Security-Based Swap Data Repositories; DTCC Data Repository (U.S.) LLC; Notice of Filing of Application for Registration as a Security-Based Swap Data Repository, 44379-44388 [2016-16112]
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Federal Register / Vol. 81, No. 130 / Thursday, July 7, 2016 / Notices
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 12 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s Internet
comment form https://www.sec.gov/
rules/sro.shtml); or
• Send an Email to rule-comments@
sec.gov. Please include File No. SR–ISE
Mercury–2016–12 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE Mercury–2016–12. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of ISE Mercury. All
comments received will be posted
without change; the Commission does
not edit personal identifying
12 15
U.S.C. 78s(b)(2)(B).
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information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–ISE Mercury–2016–12 and
should be submitted by July 28, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–16029 Filed 7–6–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78216; File No. SBSDR–
2016–02]
Security-Based Swap Data
Repositories; DTCC Data Repository
(U.S.) LLC; Notice of Filing of
Application for Registration as a
Security-Based Swap Data Repository
June 30, 2016.
I. Introduction
On April 6, 2016 and as amended on
April 25, 2016, DTCC Data Repository
(U.S.) LLC (‘‘DDR’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a Form SDR seeking
registration as a security-based swap
data repository (‘‘SDR’’) under Section
13(n) of the Securities Exchange Act of
1934 (‘‘Exchange Act’’) 1 and the
Commission’s rules promulgated
thereunder.2 DDR states that it proposes
to operate as a registered SDR for
security-based swap (‘‘SBS’’)
transactions in the credit, equity, and
interest rates 3 derivatives asset classes.
The Commission is publishing this
notice to solicit comments from
interested persons regarding DDR’s
Form SDR,4 and the Commission will
CFR 200.30–3(a)(12).
U.S.C. 78m(n)(3).
2 17 CFR 240.13n–1 through 240.13n–12.
3 DDR seeks to include in its application the
‘‘rates’’ asset class based on feedback from potential
DDR participants who have identified certain types
of transactions which will be reported through the
interest rate infrastructure within the industry and
that the industry participants have identified as
falling under the definition of a SBS. The
Commission notes that DDR’s application is for
registration as a SBS data repository, which the
Exchange Act defines as a ‘‘person that collects and
maintains information or records with respect to
transactions or positions in, or the terms and
conditions of, security-based swaps entered into by
third parties for the purpose of providing a
centralized recordkeeping facility for security-based
swaps.’’ 15 U.S.C. 78c(a)(75).
4 DDR filed its Form SDR, including the exhibits
thereto, electronically with the Commission. The
descriptions set forth in this notice regarding the
structure and operations of DDR have been derived,
excerpted, and/or summarized from information in
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13 17
1 15
Frm 00122
Fmt 4703
Sfmt 4703
44379
consider any comments it receives in
making its determination whether to
grant DDR registration as an SDR.5
II. Background
A. SDR Registration, Duties and Core
Principles, and Regulation SBSR
Section 763(i) of the Dodd-Frank Act
added Section 13(n) to the Exchange
Act, which requires an SDR to register
with the Commission and provides that,
to be registered and maintain
registration as an SDR, an SDR must
comply with certain requirements and
‘‘core principles’’ described in Section
13(n) and any requirement that the
Commission may impose by rule or
regulation.6
The Commission adopted Exchange
Act Rules 13n–1 through 13n–12 (‘‘SDR
rules’’), which require an SDR to register
with the Commission and comply with
certain ‘‘duties and core principles.’’ 7
Among other requirements, the SDR
rules require an SDR to collect and
maintain accurate SBS data and make
such data available to the Commission
and other authorities so that relevant
authorities will be better able to monitor
the buildup and concentration of risk
exposure in the SBS market.8
Concurrent with the Commission’s
adoption of the SDR rules, the
Commission adopted Regulation SBSR,9
which, among other things, provides for
the reporting of SBS information to
registered SDRs, and the public
dissemination of SBS transaction,
volume, and pricing information by
registered SDRs. In addition, Regulation
SBSR requires each registered SDR to
register with the Commission as a
securities information processor.10
B. Standard for Granting SDR
Registration
To be registered with the Commission
as an SDR and maintain such
DDR’s Form SDR application, and principally from
DDR’s Rulebook (Exhibit HH.2), which outlines the
applicant’s policies and procedures designed to
address its statutory and regulatory obligations as
an SDR registered with the Commission. DDR’s
Form SDR application and non-confidential
exhibits thereto are available on [appropriate
EDGAR reference to be inserted]. In addition, the
public may access copies of these materials on the
Commission’s Web site at: [appropriate Web site
address to be inserted].
