clearing swaps shall be made as provided in paragraph (i) of this section. (a) If only one counterparty is a swap dealer, the swap dealer shall be the reporting counterparty. (b) If neither counterparty is a swap dealer, and only one counterparty is a major swap participant, the major swap participant shall be the reporting counterparty. (c) If both counterparties are non-SD/ MSP counterparties, and only one counterparty is a financial entity as defined in CEA section 2(h)(7)(C), the counterparty that is a financial entity shall be the reporting counterparty. (d) If both counterparties are swap dealers, or both counterparties are major swap participants, or both counterparties are non-SD/MSP counterparties that are financial entities as defined in CEA section 2(h)(7)(C), or both counterparties are non-SD/MSP counterparties and neither counterparty VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 is a financial entity as defined in CEA section 2(h)(7)(C): (1) For a swap executed on or pursuant to the rules of a swap execution facility or designated contract market, the counterparties shall agree which counterparty shall be the reporting counterparty. (2) For an off-facility swap, the counterparties shall agree as one term of their swap which counterparty shall be the reporting counterparty. (e) Notwithstanding the provisions of paragraphs (a) through (d) of this section, if both counterparties to a swap are non-SD/MSP counterparties and only one counterparty is a U.S. person, that counterparty shall be the reporting counterparty. (f) Notwithstanding the provisions of paragraphs (a) through (e) of this section, if neither counterparty to a swap is a U.S. person, but the swap is executed on or pursuant to the rules of a swap execution facility or designated contract market or otherwise executed in the United States, or is cleared by a derivatives clearing organization: (1) For such a swap executed on or pursuant to the rules of a swap execution facility or designated contract market, the counterparties shall agree which counterparty shall be the reporting counterparty. (2) For an off-facility swap, the counterparties shall agree as one term of their swap which counterparty shall be the reporting counterparty. (g) If a reporting counterparty selected pursuant to paragraphs (a) through (f) of this section ceases to be a counterparty to a swap due to an assignment or novation, the reporting counterparty for reporting of required swap continuation data following the assignment or novation shall be selected from the two current counterparties as provided in paragraphs (g)(1) through (4) of this section. (1) If only one counterparty is a swap dealer, the swap dealer shall be the reporting counterparty and shall fulfill all counterparty reporting obligations. (2) If neither counterparty is a swap dealer, and only one counterparty is a major swap participant, the major swap participant shall be the reporting counterparty and shall fulfill all counterparty reporting obligations. (3) If both counterparties are non-SD/ MSP counterparties, and only one counterparty is a U.S. person, that counterparty shall be the reporting counterparty and shall fulfill all counterparty reporting obligations. (4) In all other cases, the counterparty that replaced the previous reporting counterparty by reason of the assignment or novation shall be the PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 41777 reporting counterparty, unless otherwise agreed by the counterparties. (h) For all swaps executed on or pursuant to the rules of a swap execution facility or designated contract market, the rules of the swap execution facility or designated contract market must require each swap counterparty to provide sufficient information to the swap execution facility or designated contract market to enable the swap execution facility or designated contract market to report all swap creation data as provided in this part. (1) To achieve this, the rules of the swap execution facility or designated contract market must require each market participant placing an order with respect to any swap traded on the swap execution facility or designated contract market to include in the order, without limitation: (i) The legal entity identifier of the market participant placing the order. (ii) A yes/no indication of whether the market participant is a swap dealer with respect to the product with respect to which the order is placed. (iii) A yes/no indication of whether the market participant is a major swap participant with respect to the product with respect to which the order is placed. (iv) A yes/no indication of whether the market participant is a financial entity as defined in CEA section 2(h)(7)(C). (v) A yes/no indication of whether the market participant is a U.S. person. (vi) If applicable, an indication that the market participant will elect an exception to, or an exemption from, the clearing requirement under part 50 of this chapter for any swap resulting from the order. (vii) If the swap will be allocated: (A) An indication that the swap will be allocated. (B) The legal entity identifier of the agent. (C) An indication of whether the swap is a post-allocation swap. (D) If the swap is a post-allocation swap, the unique swap identifier of the initial swap transaction between the reporting counterparty and the agent. (2) To achieve this, the swap execution facility or designated contract market must use the information obtained pursuant to paragraph (h)(1) of this section to identify the counterparty that is the reporting counterparty pursuant to the CEA and this section. (i) Clearing swaps. Notwithstanding the provisions of paragraphs (a) through (h) of this section, if the swap is a clearing swap, the derivatives clearing organization that is a counterparty to such swap shall be the reporting E:\FR\FM\27JNR2.SGM 27JNR2 41778 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations counterparty and shall fulfill all reporting counterparty obligations for such swap. ■ 8. Revise § 45.10 to read as follows: mstockstill on DSK3G9T082PROD with RULES2 § 45.10 Reporting to a single swap data repository. All swap data for a given swap, which shall include all swap data required to be reported pursuant to parts 43 and 45 of this chapter, must be reported to a single swap data repository, which shall be the swap data repository to which the first report of required swap creation data is made pursuant to this part. (a) Swaps executed on or pursuant to the rules of a swap execution facility or designated contract market. To ensure that all swap data, including all swap data required to be reported pursuant to parts 43 and 45 of this chapter, for a swap executed on or pursuant to the rules of a swap execution facility or designated contract market is reported to a single swap data repository: (1) The swap execution facility or designated contract market that reports required swap creation data as required by § 45.3 shall report all such data to a single swap data repository. As soon as technologically practicable after execution, the swap execution facility or designated contract market shall transmit to both counterparties to the swap, and to the derivatives clearing organization, if any, that will clear the swap, both: (i) The identity of the swap data repository to which required swap creation data is reported by the swap execution facility or designated contract market; and (ii) The unique swap identifier for the swap, created pursuant to § 45.5. (2) Thereafter, all required swap creation data and all required swap continuation data reported for the swap reported by any registered entity or counterparty shall be reported to that same swap data repository (or to its successor in the event that it ceases to operate, as provided in part 49 of this chapter). (b) Off-facility swaps with a swap dealer or major swap participant reporting counterparty. To ensure that all swap data, including all swap data required to be reported pursuant to parts 43 and 45 of this chapter, for off-facility swaps with a swap dealer or major swap participant reporting counterparty is reported to a single swap data repository: (1) If the reporting counterparty reports primary economic terms data to a swap data repository as required by § 45.3: VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 (i) The reporting counterparty shall report primary economic terms data to a single swap data repository. (ii) As soon as technologically practicable after execution, but no later than as required pursuant to § 45.3, the reporting counterparty shall transmit to the other counterparty to the swap both the identity of the swap data repository to which primary economic terms data is reported by the reporting counterparty, and the unique swap identifier for the swap created pursuant to § 45.5. (iii) If the swap will be cleared, the reporting counterparty shall transmit to the derivatives clearing organization at the time the swap is submitted for clearing both the identity of the swap data repository to which primary economic terms data is reported by the reporting counterparty, and the unique swap identifier for the swap created pursuant to § 45.5. (2) Thereafter, all required swap creation data and all required swap continuation data reported for the swap, by any registered entity or counterparty, shall be reported to the swap data repository to which swap data has been reported pursuant to paragraph (b)(1) or (2) of this section (or to its successor in the event that it ceases to operate, as provided in part 49 of this chapter). (c) Off-facility swaps with a non-SD/ MSP reporting counterparty. To ensure that all swap data, including all swap data required to be reported pursuant to parts 43 and 45 of this chapter, for such swaps is reported to a single swap data repository: (1) If the reporting counterparty reports primary economic terms data to a swap data repository as required by § 45.3: (i) The reporting counterparty shall report primary economic terms data to a single swap data repository. (ii) As soon as technologically practicable after execution, but no later than as required pursuant to § 45.3, the reporting counterparty shall transmit to the other counterparty to the swap the identity of the swap data repository to which primary economic terms data was reported by the reporting counterparty. (iii) If the swap will be cleared, the reporting counterparty shall transmit to the derivatives clearing organization at the time the swap is submitted for clearing the identity of the swap data repository to which primary economic terms data was reported by the reporting counterparty. (2) The swap data repository to which the swap is reported as provided in paragraph (c) of this section shall transmit the unique swap identifier created pursuant to § 45.5 to both PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 counterparties and to the derivatives clearing organization, if any, as soon as technologically practicable after creation of the unique swap identifier. (3) Thereafter, all required swap creation data and all required swap continuation data reported for the swap, by any registered entity or counterparty, shall be reported to the swap data repository to which swap data has been reported pursuant to paragraph (c)(1) of this section (or to its successor in the event that it ceases to operate, as provided in part 49 of this chapter). (d) Clearing swaps. To ensure that all swap data for a given clearing swap, and for clearing swaps that replace a particular original swap or that are created upon execution of the same transaction and that do not replace an original swap, is reported to a single swap data repository: (1) The derivatives clearing organization that is a counterparty to such clearing swap shall report all required swap creation data for that clearing swap to a single swap data repository. As soon as technologically practicable after acceptance of an original swap by a derivatives clearing organization for clearing or execution of a clearing swap that does not replace an original swap, the derivatives clearing organization shall transmit to the counterparty to each clearing swap the legal entity identifier of the swap data repository to which the derivatives clearing organization reported the required swap creation data for that clearing swap. (2) Thereafter, all required swap creation data and all required swap continuation data reported for that clearing swap shall be reported by the derivatives clearing organization to the swap data repository to which swap data has been reported pursuant to paragraph (d)(1) of this section (or to its successor in the event that it ceases to operate, as provided in part 49 of this chapter). (3) For clearing swaps that replace a particular original swap, and for equal and opposite clearing swaps that are created upon execution of the same transaction and that do not replace an original swap, the derivatives clearing organization shall report all required swap creation data and all required swap continuation data for such clearing swaps to a single swap data repository. ■ 9. Revise Appendix 1 to part 45 to read as follows: Appendix 1 to Part 45—Tables of Minimum Primary Economic Terms Data E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations 41779 EXHIBIT A—MINIMUM PRIMARY ECONOMIC TERMS DATA—CREDIT SWAPS AND EQUITY SWAPS [Enter N/A for fields that are not applicable] Data categories and fields for all swaps Comment Asset Class ............................................................................................... The Unique Swap Identifier for the swap ................................................. The Legal Entity Identifier of the reporting counterparty ......................... An indication of whether the reporting counterparty is a swap dealer with respect to the swap. An indication of whether the reporting counterparty is a major swap participant with respect to the swap. If the reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the reporting counterparty is a derivatives clearing organization with respect to the swap. An indication of whether the reporting counterparty is a U.S. person ..... An indication that the swap will be allocated ........................................... If the swap will be allocated, or is a post-allocation swap, the Legal Entity Identifier of the agent. An indication that the swap is a post-allocation swap ............................. If the swap is a post-allocation swap, the unique swap identifier of the initial swap transaction between the reporting counterparty and the agent. The Legal Entity Identifier of the non-reporting party .............................. An indication of whether the non-reporting counterparty is a swap dealer with respect to the swap. An indication of whether the non-reporting counterparty is a major swap participant with respect to the swap. If the non-reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the non-reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the non-reporting counterparty is a U.S. person. The Unique Product Identifier assigned to the swap ............................... If no Unique Product Identifier is available for the swap because the swap is not sufficiently standardized, the taxonomic description of the swap pursuant to the CFTC-approved product classification system. If no CFTC-approved UPI and product classification system is yet available, the internal product identifier or product description used by the swap data repository. An indication that the swap is a multi-asset swap ................................... For a multi-asset class swap, an indication of the primary asset class .. For a multi-asset class swap, an indication of the secondary asset class(es). An indication that the swap is a mixed swap ........................................... For a mixed swap reported to two non-dually- registered swap data repositories, the identity of the other swap data repository (if any) to which the swap is or will be reported. An indication of the counterparty purchasing protection .......................... An indication of the counterparty selling protection ................................. Information identifying the reference entity .............................................. Contract type ............................................................................................ Block trade indicator ................................................................................. Execution timestamp ................................................................................ mstockstill on DSK3G9T082PROD with RULES2 Execution venue ....................................................................................... Start date .................................................................................................. Maturity, termination or end date ............................................................. The price ................................................................................................... The notional amount, and the currency in which the notional amount is expressed. The amount and currency (or currencies) of any up-front payment VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00045 Fmt 4701 Field values: Credit, equity, FX, interest rates, other commodities. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.7. Field values: Yes, Not applicable. Generally, the asset class traded by the desk trading the swap for the reporting counterparty. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Yes, Not applicable. Field value: LEI of the other SDR to which the swap is or will be reported. Field values: LEI, or substitute identifier for a natural person. Field values: LEI, or substitute identifier for a natural person. The entity that is the subject of the protection being purchased and sold in the swap. Field values: LEI, or substitute identifier for a natural person. E.g., swap, swaption, forward, option, basis swap, index swap, basket swap. Indication (Yes/No) of whether the swap qualifies as a block trade or large notional swap. The date and time of the trade, expressed using Coordinated Universal Time (‘‘UTC’’). The swap execution facility or designated contract market on or pursuant to the rules of which the swap was executed. Field values: LEI of the swap execution facility or designated contract market, or ‘‘off-facility’’ if not so executed. The date on which the swap starts or goes into effect. The date on which the swap expires. E.g., strike price, initial price, spread. Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 41780 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations EXHIBIT A—MINIMUM PRIMARY ECONOMIC TERMS DATA—CREDIT SWAPS AND EQUITY SWAPS—Continued [Enter N/A for fields that are not applicable] Data categories and fields for all swaps Comment Payment frequency of the reporting counterparty .................................... A description of the payment stream of the reporting counterparty, e.g., coupon. A description of the payment stream of the non-reporting counterparty, e.g., coupon. Time and date of submission to the swap data repository, expressed using UTC, as recorded by an automated system where available, or as recorded manually where an automated system is not available. Yes/No indication of whether the swap will be submitted for clearing to a derivatives clearing organization. LEI of the derivatives clearing organization. Yes/No. Payment frequency of the non-reporting counterparty ............................ Timestamp for submission to swap data repository ................................ Clearing indicator ...................................................................................... Clearing venue ......................................................................................... If the swap will not be cleared, an indication of whether an exception to, or an exemption from, the clearing requirement has been elected with respect to the swap under part 50 of this chapter. The identity of the counterparty electing an exception or exemption to the clearing requirement under part 50 of this chapter. Clearing exception or exemption type ...................................................... Indication of collateralization .................................................................... Any other term(s) of the swap matched or affirmed by the counterparties in verifying the swap. Field values: LEI, or substitute identifier for natural person. The type of clearing exception or exemption being claimed. Field values: End user, Inter-affiliate or Cooperative. Is the swap collateralized, and if so to what extent? Field values: Uncollateralized, partially collateralized, one-way collateralized, fully collateralized. Use as many fields as required to report each such term. EXHIBIT A—MINIMUM PRIMARY ECONOMIC TERMS DATA—CREDIT SWAPS AND EQUITY SWAPS [Enter N/A for fields that are not applicable] Additional data categories and fields for clearing swaps Comment Clearing swap USIs .................................................................................. The USIs of each clearing swap that replaces the original swap that was submitted for clearing to the DCO, other than the USI for which the PET data is currently being reported (as ‘‘USI’’ field above). The USI of the original swap submitted for clearing to the DCO that is replaced by clearing swaps. LEI of SDR to which the original swap was reported. LEI of Clearing member. Clearing member client account number. An indication whether the clearing member acted as principal for a house trade or agent for a customer trade. The date and time at which the DCO received the original swap for clearing, expressed using UTC. The date and time at which the DCO accepted the original swap for clearing, expressed using UTC. Original swap USI ..................................................................................... Original swap SDR ................................................................................... Clearing member LEI ............................................................................... Clearing member client account ............................................................... Origin (house or customer) ...................................................................... Clearing receipt timestamp ....................................................................... Clearing acceptance timestamp ............................................................... EXHIBIT B—MINIMUM PRIMARY ECONOMIC TERMS DATA—FOREIGN EXCHANGE TRANSACTIONS (OTHER THAN CROSSCURRENCY SWAPS) [Enter N/A for fields that are not applicable] mstockstill on DSK3G9T082PROD with RULES2 Data fields for all swaps Comment Asset Class ............................................................................................... The Unique Swap Identifier for the swap ................................................. The Legal Entity Identifier of the reporting counterparty ......................... An indication of whether the reporting counterparty is a swap dealer with respect to the swap. An indication of whether the reporting counterparty is a major swap participant with respect to the swap. If the reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the reporting counterparty is a derivatives clearing organization with respect to the swap. An indication of whether the reporting counterparty is a U.S. person ..... An indication that the swap will be allocated ........................................... If the swap will be allocated, or is a post-allocation swap, the Legal Entity Identifier of the agent. An indication that the swap is a post-allocation swap ............................. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00046 Fmt 4701 Field values: Credit, equity, FX, interest rates, other commodities. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations 41781 EXHIBIT B—MINIMUM PRIMARY ECONOMIC TERMS DATA—FOREIGN EXCHANGE TRANSACTIONS (OTHER THAN CROSSCURRENCY SWAPS)—Continued [Enter N/A for fields that are not applicable] Data fields for all swaps Comment If the swap is a post-allocation swap, the unique swap identifier of the initial swap transaction between the reporting counterparty and the agent. The Legal Entity Identifier of the non-reporting party .............................. An indication of whether the non-reporting counterparty is a swap dealer with respect to the swap. An indication of whether the non-reporting counterparty is a major swap participant with respect to the swap. If the non-reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the non-reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the non-reporting counterparty is a U.S. person. The Unique Product Identifier assigned to the swap ............................... If no Unique Product Identifier is available for the swap because the swap is not sufficiently standardized, the taxonomic description of the swap pursuant to the CFTC-approved product classification system. If no CFTC-approved UPI and product classification system is yet available, the internal product identifier or product description used by the swap data repository. An indication that the swap is a multi-asset swap ................................... For a multi-asset class swap, an indication of the primary asset class .. For a multi-asset class swap, an indication of the secondary asset class(es). An indication that the swap is a mixed swap ........................................... For a mixed swap reported to two non-dually-registered swap data repositories, the identity of the other swap data repository (if any) to which the swap is or will be reported. Contract type ............................................................................................ Block trade indicator ................................................................................. Execution timestamp ................................................................................ Execution venue ....................................................................................... Currency 1 ................................................................................................ Currency 2 ................................................................................................ Notional amount 1 .................................................................................... Notional amount 2 .................................................................................... Exchange rate .......................................................................................... Delivery type ............................................................................................. Settlement or expiration date ................................................................... Timestamp for submission to swap data repository ................................ Clearing indicator ...................................................................................... mstockstill on DSK3G9T082PROD with RULES2 Clearing venue ......................................................................................... If the swap will not be cleared, an exception to, or an exemption from, the clearing requirement has been elected with respect to the swap under part 50 of this chapter. The identity of the counterparty electing an exception or exemption to the clearing requirement under part 50 of this chapter. Clearing exception or exemption type ...................................................... Indication of collateralization .................................................................... Any other term(s) of the trade matched or affirmed by the counterparties in verifying the trade. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00047 Fmt 4701 As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.7. Field values: Yes, Not applicable. Generally, the asset class traded by the desk trading the swap for the reporting counterparty. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Yes, Not applicable. Field value: LEI of the other SDR to which the swap is or will be reported. E.g., forward, non-deliverable forward (NDF), non- deliverable option (NDO), vanilla option, simple exotic option, complex exotic option. Indication (Yes/No) of whether the swap qualifies as a block trade or large notional swap. The date and time of the trade, expressed using Coordinated Universal Time (‘‘UTC’’). The swap execution facility or designated contract market on or pursuant to the rules of which the swap was executed. Field values: LEI of the swap execution facility or designated contract market, or ‘‘off-facility’’ if not so executed. ISO code. ISO code. For currency 1. For currency 2. Contractual rate of exchange of the currencies. Physical (deliverable) or cash (non-deliverable). Settlement date, or for an option the contract expiration date. Time and date of submission to the swap data repository, expressed using Coordinated Universal Time (‘‘UTC’’), as recorded by an automated system where available, or as recorded manually where an automated system is not available. Yes/No indication of whether the swap will be submitted for clearing to a derivatives clearing organization. LEI of the derivatives clearing organization. Yes/No. Field values: LEI, or substitute identifier, for a natural person. The type of clearing exception or exemption being claimed. Field values: End user, Inter-affiliate or Cooperative. Is the trade collateralized, and if so to what extent? Field values: Uncollateralized, partially collateralized, one-way collateralized, fully collateralized. E.g., for options, premium, premium currency, premium payment date; for non-deliverable trades, settlement currency, valuation (fixing) date; indication of the economic obligations of the counterparties. Use as many fields as required to report each such term. Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 41782 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations EXHIBIT B—MINIMUM PRIMARY ECONOMIC TERMS DATA—FOREIGN EXCHANGE TRANSACTIONS (OTHER THAN CROSSCURRENCY SWAPS) [Enter N/A for fields that are not applicable] Additional data categories and fields for clearing swaps Comment Clearing swap USIs .................................................................................. The USIs of each clearing swap that replaces the original swap that was submitted for clearing to the DCO, other than the USI for which the PET data is currently being reported (as ‘‘USI’’ field above). The USI of the original swap submitted for clearing to the DCO that is replaced by clearing swaps. LEI of SDR to which the original swap was reported. LEI of Clearing member. Clearing member client account number. An indication whether the clearing member acted as principal for a house trade or agent for a customer trade. The date and time at which the DCO received the original swap for clearing, expressed using UTC. The date and time at which the DCO accepted the original swap for clearing, expressed using UTC. Original swap USI ..................................................................................... Original swap SDR ................................................................................... Clearing member LEI ............................................................................... Clearing member client account ............................................................... Origin (house or customer) ...................................................................... Clearing receipt timestamp ....................................................................... Clearing acceptance timestamp ............................................................... EXHIBIT C—MINIMUM PRIMARY ECONOMIC TERMS DATA—INTEREST RATE SWAPS (INCLUDING CROSS-CURRENCY SWAPS) [Enter N/A for fields that are not applicable] mstockstill on DSK3G9T082PROD with RULES2 Data fields for all swaps Comment Asset Class ............................................................................................... The Unique Swap Identifier for the swap ................................................. The Legal Entity Identifier of the reporting counterparty ......................... An indication of whether the reporting counterparty is a swap dealer with respect to the swap. An indication of whether the reporting counterparty is a major swap participant with respect to the swap. If the reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the reporting counterparty is a derivatives clearing organization with respect to the swap. An indication of whether the reporting counterparty is a U.S. person ..... An indication that the swap will be allocated ........................................... If the swap will be allocated, or is a post-allocation swap, the Legal Entity Identifier of the agent. An indication that the swap is a post-allocation swap ............................. If the swap is a post-allocation swap, the unique swap identifier of the initial swap transaction between the reporting counterparty and the agent. The Legal Entity Identifier of the non-reporting counterparty .................. An indication of whether the non-reporting counterparty is a swap dealer with respect to the swap. An indication of whether the non-reporting counterparty is a major swap participant with respect to the swap. If the non-reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the non-reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the non-reporting counterparty is a U.S. person. The Unique Product Identifier assigned to the swap ............................... If no Unique Product Identifier is available for the swap because the swap is not sufficiently standardized, the taxonomic description of the swap pursuant to the CFTC-approved product classification system. If no CFTC-approved UPI and product classification system is yet available, the internal product identifier or product description used by the swap data repository. An indication that the swap is a multi-asset swap ................................... For a multi-asset class swap, an indication of the primary asset class .. For a multi-asset class swap, an indication of the secondary asset class(es). An indication that the swap is a mixed swap ........................................... VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00048 Fmt 4701 Field values: Credit, equity, FX, interest rates, other commodities. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.7. Field values: Yes, Not applicable. Generally, the asset class traded by the desk trading the swap for the reporting counterparty. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Yes, Not applicable. Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations 41783 EXHIBIT C—MINIMUM PRIMARY ECONOMIC TERMS DATA—INTEREST RATE SWAPS (INCLUDING CROSS-CURRENCY SWAPS)—Continued [Enter N/A for fields that are not applicable] Data fields for all swaps Comment For a mixed swap reported to two non-dually-registered swap data repositories, the identity of the other swap data repository (if any) to which the swap is or will be reported. Contract type ............................................................................................ Block trade indicator ................................................................................. Field value: LEI of the other SDR to which the swap is or will be reported. Execution timestamp ................................................................................ Execution venue ....................................................................................... Start date .................................................................................................. Maturity, termination or end date ............................................................. Day count convention. Notional amount (leg 1) ............................................................................ Notional currency (leg 1) .......................................................................... Notional amount (leg 2) ............................................................................ Notional currency (leg 2) .......................................................................... Payer (fixed rate) ...................................................................................... Payer (floating rate leg 1) ......................................................................... Payer (floating rate leg 2) ......................................................................... Direction .................................................................................................... Option type ............................................................................................... Fixed rate. Fixed rate day count fraction .................................................................... Floating rate payment frequency. Floating rate reset frequency. Floating rate index name/rate period ....................................................... Timestamp for submission to swap data repository ................................ Clearing indicator ...................................................................................... Clearing venue ......................................................................................... If the swap will not be cleared, an indication of whether an exception to, or an exemption from, the clearing requirement has been elected with respect to the swap under part 50 of this chapter. The identity of the counterparty electing an exception or exemption to the clearing requirement under part 50 of this chapter. Clearing exception or exemption type ...................................................... Indication of collateralization .................................................................... Any other term(s) of the swap matched or affirmed by the counterparties in verifying the swap. E.g., swap, swaption, option, basis swap, index swap. Indication (Yes/No) of whether the swap qualifies as a block trade or large notional swap. The date and time of the trade, expressed using Coordinated Universal Time (‘‘UTC’’). The swap execution facility or designated contract market on or pursuant to the rules of which the swap was executed. Field values: LEI of the swap execution facility or designated contract market, or ‘‘off-facility’’ if not so executed. The date on which the swap starts or goes into effect. The date on which the swap expires or ends. The current active notional amount. ISO code. The current active notional amount. ISO code. Is the reporting party a fixed rate payer? Yes/No/Not applicable. If two floating legs, the payer for leg 1. If two floating legs, the payer for leg 2. For swaps: Whether the principal is paying or receiving the fixed rate. For float-to-float and fixed-to-fixed swaps: Indicate N/A. For non-swap instruments and swaptions: Indicate the instrument that was bought or sold. E.g., put, call, straddle. E.g., actual 360. E.g., USD-Libor-BBA. Time and date of submission to the swap data repository, expressed using UTC, as recorded by an automated system where available, or as recorded manually where an automated system is not available. Yes/No indication of whether the swap will be submitted for clearing to a derivatives clearing organization. LEI of the derivatives clearing organization. Yes/No. Field values: LEI, or substitute identifier, for a natural person. The type of clearing exception or exemption being claimed. Field values: End user, Inter-affiliate or Cooperative. Is the swap collateralized, and if so to what extent? Field values: Uncollateralized, partially collateralized, one-way collateralized, fully collateralized. E.g., early termination option clause. Use as many fields as required to report each such term. EXHIBIT C—MINIMUM PRIMARY ECONOMIC TERMS DATA—INTEREST RATE SWAPS (INCLUDING CROSS-CURRENCY SWAPS) [Enter N/A for fields that are not applicable] Comment Clearing swap USIs .................................................................................. mstockstill on DSK3G9T082PROD with RULES2 Additional data categories and fields for clearing swaps The USIs of each clearing swap that replaces the original swap that was submitted for clearing to the DCO, other than the USI for which the PET data is currently being reported (as ‘‘USI’’ field above). The USI of the original swap submitted for clearing to the DCO that is replaced by clearing swaps. LEI of SDR to which the original swap was reported. LEI of Clearing member. Clearing member client account number. An indication whether the clearing member acted as principal for a house trade or agent for a customer trade. The date and time at which the DCO received the original swap for clearing, expressed using UTC. Original swap USI ..................................................................................... Original swap SDR ................................................................................... Clearing member LEI ............................................................................... Clearing member client account ............................................................... Origin (house or customer) ...................................................................... Clearing receipt timestamp ....................................................................... VerDate Sep<11>2014 20:54 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 41784 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations EXHIBIT C—MINIMUM PRIMARY ECONOMIC TERMS DATA—INTEREST RATE SWAPS (INCLUDING CROSS-CURRENCY SWAPS)—Continued [Enter N/A for fields that are not applicable] Additional data categories and fields for clearing swaps Comment Clearing acceptance timestamp ............................................................... The date and time at which the DCO accepted the original swap for clearing, expressed using UTC. EXHIBIT D—MINIMUM PRIMARY ECONOMIC TERMS DATA—OTHER COMMODITY SWAPS [Enter N/A for fields that are not applicable] Data field for all swaps Comment mstockstill on DSK3G9T082PROD with RULES2 Asset Class ............................................................................................... The Unique Swap Identifier for the swap ................................................. The Legal Entity Identifier of the reporting counterparty ......................... An indication of whether the reporting counterparty is a swap dealer with respect to the swap. An indication of whether the reporting counterparty is a major swap participant with respect to the swap. If the reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the reporting counterparty is a derivatives clearing organization with respect to the swap. An indication of whether the reporting counterparty is a U.S. person ..... An indication that the swap will be allocated ........................................... If the swap will be allocated, or is a post-allocation swap, the Legal Entity Identifier of the agent. An indication that the swap is a post-allocation swap ............................. If the swap is a post-allocation swap, the unique swap identifier of the initial swap transaction between the reporting counterparty and the agent. The Legal Entity Identifier of the non-reporting party .............................. An indication of whether the non-reporting counterparty is a swap dealer with respect to the swap. An indication of whether the non-reporting counterparty is a major swap participant with respect to the swap. If the non-reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the non-reporting counterparty is a financial entity as defined in CEA section 2(h)(7)(C). An indication of whether the non-reporting counterparty is a U.S. person. The Unique Product Identifier assigned to the swap ............................... If no Unique Product Identifier is available for the swap because the swap is not sufficiently standardized, the taxonomic description of the swap pursuant to the CFTC-approved product classification system. If no CFTC-approved UPI and product classification system is yet available, the internal product identifier or product description used by the swap data repository. An indication that the swap is a multi-asset swap ................................... For a multi-asset class swap, an indication of the primary asset class .. For a multi-asset class swap, an indication of the secondary asset class(es). An indication that the swap is a mixed swap ........................................... For a mixed swap reported to two non-dually- registered swap data repositories, the identity of the other swap data repository (if any) to which the swap is or will be reported. Contract type ............................................................................................ Block trade indicator ................................................................................. Execution timestamp ................................................................................ VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00050 Fmt 4701 Field values: Credit, equity, FX, interest rates, other commodities. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. As provided in § 45.5. As provided in § 45.6, or substitute identifier for a natural person. Yes/No. Yes/No. Yes/No. Yes/No. As provided in § 45.7. Field values: Yes, Not applicable. Generally, the asset class traded by the desk trading the swap for the reporting counterparty. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Credit, equity, FX, interest rates, other commodities. Field values: Yes, Not applicable. Field value: LEI of the other SDR to which the swap is or will be reported. E.g., swap, swaption, option, basis swap, index swap. Indication (Yes/No) of whether the swap qualifies as a ‘‘block trade’’ or ‘‘large notional off-facility swap’’ as defined in part 43 of the CFTC’s regulations. The date and time of the trade, expressed using Coordinated Universal Time (‘‘UTC’’), as recorded by an automated system where available, or as recorded manually where an automated system is not available. Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations 41785 EXHIBIT D—MINIMUM PRIMARY ECONOMIC TERMS DATA—OTHER COMMODITY SWAPS—Continued [Enter N/A for fields that are not applicable] Data field for all swaps Comment Execution venue ....................................................................................... The swap execution facility or designated contract market on or pursuant to the rules of which the swap was executed. Field values: LEI of the swap execution facility or designated contract market, or ‘‘off-facility’’ if not so executed. Time and date of submission to the swap data repository, expressed using UTC, as recorded by an automated system where available, or as recorded manually where an automated system is not available. The date on which the swap commences or goes into effect (e.g., in physical oil, the pricing start date). The date on which the swap expires or ends (e.g., in physical oil, the pricing end date). The counterparty purchasing the product: (E.g., the payer of the fixed price (for a swap), or the payer of the floating price on the underlying swap (for a put swaption), or the payer of the fixed price on the underlying swap (for a call swaption). Field values: LEI, if available, or substitute identifier, for a natural person. The counterparty offering the product: (E.g., the payer of the floating price (for a swap), the payer of the fixed price on the underlying swap (for a put swaption), or the payer of the floating price on the underlying swap (for a call swaption). Field values: LEI, or substitute identifier, for a natural person. The unit of measure applicable for the quantity on the swap. E.g., barrels, bushels, gallons, pounds, tons. The amount of the commodity (the number of quantity units) quoted on the swap. The rate at which the quantity is quoted on the swap. E.g., hourly, daily, weekly, monthly. The quantity of the commodity for the entire term of the swap. Physical delivery or cash. The price of the swap. For options, the strike price. The unit of measure applicable for the price of the swap. ISO code. The published price as paid by the buyer (if applicable). For swaptions, applies to the underlying swap. The averaging method used to calculate the index of the buyer pay index. For swaptions, applies to the underlying swap. The published price as paid by the seller (if applicable). For swaptions, applies to the underlying swap. The averaging method used to calculate the index of the seller pay index. For swaptions, applies to the underlying swap. If applicable, the grade of the commodity to be delivered, e.g., the grade of oil or refined product. Descriptor for the type of option transaction. E.g., put, call, straddle. E.g., American, European, European Daily, European Monthly, Asian. The total amount paid by the option buyer. For electric power, the hours of the day for which the swap is effective. For electric power, the time zone prevailing for the hours during which electricity is transmitted. For electric power, the profile applicable for the delivery of power. For electric power, the load profile for the delivery of power. Yes/No indication of whether the swap will be submitted for clearing to a derivatives clearing organization. LEI of the derivatives clearing organization. Yes/No. Timestamp for submission to swap data repository ................................ Start date .................................................................................................. Maturity, termination, or end date ............................................................ Buyer ........................................................................................................ Seller ......................................................................................................... Quantity unit ............................................................................................. Quantity .................................................................................................... Quantity frequency ................................................................................... Total quantity ............................................................................................ Settlement method ................................................................................... Price .......................................................................................................... Price unit ................................................................................................... Price currency ........................................................................................... Buyer pay index ........................................................................................ Buyer pay averaging method ................................................................... Seller pay index ........................................................................................ Seller pay averaging method ................................................................... Grade ........................................................................................................ Option type ............................................................................................... Option style ............................................................................................... Option premium ........................................................................................ Hours from through .................................................................................. Hours from through time zone ................................................................. Days of week ............................................................................................ Load type .................................................................................................. Clearing indicator ...................................................................................... mstockstill on DSK3G9T082PROD with RULES2 Clearing venue ......................................................................................... If the swap will not be cleared, an indication of whether an exception to, or an exemption from, the clearing requirement has been elected with respect to the swap under part 50 of this chapter. The identity of the counterparty electing an exception or exemption to the clearing requirement under part 50 of this chapter. Clearing exception or exemption type ...................................................... Indication of collateralization .................................................................... Any other term(s) of the swap matched or affirmed by the counterparties in verifying the swap. VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 PO 00000 Frm 00051 Fmt 4701 Field values: LEI, or substitute identifier, for a natural person. The type of clearing exception or exemption being claimed. Field values: End user, Inter-affiliate or Cooperative. Is the swap collateralized, and if so to what extent? Field values: Uncollateralized, partially collateralized, one-way collateralized, fully collateralized. Use as many fields as required to report each such term. Sfmt 4700 E:\FR\FM\27JNR2.SGM 27JNR2 41786 Federal Register / Vol. 81, No. 123 / Monday, June 27, 2016 / Rules and Regulations EXHIBIT D—MINIMUM PRIMARY ECONOMIC TERMS DATA—OTHER COMMODITY SWAPS [Enter N/A for fields that are not applicable] Additional data categories and fields for clearing swaps Comment Clearing swap USIs .................................................................................. The USIs of each clearing swap that replaces the original swap that was submitted for clearing to the DCO, other than the USI for which the PET data is currently being reported (as ‘‘USI’’ field above). The USI of the original swap submitted for clearing to the DCO that is replaced by clearing swaps. LEI of SDR to which the original swap was reported. LEI of Clearing member. Clearing member client account number. An indication whether the clearing member acted as principal for a house trade or agent for a customer trade. The date and time at which the DCO received the original swap for clearing, expressed using UTC. The date and time at which the DCO accepted the original swap for clearing, expressed using UTC. Original swap USI ..................................................................................... Original swap SDR ................................................................................... Clearing member LEI ............................................................................... Clearing member client account ............................................................... Origin (house or customer) ...................................................................... Clearing receipt timestamp ....................................................................... Clearing acceptance timestamp ............................................................... Issued in Washington, DC, on June 14, 2016, 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 Amendments to Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps— Commission Voting Summary and Chairman’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 mstockstill on DSK3G9T082PROD with RULES2 Regular reporting of data on swaps is a key component of the swaps reforms that were agreed to by the G–20 leaders and codified in the Dodd-Frank Wall Street Reform and VerDate Sep<11>2014 20:26 Jun 24, 2016 Jkt 238001 Consumer Protection Act. Since taking office, a priority of mine has been to improve data quality and to simplify reporting obligations for market participants. I know that my fellow Commissioners Bowen and Giancarlo share this goal. That is why I am very pleased that today, the Commission has acted unanimously to improve the process for reporting data on cleared swaps. This final rule will significantly enhance data quality and reduce reporting costs in a number of ways. It streamlines the reporting process to ensure there are not duplicate records of a swap, which can lead to double counting that can distort the data. It makes sure that accurate valuations of swaps are provided on an ongoing basis. And it eliminates some needless reporting requirements for swap dealers and major swap participants. This rule provides clarity and certainty in a number of areas, and will improve our ability to trace a swap through all phases of its lifecycle. Ultimately, it will provide us with a better picture of the swaps market, and enhance our ability to identify the buildup of risk that may pose a threat to the financial system. Today’s final rule reflects the largely positive feedback we received on our PO 00000 Frm 00052 Fmt 4701 Sfmt 9990 proposal, which was released in August, 2015. We very much appreciate the input that market participants have given us. This effort is just one piece of our work to ensure accuracy and completeness in data reporting, to harmonize data standards, and to improve data quality, while avoiding excessive burdens and duplication. For example, our other efforts will include the development of technical specifications for the reporting of 120 priority data elements, which will lead to greater consistency and standardization in reporting. We are also leading international efforts on data harmonization, including the development of tools that will allow regulators to identify swaps and swap activity by product type and transaction type throughout the life of a swap. I thank CFTC staff for their hard work on this rule, as well as the market participants who took the time to provide us feedback. And I also thank my fellow Commissioners Bowen and Giancarlo for their careful consideration and unanimous support for this measure. [FR Doc. 2016–14414 Filed 6–24–16; 8:45 am] BILLING CODE 6351–01–P E:\FR\FM\27JNR2.SGM 27JNR2

Agencies

[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41735-41786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14414]



[[Page 41735]]

Vol. 81

Monday,

No. 123

June 27, 2016

Part III





Commodity Futures Trading Commission





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17 CFR Part 45





Amendments to Swap Data Recordkeeping and Reporting Requirements for 
Cleared Swaps; Final Rule

Federal Register / Vol. 81 , No. 123 / Monday, June 27, 2016 / Rules 
and Regulations

[[Page 41736]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 45

RIN 3038-AE12


Amendments to Swap Data Recordkeeping and Reporting Requirements 
for Cleared Swaps

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is adopting final regulations relating to swap data reporting 
in connection with cleared swaps for swap data repositories (``SDRs''), 
derivatives clearing organizations (``DCOs''), designated contract 
markets (``DCMs''), swap execution facilities (``SEFs''), swap dealers 
(``SDs''), major swap participants (``MSPs''), and swap counterparties 
who are neither SDs nor MSPs. Commodity Exchange Act (``CEA'' or 
``Act'') provisions relating to swap data recordkeeping and reporting 
were added by the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (``Dodd-Frank Act''). These regulations adopt without change 
revisions to the Commission regulations as proposed in the Notice of 
Proposed Rulemaking (``NPRM'') issued August 31, 2015. These revisions 
clarify regulations to clearly delineate the swap data reporting 
requirements associated with each of the swaps involved in a cleared 
swap transaction. Additionally, these revisions leave the choice of SDR 
for each swap in a cleared swap transaction to the entity submitting 
the first report on such swap.

DATES: This rule is effective July 27, 2016 except for the removal of 
Sec.  45.4(b)(2)(ii) which is effective June 27, 2016.
    Compliance Date: The compliance date for all revisions and 
additions to part 45 of the Commission's regulations under this final 
rule is December 27, 2016. Until such date, all existing reporting 
obligations under part 45 (other than those contained in removed 
paragraph (b)(2)(ii) of Sec.  45.4), including existing obligations on 
reporting continuation data on original swaps and creation and 
continuation data on clearing swaps, shall remain in effect.

FOR FURTHER INFORMATION CONTACT: Daniel Bucsa, Deputy Director, 
Division of Market Oversight, 202-418-5435, dbucsa@cftc.gov; Andrew 
Ridenour, Special Counsel, Division of Market Oversight, 202-418-5438, 
aridenour@cftc.gov; Owen J. Kopon, Attorney-Advisor, Division of Market 
Oversight, 202-418-5360, okopon@cftc.gov; Benjamin DeMaria, Special 
Counsel, Division of Market Oversight, 202-418-5988, bdemaria@cftc.gov; 
Aaron Brodsky, Special Counsel, Division of Market Oversight, 202-418-
5349, abrodsky@cftc.gov; or Esen Onur, Economist, Office of the Chief 
Economist, 202-418-6146, eonur@cftc.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Introduction
    B. Statutory Authority
    C. Regulatory History--Final Part 45 Rulemaking
    D. Consultation With Other U.S. Financial Regulators
    E. Summary of Proposed Revisions and Additions to Part 45
II. Revised and New Regulations
    A. Definitions--Amendments to Sec.  45.1
    B. Swap Data Reporting: Creation Data--Amendments to Sec.  45.3
    C. Swap Data Reporting: Continuation Data--Amendments to Sec.  
45.4
    D. Unique Swap Identifiers--Amendments to Sec.  45.5
    E. Determination of Which Counterparty Must Report--Amendments 
to Sec.  45.8
    F. Reporting to a Single Swap Data Repository--Amendments to 
Sec.  45.10
    G. Examples of Cleared Swap Reporting Workflows Under the 
Adopted Revisions
    H. Primary Economic Terms Data--Amendments to Appendix 1 to Part 
45--Tables of Minimum Primary Economic Terms
III. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Cost-Benefit Considerations
    D. Antitrust Considerations
IV. Compliance Dates

I. Background

A. Introduction

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Act.\1\ Title VII of the Dodd-Frank Act amended the CEA \2\ to 
establish a comprehensive new regulatory framework for swaps and 
security-based swaps. The legislation was enacted to reduce systemic 
risk, increase transparency, and promote market integrity within the 
financial system by, among other things: Providing for the registration 
and comprehensive regulation of SDs and MSPs; imposing clearing and 
trade execution requirements on standardized derivative products; 
creating rigorous recordkeeping and data reporting regimes with respect 
to swaps, including real time reporting; and enhancing the Commission's 
rulemaking and enforcement authorities with respect to, among others, 
all registered entities, intermediaries, and swap counterparties 
subject to the Commission's oversight.
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    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the 
Dodd-Frank Act may be accessed at http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm.
    \2\ 7 U.S.C. 1, et seq.
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B. Statutory Authority

    To enhance transparency, promote standardization, and reduce 
systemic risk, section 727 of the Dodd-Frank Act added to the CEA 
section 2(a)(13)(G),\3\ which requires all swaps, whether cleared or 
uncleared, to be reported to SDRs.\4\ SDRs are registered entities 
created by section 728 of the Dodd-Frank Act to collect and maintain 
data related to swap transactions as prescribed by the Commission, and 
to make such data available to the Commission and other regulators.\5\ 
Section 21(b) of the CEA,\6\ added by section 728 of the Dodd-Frank 
Act, directs the Commission to prescribe standards for swap data 
recordkeeping and reporting, which are to apply to both registered 
entities and counterparties involved with swaps,\7\ and which are to be 
comparable to standards for clearing organizations in connection with 
their clearing of swaps.\8\
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    \3\ 7 U.S.C. 2(a)(13)(G).
    \4\ See also 7 U.S.C. 1a(40)(E), 1a(48).
    \5\ Regulations governing core principles and registration 
requirements for, and the duties of, SDRs are the subject of part 49 
of this chapter.
    \6\ 7 U.S.C. 24a(b).
    \7\ 7 U.S.C. 24a(b)(1)(A).
    \8\ 7 U.S.C. 24a(b)(3).
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C. Regulatory History--Final Part 45 Rulemaking

    On December 20, 2011, the Commission adopted part 45 of the 
Commission's regulations (``Final Part 45 Rulemaking'').\9\ Part 45 
implements the requirements of section 21 of the CEA by setting forth 
the manner and content of reporting to SDRs, and requires electronic 
reporting both when a swap is initially executed, referred to as 
``creation'' data,\10\ and over the course

[[Page 41737]]

of the swap's existence, referred to as ``continuation'' data.\11\ 
Additionally, part 45 sets forth varying reporting timeframes depending 
on the type of reporting, counterparty, execution, or product.\12\
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    \9\ See Swap Data Recordkeeping and Reporting Requirements, 
Final Rule, 77 FR 2136 (Jan. 13, 2012).
    \10\ See 17 CFR 45.1 (defining ``required swap creation data'' 
as all primary economic terms data for a swap in the swap asset 
class in question, and all confirmation data for the swap.). 
``Primary economic terms data'' is defined as all of the data 
elements necessary to fully report all of the primary economic terms 
of a swap in the swap asset class of the swap in question, while 
``confirmation data'' is defined as all of the terms of a swap 
matched and agreed upon by the counterparties in confirming the 
swap. Id. For cleared swaps, confirmation data also includes the 
internal identifiers assigned by the automated systems of the DCO to 
the two transactions resulting from novation to the clearing house. 
Id. See also 17 CFR 45.3.
    \11\ See 17 CFR 45.1 (defining ``required swap continuation 
data'' as all of the data elements that must be reported during the 
existence of a swap to ensure that all data concerning the swap in 
the swap data repository remains current and accurate, and includes 
all changes to the primary economic terms of the swap occurring 
during the existence of the swap). See also 17 CFR 45.4.
    \12\ See 17 CFR 45.3(a), 45.3(b), 45.3(c), and 45.3(d).
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    As part of the Commission's ongoing efforts to improve swap 
transaction data quality and to improve the Commission's ability to 
utilize the data for regulatory purposes, Commission staff has 
continued to evaluate issues in connection with reporting under part 
45, including those related to cleared swaps in particular. To this 
end, Commission staff formed an interdivisional staff working group 
(``IDWG'') to identify, and to recommend resolutions to, reporting 
challenges associated with certain swaps transaction data recordkeeping 
and reporting provisions, including the provisions adopted in the Final 
Part 45 Rulemaking.\13\
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    \13\ See Press Release, CFTC to Form an Interdivisional Working 
Group to Review Regulatory Reporting (Jan. 21, 2014), available at 
http://www.cftc.gov/PressRoom/PressReleases/pr6837-14.
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    Based in large part on those efforts, the Commission published a 
request for comment on a variety of swap data reporting and 
recordkeeping provisions to help determine how such provisions were 
being applied, and to determine whether or what clarifications or 
enhancements to these provisions may be appropriate (the ``IDWG Request 
for Comment'').\14\ One of the subjects of the IDWG Request for Comment 
was the reporting of cleared swaps, and, in particular, the manner in 
which the swap data reporting rules should address cleared swaps.\15\ 
After considering the comments submitted in response to the IDWG 
Request for Comment relating to the reporting of cleared swaps,\16\ the 
Commission issued a Notice of Proposed Rulemaking (the ``NPRM'') in 
which it proposed changes to part 45 as they relate to the reporting of 
cleared swaps transactions.\17\ In response to the NPRM, the Commission 
received 17 comments letters addressing its proposed revisions to part 
45.\18\ This release will address the comments received on specific 
aspects of the NPRM, and on specific issues raised in the IDWG Request 
for Comment, in connection with explaining each of the amended 
regulations adopted herein.\19\
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    \14\ See Review of Swap Data Recordkeeping and Reporting 
Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014). The 
IDWG Request for Comment was referred to simply as the ``Request for 
Comment'' in the NPRM. The Commission has changed the short form 
citation for that document in the final release to distinguish it 
from the subsequent request for comment related to draft technical 
specifications, referenced throughout this release.
    \15\ 79 FR 16689, 16694.
    \16\ The comment file for responses to the IDWG Request for 
Comment is available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1484. Commenters responding to the IDWG Request 
for Comment included: The American Gas Association, May 27, 2014; 
American Petroleum Institute, May 27, 2014; Americans for Financial 
Reform, May 27, 2014 (``AFR''); Australian Bankers' Association, May 
27, 2014 (``ABA''); Better Markets, Inc., May 27, 2014, (``Better 
Markets''); B&F Capital Markets, Inc., May 27, 2014; CME Group, May 
27, 2014 (``CME''); Coalition for Derivatives End-Users, May 27, 
2014 (``CDEU''); Coalition of Physical Energy Companies, May 27, 
2014; Commercial Energy Working Group, May 27, 2014 (``CEWG''); 
Commodity Markets Council, May 27, 2014 (``CMC''); The Depository 
Trust & Clearing Corporation, May 27, 2014 (``DTCC''); EDF Trading 
North America, LLC, May 27, 2014; Edison Electric Institute, May 27, 
2014 (``EEI''); Financial InterGroup Holdings Ltd, May 27, 2014; 
Financial Services Roundtable (``FSR''), May 27, 2014; Fix Trading 
Community, May 27, 2014; The Global Foreign Exchange Division of the 
Global Financial Markets Association, May 27, 2014 (``GFMA''); HSBC, 
May 27, 2014; Interactive Data Corporation, May 27, 2014; ICE Trade 
Vault, LLC, May 27, 2014 (``ITV''); International Energy Credit 
Association, May 27, 2014; International Swaps and Derivatives 
Association, Inc., May 23, 2014 (``ISDA''); Japanese Bankers 
Association, May 27, 2014 (``JBA''); Just Energy Group Inc., May 27, 
2014; LCH.Clearnet Group Limited, May 29, 2014 (``LCH''); Managed 
Funds Association, May 27, 2014 (``MFA''); Markit, May 27, 2014; 
Natural Gas Supply Association, May 27, 2014 (``NGSA''); NFP 
Electric Associations (National Rural Electric Cooperative 
Association, American Public Power Association, and Large Public 
Power Council), May 27, 2014 (``NFPEA''); OTC Clearing Hong Kong 
Limited, May 27, 2014 (``OTC Hong Kong''); Securities Industry and 
Financial Markets Association Asset Management Group, May 27, 2014 
(``SIFMA''); SWIFT, May 27, 2014; Swiss Re, May 27, 2014; Thomson 
Reuters (SEF) LLC, May 27, 2014 (``TR SEF''); and TriOptima, May 27, 
2014. Discussions of comments on reporting of cleared swaps received 
in response to the IDWG Request for Comment are included in the 
preamble to the NPRM.
    \17\ See Amendments to Swap Data Recordkeeping and Reporting 
Requirements for Cleared Swaps, Notice of Proposed Rulemaking, 80 FR 
52544 (Aug. 31, 2015).
    \18\ The comment file for responses to the NPRM is available at 
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1614. 
Commenters to the NPRM included: Better Markets, October 30, 2015; 
CME, October 30, 2015; COPE, October 30, 2015; CEWG, October 30, 
2015; CMC, October 30, 2015; DTCC, October 30, 2015; EEI/EPSA, 
October 30, 2015; Eurex Clearing AG (``Eurex''); FSR, October 30, 
2015; ITV, October 30, 2015; ISDA, October 30, 2015; JBA, October 
30, 2015; LCH, October 30, 2015; MFA and Alternative Investment 
Management Association (``AIMA''), October 30, 2015; Markit, October 
30, 2015; and North American Derivatives Exchange, Inc., October 30, 
2015 (``Nadex'').
    \19\ Unless otherwise noted, references to ``commenters'' 
throughout this release refer to those who submitted comment letters 
to the NPRM.
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    The swap data reporting framework adopted in the original Final 
Part 45 Rulemaking was largely based on the mechanisms for the trading 
and execution of uncleared swaps. Under such a regime, swap data 
reporting was premised upon the existence of one continuous swap for 
reporting and data representation purposes. The Commission has since 
had additional opportunities to consult with industry and has observed 
how the part 45 regulations function in practice with respect to swaps 
that are cleared, including how the implementation of part 45 interacts 
with the implementation of part 39 of the Commission's regulations, 
which contains provisions applicable to DCOs.
    In particular, Sec.  39.12(b)(6) provides that upon acceptance of a 
swap by a DCO for clearing, that original swap is extinguished and 
replaced by equal and opposite swaps, with the DCO as the counterparty 
to each resulting swap.\20\ The original swap that is extinguished upon 
acceptance for clearing is commonly referred to by market participants 
as the ``alpha'' swap and the equal and opposite swaps that replace the 
original swap are commonly referred to as ``beta'' and ``gamma'' swaps. 
The process of extinguishing the ``alpha'' swap and creating the 
``beta'' and ``gamma'' swaps is generally referred to as a novation. 
The Commission has observed that certain provisions of part 45 could 
better accommodate the cleared swap framework set forth in Sec.  
39.12(b)(6). The new regulations in this release are intended to 
provide clarity to swap counterparties and registered entities of their 
part 45 reporting obligations with respect to the swaps involved in a 
cleared swap transaction. These amendments and new regulations are also 
intended to improve the efficiency of data collection and maintenance 
associated with the reporting of the

[[Page 41738]]

swaps involved in a cleared swap transaction.
---------------------------------------------------------------------------

    \20\ See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps 
to have rules providing that, upon acceptance of a swap by the DCO 
for clearing: (i) The original swap is extinguished; (ii) the 
original swap is replaced by an equal and opposite swap between the 
[DCO] and each clearing member acting as principal for a house 
trading or acting as agent for a customer trade). The Commission 
reaffirmed its position regarding the composition of a cleared swap 
in a statement regarding Chicago Mercantile Exchange (``CME'') Rule 
1001. See Statement of the Commission on the Approval of CME Rule 
1001 (Mar. 6, 2013), at 6, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.
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D. Consultation With Other U.S. Financial Regulators

    In developing these rules, Commission staff has engaged in 
extensive consultations with other U.S. financial regulators, including 
the Securities and Exchange Commission (``SEC''), the Federal Reserve 
Board of Governors, the Federal Housing Finance Agency, the Federal 
Deposit Insurance Corporation, Office of Comptroller of the Currency, 
and the Farm Credit Administration. As noted in the NPRM,\21\ the 
Commission endeavored to harmonize the regulations in this release with 
the approach proposed by the SEC in its release proposing certain new 
rules and rule amendments to Regulation SBSR--Reporting and 
Dissemination of Security-Based Swap Information (``Regulation 
SBSR'').\22\
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    \21\ 80 FR 52544, 52545-46.
    \22\ See Regulation SBSR--Reporting and Dissemination of 
Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015).
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E. Summary of Revisions and Additions to Part 45

    The Commission is making revisions and additions to Sec. Sec.  
45.1, 45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order 
to provide clarity to swap counterparties as well as to registered 
entities regarding their respective part 45 reporting obligations in 
connection with each of the swaps involved in a cleared swap 
transaction.\23\ The Commission is adopting the following amendments, 
each of which is discussed in greater detail in Section II of this 
release:
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    \23\ The Commission is also amending the part 45 authority 
citation to replace a reference to 7 U.S.C. 24 with a reference to 7 
U.S.C. 24a.
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     Amendments to Sec.  45.1 revise the definition of 
``derivatives clearing organization'' to update a cross-reference and 
to clarify that the definition covers only registered DCOs. Revised 
Sec.  45.1 also adds new definitions for ``original swaps'' and 
``clearing swaps.'' These terms are used throughout amended part 45 to 
help clarify reporting obligations for the swaps involved in a cleared 
swap transaction.
     Amendments to Sec.  45.3 modify and clarify DCO creation 
data reporting obligations for swaps that result from the clearing 
process; establish which entity has the obligation to choose the SDR to 
which creation data is reported; eliminate confirmation data reporting 
obligations for swaps that are intended to be submitted to a DCO for 
clearing at the time of execution; and make conforming changes.
     Amendments to Sec.  45.4 modify and clarify continuation 
data reporting obligations for original swaps, including the obligation 
of a clearing DCO to report original swap terminations to the SDR to 
which the original swap was reported; modify and clarify the obligation 
to report data providing for the linking of original and clearing swaps 
and the original and clearing swap SDRs; remove the requirement for SD/
MSP reporting counterparties to report daily valuation data for cleared 
swaps; and make conforming changes.
     Amendments to Sec.  45.5 set forth a DCO's obligations to 
create, transmit, and use unique swap identifiers (``USIs'') to 
identify clearing swaps.
     Amendments to Sec.  45.8 provide that the DCO will be the 
reporting counterparty for clearing swaps.
     Amendments to Sec.  45.10 provide that all swap data for a 
given clearing swap, and all swap data for each clearing swap that 
replaces a particular original swap (and each equal and offsetting 
clearing swap that is created upon execution of the same transaction 
and that does not replace an original swap), must be reported to a 
single SDR. Amendments also make conforming changes.
     Amendments to appendix 1 modify certain existing primary 
economic term (``PET'') data fields and certain explanatory notes in 
the Comment sections for existing PET data fields, and add several new 
PET data fields to account for the clarifications provided in this 
release for the reporting of clearing swaps.

II. Revised and New Regulations

    Throughout Section II of this release, the Commission will discuss 
each amendment and the related comments. The Commission is also 
including several examples to demonstrate how cleared swap reporting 
workflows would function under the new regulations.
    The Commission received some general comments on the proposed 
amendments to part 45 relating to data quality. Better Markets was 
generally supportive of the proposals, and commented that the NPRM 
integrated many of the technical public comments on the concept release 
to address the small but important fixes on reporting of cleared swap 
transactions.\24\ COPE was also generally supportive of the NPRM on the 
``guiding principal'' that end-users should not be unduly burdened by 
the Commission's swap reporting regulations.\25\ COPE requested that 
the Commission clarify that, under the proposed amendments, end-users 
would not have reporting obligations on swaps executed pursuant to the 
rules of a SEF or DCM and then cleared by a DCO.\26\
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    \24\ See Better Markets Oct. 30, 2015 Letter, at 2.
    \25\ See COPE Oct. 30, 2015 Letter, at 2.
    \26\ See COPE Oct. 30, 2015 Letter, at 2. In response to COPE's 
request for clarification, the Commission notes that under the final 
rule being adopted, a non-SD/MSP would likely have no reporting 
obligations on a swap executed on a SEF or DCM that is intended to 
be cleared at the time of execution. However, the original swap 
reporting counterparty as determined by the reporting hierarchy 
under Sec.  45.8 could have obligations to report any amendments or 
modifications of PET data fields, as well as any continuation data 
on a swap between the execution of the swap and its acceptance for 
clearing, such as a novation, allocation or termination. In such 
circumstances, the reporting counterparty on the original swap would 
have a reporting obligation under either Sec.  45.3 or Sec.  45.4, 
respectively. Separately, end-users may also have obligations to 
correct errors or omissions discovered in swap data for which the 
end-user is the reporting counterparty pursuant to Sec.  45.14(a), 
or to notify the reporting counterparty of such errors or omissions 
if the end-user is not the reporting counterparty pursuant to Sec.  
45.14(b).
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A. Definitions--Amendments to Sec.  45.1

1. Existing Sec.  45.1
    Existing Sec.  45.1 defines ``derivatives clearing organization'' 
for purposes of part 45 by cross-referencing section 1a(9) of the CEA 
\27\ and any Commission regulations implementing that section, 
including but not limited to Sec.  39.5. Existing Sec.  45.1 does not 
include definitions of either ``original swap'' or ``clearing swap.''
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    \27\ 7 U.S.C. 1a(9).
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2. Proposed Amendments and Additions to Sec.  45.1
i. ``Derivatives Clearing Organization''
    The Commission proposed to revise the definition of ``derivatives 
clearing organization'' in Sec.  45.1 so that it cross-references the 
definition provided in Sec.  1.3(d) of the Commission's regulations and 
so that it explicitly refers to a DCO registered with the Commission 
under section 5b(a) of the CEA.\28\ This modification redefines a 
``derivatives clearing organization'' for purposes of part 45 to mean a 
derivatives clearing organization, as defined by Sec.  1.3(d) of this 
chapter, that is registered with the Commission.\29\
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    \28\ 7 U.S.C. 7a-1(a).
    \29\ See 80 FR 52544, 52547.
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ii. ``Original Swap'' and ``Clearing Swap''
    The Commission proposed to add definitions of ``original swap'' and 
``clearing swap'' to part 45 so that the part 45 reporting rules will 
be more consistent with the regulations

[[Page 41739]]

applicable to DCOs set forth in Sec.  39.12(b)(6).\30\
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    \30\ See 80 FR 52544, 52547.
---------------------------------------------------------------------------

    The Commission proposed to define ``original swap'' as a swap that 
has been accepted for clearing by a derivatives clearing organization 
and ``clearing swap'' as a swap created pursuant to the rules of a 
derivatives clearing organization that has a derivatives clearing 
organization as a counterparty, including any swap that replaces an 
original swap that was extinguished upon acceptance of such original 
swap by the derivatives clearing organization for clearing.
    As noted above, while original swaps are commonly referred to as 
``alpha'' swaps and while the equal and opposite swaps that replace the 
original swap are commonly referred to as ``beta'' and ``gamma'' swaps, 
the Commission will use the proposed defined terms ``original swap'' 
and ``clearing swap'' throughout this section of the release.
3. Comments
    The Commission received comments on the proposed definitions from a 
variety of market participants. Many commenters were supportive of the 
proposed amendments to the definitions and the clarification that they 
provide. Other commenters supported clarification of the definitions, 
but suggested further modifications to the proposed definitions.
i. Derivatives Clearing Organization
    Both ISDA and FSR commented that the proposed definition of 
``derivatives clearing organization'' should be expanded to include 
derivatives clearing organizations that are exempt from registering 
with the Commission.\31\ These commenters suggested that the reporting 
obligations should apply to the central counterparty regardless of 
whether that counterparty is registered with the Commission. ISDA also 
commented that the reporting obligations should apply to those 
derivatives clearing organizations that are currently in the process of 
registering with the Commission.\32\
---------------------------------------------------------------------------

    \31\ See ISDA Oct. 30, 2015 Letter, at 2-3; FSR Oct. 30, 2015 
Letter, at 5.
    \32\ See ISDA Oct. 30, 2015 Letter, at 2-3.
---------------------------------------------------------------------------

ii. Clearing Swap
    With respect to the proposed definition of ``clearing swap,'' ISDA 
reiterated its comment that the definition should include all swaps 
that are cleared through registered derivatives clearing organizations 
as well as those that are cleared through derivatives clearing 
organizations that are in the process of registering or are exempt from 
registration.\33\ LCH commented that the definition of clearing swap is 
incomplete as it may not capture cleared trades between a clearing 
member and its client in a principal clearing model, because the DCO is 
not a party to that transaction.\34\
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    \33\ See Id. at 3.
    \34\ See LCH Oct. 30, 2015 Letter, at 2.
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iii. Original Swap
    Regarding the definition of ``original swap,'' ISDA commented that 
it is supportive of the proposed definition and agrees that swaps 
submitted for clearing should be classified as original swaps.\35\ LCH 
commented that the definition of original swap is sufficiently clear 
and complete.\36\ ISDA requested clarification on guidance issued by 
the Commission's Divisions of Clearing and Risk and Market 
Oversight,\37\ specifically as to whether there is an original swap 
associated with CDS Clearing-Related Swaps that are created through a 
firm or forced trade process.\38\ EEI/EPSA sought clarification from 
the Commission that the definition of original swap includes both off-
facility swaps that are submitted for clearing, rejected, then 
resubmitted and accepted for clearing, and swaps that are not intended 
to be cleared when executed but are cleared at some point subsequent to 
execution.\39\
---------------------------------------------------------------------------

    \35\ See ISDA Oct. 30, 2015 Letter, at 3.
    \36\ See LCH Oct. 30, 2015 Letter, at 2.
    \37\ See CFTC Letter No. 15-51 (Sept. 18, 2015).
    \38\ ISDA also commented that it is not clear whether the 
associated clearing swaps are publicly reportable swap transactions 
for Part 43 purposes. See ISDA Oct. 30, 2015 Letter, at 3.
    \39\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.
---------------------------------------------------------------------------

4. Final Rule
    Having reviewed all relevant comments, the Commission has 
determined to adopt the definitions as proposed in the NPRM. The 
Commission has noted the comments received from market participants on 
the limitation of ``derivatives clearing organization'' to DCOs 
registered with the Commission. The Commission notes that, as of the 
date of this release, it has granted exemptive relief to four non-U.S. 
central counterparties from registering as a DCO with the Commission, 
under section 5b(h) of the CEA, pursuant to Commission Orders (``DCO 
Exemptive Orders'').\40\ The DCO Exemptive Orders include reporting 
obligations that are consistent with those imposed on registered DCOs 
under amended part 45.\41\ Therefore, the Commission believes that it 
is sufficient for the obligations on derivatives clearing organizations 
in part 45 to apply only to registered DCOs and, as a result, the 
definition of ``derivatives clearing organization'' under amended 
regulation 45.1 will cover only registered DCOs, as proposed.
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    \40\ As of the date of this final release, the Commission has 
issued DCO Exemptive Orders to ASX Clear (Futures) Pty Ltd. 
(``ASX''), Japan Securities Clearing Corp., Korea Exchange Inc., and 
OTC Clear Hong Kong Ltd. (``OTC Clear''). The Commission amended 
ASX's DCO Exemptive Order on January 28, 2016 to require ASX to 
report the termination of any swap accepted for clearing by ASX to 
the SDR to which the original swap was reported.
    \41\ The Commission also notes ISDA's comment concerning 
entities that are in the process of registering as a DCO. Because 
there is no temporary or provisional registration of DCOs, such 
entities should not be entering into swaps that must be reported 
under part 45 without full registration.
---------------------------------------------------------------------------

    The Commission notes general support for the definition of 
``clearing swap.'' The Commission notes that the newly-defined term 
``clearing swap'' would include any swap to which the DCO is a 
counterparty, regardless of whether such swap is replacing an original 
swap.\42\ While a cleared swap transaction generally comprises an 
original swap that is terminated upon novation and the equal and 
opposite swaps that replace it, the Commission is aware of certain 
circumstances in which a cleared swap transaction may not involve the 
replacement of an original swap.\43\ Accordingly, the revised 
definition of ``clearing swap'' is intended to encompass: (1) Swaps to 
which the DCO is a counterparty and that replace an original swap 
(i.e., swaps commonly known as betas and gammas) and (2) all other 
swaps to which the DCO is a counterparty (even if such swap does not 
replace an original swap).
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    \42\ The Commission has noted LCH's request for guidance 
concerning reporting clearing swaps under the principal model of 
clearing more commonly used outside of the United States. The 
Commission declines to include such guidance at this time, but would 
note that this issue of reporting principal versus agency model 
clearing swaps is under consideration as part of the Technical 
Specifications Request for Comment issued by the Commission's Office 
of Data and Technology and the Division of Market Oversight on 
December 22, 2015 relating to draft technical specifications for 
certain swap data elements (``Technical Specifications Request for 
Comment''). See Draft Technical Specifications for Certain Swap Data 
Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf.
    \43\ For example, in the preamble to the part 39 adopting 
release, the Commission noted that ``open offer'' systems are 
acceptable under Sec.  39.12(b)(6), stating that: Effectively, under 
an open offer system there is no ``original'' swap between executing 
parties that needs to be novated; the swap that is created upon 
execution is between the DCO and the clearing member, acting either 
as principal or agent. Derivatives Clearing Organization General 
Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov. 
8, 2011).

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[[Page 41740]]

    The Commission also notes the broad support for the newly-defined 
term ``original swap.'' \44\ In addressing ISDA's request for 
clarification on firm or forced trades at the DCO, the Commission notes 
that guidance from its Divisions of Clearing and Risk and Market 
Oversight states that swaps arising out of a DCO's firm or forced trade 
process would constitute ``clearing swaps.'' \45\ The Divisions' 
guidance also states that DCOs should be the reporting counterparty of 
such swaps.
---------------------------------------------------------------------------

    \44\ See ISDA Oct. 30, 2015 Letter, at 3; LCH Oct. 30, 2015 
Letter, at 2.
    \45\ CFTC Letter No. 15-51 (Sept. 18, 2015).
---------------------------------------------------------------------------

    The proposed definition of original swap will provide clarity with 
respect to certain continuation data reporting requirements for such 
swaps by tying such obligations to a specific point in time in the life 
of a swap that is either intended to be submitted to a DCO for clearing 
at the time of execution, or that is not intended to be cleared at the 
time of execution but is later submitted to a DCO for clearing. The 
Commission notes that under the proposed definition, a swap that is 
submitted to a DCO for clearing can become an original swap by virtue 
of the DCO's acceptance of such swap for clearing, irrespective of: (1) 
Whether such swap is executed on or pursuant to the rules of a SEF or 
DCM or off-facility; (2) whether or not such swap is subject to the 
clearing requirement; and (3) whether such swap is intended to be 
cleared at the time of execution or not intended to be cleared at the 
time of execution, but subsequently submitted to a DCO for 
clearing.\46\
---------------------------------------------------------------------------

    \46\ See 17 CFR 39.12(b)(6). Clearing swaps would not be 
executed on or pursuant to the rules of a SEF or DCM as such swaps 
are created pursuant to the rules of a DCO.
---------------------------------------------------------------------------

    In addressing EEI/EPSA's comment on whether the term ``original 
swaps'' would include off-facility swaps rejected and then resubmitted 
for clearing, or swaps not intended to be cleared at execution but 
subsequently submitted for clearing, the Commission notes that a swap 
becomes an ``original swap'' once it is accepted for clearing by a DCO. 
The definition would apply regardless of whether the swap had 
previously been rejected for clearing, or whether it was not intended 
to be cleared at the time of execution.

B. Swap Data Reporting: Creation Data--Amendments to Sec.  45.3

1. Existing Sec.  45.3
    Regulation 45.3 requires reporting to an SDR of two types of 
``creation data'' generated in connection with a swap's creation: 
``primary economic terms data'' (``PET data'') and ``confirmation 
data.'' Additionally, Sec.  45.3 governs what creation data must be 
reported, who must report it, and deadlines for its reporting.
    The swap data reporting requirements under Sec.  45.3 concerning 
both PET data and confirmation data differ for reporting counterparties 
and entities depending on whether the swap is executed on or pursuant 
to the rules of a SEF or DCM (Sec.  45.3(a)), is subject to mandatory 
clearing and executed off-facility (Sec.  45.3(b)), or is not subject 
to mandatory clearing and executed off-facility (Sec.  45.3(c) and 
(d)). Regulation 45.3 also addresses specific creation data reporting 
requirements in circumstances where a swap is accepted for clearing by 
a DCO,\47\ including the excusal of the reporting counterparty from 
reporting creation data in certain circumstances.\48\
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    \47\ See 17 CFR 45.3(a)(2), (b)(2), (c)(1)(ii), (c)(2)(ii), and 
(d)(2).
    \48\ See 17 CFR 45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).
---------------------------------------------------------------------------

2. Proposed Amendments to Sec.  45.3
    As noted above, the Commission has observed how the part 45 
regulations function in practice with respect to swaps that are 
cleared. While CEA section 2(a)(13)(G) requires each swap (whether 
cleared or uncleared) to be reported to a registered SDR, the 
Commission believes that the interplay between the Sec.  45.3 reporting 
requirements applicable to SEFs, DCMs and reporting counterparties, and 
the reporting requirements applicable to DCOs, should be clarified in 
the context of a cleared swap transaction. Accordingly, the Commission 
proposed several amendments to Sec.  45.3 to better delineate the 
creation data reporting requirements associated with each swap involved 
in a cleared swap transaction.
i. Proposed Revised References to Clearing Requirement Exceptions and 
Exemptions
    References to the end-user exception to the swap clearing 
requirement set forth in section 2(h)(7) of the CEA are included in 
existing Sec. Sec.  45.3 and 45.8. Following the publication of the 
Final Part 45 Rulemaking, the Commission codified the end-user 
exception in Sec.  50.50 and published two exemptions to the swap 
clearing requirement: The inter-affiliate exemption in Sec.  50.52, and 
the financial cooperative exemption in Sec.  50.51. Therefore, the 
Commission proposed revisions to the introductory language of Sec.  
45.3, Sec. Sec.  45.3(b)-(d), and 45.8(h)(1)(vi) to reflect that 
exceptions to, and exemptions from, the clearing requirement are now 
codified in part 50 of the Commission's regulations.\49\
---------------------------------------------------------------------------

    \49\ See 80 FR 52544, 52548.
---------------------------------------------------------------------------

ii. Proposed Addition of Sec.  45.3(e)--Clearing Swaps
    Paragraphs (a)-(d) of Sec.  45.3 govern creation data reporting in 
connection with swaps executed on or pursuant to the rules of a SEF or 
DCM and for off-facility swaps, but do not separately address creation 
data reporting for swaps created through the clearing process by a DCO 
(i.e., clearing swaps). Accordingly, the Commission proposed 
renumbering existing paragraph (e) (Allocations) of Sec.  45.3 as 
paragraph (f), and adding new paragraph (e) to Sec.  45.3, which will 
exclusively govern creation data reporting requirements for clearing 
swaps. The Commission also proposed revising the introductory language 
of Sec.  45.3 to clarify that paragraphs (a)-(d) apply to all swaps 
except clearing swaps, while paragraph (e) applies to clearing 
swaps.\50\ The Commission did not propose to change the existing 
requirements for who reports creation data for those swaps that become 
original swaps. Creation data for such swaps will continue to be 
reported by the reporting counterparty, as determined pursuant to Sec.  
45.8, or by the SEF/DCM in the case of on-facility swaps.
---------------------------------------------------------------------------

    \50\ See 80 FR 52544, 52548-49.
---------------------------------------------------------------------------

    Under the proposed revisions to Sec.  45.3(e), a DCO would be 
required as reporting counterparty under new Sec.  45.8(i) \51\ to 
report all required swap creation data for each clearing swap, either 
as soon as technologically practicable after an original swap is 
accepted by the DCO for clearing (in the event that the clearing swap 
replaced an original swap), or as soon as technologically practicable 
after execution of a clearing swap (in the event that the clearing swap 
does not replace an original swap). Additionally, under the proposed 
revisions to Sec.  45.3(e), required swap creation data for clearing 
swaps must be provided to a registered SDR electronically by the DCO 
and must include all PET data and all confirmation data for each 
clearing swap.
---------------------------------------------------------------------------

    \51\ The Commission proposed adding Sec.  45.8(i), which 
establishes the DCO as the reporting counterparty for all clearing 
swaps. This change is discussed in greater detail in Section II.E. 
of this release. The Commission also proposed conforming amendments 
to Sec.  45.4(b)(1) and (2) to add the phrase ``as reporting 
counterparty'' after ``derivatives clearing organization'' to make 
clear that the DCO will be the reporting counterparty for purposes 
of those provisions. See Section II.C.
---------------------------------------------------------------------------

    As noted above, CEA section 2(a)(13)(G) \52\ requires each swap

[[Page 41741]]

(whether cleared or uncleared) to be reported to a registered SDR. 
Proposed revisions to paragraphs (a)-(d) and new paragraph (e) of Sec.  
45.3 will thus cover creation data reporting requirements for all 
swaps: Revised Sec.  45.3(a) applies to each swap executed on or 
pursuant to the rules of a SEF or DCM, revised Sec.  45.3(b)-(d) 
applies to ``all off-facility swaps,'' and proposed new Sec.  45.3(e) 
would apply to clearing swaps. The proposed amendments to Sec.  
45.3(a)-(d) would thus exclude clearing swaps. Under the proposed 
amendments to Sec.  45.3, a SEF/DCM or counterparty other than the DCO 
will not have swap data reporting obligations with respect to clearing 
swaps. Additionally, revised Sec.  45.3(a)-(d) will govern the creation 
data reporting requirements for swaps, including swaps commonly known 
as ``alpha'' swaps, regardless of whether they later become original 
swaps by virtue of their acceptance for clearing.\53\
---------------------------------------------------------------------------

    \52\ 7 U.S.C. 2(a)(13)(G).
    \53\ Swaps created by a DCO under Sec.  39.12(b)(6) are a type 
of clearing swap as defined in this release, and thus could not be 
executed on or pursuant to the rules of a SEF or DCM. Additionally, 
a DCO would not report creation data for a swap that was executed on 
or pursuant to the rules of a SEF or DCM, or for an off-facility 
swap that is submitted to the DCO for clearing, because, under Sec.  
45.3(a)-(d), the SEF/DCM or reporting counterparty would be 
responsible for reporting creation data for such swaps after 
execution. Under the revisions to Sec.  45.3, a DCO will not have 
creation data reporting obligations for swaps that are not clearing 
swaps. The Commission notes that the revisions to Sec.  45.3 in this 
release are consistent with the prior no action relief and guidance 
issued by Commission staff relating to firm or forced trades at 
DCOs. See CFTC Letter No. 15-51 (Sept. 18, 2015); CFTC No-Action 
Letter No. 14-119 (Sept. 29, 2014).
---------------------------------------------------------------------------

iii. Proposed Removal of Provisions
    As noted above, several provisions of existing Sec.  45.3 impose 
certain creation data reporting requirements on a DCO in circumstances 
where a swap is accepted for clearing by a DCO. To ensure consistency 
with Sec.  39.12(b)(6), the Commission proposed to remove these 
creation data reporting provisions (current Sec. Sec.  45.3(a)(2),\54\ 
(b)(2), (c)(1)(ii), (c)(2)(ii), and (d)(2)), and replacing them with 
new proposed Sec.  45.3(e), as described above.\55\
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    \54\ The Commission is also renumbering Sec.  45.3(a)(1) as 
Sec.  45.3(a).
    \55\ See 80 FR 52544, 52548-49.
---------------------------------------------------------------------------

    Additionally, the Commission proposed to remove portions of 
Sec. Sec.  45.3(b)(1), (c)(1)(i), (c)(2)(i), and (d)(1).\56\ 
Previously, where both a DCO and reporting counterparty had obligations 
under Sec.  45.3 for reporting creation data for the same swap, the 
reporting counterparty would be excused from reporting creation data if 
the swap is accepted for clearing before any PET data is reported by 
the reporting counterparty. Under the proposed regulation, these 
excusal provisions are no longer necessary because the proposed rules 
require DCOs to report creation data only for clearing swaps, and not 
for swaps accepted for clearing (i.e., original swaps).
---------------------------------------------------------------------------

    \56\ See 80 FR 52544, 52549.
---------------------------------------------------------------------------

iv. Proposed Removal of Certain Confirmation Data Reporting 
Requirements
    Existing Sec. Sec.  45.3(a)-(d) requires the SEF/DCM (under Sec.  
45.3(a)) or the reporting counterparty (under Sec. Sec.  45.3(b)-(d)) 
to report both PET and confirmation data in order to comply with 
creation data reporting obligations. The Commission believes that the 
confirmation data requirements for clearing swaps in new Sec.  45.3(e) 
will provide the Commission with a sufficient representation of the 
confirmation data for a cleared swap transaction, because the original 
swap is extinguished upon acceptance for clearing and replaced by equal 
and opposite clearing swaps.
    Accordingly, for swaps that are intended to be submitted to a DCO 
for clearing at the time of execution, the Commission proposed to amend 
Sec. Sec.  45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to remove 
the existing confirmation data reporting requirements.\57\
---------------------------------------------------------------------------

    \57\ See 80 FR 52544, 52549-50.
---------------------------------------------------------------------------

v. Proposed Revisions to Sec.  45.3(f)--Allocations
    The Commission proposed renumbering existing Sec.  45.3(e), which 
governs creation data reporting for swaps involving allocation, as 
Sec.  45.3(f).\58\ The Commission also proposed replacing the phrase 
``original swap transaction'' in Sec. Sec.  45.3(f)(2) and 
45.8(h)(1)(vii)(D), and in the PET data tables found in appendix 1 to 
part 45, with ``initial swap transaction'' to avoid confusion with the 
term ``original swap,'' which is defined in Sec.  45.1.\59\
---------------------------------------------------------------------------

    \58\ The Commission also proposed renumbering Sec.  45.3 
paragraphs (f), (g), and (h) as paragraphs (g), (h), and (i), 
respectively.
    \59\ See 80 FR 52544, 52550.
---------------------------------------------------------------------------

vi. Proposed Addition of Sec.  45.3(j): Choice of SDR
    The Commission proposed adding Sec.  45.3(j) in order to explicitly 
establish which entity has the obligation to choose the SDR to which 
the required swap creation data is reported.\60\ New Sec.  45.3(j) 
provides that: For swaps executed on or pursuant to the rules of a SEF 
or DCM (including swaps that may later become original swaps), the SEF 
or DCM has the obligation to choose the SDR; for all other swaps 
(including off-facility swaps and/or clearing swaps) the reporting 
counterparty (as determined in Sec.  45.8) will have the obligation to 
choose the SDR.\61\
---------------------------------------------------------------------------

    \60\ See 80 FR 52544, 52550.
    \61\ Regulation 45.3(j) generally reflects the language included 
in the preamble to the original Final Part 45 Rulemaking, which 
provides that the SEF or DCM would select the SDR for platform-
executed swaps, and the reporting counterparty would choose the SDR 
for off-facility swaps. See 77 FR 2136, 2146 (Jan. 13, 2012). Under 
the new rule, the DCO will have the obligation to choose the SDR for 
clearing swaps.
---------------------------------------------------------------------------

    Under the proposed addition of Sec.  45.3(j) and the proposed 
revisions to Sec.  45.10,\62\ the entity with the obligation to report 
the initial required swap creation data will select the SDR to which 
all subsequent swap creation and continuation data for that swap will 
be reported by choosing the SDR to which such initial required swap 
creation data is reported. Thereafter, all required swap creation data 
and all required swap continuation data for a given swap will be 
reported to the same SDR used by the registered entity or 
counterparty.\63\
---------------------------------------------------------------------------

    \62\ Revisions to Sec.  45.10 are discussed in Section II.F 
below. As will be discussed in Section II.F below, by operation of 
Sec.  45.10, DCOs will be obligated to report all required 
continuation data for original swaps to the registered SDR (as 
selected by the SEF, DCM, or reporting counterparty pursuant to 
proposed Sec.  45.3(j)) to which required creation data for the swap 
was reported pursuant to Sec. Sec.  45.3(a)-(d).
    \63\ See Proposed Sec.  45.10. See also Section II.F.2, infra.
---------------------------------------------------------------------------

    Finally, the Commission notes that it is aware of certain 
situations wherein SEFs, DCMs and reporting counterparties for off-
facility swap transactions may report the part 43 data for a swap to an 
SDR prior to reporting the part 45 required creation data for the same 
swap. In such situations, the registered entity or reporting 
counterparty has effectively chosen the SDR for the swap prior to 
submitting the part 45 data, since, pursuant to revisions to Sec.  
45.10 adopted in this release, all swap data reported pursuant to parts 
43 and 45 for a given swap is required to be reported to a single 
SDR.\64\ For example, if a swap is executed on or pursuant to the rules 
of SEF A, and SEF A immediately upon execution reports the part 43 data 
to SDR B, prior to reporting part 45 data, SEF A has effectively chosen 
SDR B as the SDR for all required creation data for the swap, because 
revised Sec.  45.10 requires that all part 43 and 45 swap data for a 
given swap must be reported to a single SDR.\65\ Accordingly, in this 
example,

[[Page 41742]]

part 45 required creation data must be reported to SDR B.
---------------------------------------------------------------------------

    \64\ Id.
    \65\ Id.
---------------------------------------------------------------------------

vii. Proposed Removal of Expired Compliance Date References
    The Commission proposed to remove the references to the expired 
compliance dates in Sec. Sec.  45.3(b)(1)(i), (b)(1)(ii), (b)(2), 
(b)(2)(ii), (c)(1)(i)(A), (c)(1)(i)(B), (c)(2)(i)(A), (c)(2)(i)(B), 
(d)(1), and (d)(3), and in the introductory language to Sec.  45.3.\66\ 
These references to phase-in compliance dates are no longer necessary 
as they have expired.
---------------------------------------------------------------------------

    \66\ See 80 FR 52544, 52550.
---------------------------------------------------------------------------

3. Comments
    The Commission received a number of comments in response to its 
proposed revisions to Sec.  45.3. Many of these comments focused on the 
proposed reporting of creation data associated with clearing swaps and 
related reporting obligations concerning original swaps. Other comments 
addressed the new choice of SDR provision set out in Sec.  45.3(j). 
And, finally, some commenters discussed the new clearing swaps rules in 
the context of principal model clearing.\67\
---------------------------------------------------------------------------

    \67\ FSR requested that the Commission codify no action relief 
issued by the Division of Clearing and Risk and the Division of 
Market Oversight on April 5, 2013, providing relief to non-SD/MSPs 
from reporting requirements for swaps between wholly-owned 
affiliates. See FSR Oct. 30, 2015 Letter, at 5 (referencing CFTC No-
Action Letter No. 13-09 (Apr. 5, 2013)). This request is beyond the 
scope of the NPRM and will not be addressed in this release.
---------------------------------------------------------------------------

i. Creation Data Reporting for Clearing Swaps
    With respect to the reporting of clearing swaps, commenters 
generally supported the Commission's proposal to require DCOs to report 
creation data for clearing swaps.\68\ FSR and CMC agreed that the DCO 
is in the best position to report creation data for clearing swaps.\69\ 
ISDA,\70\ DTCC, and LCH also noted support for requiring DCOs to report 
data for clearing swaps.\71\ CME likewise supported the requirement for 
DCOs to report creation data for clearing swaps, recommending that the 
DCO be assigned all reporting obligations for original and clearing 
swaps.\72\ Markit recommended an alternative approach whereby the 
reporting counterparty to the original swap would be permitted to 
choose whether it reports creation data for the clearing swaps, while 
allowing the reporting counterparty to delegate the reporting 
responsibilities to a DCO.\73\
---------------------------------------------------------------------------

    \68\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015 
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 
Letter, at 2; DTCC Oct. 30, 2015 Letter, at 3.
    \69\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015 
Letter, at 2.
    \70\ ISDA also commented that currently not all DCOs report 
clearing swaps in a consistent manner in instances where an 
affiliate of a clearing member enters into a swap that is 
subsequently cleared through its affiliated clearing member. ISDA 
suggested that the Commission make clear that the submission of a 
swap for clearing should not result in a change in the name of the 
counterparty that is reported to an SDR and that the report 
submitted by the DCO for the clearing swap has to reflect the 
relevant affiliate and not the clearing member as the legal 
counterparty to the clearing swap with the derivatives clearing 
organization. See ISDA Oct. 30, 2015 Letter, at 12. While noting 
this comment, the Commission declines to address this as beyond the 
scope of the NPRM.
    \71\ See ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015 
Letter, at 3 (distinguishing between reporting obligations and the 
ability to select the SDR to which data related to clearing swaps is 
reported); LCH Oct. 30, 2015 Letter, at 2.
    \72\ See CME Oct. 30 2015 Letter, at 3.
    \73\ See Markit Oct. 30 2015 Letter, at 5.
---------------------------------------------------------------------------

    LCH requested that the Commission change references to ``execution 
of a clearing swap'' in proposed Sec.  45.3(e) to ``creation of a 
clearing swap'' in order to more clearly address compression events. 
LCH also suggested cross-referencing re-numbered Sec.  45.3(f) to new 
Sec.  45.3(e), to cover situations where block trades are allocated 
post-clearing.\74\
---------------------------------------------------------------------------

    \74\ See LCH Oct. 30, 2015 Letter, at 2.
---------------------------------------------------------------------------

ii. Removal of Confirmation Data Reporting Requirements for Intended To 
Be Cleared Swaps
    With respect to swaps that become original swaps, commenters were 
generally supportive of the Commission's proposal to eliminate the 
requirement for reporting confirmation data on intended to be cleared 
swaps.\75\ FSR commented that the reporting of confirmation data for 
clearing swaps should provide sufficient confirmation data for a 
cleared swap transaction.\76\ Markit, on the other hand, commented that 
eliminating the requirement for reporting confirmation data for swaps 
that are intended to be cleared, while still maintaining the 
requirement to report primary economic terms data, will not benefit 
reporting workflows and that there is little incremental cost to report 
confirmation data as reporting systems are set up to capture that 
information already.\77\
---------------------------------------------------------------------------

    \75\ See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015 
Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3.
    \76\ See FSR Oct. 30, 2015 Letter, at 3.
    \77\ See Markit Oct. 30, 2015 Letter, at 2-3.
---------------------------------------------------------------------------

iii. Creation Data Reporting for Swaps That Become Original Swaps
    While the proposed amendments to part 45, aside from the removal of 
the excusal provisions noted above, do not change creation data 
reporting requirements for swaps that become original swaps, several 
commenters commented on which entity should be responsible for 
reporting creation data for swaps that will become original swaps. Some 
commenters suggested that if reporting of creation data for swaps that 
become original swaps continues, the DCO, rather than the reporting 
counterparty, should be responsible for reporting the creation data for 
that swap.\78\ CME commented that assigning all the reporting 
obligations for original and clearing swaps to the DCO is a better and 
simpler way to address alpha swap reporting, and would eliminate the 
need to reconcile original and clearing swaps across SDRs.\79\ CMC 
similarly commented that DCOs are best positioned to report on swaps 
that they accept or reject for clearing and should assume all reporting 
obligations for cleared swaps, including all reporting of swaps that 
are intended to be cleared.\80\ AIMA likewise suggested that if the 
Commission continues to require the reporting of original swaps, 
assigning the reporting obligations to the DCO will remove reporting 
burdens and the risk of data fragmentation across SDRs.\81\
---------------------------------------------------------------------------

    \78\ See e.g., CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 
2015 Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 
2015 Letter, at 3.
    \79\ See CME Oct. 30, 2015 Letter, at 3.
    \80\ See CMC Oct. 30, 2015 Letter, at 2.
    \81\ See AIMA Oct. 30, 2015 Letter, at 6.
---------------------------------------------------------------------------

    Other commenters recommended that the Commission continue requiring 
the reporting counterparty to report creation data for those swaps that 
will become original swaps.\82\ LCH commented that the reporting 
counterparty should always be a party to the transaction and therefore, 
in the case of a swap that will become an original swap, the DCO would 
not be better suited than the SEF, DCM, or reporting counterparty to 
report the creation data.\83\ Eurex suggested that assigning the 
reporting obligation of original swap creation data to the DCO may 
present a timeliness issue depending on when the DCO receives the 
necessary information from the counterparties.\84\ ISDA likewise agreed 
that the obligation to report swaps that become original swaps should 
remain with the reporting counterparty for that swap.\85\
---------------------------------------------------------------------------

    \82\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.
    \83\  See LCH Oct. 30, 2015 Letter, at 2.
    \84\ See Eurex Oct. 30, 2015 Letter, at 4.
    \85\ ISDA also commented in support of the Commission's proposal 
to remove the provisions in Sec.  45.3 that excused a reporting 
counterparty from reporting creation data for a swap accepted for 
clearing before the primary economic terms reporting deadline. See 
ISDA Oct. 30, 2015 Letter, at 4.