5 DDR’s Form SDR application also constitutes an
application for registration as a securities
information processor. See Exchange Act Release
No. 74246 (Feb. 11, 2015), 80 FR 14438, 14458
(Mar. 19, 2015) (‘‘SDR Adopting Release’’).
6 15 U.S.C. 78m(n).
7 See SDR Adopting Release, 80 FR 14438.
8 See SDR Adopting Release, 80 FR at 14450.
9 See Exchange Act Release No. 74244 (Feb. 11,
2015), 80 FR 14563 (Mar. 19, 2015) (‘‘Regulation
SBSR Adopting Release’’).
10 See Regulation SBSR Adopting Release, 80 FR
at 14567.
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registration, an SDR is required (absent
an exemption) to comply with the
requirements and core principles
described in Exchange Act Section
13(n), as well as with any requirements
that the Commission adopts by rule or
regulation.11 Exchange Act Rule 13n–
1(c)(3) provides that the Commission
shall grant the registration of an SDR if
it finds that the SDR is so organized,
and has the capacity, to be able to (i)
assure the prompt, accurate, and reliable
performance of its functions as an SDR;
(ii) comply with any applicable
provisions of the securities laws and the
rules and regulations thereunder; and
(iii) carry out its functions in a manner
consistent with the purposes of Section
13(n) of the Exchange Act and the rules
and regulations thereunder.12 The
Commission must deny registration of
an SDR if it does not make such a
finding.13
In determining whether an applicant
meets the criteria set forth in Rule 13n–
1(c), the Commission will consider the
information reflected by the applicant
on its Form SDR, as well as any
additional information obtained from
the applicant. For example, Form SDR
requires an applicant to provide, among
other things, contact information, a list
of the asset class(es) for which the
applicant is collecting and maintaining
data or for which it proposes to collect
and maintain data, a description of the
functions that it performs or proposes to
perform, and general information
regarding its business organization.14
This, and other information reflected on
the Form SDR, will assist the
Commission in understanding the basis
for registration as well as the SDR
applicant’s overall business structure,
financial condition, track record in
providing access to its services and data,
technological reliability, and policies
and procedures to comply with its
statutory and regulatory obligations.15
Furthermore, the information requested
in Form SDR will enable the
Commission to assess whether the SDR
applicant would be able to comply with
the federal securities laws and the rules
and regulations thereunder, and
ultimately whether to grant or deny an
application for registration.16
III. DDR Application for Registration
DDR currently operates as a trade
repository under the regulatory
framework of other authorities.
11 See Exchange Act Section 13(n)(3), 15 U.S.C.
78m(n)(3).
12 See 17 CFR 240.13n–1(c)(3).
13 See id.
14 See SDR Adopting Release, 80 FR at 14458.
15 See id.
16 See SDR Adopting Release, 80 FR at 14458–59.
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Specifically, DDR is a swap data
repository regulated and provisionally
registered by the Commodity Futures
Trading Commission (‘‘CFTC’’).17 In
that capacity, DDR has been accepting
derivatives data for the commodity,
foreign exchange, interest rate, and
credit asset classes in the United States
since December 2012.18 Additionally, in
2014, DDR was approved by the Ontario
´
Securities Commission,19 the Autorite
´
des marches financiers,20 and the
Manitoba Securities Commission 21 as a
Canadian Trade Repository to serve the
commodity, credit, equity, interest rate,
and foreign exchange asset classes.22
A. Corporate Structure and Governance
Arrangements
DDR is a New York limited liability
company, and is a wholly owned
subsidiary of DTCC Deriv/SERV LLC,
which, in turn, is a wholly owned
subsidiary of The Depository Trust &
Clearing Corporation (‘‘DTCC’’).23 DDR
is managed by a Board of Directors
17 See Order of Provisional Registration, In the
Matter of the Request of DTCC Data Repository
(U.S.), LLC for Provisional Registration as a Swap
Data Repository Pursuant to Section 21 of the
Commodity Exchange Act and Part 49 of the
Commodity Futures Trading Commission’s
Regulations (Sept. 19, 2012), available at https://
www.cftc.gov/stellent/groups/public/@otherif/
documents/ifdocs/dtccbodsonletter091912.pdf;
Order Adding Asset Class, In the Matter of the
Request of DTCC Data Repository (U.S.) LLC to
Amend Its Form SDR to Add the Other Commodity
Asset Class Pursuant to Part 49 of the Commission’s
Regulations (Dec. 3, 2012), available at https://
www.cftc.gov/stellent/groups/public/@otherif/
documents/ifdocs/dtccsdrbodsonltr120312.pdf.