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[[Page 41743]]

    Some commenters suggested that the reporting of any creation data 
for swaps that will become original swaps is unnecessary.\86\ AIMA 
commented that eliminating reporting for swaps that are intended to be 
cleared at the time of execution will significantly reduce complexity 
in the reporting regime and streamline the reported data.\87\ AIMA also 
commented that the Commission's proposed reporting approach for 
original swaps will not reduce data fragmentation.\88\ Similarly, EEI/
EPSA suggested that there is little to no benefit to original swap 
reporting for swaps that are intended to be cleared at the time of 
execution and that counterparties should not be required to report any 
creation data for such swaps.\89\ Other commenters, in response to the 
IDWG Request for Comment, supported the continued reporting of creation 
data for swaps that will become original swaps.\90\
---------------------------------------------------------------------------

    \86\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30, 
2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2.
    \87\ See AIMA Oct. 30, 2015 Letter, at 3.
    \88\ See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting 
original swap creation data to one SDR and reporting clearing swap 
data to a different SDR may undermine data quality for the 
Commission's supervisory purposes).
    \89\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.
    \90\ See NPRM, 80 FR 52544, 52549 at nn. 37-39 (citing DTCC May 
27, 2014 Letter at 17-18; AFR May 27, 2014 Letter at 5; Markit May 
27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10).
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iv. Choice of SDR Provisions
    The Commission received a number of comments on its proposal 
regarding the selection of the SDR to which the required swap creation 
data should be reported. Some commenters were supportive of the 
Commission's proposed addition of Sec.  45.3(j) and proposed 
modifications to Sec.  45.10 relating to the choice of the SDR for a 
particular swap. As discussed below, other commenters suggested 
modifications to the Commission's proposal and changes to the manner in 
which the SDR is selected for a particular swap.
    With respect to clearing swaps, commenters were divided as to which 
entity should have the ability to select the SDR. FSR, LCH, and ISDA 
all supported allowing the DCO to select the SDR for purposes of 
reporting creation data for clearing swaps, as the DCO has the sole 
obligation to report clearing swaps.\91\ CME and LedgerX similarly 
supported the proposal to allow DCOs to select the SDR for clearing 
swaps.\92\ CME supports the Commission's proposal to assign all 
clearing swap reporting obligations, and the right to select the SDR to 
which it reports, to the DCO. CME also recommended that the Commission 
assign all original swap reporting obligations, and associated SDR 
selection rights, to the DCO, which would, in CME's opinion, ensure 
that all data for a cleared swap transaction is housed in the same SDR, 
thereby avoiding data fragmentation.\93\
---------------------------------------------------------------------------

    \91\ See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4.
    \92\ See CME Oct. 30, 2015 Letter, at 1-2; LedgerX Oct. 30, 2015 
Letter, at 1.
    \93\ See CME Oct. 30, 2015 Letter, at 2-3.
---------------------------------------------------------------------------

    Other commenters suggested that the reporting counterparty to the 
swap that becomes the original swap should select the SDR to which the 
clearing swaps are reported. DTCC commented that the DCO for a clearing 
swap should have the obligation to report the clearing swap to the SDR 
selected by the reporting counterparty to the swap that became the 
original swap, or selected by the SEF or DCM for on-facility swaps.\94\ 
DTCC commented that this ``single SDR approach'' would be vital for 
providing a full audit trail and the ability to efficiently aggregate 
data.\95\ DTCC also commented that allowing the DCO to select the SDR 
for clearing swaps creates a competition problem due to vertically 
integrated SDRs and DCOs.\96\ DTCC explained that permitting a DCO to 
report to an affiliated SDR when the original swap data had been 
reported to another SDR, allows DCOs to bundle services and further 
entrenches DCOs' vertical integration of trade execution, clearing, and 
data reporting.\97\ Markit recommended that the Commission allow the 
reporting counterparty to the swap that becomes the original swap to 
select the SDR to which the clearing swap is reported, while also 
allowing that reporting counterparty to delegate the selection of the 
swap data repository to the DCO. Markit commented that this 
counterparty choice approach would result in a more competitive DCO 
marketplace.\98\
---------------------------------------------------------------------------

    \94\  See DTCC Oct. 30, 2015 Letter, at 3.
    \95\ See id. at 4.
    \96\ See id. at 7.
    \97\  See id.
    \98\ See Markit Oct. 30, 2015 Letter, at 5.
---------------------------------------------------------------------------

    Other commenters suggested that, for on-facility swaps that are not 
cleared by a DCO, the party responsible for reporting continuation data 
for the swap should not be bound by the SEF or DCM's choice of SDR for 
the reporting of creation data.\99\ ISDA commented that in such cases 
the selection of the SDR should not be assigned to the entity that has 
the first obligation to report, but rather should be assigned to the 
entity that has the longest, recurring, or most frequent obligation to 
report.\100\
---------------------------------------------------------------------------

    \99\ See ISDA Oct. 30, 2015 Letter, at 4-5; JBA Oct. 30, 2015 
Letter, at 1.
    \100\ See ISDA Oct. 30, 2015 Letter, at 4-5.
---------------------------------------------------------------------------

v. Reporting of Principal Model Cleared Swaps
    Finally, a few comments focused on swaps that are cleared through a 
principal, rather than agency, model. Eurex commented that it is not 
clear under the proposal which entity is to be reported as the 
counterparty to the DCO with regard to a clearing swap in the principal 
model.\101\
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    \101\  See Eurex Oct. 30, 2015 Letter, at 9; see also FSR Oct. 
30, 2015 Letter, at 5.
---------------------------------------------------------------------------

4. Final Rule
    The Commission has considered the comments that it received in 
response to the proposed changes to Sec.  45.3. As discussed above, 
some of the proposed changes to Sec.  45.3 received widespread support 
among commenters, while other proposed changes received both support 
and objection from commenters. The Commission has decided to adopt the 
changes to Sec.  45.3 as proposed in the NPRM for the following 
reasons.\102\
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    \102\ The Commission has made one non-substantive conforming 
change to final Sec.  45.3(b), changing the phrase ``exception or 
exemption from the clearing requirement'' to ``exception to, or 
exemption from, the clearing requirement,'' to make this provision 
consistent with other uses of the phrase throughout Sec.  45.3.
---------------------------------------------------------------------------

i. Creation Data Reporting for Clearing Swaps
    As discussed above, the Commission's proposal to require DCOs to 
report creation data for clearing swaps received support from 
commenters.\103\ The Commission agrees with these commenters that the 
DCO is in the best position to report creation data for clearing swaps. 
As for Markit's proposed counterparty choice alternative, the 
Commission recognizes the flexibility that Markit's proposal could 
offer parties to the clearing swap. However, the Commission believes 
Markit's proposal would likely result in additional complexity in the 
reporting process and could obscure, to the Commission, which entity 
has the ultimate responsibility for reporting the clearing swap. After 
considering the comments received, the Commission continues to believe 
that the DCO is the entity with the easiest and quickest access to full 
information with respect to PET data and confirmation data for clearing 
swaps. Commission regulation

[[Page 41744]]

Sec.  39.12(b)(6) requires DCOs to have rules providing that, upon 
acceptance of a swap by the DCO for clearing, the original swap is 
extinguished and replaced by an equal and opposite swap between the DCO 
and each clearing member acting as either principal for a house trade 
or agent for a customer trade.\104\ Because the DCO must replace an 
original swap with clearing swaps when accepting the original swap for 
clearing, the Commission believes that the DCO should be the entity 
that reports creation data for clearing swaps, and adopts its proposal 
to require DCOs to report creation data for clearing swaps.
---------------------------------------------------------------------------

    \103\ See FSR Oct. 30, 2015 Letter, at 2; CMC Oct. 30, 2015 
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; DTCC Oct. 30, 2015 
Letter, at 3; LCH Oct. 30, 2015 Letter, at 2.
    \104\ See 17 CFR 39.12(b)(6).
---------------------------------------------------------------------------

    The Commission notes LCH's comments that, when establishing the 
timing requirement for reporting clearing swaps that do not replace 
original swaps in Sec.  45.3(e), the term ``creation of a clearing 
swap'' may better capture compression events than ``execution of a 
clearing swap.'' The Commission believes that the phrase ``execution of 
a clearing swap,'' for purposes of part 45, is sufficiently clear to 
cover reporting obligations for all clearing swaps that do not replace 
original swaps. The Commission also believes that the adopted reporting 
requirements for clearing swaps would cover post-clearing allocations 
of block trades raised by LCH. If a block trade is allocated after 
clearing, then any allocations of that block would have a DCO as one 
counterparty. Thus, such post-allocation swaps would be clearing swaps 
and must be reported by the DCO pursuant to Sec.  45.3(e).
ii. Removal of Confirmation Data Reporting Requirements for Intended To 
Be Cleared Swaps
    Under the new rules, SEFs/DCMs and reporting counterparties will 
continue to be required to report PET data as part of their creation 
data reporting, but will be required to report confirmation data only 
for swaps that, at the time of execution, are not intended to be 
submitted to a DCO for clearing. For swaps that, at the time of 
execution, are intended to be submitted to a DCO for clearing, SEFs/
DCMs and reporting counterparties will not be required to report 
confirmation data. If the swap is accepted for clearing by a DCO, the 
DCO will be required to report confirmation data for the clearing swaps 
pursuant to proposed Sec.  45.3(e).\105\
---------------------------------------------------------------------------

    \105\ The Commission notes that this change only impacts certain 
confirmation data reporting and recordkeeping requirements in Sec.  
45.3, and does not alter existing obligations to generate or 
exchange confirmations under other Commission regulations.
---------------------------------------------------------------------------

    With respect to swaps that will become original swaps, the 
Commission received widespread support of the proposed elimination of 
the requirement to report confirmation data associated with these 
swaps.\106\ One commenter did suggest that there is little incremental 
cost to continuing to require reporting of confirmation data for swaps 
that will become original swaps.\107\ However, the Commission continues 
to believe that the confirmation data requirements for clearing swaps 
provide the Commission with a sufficient representation of the 
confirmation data for a cleared swap transaction, as the original swap 
is extinguished upon acceptance for clearing and replaced by equal and 
opposite clearing swaps. Accordingly, the Commission is adopting its 
proposal to remove the confirmation data reporting requirement for 
swaps that are intended to be cleared at the time of execution.
---------------------------------------------------------------------------

    \106\ See FSR Oct. 30, 2015 Letter, at 3; ISDA Oct. 30, 2015 
Letter, at 4; EEI/EPSA Oct. 30, 2015 Letter, at 3.
    \107\ See Markit Oct. 30, 2015 Letter, at 2-3.
---------------------------------------------------------------------------

iii. Creation Data Reporting for Swaps That Become Original Swaps
    With the exception of the removal of excusal provisions, the 
Commission has not proposed to change the existing requirement to 
report creation data for swaps that will become original swaps. As 
noted in the NPRM, CEA section 2(a)(13)(G) requires each swap, whether 
cleared or uncleared, to be reported to a registered SDR.\108\ The 
Commission did, however, receive some comments urging the Commission to 
eliminate the existing requirement to report swaps that will become 
original swaps. The Commission also received, in response to the IDWG 
Request for Comment, comments in support of continued reporting of 
creation data for swaps that will become original swaps.\109\
---------------------------------------------------------------------------

    \108\ See 80 FR 52544, 52548.
    \109\ See NPRM, 80 FR 52544, 52549, nn. 37-39 (citing DTCC May 
27, 2014 Letter at 17-18; AFR May 27, 2014 Letter at 5; Markit May 
27, 2014 Letter at 25; TR SEF May 27, 2014 Letter at 10).
---------------------------------------------------------------------------

    Having reviewed the comments regarding reporting of swaps that 
become original swaps, the Commission continues to interpret CEA 
section 2(a)(13)(G) as requiring all swaps to be reported, which would 
include swaps that become original swaps as distinct swaps from 
resulting clearing swaps under Sec.  39.12(b)(6). Further, the 
Commission continues to believe that original swaps contain essential 
information regarding the origins of cleared swap transactions for 
market surveillance and audit-trail purposes, including but not limited 
to the identity of the original counterparties, the execution venue, 
and the timestamp of the original transaction between the original 
counterparties. Such essential information could not be easily 
determined if only resulting clearing swaps were to be reported. The 
Commission's ability to trace the history of a cleared swap transaction 
from execution between the original counterparties to clearing novation 
relies on this information. The Commission also notes that the 
continued reporting of swaps that become original swaps is consistent 
with the SEC's proposed Regulation SBSR--Reporting and Dissemination of 
Security-Based Swap Information.\110\ Finally, the continued reporting 
of original swaps, including original swap terminations, will aid the 
Commission's ability to analyze cleared swap activity and review swap 
activity for compliance with the clearing requirement. For these 
reasons the Commission, in this final rule, continues to require 
reporting of swaps that will become original swaps.
---------------------------------------------------------------------------

    \110\ See Regulation SBSR, 80 FR 14740.
---------------------------------------------------------------------------

    The Commission received divided comments as to which entity should 
be responsible for reporting creation data for those swaps that will 
become original swaps. Some commenters suggested that the DCO should be 
the reporting counterparty,\111\ while other commenters recommended 
that the reporting counterparty report creation data for those swaps 
that will become original swaps.\112\ After careful consideration of 
the comments received on this issue, the Commission believes that the 
creation data reporting requirements for those swaps that will become 
original swaps should remain as they currently exist, aside from the 
removal of excusal provisions noted above. The Commission recognizes 
that reporting counterparties and registered entities have invested 
substantial time and resources to report swaps (both cleared and not 
cleared) to SDRs and that DCOs have invested substantial resources to 
report clearing swaps. The Commission believes that maintaining the 
existing requirement for the reporting counterparty, rather than for 
the DCO, to report creation data of the swap that will become an 
original swap will help to prevent disruption of established industry 
workflows. The Commission also continues to believe that the SEF/DCM or 
reporting

[[Page 41745]]

counterparty has the easiest and fastest access to initial creation 
data for swaps that become original swaps.
---------------------------------------------------------------------------

    \111\ See CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 2015 
Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015 
Letter, at 2.
    \112\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.
---------------------------------------------------------------------------

    As discussed in its Final Part 45 Rulemaking, the Commission 
believes that requiring all swaps that become original swaps to be 
reported only to SDRs chosen by the DCO of the resulting clearing swaps 
could create an uneven playing field between DCO affiliated SDRs and 
non-DCO affiliated SDRs.\113\ Likewise, if the reporting counterparty 
or SEF/DCM were to report creation data, or select the SDR to which 
such data is reported, an SDR in which swap dealers have an ownership 
interest may obtain a dominant market position. This Final Rule avoids 
injecting the Commission into a market decision by maintaining the 
requirement that creation data for swaps that become original swaps is 
reported by the reporting counterparty for that swap, or the SEF/DCM, 
and the resulting clearing swaps are reported by the DCO.
---------------------------------------------------------------------------

    \113\ See 77 FR 2136, 2149.
---------------------------------------------------------------------------

    The Commission acknowledges the data fragmentation concerns raised 
by those that recommend DCOs report original swap creation data, 
however, the Commission also recognizes that requiring the DCOs, rather 
than the original reporting counterparty, to report original swap 
creation data may also present challenges. For example, Eurex noted 
that there could be a timeliness issue depending on when the DCO 
receives necessary information from counterparties to report creation 
data.\114\ The Commission also is concerned that, should DCOs report 
original swaps, potential delays in clearing could delay real-time 
swaps reporting pursuant to part 43. The Commission believes that 
accurate and timely reporting of the required data fields by all 
parties, in particular the clearing swap PET fields and data elements 
specific to terminations of original swaps, will alleviate data 
fragmentation concerns for those situations where the original swap and 
clearing swaps are reported to different SDRs.
---------------------------------------------------------------------------

    \114\ See Eurex Oct. 30, 2015 Letter, at 4.
---------------------------------------------------------------------------

iv. Choice of SDR Provisions
    The Commission received a variety of comments on its proposed 
addition of Sec.  45.3(j) and modifications to Sec.  45.10 regarding 
the choice of the SDR for a particular swap. With respect to clearing 
swaps, some commenters recommended that the DCO should select the 
SDR,\115\ while other commenters suggested the reporting counterparty 
to the original swap should select the SDR to which the clearing swap 
must be reported.\116\ The Commission has considered these comments and 
continues to believe, as discussed above, that placing the obligation 
to choose the SDR on the registered entity or counterparty that is 
required to first report the required swap creation data, rather than 
on another entity, will result in more efficient data reporting. 
Allowing the first entity to report data on a swap to choose the SDR 
will allow reporting entities to select an SDR to which they have 
established connections; giving another entity the ability to choose 
the SDR could require the first reporting entities to connect to 
multiple SDRs. The Commission also believes allowing the first 
reporting registered entity or counterparty to choose the SDR will also 
promote competition among SDRs to provide SDR services to a broad array 
of reporting entities.
---------------------------------------------------------------------------

    \115\ See FSR Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 
Letter, at 2; ISDA Oct. 30, 2015 Letter, at 4; CME Oct. 30, 2015 
Letter, at 2-3 (CME also suggested that the DCO select the SDR to 
which original swaps are reported); LedgerX Oct. 30, 2015 Letter, at 
1.
    \116\ See DTCC Oct. 30, 2015 Letter, at 3; Markit Oct. 30, 2015 
Letter, at 5 (Markit also suggested the counterparty have the option 
to delegate the selection of the SDR to the DCO).
---------------------------------------------------------------------------

    Requiring this method of SDR selection also avoids inserting anyone 
other than a party to the swap (or facility where the transaction is 
executed) into the decision as to how a registered entity or 
counterparty fulfills its regulatory obligation to report initial 
required swap creation data. As with the ``first-touch'' approach taken 
with respect to the creation of USIs in part 45,\117\ the Commission 
believes that the entity with the first reporting obligation should 
select the SDR for that report. The Commission believes that this 
method of SDR selection will avoid delays in real-time reporting for 
part 43 purposes. If DCOs were to select the SDR for an original swap, 
the DCO would not be in a position to make such selection until after a 
swap was accepted for clearing. Any delays in clearing would translate 
into delays in reporting for both part 43 real-time reporting and part 
45 reporting.
---------------------------------------------------------------------------

    \117\ See Final Part 45 Rulemaking, 77 FR 2136, 2158.
---------------------------------------------------------------------------

    The registered entity or counterparty that is required to report a 
swap pursuant to Sec.  45.8 may select an SDR to which its 
technological systems are most suited or to which it already has an 
established relationship, providing for the efficient and accurate 
reporting of swap data. The Commission notes that this Final Rule does 
not prohibit a registered entity or counterparty from choosing an SDR 
based on consideration of market preference or other factors, however, 
the obligation to choose the SDR will rest solely with the registered 
entity or counterparty set forth in amended Sec.  45.8. The Commission 
recognizes that this may result in original swaps and clearing swaps 
being reported to different SDRs, however, the Commission believes that 
the required data fields, such as original swap USI included in 
clearing swap reporting, and clearing swap USIs included in original 
swap reporting, will allow the Commission to efficiently and accurately 
link data across SDRs and perform its regulatory mandate.
    The Commission has also noted ISDA's proposed alternative that the 
entity with the ``longest, recurring, or most frequent obligation to 
report'' be given choice of SDR. In particular, ISDA expressed concern 
that market participants would be required, due to the made available 
to trade mandate, to trade certain swaps at a particular SEF, and 
therefore be required to report to that SEF's chosen SDR. However, the 
Commission notes that any swaps made available to trade would be 
subject to the clearing mandate. As discussed above, counterparties to 
cleared, on-facility swaps would likely have no reporting 
obligations.\118\ Therefore, the concern raised by ISDA would not 
likely impact a large percentage of on-facility swaps. Moreover, ISDA 
notes that its proposed alternative would require amending various 
other provisions in part 45, including assignment of reporting 
counterparty designation and USI creation. Additionally, the Commission 
notes that the ``longest, recurring, or most frequent obligation to 
report'' may be difficult to determine at the outset of a swap, 
creating potential confusion as to who could select the SDR. Because 
amended Sec.  45.3(j) codifies current industry practice,\119\ the 
Commission believes the choice of SDR provisions adopted in this final 
rule create the least disruption in the market while achieving the goal 
of consistent and timely swaps reporting.
---------------------------------------------------------------------------

    \118\ See supra, n. 26, discussing reporting obligations for 
counterparties to cleared, on-facility swaps.
    \119\ See NPRM, 80 FR 52544, 52550.
---------------------------------------------------------------------------

v. Reporting of Principal Model Clearing Swaps
    The Commission has noted comments from Eurex on reporting of 
clearing swaps under the principal clearing model. The Commission is 
aware of issues surrounding the reporting of principal model clearing 
swaps, but is

[[Page 41746]]

not providing further guidance at this time.

C. Swap Data Reporting: Continuation Data--Amendments to Sec.  45.4

1. Existing Sec.  45.4
    Regulation 45.4 governs the reporting of swap continuation data to 
an SDR during a swap's existence through its final termination or 
expiration. This provision establishes the manner in which continuation 
data, including life cycle event data or state data, and valuation 
data,\120\ must be reported (Sec.  45.4(a)), and sets forth specific 
continuation data reporting requirements for both cleared (Sec.  
45.4(b)) and uncleared (Sec.  45.4(c)) swaps. For cleared swaps, Sec.  
45.4(b) currently requires that life cycle event data or state data be 
reported by the DCO, and that valuation data be reported by both the 
DCO and by the reporting counterparty (if the reporting counterparty is 
an SD or MSP).
---------------------------------------------------------------------------

    \120\ ``Required swap continuation data'' is defined in Sec.  
45.1 and includes ``life cycle event data'' or ``state data'' 
(depending on which reporting method is used) and ``valuation 
data.'' Each of these data types is defined in Sec.  45.1. ``Life 
cycle event data'' means all of the data elements necessary to fully 
report any life cycle event. ``State data'' means all of the data 
elements necessary to provide a snapshot view, on a daily basis of 
all of the primary economic terms of a swap. ``Valuation data'' 
means all of the data elements necessary to fully describe the daily 
mark of the transaction, pursuant to CEA section 4s(h)(3)(B)(iii), 
and to Sec.  23.431 if applicable. 17 CFR 45.1.
---------------------------------------------------------------------------

    For uncleared swaps, Sec.  45.4(c) requires the reporting 
counterparty to report all required swap continuation data, including 
life cycle event data or state data, and valuation data.
2. Proposed Amendments to Sec.  45.4
    The Commission understands that Sec.  45.4 could be clarified 
regarding continuation data reporting responsibilities for each of the 
swaps involved in a cleared swap transaction. Accordingly, the 
Commission proposed several amendments to Sec.  45.4 to better 
delineate the continuation data reporting requirements associated with 
each swap involved in a cleared swap transaction.\121\ In particular, 
the Commission proposed conforming changes to existing Sec.  45.4(a), 
revisions to existing Sec.  45.4(b) and to existing Sec.  45.4(c) 
(proposed to be renumbered as Sec.  45.4(d)), and the addition of new 
Sec.  45.4(c). Each proposed amendment is discussed in detail below.
---------------------------------------------------------------------------

    \121\ See 80 FR 52544, 52551.
---------------------------------------------------------------------------

i. Proposed Conforming Changes to Sec.  45.4(a)
    The Commission proposed to revise the heading of Sec.  45.4(a) to 
read ``Continuation data reporting method generally'' to reflect that 
the continuation data reporting method requirements in Sec.  45.4(a) 
apply to all swaps, regardless of asset class or whether the swap is an 
original swap, clearing swap or uncleared swap, whereas the 
continuation data reporting requirements in proposed Sec.  45.4(b), 
(c), and (d) would apply to clearing swaps, original swaps, and 
uncleared swaps, respectively.\122\
---------------------------------------------------------------------------

    \122\ See 80 FR 52544, 52551.
---------------------------------------------------------------------------

ii. Proposed Revisions to Sec.  45.4(b)
    Regulation 45.4(b) currently governs continuation data reporting 
obligations for ``cleared swaps,'' but does not distinguish among the 
different swaps involved in a cleared swap transaction (i.e. original 
and clearing swaps). The Commission thus proposed to revise the 
introductory language of Sec.  45.4(b) to replace the terms ``cleared 
swaps'' and ``swaps cleared by a derivatives clearing organization,'' 
which were not defined in the Final Part 45 Rulemaking, with the 
defined term ``clearing swaps.'' \123\
---------------------------------------------------------------------------

    \123\ See 80 FR 52544, 52551-52.
---------------------------------------------------------------------------

    The Commission proposed to remove existing Sec.  45.4(b)(2)(ii), 
which requires a reporting counterparty that is an SD or MSP to report 
valuation data for cleared swaps daily, in addition to the valuation 
data that is required to be reported by the DCO pursuant to Sec.  
45.4(b)(2)(i). For clearing swaps, the DCO would be the only swap 
counterparty required to report continuation data, including valuation 
data.\124\
---------------------------------------------------------------------------

    \124\ This proposal would codify certain no-action letters 
issued by the Commission's Division of Market Oversight. See CFTC 
No-Action Letter No. 12-55 (Dec. 17, 2012); CFTC No-Action Letter 
No. 13-34 (Jun. 26, 2013); and CFTC No-Action Letter No. 14-90 (Jun. 
30, 2014). Staff no-action relief from the requirements of Sec.  
45.4(b)(2)(ii) has been in effect since the initial compliance date 
for part 45 reporting.
---------------------------------------------------------------------------

iii. Proposed Addition of Sec.  45.4(c): Continuation Data Reporting 
for Original Swaps
    Existing Sec.  45.4(c) governs continuation data reporting for 
uncleared swaps. The Commission proposed renumbering Sec.  45.4(c) as 
Sec.  45.4(d) (for reasons discussed below), and proposed the addition 
of a new Sec.  45.4(c), which would set forth the continuation data 
reporting requirements for original swaps.\125\
---------------------------------------------------------------------------

    \125\ See 80 FR 52544, 52552.
---------------------------------------------------------------------------

    Specifically, proposed Sec.  45.4(c) would require a DCO to report 
all required continuation data for original swaps, including original 
swap terminations, to the original swap SDR pursuant to Sec.  45.3(a) 
through (d).\126\ As proposed, Sec.  45.4(c) would also reference the 
existing requirement that all continuation data must be reported in the 
manner provided in Sec.  45.13(b), and that the SDR, in order to comply 
with Sec.  49.10, must also ``accept and record'' such data, including 
original swap terminations.\127\ The proposed addition of a reference 
to Sec.  49.10 is consistent with an IDWG commenter's request for 
clarification regarding the obligation of the SDR to accept and process 
the termination message from the DCO.\128\
---------------------------------------------------------------------------

    \126\ As discussed above, under the proposed revisions to 
Sec. Sec.  45.3(a)-(d), a SEF/DCM or reporting counterparty would be 
required to report creation data for all swaps except clearing swaps 
(including for swaps that later become original swaps by virtue of 
their acceptance for clearing by a DCO). See Section II.B.4., supra. 
See also Sec. Sec.  45.10 (a)-(c) (providing that all required swap 
continuation data reported for a swap must be reported to the same 
SDR to which required swap creation data was first reported pursuant 
to Sec.  45.3). The Commission notes that pursuant to existing 
regulation Sec.  45.13, each reporting entity and/or counterparty is 
required to use the facilities, methods, or data standards provided 
or required by the SDR to which the entity or counterparty reports 
the data. 17 CFR 45.13.
    \127\ SDR regulation Sec.  49.10(a) provides that an SDR shall 
accept and promptly record all swap data in its selected asset class 
and other regulatory information that is required to be reported 
pursuant to part 45 and part 43 by DCMs, DCOs, SEFs, SDs, MSPs and/
or non-swap dealer/non-major swap participant counterparties. 
Section 49.10(a)(1) further provides that for purposes of accepting 
all swap data as required by part 45 and part 43, the registered SDR 
shall adopt policies and procedures, including technological 
protocols, which provide for electronic connectivity between the SDR 
and DCMs, DCOs, SEFs, SDs, MSPs and/or certain other non-swap 
dealer/non-major swap participant counterparties who report such 
data. It further states that the technological protocols established 
by a SDR shall provide for the receipt of swap creation data, swap 
continuation data, real-time public reporting data, and all other 
data and information required to be reported to such SDR. 
Additionally, Sec.  49.10(a)(1) provides that the SDR shall ensure 
that its mechanisms for swap data acceptance are reliable and 
secure. 17 CFR 49.10. The Commission also proposed conforming 
changes to the introductory language of Sec.  45.3 and Sec.  45.4 to 
make clear that all required swap creation and continuation data 
must be reported to the relevant SDR in the manner provided in Sec.  
45.13, and pursuant to Sec.  49.10, which sets forth rules governing 
the acceptance and recording of such data.
    \128\ See ITV May 27, 2014 Letter, at 4 (noting that failure to 
accept the termination message can produce inaccurate swap data due 
to double reporting and that the rejection of the termination 
message could distort notional amounts and market risks, and stating 
that amending the reporting rules to place the reporting obligation 
on the DCO for intended to be cleared swaps simplifies the reporting 
flows and places the responsibility on the party best-suited to 
accurately report cleared swap data).
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    As proposed, Sec.  45.4(c)(1) would require a DCO to report all 
life cycle event data for an original swap on the same day that any 
life cycle event occurs, or to report all state data for the original 
swap, daily.
    The continuation data reporting requirements of proposed Sec.  
45.4(c)

[[Page 41747]]

would apply to a swap that has been submitted to a DCO for clearing and 
that becomes an original swap by virtue of the DCO's acceptance of such 
swap for clearing. The DCO's continuation data reporting obligations 
for a swap to which it is not a counterparty (i.e., for swaps other 
than clearing swaps) will only be triggered if a swap is accepted for 
clearing (and thus becomes an original swap). If a swap is submitted to 
a DCO for clearing and is not accepted for clearing, then the DCO will 
not have continuation data reporting obligations for the swap, because 
the swap is not an original swap or a clearing swap.
iv. Proposed Additional Continuation Data Fields To Be Reported by DCOs
    Proposed Sec.  45.4(c) would require DCOs to report additional data 
fields when reporting continuation data on original swaps.\129\ These 
fields would be the LEI of the SDR to which the DCO reported clearing 
swaps replacing the original swap; the USI of the original swap being 
replaced; and the USIs of each clearing swap that is replacing the 
original swap. As discussed in the NPRM,\130\ the Commission proposed 
these additional data fields to enable the Commission to track the 
complete life of a cleared swap transaction. Inclusion of these data 
fields in continuation data on the original swap, taken in conjunction 
with existing requirements to reporting original swap information in 
reports clearing swaps, will aid the Commission in linking the original 
swap and all clearing swaps replacing it.
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    \129\ See 80 FR 52544, 52552-53.
    \130\ See 80 FR 52544, 52532-33.
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v. Proposed Revisions to Sec.  45.4(d)
    As mentioned above, the Commission proposed to renumber Sec.  
45.4(c) (Continuation data reporting for uncleared swaps) as Sec.  
45.4(d). The Commission also proposed to amend Sec.  45.4(d), which 
applies to all swaps that are not cleared by a derivatives clearing 
organization, to add the phrase ``including swaps executed on or 
pursuant to the rules of a swap execution facility or designated 
contract market.''\131\ This proposed change would clarify the existing 
requirement that reporting counterparties report all required swap 
continuation data for an uncleared swap, irrespective of whether the 
swap was executed off-facility (in which case the reporting 
counterparty must report required swap creation data), or whether the 
swap was executed on or pursuant to the rules of a SEF or DCM (in which 
case the SEF or DCM must report the required swap creation data).\132\
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    \131\ See 80 FR 52544, 52553.
    \132\ See 17 CFR 45.3(b)-(d) (creation data reporting 
requirements for off-facility swaps) and 17 CFR 45.3(a) (creation 
data reporting requirements for swaps executed on or pursuant to the 
rules of a SEF or DCM). See also Section II.B.4.iii supra.
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    Finally, the Commission proposed to modify the introductory 
language to Sec.  45.4 and Sec.  45.4(d)(1)(ii)(A) to remove outdated 
references to compliance dates that have already expired.\133\
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    \133\ See 80 FR 52544, 52553.
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3. Comments Received
    The Commission received numerous comments on its proposed revisions 
to Sec.  45.4.\134\ Below is a summary of comments for each of the 
primary revisions and additions to Sec.  45.4.
---------------------------------------------------------------------------

    \134\ The Commission did not receive any comment directly 
addressing the conforming changes to Sec.  45.4(a) or renumber and 
amended Sec.  45.4(d). The Commission received a comment from FSR on 
continuation data for amortizing swaps. See FSR Oct. 30, 2015 
Letter, at 4. Because the NPRM was limited to revisions of Sec.  
45.4 as it relates to clearing swaps, FSR's request is beyond the 
scope of this rulemaking.
---------------------------------------------------------------------------

i. Comments on Proposed Revisions to Sec.  45.4(b)
    The proposed amendment to Sec.  45.4(b)(2), requiring only DCOs to 
submit valuation data for clearing swaps, was widely supported in the 
comment letters. Although one commenter contended that valuation data 
from SD/MSP swap counterparties is valuable information and that the 
Commission should require such information from SD/MSP counterparties 
for all swaps, cleared or uncleared,\135\ many commenters to the IDWG 
Request for Comment and NPRM stated that only the DCO should have the 
responsibility to report valuation data for cleared swaps, and that the 
Commission should eliminate the requirement for an SD or MSP to report 
valuation data for cleared swaps.\136\ One commenter noted that 
valuation data and mark-to-market value data provided by DCOs are 
sufficient for the Commission to understand clearing swap valuations, 
particularly because the DCO's valuation method is the industry 
standard.\137\
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    \135\ See Markit May 27, 2014 Letter, at 10-11 (arguing that the 
Commission might receive valuable information from valuations 
reported by counterparties).
    \136\ See ABA May 27, 2014 Letter, at 2; CME May 27, 2014 
Letter, at 9-10; FSR May 27, 2014 Letter, at 2; ITV May 27, 2014 
Letter, at 2, 10, 15; ISDA May 27, 2014 Letter, at 13-14; JBA May 
27, 2014 Letter, at 2-3; MFA May 27, 2014 Letter, at 2, 4; NGSA May 
27, 2014 Letter, at 4-5; AIMA Oct. 30, 2015 Letter, at 6; ISDA Oct. 
30, 2015 Letter, at 5; JBA Oct. 30, 2015 Letter, at 2; FSR Oct. 30, 
2015 Letter, at 3.
    \137\ See Eurex Oct. 30, 2015 Letter, at 6. Eurex also stated 
that information on posted collateral could be a useful data point 
for the Commission, but the original counterparties would be in a 
better position than the DCO to report such information. Eurex also 
stated that DCOs could provide information on margin, but that such 
data would require more effort.
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ii. Comments on Proposed Revisions to Sec.  45.4(c)
    Commenters were split on support of proposed Sec.  45.4(c), which 
would require the DCO to report continuation data on the original swaps 
once they are accepted for clearing to the SDR to which the original 
swap was originally reported. ISDA strongly supported the revision, 
stating that it would eliminate the issue of cleared ``alpha'' swaps 
that had not been terminated, which negatively affects data quality. 
ISDA commented that DCOs should be allowed to report continuation data 
as either lifecycle event data or state data.\138\ DTCC, in its 
response to the IDWG Request for Comment, also supported requiring DCOs 
to report terminations of original swaps.\139\ However, DTCC commented 
that some DCOs fail to submit termination of original swaps to DTCC 
according to DTCC's technical standards.\140\ CEWG commented that DCOs 
were in the best position to report all data on original and clearing 
swaps, although it believes the original swap should not be 
reported.\141\
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    \138\ See ISDA Oct. 30, 2015 Letter, at 5.
    \139\ See DTCC May 27, 2014 Letter, at 7 (stating that when an 
alpha swap is novated, the Commission should require a DCO to submit 
information about the beta and gamma swaps in addition to the 
termination notice for the alpha swap).
    \140\ See DTCC Oct. 30, 2015 Letter, at 8.
    \141\ See CEWG Oct. 30, 2015 Letter, at 3. See Section II.B.3, 
above, for discussion of CEWG's and other commenters' positions on 
reporting of creation data for an original swap.
---------------------------------------------------------------------------

    CME commented that under the proposed division of reporting 
obligations for original swaps and clearing swaps, DCOs are dependent 
on original swap counterparties providing sufficient information on the 
original swaps to fulfill reporting obligations on terminations of the 
original swap.\142\ CME noted that counterparties rarely provided this 
information, meaning that DCOs cannot effectively terminate original 
swaps. As an alternative, CME proposed that DCOs should be the 
reporting party for creation and continuation data for both original 
and clearing swaps.\143\
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    \142\ See CME Oct. 30, 2015 Letter, at 3.
    \143\ See CME Oct. 30, 2015 Letter, at 3.
---------------------------------------------------------------------------

    In contrast, some commenters recommended that the clearing member, 
and not the DCO, should report termination of the original swap to the

[[Page 41748]]

SDR.\144\ Eurex stated that the clearing member would already have 
information on the original swap and a connection to the SDR where the 
original swap was reported, putting the original reporting party in the 
best position to report a termination.\145\ LCH commented that having 
the original reporting party report any continuation events would avoid 
reporting gaps on events occurring between creation and clearing.\146\ 
LCH commented that requiring DCOs to submit cancelations of original 
swaps would be inconsistent with reporting obligations under the 
European Markets Infrastructure Regulation (``EMIR'').\147\ LCH also 
commented that the choice of original swap SDR could become an 
eligibility criterion for clearing, and that DCOs could potentially 
reject swaps from clearing based on the original swap SDR.\148\ Eurex 
and LCH both noted that the requirement would force DCOs to connect to 
all registered SDRs and report terminations according to the technical 
requirements of each SDR.\149\ As an alternative, Eurex proposed that 
DCOs be allowed to select the SDR to which they report the termination 
of the original swap.\150\
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    \144\ See OTC Hong Kong May 27, 2014 Letter, at 2-3. OTC Hong 
Kong stated that requiring the original counterparty to report 
termination of the alpha would be more cost-effective because the 
original reporting counterparty is already required to report 
creation data and life cycle event data of such alpha to an SDR, and 
thus would already have in place a technical and operational 
interface with the SDR of its choice. The commenter also stated that 
imposing an additional requirement on a DCO to report termination of 
the alpha does not appear to increase or improve the quantity and 
quality of information already available to the Commission, and that 
the burden on DCOs of the additional reporting requirement appears 
to outweigh the benefits to the Commission. See also LCH May 29, 
2014 Letter, at 8 (stating that reporting entities should already 
report terminations under the obligation to report continuation 
data); LedgerX Oct. 30, 2015 Letter, at 3.
    \145\ See Eurex Oct. 30, 2015 Letter, at 3.
    \146\ See LCH Oct. 30, 2015 Letter, at 3.
    \147\ See id.
    \148\ See id.
    \149\ Eurex Oct. 30, 2015 Letter, at 4-5; LCH Oct. 30, 2015 
Letter, at 3.
    \150\ Eurex also suggested that reporting of terminations could 
be foregone entirely, as an original swap, by definition, has been 
accepted for clearing and ceases to exist. See Eurex Oct. 30, 2015 
Letter, at 5.
---------------------------------------------------------------------------

    Regarding timing of reporting continuation data for original swaps, 
ISDA supported the provision in new Sec.  45.4(c) allowing DCOs to 
report continuation data on original swaps daily and via either 
lifecycle event data or state data.\151\ The Japanese Bankers 
Association commented that original swaps should be terminated as soon 
as technologically practicable, to align reporting on clearing swaps 
with reporting on cleared futures transactions under Sec.  1.74.\152\ 
Eurex commented that terminations were the only lifecycle events for 
original swaps that would need to be reported as continuation 
data.\153\
---------------------------------------------------------------------------

    \151\ ISDA Oct. 30, 2015 Letter, at 5.
    \152\ JBA Oct. 30, 2015 Letter, at 2; see also LedgerX Oct. 30, 
2015 Letter, at 3 (commenting that termination of original swap 
should be reported as soon as technologically practicable, but 
commenting that reporting party of original swap should have 
obligation to report termination).
    \153\ Eurex Oct. 30, 2015 Letter, at 6. ISDA noted that bunched 
orders may be cleared either pre- or post-allocation, potentially 
creating multiple clearing swaps for a single original swap. See 
ISDA Oct. 30, 2015 Letter, at 6. ISDA commented that, where 
allocation is done after clearing, DCOs should report the USI of the 
pre-allocation swap as the ``prior ISO'' on clearing swaps for the 
allocations. Eurex commented that, in the event of default by a 
clearing member, it attempts to auction off the clearing swap. See 
Eurex Oct. 30, 2015 Letter, at 3. Eurex commented that it was 
unclear whether the novation of an auctioned clearing swap should be 
reported to the original swap SDR.
---------------------------------------------------------------------------

    DTCC requested that the Commission offer guidance on how SDRs, 
DCOs, and any other affected entities should address previously 
reported cleared swaps for which the original swap had not been 
terminated.\154\
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    \154\ See DTCC Oct. 30, 2015 Letter, at 9.
---------------------------------------------------------------------------

iii. Comments on Proposed Additional Continuation Data Fields To Be 
Reported by DCOs
    Several commenters asserted that the most cost-effective method for 
establishing a link between the original swaps and the swaps that 
replace the original swap upon acceptance for clearing is to include 
the USI of the original swap as a prior USI for the beta and gamma 
swaps.\155\ Several commenters to the IDWG Request for Comment 
supported the concept of requiring that the DCO provide USIs for 
clearing swaps to the counterparties to those swaps under proposed 
Section 45.5(d)(2).\156\ ISDA, DTCC and Markit generally supported the 
requirement that DCOs include the USI of the original swap when 
reporting clearing swaps, but objected to requiring additional fields 
linking original and clearing swaps as redundant.\157\ LCH suggested 
that there should be a standardized format for reporting terminations 
of original swaps that must be accepted by all SDRs.\158\
---------------------------------------------------------------------------

    \155\ See CME May 27, 2014 Letter, at 10 (``The most effective 
and efficient method for achieving linkage for all such events that 
have a one-to-one relationship (i.e., assignment or exercise) or a 
one-to-many relationship (i.e., clearing, novation, allocation) is 
by the inclusion of a prior USI(s).)''; DTCC letter appendix at 3 
(stating that a new swap can generally be linked to an existing 
swaps through the use of a ``prior USI'' data field); ISDA May 23, 
2014 Letter, at 11 (``Related swaps sent to different SDRs can also 
be linked via use of the USI. . . .''); Markit May 27, 2014 Letter, 
at 8 (arguing that the most effective method to establish a link 
between new and existing swaps is to store the USI of the original 
swap as a prior USI).
    \156\ See AIMA Oct. 30, 2015 Letter, at 7; Eurex Oct. 30, 2015 
Letter, at 7; ISDA Oct. 30, 2015 Letter, at 7. ITV also commented on 
requirements for SDRs to transmit USIs to non-reporting 
counterparties for swaps between non-swap dealers or major swap 
participants, not executed on a DCM or SEF under existing Section 
45.5(c)(2). ITV Oct. 30, 2015 Letter, at 4. Because the NPRM did not 
propose to amend Sec.  45.5(c)(2), this comment is beyond the scope 
of the proposed rule.
    \157\ See ISDA Oct. 30, 2015 Letter, at 6; DTCC Oct. 30, 2015 
Letter, at 8; Markit Oct. 30, 2015 Letter, at 3.
    \158\ See LCH Oct. 30, 2015 Letter, at 4.
---------------------------------------------------------------------------

4. Final Rule Text
    Having considered the comments received, the Commission has decided 
to adopt the amendments to Sec.  45.4 as proposed.
i. Conforming Changes to Sec.  45.4(a)
    Receiving no comments on the conforming changes to Sec.  45.4(a), 
the Commission adopts these changes as proposed. The changes clarify 
that the standards for reporting continuation data in Sec.  45.4(a) 
apply to all continuation events regardless of asset class or whether 
the swap is uncleared, an original swap, or a clearing swap.
ii. Revisions to Sec.  45.4(b)
    The Commission notes support among market participants for the 
amendment to Sec.  45.4 removing the requirement that SDs and MSPs 
report valuation data for clearing swaps. The Commission adopts this 
revision, codifying existing no-action relief,\159\ as proposed.
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    \159\ See CFTC Letter 15-38 (Jun. 12, 2015).
---------------------------------------------------------------------------

iii. Addition of Sec.  45.4(c)--Continuation Data Reporting for 
Original Swaps
    The Commission notes the different opinions offered by commenters 
on the proposed addition of Sec.  45.4(c), which would require DCOs to 
report continuation data, including terminations, of original swaps. 
The Commission has considered the alternative approaches to reporting 
original swap terminations that were proposed by commenters, such as 
requiring original swap reporting parties to report terminations; 
requiring DCOs to report both original and clearing swaps; and allowing 
DCOs to select the SDR for original swap terminations. The Commission 
believes that its proposed method best incorporates existing industry 
practice, whereby DCOs generally report clearing swaps as well as 
submitting termination messages on original swaps, thereby limiting 
additional costs. It may be more burdensome for the counterparties to 
the original swaps to report terminations because they would have

[[Page 41749]]

to receive messages from the DCO confirming that the original swap was 
accepted for clearing, then translate that message from the DCO into a 
termination message to the SDR. This may be particularly burdensome for 
commercial end-users executing swaps on SEFs or DCMs who might 
otherwise have no reporting obligations and who may not have the 
infrastructure in place to report as quickly or as efficiently as 
DCOs.\160\
---------------------------------------------------------------------------

    \160\ See supra, n. 26, for discussion of reporting obligations 
for on-facility cleared swaps.
---------------------------------------------------------------------------

    On the other hand, requiring DCOs to report creation and 
continuation data for both original and clearing swaps could slow the 
reporting of original swaps for part 43 and part 45 purposes. DCOs 
would need to receive messages from the counterparties, or from the SEF 
or DCM where executed on-facility, with all information necessary to 
report the swap that becomes an original swap. The DCO would then need 
to transmit such information to the SDR of its choice. Introducing an 
extra step in reporting would inherently slow reporting, which must be 
done as soon as technologically practicable particularly for 
transparency reasons. At the same time, requiring DCOs to report 
original swaps for part 43 and part 45 purposes would require DCOs to 
obtain information beyond what would be needed for clearing purposes, 
thus increasing the burden on DCOs.
    Finally, the Commission has considered the alternative proposal 
that DCOs be allowed to report an original swap termination to an SDR 
other than that where the original swap was reported. Adoption of this 
alternative approach could result in significant data fragmentation, as 
data on a single swap could be housed at more than one SDR. 
Additionally, this alternative approach would render useless any 
position reports generated by an SDR, as the SDR (or market participant 
accessing its own data on an SDR) could not determine if the swaps it 
housed are still in effect, thereby removing a potential validation 
tool for market participants.\161\
---------------------------------------------------------------------------

    \161\ The Commission notes that the approach adopted could 
generate some degree of data fragmentation, as reports on the 
original swaps may be housed at a different SDR from reports on its 
clearing swaps. However, the Commission believes this issue can be 
overcome for its regulatory purposes--namely risk analysis and 
market surveillance--if the Commission is able to pull accurate data 
on individual swaps from each of the registered SDRs. Moreover, 
accurate reporting of original swap USIs and SDR identities in 
clearing swaps reporting, and accurate clearing swaps USIs and SDR 
identities in original swaps terminations, would allow for easy 
tracking of the lifecycle of a cleared swap transaction.
---------------------------------------------------------------------------

    Having considered these alternatives as suggested by commenters, 
the Commission has determined to adopt the amendments to Sec.  45.4 as 
it has proposed. The Commission believes that DCOs are in the best 
position to report the termination of an original swap because the DCO, 
through the clearing process, has all information needed to report such 
terminations. By virtue of its decision to accept a swap for clearing 
and to extinguish the swap upon acceptance,\162\ a DCO will be the 
first entity to know that clearing occurred and that the original swap 
should be terminated, putting the DCO in the best position to report 
terminations quickly. DCOs can build original swap terminations into 
their systems architecture, allowing for fast, consistent, and accurate 
terminations.\163\
---------------------------------------------------------------------------

    \162\ See 17 CFR 39.12(b)(6). Through its rules, the DCO 
determines whether or not a swap that is submitted for clearing 
becomes an original swap.
    \163\ The Commission has also considered LCH's comment that EMIR 
puts the original swap termination obligation on the original swap 
parties. Placing reporting obligations on one party under CFTC 
regulations, and on another party under EMIR, would not create a 
direct conflict as both parties would be able to satisfy their 
respective regulatory obligations. The Commission recognizes that 
this situation could result in two termination messages for the same 
original swap, but this should not have a negative impact on the 
quality of SDR data.
---------------------------------------------------------------------------

    DCOs will also have all information needed to terminate the 
original swap based on the swap submitted for clearing. Data required 
for such termination messages would either be generated by the DCO 
itself (such as clearing swap USIs and clearing swap SDR LEIs) or could 
be included in any message submitting a swap for clearing (such as the 
USI of the original swap and the LEI of the original swap SDR). While 
CME commented that clearing members have not consistently included 
original swap USI and LEI of the original swap SDR in messages 
transmitted to the DCO for clearing, the Commission notes that DCOs 
could require their clearing members to provide such information. As 
proposed, Sec.  45.4(c) would require DCOs to report these fields. DCOs 
must obtain the relevant information from their clearing members.
iv. Addition of Continuation Data Fields To Be Reported by DCOs
    The Commission has considered the comments opposing the creation of 
required continuation data fields to be reported by DCOs for original 
swaps. The Commission has also considered ISDA's comment regarding the 
potential redundancy of having USIs of clearing swaps transmitted in 
the termination message for the original swap, as well as having the 
USI of the original swap in the creation data for the clearing swaps.
    The Commission believes that reporting the clearing swaps USIs as 
continuation data for the original swap is an efficient mechanism for 
linking clearing swaps to the original swap that they replace and 
should be used for this purpose. New Sec.  45.4(c)(2) will thus require 
DCOs to include the following additional enumerated data elements when 
reporting continuation data for original swaps pursuant to proposed 
Sec.  45.4(c)(1): (i) The legal entity identifier (``LEI'') of the SDR 
to which each clearing swap for a particular original swap was reported 
by the DCO pursuant to new Sec.  45.3(e); (ii) the USI of the original 
swap that was replaced by the clearing swaps; \164\ and (iii) the USI 
for the clearing swaps that replace the original swap.
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    \164\ See existing Sec. Sec.  45.5(a)(2)(iii), (b)(2)(iii), & 
(c)(2)(ii) (requiring the entity that created the USI to transmit 
the USI of a swap to the DCO, if any, to which the swap is submitted 
for clearing, as part of the required swap creation data transmitted 
to the derivatives clearing organization for clearing purposes). 
Proposed revisions to Sec.  45.5 are described in Section II.D of 
this release.
---------------------------------------------------------------------------

    As adopted, these data fields will enable the DCO to fulfill its 
continuation data reporting obligations, enable the SDR to maintain the 
accuracy and completeness of swap transaction data, enable the 
Commission to track the life of a cleared swap transaction, and enable 
the Commission to monitor compliance with the clearing mandate. In 
particular, inclusion within an original swap termination message the 
LEI of the clearing swap SDR will permit the Commission and other 
regulators to ascertain the SDR where the clearing swaps associated 
with a particular original swap reside, which will enable the 
Commission and other regulators to review and more effectively 
associate data available at multiple SDRs in circumstances where the 
reporting entity or counterparty selects one SDR for the original swap 
and the DCO selects a different SDR for the clearing swaps under Sec.  
45.3.
    Inclusion of the original swap's USI is necessary to enable the 
original swap SDR to associate continuation data reported by the DCO 
with the initial creation data reported by a SEF/DCM or reporting 
counterparty pursuant to Sec.  45.3(a) through (d).\165\ These data 
will

[[Page 41750]]

allow SDRs to validate termination messages reported by DCOs by 
ensuring that the termination message has the same USI as the original 
report. Similarly, in the case of clearing swaps that replace an 
original swap, inclusion of the USIs of the clearing swaps will permit 
the Commission and other regulators to identify the specific clearing 
swaps that replaced an original swap, thereby presenting a full history 
of the cleared swap transaction.
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    \165\ For instance, inclusion of the USI of the original swap in 
DCO continuation data reporting will permit the SDR receiving such 
continuation data to associate data regarding a life cycle event 
such as termination with the existing data maintained for the swap. 
This will help ensure that data in the SDR remains current and 
accurate and will enable the Commission and other regulators to 
ascertain whether a swap remains in existence or has been 
extinguished upon acceptance for clearing by a DCO.
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    Together, the revisions to Sec.  45.4(b) and the addition of Sec.  
45.4(c) will require the reporting of continuation data for original 
swaps and clearing swaps. Accordingly, the Commission expects that 
records of original swaps that have been terminated would include the 
USIs for the clearing swaps that replaced the original swap and the LEI 
of the clearing swap SDR, such that review of an original swap would 
permit the identification of the resulting clearing swaps and the SDR 
where they resides. These provisions will reflect the regulations 
applicable to DCOs outlined in part 39 of the Commission's regulations 
and will clearly delineate the continuation data reporting obligations 
associated with each swap involved in a cleared swap transaction.\166\
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    \166\ See 17 CFR 39.12(b)(6). Part 45 currently requires all 
swap data and information reported to and maintained by an SDR 
regarding a given swap to be ``current and accurate'' and to include 
``all changes'' to a swap. See 17 CFR 45.4(a).
---------------------------------------------------------------------------

    The Commission is mindful of LCH's suggestion that there be an 
industry-wide standard for original swap termination messages and 
DTCC's comment that termination reports often do not comply with SDR 
specifications. To help DCOs comply with the requirements of amended 
Sec.  45.4, the Commission encourages DCOs and SDRs to develop an 
industry-wide standard for original swap termination messages. The 
Commission anticipates that original swap termination messages could be 
standardized given the limited number of data elements that must be 
transmitted, such as clearing swap USIs, DCO LEIs, and clearing swap 
SDR LEIs. Standardization also would alleviate LCH's concern that the 
original swap's SDR would become a factor in determining whether a swap 
was eligible for clearing.
    The Commission has also considered conflicting comments on whether 
original swap terminations should be reported at the end of the day or 
as soon as technologically practicable. The Commission has determined 
to adopt the amendment as proposed and require reporting original swap 
terminations at the end of the day, as this would be consistent with 
reporting other types of continuation data under Sec.  45.4.
v. Revisions to Sec.  45.4(d)
    The Commission received no comments on the proposed revisions to 
Sec.  45.4(d), and is adopting those revision as proposed.

D. Unique Swap Identifiers--Amendments to Section 45.5

1. Existing Sec.  45.5
    Existing Sec.  45.5 requires that each swap subject to the 
Commission's jurisdiction be identified in all recordkeeping and all 
swap data reporting by the use of a USI. The rule establishes different 
requirements for the creation and transmission of USIs depending on 
whether the swap is executed on a SEF or DCM (Sec.  45.5(a)), executed 
off-facility with an SD or MSP reporting counterparty (Sec.  45.5(b)), 
or executed off-facility with a non-SD/MSP reporting counterparty 
(Sec.  45.5(c)). Existing Sec.  45.5 provides that for swaps executed 
on a SEF or DCM, the SEF or DCM creates the USI, and for swaps not 
executed on a SEF or DCM, the USI is created by an SD or MSP reporting 
counterparty, or by the SDR if the reporting counterparty is not an SD 
or MSP.\167\
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    \167\ See 17 CFR 45.5(a)-(c).
---------------------------------------------------------------------------

    With the exception of swaps with a non-SD/MSP reporting 
counterparty, the existing rule generally requires USI creation and 
transmission to be carried out by the entity or counterparty required 
to report all required swap creation data for the swap. Existing Sec.  
45.5 thus does not distinguish between original and clearing swaps, 
does not provide USI creation and transmission requirements 
specifically for DCOs, and consequently does not provide for the 
issuance to DCOs of a USI ``namespace,'' which is one of two component 
parts of a USI.\168\
---------------------------------------------------------------------------

    \168\ See, e.g., 17 CFR 45.5(a)(1)(i), (b)(1)(i) and (c)(1)(i) 
(the data component of a USI commonly referred to as a namespace is 
the unique alphanumeric code assigned to the registered entity 
responsible for generating the USI for the purpose of identifying 
such registered entity with respect to USI creation).
---------------------------------------------------------------------------

    The Commission understands that, in practice, SEFs/DCMs and 
reporting counterparties, or SDRs in the case of non-SD/MSP reporting 
counterparties, generate and assign USIs for swaps that would become 
original swaps under the proposed rules, and that DCOs generate and 
assign USIs to swaps that would qualify as clearing swaps in connection 
with reporting required swap creation data for clearing swaps to SDRs.
2. Proposed Amendments to Sec.  45.5
    The Commission proposed to renumber existing Sec.  45.5(d) as Sec.  
45.5(e), and to create a new Sec.  45.5(d) that would set forth 
requirements regarding the creation and transmission of USIs for 
clearing swaps.\169\
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    \169\ The Commission also proposes conforming amendments to 
renumber existing Sec.  45.5(e) as Sec.  45.5(f).
---------------------------------------------------------------------------

    As proposed, Sec.  45.5(d)(1) would require a DCO to generate and 
assign a USI for each clearing swap upon, or as soon as technologically 
practicable after, acceptance of an original swap by the DCO for 
clearing (or execution of a clearing swap that does not replace an 
original swap), and prior to reporting the required swap creation data 
for each clearing swap.\170\ Proposed Sec.  45.5(d)(1) would also 
require that the USI for each clearing swap consist of two data 
components: A unique alphanumeric code assigned to the DCO by the 
Commission for the purpose of identifying the DCO with respect to USI 
creation, and an alphanumeric code generated and assigned to that 
clearing swap by the automated systems of the DCO. These proposed USI 
creation requirements and data components for DCOs and clearing swaps 
are consistent with those currently required by part 45 for other 
registered entities such as SEFs, DCMs, and SDRs.\171\
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    \170\ See 80 FR 52544, 52554.
    \171\ See, e.g., 17 CFR 45.5(a), 45.5(c).
---------------------------------------------------------------------------

    As proposed, Sec.  45.5(d)(2) would require a DCO to transmit the 
USI for a clearing swap electronically to the SDR to which the DCO 
reports required swap creation data for the clearing swap, as part of 
that report, and to the DCO's counterparty with respect to that 
clearing swap, as soon as technologically practicable after either 
acceptance of the original swap by the DCO for clearing or execution of 
a clearing swap that does not replace an original swap.\172\
---------------------------------------------------------------------------

    \172\ See 80 FR 52544, 52554.
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    Finally, the Commission proposed to amend Sec. Sec.  45.5(a), 
45.8(f), and 45.10(a) to incorporate the language ``or pursuant to the 
rules of'' to the phrase ``swaps executed on a swap execution facility 
or designated contract market'' to make clear that those provisions 
currently apply to all swaps executed on or pursuant to the rules of a 
SEF or DCM.\173\
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    \173\ See 80 FR 52544, 52554.
---------------------------------------------------------------------------

3. Comments Received
    The Commission received several comments regarding its proposed 
amendments to Sec.  45.5.\174\ All comments

[[Page 41751]]

received were supportive of the amendment to Sec.  45.5(d)(1), which 
requires DCOs to generate USIs for clearing swaps.\175\
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    \174\ ITV requested that the Commission remove the obligation 
for SDRs, when a swap is executed between two non-SD/MSPs and the 
SDR is obligated to create the USI, to transmit the USI to the 
counterparties. ITV commented that this could create obligations for 
SDRs to transmit information to parties not enrolled with the SDR. 
The Commission has noted this comment, but it is beyond the scope of 
the NPRM.
    \175\ See ITV Oct. 30, 2015 Letter, at 3 (but noting that 
generation of the USI for a clearing swap by the SDR would slow 
acceptance of swaps in the clearing process); ISDA Oct. 30, 2015 
Letter, at 7 (also suggesting that the Commission require the 
namespace component of USIs for each DCO be made publicly 
available); AIMA Oct. 30, 2015 Letter, at 7.
---------------------------------------------------------------------------

    FSR requested that the Commission adopt ISDA best practices for 
identifying international swaps, including allowing for the use of a 
USI as a unique transaction identifier (``UTI'') for reporting swaps in 
other jurisdictions.\176\ FSR commented that adopting the ISDA best 
practice concerning USIs would avoid potential double-counting when an 
international swap is reported to two separate SDRs in two 
jurisdictions.\177\
---------------------------------------------------------------------------

    \176\ See FSR Oct. 30, 2015 Letter, at 4.
    \177\ See id.
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    ISDA commented that, in principal model clearing, the DCO should 
ensure that both the DCO's clearing member and the ultimate 
counterparty (if not the clearing member) receive the clearing swap 
USIs.\178\ ISDA further noted that the current Orders of Exemption 
issued to foreign DCOs do not include an obligation for those exempt 
DCOs to generate the USIs for reportable clearing swaps.\179\
---------------------------------------------------------------------------

    \178\ See ISDA Oct. 30, 2015 Letter, at 6.
    \179\ See ISDA Oct. 30, 2015 Letter, at 6.
---------------------------------------------------------------------------

4. Final Rule Text of Sec.  45.5
    Having considered the comments relating to the purpose and scope of 
the proposed amendments to Sec.  45.5, the Commission is adopting 
amended Sec.  45.5 as proposed. The proposed Sec.  45.5(d) provisions 
that would govern creation and assignment of USIs by the DCO with 
respect to clearing swaps would be consistent with the Commission's 
``first-touch'' approach to USI creation for SEFs, DCMs, SDs, MSPs, and 
SDRs.\180\
---------------------------------------------------------------------------

    \180\ See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13, 
2012). The Commission's approach with respect to SEFs, DCMs, SDs, 
MSPs, and SDRs was designed to foster efficiency by taking advantage 
of the technological sophistication and capabilities of such 
entities, while ensuring that a swap is identified by a USI from its 
inception.
---------------------------------------------------------------------------

    The Commission notes ISDA's request for guidance on whether DCOs 
must ensure, in the principal clearing mode, that the ultimate 
counterparty (when not the clearing member) receive the USI of the 
clearing swaps. As noted above, the Commission is aware of various 
issues relating to reporting of principal model clearing but will not 
offer further guidance at this time. The Commission notes ISDA's 
comment that the current Orders of Exemption for foreign DCOs do not 
include a requirement that the DCO generate USIs for reportable 
clearing swaps. Finally, the Commission notes FSR's request for the 
Commission to align the use of USIs and UTIs for reporting 
international swaps. While the Commission declines to address the issue 
in this release as it is beyond the scope of the NPRM, the Commission 
is cognizant of the need to harmonize reporting across jurisdictions 
and will continue to work with other regulators to address this and 
other issues.

E. Determination of Which Counterparty Must Report--Amendments to Sec.  
45.8

1. Existing Sec.  45.8
    Existing Sec.  45.8 sets forth a hierarchy under which the 
reporting counterparty for a particular swap depends on the nature of 
the counterparties involved in the transaction. Regulation 45.8 assigns 
a reporting counterparty for off-facility swaps, for which the 
reporting counterparty must report all required swap creation data, as 
well as for swaps executed on or pursuant to the rules of a SEF or DCM, 
for which the SEF or DCM must report all required swap creation data.
2. Proposed Amendments to Sec.  45.8
    The Commission proposed to add paragraph (i) to Sec.  45.8 in order 
to explicitly provide that the DCO will be the reporting counterparty 
for clearing swaps.\181\ The Commission also proposed to amend the 
introductory language of Sec.  45.8 to make clear that the reporting 
counterparty for all swaps except clearing swaps will be made as 
provided in paragraphs (a) through (h) of Sec.  45.8, while the 
reporting counterparty for clearing swaps will be made as provided in 
paragraph (i) of Sec.  45.8. The Commission further proposed to remove 
the language ``if available'' from Sec.  45.8(h)(1)(i) to ensure 
consistency with proposed changes to appendix 1 to part 45. As 
discussed below in addressing changes to the PET data fields in 
appendix 1, the ``if available'' language was only relevant prior to 
availability of the LEI system.\182\
---------------------------------------------------------------------------

    \181\ See 80 FR 52544, 52554-55.
    \182\ See, infra, Section II.H.1.i.
---------------------------------------------------------------------------

    The Commission proposed to further amend Sec.  45.8 to remove part 
of paragraphs (d)(1) and (f)(1) and to remove part of paragraph (h)(2) 
and all of paragraphs (h)(2)(i) and (ii), which require SEFs to notify 
counterparties to a swap if it cannot determine who would be the 
reporting counterparty. Finally, the Commission proposed conforming 
changes to explanatory notes in the PET data tables in appendix 1 to 
part 45 that reference the situation described in Sec.  45.8(h)(2).
3. Comments Received
    The Commission received six comments in connection with its 
proposed amendments to Sec.  45.8. One commenter supported proposed 
Sec.  45.8(i) as it would promote efficiency in reporting by explicitly 
designating the DCO as the reporting party for clearing swaps.\183\
---------------------------------------------------------------------------

    \183\ See AIMA Oct. 30, 2015 Letter, at 6.
---------------------------------------------------------------------------

    ISDA noted a potential inconsistency between reporting obligations 
under parts 43 and 45 for clearing swaps, as DCOs are not included in 
the hierarchy under Sec.  43.3 for determining reporting party of real-
time reporting.\184\ ISDA suggested that this could result in 
duplicative reporting obligations for DCOs and clearing members in 
situations where a clearing swap does not replace an original swap.
---------------------------------------------------------------------------

    \184\ See ISDA Oct. 30, 2015 Letter, at 7.
---------------------------------------------------------------------------

    EEI/EPSA requested that the Commission not remove, as proposed, the 
provisions in Sec. Sec.  45.8(d)(1) and (f)(1), which currently require 
the counterparties to select the reporting party, where the swap is 
executed on a SEF or DCM and both counterparties have the same SD, MSP 
or financial entity status.\185\ The commenter requested that the 
provisions be left in place because the proposed rule did not set out 
how the reporting party would be determined. ITV argued that the 
reporting hierarchy in existing Sec. Sec.  45.8(c) and (e), when 
applied to uncleared swaps between end-users, particularly in the 
commodity asset class, can preclude end-users from negotiating between 
themselves who the reporting party would be.\186\ This may result in 
the selection of a reporting party who has less technical 
infrastructure than the non-reporting counterparty.\187\ ISDA 
recommended that the Commission encourage SEFs to adopt the ISDA asset 
class tie-breaker logic (the ``ISDA RCP'') for determining reporting 
party for on-SEF swaps.\188\
---------------------------------------------------------------------------

    \185\ See EEI/EPSA Oct. 30, 2015 Letter, at 4.
    \186\ See ITV Oct. 30, 2015 Letter, at 4 and 6.
    \187\ ITV also commented that it believes counterparties should 
be permit to select the reporting party for a swap when both 
counterparties are non-SD/MSPs, regardless of financial entity 
status or U.S. person status. See ITV Oct. 30, 2015 Letter, at 4.
    \188\ See ISDA Oct. 30, 2015 Letter, at 7.
---------------------------------------------------------------------------

    Two commenters noted that, with the addition of proposed Sec.  
45.8(i)

[[Page 41752]]

addressing the reporting of clearing swaps, the phrase ``or is cleared 
by a derivatives clearing organization'' in Sec.  45.8(f) would become 
inapplicable.\189\ The commenters recommended that the Commission 
remove this clause from existing Sec.  45.8(f).
---------------------------------------------------------------------------

    \189\ See EEI/EPSA Oct. 30, 2015 Letter, at 4; CMC Oct. 30, 2015 
Letter, at 3.
---------------------------------------------------------------------------

4. Final Rule Text of Sec.  45.8
    For the reasons expressed more fully below, the Commission has 
decided to adopt the amendments to Sec.  45.8 as proposed.
    The Commission has considered ISDA's comment that the inclusion of 
DCOs in the part 45 reporting hierarchy could create inconsistencies 
between part 43 and part 45 reporting obligations for clearing swaps 
that do not replace original swaps. Existing Sec.  43.3(a)(3) sets out 
the reporting hierarchy for real-time reporting of off-facility swaps. 
DCOs are not included in this hierarchy, but the hierarchy is 
applicable unless otherwise agreed to by the parties prior to the 
execution of the publicly reportable swap transaction.\190\ To the 
extent that clearing swaps are reportable events under part 43, the 
Commission notes that DCOs and their clearing members could agree that 
the DCO should be the reporting party for part 43 purposes pursuant to 
the ``unless otherwise agreed'' clause of Sec.  43.3(a)(3). It is only 
if the DCO and its clearing member did not so agree would the clearing 
member have part 43 reporting obligations for some clearing swaps 
pursuant to the reporting hierarchy under Sec.  43.3. The Commission 
therefore declines in this rule release to include DCOs in the part 43 
real-time reporting hierarchy.
---------------------------------------------------------------------------

    \190\ 17 CFR 43.3(a)(3).
---------------------------------------------------------------------------

    The Commission has also considered comments from EEI/EPSA and ITV 
regarding the removal of provisions in Sec. Sec.  45.8(d)(1) and (f)(1) 
governing the selection of reporting parties for swaps executed on SEFs 
and DCMs. As was explained in the preamble to the NPRM, the Commission 
proposed to remove these provisions to help preserve parties' anonymity 
on SEFs and DCMs, in particular for swaps cleared through a straight-
through-processing mechanism.\191\ SEFs have adopted various formulas 
to determine who will be the reporting party when both counterparties 
have the same SD, MSP, financial entity, and U.S. Person status. These 
formulas will ensure that reporting parties are selected consistently. 
Therefore, the Commission is adopting amendments to Sec. Sec.  
45.9(d)(1) and (f)(1) as proposed. In addressing ISDA's comment 
regarding the ISDA RCP, the Commission declines to adopt or impose any 
particular formula at this time for selecting the reporting party, 
instead leaving such determinations to the SEFs.
---------------------------------------------------------------------------

    \191\ See 80 FR 52544, 52555.
---------------------------------------------------------------------------

    The Commission has also considered EEI/EPSA's and CMC's comments 
regarding the continued inclusion of the phrase ``or is cleared by a 
derivatives clearing organization'' in Sec.  45.8(f). The Commission 
notes that existing Sec.  45.8(f) addresses reporting hierarchy for 
certain categories of reportable swaps executed between two non-U.S. 
Persons; one category of such reportable swaps is a swap cleared 
through a DCO. The Commission notes that the swap ``cleared by a 
derivatives clearing organization'' in this provision relates to the 
original swap between the original counterparties, and not the clearing 
swaps with the DCO. The Commission is adopting Sec.  45.8(f) as 
proposed, with the continued inclusion of the phrase ``cleared by a 
derivatives clearing organization.''

F. Reporting to a Single Swap Data Repository--Amendments to Sec.  
45.10

1. Existing Sec.  45.10
    Existing Sec.  45.10 requires ``all swap data for a given swap'' to 
be reported to a single SDR, which must be the same SDR to which 
creation data for that swap is first reported. The time and manner in 
which such data must be reported to a single SDR depends on whether the 
swap is executed on a SEF or DCM,\192\ executed off-facility with an 
SD/MSP reporting counterparty,\193\ or executed off-facility with a 
non-SD/MSP reporting counterparty.\194\ Currently, Sec.  45.10(b) and 
(c) also provide circumstances in which a reporting counterparty is 
excused from reporting PET data to an SDR because the swap is accepted 
for clearing by a DCO before the applicable reporting deadline.
---------------------------------------------------------------------------

    \192\ See 17 CFR 45.10(a).
    \193\ See 17 CFR 45.10(b)
    \194\ See 17 CFR 45.10(c).
---------------------------------------------------------------------------

2. Proposed Amendments to Sec.  45.10
    In order to further clarify that ``all swap data for a given swap'' 
encompasses all swap data required to be reported pursuant to parts 43 
and 45 of the Commission's regulations, the Commission proposed to add 
language to this effect to paragraphs (a) through (c) and to the 
introductory language of Sec.  45.10.\195\ This proposed additional 
language would clarify the existing requirement that registered 
entities and reporting counterparties must provide all swap data 
required under parts 43 and 45 to a single SDR for a given swap.\196\
---------------------------------------------------------------------------

    \195\ See 80 FR 52544, 52555-56.
    \196\ The Commission also proposed to repeat the language ``Off-
facility swaps with a swap dealer or major swap participant 
reporting counterparty'' from the title of Sec.  45.10(b) in the 
body of that regulation to make clear that the requirement pertains 
to off-facility swaps with an SD or MSP.
---------------------------------------------------------------------------

    The Commission also proposed to remove Sec.  45.10(b)(2) and 
(c)(2),\197\ which are no longer applicable because they reference 
provisions in Sec.  45.3(b)(1), (c)(1)(i), and (c)(2)(i) that, as 
discussed above, the Commission proposed to remove.\198\
---------------------------------------------------------------------------

    \197\ The Commission also proposed conforming amendments to 
Sec.  45.10 to renumber paragraph (b)(3) as (b)(2), paragraph (c)(3) 
as (c)(2), and paragraph (c)(4) as (c)(3). The Commission also 
proposed to remove a reference to Sec.  45.10(c)(2) from existing 
Sec.  45.10(c)(4) because the Commission proposed to remove Sec.  
45.10(c)(2).
    \198\ See Section II.B.2.ii, supra.
---------------------------------------------------------------------------

    Additionally, the Commission proposed to add new Sec.  45.10(d), 
which would govern clearing swaps and would establish explicit 
requirements that DCOs report all required swap creation data and all 
required swap continuation data for each clearing swap to a single 
SDR.\199\ Specifically, proposed Sec.  45.10(d)(1) would require a DCO 
to report all required swap creation data for a particular clearing 
swap to a single SDR. As proposed, Sec.  45.10(d)(1) would also require 
the DCO to transmit the LEI of the SDR to which it reported the 
required swap creation data for each clearing swap to the counterparty 
of each clearing swap, as soon as technologically practicable after 
either acceptance of the original swap by the DCO for clearing or 
execution of a clearing swap that does not replace an original 
swap.\200\
---------------------------------------------------------------------------

    \199\ See 80 FR 52544, 52555-56.
    \200\ See 80 FR 52544, 52555-56.
---------------------------------------------------------------------------

    As proposed, Sec.  45.10(d)(2) would require a DCO to report all 
required swap creation data and all required swap continuation data for 
a particular clearing swap to the same SDR that received the initial 
swap creation data for the clearing swap required by Sec.  45.10(d)(1). 
In the event there are two or more clearing swaps that replace a 
particular original swap, and in the event there are equal and opposite 
clearing swaps that are created upon execution of the same transaction 
and that do not replace an original swap, proposed Sec.  45.10(d)(3) 
would require the DCO to report all required swap creation and 
continuation data for each such clearing swap to a single SDR.\201\

[[Page 41753]]

Accordingly, all required creation and continuation data for all 
clearing swaps that can be traced back to the same original swap (and 
for all equal and opposite clearing swaps that are created upon 
execution of the same transaction but that do not replace an original 
swap) will be reported to a single SDR.
---------------------------------------------------------------------------

    \201\ The Commission notes that proposed Sec.  45.10(d)(3) would 
require any equal and opposite clearing swaps, including those 
resulting from the operation of Sec.  39.12(b)(6) of the 
Commission's regulations, to be reported to a single SDR, regardless 
of whether such clearing swaps replaced an original swap.
---------------------------------------------------------------------------

    The Commission noted in its proposal that by operation of proposed 
new Sec.  45.8(i) and (j) and proposed Sec.  45.3(e), there may be 
scenarios in which the SEF/DCM or reporting counterparty reports 
required swap creation data for the swap that became the original swap 
to one SDR, and the DCO reports required swap creation data for the 
clearing swaps that replace the original swap to a different SDR.\202\ 
The Commission proposed to require that all swap data for the clearing 
swaps that can be traced back to the same original swap be reported to 
the same SDR, but did not require that the clearing swaps be reported 
to the same SDR as the original swap.\203\
---------------------------------------------------------------------------

    \202\ See 80 FR 52556.
    \203\ See id.
---------------------------------------------------------------------------

    The Commission included in the NPRM the following example to 
illustrate the application of proposed Sec.  45.10: \204\
---------------------------------------------------------------------------

    \204\ See 80 FR 52544, 52556.
---------------------------------------------------------------------------

    Swap 1 is intended to be submitted to a DCO for clearing and 
executed on or pursuant to the rules of a SEF. The SEF reports all 
required creation data for such swap to registered SDR A pursuant to 
Sec.  45.3(a), which was selected by the SEF pursuant to proposed Sec.  
45.3(j)(1), and submits the swap to the DCO for clearing. Upon 
acceptance of Swap 1 for clearing, the DCO extinguishes Swap 1 and 
replaces it with Swap 2 and Swap 3, both of which are clearing swaps. 
Swap 1 is now an original swap.
    Proposed Sec.  45.4(c) would require the DCO to report the 
termination of Swap 1 to SDR A,\205\ reflecting that Swap 1, now an 
original swap, has been terminated through clearing novation.\206\ The 
DCO would also report all required swap creation data for clearing Swap 
2 to a single SDR of its choice (say, for example, SDR B) pursuant to 
proposed Sec. Sec.  45.3(e) and (j)(2), and 45.10(d).\207\ Similarly, 
the DCO would be required to report all required swap creation data for 
clearing Swap 3 to a single SDR, in this case SDR B. Pursuant to 
proposed Sec.  45.10(d)(3), the DCO would be required to report all 
required swap creation data for clearing Swap 2 and clearing Swap 3 to 
the same SDR (SDR B) because Swap 2 and Swap 3 replaced Swap 1. 
Thereafter, proposed Sec.  45.10(d)(2) would require the DCO to report 
all required swap creation data and continuation data to the SDR where 
the first report of required swap creation data for both clearing Swap 
2 and clearing Swap 3 was made (SDR B).
---------------------------------------------------------------------------

    \205\ Pursuant to proposed Sec.  45.10(a)(2), (b)(2), and 
(c)(3), continuation data for original swaps must be reported to the 
SDR where the first report of required swap creation data was made 
for the swap.
    \206\ Pursuant to existing Sec.  45.13(b), the DCO shall use the 
facilities, methods, or data standards provided or required by SDR 
A. 17 CFR 45.13(b).
    \207\ The Commission notes that pursuant to proposed Sec. Sec.  
45.10(a)-(d), the DCO in this example could select an SDR other than 
SDR A.
---------------------------------------------------------------------------

3. Comments Received
    The Commission received three comments addressing its proposed 
amendments to Sec.  45.10.\208\ AIMA supported the Commission's 
proposal clarifying that the DCO is obligated to report creation and 
continuation data for clearing swaps to a single SDR.\209\
---------------------------------------------------------------------------

    \208\ An additional comment letter addressed the issue of 
``portability'' of swaps reporting between SDRs. See ITV Oct. 30, 
2015 Letter, at 3-4. The portability issue is beyond the scope of 
the NPRM.
    \209\ See AIMA Oct. 30, 2015 Letter, at 7.
---------------------------------------------------------------------------

    ISDA opposed the requirement in proposed Sec.  45.10(d)(1) that a 
DCO transmit to the counterparties of clearing swaps the LEI of the SDR 
to which the clearing swaps were reported.\210\ ISDA doubted the value 
of such information for the clearing swap counterparties, and opined 
that counterparties are unlikely to build mechanisms to retain such 
information on a transactional basis.\211\ ISDA also noted that a DCO 
would be separately required to send a termination of the original swap 
to the original swap's SDR, and this report would include the LEI of 
the SDR to which the clearing swaps are reported, making a report of 
such data to the counterparties redundant.\212\
---------------------------------------------------------------------------

    \210\ See ISDA Oct. 30, 2015 Letter, at 8.
    \211\ Id.
    \212\ Id.
---------------------------------------------------------------------------

    DTCC opposed the provision in proposed Sec.  45.10(d)(1) that would 
allow a DCO to select the SDR for reporting clearing swaps, instead 
arguing that clearing swaps should be reported to the same SDR as the 
original swap.\213\ DTCC argued that such reporting would create data 
fragmentation between the original swap and related clearing swaps.
---------------------------------------------------------------------------

    \213\ See DTCC Oct. 30, 2015 Letter, at 6.
---------------------------------------------------------------------------

4. Final Rule Text of Sec.  45.10
    Having considered all of the comments relating to the purpose and 
scope of the proposed amendments to Sec.  45.10, including amendments 
to Sec. Sec.  45.10(a) through (c) and new Sec.  45.10(d), the 
Commission is adopting amended Sec.  45.10 as proposed. The 
requirements for DCOs demonstrated in the above example and contained 
in proposed Sec.  45.10(d)(1) and (2) are consistent with the existing 
requirements for SEFs, DCMs, and other reporting counterparties under 
current Sec.  45.10. By requiring that all swap data for each clearing 
swap be reported to a single SDR, proposed Sec. Sec.  45.10(d)(1) and 
(2) further the Commission's stated purpose in creating Sec.  45.10, 
and part 45 generally, of reducing fragmentation of data for a given 
swap across multiple SDRs.\214\
---------------------------------------------------------------------------

    \214\ See, e.g., Final Part 45 Rulemaking, 77 FR 2136, 2139 
(``To avoid fragmentation of data for a given swap across multiple 
SDRs, the [Notice of Proposed Rulemaking] [for part 45] would 
require that all data for a particular swap must be reported to the 
same SDR.''); at 2143 (``First, in order to prevent fragmentation of 
data for a single swap across multiple SDRs, which would seriously 
impair the ability of the Commission and other regulators to view or 
aggregate all of the data concerning the swap, the proposed rule 
provided that, once an initial data report concerning a swap is made 
to an SDR, all data reported for that swap thereafter must be 
reported to the same SDR.''); and at 2168 (``The Commission believes 
the important regulatory purposes of the Dodd-Frank Act would be 
frustrated, and that regulators' ability to see necessary 
information concerning swaps could be impeded, if data concerning a 
given swap was spread over multiple SDRs.'').
---------------------------------------------------------------------------

    The proposed requirement in Sec. Sec.  45.10(d)(3) that the DCO 
report to a single SDR all swap data for each clearing swap that can be 
traced back to the same original swap also supports the goal of 
avoiding fragmentation of swap data. Though clearing swaps are new 
individual swaps, all clearing swaps that issue from the same original 
swap are component parts of a cleared swap transaction. Fragmentation 
among clearing swaps would needlessly impair the ability of the 
Commission and other regulators to view or aggregate all the data 
concerning the related clearing swaps.
    While proposed Sec.  45.10 ensures that each swap comprising a 
cleared swap transaction is reported to a single SDR, the Commission 
notes DTCC's comments on data fragmentation where original swaps are 
reported to different SDRs than their resulting clearing swaps. 
However, as long as DCOs properly identify the original swap's USI and 
SDR in reports on clearing swaps, and report clearing swaps' USIs and 
SDR in terminations of the original swaps, the Commission believes it 
will be able to reconcile those transactions when performing risk and 
other analysis. As discussed in Section II.C.4.iii above, the 
Commission has considered various alternatives to the adopted rules. 
The Commission believes that the adopted amendments will provide the 
Commission with the information it needs to perform its regulatory 
obligations while minimizing

[[Page 41754]]

costs to market participants, SDRs, and DCOs.
    In response to ISDA's comment that counterparties were unlikely to 
build mechanisms to retain information on the SDR to which clearing 
swaps were reported, the Commission believes that all swaps 
counterparties should be aware of the SDR to which their swaps are 
reported. The Commission notes that under existing Sec.  45.14(b) non-
reporting parties to swaps have obligations to correct any errors or 
omissions in swaps data of which they become aware.

G. Examples of Cleared Swap Reporting Workflows Under the Adopted 
Revisions

    The following examples demonstrate the manner in which the adopted 
revisions and additions to part 45 rules would operate in hypothetical 
scenarios involving: (1) An off-facility swap not subject to the 
clearing requirement with an SD/MSP reporting counterparty; and (2) a 
swap executed on or pursuant to the rules of a SEF or DCM. All 
references to part 45 appearing in the following examples refer to the 
rules as adopted in this release. These examples are provided only for 
illustrative purposes to demonstrate the applicability of certain rules 
adopted in this release in hypothetical scenarios. The examples are not 
intended to dictate any aspect of compliance, reporting or other 
related processes and are not intended to cover all possible reporting 
circumstances.
1. Off-Facility Swap Not Subject to the Clearing Requirement With SD/
MSP Reporting Counterparty
    An off-facility swap that is not subject to the clearing 
requirement is executed with an SD reporting counterparty. The SD 
generates and assigns a USI for the swap pursuant to Sec.  45.5(b) and 
reports all required swap creation data for the swap to SDR A pursuant 
to Sec.  45.3(c). The SD submits the swap to a DCO for clearing and, 
pursuant to Sec.  45.10(b), transmits to the DCO, at the time the swap 
is submitted for clearing, the identity of SDR A and the USI for the 
swap.
    The DCO accepts the swap for clearing, extinguishing it and 
replacing it with clearing swaps; the swap that was submitted for 
clearing is now an original swap. The DCO generates and assigns a USI 
to each clearing swap pursuant to Sec.  45.5(d) and, pursuant to Sec.  
45.3(e), reports all required swap creation data for the clearing 
swaps, including the original swap USI and all additional data fields 
applicable to clearing swaps,\215\ to SDR B, which the DCO in this 
example selected pursuant to Sec.  45.3(j)(2).
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    \215\ Modifications to appendix 1 would require that PET data 
include the original swap USI and all data categories and fields 
applicable to clearing swaps. See infra, Section II.H.3.
---------------------------------------------------------------------------

    Pursuant to Sec.  45.4(c), the DCO would report continuation data 
for the original swap, including the original swap termination notice, 
to SDR A using either the life cycle or state data methods, and using 
the facilities, methods, or data standards provided or required by SDR 
A.\216\ In addition to all other necessary continuation data, original 
swap continuation data reported by the DCO, including the original swap 
termination notice, would also include: The LEI of SDR B (the SDR to 
which creation data for each clearing swap that replaced the particular 
original swap was reported); \217\ the USI of the original swap as 
transmitted to the DCO by the SD at the time the swap was submitted for 
clearing; and the USI for each clearing swap.
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    \216\ See 17 CFR 45.13(b).
    \217\ The Commission notes that the amended Sec.  45.4(c)(2)(i) 
requirement that the DCO include the LEI of the SDR to which all 
required swap creation data for each clearing swap was reported by 
the DCO applies whether or not swap data for the original and 
clearing swaps is reported to the same SDR or to different SDRs. The 
Commission expects that this information will be useful for 
regulators with respect to their review of data pertaining to 
cleared swap transactions, and to SDRs with respect to their 
processing of swap data received, even when the original and 
clearing swaps reside in the same SDR.
---------------------------------------------------------------------------

    The DCO would also transmit to each counterparty to the clearing 
swaps, as soon as technologically practicable after acceptance for 
clearing, the USI of each clearing swap pursuant to Sec.  45.5(d)(2) 
and the LEI of the SDR to which the clearing swap was reported pursuant 
to Sec.  45.10(d)(1).
    The DCO would have no further continuation data reporting 
obligations with respect to the original swap thereafter. However, the 
Commission notes that pursuant to Sec.  45.14, registered entities and 
counterparties required to report swap data to an SDR must report any 
known errors and omissions in the data reported.\218\ Additionally, 
non-reporting counterparties are required to notify the reporting 
counterparty of such errors or omissions.\219\ Finally, pursuant to 
Sec.  49.10(a), SDR A would be required to accept and record any 
original swap continuation data, including the original swap 
termination.
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    \218\ While the DCO would have no additional continuation data 
reporting requirement with respect to the original swap after 
reporting the termination upon acceptance for clearing, the DCO 
remains obligated under Sec.  45.14 to correct errors and omissions 
in the data reported by the DCO, including the termination notice. 
For example, if a swap is submitted to, and accepted by, a DCO for 
clearing, the DCO would report the termination notice of the 
original swap to the SDR to which the creation data for the original 
swap was reported. After submission of the termination notice to the 
SDR, if the DCO should become aware of an error or omission in the 
termination notice, the DCO is required, pursuant to Sec.  45.14, to 
correct any errors and omissions in the data so reported as soon as 
is technologically practicable after discovery of such errors or 
omissions. Likewise, all reporting entities and swap counterparties 
also remain obligated under Sec.  45.14 to correct errors and 
omissions in all data reported by or on behalf of each entity and 
swap counterparty to an SDR.
    \219\ Pursuant to Sec.  45.14(b), if a counterparty to a swap 
that is not the reporting counterparty as determined by Sec.  45.8 
discovers any error or omission with respect to the continuation 
data, including termination notice of the original swap, such non-
reporting counterparty is required to notify the DCO of each such 
error or omission.
---------------------------------------------------------------------------

2. Swaps Executed on or Pursuant to the Rules of a SEF or DCM
    A swap is executed on or pursuant to the rules of a SEF or DCM. The 
SEF/DCM generates and assigns a USI for the swap pursuant to Sec.  
45.5(a) and reports all required swap creation data to SDR A pursuant 
to Sec.  45.3(a). The SEF/DCM submits the swap to a DCO for clearing 
and, pursuant to Sec.  45.10(a), transmits to the DCO, at the time the 
swap is submitted for clearing, the identity of SDR A and the USI for 
the swap.
    The DCO accepts the swap for clearing, extinguishing it and 
replacing it with clearing swaps; the swap that was submitted for 
clearing is now an original swap. Under Sec. Sec.  45.5(d) and 45.3(e), 
the DCO would generate and assign a USI to each clearing swap and 
report all required swap creation data, including the original swap USI 
and all additional data fields applicable to clearing swaps, for the 
clearing swaps to registered SDR A, which, in this example, the DCO 
selected pursuant to Sec.  45.3(j)(2).\220\
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    \220\ Pursuant to Sec.  45.3(j)(2), the DCO could have selected 
SDR B.
---------------------------------------------------------------------------

    Pursuant to Sec.  45.4(c), the DCO would report continuation data 
for the original swap, including the original swap termination notice, 
to SDR A using either the life cycle or state data methods, and using 
the facilities, methods, or data standards provided or required by SDR 
A. Such continuation data would include the LEI of SDR A (the SDR to 
which creation data for each clearing swap that replaced the particular 
original swap was reported), the USI of the original swap as 
transmitted to the DCO by the SEF/DCM at the time the swap was 
submitted for clearing, and the USI for each clearing swap.
    The DCO would also transmit to each counterparty to the clearing 
swaps, as soon as technologically practicable after

[[Page 41755]]

acceptance for clearing, the USI of each clearing swap pursuant to 
Sec.  45.5(d)(2) and the LEI of the SDR to which the clearing swap was 
reported pursuant to Sec.  45.10(d)(1).
    The DCO would have no further continuation data reporting 
obligations with respect to the original swap thereafter. However, the 
Commission notes that pursuant to Sec.  45.14, registered entities and 
counterparties required to report swap data to an SDR must report any 
known errors and omissions in the data reported. Additionally, non-
reporting counterparties are also required to notify the reporting 
counterparty of such errors or omissions.\221\ Finally, pursuant to 
Sec.  49.10(a), SDR A would be required to accept and record the 
original swap termination.
---------------------------------------------------------------------------

    \221\ See notes 220-221, supra.
---------------------------------------------------------------------------

H. Primary Economic Terms Data--Amendments to Appendix 1 to Part 45--
Tables of Minimum Primary Economic Terms

    The Commission's existing lists of minimum primary economic terms 
for swaps in each swap asset class are found in tables in Exhibits A-D 
of appendix 1 to part 45. Those tables include data elements that 
reflect generic economic terms and conditions common to most 
standardized products. They reflect the fact that PET data captures a 
swap's basic nature and essential economic terms, and are provided in 
order to ensure to the extent possible that all such essential terms, 
where applicable, are included when required primary economic terms are 
reported for each swap.

1. Proposed Amendments and Additions to Primary Economic Data Fields

    The Commission proposed the following revisions to Exhibits A-D of 
appendix 1, each of which is discussed in greater detail below: (1) 
Modifications to existing PET data fields; (2) the addition of three 
new PET data fields applicable to all reporting entities for all swaps; 
and (3) the addition of a number of new data fields that must be 
reported by DCOs for clearing swaps.\222\
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    \222\ The Commission also proposes to revise each of the data 
categories and fields that reference the clearing requirement 
exception in CEA section 2(h)(7) to reflect that exceptions to, and 
exemptions from, the clearing requirement, including the clearing 
requirement exception in CEA section 2(h)(7), are set forth under 
part 50 of the Commission's regulations. Additionally, the 
Commission is making non-substantive edits to the following fields 
in Exhibits A-D: Asset class; For a multi-asset class swap, an 
indication of the primary asset class; For a multi-asset class swap, 
an indication of the secondary asset class(es); and to the Clearing 
member client account field in Exhibits C and D.
---------------------------------------------------------------------------

i. Proposed Modifications to Existing PET Data Fields
    The Commission proposed clarifying and conforming changes and minor 
corrective modifications to the following existing PET data fields: 
\223\
---------------------------------------------------------------------------

    \223\ See 80 FR 52544, 52558.
---------------------------------------------------------------------------

     The Unique Swap Identifier for the swap--The Commission 
proposed to remove the explanatory note in the Comment section to this 
data field in Exhibits A-D. The explanatory note is no longer necessary 
because under proposed Sec.  45.5(d), the DCO would create the USI for 
each clearing swap.
     PET data fields that utilize a LEI \224\--The Commission 
proposed conforming changes to the Comment sections to data fields in 
Exhibits A-D that utilize the LEI to reflect that the CFTC has 
designated an LEI system \225\ and to reflect that a substitute 
identifier may be reported for natural person swap counterparties.
---------------------------------------------------------------------------

    \224\ These include the following fields in Exhibits A-D: The 
Legal Entity Identifier of the reporting counterparty; If the swap 
will be allocated, or is a post-allocation swap, the Legal Entity 
Identifier of the agent; The Legal Entity Identifier of the non-
reporting party; Clearing venue; The identity of the counterparty 
electing an exception or exemption to the clearing requirement under 
Part 50 of this chapter (formerly The identity of the counterparty 
electing the clearing requirement exception in CEA section 2(h)(7)); 
Exhibit A: An indication of the counterparty purchasing protection; 
An indication of the counterparty selling protection; Information 
identifying the reference entity; Exhibit D: Buyer, Seller.
    \225\ The explanatory notes discussing a situation where no CFTC 
designated LEI is yet available are no longer applicable. See 
generally Order Extending the Designation of the Provider of Legal 
Entity Identifiers To Be Used in Recordkeeping and Swap Data 
Reporting Pursuant to the Commission's Regulations, 80 FR 44078 
(Jul. 24, 2015).
---------------------------------------------------------------------------

     If no CFTC-approved LEI for the non-reporting counterparty 
is yet available, the internal identifier for the non-reporting 
counterparty used by the swap data repository--The Commission proposed 
to remove this data field in each of the Exhibits. As noted above, the 
CFTC has designated an LEI, and these PET data fields are no longer 
applicable.
     For a mixed swap reported to two non-dually-registered 
swap data repositories, the identity of the other swap data repository 
(if any) to which the swap is or will be reported--The Commission 
proposed to add an explanatory note to the Comment section for this 
data field in Exhibits A-D providing that the field value is the LEI of 
the other SDR to which the swap is or will be reported.
     Block trade indicator--The Commission proposed to modify 
the Comment section to this data field in Exhibits A-D to reflect that 
the CFTC has issued a final rulemaking regarding Procedures To 
Establish Appropriate Minimum Block Sizes for Large Notional Off-
Facility Swaps and Block Trades.\226\
---------------------------------------------------------------------------

    \226\ See, generally, Procedures To Establish Appropriate 
Minimum Block Sizes for Large Notional Off-Facility Swaps and Block 
Trades, Final Rule, 78 FR 32866 (May 31, 2013).
---------------------------------------------------------------------------

     Execution venue--The Commission proposed to modify the 
explanatory note in the Comment section to this data field in Exhibits 
A-D to reflect that the CFTC has designated an LEI system and to 
require the reporting of only the LEI of the SEF or DCM for swaps 
executed on or pursuant to the rules of a SEF or DCM.
     Clearing indicator--The Commission proposed modifications 
to the explanatory note in the Comment section to this data field in 
Exhibits A-D to provide for the reporting of a Yes/No indication of 
whether the swap will be submitted for clearing to a DCO.
     Clearing venue--The Commission proposed modifications to 
the Comment section of this data field in Exhibits A-D to provide for 
the reporting of only the LEI of the derivatives clearing organization.
ii. Proposed Addition of New PET Data Fields Applicable to All 
Reporting Entities for All Swaps
    The Commission proposed to add to Exhibits A-D the following new 
PET fields which would be applicable to all reporting entities for all 
swaps: \227\
---------------------------------------------------------------------------

    \227\ See 80 FR 52544, 52558-59.
---------------------------------------------------------------------------

     Asset class--This data field would provide the specific 
asset class for the swap. Field values: Credit, equity, FX, interest 
rates and other commodities.
     An indication of whether the reporting counterparty is a 
derivatives clearing organization with respect to the swap.
     Clearing exception or exemption type--This field would 
provide the type of clearing exception or exemption being claimed. 
Field values: End user, Inter-affiliate or Cooperative.
iii. Proposed Addition of New PET Data Fields Applicable to DCOs for 
Clearing Swaps
    The Commission also proposed to modify Exhibits A-D in order to add 
new PET fields specifically to be reported by DCOs for clearing 
swaps.\228\ The proposed data fields that must be reported by DCOs for 
clearing swaps include the following:
---------------------------------------------------------------------------

    \228\ See 80 FR 52544, 52559.
---------------------------------------------------------------------------

     Clearing swap USIs--This data field would provide the USI 
for each clearing swap that replaces the original swap,

[[Page 41756]]

other than the USI for which the PET data is currently being reported.
     Original swap USI--This data field would provide the USI 
for the original swap that was replaced by clearing swaps.\229\
---------------------------------------------------------------------------

    \229\ See also Sec. Sec.  45.10(a)(1), (b)(1)(iii), (b)(2)(ii), 
(c)(1)(iii), (c)(2)(ii), and (c)(3) (requiring entities with 
reporting obligations to transmit to the DCO for swaps submitted for 
clearing ``the identity of the swap data repository to which 
required swap creation data is reported'' and the USI for the swap).
---------------------------------------------------------------------------

     Original swap SDR--This data field would provide the LEI 
of the SDR to which the original swap was reported.\230\
---------------------------------------------------------------------------

    \230\ Id.
---------------------------------------------------------------------------

     Clearing member LEI--This data field would provide the LEI 
of the clearing member.
     Clearing member client account--This data field would 
provide the account number for the client, if applicable, of the 
clearing member.
     Origin (house or customer)--This data field would provide 
information regarding whether the clearing member acted as principal 
for a house trade or agent for a customer trade.
     Clearing receipt timestamp--This data field would provide 
the date and time at which the DCO received the original swap that was 
submitted for clearing.
     Clearing acceptance timestamp--This data field would 
provide the date and time at which the DCO accepted the original swap 
that was submitted for clearing.
3. Comments Received
i. General Comments
    Eurex commented that there are no additional fields for clearing 
swaps beyond those proposed which are necessary to understand a 
clearing swap or the mechanics of the clearing process.\231\ JBA 
cautioned that the definitions used in the markets are not always 
consistent with those proposed by the NPRM, which places a significant 
burden on small-sized market participants.\232\ JBA also noted 
potential difficulties in reporting hybrid instruments because swaps 
with multiple underlying assets may have their own market conventions 
that do not fall under the categories in the proposed rules.\233\
---------------------------------------------------------------------------

    \231\ See Eurex Oct. 30, 2015 Letter, at 8.
    \232\ See JBA Oct. 30, 2015 Letter, at 2-3.
    \233\ See JBA Oct. 30, 2015 Letter, at 3.
---------------------------------------------------------------------------

    Several commenters addressed how PET data fields can operate in the 
context of agency and principal clearing models. LCH recommended that 
the Commission require a PET data field indicating if a swap is cleared 
following an agency or principal model.\234\ ISDA recommended combining 
the ``Clearing indicator'' and ``Origin (house or customer)'' fields 
into a single ``Cleared'' field with four possible values--not cleared, 
intended to be cleared, cleared (principal), and cleared (agency).\235\ 
ISDA commented that the current reporting system results in DCOs 
reporting principal cleared trades in a manner designed for agency 
clearing model. ISDA commented that this is at odds with European Union 
requirements and may result in data reported to multiple jurisdictions 
that is not reconcilable.\236\ Eurex commented that, in the principal 
model, the DCO may not know the identity of the clearing member's 
client; if the DCO is required to report that client's identity, it 
would be necessary for anyone trading part 45 reportable swaps to 
possess an LEI.\237\
---------------------------------------------------------------------------

    \234\ See LCH Oct. 30, 2015 Letter, at 4.
    \235\ See ISDA Oct. 30, 2015 Letter, at 9-10.
    \236\ See ISDA Oct. 30, 2015 Letter, at 11.
    \237\ See Eurex Oct. 30, 2015 Letter, at 8.
---------------------------------------------------------------------------

    LCH commented that the ``Original swap USI,'' ``Original swap 
SDR,'' and ``Clearing member client account'' PET fields for clearing 
swaps should only be required ``if applicable.'' \238\
---------------------------------------------------------------------------

    \238\ See LCH Oct. 30, 2015 Letter, at 4.
---------------------------------------------------------------------------

ii. Comments on Specific Proposed PET Fields \239\
---------------------------------------------------------------------------

    \239\ DTCC also commented on the proposed PET field for 
``Clearing swap USIs,'' ``Original swap USIs,'' and ``Original swap 
SDRs.'' See DTCC Oct. 30, 2015 Letter, at 8-9. These comments are 
addressed in the discussions on proposed revisions to Sec. Sec.  
45.5 and 45.8, supra Sections II.D and II.E.
---------------------------------------------------------------------------

    ISDA supported the proposed modification of the clearing venue and 
execution venue PET fields to require the submission of an LEI for such 
venues.\240\ ISDA also supported the addition of the ``Asset class'' 
PET data field for all swaps.\241\ ISDA also commented on the removal 
of internal counterparty identifiers as a valid submission for various 
counterparty identification fields, noting that not all global 
regulators require swap counterparties to obtain LEIs.\242\ ISDA 
requested that the Commission continue to work with global regulators 
to ensure uniform adoption of the LEI standard across jurisdictions.
---------------------------------------------------------------------------

    \240\ See ISDA Oct. 30, 2015 Letter, at 8.
    \241\ See id. at 9.
    \242\ See id., at 8.
---------------------------------------------------------------------------

    ISDA commented that the PET field for ``Block trade indicator'' 
should be removed rather than amended because block trade status only 
affects part 43 reporting.\243\ ISDA questioned the value that block 
trade status would provide the Commission when evaluating swap 
data.\244\ Further, block trade status may change over the life of a 
swap and there is no guidance in part 43 or part 45 on how to deal with 
such changes.\245\
---------------------------------------------------------------------------

    \243\ See id. at 8.
    \244\ See id. at 8.
    \245\ See id. at 8.
---------------------------------------------------------------------------

    Finally, ISDA commented on the proposed ``Clearing exception or 
exemption type'' PET field, which would require the reporting party to 
identify the clearing exception or exemption exercised for a particular 
swap.\246\ ISDA commented that it could be challenging and costly for 
firms to implement this change, while providing duplicative information 
because exemption elections must already be provided to SDRs.\247\ ISDA 
recommended that the ``Clearing exception or exemption type'' PET field 
acceptable values be limited to ``inter-affiliate'' and ``other,'' 
because inter-affiliate trades can be identified under existing 
reporting standards.
---------------------------------------------------------------------------

    \246\ See id. at 9.
    \247\ See id. at 9.
---------------------------------------------------------------------------

4. Final Rule Text
    Having considered the comments provided in response to the NPRM, 
the Commission is adopting the revisions to Appendix 1 of part 45 as 
proposed.\248\ In response to the IDWG Request for Comment, some 
commenters argued that the Commission should not require additional 
data fields for reporting and should reduce the number of fields 
currently required.\249\ The Commission explained in the NPRM that the 
proposed modifications to existing PET data fields will add clarity to 
the current reporting requirements. In regards to the additional 
fields, the NPRM explained that the new fields will require the 
reporting of information that is essential to the efficient operation 
of reporting of

[[Page 41757]]

the swaps involved in a cleared swap transaction.\250\
---------------------------------------------------------------------------

    \248\ The Commission has also noted ITV's comment requesting the 
addition of an indicator that a swap was part of a package 
transaction. See ITV Oct. 30, 2015 Letter, at 3. While this comment 
is beyond the scope of the NPRM, the Commission would note that the 
Technical Specifications Request for Comment solicits input on this 
topic.
    \249\ See CMC May 27, 2014 Letter, at 3 (recommending that the 
Commission reduce the number and complexity of data fields required 
to improve data reporting); CME letter at 17-19 (providing 
recommendations on modification for specific data fields and arguing 
against requiring certain additional reporting); DTCC May 27, 2014 
Letter, at 3, appendix at 15 (suggesting that the Commission 
consider whether requiring fewer data elements would better enable 
the Commission and other regulators to fulfill their regulatory 
obligations); International Energy Credit Association May 27, 2014 
Letter, at 5-6 (arguing that existing swap data reporting 
requirements do not need to be expanded and that data reporting 
would be improved by reducing the current reporting burden); Swiss 
Re May 27, 2014 Letter, at 5 (describing reporting difficulties for 
specific data fields).
    \250\ See 80 FR 52544, 52559.
---------------------------------------------------------------------------

    Regarding the proposed PET fields for clearing swaps, as noted in 
the NPRM, the Commission believes such data elements would more 
accurately capture the additional, unique features of clearing swaps 
that are not relevant to uncleared swaps.\251\ The Commission has noted 
the number of comments addressing the issue of reporting swaps cleared 
under the principal, as opposed to agency, model of clearing. In 
particular, the Commission has reviewed ISDA's comment on combining the 
``Clearing indicator'' and ``Origin (house or customer)'' fields. While 
the Commission is adopting those fields as proposed, the Commission 
would note that in the Technical Specifications Request for Comment, 
the Commission solicited input on a potential data element indicating 
agency versus principal clearing model, and on reporting package 
transactions.\252\
---------------------------------------------------------------------------

    \251\ See 80 FR 52544, 52559.
    \252\ See Draft Technical Specifications for Certain Swap Data 
Elements, Request for Comment (Dec. 22, 2015), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf. (``Technical Specifications 
Request for Comment'').
---------------------------------------------------------------------------

    The Commission notes LCH's comment that certain PET data elements 
should only be reported ``if applicable.'' The Commission notes that 
appendix 1 to part 45 states that reporting parties should ``[e]nter N/
A for fields that are not applicable,'' which is repeated in the header 
to every column in appendix 1. To ensure that reported swap data is 
complete, the Commission would reiterate that any PET data field that 
is not applicable to a particular swap should be marked ``N/A'' and not 
left blank. Otherwise, the Commission cannot determine if a field is 
inapplicable or if an applicable data element is missing.
    The Commission declines to remove the ``Block trade indicator'' as 
requested by ISDA because this indicator is necessary for a proper 
review of market activity for surveillance and enforcement purposes. 
The Commission would note that block trade status is most relevant for 
part 43 real-time reporting purposes. Therefore, in response to ISDA's 
request for guidance, the Commission would note that a swap's block 
trade status should be determined as of the time of execution; 
subsequent changes to notional amounts should not impact whether the 
swap met the block trade threshold originally.
    As for the ``Clearing exception or exemption type'' PET field, the 
Commission has noted ISDA's comment that this field may be difficult to 
implement. However, the Commission believes that additional PET fields 
indicating clearing exception and exemption type are necessary for the 
Commission to track compliance with Commission regulation Sec.  50.50. 
While reporting counterparties are required under existing Sec.  
50.50(b) to provide clearing exemption election forms with SDRs, the 
existing swaps data reporting rules do not require that the reporting 
counterparty indicate that such clearing exemption was elected for a 
particular swap. Without such information provided as part of 
transaction-specific swaps data, the Commission is unable to determine 
which counterparties are relying on an exemption and how often such 
elections are being made.\253\ This additional PET field will aid the 
Commission in tracking compliance with the clearing mandate by 
providing transaction specific information on why certain swaps were 
uncleared.
---------------------------------------------------------------------------

    \253\ As noted above, in addition to the end-user exception to 
the swap clearing requirement set forth in section 2(h)(7) of the 
CEA and codified in part 50 of the Commission's regulations, the 
Commission has published two exemptions to the swap clearing 
requirement: The inter-affiliate exemption (Sec.  50.52) and the 
financial cooperative exemption (Sec.  50.51).
---------------------------------------------------------------------------

    The asset class data field will assist the Commission in 
identifying the asset class for swaps reported to registered SDRs 
pursuant to part 45. The indication of whether the reporting 
counterparty is a DCO with respect to the swap data field is consistent 
with proposed Sec.  45.8(i), which designates the DCO as the reporting 
counterparty for clearing swaps, and the existing PET data fields that 
require certain information related to the registration status of the 
counterparties to be included in PET data reporting.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires federal agencies, 
in promulgating rules, to consider the impact of those rules on small 
entities.\254\ The rules proposed herein will have a direct effect on 
SDRs, DCOs, SEFs, DCMs, SDs, MSPs, and non-SD/MSP counterparties who 
are counterparties to one or more swaps and subject to the Commission's 
jurisdiction. The Commission has previously established certain 
definitions of ``small entities'' to be used by the Commission in 
evaluating the impact of its rules on small entities in accordance with 
the RFA.\255\ The Commission has previously determined that DCMs \256\ 
and DCOs \257\ are not small entities for the purpose of the RFA. The 
Commission has also previously proposed that SDRs, SEFs, SDs, and MSPs 
should not be considered to be small entities.\258\
---------------------------------------------------------------------------

    \254\ See 5 U.S.C. 601 et seq.
    \255\ 47 FR 18618, 18618-21, Apr. 30, 1982.
    \256\ Id.
    \257\ 66 FR 45604, 45609, Aug. 29, 2001.
    \258\ Swap Data Recordkeeping and Reporting, Notice of Proposed 
Rulemaking, (``Part 45 NPRM'') 75 FR 76574, 76595 (Dec. 8, 2010) 
(discussing why SDRs, SEFs, SDs, and MSPs should not be considered 
small entities).
---------------------------------------------------------------------------

    The Final Part 45 Rulemaking and preceding proposal discussed how 
certain non-SD/MSP counterparties could be considered small entities in 
certain limited situations, but concluded that part 45 does not have a 
significant impact on a substantial number of small entities.\259\ The 
modifications to part 45 adopted herein do not affect that conclusion, 
or the reasoning behind it, and therefore the Commission does not 
believe that these adopted rules will have a significant economic 
impact on a substantial number of small entities. To the extent that 
this rulemaking has any significant impact on small entities, it 
removes some reporting obligations by explicitly putting the obligation 
to terminate original swaps on DCOs accepting those swaps.
---------------------------------------------------------------------------

    \259\ Final Part 45 Rulemaking, 77 FR 2136, 2170-71 (discussion 
for non-SD/MSP counterparties); Part 45 NPRM, 75 FR 76574, 76595 
(discussion for non-SD/MSP counterparties).
---------------------------------------------------------------------------

    Therefore, the Chairman, on behalf of the Commission, pursuant to 5 
U.S.C. 605(b), hereby certifies that the adopted rules will not have a 
significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

    The purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 
et seq. (``PRA'') are, among other things, to minimize the paperwork 
burden to the private sector, to ensure that any collection of 
information by a government agency is put to the greatest possible 
uses, and to minimize duplicative information collections across the 
government.\260\ The PRA applies to all information, regardless of form 
or format, whenever the government is obtaining, causing to be 
obtained, or soliciting information, and includes required disclosure 
to third parties or the public, of facts or opinions, when the 
information collection calls for answers to identical questions posed 
to, or identical reporting or recordkeeping requirements imposed on, 
ten or more persons.\261\ The

[[Page 41758]]

PRA requirements have been determined to include not only mandatory but 
also voluntary information collections, and include both written and 
oral communications.\262\ Under 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 from 
the Office of Management and Budget (``OMB''). The OMB control number 
for the information collection associated with part 45 swaps reporting 
is 3038-0096.\263\ Because reporting entities under part 45 would also 
be required to report swaps pursuant to part 43, where applicable, some 
of the burden associated with swaps reporting under part 45 is covered 
in the information collection covering real-time swaps reporting 
pursuant to part 43.\264\
---------------------------------------------------------------------------

    \260\ See 44 U.S.C. 3501.
    \261\ See 44 U.S.C. 3502.
    \262\ See 5 CFR 1320.3(c)(1).
    \263\ The NPRM improperly cited information collection 3038-
0089, rather than 3038-0096, as the collection relating to swaps 
reporting under part 45. However, the NPRM's discussion of what 
information is collected and the burden estimates for swaps 
reporting under part 45 correctly described collection 3038-0096, 
which is the basis of this PRA discussion.
    \264\ See Information Collection 3038-0070; see also 77 FR 2136, 
2174. (``The Commission notes, however, that these burdens should 
not be considered additional to the costs of compliance with part 
43, because the basic data reporting technology, processes, and 
personnel hours and expertise needed to fulfill the requirements of 
part 43 encompass both the data stream necessary for real-time 
public reporting and the creation data stream necessary for 
regulatory reporting.'').
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    The Commission intends to amend existing collection 3038-0096 to 
account for adjustments to reporting entities' swaps data reporting 
systems necessitated by this release. Information collection 3038-0096 
\265\ includes an estimate of burden hours and costs associated with 
various requirements of part 45 swaps reporting and recordkeeping,\266\ 
including the reporting of creation data under Sec.  45.3 and 
continuation data under Sec.  45.4,\267\ the maintenance of an internal 
order management system (``OMS''), and personnel needed to maintain a 
compliance program in support of an OMS system. The intended amendment 
to the collection will add an estimate for the burden associated (a) 
with changing reporting systems to comply with changes to the required 
data to be reported under Sec.  45.3 and Sec.  45.4, and (b) with 
requirements that DCOs potentially connect to all registered SDRs. The 
Commission will be filing to update this information collection with 
OMB prior to the effective date of this release. This update will be 
publicly noticed and made available for comment in the Federal 
Register.
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    \265\ The Commission issued a notice of intent to renew 
information collection 3038-0096 on August 7, 2015. See Notice of 
Intent to Renew Collection 3038-0096, 80 FR 47477 (Aug. 7, 2015). 
The Commission received no comments on this notice of intent to 
renew. The comment file is available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1608. The Office of Management 
and Budget approved without change the renewal of this information 
collection on December 21, 2015.
    \266\ Supporting documentation for the renewal of information 
collection 3038-0096 is available at http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201508-3038-002.
    \267\ ``Creation data'' under Sec.  45.3 includes all PET data 
fields listed in appendix 1 to part 45, as well as all 
``confirmation data,'' which includes all terms of the swap matched 
and agreed upon by the parties. ``Continuation data'' reporting 
under Sec.  45.4 requires a reporting entity to ensure that all data 
on a swap is kept current and accurate, including any changes to 
primary economic terms.
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    The Commission received several comments on the costs associated 
with part 45 swaps reporting that could implicate PRA burdens.\268\ 
Regarding the addition of PET fields applicable to all swaps, ISDA 
commented that the PET field for ``clearing exception or exemption 
type'' would be ``very challenging and costly'' to implement.\269\ 
However, neither ISDA nor any other commenter provided information 
quantifying the cost to update reporting systems to account for the 
modified and additional PET fields. As discussed more extensively in 
Section III.C.9, the information required to be reported in the 
modified ``clearing exception or exemption type'' is also already in 
the possession of the reporting entity; changes to reporting systems 
required to report this field would involve adding a known piece of 
information to the message reported to an SDR. Regarding new PET fields 
for clearing swaps, Eurex commented that DCOs would need to collect 
data from the original swap counterparties or trading venue to be able 
to report these fields.\270\ The information required to report these 
PET fields is either generated by the DCO itself (such as clearing swap 
USI, clearing member LEI, clearing member internal identifier, house/
customer account flag, and receipt and clearing timestamps) or should 
be included in the clearing member's submission of a swap to the DCO 
for clearing (such as the original swap USI and original swap SDR). 
While the Commission believes that reporting entities already possess 
information required to report the added and amended PET fields, the 
Commission intends to amend collection 3038-0096 to account for changes 
that reporting entities must make to their reporting systems to comply 
with these new and amended fields.
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    \268\ In addition, FSR requested that the Commission promulgate 
rules to standardize data elements. See FSR Oct. 30, 2015 Letter, at 
4. While this comment would relate to the burden of reporting for 
part 45 purposes, it is beyond the scope of the NPRM. The Commission 
would note Commission staff's efforts in connection with the 
Technical Specifications Request for Comment, discussed in n. 42. 
The Commission also received some comments suggesting that the 
Commission not require the reporting of intended-to-be-cleared 
original swaps, or require DCOs to report such swaps. See, e.g., 
CEWG Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 2015 Letter, at 2. 
While not requiring such reporting would reduce the burden on 
original swap reporting entities, the NPRM and adopted amendments to 
part 45 do not change the existing requirement to report such swaps. 
Therefore, this comment is beyond the scope of the NPRM. See, supra, 
Section II.B.4.iii.
    \269\ ISDA Oct. 30, 2015 Letter, at 9.
    \270\ See Eurex Oct. 30, 2015 Letter, at 5.
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    Some commenters raised concerns that requiring DCOs to report 
continuation data for original swaps to the SDR to which the original 
swap was reported could increase costs for DCOs as they may need to 
connect to SDRs to which they do not currently have a connection.\271\ 
The Commission understands that DCOs already may report terminations to 
the original SDR, and to the extent these reporting systems are already 
implemented the new rules will not introduce additional costs for these 
DCOs. Moreover, the costs of additional SDR connections that may not 
yet be in place are addressed by the Commission more fully below at 
III.C.5. However, the Commission recognizes that requiring DCOs to 
potentially connect to more than one SDR in order to report 
continuation data for original swaps may require an update to the 
existing information collection 3038-0096. The Commission will be 
filing to update this information collection with OMB prior to the 
effective date of this release. This update will be publicly noticed 
and made available for comment in the Federal Register.
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    \271\ See e.g., Eurex Oct. 30, 2015 Letter, at 5, 9; LedgerX 
Oct. 30, 2015 Letter, at 2; LCH Oct. 30, 2015 Letter, at 3. The 
Commission notes that another commenter stated that ``DCOs have 
already made connections with the major CFTC-registered SDRs.'' 
(DTCC Oct. 30, 2015, Letter at 5).
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C. Cost-Benefit Considerations

1. Introduction
    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 certain orders.\272\ Section 15(a) further 
specifies that the costs and benefits shall be evaluated in light of 
five broad areas of market and public concern: (1) Protection of market

[[Page 41759]]

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.
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    \272\ 7 U.S.C. 19(a).
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    The Commission is amending and making additions to Sec. Sec.  45.1, 
45.3, 45.4, 45.5, 45.8, 45.10, and appendix 1 to part 45 in order to 
provide clarity to counterparties to a swap and registered entities 
regarding their part 45 reporting obligations with respect to cleared 
swap transactions and to improve the efficiency of data collection and 
maintenance associated with the reporting of the swaps involved in a 
cleared swap transaction. The final rule adopts revisions to part 45 as 
proposed in the NPRM.
2. Background
    The swap data reporting framework adopted in the Final Part 45 
Rulemaking \273\ was largely based on the mechanisms for the trading 
and execution of uncleared swaps. The plain language of the existing 
part 45 rules presumes the existence of a single, continuous swap both 
prior to and after acceptance of a swap for clearing by a DCO. Under 
that framework, registered entities and counterparties would each 
report data with respect to a single swap when such swap is initially 
executed, referred to as ``creation data,'' and over the course of the 
swap's existence, referred to as ``continuation data.'' \274\
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    \273\ See 77 FR 2136.
    \274\ Section 45.1 defines ``required swap creation data'' as 
primary economic terms data and confirmation data. Section 45.1 
defines ``primary economic terms data'' as all of the data elements 
necessary to fully report all of the primary economic terms of a 
swap in the swap asset class of the swap in question and defines 
``confirmation data'' as all of the terms of a swap matched and 
agreed upon by the counterparties in confirming the swap. 17 CFR 
45.1. For cleared swaps, confirmation data also includes the 
internal identifiers assigned by the automated systems of the 
derivatives clearing organization to the two transactions resulting 
from novation to the clearing house. Id.
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    The Commission has since had additional opportunities to consult 
with industry and with other regulators, including the SEC,\275\ and to 
observe how the part 45 regulations function in practice with respect 
to swaps that are cleared, including how the implementation of part 45 
interacts with the implementation of part 39 of the Commission's 
regulations, which contains provisions applicable to DCOs.
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    \275\ The SEC proposed certain new rules and rule amendments to 
Regulation SBSR governing reporting in the context of security-based 
swaps. See Regulation SBSR--Reporting and Dissemination of Security-
Based Swap Information, 80 FR 14740 (Mar. 19, 2015).
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    In particular, Sec.  39.12(b)(6) provides that upon acceptance of a 
swap by a DCO for clearing, the original swap is extinguished and 
replaced by equal and opposite swaps, with the DCO as the counterparty 
to each such swap.\276\ The original swap that is extinguished upon 
acceptance for clearing is commonly referred to as the ``alpha'' swap 
and the equal and opposite swaps that replace the original swap are 
commonly referred to as ``beta'' and ``gamma'' swaps. The Commission is 
of the view that the existing part 45 regulations should be amended to 
better accommodate the multi-swap framework of Sec.  39.12(b)(6) by 
explicitly addressing beta and gamma swaps as distinct swaps for 
purposes of part 45 reporting.\277\
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    \276\ See 17 CFR 39.12(b)(6) (requiring a DCO that clears swaps 
to have rules providing that, upon acceptance of a swap by the [DCO] 
for clearing: (i) The original swap is extinguished; (ii) the 
original swap is replaced by an equal and opposite swap between the 
[DCO] and each clearing member acting as principal for a house 
trading or acting as agent for a customer trade). Subsequent to 
adoption of the Final Part 45 Rulemaking, the Commission affirmed 
that the multi-swap framework (comprising separate and unique 
original and resulting swaps) should apply for part 45 reporting 
purposes. See Statement of the Commission on the Approval of Chicago 
Mercantile Exchange Rule 1001 (Mar. 6, 2013), at 6, available at: 
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.
    \277\ The Commission also notes that a single swap reporting 
framework for cleared swaps, as opposed to a multi-swap framework 
like the one contemplated by Sec.  39.12(b)(6), would likely not be 
consistent with the approach proposed by the SEC in its release 
proposing certain new rules and rule amendments to Regulation SBSR. 
See Regulation SBSR--Reporting and Dissemination of Security-Based 
Swap Information, 80 FR 14740 (Mar. 19, 2015). The Commission 
discusses the benefits associated with harmonizing its approach with 
that of other regulators later in this release.
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    The existing part 45 regulations do not explicitly address the 
reporting of ``alpha,'' ``beta,'' and ``gamma'' swaps; however, 
industry practice has evolved to address such reporting. The Commission 
understands that market participants generally report part 45 data for 
cleared swap transactions in conformance with the framework described 
in Sec.  39.12(b)(6), where separate swaps (alphas, betas, and gammas) 
are represented individually in reported swap data. The Commission 
understands that under existing market practice: SEFs, DCMs and 
reporting counterparties generally report required swap creation data 
for alpha swaps to the SDR of their choice; DCOs that accept alpha 
swaps for clearing generally report required swap creation data for the 
beta and gamma swaps that result from clearing novation of the alpha 
swap to the SDR of their choice (which may be different than the SDR to 
which the alpha swap was reported); such DCOs do not in all cases 
include the USI of the alpha swap in creation data reported for the 
beta and gamma swaps; and that DCOs may inconsistently report, and SDRs 
may inconsistently accept and process, alpha swap terminations.\278\
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    \278\ While the above reflects the Commission's general 
understanding of industry practice with respect to the reporting of 
component parts of a cleared swap transaction, the Commission does 
not possess complete information regarding certain details and 
nuances of the reporting practices of different registered entities 
and reporting counterparties. For instance, in some cases, the 
Commission generally does not possess sufficient information to 
ascertain the period of time between the DCO's acceptance of an 
alpha swap for clearing and the DCO's report of creation data for 
beta and gamma swaps. The Commission posed questions eliciting 
specific details or nuances of industry practice that are likely to 
have cost/benefit implications in the relevant sections of the NPRM.
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    The gaps between the existing part 45 regulations, Sec.  
39.12(b)(6), and certain industry practices, including those outlined 
above, have likely contributed to a lack of certainty regarding the 
applicability of the part 45 regulations to beta and gamma swaps, 
including which registered entity or counterparty is required to report 
creation data and/or continuation data for such swaps, and the manner 
in which such swaps must be reported. The Commission understands that 
this uncertainty presents compliance challenges for registered entities 
and reporting counterparties.
    Additionally, the lack of clarity regarding existing part 45 
obligations with respect to beta and gamma swaps has impacted the 
accuracy, quality, and usefulness of data that is reported for cleared 
swaps. For instance, inconsistent DCO reporting of alpha swap USIs in 
creation data for beta and gamma swaps hinders the Commission's ability 
to trace the history of a cleared swap transaction from execution 
between the original counterparties to clearing novation. Even in cases 
where the Commission can ascertain the USI of a specific alpha swap 
that was replaced by beta and gamma swaps, SDR data available to the 
Commission at times misleadingly shows some alpha swaps as remaining 
open between the original counterparties, when in actuality such swaps 
have been extinguished through clearing novation. The inability to 
determine whether an alpha swap has been terminated impedes the 
Commission's ability to analyze cleared swap activity and to review 
swap activity for compliance with the clearing

[[Page 41760]]

requirement.\279\ If alpha swaps have been terminated, yet appear to 
remain open, then a risk of double counting swap notional exposures can 
result, which would impede the Commission's ability to analyze and 
study swaps market activity using accurate information. The inability 
to link the different swaps in a cleared swap transaction also impedes 
the Commission's ability to assess exposures of market participants in 
the uncleared and cleared swaps markets. Additionally, certain creation 
data fields that are currently populated for beta and gamma swaps prove 
difficult to interpret by the Commission, and thus can result in 
inconsistencies in their application and reporting among alpha, beta, 
and gamma swaps, hindering the Commission's ability to interpret and 
analyze data regarding beta and gamma swaps.
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    \279\ Commission staff recently noted difficulty in evaluating 
the proper de minimis level of activity for swap dealer registration 
under Commission regulation 1.3(ggg), in part due to difficulties 
linking alpha swaps with resulting beta and gamma swaps. See Swap 
Dealer De Minimis Exception Preliminary Report (Nov. 18, 2015), at 
13-14, available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf. In the report, Staff 
noted that the finalization and implementation of this final rule 
release for reporting of cleared swaps should help to mitigate this 
issue going forward.
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    The revisions and additions that are being adopted in this final 
rulemaking would amend part 45 to differentiate reporting requirements 
for cleared and uncleared swap transactions, and which explicitly 
address swap counterparty and registered entity reporting requirements 
for each component (e.g., alpha, beta, and gamma) of a cleared swap 
transaction. This rulemaking will remove uncertainty as to which 
counterparty to a swap is responsible for reporting creation data for 
each of the various components of a cleared swap transaction. The final 
rule makes clear whose obligation it is to report the termination of 
the original swap upon acceptance of a swap by a DCO for clearing. 
These additional details include where, when, and how to report the 
swap data pertaining to the establishment of the beta and gamma swaps 
and the reporting of the termination message to the SDR that originally 
received the swap data for the alpha swap. This final rule is also 
intended to improve the efficiency of data collection and maintenance 
associated with the reporting of the swaps involved in a cleared swap 
transaction and to improve the accuracy, quality, and usefulness of 
data that is reported for cleared swaps and alpha swaps that have been 
extinguished due to clearing novation.
    The Commission believes that the baseline for this consideration of 
costs and benefits is generally the existing part 45 regulations, which 
were adopted in 2011.\280\ However, as described above, in certain 
circumstances, industry practice has been informed by certain 
provisions of part 39 and by subsequent industry developments, and thus 
does not necessarily reflect the plain language of the existing part 45 
regulations. In those circumstances, the baseline for this 
consideration of costs and benefits will be industry practice.
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    \280\ See Swap Data Recordkeeping and Reporting Requirements, 
Final Rule, 77 FR 2136 (Jan. 13, 2012).
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    The following consideration of costs and benefits is organized 
according to the rules and rule amendments put forth in this final 
rulemaking. For each rule, the Commission summarizes the amendments 
\281\ and identifies and discusses the costs and benefits attributable 
to them, including a discussion of the commenters' suggestions with 
regards to the costs and benefits of the amendments present in the IDWG 
Request for Comment and the NPRM.\282\ The Commission then considers 
the costs and benefits of certain alternatives to the rules put forth 
in this final rulemaking, as well as the costs and benefits of all of 
the rules jointly in light of the five public interest considerations 
set out in section 15(a) of the CEA.
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    \281\ As described in detail throughout Section II of this final 
release, the Commission is also adopting a number of non-
substantive, conforming rule amendments in this release, such as 
renumbering certain provisions and modifying the wording of existing 
provisions to ensure consistency with the wording in newly proposed 
definitions. Non-substantive amendments of this nature will not be 
discussed in the cost-benefit portion of this final release.
    \282\ See IDWG Request for Comment, 79 FR 16689 (Mar. 26, 2014); 
NPRM, 80 FR 52544, 52570 (Aug. 31, 2015).
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    The Commission notes that this consideration of costs and benefits 
is based on the understanding that the swaps market functions 
internationally, with many transactions involving U.S. firms taking 
place across international boundaries, with some Commission registrants 
being organized outside of the United States, with leading industry 
members typically conducting operations both within and outside the 
United States, and with industry members commonly following 
substantially similar business practices wherever located. Where the 
Commission does not specifically refer to matters of location, the 
below discussion of costs and benefits refers to the effects of the 
proposed rules on all swaps activity subject to the amended 
regulations, whether by virtue of the activity's physical location in 
the United States or by virtue of the activity's connection with or 
effect on U.S. commerce under CEA section 2(i).\283\ The Commission 
also notes that the existing part 45 regulations generally contemplate 
situations where a swap may be required to be reported pursuant to U.S. 
law and the law of another jurisdiction.\284\
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    \283\ 7 U.S.C. 2(i). Section 2(i)(1) makes the swaps provisions 
of the Dodd-Frank Act, and Commission regulations promulgated under 
those provisions, applicable to activities outside the United States 
that ``have a direct and significant connection activities in, or 
effect on, commerce of the United States;'' while section 2(i)(2) 
makes them applicable to activities outside the United States that 
contravene Commission rules promulgated to prevent evasion of Dodd-
Frank. Application of section 2(i)(1) to the existing part 45 
regulations with respect to SDs/MSPs and non-SD/non-MSP 
counterparties is discussed in the Commission's non-binding 
Interpretive Guidance and Policy Statement Regarding Compliance With 
Certain Swap Regulations, 78 FR 45292 (July 26, 2013).
    \284\ See 17 CFR 45.1 (defining ``International swap'' to mean a 
swap required by U.S. law and the law of another jurisdiction to be 
reported both to a swap data repository and to a different trade 
repository registered with the other jurisdiction.); see also 17 CFR 
45.3(h) (prescribing requirements with respect to international 
swaps).
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3. Definitions--Amendments to Sec.  45.1
    The adopted amendments to Sec.  45.1 revise the definition of 
``derivatives clearing organization'' for purposes of part 45 to update 
a reference to an existing definition of ``derivatives clearing 
organization'' and make clear that part 45 applies to DCOs registered 
with the Commission. The adopted amendments to Sec.  45.1 will also add 
new definitions for ``original swaps'' (swaps that have been accepted 
for clearing by a DCO, commonly referred to as ``alpha'' swaps) and 
``clearing swaps'' (swaps created pursuant to the rules of a DCO that 
have a DCO as a counterparty, including, but not limited to, any swap 
that replaces an original swap that was extinguished upon acceptance 
for clearing, commonly referred to as ``beta'' and ``gamma'' swaps).
    The terms original swap and clearing swaps will be used throughout 
amended part 45 to help clarify reporting obligations for each swap 
involved in a cleared swap transaction. Likewise, the Commission will 
use the defined terms ``original swaps'' and ``clearing swaps'' 
throughout this consideration of costs and benefits. Given that these 
terms are a product of this release and are not yet part of industry 
nomenclature, the Commission will also use the terms ``alpha, beta, and 
gamma'' throughout this consideration of costs and benefits when 
discussing existing industry

[[Page 41761]]

practice and when helpful for purposes of clarification.\285\
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    \285\ The Commission determined to utilize the proposed to be 
defined terms ``original swap'' and ``clearing swaps'' in this 
release rather than the industry terms ``alpha, beta, and gamma'' 
because while a cleared-swap transaction generally comprises an 
original swap that is terminated upon novation and the equal and 
opposite swaps that replace it, the Commission is aware of certain 
circumstances in which a clearing swap may not involve the 
replacement of an original swap (e.g., an open offer swap, as 
discussed earlier in this release). See supra, Section II.A.
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    The Commission notes that commenters did not submit any comments 
relevant to the costs and benefits of the proposed amendments to Sec.  
45.1.
i. Costs
    The Commission does not anticipate that these definitions, in and 
of themselves, impose additional costs on DCOs or market participants. 
However, these definitions will be referenced in other proposed 
substantive provisions and the costs and benefits of those substantive 
requirements will be discussed in the relevant sections below.
ii. Benefits
    As discussed earlier in this release, the plain language of the 
existing part 45 regulations presumes the existence of one continuous 
swap and does not explicitly acknowledge distinct reporting 
requirements for the individual components (i.e., alphas, betas, and 
gammas) of a cleared swap transaction. However, industry practice is 
generally to report part 45 data for cleared swap transactions in 
conformance with the multi-swap framework described in Sec.  
39.12(b)(6) (i.e., to report alphas, betas, and gammas separately). The 
definitions of original and clearing swaps, along with the other 
revisions to part 45 covered in this release, will help align the part 
45 regulations with part 39 and with certain industry practices and 
will explicitly delineate the swap data reporting obligations 
associated with each of the swaps involved in a cleared swap 
transaction.\286\
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    \286\ The Commission acknowledges that the alternative 
approaches to the reporting of cleared swap transactions separately 
discussed in Section III.C.10, Consideration of Alternatives, later 
in this release could also provide these benefits for registered 
entities and swap counterparties. However, for the reasons explained 
in that section, the Commission is of the view that the proposed 
approach is more consistent with industry practice than the 
alternatives.
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4. Creation Data Reporting by DCOs--Amendments to Sec.  45.3
    Existing Sec.  45.3 requires reporting to an SDR of two types of 
``creation data'' generated in connection with a swap's creation: 
``primary economic terms data'' and ``confirmation data.'' \287\ 
Regulation 45.3 governs what creation data must be reported, who must 
report it, and deadlines for its reporting.
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    \287\ Section 45.1 defines ``required swap creation data'' as 
primary economic terms data and confirmation data. Section 45.1 
defines ``primary economic terms data'' as all of the data elements 
necessary to fully report all of the primary economic terms of a 
swap in the swap asset class of the swap in question and defines 
``confirmation data'' as all of the terms of a swap matched and 
agreed upon by the counterparties in confirming the swap. 17 CFR 
45.1. For cleared swaps, confirmation data also includes the 
internal identifiers assigned by the automated systems of the 
derivatives clearing organization to the two transactions resulting 
from novation to the clearing house.'' Id.
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    Amended Sec.  45.3(e) will govern creation data reporting 
requirements for swaps that fall under the proposed definition of 
clearing swaps. Amended Sec.  45.3(e) will also require a DCO, as 
reporting counterparty under adopted Sec.  45.8(i),\288\ to report all 
required swap creation data for each clearing swap as soon as 
technologically practicable after acceptance of an original swap by a 
DCO for clearing (in the event that the clearing swap replaces an 
original swap) or as soon as technologically practicable after 
execution of the clearing swap (in the event that the clearing swap 
does not replace an original swap).\289\
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    \288\ As discussed in greater detail below, adopted Sec.  
45.8(i) will designate the DCO as the reporting counterparty for 
clearing swaps.
    \289\ As noted earlier in this release, the amended definition 
of ``clearing swap'' is intended to encompass: (1) Swaps that 
replace an original swap and to which the DCO is a counterparty 
(i.e., swaps commonly known as betas and gammas) and (2) all other 
swaps to which the DCO is a counterparty (even if such swap does not 
replace an original swap). The Commission understands that there may 
be instances in which a clearing swap does not replace an original 
swap. For example, in the preamble to the part 39 adopting release, 
the Commission noted that ``open offer'' systems are acceptable 
under Sec.  39.12(b)(6), stating that ``Effectively, under an open 
offer system there is no `original' swap between executing parties 
that needs to be novated; the swap that is created upon execution is 
between the DCO and the clearing member, acting either as principal 
or agent.''). See Derivatives Clearing Organization General 
Provisions and Core Principles, Final Rule 76 FR 69334, 69361 (Nov. 
8, 2011).
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    Swaps other than clearing swaps, including swaps that later become 
original swaps by virtue of their acceptance for clearing by a DCO, 
will continue to be reported as currently required under existing Sec.  
45.3(a)-(d). The Commission is thus following an approach to creation 
data reporting that will require reporting counterparties or SEFs/DCMs 
to report creation data for swaps commonly known as alpha swaps, and 
that will require DCOs to report creation data for swaps commonly known 
as beta and gamma swaps, and for any other swaps to which the DCO is a 
counterparty.\290\
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    \290\ Because the reporting counterparty or SEF/DCM are 
currently required under Part 45 to report a swap that would become 
an original swap under this final release, there is no need to 
conduct a cost-benefit consideration of this requirement. 
Alternatives to the current reporting approach for original swaps 
are discussed in the Consideration of Alternatives section, Section 
III.C.10, below.
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    With respect to confirmation data reporting, for swaps that are 
intended to be cleared at the time of execution, the Commission is 
amending Sec.  45.3(a), (b), (c)(1)(iii), (c)(2)(iii), and (d)(2) to 
remove certain existing confirmation data reporting requirements. Under 
the modified rules, SEFs/DCMs and reporting counterparties will 
continue to be required to report PET data as part of their creation 
data reporting, but will not be required to report confirmation data 
for swaps that are intended to be submitted to a DCO for clearing at 
the time of execution. Instead, the DCO will be required to report 
confirmation data for clearing swaps pursuant to proposed Sec.  
45.3(e).
    The Commission is also amending Sec.  45.3(j), which will provide 
that: for swaps executed on or pursuant to the rules of a SEF or DCM 
(including swaps that become original swaps), the SEF or DCM will have 
the obligation to choose the SDR for such swaps; for all other swaps 
(including for off-facility swaps and/or clearing swaps) the reporting 
counterparty (as determined under Sec.  45.8) will have the obligation 
to choose the SDR.
    The Commission has considered the letters sent by commenters to the 
cost-benefit considerations of proposed amendments to Sec.  45.3. 
Several comments were received on the elimination of the requirement 
for reporting confirmation data for swaps that are intended to be 
cleared. On the cost-benefit considerations front, Markit commented 
that eliminating the requirement for reporting confirmation data for 
swaps that are intended to be cleared, while still maintaining the 
requirement to report primary economic terms data, will not benefit 
reporting workflows and that there is little incremental cost to report 
confirmation data as reporting systems are set-up to capture that 
information already.\291\
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    \291\ See Markit Oct. 30, 2015 Letter, at 2-3.
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    With regards to eliminating the requirement for reporting 
confirmation data, the Commission acknowledges that there might be 
incremental cost savings due to the elimination of this requirement, as 
suggested by commenters. Nevertheless, the Commission believes that 
there is no cost associated with the elimination of

[[Page 41762]]

this requirement and that confirmation data requirements for clearing 
swaps provide the Commission with a sufficient representation of the 
confirmation data for a cleared swap transaction. As a result, the 
Commission believes that there are benefits in the form of cost savings 
that need to be considered in the elimination of this requirement.
    Other commenters responded to the question of which entity should 
be responsible for reporting creation data for swaps that will become 
original swaps. Commenters were split on this question. Some commenters 
suggested that the DCO, rather than the reporting counterparty, should 
be responsible for reporting the creation data for that swap.\292\ CME 
commented that assigning all the reporting obligations for original and 
clearing swaps to the DCO is a better and simpler way to address alpha 
swap reporting, and will eliminate the need to reconcile original and 
clearing swaps across SDRs.\293\ CMC similarly commented that DCOs are 
in the best position to report on swaps that are accepted or rejected 
for clearing and should assume all reporting obligations for cleared 
swaps, including all reporting of swaps that are intended to be 
cleared.\294\ AIMA likewise suggested that if the Commission continues 
the reporting requirements associated with original swaps, assigning 
the reporting obligations to the DCOs will remove reporting burdens and 
the risk of data fragmentation across SDRs.\295\
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    \292\ See e.g., CME Oct. 30, 2015 Letter, at 2-3; CMC Oct. 30, 
2015 Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 
2015 Letter, at 3.
    \293\ See CME Oct. 30, 2015 Letter, at 3.
    \294\ See CMC Oct. 30, 2015 Letter, at 2.
    \295\ See AIMA Oct. 30, 2015 Letter, at 6.
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    Other commenters recommended that the Commission continue to 
require the reporting counterparty to report creation data for those 
swaps that will become original swaps.\296\ LCH commented that the 
reporting counterparty of a trade should always be a party to the 
transaction and therefore, in the case of a swap that will become an 
original swap, the DCO would not be better suited than the SEF, DCM, or 
reporting counterparty to report the creation data.\297\ Eurex 
suggested that assigning the reporting obligation of original swap 
creation data to the DCO may present a timeliness issue depending on 
when the DCO receives the necessary information from the 
counterparties.\298\ ISDA likewise agreed that the obligation to report 
swaps that become original swaps should remain with the reporting 
counterparty for that swap.\299\
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    \296\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4.
    \297\ See LCH Oct. 30, 2015 Letter, at 2.
    \298\ See Eurex Oct. 30, 2015 Letter, at 4.
    \299\ ISDA also commented in support of the Commission's 
proposal to remove the provisions in Sec.  45.3 that excused a 
reporting counterparty from reporting creation data for a swap 
accepted for clearing before the primary economic terms reporting 
deadline. See ISDA Oct. 30, 2015 Letter, at 4.
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    Furthermore, certain commenters suggested that the reporting of any 
creation data for swaps that will become original swaps is 
unnecessary.\300\ AIMA commented that eliminating reporting for swaps 
that are intended to be cleared at the time of execution will 
significantly reduce complexity in the reporting regime and streamline 
the reported data.\301\ AIMA also commented that the proposed reporting 
approach for original swaps will not reduce data fragmentation.\302\ 
Similarly, EEI/EPSA suggested that there is little to no benefit to 
original swap reporting for swaps that are intended to be cleared at 
the time of execution and that counterparties should not be required to 
report any creation data for such swaps.\303\
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    \300\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30, 
2015 Letter, at 3; CEWG Oct. 30, 2015 Letter, at 2.
    \301\ See AIMA Oct. 30, 2015 Letter, at 3.
    \302\ See AIMA Oct. 30, 2015 Letter, at 4 (noting that reporting 
original swap creation data to one SDR and reporting clearing swap 
data to a different SDR may undermine data quality for the 
Commission's supervisory purposes).
    \303\ See EEI/EPSA Oct. 30, 2015 Letter, at 3.
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    While the NPRM did not propose changing the existing obligation to 
report swaps that become original swaps, and is therefore beyond the 
scope of the NPRM, the Commission continues to believe that original 
swaps contain essential information regarding the origins of cleared 
swap transactions for market surveillance and audit-trail purposes. The 
Commission's ability to trace the history of a cleared swap transaction 
from execution between the original counterparties to clearing novation 
relies on this information and this is a significant benefit to the 
Commission in terms of understanding the market structure as well as 
for surveillance purposes.
    With respect to the issue of who reports creation data for those 
swaps that will become original swaps, the Commission believes that the 
requirement that the reporting counterparty report creation data for 
those swaps that will become original swaps should remain. The 
Commission believes there are significant benefits associated with 
maintaining established industry workflows. Reporting counterparties 
and registered entities have invested substantial time and resources to 
report swaps (both cleared and not cleared) to SDRs, and DCOs have 
invested substantial resources to report clearing swaps. The Commission 
believes it would be efficient to make use of this existing 
infrastructure and asking market participants to make changes to this 
established workflow might be costly. The Commission acknowledges the 
data fragmentation concerns raised by those that recommend DCOs report 
original swap creation data. However, the Commission also recognizes 
that requiring the DCOs, rather than the original reporting 
counterparty, to report original swap creation data may present 
challenges of its own.\304\ The Commission also believes that there are 
significant benefits associated with maintaining accurate and timely 
reporting of the required data fields and that this will outweigh data 
fragmentation concerns for those situations where the original swap and 
clearing swaps are reported to different SDRs.
---------------------------------------------------------------------------

    \304\ See e.g., Eurex Oct. 30, 2015 Letter, at 4 (suggesting 
there could be timeliness issue depending on when the DCO receives 
necessary information from counterparties to report creation data).
---------------------------------------------------------------------------

    The Commission has considered arguments made by the commenters with 
respect to choice of SDR and believes that placing the obligation to 
choose the SDR on the registered entity or counterparty that is 
required to report the swap, rather than on another entity, will result 
in more efficient data reporting. Allowing the first entity to report 
data on a swap to choose the SDR will allow reporting entities to 
select an SDR to which they have established connections; giving 
another entity the ability to choose the SDR could require the first 
reporting entities to connect to multiple SDRs. The Commission also 
believes allowing the first reporting registered entity or counterparty 
to choose the SDR will also promote competition among SDRs to provide 
SDR services to a broad array of reporting entities.
    This method of SDR selection also avoids the insertion of any 
entity other than a party to the swap or facility where the transaction 
is executed, into the decision as to how a registered entity or 
counterparty fulfills its regulatory obligation to report initial 
required swap creation data. As with the ``first-touch'' approach taken 
with respect to the creation of USIs in part 45,\305\ the Commission 
believes that the entity with the first reporting obligation should 
select the SDR for that report. The Commission believes that such a

[[Page 41763]]

method of SDR selection will avoid delays in real-time reporting for 
part 43 purposes. If DCOs were to select the SDR for an original swap, 
the DCO would not be in a position to make such selection until after a 
swap was accepted for clearing. Any delays in clearing would translate 
into delays in reporting for both part 43 real-time reporting and part 
45 reporting. Additionally, the registered entity or counterparty that 
is required to report a swap pursuant to Sec.  45.8 may select an SDR 
to which its technological systems are most suited or to which it 
already has an established relationship, providing for the efficient 
and accurate reporting of swap data. As a result, the Commission 
believes that amendments to Sec.  45.3(j) simply codify existing 
practice and will not impose any additional connection costs for DCOs 
or SDRs. In addition, the Commission believes that allowing DCOs to 
choose the SDRs to which they report creation and continuation data is 
cost-minimizing for DCOs because it allows them to select the SDR which 
is most cost effective.
---------------------------------------------------------------------------

    \305\ See Final Part 45 Rulemaking, 77 FR 2136, 2158 (Jan. 13, 
2012).
---------------------------------------------------------------------------

i. Costs
    The Commission understands that under current industry practice, 
DCOs commonly report to SDRs creation data for swaps that would fall 
under the definition of clearing swaps. Accordingly, to the extent that 
DCOs already have been reporting in conformance with adopted Sec.  
45.3(e), the Commission does not expect the final rule to result in any 
additional costs.
    With respect to registered DCOs organized outside of the United 
States, its territories, and possessions, that are subject to 
supervision and regulation in a foreign jurisdiction, a home country 
trade reporting regulatory regime may require the DCO to report swap 
data to a trade repository in the home country jurisdiction. For 
clearing swaps that a DCO would be required to report both to a 
registered SDR pursuant to the amendments to part 45, and to a foreign 
trade repository pursuant to a home country trade reporting regulatory 
regime, the Commission acknowledged in the NPRM that a DCO could be 
expected to incur some additional costs in satisfying both its CFTC and 
home country reporting obligations, relative to a DCO that would only 
be subject to part 45 reporting requirements. As also indicated in the 
NPRM, DCOs are not currently required to provide such cost information 
to the Commission, the Commission lacks access to the information 
needed to assess the magnitude of the costs relating to compliance with 
reporting obligations in multiple jurisdictions. In addition, the 
Commission did not receive any comments on, nor estimates of, the costs 
relating to compliance with reporting obligations in multiple 
jurisdictions. In terms of any potential costs, the Commission expects 
that industry technological innovations may effectively allow for 
satisfaction of swap data reporting requirements across more than one 
jurisdiction by means of a single data submission, and that a 
streamlined reporting process or other technology and operational 
enhancements could mitigate the cost of satisfying reporting 
requirements for swaps that may be required to be reported to a foreign 
trade repository under a home country regulatory regime as well as to a 
registered SDR pursuant to amendments to part 45.\306\ Additionally, 
the Commission anticipates that adopting an approach to the reporting 
of cleared swaps in the United States that is, to the extent possible, 
consistent with the approaches adopted in other jurisdictions may also 
minimize compliance costs for entities operating in multiple 
jurisdictions.\307\ The Commission also notes that any costs arising 
from reporting swap data with respect to more than one jurisdiction 
could already have been realized, to the extent that DCOs located 
outside the United States are already reporting swap data to a 
registered SDR in addition to reporting swap data to a trade repository 
pursuant to a home country regulatory regime.
---------------------------------------------------------------------------

    \306\ As noted in the NPRM, the part 45 regulations contemplate 
situations where a swap may be required to be reported pursuant to 
U.S. law and the law of another jurisdiction. See 80 FR 52544, 52564 
n. 138.
    \307\ The Commission understands that the approach followed in 
this final release for the reporting of cleared swaps (e.g., 
requiring separate reporting of alphas, betas, and gammas) is 
largely consistent with the multi-swap approach adopted by a number 
of jurisdictions, including, for example, the European Union, 
Singapore, and Australia.
---------------------------------------------------------------------------

    Finally, with respect to choice of SDR, the Commission believes 
that amendments to Sec.  45.3(j) will not impose any additional costs 
because the amendments simply codify existing practice--the Commission 
understands that the workflows that apply the proposed choice of SDR 
obligations are already in place.
    The Commission believes that allowing DCOs to choose the SDRs to 
which they report creation and continuation data is cost-minimizing for 
DCOs because it allows them to select the SDR which is most cost 
effective. As discussed in greater detail below, the Commission 
anticipates that DCOs that have affiliated SDRs will continue their 
current practice of reporting clearing swaps to their affiliated 
SDRs.\308\
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    \308\ The Commission acknowledges several commenters at both the 
IDWG Request for Comment and NPRM stages who commented on the costs 
to reporting counterparties when reporting original swaps. See, 
e.g., CME Oct. 30, 2015 Letter, at 6-7; CMC Oct. 30, 2015 Letter, at 
2. However, the Commission has noted that the revisions to part 45 
adopted in this release do not change the existing obligation of 
those entities to report original swaps. Therefore, the costs 
currently incurred by such reporting counterparties are not a factor 
when considering the costs and benefits of the revisions adopted in 
this release. The Commission does discuss those costs in the 
Consideration of Alternatives, below at Section III.C.10.
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ii. Benefits
    Amended Sec.  45.3(e) will explicitly articulate DCO part 45 
reporting obligations with respect to clearing swaps (e.g., betas and 
gammas).\309\ As explained above, existing Sec.  45.3 does not 
explicitly acknowledge distinct reporting requirements for swaps 
commonly known as alphas, betas, and gammas. The amendments explicitly 
delineate creation data reporting obligations for each component of a 
cleared swap transaction, which will improve the Commission's ability 
to analyze data associated with such transactions.
---------------------------------------------------------------------------

    \309\ The Commission acknowledges that the alternatives 
separately discussed in the Consideration of Alternatives section 
later in this release could also provide these benefits for 
registered entities and swap counterparties. However, for the 
reasons explained in that section, the Commission is of the view 
that the proposed approach is more consistent with industry practice 
than the alternatives.
---------------------------------------------------------------------------

    Requiring DCOs to report required swap creation data for clearing 
swaps to SDRs in the manner outlined in this release is expected to 
result in uniform protocols and consistent reporting of the individual 
components of a cleared swap transaction. The Commission believes that 
the adopted reporting framework for cleared swaps will result in more 
consistent reporting of all components of a cleared swap transaction, 
including linkages between the related swaps, thereby increasing the 
efficiency of the SDR data collection function and enhancing the 
Commission's ability to utilize the data for regulatory purposes, 
including for systemic risk mitigation, market monitoring, and market 
abuse prevention.
    With respect to confirmation data reporting, the Commission 
anticipates that the removal of certain confirmation data reporting 
requirements will result in decreased costs for swap counterparties 
and/or registered entities that are currently gathering and conveying 
electronically the information necessary to report

[[Page 41764]]

confirmation data for swaps that are intended to be submitted to a DCO 
for clearing at the time of execution.\310\
---------------------------------------------------------------------------

    \310\ See CEWG May 27, 2014 Letter, at 4-5 (stating that 
reporting confirmation data in addition to PET data is highly 
redundant because confirmation data simply includes all of the PET 
data matched and agreed to by the counterparties); ISDA May 27, 2014 
Letter, at 6-8 (noting that ``Confirmation data should not be 
required for an alpha trade that is intended for clearing at point 
of execution, whether due to the clearing mandate or bilateral 
agreement. Confirmation data for alpha swaps is not meaningful since 
they will be terminated and replaced with cleared swaps 
simultaneously or shortly after execution for which confirmation 
data will be reported by the DCO.'').
---------------------------------------------------------------------------

    With respect to the adopted rule allowing the removal of certain 
confirmation data reporting requirements for swaps that are intended to 
be submitted to a DCO for clearing at the time of execution, the 
Commission is of the view that the adopted confirmation data reporting 
requirements for clearing swaps should provide the necessary 
confirmation data with respect to cleared swap transactions. Given that 
the adopted rules will require the DCO to report confirmation data for 
clearing swaps, requiring an additional set of confirmation data 
reporting for the now-terminated original swap, in addition to PET 
data, would be duplicative and therefore unnecessary.
    Finally, with respect to choice of SDR, under adopted Sec.  
45.3(j), the party with the obligation to report the first data for a 
swap has the discretion to select the SDR of its choice. This can be an 
SDR with which the party already has a working relationship, an SDR 
which is, in the registered entity or reporting counterparty's 
estimation, most cost-effective, or an SDR that provides the best 
overall service and product. The Commission believes that this 
flexibility to select SDRs will minimize reporting errors and improve 
reporting efficiencies by allowing the reporting entity to select an 
SDR with which it has a connection and reporting systems in place. The 
Commission also believes this approach will foster competition between 
SDRs, as reporting entities such as SEFs/DCMs, SDs/MSPs, DCOs, and non-
SD/MSPs can select the SDR to which they will report. Further, allowing 
the reporting entity to select the SDR will reduce costs, as reporting 
counterparties and registered entities (other than DCOs) should not 
have to establish a connection to more than one SDR unless they prefer 
to do so. The Commission understands that Sec.  45.3(j) is consistent 
with industry practice,\311\ and thus that the benefits described above 
are already being realized.
---------------------------------------------------------------------------

    \311\ The Commission notes that industry practice with respect 
to choice of SDR has likely been influenced in part by a variety of 
factors, including, among others, the Commission's statement 
regarding CME Rule 1001. See Statement of the Commission on the 
Approval of CME Rule 1001 (Mar. 6, 2013), at 6. The Commission notes 
that other DCOs have adopted similar rules. See, e.g., ICE Clear 
Credit Rule 211.
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5. Continuation Data Reporting by DCOs--Adopted Amendments to Sec.  
45.4
    The Commission's amendments to Sec.  45.4, which governs the 
reporting of swap continuation data to an SDR during a swap's existence 
through its final termination or expiration, incorporate the 
distinction between original swaps and clearing swaps. The Commission 
is removing Sec.  45.4(b)(2)(ii), which requires a reporting 
counterparty that is an SD or MSP to report valuation data for cleared 
swaps daily; instead, the DCO will be the only swap counterparty 
required to report swap continuation data, including valuation data, 
for clearing swaps.
    Notably, amended Sec.  45.4(c) will require a DCO to report all 
required continuation data for original swaps, including original swap 
terminations, to the SDR to which such original swap was reported. 
Finally, adopted Sec.  45.4(c)(2) will require that continuation data 
reported by DCOs include the following data fields as life cycle event 
data or state data for original swaps pursuant to adopted Sec.  
45.4(c)(1): (i) The LEI of the SDR to which each clearing swap that 
replaced a particular original swap was reported by the DCO pursuant to 
new Sec.  45.3(e); (ii) the USI of the original swap that was replaced 
by the clearing swaps; and (iii) the USIs for each of the clearing 
swaps that replace the original swap.
    The Commission has considered the costs and benefits raised by 
commenters on the proposed addition of Sec.  45.4(c) and its 
requirement that DCOs report continuation data for original swaps, 
including terminations. The Commission believes that the adopted 
revisions to Sec.  45.4(c) are broadly in line with existing industry 
practice, and set out specific obligations that will ensure 
continuation data is properly reported and reflected in the data that 
the Commission uses to fulfill its regulatory obligations. The 
Commission notes that it may be more burdensome for the counterparties 
to the original swaps, rather than the DCO, to report terminations, as 
the counterparty would have to receive a message from the DCO 
confirming that the original swap was accepted for clearing and then 
translate that message from the DCO into a termination message to the 
SDR. Particularly, this may be most burdensome to commercial end-users 
executing swaps on SEFs or DCMs who might otherwise have no reporting 
obligations and who may not have the infrastructure in place to report 
as quickly or as efficiently as DCOs.\312\ The Commission's proposed 
rules largely avoid these costs for commercial end-users.
---------------------------------------------------------------------------

    \312\ See, supra, n. 26, discussing reporting obligations for 
end-users trading on-facility cleared swaps.
---------------------------------------------------------------------------

i. Costs
    Existing Sec.  45.4(b)(2) requires that both SDs/MSPs and DCOs 
report daily valuation data for cleared swaps. The removal of Sec.  
45.4(b)(2)(ii) will eliminate the existing valuation data reporting 
requirement for SDs/MSPs, leaving DCOs as the sole entity responsible 
for daily valuation data reporting. As DCOs are currently required to 
report valuation data for cleared swaps, they will not bear any 
additional costs as a result of this proposed amendment.
    While DCOs are currently required to report continuation data on 
``cleared swaps,'' including terminations, to SDRs under existing Sec.  
45.4,\313\ the adopted rule clarifies reporting obligations as they 
relate to swaps that become original swaps. The Commission understands 
that DCOs frequently assume responsibility to report the termination of 
swaps that become alpha swaps, but that DCOs do not consistently report 
such alpha swap terminations or do not report them in the form required 
by the alpha swap SDR. Some DCOs that do not currently have 
connectivity to the SDR where the SEF/DCM or original counterparties 
first reported the swap will incur costs associated with establishing 
such connectivity. DCOs will also realize costs associated with the 
termination notice and submissions correcting previously erroneously 
reported or omitted data. However, DCO reporting of alpha swap 
terminations has not been uniform and may vary by DCO and SDR. The 
Commission is aware that, in some instances, DCOs currently report 
alpha swap terminations to the original SDR that received the original 
submission of the intended to be cleared swap. To the extent that DCOs 
have implemented systems to report alpha swap terminations to the 
original swap SDR, the amended rules thus will not introduce any new 
costs for those DCOs.
---------------------------------------------------------------------------

    \313\ Section 45.4(b) as effective prior to this rule release, 
required DCOs to report continuation data on all swaps cleared by 
the derivatives clearing organization, including life cycle event 
data or state data.
---------------------------------------------------------------------------

    The Commission received three comments concerning the costs and 
benefits of the proposed amendments to

[[Page 41765]]

Sec.  45.4 in two different contexts. In commenting on the NPRM, LCH 
and Eurex expressed concerns with the infrastructure required to have 
the DCO connected to every SDR chosen by the SD/MSP for which the DCO 
clears and report terminations according to the technical requirements 
of each SDR.\314\ Eurex specifically indicated that the cost of 
implementing the required infrastructure would have significant time 
and financial costs. In commenting on the IDWG Request for Comment, one 
foreign central counterparty now acting pursuant to a DCO Exemptive 
Order cited a specific cost for connecting to a new SDR as involving at 
least 150 man-days.\315\ Based on the most recent industry compensation 
reports, the median cost to a firm for 150 working days by a computer 
programmer in the finance industry would be $61,000 per DCO to SDR 
connection.\316\ Considering that each DCO must have a connection to at 
least one registered SDR currently to report beta and gamma swaps under 
current industry practice, and considering that there are only four 
registered SDRs, each DCO could be expected to incur at most $183,000 
to connect to all registered SDRs. This cost would be reduced to the 
extent that the DCO has existing connections to more than one SDR or if 
it clears swaps for clearing members whose original swaps are reported 
to a limited number of SDRs.
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    \314\ See Eurex Oct. 30, 2015 Letter, at 4-5; LCH Oct. 30, 2015 
Letter, at 3.
    \315\ See OTC Hong Kong May 27, 2014 Letter, at 2-3 (contending 
that setup, application development, and testing to interface with 
each SDR is likely to require at least 150 man-days, and that a more 
cost-effective framework would be to require the original 
counterparty to report termination of the alpha once it receives 
confirmation that the alpha has been accepted for clearing, and that 
the original counterparty would already have in place technical and 
operational interfaces with the SDR of its choice. The commenter 
also contended that the burden on DCOs of additional reporting 
outweighs the benefits to the CFTC).
    \316\ See SIFMA Report, Management & Professional Earnings in 
the Securities Industry 2013 (October 2013), available at http://www.sifma.org/research/item.aspx?id=8589940603. This estimate is 
based on the median total compensation for a Programmer (Code 1604) 
($91,050), on an hourly basis assuming 1,800 hours worked per year 
($50.83) and an eight hour work day.
---------------------------------------------------------------------------

    With respect to additional data fields, as discussed above, adopted 
Sec.  45.4(c)(2) will add three data fields (the LEI of the SDR to 
which creation data for the clearing swaps was reported, the USI of the 
original swap, and USIs of the clearing swaps) to the life cycle event 
data or to state data reported by DCOs as continuation data for 
original swaps.\317\ All three of these data fields are either already 
in use or can be created by the SDR and reported by the DCO. While 
requiring the reporting of additional fields imposes costs, DCOs should 
already possess the information needed for these fields, and the 
Commission believes that the extra costs to DCOs associated with 
adopted Sec.  45.4(c)(2) would be minimal. The Commission requested 
relevant information and quantitative estimates regarding the costs 
associated with creating and using these fields but did not receive 
any. As discussed in Section II.C.4.iv above, the Commission would 
encourage SDRs and DCOs to standardize messages for terminating 
original swap, which should alleviate some of the burden on DCOs.
---------------------------------------------------------------------------

    \317\ ``Required swap continuation data'' is defined in Sec.  
45.1 and includes ``life cycle event data'' or ``state data'' 
(depending on which reporting method is used) and ``valuation 
data.'' Each of these data types is defined in Sec.  45.1. ``Life 
cycle event data'' means all of the data elements necessary to fully 
report any life cycle event. ``State data'' means all of the data 
elements necessary to provide a snapshot view, on a daily basis of 
all of the primary economic terms of a swap. 17 CFR 45.1.
---------------------------------------------------------------------------

ii. Benefits
    Adopted Sec.  45.4(c) will ensure that data concerning original 
swaps remains current and accurate, allowing the Commission to 
ascertain whether an original swap was terminated through clearing 
novation. Original swap data that does not reflect the current state of 
the swap frustrates the use of swap data for regulatory purposes, 
including, but not limited to, assessing market exposures between 
counterparties and evaluating compliance with the clearing 
mandate.\318\ The Commission is of the view that, to the extent that 
DCOs' current practices are not currently in conformance with the 
adopted rule, requiring the DCO to report continuation data for 
original swaps is the most efficient and effective method to ensure 
that data concerning original swaps remains current and accurate as the 
DCO, through its rules, determines when an original swap is terminated 
and thus has the quickest and easiest access to authoritative 
information concerning termination of the original swap.
---------------------------------------------------------------------------

    \318\ See Swap Dealer De Minimis Exception Preliminary Report, 
(Nov. 18, 2015), at 13-14, available at http://www.cftc.gov/idc/groups/public/@swaps/documents/file/dfreport_sddeminis_1115.pdf.
---------------------------------------------------------------------------

    Adopted Sec.  45.4(c) will ensure that part 45 explicitly addresses 
DCO part 45 continuation data reporting obligations with respect to 
original swaps (i.e., alphas).\319\ Existing Sec.  45.4(b), which 
addresses ``continuation data reporting for cleared swaps,'' requires 
DCOs to report continuation data for ``all swaps cleared by a [DCO],'' 
but does not explicitly address the multi-swap framework provided in 
Sec.  39.12(b)(6).\320\ Therefore, uncertainty persists as to whether, 
under existing Sec.  45.4(b) the DCO must report continuation data for 
the alpha, beta and gamma swaps. The inconsistent interpretation of 
this reporting requirement leads to substantial differences in 
reporting of cleared swaps and presents challenges for regulatory 
oversight. The continuation data reporting requirements adopted in this 
rule will make explicit that the DCO has the obligation to report 
continuation data for original swaps that have been terminated and the 
clearing swaps that replace a terminated original swap.
---------------------------------------------------------------------------

    \319\ The Commission acknowledges that the alternatives 
separately discussed in the Consideration of Alternatives, Section 
III.C.10, could also provide these benefits for registered entities 
and swap counterparties. However, for the reasons explained in that 
section, the Commission is of the view that the proposed approach is 
superior to the alternatives.
    \320\ As discussed earlier in this release, Sec.  39.12(b)(6) 
provides that upon acceptance of a swap by a DCO for clearing, the 
original swap is extinguished and replaced by equal and opposite 
swaps, with the DCO as the counterparty to each such swap. See 17 
CFR 39.12(b)(6).
---------------------------------------------------------------------------

    The Commission believes that the removal of the requirement that 
SDs and MSPs report daily valuation data for cleared swaps from Sec.  
45.4(b)(2) can result in cost savings to the extent that any SDs and 
MSPs are not currently relying on no-action relief.\321\ In addition, 
because there are fewer DCOs than non-DCO reporting counterparties, 
placing the responsibility to report valuation data solely on the DCO 
will result in a more consistent and standardized valuation reporting 
scheme, as there would be a dramatic decrease in the number of 
potential valuation data submitters to SDRs. This will benefit SDRs, 
regulators, and the public because it would facilitate data aggregation 
and improve the Commission's ability to analyze SDR data and to satisfy 
its risk and market oversight responsibilities, including measurement 
of the notional amount of outstanding swaps in the market.
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    \321\ See CFTC No-Action Letter No. 12-55 (Dec. 17, 2012); CFTC 
No-Action Letter No. 13-34 (Jun. 26, 2013); CFTC No-Action Letter 
No. 14-90 (Jun. 30, 2014); and CFTC No-Action Letter No.15-38 (Jun. 
15, 2015). Staff no-action relief from the requirements of Sec.  
45.4(b)(2)(ii) has been in effect since the initial compliance date 
for part 45 reporting.
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    Adopted Sec.  45.4(c)(2) will require DCOs to report three 
important continuation data fields for original swaps which will assist 
regulators in tracing the history of, and associating

[[Page 41766]]

the individual swaps involved in, a cleared swap transaction, from 
execution of the original swap through the life of each clearing swap 
that replaces an original swap, regardless of the SDR(s) to which the 
original and clearing swaps are reported. The newly required 
continuation data elements to be reported by the DCOs for original 
swaps will ensure that original swap continuation data includes 
sufficient information to identify, by USI, any clearing swaps created 
from the same original swap, as well as the SDR where those clearing 
swaps reside. As such, the Commission expects that review of any 
particular swap in a registered SDR will include a listing of all other 
relevant USIs with respect to that swap (e.g., original swap and 
clearing swaps). The Commission believes that this requirement will 
help ensure the availability of information necessary to link original 
swaps and clearing swaps, even if those swaps are reported to different 
SDRs. The ability to link original and clearing swaps across multiple 
SDRs will decrease data fragmentation and will increase the ability of 
the Commission to accurately aggregate cleared swap data across various 
SDRs. As a result, adopted Sec.  45.4(c)(2) will improve the ease of 
use for cleared swaps data, which will enhance the Commission's ability 
to perform its regulatory duties, including to protect market 
participants and the public.
6. USI Creation by DCOs--Sec.  45.5(d)
    Existing Sec.  45.5 requires that each swap subject to the 
Commission's jurisdiction be identified in all swap recordkeeping and 
data reporting by a USI. The rule establishes different requirements 
for the creation and transmission of USIs depending on whether the swap 
is executed on a SEF or DCM or executed off-facility with or without an 
SD or MSP reporting counterparty. Existing Sec.  45.5 also provides 
that for swaps executed on or pursuant to the rules of a SEF or DCM, 
the SEF or DCM creates the USI, and for swaps not executed on or 
pursuant to the rules of a SEF or DCM, the USI is created by an SD or 
MSP reporting counterparty, or by the SDR if the reporting counterparty 
is not an SD or MSP.
    Amended rule Sec.  45.5(d) will require a DCO to generate and 
assign a USI for a clearing swap upon, or as soon as technologically 
practicable after, acceptance of an original swap by the DCO for 
clearing (in the event the clearing swap replaces an original swap) or 
execution of a clearing swap (in the event that the clearing swap does 
not replace an original swap), and prior to reporting the required swap 
creation data for the swap. Amended Sec.  45.5(d) contains provisions 
governing creation and assignment of USIs by the DCO that are 
consistent with analogous provisions governing creation and assignment 
of USIs by SEFs, DCMs, SDs, MSPs, and SDRs.
    All comments received with respect to amended Sec.  45.5(d) were 
supportive of the change and there were no comments with regards to the 
costs and benefits of this amendment.
i. Costs
    The Commission believes that adopted Sec.  45.5(d) is largely 
consistent with industry practice and will not result in any additional 
costs for DCOs. Any DCOs that will not be in complete conformance with 
the adopted rule may need to enhance their existing technological 
protocols in order to create USIs in house, but these marginal costs 
would likely be lower than the costs associated with obtaining a USI 
with a separate USI-creating entity. The Commission believes that 
creating USIs in-house, rather than with a different USI creating 
entity, is less costly for DCOs and the Commission did not receive any 
data on that comparison or on any other quantifiable cost structures 
associated with Sec.  45.5(d).
ii. Benefits
    As noted above, the existing part 45 regulations do not explicitly 
address the assignment of USIs to swaps that fall within the adopted 
definition of clearing swaps. Explicitly requiring DCOs to generate, 
assign, and transmit USIs for clearing swaps will provide regulatory 
certainty with respect to the generation and assignment of USIs for 
clearing swaps. The adopted rule will also help ensure consistent and 
uniform USI creation and assignment for such swaps and will allow 
regulators to better identify and trace the swaps generally involved in 
cleared swap transactions, from execution of the original swap through 
the life of each clearing swap.
7. Determination of the Reporting Counterparty for Clearing Swaps--
Sec.  45.8
    Current Sec.  45.8 establishes a hierarchy under which the 
reporting counterparty for a particular swap depends on the nature of 
the counterparties involved in the transaction. DCOs are not included 
in the existing Sec.  45.8 hierarchy. The Commission is adopting Sec.  
45.8(i) in order to identify DCOs in the hierarchy as the reporting 
counterparty for clearing swaps.
    One commenter supported proposed Sec.  45.8(i) as it promoted 
efficiency in reporting by explicitly designating the DCO as the 
reporting party for clearing swaps.\322\ There were no other comments 
with respect to the costs and benefits of this amendment.
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    \322\ See AIMA Oct. 30, 2015 Letter, at 6.
---------------------------------------------------------------------------

i. Costs
    The Commission believes that the adopted amendments to Sec.  45.8, 
in and of themselves, will not impose any additional costs on 
registered entities or reporting counterparties. The Commission 
believes that the rule simply reflects established reporting 
arrangements, which, to the Commission's understanding, is for the DCO 
to submit data to the SDR for swaps that would fall within the 
definition of clearing swaps.
ii. Benefits
    As noted above, clearing swaps are not explicitly acknowledged in 
existing Sec.  45.3, and DCOs are not identified as reporting 
counterparties in the reporting counterparty hierarchy of Sec.  45.8. 
The Commission acknowledges the comment by AIMA that one benefit of 
proposed Sec.  45.8(i) is that it improves efficiency in reporting by 
explicitly designating the DCO as the reporting party for clearing 
swaps. In addition, the Commission expects that modifications to the 
Sec.  45.8 reporting counterparty hierarchy will eliminate ambiguity 
regarding which registered entity or swap counterparty is required to 
report required creation data for clearing swaps, explicitly 
delineating the nature and extent of DCO reporting obligations, and 
affording market participants and SDRs a more precise and accurate 
understanding of reporting obligations under part 45.
8. Reporting to a Single Swap Data Repository--Sec.  45.10
    Existing Sec.  45.10 requires that all swap data for a given swap 
must be reported to a single SDR, which must be the same SDR to which 
creation data for that swap is first reported. The time and manner in 
which such data must be reported to a single SDR depends on whether the 
swap is executed on a SEF or DCM or executed off-facility with or 
without an SD/MSP reporting counterparty. The Commission is amending 
Sec.  45.10 to require DCOs to report all data for a particular 
clearing swap to a single SDR. Moreover, consistent with current 
industry practice, amended Sec.  45.10(d)(3) will require the DCO to 
report all required swap creation data for each clearing swap that 
replaces a particular original swap (i.e., the beta and gamma that

[[Page 41767]]

replace a particular alpha) to a single SDR, such that all required 
creation data and all required continuation data for all clearing swaps 
that can be traced back to the same original swap will be reported to 
the same SDR (although not necessarily the same SDR as the original 
swap).
i. Costs
    The Commission does not expect DCOs to incur any new costs 
associated with ensuring that clearing swap data is reported to a 
single SDR because the requirements of the adopted rule are, to the 
Commission's understanding, consistent with current DCO reporting 
practice.
ii. Benefits
    The Commission believes that the benefit of reporting data 
associated with each clearing swap to a single SDR is that all required 
creation data, all required continuation data for related clearing 
swaps and, by extension, USIs linking clearing swaps to the original 
swap, will be stored with the same SDR. This will minimize confusion on 
the part of SDRs and regulators regarding which swaps are still active 
and which ones have been terminated. The Commission notes that the 
benefits of reporting all data for clearing swaps to the same SDR are 
currently being realized, as it is current industry practice for DCOs 
to report swaps that will fall under the amended definition of clearing 
swaps in conformance with adopted Sec.  45.10(d)(3).
9. PET Data--Adopted Amendments to the Primary Economic Terms Data 
Tables
    The Commission's current lists of minimum (required) primary 
economic terms for swaps in each swap asset class are found in tables 
in Exhibits A-D of appendix 1 to part 45. With this final release, the 
Commission has modified the descriptions of some PET fields applicable 
to all swaps, added some PET fields applicable to all swaps, and added 
some PET fields applicable only to clearing swaps. For PET fields 
applicable to clearing swaps, the Commission is adding several new data 
elements under the heading ``Additional Data Categories and Fields for 
Clearing Swaps'' to Exhibits A-D in order to more accurately capture 
the additional, unique features of clearing swaps that are not relevant 
to original swaps or uncleared swaps. The newly proposed data fields 
include: The USI for the clearing swap; the USI for the original swap; 
the SDR to which the original swap was reported; clearing member LEI, 
clearing member client account origin, house or customer account; 
clearing receipt timestamp; and clearing acceptance timestamp.
    As for PET field modifications and additions relevant for all 
swaps, the Commission is also adding several new required data 
elements, which will be applicable to all swaps, and making conforming 
changes to some existing data elements. The newly added fields include: 
Asset class, an indication of whether the reporting counterparty is a 
DCO with respect to the swap, and clearing exception or exemption 
types.
    The Commission has received various comments with respect to the 
proposed changes to the primary economic terms data but few that 
address the cost and benefits of the changes are summarized below.\323\ 
ISDA commented on the proposed ``Clearing exception or exemption type'' 
PET field, which would require the reporting party to identify the 
clearing exemption exercised for a particular swap.\324\ ISDA commented 
that it could be challenging and costly for firms to implement this 
change, while providing no new information because exception and 
exemption elections must already be provided to SDRs. Because existing 
reporting standards can identify inter-affiliate trades, ISDA 
recommended that the ``Clearing exception or exemption type'' PET field 
acceptable values be limited to ``inter-affiliate'' and ``other.''
---------------------------------------------------------------------------

    \323\ One commenter cautioned that the definitions used in the 
markets are not always consistent with those proposed by the NPRM, 
which places a significant burden on small-sized market 
participants. See JBA Oct. 30, 2015 Letter, at 2-3. Because the only 
new fields either relate solely to clearing swap reporting (and 
therefore affect only DCOs), reference terms defined in the 
Regulations (such as ``Asset class''), or reference the application 
of certain provisions of the Regulations (such as ``Clearing 
Exception or Exemption Type''), the Commission believes the terms in 
the new PET data fields are sufficiently clear to avoid any costs or 
burden cited by this commenter.
    \324\ See ISDA Oct. 30, 2015 Letter, at 9.
---------------------------------------------------------------------------

    With respect to ISDA's comment, SDs are already required already to 
submit to SDRs information on any clearing exception or exemption 
elections made by their counterparties pursuant to part 50. The 
Commission believes that reporting information on clearing exception or 
exemption elections on a transactional basis, in the manner described 
in the proposed changes to the primary economic terms, should not 
substantially increase costs on reporting counterparties.
i. Costs
    The Commission emphasizes that, as a result of the amendments to 
the PET data tables for clearing swaps, the newly added data fields for 
clearing swaps will be reported exclusively by DCOs. While there might 
be costs associated with reporting newly added data fields, the 
Commission believes that DCOs are better situated than swap 
counterparties to report the additional fields for clearing swaps 
without the substantial costs and operational burdens because DCOs 
already possess certain information, or other registered entities and 
swap counterparties are required to transmit the information to DCOs, 
regarding those fields. For example, the data necessary to report the 
adopted ``original swap SDR'' field is currently required to be 
transmitted to the DCO under existing Sec.  45.5, and the Commission 
understands that data required by the amended ``clearing receipt 
timestamp'' and ``clearing acceptance timestamp'' fields may already be 
generated and present in DCO systems--such DCOs would just have to 
transfer those timestamps to the reporting system for each clearing 
swap. Similarly, the Commission understands that house or customer 
account designations are already collected and maintained in relation 
to certain part 39 reporting obligations. Hence, there will be no 
additional cost in collecting the information necessary to report the 
``origin (house or customer)'' field, and marginal costs might stem 
from conveying the information in part 45 swap data reports. The 
Commission solicited comments on the extent to which DCOs may already 
possess the information required by the amended additional fields and 
the costs associated with obtaining and/or reporting such information 
but did not receive any comments or estimates on this topic.
    While the Commission requested the data needed to quantify the cost 
of the addition of three data fields applicable to all reporting 
entities (asset class, DCO indicator, and clearing exception or 
exemption type), the Commission did not receive any quantifiable 
estimates of costs associated with creating and using these fields from 
commenters. The Commission believes that the costs associated with 
these additional fields will not be substantial since the information 
necessary to report these data elements is likely to be readily 
available in connection with the execution of swaps, with some marginal 
costs stemming from the requirement to include the information in PET 
data reported to an SDR (to the extent that such information is not 
already reported). The Commission understands that in at least some 
cases, market practice is to report some of the information required by 
the proposed

[[Page 41768]]

three new data fields applicable to all reporting entities for all 
swaps.
ii. Benefits
    The Commission believes that the additions to the list of minimum 
primary economic terms will result in a variety of benefits. Clearing 
swap PET fields, such as USI for the original swap or the SDR to which 
the original swap was reported, can facilitate the monitoring of each 
original swap by SDRs and regulators. Clearing swap PET fields can also 
prevent potential double-counting of swap transactions or notional 
amounts, thus improving the accuracy of SDR data for use by the 
Commission in such activities as evaluating swap dealer de minimis 
thresholds. Other proposed fields such as clearing member LEI or 
clearing member client account information will facilitate the 
Commission's assessment of risk management of market participants, 
promoting the protection of the financial integrity of the markets and 
the protection of market participants and the public.
    The new PET fields for all swaps also will benefit the Commission 
in performing its regulatory obligations. The asset class data field 
will assist the Commission in determining the asset class for swaps 
reported to SDRs, enhancing the Commission's ability to identify swaps 
activity in each asset class as well as the capability to use the data 
for regulatory purposes. The indication of whether the reporting 
counterparty is a DCO with respect to the swap data field will help the 
Commission monitor DCOs' compliance with reporting of clearing swap 
data elements, and improve the Commission's ability to analyze swap 
data relating to cleared swap transactions. The clearing exception or 
exemption types data field will enable the Commission to ascertain the 
specific exception or exemption from the clearing requirement that was 
elected and will assist in the evaluation of compliance with the 
clearing requirement, as well as assessing market activity in uncleared 
swaps.
10. Consideration of Alternatives
    The Commission considered the costs and benefits of certain 
alternatives raised by commenters in response to the IDWG Request for 
Comment and the NPRM, including whether part 45 should require intended 
to be cleared swaps (original swaps) to be reported to registered SDRs. 
Some commenters noted that reporting of alpha swaps is beneficial and 
should continue to be required,\325\ while other commenters contended 
that alpha swaps should not be required to be reported to an SDR and 
questioned the benefits of requiring the reporting of alpha swaps.\326\
---------------------------------------------------------------------------

    \325\ See TR SEF May 27, 2014 Letter, at 10; AFR May 27, 2014 
Letter, at 5; Markit May 27, 2014 Letter, at 25; and DTCC May 27, 
2014 Letter, at 17-18.
    \326\ See AIMA Oct. 30, 2015 Letter, at 2-6; EEI/EPSA Oct. 30, 
2015 Letter, at 3; CEWG Oct. 30, 2015 Letter. At 2; SIFMA May 27, 
2014 Letter, at 4; CEWG May 27, 2014 Letter, at 15; CME May 27, 2014 
Letter, at 2-3
---------------------------------------------------------------------------

    Some commenters stated that the Commission should require clearing 
swaps to be reported to the same SDR as original swaps, so that the 
entire history of a swap would reside at the same SDR.\327\ A number of 
commenters suggested that part 45 should place swap data reporting 
obligations solely on DCOs, including with respect to swaps that are 
intended to be cleared at the time of execution and accepted for 
clearing by a DCO (swaps commonly known as ``alpha'' swaps) and swaps 
resulting from clearing (swaps commonly known as ``beta'' and ``gamma'' 
swaps).\328\ However, other commenters noted that it would not be 
appropriate to require a DCO to report information related to the 
execution of an alpha swap.\329\
---------------------------------------------------------------------------

    \327\ See DTCC Oct. 30, 2015 Letter, at 3; DTCC May 27, 2014 
Letter, at 2-3, appendix at 4, 21 (arguing that the Commission 
should adopt a ``single SDR'' rule to ensure that all of the data 
for a swap is available in one SDR); ISDA May 27, 2014 Letter, at 
44.
    \328\ See CMC Oct. 30, 2015 Letter, at 2-3; CME Oct. 30, 2015 
Letter, at 2-3; AIMA Oct. 30, 2015 Letter, at 6; CEWG Oct. 30, 2015 
Letter, at 3; CMC May 27, 2014 Letter, at 1, 3, 6; NFPEA May 27, 
2014 Letter, at 12; EEI/EPSA May 27, 2014 Letter, at 3, 14; ITV May 
27, 2014 Letter, at 3, 17; CEWG May 27, 2014 Letter, at 16; CME May 
27, 2014 Letter, at 20; and NFP Electric Associations May 27, 2014 
Letter, at 4.
    \329\ See ISDA Oct. 30, 2015 Letter, at 4; LCH Oct. 30, 2015 
Letter, at 2; Eurex Oct. 30, 2015 Letter, at 4; LCH May 29, 2014 
Letter, at 10.
---------------------------------------------------------------------------

    In light of these comments, the Commission considered the costs and 
benefits of six alternatives in comparison to the costs and benefits of 
the proposed rule: (1) Requiring original and clearing swaps to be 
reported to the same SDR chosen by the reporting counterparty or SEF/
DCM; (2) requiring original and clearing swaps to be reported to the 
same SDR chosen by the DCO accepting the swap for clearing; (3) 
requiring only one report for each swap intended for clearing, that is, 
not requiring original (alpha) swaps to be reported separately from 
clearing swaps, with the SDR chosen by the reporting counterparty or 
SEF/DCM; (4) requiring only one report for each swap intended for 
clearing as in (3), but with the SDR chosen by the DCO accepting the 
swap for clearing; (5) requiring the DCO to report both the original 
swap and all resulting clearing swaps, to the SDR of its choosing; and 
(6) requiring the original swap reporting counterparty to report the 
creation and the termination of the original swap.\330\
---------------------------------------------------------------------------

    \330\ The Commission highlighted the first four alternatives in 
its NPRM, and added the last two in light of comments provided in 
response to the NPRM.
---------------------------------------------------------------------------

    The first two alternatives each require swaps that become original 
swaps and the resulting clearing swaps to be reported to the same SDR. 
If such swaps were reported to the same SDR, there would be no need for 
certain requirements in proposed Sec.  45.4(c) that extra fields, such 
as clearing swap SDR, be included in the report to the SDR for the 
clearing swap to link the clearing swap to an original swap on a 
different SDR. Similarly, the need for certain clearing swap PET data 
fields, such as the identity of the original SDR, intended to be used 
for linking purposes, might not be necessary. This would reduce costs 
to the extent that certain PET data fields would not be required to 
link the original and clearing swaps. The first approach would require 
DCOs to connect to multiple SDRs to the same extent as the adopted 
rules. However, the second approach could require reporting 
counterparties or SEFs/DCMs to connect to multiple SDRs, which could 
increase costs for a larger number of market participants.
    Because the adopted rule more closely reflects current industry 
practice relative to the alternative, there would be some potentially 
significant one-time costs, including the costs of changes to existing 
systems, associated with changing practices to conform to the 
alternatives. Additionally, a substantial portion of aggregation costs 
for regulators, and, likely, market participants, arises from the 
current landscape, which includes multiple SDRs. The adopted 
requirements to link original and clearing swaps at multiple SDRs is a 
relatively minor burden compared with the existing burden on the 
Commission, and potentially other regulators, in reconciling swap data 
for a cleared swap transaction across multiple SDRs without data 
elements linking the original and clearing swaps. Additionally, costs 
associated with monitoring and aggregation would likely be mitigated by 
the continuation data fields of adopted Sec.  45.4(c)(2), which would 
enable regulators to more effectively connect original swaps at one SDR 
with clearing swaps at another SDR. Also, as noted in Section 
II.B.4.iv, above, these options could also introduce delays in 
reporting under

[[Page 41769]]

both part 43 and part 45, which could undermine the price discovery 
function of real-time reporting.
    Regarding who would choose the single SDR, the SDR could be chosen 
by the reporting counterparty (or DCM or SEF) or by the DCO. Under 
either of the first two alternatives, one registered entity or 
counterparty's choice of SDR would bind a second registered entity or 
counterparty to also report to that SDR, which could be an SDR that the 
second registered entity or counterparty would not otherwise select. 
Allowing the reporting counterparty or SEF/DCM to choose the SDR would 
enable the reporting party to choose the SDR with the best combination 
of prices and service, and thus may promote competition among SDRs. 
Allowing the DCO to choose the SDR for both original and clearing swaps 
would likely result in the DCO always choosing the same SDR, which may 
be the SDR that is affiliated with the DCO (that is, shares the same 
parent company). This would reduce costs for DCOs since they would need 
to maintain connectivity with only one SDR, but would limit the ability 
of SDRs to compete since DCOs could choose to report only to SDRs with 
which they are affiliated.\331\
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    \331\ The Commission requested comment on the extent to which 
SDRs compete on the basis of price or service and the extent to 
which SDRs are chosen on the basis of relationships with registered 
entities and reporting counterparties. Markit commented on DCOs 
using affiliated SDRs for reporting, which is addressed in the 
Antitrust Considerations, Section III.D, below.
---------------------------------------------------------------------------

    Under the third and fourth alternatives, there would be no 
requirement to report intended to be cleared swaps (original swaps) 
separately from the resulting clearing swaps. Rather, there would only 
be one report for each cleared swap transaction. This would be a change 
from current swap market practice. As with the first two alternatives, 
the choice of SDR could be made by the reporting counterparty as 
determined under current Sec.  45.8, or by the DCO as under adopted 
Sec.  45.8(i). If there is only one report for each cleared swap 
transaction, there would be ongoing cost savings associated with the 
need to make fewer reports to SDRs. As with the first two alternatives, 
there would be no need for the requirement in adopted Sec.  45.4(c) 
that extra fields, such as clearing swap SDR, be included in the report 
to the SDR to link the clearing swap to an original swap on a different 
SDR, and market participants and the Commission could access all 
information about a single cleared swap transaction at a single SDR. 
This would also reduce costs relative to the adopted rule. However, the 
benefits of separate reports for original and clearing swaps would be 
foregone and there may be a less complete record of the history of each 
cleared swap. Moreover, it would be more difficult for the Commission 
to determine the original counterparties, original execution time, and 
other vital information on the original swap for market surveillance or 
enforcement purposes. It may be possible to reclaim these benefits 
through requiring additional fields in each cleared swap report, 
although this would also increase costs and would require DCOs to 
receive and report information beyond what is otherwise required for 
clearing purposes. Additionally, because the adopted rule more closely 
reflects current industry practice relative to these alternatives, 
there would be some potentially significant one-time costs, including 
the costs of changes to existing systems, associated with changing 
practices to conform to the alternatives. The effects of who chooses 
the SDR are similar to the effects described for the first two 
alternatives.
    Under the fifth alternative, the DCO would report both the swap 
that becomes the original swap (including creation data and 
termination) and all clearing swaps resulting from clearing of the 
original swap. While one DCO and some end-users supported this 
alternative as simplifying work flows and reducing costs to original 
swaps counterparties,\332\ other DCOs opposed requiring DCOs to report 
original and clearing swaps because DCOs would not have all information 
required to report original swaps.\333\ While recognizing that this 
alternative could reduce costs for reporting counterparties, the 
Commission declined to adopt this alternative as DCOs would not have 
all information necessary to submit such reports. Further, the 
Commission declined to adopt this alternative because of negative 
impacts on the timeliness of reporting real-time pricing information 
under part 43.
---------------------------------------------------------------------------

    \332\ See CME Oct. 30, 2015 Letter, at 6-7; CMC Oct. 30, 2015 
Letter, at 2-3.
    \333\ See LCH Oct. 30, 2015 Letter, at 2; Eurex Oct. 30, 2015 
Letter, at 4.
---------------------------------------------------------------------------

    Finally, under the sixth alternative, the reporting counterparty to 
the original swap would be required to report the termination of that 
swap upon acceptance for clearing. As addressed above in the discussion 
of final Sec.  45.4, the Commission believes that DCOs would be in a 
better position to report the termination of the original swap, and 
would have all information necessary to report such terminations.
    The Commission has determined not to adopt the alternatives listed 
above because the final rule is more consistent with current industry 
practice than such alternatives. The Commission understands that 
reporting counterparties and registered entities are already set up to 
report alpha swaps to registered SDRs (whether or not such swaps are 
intended to be cleared at the time of execution) and that DCOs are 
already set up to report beta and gamma swaps that result from 
acceptance of a swap for clearing, and have been making such reports. 
Accordingly, the industry has already incurred the costs of setting up 
a system for reporting cleared swap transactions to SDRs (including 
separate reports for swaps that would fall within the proposed 
definitions of original and clearing swaps). Changing this system to 
conform to an alternative rule would have certain costs to reporting 
entities.
    The Commission also believes that clarifying distinct reporting 
requirements in part 45 for alphas (swaps that become original swaps) 
and betas and gammas (clearing swaps that replace original swaps) 
presents a full history of each cleared swap transaction and permits 
the Commission and other regulators to identify and analyze each 
component part of such transactions. The Commission also continues to 
believe that placing the part 45 reporting obligation on the 
counterparty or registered entity closest to the source of, and with 
the easiest and fastest access to, complete and accurate data regarding 
a swap fosters accuracy and completeness in swap data reporting. In 
light of these benefits, the Commission will maintain the current 
industry practice of separately reporting both alpha swaps (i.e., swaps 
that would become original swaps under the proposed rules) and beta and 
gamma swaps (i.e., clearing swaps as defined under the proposed rules).
    Additionally, the multi-swap reporting approach adopted in this 
rule is largely consistent with the approach proposed by the SEC in its 
release proposing certain new rules and rule amendments to Regulation 
SBSR,\334\ and is also largely consistent with the approach adopted by 
several foreign regulators.\335\ Given that the swaps market is global 
in nature, the Commission anticipates that adopting

[[Page 41770]]

an approach to the reporting of cleared swaps in the United States that 
is consistent with the approaches adopted in other jurisdictions may 
minimize compliance costs for entities operating in multiple 
jurisdictions.
---------------------------------------------------------------------------

    \334\ See Regulation SBSR--Reporting and Dissemination of 
Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015).
    \335\ The Commission's understanding is that a number of 
jurisdictions, including the European Union, Singapore, and 
Australia, for example, also account for a multi-swap approach to 
the reporting of cleared swaps.
---------------------------------------------------------------------------

11. Section 15(a) Factors
    Section 15(a) of the CEA requires the Commission to consider the 
effects of its actions in light of the following five factors:
    (1) Protection of market participants and the public. In the Final 
Part 45 Rulemaking, the Commission stated that the data reporting 
requirements of part 45 provided for protection of market participants 
and the public by providing regulatory agencies with a wealth of 
previously unavailable data in a unified format, greatly enhancing the 
ability of market and systemic risk regulators to perform their 
oversight and enforcement functions.\336\ The Commission believes that 
the adopted amendments outlined in this final release will enhance 
these protections by explicitly providing how and by whom each of the 
swaps involved in a cleared swap transaction should be reported. In 
particular, by requiring DCOs to electronically report the creation 
data and continuation data for clearing swaps, the Commission believes 
that data on all clearing swaps associated with a specific original 
swap will be aggregated at the same SDR, provided by a single entity 
and readily available for accurate and complete analysis. This will 
also allow the Commission and other regulators to access all data 
pertaining to related clearing swaps from a single SDR. These 
enhancements should allow for efficiencies in oversight and enforcement 
functions, resulting in improved protection of market participants and 
the public.
---------------------------------------------------------------------------

    \336\ 77 FR 2136, 2188.
---------------------------------------------------------------------------

    (2) The efficiency, competitiveness and financial integrity of the 
markets. In the Final Part 45 Rulemaking, the Commission stated that 
the swap data reporting requirements of part 45 would enhance the 
financial integrity of swap markets.\337\ The Commission also stated 
that part 45's streamlined reporting regime, including the counterparty 
hierarchy used to select the reporting counterparty, could be 
considered efficient in that it assigns greater reporting 
responsibility to more sophisticated entities more likely to be able to 
realize economies of scale and scope in reporting costs.\338\ The 
Commission believes that the amendments in this final release will 
further enhance this efficiency by requiring DCOs to report where they 
are the party best equipped to do so.\339\ In addition, by explicitly 
delineating reporting responsibilities associated with each component 
of a cleared swap transaction, the adopted rules should result in 
improved reliability and consistency of the swaps data reported, 
further enhancing the financial integrity of the swap markets.
---------------------------------------------------------------------------

    \337\ Id. at 2189.
    \338\ Id.
    \339\ As noted earlier in this release, the Commission's 
understanding is that the DCO is the entity that should have the 
easiest and quickest access to full information with respect to PET 
data and confirmation data for clearing swaps, as well with respect 
to terminations of original swaps.
---------------------------------------------------------------------------

    The rule confirming that the reporting counterparty or SEF/DCM has 
the right to choose the SDR for the original swap can promote 
competition among SDRs. However, the Commission also acknowledges that 
by allowing DCOs to choose the SDR to which they report, competition 
for SDR services can be impacted as a result of DCOs reporting to their 
affiliated SDR, that is, an SDR that shares the same parent company as 
the DCO. Any such impact on competition will be a consequence of 
business decisions designed to realize costs savings associated with 
the affiliations between DCOs and SDRs. The Commission notes that 
section 21 of the CEA permits a DCO to register as an SDR.
    (3) Price Discovery. In the Final Part 45 Rulemaking, the 
Commission stated that the swap data reporting requirements of part 45 
did not have a material effect on the price discovery process.\340\ The 
Commission believes that the adopted amendments also will not have a 
material effect on price discovery.
---------------------------------------------------------------------------

    \340\ 77 FR 2136, 2189 (Jan. 13, 2012).
---------------------------------------------------------------------------

    (4) Risk Management. In the Final Part 45 Rulemaking, the 
Commission stated that the data reporting requirements of part 45 did 
not have a material effect on sound risk management practices.\341\ The 
Commission believes that the adopted amendments also will not have a 
material effect on sound risk management practices.
---------------------------------------------------------------------------

    \341\ Id. at 2189.
---------------------------------------------------------------------------

    (5) Other Public Interest Considerations. In the Final Part 45 
Rulemaking, the Commission stated that the data reporting requirements 
will allow regulators to readily acquire and analyze market data, thus 
streamlining the surveillance process.\342\ The Commission 
preliminarily believes that the amendments outlined in this release 
will enhance this consideration by providing certainty about how and by 
whom each of the swaps involved in a cleared swap transaction should be 
reported.
---------------------------------------------------------------------------

    \342\ Id.
---------------------------------------------------------------------------

    As noted earlier in this release, the multi-swap reporting approach 
proposed in this final release is largely consistent with the 
approaches proposed by the SEC and adopted by several foreign 
regulators. Given that the swaps market is global in nature, the 
Commission anticipates that adopting an approach that is consistent 
with the approaches adopted by other regulators may further other 
public interest considerations by reducing compliance costs for 
entities operating in multiple jurisdictions.

D. Antitrust Considerations

    Section 15(b) of the CEA requires the Commission to take into 
consideration the public interest to be protected by the antitrust 
laws, and endeavor to take the least anticompetitive means of achieving 
the objectives of the CEA, in issuing any order or adopting any 
Commission rule or Regulation. The Commission evaluated the amendments 
to Part 45 in the context of 7 U.S.C. 2(a)(13)(G) and 7 U.S.C. 24a, 
which were adopted by Congress as part of the Dodd-Frank Act. These 
provisions require each swap, whether cleared or uncleared, to be 
reported to a registered SDR. The Dodd-Frank Act was enacted to reduce 
systemic risk, increase transparency, and promote market integrity by, 
among other things, creating rigorous data reporting regimes with 
respect to swaps, including real time reporting.\343\ As noted in this 
release, the Commission has adopted these amendments to help ensure 
that cleared swaps transactions are reported to SDRs in a consistent 
and accurate way to allow the Commission to evaluate market risk and 
monitor for abusive trading practices.
---------------------------------------------------------------------------

    \343\ 77 FR 2136, 2137.
---------------------------------------------------------------------------

    In the Final Part 45 Rulemaking, the Commission identified choice 
of SDR as one area of the rules that could potentially have an impact 
on competition.\344\ In that release, the Commission stated that the 
adopted rule governing who makes the initial creation data report and 
selects the SDR ``favors market competition, avoids injecting the 
Commission into a market decision, and leaves the choice of SDR to be 
influenced by market forces and possible market innovations.'' \345\
---------------------------------------------------------------------------

    \344\ 77 FR 2136, 2149.
    \345\ 77 FR 2136, 2149.
---------------------------------------------------------------------------

    In the NPRM proposing amendments on cleared swap reporting, the 
Commission asked for comments on any anticompetitive impacts of the 
proposed

[[Page 41771]]

cleared swaps reporting rules.\346\ In response to the NPRM, the 
Commission received two comments directly addressing competitive 
concerns. DTCC and Markit both commented that allowing a DCO to select 
the SDR for clearing swaps will impact competition as some DCOs have 
affiliated SDRs, which may allow DCOs to bundle clearing services with 
SDR services.\347\
---------------------------------------------------------------------------

    \346\ 80 FR 52571.
    \347\ See Markit Oct. 30, 2015 Letter, at 3-5; DTCC Oct. 30, 
2015 Letter, at 7.
---------------------------------------------------------------------------

    DTCC commented that allowing the DCO to report to an affiliated 
SDR, particularly after the original swap has already been reported to 
a different SDR, will further entrench DCOs' vertical integration in 
trade execution, clearing, and data reporting.\348\ DTCC argued that 
this would, in turn, increase barriers to entry for exchanges, 
clearinghouses, and independent SDRs that are unaffiliated with 
DCOs.\349\ As an alternative, DTCC proposed to grant the registered 
entity or reporting counterparty that is obligated to report the 
original swap the ability to select the SDR to which the clearing swaps 
must be reported by the DCO.\350\
---------------------------------------------------------------------------

    \348\ See DTCC Oct. 30, 2015 Letter, at 7.
    \349\ See DTCC Oct. 30, 2015 Letter, at 7.
    \350\ See DTCC Oct. 30, 2015 Letter, at 7.
---------------------------------------------------------------------------

    Markit argued that allowing the DCO to select the SDR to which 
clearing swaps are reported would provide regulatory approval for 
anticompetitive tying of clearing and reporting services.\351\ Markit 
contrasted the current marketplace for clearing services with what 
existed in March 2013 when the Commission approved CME Rule 1001, and 
alleged that concentration has increased since 2013.\352\ In support, 
Markit argued that one DCO--which is affiliated with an SDR--clears 87 
percent of global credit index swaps.\353\ As an alternative to the 
Commission's proposal, Markit proposed that the reporting counterparty 
for an original swap be permitted, at its discretion, to both report 
the resulting clearing swaps and select the SDR to which the clearing 
swaps are reported. Under Markit's proposal, the reporting counterparty 
to the original swap would also be permitted to delegate this reporting 
and SDR selection responsibility to the DCO.\354\
---------------------------------------------------------------------------

    \351\ See Markit Oct. 30, 2015 Letter, at 4.
    \352\ See Markit Oct. 30, 2015 Letter, at 4.
    \353\ See Markit Oct. 30, 2015 Letter, at 4-5.
    \354\ See Markit Oct. 30, 2015 Letter, at 5.
---------------------------------------------------------------------------

    The Commission has taken into consideration the public interest to 
be protected by the antitrust laws, and endeavored to take the least 
anticompetitive means of achieving the objectives of the CEA in 
adopting this final rule. Having considered the comments raised by DTCC 
and Markit, the Commission believes that the amendments to part 45 
concerning choice of SDR announced in this release meet this least-
anticompetitive-means standard.
    The mix of entities reporting swaps to the various SDRs illustrates 
how the choice of SDR currently operates in the marketplace. Presently 
there are four registered SDRs to which swaps may be reported. Two of 
the SDRs (CME and ICE Trade Vault) are affiliated with DCOs and contain 
swaps data reported by those DCOs, as well as data reported by SEFs, 
SDs, and non-SD/MSP market participants. These SDRs receive swap data 
on uncleared swaps, as well as both the original swaps and clearing 
swaps from cleared swap transactions. One SDR (DTCC) is a subsidiary of 
a large financial services utility and has ownership and governance 
ties to a number of swap dealers. DTCC receives swap data from a number 
of those swap dealers, as well as SEFs, non-SD/MSP market participants, 
and at least one DCO. DTCC receives swaps reporting for a large number 
of uncleared swaps, as well as original swaps whose associated clearing 
swaps are reported at either DTCC or a DCO-affiliated SDR. The fourth 
SDR (Bloomberg) is corporately affiliated with a SEF and available to 
accept data from, among others, SEFs/DCMs, DCOs, and reporting 
counterparties. Also relevant to this discussion, some SD/MSPs and SEFs 
report swaps to multiple SDRs. Some SDs and SEFs, even those with 
corporate affiliations or ownership links to SDRs, report some swaps to 
SDRs to which they have no such connections. The mix of swaps reported 
to each SDR (uncleared, original and clearing swaps) and the mix of 
reporting entities using each SDR are the result of market 
participants' decisions on how to fulfill reporting obligations.
    Consumers of SDR services under these amendments are the entities 
with the first reporting obligation on a swap: SEFs/DCMs for uncleared 
or original swaps executed on-facility; reporting counterparties 
(primarily swap dealers, but also non-SD/MSP market participants) for 
uncleared or original swaps executed off-facility; and DCOs for 
clearing swaps. The amendments place the choice of SDR for each 
individual swap with the entity first required to report data on that 
swap. The amendments do not place the choice of SDR with a single 
entity or counterparty with respect to more than one swap. In other 
words, the choice of SDR will be made as to a particular swap when a 
registered entity or reporting counterparty that is required to report 
the swap makes the first report of all creation data on a particular 
swap.\355\ Because each reporting entity responsible for the first 
report of a swap would have its choice of SDR, the Commission does not 
believe that the amendments to Part 45 in this release will 
significantly impact the mix of swaps reported to each SDR and the mix 
of reporting entities using each SDR, as described above.
---------------------------------------------------------------------------

    \355\ As discussed in section III.C.4. above, Sec.  45.3(j) 
provides that the registered entity or counterparty required to 
report swap creation data has the choice of SDR when fulfilling its 
obligations under Sec. Sec.  45.3(a)-(e).
---------------------------------------------------------------------------

    In determining which entity may select the SDR for the original and 
separately for clearing swap components of a cleared swap transaction, 
the Commission considered three alternatives that potentially could 
achieve the objectives of the CEA: (a) Allowing the entity initially 
reporting an original swap to select the SDR for both the original and 
clearing swaps, by requiring clearing swaps to be reported to the same 
SDR as the original swaps they replace; (b) allowing the DCO to select 
the SDR for both the original and clearing swaps; or (c) allowing the 
entity first reporting a swap to select the SDR, specifically by 
allowing the original swap reporting entity to select the SDR for the 
original swap and the DCO to select the SDR for the clearing swaps. Of 
the three, the Commission considers its ultimate decision--option (c)--
to be the least anticompetitive to satisfy its regulatory objectives. 
Both option (a) and (b) hold significant potential for a particular 
constituency group--namely swap dealers or DCOs, respectively-- to 
assume an outsized role in shaping the evolving SDR landscape to favor 
the competitive interests of particular SDRs to which they have 
financial ties.\356\ In contrast, option (c) minimizes this potential 
by diffusing the SDR selection role across different categories of 
reporting entities. No reporting entity (such as an individual DCO) or 
group of similarly situated reporting entities

[[Page 41772]]

(such as SDs that have an ownership interest in an SDR) would be able 
to dictate where another reporting entity reports a swap. As a result, 
swaps reporting should not become concentrated in a single SDR 
associated with either DCOs or SDs. On the contrary, even assuming that 
all SDs choose to report all original and uncleared swaps to DTCC while 
ICE and CME report all clearing swaps to their affiliated SDRs, swaps 
reporting will be diffused across at least three SDRs. At the same 
time, the adopted amendments allow reporting entities to take advantage 
of costs savings and efficiencies by selecting an SDR with which the 
reporting entity has an existing relationship.
---------------------------------------------------------------------------

    \356\ As noted, DTCC has ownership and governance ties to a 
number of swap dealers. Additionally, some swap dealers in the DTCC 
ownership consortium have ownership and/or governance ties to 
certain SEFs. Accordingly, the Commission sees a strong incentive 
for swap dealers and swap dealer-affiliated SEFs to select DTCC as 
the SDR to the extent this part 45 amendment grants them authority 
to do so.
    Conversely, the Commission foresees a strong likelihood that 
DCO's that have affiliate SDRs, will select their respective SDR 
affiliates to the extent this part 45 amendment grants them 
authority to do so and doing so is consistent with their core 
principle obligations. As discussed below, the CME Group DCO 
currently has a rule providing that all swaps that it clears be 
reported to the CME-affiliated SDR.
---------------------------------------------------------------------------

    In the context of this rulemaking, the Commission believes that the 
concerns of DTCC and Market are misdirected. The criticism of both 
commenters pivots on the fundamental view that ``the proposed rule 
unnecessarily permits DCOs to bundle services'' and that 
anticompetitive consequences flow from such bundling.\357\ The instant 
amendment, however, merely specifies who, in a particular circumstance, 
will select the SDR to which a particular swap will be reported; the 
amendment neither permits nor prohibits DCO/SDR bundling--it does not 
speak to the issue at all. To the extent that a particular DCO reports 
all of its swaps to a particular SDR (pursuant to a DCO rule or 
otherwise), it must do so consistent with its core principle 
obligations, including Core Principle N.\358\ This amendment does not 
alter or otherwise impact that obligation. DCO registration is 
contingent upon ongoing compliance with Core Principle N.\359\ Thus the 
question of whether a particular DCO may be restraining trade or 
imposing an anticompetitive burden through the manner in which it 
exercises its Sec.  45.3(j) SDR-choice (including under a theory of 
anticompetitive tying) is properly addressed as a matter of DCO 
compliance with Core Principle N.\360\
---------------------------------------------------------------------------

    \357\ DTCC Oct. 30, 2015 Letter, at, p. 7; see also, Markit Oct. 
30, 2015 Letter, at 4 (``proposed policy would provide regulatory 
approval for anticompetitive tying of clearing and regulatory 
reporting services'').
    \358\ CEA section 5b(c)(2)(N), 7 U.S.C.7a-1(c)(2)(N). DCO Core 
Principle N provides that unless necessary or appropriate to achieve 
the purposes of this Act, a derivatives clearing organization shall 
not--(i) adopt any rule or take any action that results in any 
unreasonable restraint of trade; or (ii) impose any material 
anticompetitive burden.
    \359\ See CEA section 5b(c)(2)(A)(i), 7 U.S.C. 7a-1(c)(2)(A)(i); 
17 CFR 39.10(a).
    \360\ Currently, CME Rule 1001 provides that the CME Group DCO 
will report all swaps resulting from its clearing to the CME Group 
SDR. After consideration pursuant to section 5c(c)(5) of the CEA and 
Commission regulation 40.5, the Commission granted CME's request for 
approval of Rule 1001 on March 6, 2013. See Statement of the 
Commission (``Statement''), available at http://www.cftc.gov/idc/groups/public/@newsroom/documents/file/statementofthecommission.pdf. 
In granting the request for approval, the Commission determined, 
among other things, that under the then-current facts and 
circumstances Rule 1001 was not inconsistent with DCO Core Principle 
N. As the Statement expressly stated, however, the Commission's 
determination was based on the ``present facts and circumstances,'' 
and that ``CME has a continuing obligation to implement its Rule 
1001 in a manner consistent with the Commission's regulations and 
the DCO Core Principles, including Core Principle N, based on the 
relevant facts and circumstances as they may change over time.'' 
Statement at 12. The Commission expects that DCOs will continue to 
monitor industry circumstances and amend their rules and conduct as 
necessary to remain in statutory and regulatory compliance as 
industry conditions evolve. More specifically in the context of 
compliance with Core Principle N, the Commission expects such 
ongoing monitoring to include attention to the competitive impact of 
DCO rules and conduct in appropriately defined relevant antitrust 
product and geographic markets, and assessment of whether particular 
DCO rules or conduct transgress antitrust laws, including Sherman 
Act sections 1 and 2, 15 U.S.C. 1 and 2.
---------------------------------------------------------------------------

IV. Compliance Dates

    Because some revisions and additions to part 45 create new 
reporting obligations or clarify existing reporting obligations, while 
some remove obligations presently covered by no-action or other relief, 
the Commission is adopting this release on a bifurcated basis. The 
deletion of former Sec.  45.4(b)(2)(ii), requiring that SD/MSP 
counterparties to clearing swaps report valuation data on those swaps, 
shall be effective upon publication in the Federal Register.
    Compliance with all other revisions and additions to part 45 
adopted in this release shall be required one hundred and eighty (180) 
days after this release is published in the Federal Register. The 
Commission has noted comments on the need for market participants, 
SDRs, DCOs, and other affected parties to update systems to comply with 
the proposed changes to part 45.\361\ Therefore, the Commission is 
adopting the revisions and additions to part 45 with compliance dates 
for new obligations that will provide sufficient time to update and 
test reporting systems.
---------------------------------------------------------------------------

    \361\ See JBA Oct. 30, 2015 Letter, at 2 (requesting delayed 
implementation); DTCC Oct. 30, 2015 Letter, at 9 (requesting that 
all changes to PET fields be required prospectively only, and not 
for existing swaps; requesting implementation time of 6 months); 
ISDA Oct. 30, 2015 Letter, at 12 (requesting delayed implementation, 
but deferring to SDRs and DCOs on timeline for such implementation); 
LCH Oct.30, 2015 Letter, at 2 (recommending at least 12 months for 
DCOs and SDRs to coordinate on solution for reporting).
---------------------------------------------------------------------------

List of Subjects in 17 CFR Part 45

    Data recordkeeping requirements and data reporting requirements, 
Swaps.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission amends 17 CFR part 45 as set forth below:

PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

0
1. The authority citation for part 45 is revised to read as follows:

    Authority:  7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended 
by Title VII of the Wall Street Reform and Consumer Protection Act 
of 2010, Pub. L. 111-203, 124 Stat. 1376 (2010), unless otherwise 
noted.


0
2. Amend Sec.  45.1 as follows:
0
a. Add a definition for ``clearing swap'' in alphabetical order;
0
b. Revise the definition of ``derivatives clearing organization''; and
0
c. Add a definition for ``original swap'' in alphabetical order.
    The additions and revisions read as follows:


Sec.  45.1  Definitions.

* * * * *
    Clearing swap means a swap created pursuant to the rules of a 
derivatives clearing organization that has a derivatives clearing 
organization as a counterparty, including any swap that replaces an 
original swap that was extinguished upon acceptance of such original 
swap by the derivatives clearing organization for clearing.
* * * * *
    Derivatives clearing organization means a derivatives clearing 
organization, as defined by Sec.  1.3(d) of this chapter, that is 
registered with the Commission.
* * * * *
    Original swap means a swap that has been accepted for clearing by a 
derivatives clearing organization.
* * * * *

0
3. Revise Sec.  45.3 to read as follows:


Sec.  45.3  Swap data reporting: Creation data.

    Registered entities and swap counterparties must report required 
swap creation data electronically to a swap data repository as set 
forth in this section and in the manner provided in Sec.  45.13(b). The 
rules governing acceptance and recording of such data by a swap data 
repository are set forth in Sec.  49.10 of this chapter. The reporting 
obligations of swap counterparties with respect to swaps executed prior 
to the applicable compliance date and in existence on or after July 21, 
2010, the date of enactment of the Dodd-Frank Act, are set forth in 
part 46 of this chapter. This section and Sec.  45.4 establish the 
general swap data

[[Page 41773]]

reporting obligations of swap dealers, major swap participants, non-SD/
MSP counterparties, swap execution facilities, designated contract 
markets, and derivatives clearing organizations to report swap data to 
a swap data repository. In addition to the reporting obligations set 
forth in this section and in Sec.  45.4, registered entities and swap 
counterparties are subject to other reporting obligations set forth in 
this chapter, including, without limitation, the following: Swap 
dealers, major swap participants, and non-SD/MSP counterparties are 
also subject to the reporting obligations with respect to corporate 
affiliations reporting set forth in Sec.  45.6; swap execution 
facilities, designated contract markets, swap dealers, major swap 
participants, and non-SD/MSP counterparties are subject to the 
reporting obligations with respect to real time reporting of swap data 
set forth in part 43 of this chapter; counterparties to a swap for 
which an exception to, or an exemption from, the clearing requirement 
has been elected under part 50 of this chapter are subject to the 
reporting obligations set forth in part 50 of this chapter; and, where 
applicable, swap dealers, major swap participants, and non-SD/MSP 
counterparties are subject to the reporting obligations with respect to 
large traders set forth in parts 17 and 18 of this chapter. Paragraphs 
(a) through (d) of this section apply to all swaps except clearing 
swaps, while paragraph (e) applies only to clearing swaps.
    (a) Swaps executed on or pursuant to the rules of a swap execution 
facility or designated contract market. For each swap executed on or 
pursuant to the rules of a swap execution facility or designated 
contract market, the swap execution facility or designated contract 
market must report all primary economic terms data for the swap, as 
defined in Sec.  45.1, as soon as technologically practicable after 
execution of the swap. If the swap is not intended to be submitted to a 
derivatives clearing organization for clearing at the time of 
execution, the swap execution facility or designated contract market 
must report all confirmation data for the swap, as defined in Sec.  
45.1, as soon as technologically practicable after execution of the 
swap.
    (b) Off-facility swaps subject to the clearing requirement. For all 
off-facility swaps subject to the clearing requirement under part 50 of 
this chapter, except for those off-facility swaps for which an 
exception to, or exemption from, the clearing requirement has been 
elected under part 50 of this chapter, and those off-facility swaps 
covered by CEA section 2(a)(13)(C)(iv), required swap creation data 
must be reported as provided in paragraph (b) of this section.
    (1) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, within 
the applicable reporting deadline set forth in paragraph (b)(1)(i) or 
(ii) of this section.
    (i) If the reporting counterparty is a swap dealer or a major swap 
participant, the reporting counterparty must report all primary 
economic terms data for the swap as soon as technologically practicable 
after execution, but no later than 15 minutes after execution.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty, 
the reporting counterparty must report all primary economic terms data 
for the swap as soon as technologically practicable after execution, 
but no later than one business hour after execution.
    (2) [Reserved]
    (c) Off-facility swaps not subject to the clearing requirement, 
with a swap dealer or major swap participant reporting counterparty. 
For all off-facility swaps not subject to the clearing requirement 
under part 50 of this chapter, all off-facility swaps for which an 
exception to, or an exemption from, the clearing requirement has been 
elected under part 50 of this chapter, and all off-facility swaps 
covered by CEA section 2(a)(13)(C)(iv), for which a swap dealer or 
major swap participant is the reporting counterparty, required swap 
creation data must be reported as provided in paragraph (c) of this 
section.
    (1) Credit, equity, foreign exchange, and interest rate swaps. For 
each such credit swap, equity swap, foreign exchange instrument, or 
interest rate swap:
    (i) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, within 
the applicable reporting deadline set forth in paragraph (c)(1)(i)(A) 
or (B) of this section.
    (A) If the non-reporting counterparty is a swap dealer, a major 
swap participant, or a non-SD/MSP counterparty that is a financial 
entity as defined in CEA section 2(h)(7)(C), or if the non-reporting 
counterparty is a non-SD/MSP counterparty that is not a financial 
entity as defined in CEA section 2(h)(7)(C) and verification of primary 
economic terms occurs electronically, then the reporting counterparty 
must report all primary economic terms data for the swap as soon as 
technologically practicable after execution, but no later than 30 
minutes after execution.
    (B) If the non-reporting counterparty is a non-SD/MSP counterparty 
that is not a financial entity as defined in CEA section 2(h)(7)(C), 
and if verification of primary economic terms does not occur 
electronically, then the reporting counterparty must report all primary 
economic terms data for the swap as soon as technologically practicable 
after execution, but no later than 30 minutes after execution.
    (ii) If the swap is not intended to be submitted to a derivatives 
clearing organization for clearing at the time of execution, the 
reporting counterparty must report all confirmation data for the swap, 
as defined in Sec.  45.1, as soon as technologically practicable after 
confirmation, but no later than: 30 minutes after confirmation if 
confirmation occurs electronically; or 24 business hours after 
confirmation if confirmation does not occur electronically.
    (2) Other commodity swaps. For each such other commodity swap:
    (i) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, within 
the applicable reporting deadline set forth in paragraph (c)(2)(i)(A) 
or (B) of this section.
    (A) If the non-reporting counterparty is a swap dealer, a major 
swap participant, or a non-SD/MSP counterparty that is a financial 
entity as defined in CEA section 2(h)(7)(C), or if the non-reporting 
counterparty is a non-SD/MSP counterparty that is not a financial 
entity as defined in CEA section 2(h)(7)(C) and verification of primary 
economic terms occurs electronically, then the reporting counterparty 
must report all primary economic terms data for the swap as soon as 
technologically practicable after execution, but no later than two 
hours after execution.
    (B) If the non-reporting counterparty is a non-SD/MSP counterparty 
that is not a financial entity as defined in CEA section 2(h)(7)(C), 
and if verification of primary economic terms does not occur 
electronically, then the reporting counterparty must report all primary 
economic terms data for the swap as soon as technologically practicable 
after execution, but no later than two hours after execution.
    (ii) If the swap is not intended to be submitted to a derivatives 
clearing organization for clearing at the time of execution, the 
reporting counterparty must report all confirmation data for the swap, 
as defined in Sec.  45.1, as soon as technologically practicable after 
confirmation, but no later than: 30 Minutes after confirmation if 
confirmation occurs electronically; or 24

[[Page 41774]]

business hours after confirmation if confirmation does not occur 
electronically.
    (d) Off-facility swaps not subject to the clearing requirement, 
with a non-SD/MSP reporting counterparty. For all off-facility swaps 
not subject to the clearing requirement under part 50 of this chapter, 
all off-facility swaps for which an exception to, or an exemption from, 
the clearing requirement has been elected under part 50 of this 
chapter, and all off-facility swaps covered by CEA section 
2(a)(13)(C)(iv), in all asset classes, for which a non-SD/MSP 
counterparty is the reporting counterparty, required swap creation data 
must be reported as provided in paragraph (d) of this section.
    (1) The reporting counterparty, as determined pursuant to Sec.  
45.8, must report all primary economic terms data for the swap, as soon 
as technologically practicable after execution, but no later than 24 
business hours after execution.
    (2) If the swap is not intended to be submitted to a derivatives 
clearing organization for clearing at the time of execution, the 
reporting counterparty must report all confirmation data for the swap, 
as defined in Sec.  45.1, as soon as technologically practicable after 
confirmation, but no later than 24 business hours after confirmation.
    (e) Clearing swaps. As soon as technologically practicable after 
acceptance of an original swap by a derivatives clearing organization 
for clearing, or as soon as technologically practicable after execution 
of a clearing swap that does not replace an original swap, the 
derivatives clearing organization, as reporting counterparty, must 
report all required swap creation data for the clearing swap. Required 
swap creation data for clearing swaps must include all confirmation 
data and all primary economic terms data, as those terms are defined in 
Sec.  45.1 and as included in appendix 1 to this part.
    (f) Allocations. For swaps involving allocation, required swap 
creation data shall be reported to a single swap data repository as 
follows.
    (1) Initial swap between reporting counterparty and agent. The 
initial swap transaction between the reporting counterparty and the 
agent shall be reported as required by Sec.  45.3(a) through (d). A 
unique swap identifier for the initial swap transaction must be created 
as provided in Sec.  45.5.
    (2) Post-allocation swaps--(i) Duties of the agent. In accordance 
with this section, the agent shall inform the reporting counterparty of 
the identities of the reporting counterparty's actual counterparties 
resulting from allocation, as soon as technologically practicable after 
execution, but not later than eight business hours after execution.
    (ii) Duties of the reporting counterparty. The reporting 
counterparty must report all required swap creation data for each swap 
resulting from allocation to the same swap data repository to which the 
initial swap transaction is reported as soon as technologically 
practicable after it is informed by the agent of the identities of its 
actual counterparties. The reporting counterparty must create a unique 
swap identifier for each such swap as required in Sec.  45.5.
    (iii) Duties of the swap data repository. The swap data repository 
to which the initial swap transaction and the post-allocation swaps are 
reported must map together the unique swap identifiers of the initial 
swap transaction and of each of the post-allocation swaps.
    (g) Multi-asset swaps. For each multi-asset swap, required swap 
creation data and required swap continuation data shall be reported to 
a single swap data repository that accepts swaps in the asset class 
treated as the primary asset class involved in the swap by the swap 
execution facility, designated contract market, or reporting 
counterparty making the first report of required swap creation data 
pursuant to this section. The registered entity or reporting 
counterparty making the first report of required swap creation data 
pursuant to this section shall report all primary economic terms for 
each asset class involved in the swap.
    (h) Mixed swaps. (1) For each mixed swap, required swap creation 
data and required swap continuation data shall be reported to a swap 
data repository registered with the Commission and to a security-based 
swap data repository registered with the Securities and Exchange 
Commission. This requirement may be satisfied by reporting the mixed 
swap to a swap data repository or security-based swap data repository 
registered with both Commissions.
    (2) The registered entity or reporting counterparty making the 
first report of required swap creation data pursuant to this section 
shall ensure that the same unique swap identifier is recorded for the 
swap in both the swap data repository and the security-based swap data 
repository.
    (i) International swaps. For each international swap, the reporting 
counterparty shall report as soon as practicable to the swap data 
repository the identity of the non-U.S. trade repository not registered 
with the Commission to which the swap is also reported and the swap 
identifier used by the non-U.S. trade repository to identify the swap. 
If necessary, the reporting counterparty shall obtain this information 
from the non-reporting counterparty.
    (j) Choice of SDR. The entity with the obligation to choose the 
swap data repository to which all required swap creation data for the 
swap is reported shall be the entity that is required to make the first 
report of all data pursuant to this section, as follows:
    (1) For swaps executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the swap execution 
facility or designated contract market shall choose the swap data 
repository;
    (2) For all other swaps, the reporting counterparty, as determined 
in Sec.  45.8, shall choose the swap data repository.


Sec.  45.4  [Amended]

0
4. Effective June 27, 2016, remove Sec.  45.4 (b)(2)(ii).

0
5. Effective July 27, 2016, revise Sec.  45.4 to read as follows:


Sec.  45.4  Swap data reporting: Continuation data.

    Registered entities and swap counterparties must report required 
swap continuation data electronically to a swap data repository as set 
forth in this section and in the manner provided in Sec.  45.13(b). The 
rules governing acceptance and recording of such data by a swap data 
repository are set forth in Sec.  49.10 of this chapter. The reporting 
obligations of registered entities and swap counterparties with respect 
to swaps executed prior to the applicable compliance date and in 
existence on or after July 21, 2010, the date of enactment of the Dodd-
Frank Act, are set forth in part 46 of this chapter. This section and 
Sec.  45.3 establish the general swap data reporting obligations of 
swap dealers, major swap participants, non-SD/MSP counterparties, swap 
execution facilities, designated contract markets, and derivatives 
clearing organizations to report swap data to a swap data repository. 
In addition to the reporting obligations set forth in this section and 
in Sec.  45.3, registered entities and swap counterparties are subject 
to other reporting obligations set forth in this chapter, including, 
without limitation, the following: Swap dealers, major swap 
participants, and non-SD/MSP counterparties are also subject to the 
reporting obligations with respect to corporate affiliations reporting 
set forth in Sec.  45.6; swap execution facilities, designated contract 
markets, swap dealers, major swap participants, and non-SD/MSP 
counterparties are subject to the reporting obligations with respect

[[Page 41775]]

to real time reporting of swap data set forth in part 43 of this 
chapter; and, where applicable, swap dealers, major swap participants, 
and non-SD/MSP counterparties are subject to the reporting obligations 
with respect to large traders set forth in parts 17 and 18 of this 
chapter.
    (a) Continuation data reporting method generally. For each swap, 
regardless of asset class, reporting counterparties and derivatives 
clearing organizations required to report swap continuation data must 
do so in a manner sufficient to ensure that all data in the swap data 
repository concerning the swap remains current and accurate, and 
includes all changes to the primary economic terms of the swap 
occurring during the existence of the swap. Reporting entities and 
counterparties fulfill this obligation by reporting either life cycle 
event data or state data for the swap within the applicable deadlines 
set forth in this section. Reporting counterparties and derivatives 
clearing organizations required to report swap continuation data for a 
swap may fulfill their obligation to report either life cycle event 
data or state data by reporting:
    (1) Life cycle event data to a swap data repository that accepts 
only life cycle event data reporting;
    (2) State data to a swap data repository that accepts only state 
data reporting; or
    (3) Either life cycle event data or state data to a swap data 
repository that accepts both life cycle event data and state data 
reporting.
    (b) Continuation data reporting for clearing swaps. For all 
clearing swaps, required continuation data must be reported as provided 
in this section.
    (1) Life cycle event data or state data reporting. The derivatives 
clearing organization, as reporting counterparty, must report to the 
swap data repository either:
    (i) All life cycle event data for the swap, reported on the same 
day that any life cycle event occurs with respect to the swap; or
    (ii) All state data for the swap, reported daily.
    (2) Valuation data reporting. Valuation data for the swap must be 
reported by the derivatives clearing organization, as reporting 
counterparty, daily.
    (c) Continuation data reporting for original swaps. For all 
original swaps, required continuation data, including terminations, 
must be reported to the swap data repository to which the swap that was 
accepted for clearing was reported pursuant to Sec.  45.3(a) through 
(d) in the manner provided in Sec.  45.13(b) and in this section, and 
must be accepted and recorded by such swap data repository as provided 
in Sec.  49.10 of this chapter.
    (1) Life cycle event data or state data reporting. The derivatives 
clearing organization that accepted the swap for clearing must report 
to the swap data repository either:
    (i) All life cycle event data for the swap, reported on the same 
day that any life cycle event occurs with respect to the swap; or
    (ii) All state data for the swap, reported daily.
    (2) In addition to all other necessary continuation data fields, 
life cycle event data and state data must include all of the following:
    (i) The legal entity identifier of the swap data repository to 
which all required swap creation data for each clearing swap was 
reported by the derivatives clearing organization pursuant to Sec.  
45.3(e);
    (ii) The unique swap identifier of the original swap that was 
replaced by the clearing swaps; and
    (iii) The unique swap identifier of each clearing swap that 
replaces a particular original swap.
    (d) Continuation data reporting for uncleared swaps. For all swaps 
that are not cleared by a derivatives clearing organization, including 
swaps executed on or pursuant to the rules of a swap execution facility 
or designated contract market, the reporting counterparty must report 
all required swap continuation data as provided in this section.
    (1) Life cycle event data or state data reporting. The reporting 
counterparty for the swap must report to the swap data repository 
either all life cycle event data for the swap or all state data for the 
swap, within the applicable deadline set forth in paragraphs (d)(1)(i) 
or (ii) of this section.
    (i) If the reporting counterparty is a swap dealer or major swap 
participant:
    (A) Life cycle event data must be reported on the same day that any 
life cycle event occurs, with the sole exception that life cycle event 
data relating to a corporate event of the non-reporting counterparty 
must be reported no later than the second business day after the day on 
which such event occurs.
    (B) State data must be reported daily.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty:
    (A) Life cycle event data must be reported no later than the end of 
the first business day following the date of any life cycle event; with 
the sole exception that life cycle event data relating to a corporate 
event of the non-reporting counterparty must be reported no later than 
the end of the second business day following such event.
    (B) State data must be reported daily.
    (2) Valuation data reporting. Valuation data for the swap must be 
reported by the reporting counterparty for the swap as follows:
    (i) If the reporting counterparty is a swap dealer or major swap 
participant, the reporting counterparty must report all valuation data 
for the swap, daily.
    (ii) If the reporting counterparty is a non-SD/MSP counterparty, 
the reporting counterparty must report the current daily mark of the 
transaction as of the last day of each fiscal quarter. This report must 
be transmitted to the swap data repository within 30 calendar days of 
the end of each fiscal quarter. If a daily mark of the transaction is 
not available for the swap, the reporting counterparty satisfies this 
requirement by reporting the current valuation of the swap recorded on 
its books in accordance with applicable accounting standards.

0
6. Revise Sec.  45.5 to read as follows:


Sec.  45.5  Unique swap identifiers.

    Each swap subject to the jurisdiction of the Commission shall be 
identified in all recordkeeping and all swap data reporting pursuant to 
this part by the use of a unique swap identifier, which shall be 
created, transmitted, and used for each swap as provided in paragraphs 
(a) through (f) of this section.
    (a) Swaps executed on or pursuant to the rules of a swap execution 
facility or designated contract market. For each swap executed on or 
pursuant to the rules of a swap execution facility or designated 
contract market, the swap execution facility or designated contract 
market shall create and transmit a unique swap identifier as provided 
in paragraphs (a)(1) and (2) of this section.
    (1) Creation. The swap execution facility or designated contract 
market shall generate and assign a unique swap identifier at, or as 
soon as technologically practicable following, the time of execution of 
the swap, and prior to the reporting of required swap creation data. 
The unique swap identifier shall consist of a single data field that 
contains two components:
    (i) The unique alphanumeric code assigned to the swap execution 
facility or designated contract market by the Commission for the 
purpose of identifying the swap execution facility or designated 
contract market with respect to unique swap identifier creation; and
    (ii) An alphanumeric code generated and assigned to that swap by 
the automated systems of the swap execution facility or designated 
contract

[[Page 41776]]

market, which shall be unique with respect to all such codes generated 
and assigned by that swap execution facility or designated contract 
market.
    (2) Transmission. The swap execution facility or designated 
contract market shall transmit the unique swap identifier 
electronically as follows:
    (i) To the swap data repository to which the swap execution 
facility or designated contract market reports required swap creation 
data for the swap, as part of that report;
    (ii) To each counterparty to the swap, as soon as technologically 
practicable after execution of the swap;
    (iii) To the derivatives clearing organization, if any, to which 
the swap is submitted for clearing, as part of the required swap 
creation data transmitted to the derivatives clearing organization for 
clearing purposes.
    (b) Off-facility swaps with a swap dealer or major swap participant 
reporting counterparty. For each off-facility swap where the reporting 
counterparty is a swap dealer or major swap participant, the reporting 
counterparty shall create and transmit a unique swap identifier as 
provided in paragraphs (b)(1) and (2) of this section.
    (1) Creation. The reporting counterparty shall generate and assign 
a unique swap identifier as soon as technologically practicable after 
execution of the swap and prior to both the reporting of required swap 
creation data and the transmission of data to a derivatives clearing 
organization if the swap is to be cleared. The unique swap identifier 
shall consist of a single data field that contains two components:
    (i) The unique alphanumeric code assigned to the swap dealer or 
major swap participant by the Commission at the time of its 
registration as such, for the purpose of identifying the swap dealer or 
major swap participant with respect to unique swap identifier creation; 
and
    (ii) An alphanumeric code generated and assigned to that swap by 
the automated systems of the swap dealer or major swap participant, 
which shall be unique with respect to all such codes generated and 
assigned by that swap dealer or major swap participant.
    (2) Transmission. The reporting counterparty shall transmit the 
unique swap identifier electronically as follows:
    (i) To the swap data repository to which the reporting counterparty 
reports required swap creation data for the swap, as part of that 
report;
    (ii) To the non-reporting counterparty to the swap, as soon as 
technologically practicable after execution of the swap; and
    (iii) To the derivatives clearing organization, if any, to which 
the swap is submitted for clearing, as part of the required swap 
creation data transmitted to the derivatives clearing organization for 
clearing purposes.
    (c) Off-facility swaps with a non-SD/MSP reporting counterparty. 
For each off-facility swap for which the reporting counterparty is a 
non-SD/MSP counterparty, the swap data repository to which primary 
economic terms data is reported shall create and transmit a unique swap 
identifier as provided in paragraphs (c)(1) and (2) of this section.
    (1) Creation. The swap data repository shall generate and assign a 
unique swap identifier as soon as technologically practicable following 
receipt of the first report of required swap creation data concerning 
the swap. The unique swap identifier shall consist of a single data 
field that contains two components:
    (i) The unique alphanumeric code assigned to the swap data 
repository by the Commission at the time of its registration as such, 
for the purpose of identifying the swap data repository with respect to 
unique swap identifier creation; and
    (ii) An alphanumeric code generated and assigned to that swap by 
the automated systems of the swap data repository, which shall be 
unique with respect to all such codes generated and assigned by that 
swap data repository.
    (2) Transmission. The swap data repository shall transmit the 
unique swap identifier electronically as follows:
    (i) To the counterparties to the swap, as soon as technologically 
practicable following creation of the unique swap identifier; and
    (ii) To the derivatives clearing organization, if any, to which the 
swap is submitted for clearing, as soon as technologically practicable 
following creation of the unique swap identifier.
    (d) Clearing swaps. For each clearing swap, the derivatives 
clearing organization that is a counterparty to such swap shall create 
and transmit a unique swap identifier as provided in paragraphs (d)(1) 
and (2) of this section.
    (1) Creation. The derivatives clearing organization shall generate 
and assign a unique swap identifier upon, or as soon as technologically 
practicable after, acceptance of an original swap by the derivatives 
clearing organization for clearing or execution of a clearing swap that 
does not replace an original swap, and prior to the reporting of 
required swap creation data for the clearing swap. The unique swap 
identifier shall consist of a single data field that contains two 
components:
    (i) The unique alphanumeric code assigned to the derivatives 
clearing organization by the Commission for the purpose of identifying 
the derivatives clearing organization with respect to unique swap 
identifier creation; and
    (ii) An alphanumeric code generated and assigned to that clearing 
swap by the automated systems of the derivatives clearing organization, 
which shall be unique with respect to all such codes generated and 
assigned by that derivatives clearing organization.
    (2) Transmission. The derivatives clearing organization shall 
transmit the unique swap identifier electronically as follows:
    (i) To the swap data repository to which the derivatives clearing 
organization reports required swap creation data for the clearing swap, 
as part of that report; and
    (ii) To its counterparty to the clearing swap, as soon as 
technologically practicable after acceptance of a swap by the 
derivatives clearing organization for clearing or execution of a 
clearing swap that does not replace an original swap.
    (e) Allocations. For swaps involving allocation, unique swap 
identifiers shall be created and transmitted as follows.
    (1) Initial swap between reporting counterparty and agent. The 
unique swap identifier for the initial swap transaction between the 
reporting counterparty and the agent shall be created as required by 
paragraphs (a) through (c) of this section, and shall be transmitted as 
follows:
    (i) If the unique swap identifier is created by a swap execution 
facility or designated contract market, the swap execution facility or 
designated contract market must include the unique swap identifier in 
its swap creation data report to the swap data repository, and must 
transmit the unique identifier to the reporting counterparty and to the 
agent.
    (ii) If the unique swap identifier is created by the reporting 
counterparty, the reporting counterparty must include the unique swap 
identifier in its swap creation data report to the swap data 
repository, and must transmit the unique identifier to the agent.
    (2) Post-allocation swaps. The reporting counterparty must create a 
unique swap identifier for each of the individual swaps resulting from 
allocation, as soon as technologically practicable after it is informed 
by the agent of the identities of its actual counterparties, and must 
transmit each such unique swap identifier to:
    (i) The non-reporting counterparty for the swap in question.
    (ii) The agent.
    (iii) The derivatives clearing organization, if any, to which the 
swap

[[Page 41777]]

is submitted for clearing, as part of the required swap creation data 
transmitted to the derivatives clearing organization for clearing 
purposes.
    (f) Use. Each registered entity or swap counterparty subject to the 
jurisdiction of the Commission shall include the unique swap identifier 
for a swap in all of its records and all of its swap data reporting 
concerning that swap, from the time it creates or receives the unique 
swap identifier as provided in this section, throughout the existence 
of the swap and for as long as any records are required by the CEA or 
Commission regulations to be kept by that registered entity or 
counterparty concerning the swap, regardless of any life cycle events 
or any changes to state data concerning the swap, including, without 
limitation, any changes with respect to the counterparties to or the 
ownership of the swap. This requirement shall not prohibit the use by a 
registered entity or swap counterparty in its own records of any 
additional identifier or identifiers internally generated by the 
automated systems of the registered entity or swap counterparty, or the 
reporting to a swap data repository, the Commission, or another 
regulator of such internally generated identifiers in addition to the 
reporting of the unique swap identifier.

0
7. Revise Sec.  45.8 to read as follows:


Sec.  45.8  Determination of which counterparty must report.

    The determination of which counterparty is the reporting 
counterparty for all swaps, except clearing swaps, shall be made as 
provided in paragraphs (a) through (h) of this section. The 
determination of which counterparty is the reporting counterparty for 
all clearing swaps shall be made as provided in paragraph (i) of this 
section.
    (a) If only one counterparty is a swap dealer, the swap dealer 
shall be the reporting counterparty.
    (b) If neither counterparty is a swap dealer, and only one 
counterparty is a major swap participant, the major swap participant 
shall be the reporting counterparty.
    (c) If both counterparties are non-SD/MSP counterparties, and only 
one counterparty is a financial entity as defined in CEA section 
2(h)(7)(C), the counterparty that is a financial entity shall be the 
reporting counterparty.
    (d) If both counterparties are swap dealers, or both counterparties 
are major swap participants, or both counterparties are non-SD/MSP 
counterparties that are financial entities as defined in CEA section 
2(h)(7)(C), or both counterparties are non-SD/MSP counterparties and 
neither counterparty is a financial entity as defined in CEA section 
2(h)(7)(C):
    (1) For a swap executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the counterparties 
shall agree which counterparty shall be the reporting counterparty.
    (2) For an off-facility swap, the counterparties shall agree as one 
term of their swap which counterparty shall be the reporting 
counterparty.
    (e) Notwithstanding the provisions of paragraphs (a) through (d) of 
this section, if both counterparties to a swap are non-SD/MSP 
counterparties and only one counterparty is a U.S. person, that 
counterparty shall be the reporting counterparty.
    (f) Notwithstanding the provisions of paragraphs (a) through (e) of 
this section, if neither counterparty to a swap is a U.S. person, but 
the swap is executed on or pursuant to the rules of a swap execution 
facility or designated contract market or otherwise executed in the 
United States, or is cleared by a derivatives clearing organization:
    (1) For such a swap executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the counterparties 
shall agree which counterparty shall be the reporting counterparty.
    (2) For an off-facility swap, the counterparties shall agree as one 
term of their swap which counterparty shall be the reporting 
counterparty.
    (g) If a reporting counterparty selected pursuant to paragraphs (a) 
through (f) of this section ceases to be a counterparty to a swap due 
to an assignment or novation, the reporting counterparty for reporting 
of required swap continuation data following the assignment or novation 
shall be selected from the two current counterparties as provided in 
paragraphs (g)(1) through (4) of this section.
    (1) If only one counterparty is a swap dealer, the swap dealer 
shall be the reporting counterparty and shall fulfill all counterparty 
reporting obligations.
    (2) If neither counterparty is a swap dealer, and only one 
counterparty is a major swap participant, the major swap participant 
shall be the reporting counterparty and shall fulfill all counterparty 
reporting obligations.
    (3) If both counterparties are non-SD/MSP counterparties, and only 
one counterparty is a U.S. person, that counterparty shall be the 
reporting counterparty and shall fulfill all counterparty reporting 
obligations.
    (4) In all other cases, the counterparty that replaced the previous 
reporting counterparty by reason of the assignment or novation shall be 
the reporting counterparty, unless otherwise agreed by the 
counterparties.
    (h) For all swaps executed on or pursuant to the rules of a swap 
execution facility or designated contract market, the rules of the swap 
execution facility or designated contract market must require each swap 
counterparty to provide sufficient information to the swap execution 
facility or designated contract market to enable the swap execution 
facility or designated contract market to report all swap creation data 
as provided in this part.
    (1) To achieve this, the rules of the swap execution facility or 
designated contract market must require each market participant placing 
an order with respect to any swap traded on the swap execution facility 
or designated contract market to include in the order, without 
limitation:
    (i) The legal entity identifier of the market participant placing 
the order.
    (ii) A yes/no indication of whether the market participant is a 
swap dealer with respect to the product with respect to which the order 
is placed.
    (iii) A yes/no indication of whether the market participant is a 
major swap participant with respect to the product with respect to 
which the order is placed.
    (iv) A yes/no indication of whether the market participant is a 
financial entity as defined in CEA section 2(h)(7)(C).
    (v) A yes/no indication of whether the market participant is a U.S. 
person.
    (vi) If applicable, an indication that the market participant will 
elect an exception to, or an exemption from, the clearing requirement 
under part 50 of this chapter for any swap resulting from the order.
    (vii) If the swap will be allocated:
    (A) An indication that the swap will be allocated.
    (B) The legal entity identifier of the agent.
    (C) An indication of whether the swap is a post-allocation swap.
    (D) If the swap is a post-allocation swap, the unique swap 
identifier of the initial swap transaction between the reporting 
counterparty and the agent.
    (2) To achieve this, the swap execution facility or designated 
contract market must use the information obtained pursuant to paragraph 
(h)(1) of this section to identify the counterparty that is the 
reporting counterparty pursuant to the CEA and this section.
    (i) Clearing swaps. Notwithstanding the provisions of paragraphs 
(a) through (h) of this section, if the swap is a clearing swap, the 
derivatives clearing organization that is a counterparty to such swap 
shall be the reporting

[[Page 41778]]

counterparty and shall fulfill all reporting counterparty obligations 
for such swap.

0
8. Revise Sec.  45.10 to read as follows:


Sec.  45.10  Reporting to a single swap data repository.

    All swap data for a given swap, which shall include all swap data 
required to be reported pursuant to parts 43 and 45 of this chapter, 
must be reported to a single swap data repository, which shall be the 
swap data repository to which the first report of required swap 
creation data is made pursuant to this part.
    (a) Swaps executed on or pursuant to the rules of a swap execution 
facility or designated contract market. To ensure that all swap data, 
including all swap data required to be reported pursuant to parts 43 
and 45 of this chapter, for a swap executed on or pursuant to the rules 
of a swap execution facility or designated contract market is reported 
to a single swap data repository:
    (1) The swap execution facility or designated contract market that 
reports required swap creation data as required by Sec.  45.3 shall 
report all such data to a single swap data repository. As soon as 
technologically practicable after execution, the swap execution 
facility or designated contract market shall transmit to both 
counterparties to the swap, and to the derivatives clearing 
organization, if any, that will clear the swap, both:
    (i) The identity of the swap data repository to which required swap 
creation data is reported by the swap execution facility or designated 
contract market; and
    (ii) The unique swap identifier for the swap, created pursuant to 
Sec.  45.5.
    (2) Thereafter, all required swap creation data and all required 
swap continuation data reported for the swap reported by any registered 
entity or counterparty shall be reported to that same swap data 
repository (or to its successor in the event that it ceases to operate, 
as provided in part 49 of this chapter).
    (b) Off-facility swaps with a swap dealer or major swap participant 
reporting counterparty. To ensure that all swap data, including all 
swap data required to be reported pursuant to parts 43 and 45 of this 
chapter, for off-facility swaps with a swap dealer or major swap 
participant reporting counterparty is reported to a single swap data 
repository:
    (1) If the reporting counterparty reports primary economic terms 
data to a swap data repository as required by Sec.  45.3:
    (i) The reporting counterparty shall report primary economic terms 
data to a single swap data repository.
    (ii) As soon as technologically practicable after execution, but no 
later than as required pursuant to Sec.  45.3, the reporting 
counterparty shall transmit to the other counterparty to the swap both 
the identity of the swap data repository to which primary economic 
terms data is reported by the reporting counterparty, and the unique 
swap identifier for the swap created pursuant to Sec.  45.5.
    (iii) If the swap will be cleared, the reporting counterparty shall 
transmit to the derivatives clearing organization at the time the swap 
is submitted for clearing both the identity of the swap data repository 
to which primary economic terms data is reported by the reporting 
counterparty, and the unique swap identifier for the swap created 
pursuant to Sec.  45.5.
    (2) Thereafter, all required swap creation data and all required 
swap continuation data reported for the swap, by any registered entity 
or counterparty, shall be reported to the swap data repository to which 
swap data has been reported pursuant to paragraph (b)(1) or (2) of this 
section (or to its successor in the event that it ceases to operate, as 
provided in part 49 of this chapter).
    (c) Off-facility swaps with a non-SD/MSP reporting counterparty. To 
ensure that all swap data, including all swap data required to be 
reported pursuant to parts 43 and 45 of this chapter, for such swaps is 
reported to a single swap data repository:
    (1) If the reporting counterparty reports primary economic terms 
data to a swap data repository as required by Sec.  45.3:
    (i) The reporting counterparty shall report primary economic terms 
data to a single swap data repository.
    (ii) As soon as technologically practicable after execution, but no 
later than as required pursuant to Sec.  45.3, the reporting 
counterparty shall transmit to the other counterparty to the swap the 
identity of the swap data repository to which primary economic terms 
data was reported by the reporting counterparty.
    (iii) If the swap will be cleared, the reporting counterparty shall 
transmit to the derivatives clearing organization at the time the swap 
is submitted for clearing the identity of the swap data repository to 
which primary economic terms data was reported by the reporting 
counterparty.
    (2) The swap data repository to which the swap is reported as 
provided in paragraph (c) of this section shall transmit the unique 
swap identifier created pursuant to Sec.  45.5 to both counterparties 
and to the derivatives clearing organization, if any, as soon as 
technologically practicable after creation of the unique swap 
identifier.
    (3) Thereafter, all required swap creation data and all required 
swap continuation data reported for the swap, by any registered entity 
or counterparty, shall be reported to the swap data repository to which 
swap data has been reported pursuant to paragraph (c)(1) of this 
section (or to its successor in the event that it ceases to operate, as 
provided in part 49 of this chapter).
    (d) Clearing swaps. To ensure that all swap data for a given 
clearing swap, and for clearing swaps that replace a particular 
original swap or that are created upon execution of the same 
transaction and that do not replace an original swap, is reported to a 
single swap data repository:
    (1) The derivatives clearing organization that is a counterparty to 
such clearing swap shall report all required swap creation data for 
that clearing swap to a single swap data repository. As soon as 
technologically practicable after acceptance of an original swap by a 
derivatives clearing organization for clearing or execution of a 
clearing swap that does not replace an original swap, the derivatives 
clearing organization shall transmit to the counterparty to each 
clearing swap the legal entity identifier of the swap data repository 
to which the derivatives clearing organization reported the required 
swap creation data for that clearing swap.
    (2) Thereafter, all required swap creation data and all required 
swap continuation data reported for that clearing swap shall be 
reported by the derivatives clearing organization to the swap data 
repository to which swap data has been reported pursuant to paragraph 
(d)(1) of this section (or to its successor in the event that it ceases 
to operate, as provided in part 49 of this chapter).
    (3) For clearing swaps that replace a particular original swap, and 
for equal and opposite clearing swaps that are created upon execution 
of the same transaction and that do not replace an original swap, the 
derivatives clearing organization shall report all required swap 
creation data and all required swap continuation data for such clearing 
swaps to a single swap data repository.

0
9. Revise Appendix 1 to part 45 to read as follows:

Appendix 1 to Part 45--Tables of Minimum Primary Economic Terms Data

[[Page 41779]]



 Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity
                                  Swaps
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
   Data categories and fields for all
                 swaps                               Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.
The Unique Swap Identifier for the swap  As provided in Sec.   45.5.
The Legal Entity Identifier of the       As provided in Sec.   45.6, or
 reporting counterparty.                  substitute identifier for a
                                          natural person.
An indication of whether the reporting   Yes/No.
 counterparty is a swap dealer with
 respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a major swap
 participant with respect to the swap.
If the reporting counterparty is not a   Yes/No.
 swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the reporting
 counterparty is a financial entity as
 defined in CEA section 2(h)(7)(C).
An indication of whether the reporting   Yes/No.
 counterparty is a derivatives clearing
 organization with respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a U.S. person.
An indication that the swap will be      Yes/No.
 allocated.
If the swap will be allocated, or is a   As provided in Sec.   45.6, or
 post-allocation swap, the Legal Entity   substitute identifier for a
 Identifier of the agent.                 natural person.
An indication that the swap is a post-   Yes/No.
 allocation swap.
If the swap is a post-allocation swap,   As provided in Sec.   45.5.
 the unique swap identifier of the
 initial swap transaction between the
 reporting counterparty and the agent.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting party.                         substitute identifier for a
                                          natural person.
An indication of whether the non-        Yes/No.
 reporting counterparty is a swap
 dealer with respect to the swap.
An indication of whether the non-        Yes/No.
 reporting counterparty is a major swap
 participant with respect to the swap.
If the non-reporting counterparty is     Yes/No.
 not a swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the non-
 reporting counterparty is a financial
 entity as defined in CEA section
 2(h)(7)(C).
An indication of whether the non-        Yes/No.
 reporting counterparty is a U.S.
 person.
The Unique Product Identifier assigned   As provided in Sec.   45.7.
 to the swap.
If no Unique Product Identifier is
 available for the swap because the
 swap is not sufficiently standardized,
 the taxonomic description of the swap
 pursuant to the CFTC-approved product
 classification system.
If no CFTC-approved UPI and product
 classification system is yet
 available, the internal product
 identifier or product description used
 by the swap data repository.
An indication that the swap is a multi-  Field values: Yes, Not
 asset swap.                              applicable.
For a multi-asset class swap, an         Generally, the asset class
 indication of the primary asset class.   traded by the desk trading the
                                          swap for the reporting
                                          counterparty. Field values:
                                          Credit, equity, FX, interest
                                          rates, other commodities.
For a multi-asset class swap, an         Field values: Credit, equity,
 indication of the secondary asset        FX, interest rates, other
 class(es).                               commodities.
An indication that the swap is a mixed   Field values: Yes, Not
 swap.                                    applicable.
For a mixed swap reported to two non-    Field value: LEI of the other
 dually- registered swap data             SDR to which the swap is or
 repositories, the identity of the        will be reported.
 other swap data repository (if any) to
 which the swap is or will be reported.
An indication of the counterparty        Field values: LEI, or
 purchasing protection.                   substitute identifier for a
                                          natural person.
An indication of the counterparty        Field values: LEI, or
 selling protection.                      substitute identifier for a
                                          natural person.
Information identifying the reference    The entity that is the subject
 entity.                                  of the protection being
                                          purchased and sold in the
                                          swap. Field values: LEI, or
                                          substitute identifier for a
                                          natural person.
Contract type..........................  E.g., swap, swaption, forward,
                                          option, basis swap, index
                                          swap, basket swap.
Block trade indicator..................  Indication (Yes/No) of whether
                                          the swap qualifies as a block
                                          trade or large notional swap.
Execution timestamp....................  The date and time of the trade,
                                          expressed using Coordinated
                                          Universal Time (``UTC'').
Execution venue........................  The swap execution facility or
                                          designated contract market on
                                          or pursuant to the rules of
                                          which the swap was executed.
                                          Field values: LEI of the swap
                                          execution facility or
                                          designated contract market, or
                                          ``off-facility'' if not so
                                          executed.
Start date.............................  The date on which the swap
                                          starts or goes into effect.
Maturity, termination or end date......  The date on which the swap
                                          expires.
The price..............................  E.g., strike price, initial
                                          price, spread.
The notional amount, and the currency
 in which the notional amount is
 expressed.
The amount and currency (or currencies)
 of any up-front payment

[[Page 41780]]

 
Payment frequency of the reporting       A description of the payment
 counterparty.                            stream of the reporting
                                          counterparty, e.g., coupon.
Payment frequency of the non-reporting   A description of the payment
 counterparty.                            stream of the non-reporting
                                          counterparty, e.g., coupon.
Timestamp for submission to swap data    Time and date of submission to
 repository.                              the swap data repository,
                                          expressed using UTC, as
                                          recorded by an automated
                                          system where available, or as
                                          recorded manually where an
                                          automated system is not
                                          available.
Clearing indicator.....................  Yes/No indication of whether
                                          the swap will be submitted for
                                          clearing to a derivatives
                                          clearing organization.
Clearing venue.........................  LEI of the derivatives clearing
                                          organization.
If the swap will not be cleared, an      Yes/No.
 indication of whether an exception to,
 or an exemption from, the clearing
 requirement has been elected with
 respect to the swap under part 50 of
 this chapter.
The identity of the counterparty         Field values: LEI, or
 electing an exception or exemption to    substitute identifier for
 the clearing requirement under part 50   natural person.
 of this chapter.
Clearing exception or exemption type...  The type of clearing exception
                                          or exemption being claimed.
                                          Field values: End user, Inter-
                                          affiliate or Cooperative.
Indication of collateralization........  Is the swap collateralized, and
                                          if so to what extent? Field
                                          values: Uncollateralized,
                                          partially collateralized, one-
                                          way collateralized, fully
                                          collateralized.
Any other term(s) of the swap matched    Use as many fields as required
 or affirmed by the counterparties in     to report each such term.
 verifying the swap.
------------------------------------------------------------------------


 Exhibit A--Minimum Primary Economic Terms Data--Credit Swaps and Equity
                                  Swaps
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
 Additional data categories and fields
           for clearing swaps                        Comment
------------------------------------------------------------------------
Clearing swap USIs.....................  The USIs of each clearing swap
                                          that replaces the original
                                          swap that was submitted for
                                          clearing to the DCO, other
                                          than the USI for which the PET
                                          data is currently being
                                          reported (as ``USI'' field
                                          above).
Original swap USI......................  The USI of the original swap
                                          submitted for clearing to the
                                          DCO that is replaced by
                                          clearing swaps.
Original swap SDR......................  LEI of SDR to which the
                                          original swap was reported.
Clearing member LEI....................  LEI of Clearing member.
Clearing member client account.........  Clearing member client account
                                          number.
Origin (house or customer).............  An indication whether the
                                          clearing member acted as
                                          principal for a house trade or
                                          agent for a customer trade.
Clearing receipt timestamp.............  The date and time at which the
                                          DCO received the original swap
                                          for clearing, expressed using
                                          UTC.
Clearing acceptance timestamp..........  The date and time at which the
                                          DCO accepted the original swap
                                          for clearing, expressed using
                                          UTC.
------------------------------------------------------------------------


    Exhibit B--Minimum Primary Economic Terms Data--Foreign Exchange
             Transactions (Other Than Cross-Currency Swaps)
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
       Data fields for all swaps                     Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.
The Unique Swap Identifier for the swap  As provided in Sec.   45.5.
The Legal Entity Identifier of the       As provided in Sec.   45.6, or
 reporting counterparty.                  substitute identifier for a
                                          natural person.
An indication of whether the reporting   Yes/No.
 counterparty is a swap dealer with
 respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a major swap
 participant with respect to the swap.
If the reporting counterparty is not a   Yes/No.
 swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the reporting
 counterparty is a financial entity as
 defined in CEA section 2(h)(7)(C).
An indication of whether the reporting   Yes/No.
 counterparty is a derivatives clearing
 organization with respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a U.S. person.
An indication that the swap will be      Yes/No.
 allocated.
If the swap will be allocated, or is a   As provided in Sec.   45.6, or
 post-allocation swap, the Legal Entity   substitute identifier for a
 Identifier of the agent.                 natural person.
An indication that the swap is a post-   Yes/No.
 allocation swap.

[[Page 41781]]

 
If the swap is a post-allocation swap,   As provided in Sec.   45.5.
 the unique swap identifier of the
 initial swap transaction between the
 reporting counterparty and the agent.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting party.                         substitute identifier for a
                                          natural person.
An indication of whether the non-        Yes/No.
 reporting counterparty is a swap
 dealer with respect to the swap.
An indication of whether the non-        Yes/No.
 reporting counterparty is a major swap
 participant with respect to the swap.
If the non-reporting counterparty is     Yes/No.
 not a swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the non-
 reporting counterparty is a financial
 entity as defined in CEA section
 2(h)(7)(C).
An indication of whether the non-        Yes/No.
 reporting counterparty is a U.S.
 person.
The Unique Product Identifier assigned   As provided in Sec.   45.7.
 to the swap.
If no Unique Product Identifier is
 available for the swap because the
 swap is not sufficiently standardized,
 the taxonomic description of the swap
 pursuant to the CFTC-approved product
 classification system.
If no CFTC-approved UPI and product
 classification system is yet
 available, the internal product
 identifier or product description used
 by the swap data repository.
An indication that the swap is a multi-  Field values: Yes, Not
 asset swap.                              applicable.
For a multi-asset class swap, an         Generally, the asset class
 indication of the primary asset class.   traded by the desk trading the
                                          swap for the reporting
                                          counterparty. Field values:
                                          Credit, equity, FX, interest
                                          rates, other commodities.
For a multi-asset class swap, an         Field values: Credit, equity,
 indication of the secondary asset        FX, interest rates, other
 class(es).                               commodities.
An indication that the swap is a mixed   Field values: Yes, Not
 swap.                                    applicable.
For a mixed swap reported to two non-    Field value: LEI of the other
 dually-registered swap data              SDR to which the swap is or
 repositories, the identity of the        will be reported.
 other swap data repository (if any) to
 which the swap is or will be reported.
Contract type..........................  E.g., forward, non-deliverable
                                          forward (NDF), non-
                                          deliverable option (NDO),
                                          vanilla option, simple exotic
                                          option, complex exotic option.
Block trade indicator..................  Indication (Yes/No) of whether
                                          the swap qualifies as a block
                                          trade or large notional swap.
Execution timestamp....................  The date and time of the trade,
                                          expressed using Coordinated
                                          Universal Time (``UTC'').
Execution venue........................  The swap execution facility or
                                          designated contract market on
                                          or pursuant to the rules of
                                          which the swap was executed.
                                          Field values: LEI of the swap
                                          execution facility or
                                          designated contract market, or
                                          ``off-facility'' if not so
                                          executed.
Currency 1.............................  ISO code.
Currency 2.............................  ISO code.
Notional amount 1......................  For currency 1.
Notional amount 2......................  For currency 2.
Exchange rate..........................  Contractual rate of exchange of
                                          the currencies.
Delivery type..........................  Physical (deliverable) or cash
                                          (non-deliverable).
Settlement or expiration date..........  Settlement date, or for an
                                          option the contract expiration
                                          date.
Timestamp for submission to swap data    Time and date of submission to
 repository.                              the swap data repository,
                                          expressed using Coordinated
                                          Universal Time (``UTC''), as
                                          recorded by an automated
                                          system where available, or as
                                          recorded manually where an
                                          automated system is not
                                          available.
Clearing indicator.....................  Yes/No indication of whether
                                          the swap will be submitted for
                                          clearing to a derivatives
                                          clearing organization.
Clearing venue.........................  LEI of the derivatives clearing
                                          organization.
If the swap will not be cleared, an      Yes/No.
 exception to, or an exemption from,
 the clearing requirement has been
 elected with respect to the swap under
 part 50 of this chapter.
The identity of the counterparty         Field values: LEI, or
 electing an exception or exemption to    substitute identifier, for a
 the clearing requirement under part 50   natural person.
 of this chapter.
Clearing exception or exemption type...  The type of clearing exception
                                          or exemption being claimed.
                                          Field values: End user, Inter-
                                          affiliate or Cooperative.
Indication of collateralization........  Is the trade collateralized,
                                          and if so to what extent?
                                          Field values:
                                          Uncollateralized, partially
                                          collateralized, one-way
                                          collateralized, fully
                                          collateralized.
Any other term(s) of the trade matched   E.g., for options, premium,
 or affirmed by the counterparties in     premium currency, premium
 verifying the trade.                     payment date; for non-
                                          deliverable trades, settlement
                                          currency, valuation (fixing)
                                          date; indication of the
                                          economic obligations of the
                                          counterparties. Use as many
                                          fields as required to report
                                          each such term.
------------------------------------------------------------------------


[[Page 41782]]


    Exhibit B--Minimum Primary Economic Terms Data--Foreign Exchange
             Transactions (Other Than Cross-Currency Swaps)
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
 Additional data categories and fields
           for clearing swaps                        Comment
------------------------------------------------------------------------
Clearing swap USIs.....................  The USIs of each clearing swap
                                          that replaces the original
                                          swap that was submitted for
                                          clearing to the DCO, other
                                          than the USI for which the PET
                                          data is currently being
                                          reported (as ``USI'' field
                                          above).
Original swap USI......................  The USI of the original swap
                                          submitted for clearing to the
                                          DCO that is replaced by
                                          clearing swaps.
Original swap SDR......................  LEI of SDR to which the
                                          original swap was reported.
Clearing member LEI....................  LEI of Clearing member.
Clearing member client account.........  Clearing member client account
                                          number.
Origin (house or customer).............  An indication whether the
                                          clearing member acted as
                                          principal for a house trade or
                                          agent for a customer trade.
Clearing receipt timestamp.............  The date and time at which the
                                          DCO received the original swap
                                          for clearing, expressed using
                                          UTC.
Clearing acceptance timestamp..........  The date and time at which the
                                          DCO accepted the original swap
                                          for clearing, expressed using
                                          UTC.
------------------------------------------------------------------------


   Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps
                    (Including Cross-Currency Swaps)
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
       Data fields for all swaps                     Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.
The Unique Swap Identifier for the swap  As provided in Sec.   45.5.
The Legal Entity Identifier of the       As provided in Sec.   45.6, or
 reporting counterparty.                  substitute identifier for a
                                          natural person.
An indication of whether the reporting   Yes/No.
 counterparty is a swap dealer with
 respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a major swap
 participant with respect to the swap.
If the reporting counterparty is not a   Yes/No.
 swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the reporting
 counterparty is a financial entity as
 defined in CEA section 2(h)(7)(C).
An indication of whether the reporting   Yes/No.
 counterparty is a derivatives clearing
 organization with respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a U.S. person.
An indication that the swap will be      Yes/No.
 allocated.
If the swap will be allocated, or is a   As provided in Sec.   45.6, or
 post-allocation swap, the Legal Entity   substitute identifier for a
 Identifier of the agent.                 natural person.
An indication that the swap is a post-   Yes/No.
 allocation swap.
If the swap is a post-allocation swap,   As provided in Sec.   45.5.
 the unique swap identifier of the
 initial swap transaction between the
 reporting counterparty and the agent.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting counterparty.                  substitute identifier for a
                                          natural person.
An indication of whether the non-        Yes/No.
 reporting counterparty is a swap
 dealer with respect to the swap.
An indication of whether the non-        Yes/No.
 reporting counterparty is a major swap
 participant with respect to the swap.
If the non-reporting counterparty is     Yes/No.
 not a swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the non-
 reporting counterparty is a financial
 entity as defined in CEA section
 2(h)(7)(C).
An indication of whether the non-        Yes/No.
 reporting counterparty is a U.S.
 person.
The Unique Product Identifier assigned   As provided in Sec.   45.7.
 to the swap.
If no Unique Product Identifier is       ...............................
 available for the swap because the
 swap is not sufficiently standardized,
 the taxonomic description of the swap
 pursuant to the CFTC-approved product
 classification system.
If no CFTC-approved UPI and product      ...............................
 classification system is yet
 available, the internal product
 identifier or product description used
 by the swap data repository.
An indication that the swap is a multi-  Field values: Yes, Not
 asset swap.                              applicable.
For a multi-asset class swap, an         Generally, the asset class
 indication of the primary asset class.   traded by the desk trading the
                                          swap for the reporting
                                          counterparty. Field values:
                                          Credit, equity, FX, interest
                                          rates, other commodities.
For a multi-asset class swap, an         Field values: Credit, equity,
 indication of the secondary asset        FX, interest rates, other
 class(es).                               commodities.
An indication that the swap is a mixed   Field values: Yes, Not
 swap.                                    applicable.

[[Page 41783]]

 
For a mixed swap reported to two non-    Field value: LEI of the other
 dually-registered swap data              SDR to which the swap is or
 repositories, the identity of the        will be reported.
 other swap data repository (if any) to
 which the swap is or will be reported.
Contract type..........................  E.g., swap, swaption, option,
                                          basis swap, index swap.
Block trade indicator..................  Indication (Yes/No) of whether
                                          the swap qualifies as a block
                                          trade or large notional swap.
Execution timestamp....................  The date and time of the trade,
                                          expressed using Coordinated
                                          Universal Time (``UTC'').
Execution venue........................  The swap execution facility or
                                          designated contract market on
                                          or pursuant to the rules of
                                          which the swap was executed.
                                          Field values: LEI of the swap
                                          execution facility or
                                          designated contract market, or
                                          ``off-facility'' if not so
                                          executed.
Start date.............................  The date on which the swap
                                          starts or goes into effect.
Maturity, termination or end date......  The date on which the swap
                                          expires or ends.
Day count convention...................
Notional amount (leg 1)................  The current active notional
                                          amount.
Notional currency (leg 1)..............  ISO code.
Notional amount (leg 2)................  The current active notional
                                          amount.
Notional currency (leg 2)..............  ISO code.
Payer (fixed rate).....................  Is the reporting party a fixed
                                          rate payer? Yes/No/Not
                                          applicable.
Payer (floating rate leg 1)............  If two floating legs, the payer
                                          for leg 1.
Payer (floating rate leg 2)............  If two floating legs, the payer
                                          for leg 2.
Direction..............................  For swaps: Whether the
                                          principal is paying or
                                          receiving the fixed rate. For
                                          float-to-float and fixed-to-
                                          fixed swaps: Indicate N/A.
                                         For non-swap instruments and
                                          swaptions: Indicate the
                                          instrument that was bought or
                                          sold.
Option type............................  E.g., put, call, straddle.
Fixed rate.............................
Fixed rate day count fraction..........  E.g., actual 360.
Floating rate payment frequency........
Floating rate reset frequency..........
Floating rate index name/rate period...  E.g., USD-Libor-BBA.
Timestamp for submission to swap data    Time and date of submission to
 repository.                              the swap data repository,
                                          expressed using UTC, as
                                          recorded by an automated
                                          system where available, or as
                                          recorded manually where an
                                          automated system is not
                                          available.
Clearing indicator.....................  Yes/No indication of whether
                                          the swap will be submitted for
                                          clearing to a derivatives
                                          clearing organization.
Clearing venue.........................  LEI of the derivatives clearing
                                          organization.
If the swap will not be cleared, an      Yes/No.
 indication of whether an exception to,
 or an exemption from, the clearing
 requirement has been elected with
 respect to the swap under part 50 of
 this chapter.
The identity of the counterparty         Field values: LEI, or
 electing an exception or exemption to    substitute identifier, for a
 the clearing requirement under part 50   natural person.
 of this chapter.
Clearing exception or exemption type...  The type of clearing exception
                                          or exemption being claimed.
                                          Field values: End user, Inter-
                                          affiliate or Cooperative.
Indication of collateralization........  Is the swap collateralized, and
                                          if so to what extent? Field
                                          values: Uncollateralized,
                                          partially collateralized, one-
                                          way collateralized, fully
                                          collateralized.
Any other term(s) of the swap matched    E.g., early termination option
 or affirmed by the counterparties in     clause. Use as many fields as
 verifying the swap.                      required to report each such
                                          term.
------------------------------------------------------------------------


   Exhibit C--Minimum Primary Economic Terms Data--Interest Rate Swaps
                    (Including Cross-Currency Swaps)
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
 Additional data categories and fields
           for clearing swaps                        Comment
------------------------------------------------------------------------
Clearing swap USIs.....................  The USIs of each clearing swap
                                          that replaces the original
                                          swap that was submitted for
                                          clearing to the DCO, other
                                          than the USI for which the PET
                                          data is currently being
                                          reported (as ``USI'' field
                                          above).
Original swap USI......................  The USI of the original swap
                                          submitted for clearing to the
                                          DCO that is replaced by
                                          clearing swaps.
Original swap SDR......................  LEI of SDR to which the
                                          original swap was reported.
Clearing member LEI....................  LEI of Clearing member.
Clearing member client account.........  Clearing member client account
                                          number.
Origin (house or customer).............  An indication whether the
                                          clearing member acted as
                                          principal for a house trade or
                                          agent for a customer trade.
Clearing receipt timestamp.............  The date and time at which the
                                          DCO received the original swap
                                          for clearing, expressed using
                                          UTC.

[[Page 41784]]

 
Clearing acceptance timestamp..........  The date and time at which the
                                          DCO accepted the original swap
                                          for clearing, expressed using
                                          UTC.
------------------------------------------------------------------------


  Exhibit D--Minimum Primary Economic Terms Data--Other Commodity Swaps
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
        Data field for all swaps                     Comment
------------------------------------------------------------------------
Asset Class............................  Field values: Credit, equity,
                                          FX, interest rates, other
                                          commodities.
The Unique Swap Identifier for the swap  As provided in Sec.   45.5.
The Legal Entity Identifier of the       As provided in Sec.   45.6, or
 reporting counterparty.                  substitute identifier for a
                                          natural person.
An indication of whether the reporting   Yes/No.
 counterparty is a swap dealer with
 respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a major swap
 participant with respect to the swap.
If the reporting counterparty is not a   Yes/No.
 swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the reporting
 counterparty is a financial entity as
 defined in CEA section 2(h)(7)(C).
An indication of whether the reporting   Yes/No.
 counterparty is a derivatives clearing
 organization with respect to the swap.
An indication of whether the reporting   Yes/No.
 counterparty is a U.S. person.
An indication that the swap will be      Yes/No.
 allocated.
If the swap will be allocated, or is a   As provided in Sec.   45.6, or
 post-allocation swap, the Legal Entity   substitute identifier for a
 Identifier of the agent.                 natural person.
An indication that the swap is a post-   Yes/No.
 allocation swap.
If the swap is a post-allocation swap,   As provided in Sec.   45.5.
 the unique swap identifier of the
 initial swap transaction between the
 reporting counterparty and the agent.
The Legal Entity Identifier of the non-  As provided in Sec.   45.6, or
 reporting party.                         substitute identifier for a
                                          natural person.
An indication of whether the non-        Yes/No.
 reporting counterparty is a swap
 dealer with respect to the swap.
An indication of whether the non-        Yes/No.
 reporting counterparty is a major swap
 participant with respect to the swap.
If the non-reporting counterparty is     Yes/No.
 not a swap dealer or a major swap
 participant with respect to the swap,
 an indication of whether the non-
 reporting counterparty is a financial
 entity as defined in CEA section
 2(h)(7)(C).
An indication of whether the non-        Yes/No.
 reporting counterparty is a U.S.
 person.
The Unique Product Identifier assigned   As provided in Sec.   45.7.
 to the swap.
If no Unique Product Identifier is
 available for the swap because the
 swap is not sufficiently standardized,
 the taxonomic description of the swap
 pursuant to the CFTC-approved product
 classification system.
If no CFTC-approved UPI and product
 classification system is yet
 available, the internal product
 identifier or product description used
 by the swap data repository.
An indication that the swap is a multi-  Field values: Yes, Not
 asset swap.                              applicable.
For a multi-asset class swap, an         Generally, the asset class
 indication of the primary asset class.   traded by the desk trading the
                                          swap for the reporting
                                          counterparty. Field values:
                                          Credit, equity, FX, interest
                                          rates, other commodities.
For a multi-asset class swap, an         Field values: Credit, equity,
 indication of the secondary asset        FX, interest rates, other
 class(es).                               commodities.
An indication that the swap is a mixed   Field values: Yes, Not
 swap.                                    applicable.
For a mixed swap reported to two non-    Field value: LEI of the other
 dually- registered swap data             SDR to which the swap is or
 repositories, the identity of the        will be reported.
 other swap data repository (if any) to
 which the swap is or will be reported.
Contract type..........................  E.g., swap, swaption, option,
                                          basis swap, index swap.
Block trade indicator..................  Indication (Yes/No) of whether
                                          the swap qualifies as a
                                          ``block trade'' or ``large
                                          notional off-facility swap''
                                          as defined in part 43 of the
                                          CFTC's regulations.
Execution timestamp....................  The date and time of the trade,
                                          expressed using Coordinated
                                          Universal Time (``UTC''), as
                                          recorded by an automated
                                          system where available, or as
                                          recorded manually where an
                                          automated system is not
                                          available.

[[Page 41785]]

 
Execution venue........................  The swap execution facility or
                                          designated contract market on
                                          or pursuant to the rules of
                                          which the swap was executed.
                                          Field values: LEI of the swap
                                          execution facility or
                                          designated contract market, or
                                          ``off-facility'' if not so
                                          executed.
Timestamp for submission to swap data    Time and date of submission to
 repository.                              the swap data repository,
                                          expressed using UTC, as
                                          recorded by an automated
                                          system where available, or as
                                          recorded manually where an
                                          automated system is not
                                          available.
Start date.............................  The date on which the swap
                                          commences or goes into effect
                                          (e.g., in physical oil, the
                                          pricing start date).
Maturity, termination, or end date.....  The date on which the swap
                                          expires or ends (e.g., in
                                          physical oil, the pricing end
                                          date).
Buyer..................................  The counterparty purchasing the
                                          product: (E.g., the payer of
                                          the fixed price (for a swap),
                                          or the payer of the floating
                                          price on the underlying swap
                                          (for a put swaption), or the
                                          payer of the fixed price on
                                          the underlying swap (for a
                                          call swaption). Field values:
                                          LEI, if available, or
                                          substitute identifier, for a
                                          natural person.
Seller.................................  The counterparty offering the
                                          product: (E.g., the payer of
                                          the floating price (for a
                                          swap), the payer of the fixed
                                          price on the underlying swap
                                          (for a put swaption), or the
                                          payer of the floating price on
                                          the underlying swap (for a
                                          call swaption). Field values:
                                          LEI, or substitute identifier,
                                          for a natural person.
Quantity unit..........................  The unit of measure applicable
                                          for the quantity on the swap.
                                          E.g., barrels, bushels,
                                          gallons, pounds, tons.
Quantity...............................  The amount of the commodity
                                          (the number of quantity units)
                                          quoted on the swap.
Quantity frequency.....................  The rate at which the quantity
                                          is quoted on the swap. E.g.,
                                          hourly, daily, weekly,
                                          monthly.
Total quantity.........................  The quantity of the commodity
                                          for the entire term of the
                                          swap.
Settlement method......................  Physical delivery or cash.
Price..................................  The price of the swap. For
                                          options, the strike price.
Price unit.............................  The unit of measure applicable
                                          for the price of the swap.
Price currency.........................  ISO code.
Buyer pay index........................  The published price as paid by
                                          the buyer (if applicable). For
                                          swaptions, applies to the
                                          underlying swap.
Buyer pay averaging method.............  The averaging method used to
                                          calculate the index of the
                                          buyer pay index. For
                                          swaptions, applies to the
                                          underlying swap.
Seller pay index.......................  The published price as paid by
                                          the seller (if applicable).
                                          For swaptions, applies to the
                                          underlying swap.
Seller pay averaging method............  The averaging method used to
                                          calculate the index of the
                                          seller pay index. For
                                          swaptions, applies to the
                                          underlying swap.
Grade..................................  If applicable, the grade of the
                                          commodity to be delivered,
                                          e.g., the grade of oil or
                                          refined product.
Option type............................  Descriptor for the type of
                                          option transaction. E.g., put,
                                          call, straddle.
Option style...........................  E.g., American, European,
                                          European Daily, European
                                          Monthly, Asian.
Option premium.........................  The total amount paid by the
                                          option buyer.
Hours from through.....................  For electric power, the hours
                                          of the day for which the swap
                                          is effective.
Hours from through time zone...........  For electric power, the time
                                          zone prevailing for the hours
                                          during which electricity is
                                          transmitted.
Days of week...........................  For electric power, the profile
                                          applicable for the delivery of
                                          power.
Load type..............................  For electric power, the load
                                          profile for the delivery of
                                          power.
Clearing indicator.....................  Yes/No indication of whether
                                          the swap will be submitted for
                                          clearing to a derivatives
                                          clearing organization.
Clearing venue.........................  LEI of the derivatives clearing
                                          organization.
If the swap will not be cleared, an      Yes/No.
 indication of whether an exception to,
 or an exemption from, the clearing
 requirement has been elected with
 respect to the swap under part 50 of
 this chapter.
The identity of the counterparty         Field values: LEI, or
 electing an exception or exemption to    substitute identifier, for a
 the clearing requirement under part 50   natural person.
 of this chapter.
Clearing exception or exemption type...  The type of clearing exception
                                          or exemption being claimed.
                                          Field values: End user, Inter-
                                          affiliate or Cooperative.
Indication of collateralization........  Is the swap collateralized, and
                                          if so to what extent? Field
                                          values: Uncollateralized,
                                          partially collateralized, one-
                                          way collateralized, fully
                                          collateralized.
Any other term(s) of the swap matched    Use as many fields as required
 or affirmed by the counterparties in     to report each such term.
 verifying the swap.
------------------------------------------------------------------------


[[Page 41786]]


  Exhibit D--Minimum Primary Economic Terms Data--Other Commodity Swaps
             [Enter N/A for fields that are not applicable]
------------------------------------------------------------------------
 Additional data categories and fields
           for clearing swaps                        Comment
------------------------------------------------------------------------
Clearing swap USIs.....................  The USIs of each clearing swap
                                          that replaces the original
                                          swap that was submitted for
                                          clearing to the DCO, other
                                          than the USI for which the PET
                                          data is currently being
                                          reported (as ``USI'' field
                                          above).
Original swap USI......................  The USI of the original swap
                                          submitted for clearing to the
                                          DCO that is replaced by
                                          clearing swaps.
Original swap SDR......................  LEI of SDR to which the
                                          original swap was reported.
Clearing member LEI....................  LEI of Clearing member.
Clearing member client account.........  Clearing member client account
                                          number.
Origin (house or customer).............  An indication whether the
                                          clearing member acted as
                                          principal for a house trade or
                                          agent for a customer trade.
Clearing receipt timestamp.............  The date and time at which the
                                          DCO received the original swap
                                          for clearing, expressed using
                                          UTC.
Clearing acceptance timestamp..........  The date and time at which the
                                          DCO accepted the original swap
                                          for clearing, expressed using
                                          UTC.
------------------------------------------------------------------------


    Issued in Washington, DC, on June 14, 2016, 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 Amendments to Swap Data Recordkeeping and Reporting 
Requirements for Cleared Swaps--Commission Voting Summary and 
Chairman'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

    Regular reporting of data on swaps is a key component of the 
swaps reforms that were agreed to by the G-20 leaders and codified 
in the Dodd-Frank Wall Street Reform and Consumer Protection Act. 
Since taking office, a priority of mine has been to improve data 
quality and to simplify reporting obligations for market 
participants. I know that my fellow Commissioners Bowen and 
Giancarlo share this goal. That is why I am very pleased that today, 
the Commission has acted unanimously to improve the process for 
reporting data on cleared swaps.
    This final rule will significantly enhance data quality and 
reduce reporting costs in a number of ways. It streamlines the 
reporting process to ensure there are not duplicate records of a 
swap, which can lead to double counting that can distort the data. 
It makes sure that accurate valuations of swaps are provided on an 
ongoing basis. And it eliminates some needless reporting 
requirements for swap dealers and major swap participants. This rule 
provides clarity and certainty in a number of areas, and will 
improve our ability to trace a swap through all phases of its 
lifecycle. Ultimately, it will provide us with a better picture of 
the swaps market, and enhance our ability to identify the buildup of 
risk that may pose a threat to the financial system.
    Today's final rule reflects the largely positive feedback we 
received on our proposal, which was released in August, 2015. We 
very much appreciate the input that market participants have given 
us.
    This effort is just one piece of our work to ensure accuracy and 
completeness in data reporting, to harmonize data standards, and to 
improve data quality, while avoiding excessive burdens and 
duplication. For example, our other efforts will include the 
development of technical specifications for the reporting of 120 
priority data elements, which will lead to greater consistency and 
standardization in reporting. We are also leading international 
efforts on data harmonization, including the development of tools 
that will allow regulators to identify swaps and swap activity by 
product type and transaction type throughout the life of a swap.
    I thank CFTC staff for their hard work on this rule, as well as 
the market participants who took the time to provide us feedback. 
And I also thank my fellow Commissioners Bowen and Giancarlo for 
their careful consideration and unanimous support for this measure.

[FR Doc. 2016-14414 Filed 6-24-16; 8:45 am]
BILLING CODE 6351-01-P