18 See Press Release, DTCC, DTCC Swap Data
Repository Real-Time Reporting Now Live (Jan. 03,
2013), available at https://www.dtcc.com/news/
2013/january/03/swap-data-repository-real-time.
19 See Ontario Securities Commission, Order
(Section 21.2.2 of the Securities Act), in the Matter
of the Securities Act, R.S.O. 1990, Chapter S.5, as
amended, and in the Matter of DTCC Data
Repository (U.S.) LLC (Sept. 19, 2014), available at
https://www.osc.gov.on.ca/en/SecuritiesLaw_ord_
20140923_dtcc-data-repository.htm.
20 See Autorite des marches financiers, Decision
´
´
2014–PDG–0110, Bulletin 2014–09–25, Vol. 11,
n°38 (Sept. 23, 2014), available at https://
www.lautorite.qc.ca/files/pdf/bulletin/2014/
vol11no38/vol11no38_7.pdf.
21 See Manitoba Securities Commission, Order
No. 7013 (Oct. 23, 2014), available at https://
docs.mbsecurities.ca/msc/oe/en/105125/1/
document.do.
22 Other trade repository subsidiaries of the
Depository Trust & Clearing Corporation (‘‘DTCC’’)
operate in Europe, Japan, Hong Kong, Singapore,
and Australia. See generally https://dtcc.com/
derivatives-services/global-trade-repository.
23 See Exhibit HH.2, Section 2.1. DTCC is the
parent company of a variety of entities, including
three clearing agencies registered under Section
17A of the Exchange Act and that have been
designated as systemically important by the
Financial Stability Oversight Council under Title
VIII of the Dodd-Frank Act (i.e., the National
Securities Clearing Corporation, the Fixed Income
Clearing Corporation, and the Depository Trust
Company).
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(‘‘Board’’) responsible for overseeing its
operations.24 The Board (directly or by
delegating certain responsibilities to its
committees) fulfills its responsibilities
under its charter and DDR’s mission
statement by: (i) Overseeing
management’s activities in managing,
operating, and developing DDR as a firm
and evaluating management’s
performance of its responsibilities; (ii)
ratifying management’s selection of the
CEO and providing advice and counsel
to the CEO; (iii) providing oversight of
the performance of the CEO and of DDR
to evaluate whether the business is
being appropriately managed; (iv)
setting expectations about DDR’s tone
and ethical culture and reviewing
management efforts to instill an
appropriate tone and culture; (v)
reviewing and approving DDR’s
financial objectives and major corporate
plans and actions; (vi) providing
guidance to the CEO and to management
in formulating corporate strategy and
approving strategic plans; (vii)
providing oversight of risk assessment
and risk management monitoring
processes; (viii) providing input and
direction to governance structures and
practices to position the Board to fulfill
its duties effectively and efficiently
consistent with DDR’s principles of
governance; (ix) providing oversight and
guidance regarding the design of
informational reporting to the Board and
relevant regulators; (x) adopting
principles governing new initiative
approval processes and overseeing
DDR’s processes relating to new
business selection and development of
new businesses and new or expanded
products and services, including
guidelines for the analyses supporting
any material operational or risk
management changes that are proposed
by management; (xi) providing oversight
of DDR’s internal and external audit
processes, financial reporting, and
disclosure controls and procedures,
including approving major changes in
auditing and accounting principles and
practices; (xii) fostering DDR’s ability to
ensure compliance with applicable laws
and regulations including derivatives,
securities, and corporation laws and
other applicable regulatory guidance
and international standards; (xiii)
ensuring that in DDR’s decision-making
process an Independent Perspective as
defined in Section 49.2 of the CFTC’s
regulations, is considered; 25 and (xiv)
24 See
id.
CFTC has defined the term ‘‘Independent
Perspective’’ to mean ‘‘a viewpoint that is impartial
regarding competitive, commercial, or industry
concerns and contemplates the effect of a decision
on all constituencies involved.’’ 17 CFR 49.2(a)(6).
25 The
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performing such other functions as the
Board believes appropriate or necessary,
or as otherwise prescribed by rules or
regulations.26
According to DDR, the number of
directors on the Board is determined by
DTCC Deriv/SERV LLC (‘‘DTCC Deriv/
SERV’’) as the sole LLC member of
DDR.27 DDR represents that DTCC
Deriv/SERV will strive to include on the
Board an equal number of
representatives of U.S. and non-U.S.
domiciled firms.28 DDR represents that
the Board is composed of individuals
from the following groups: Employees of
DDR’s users (either fees-paying users or
end users) with derivatives industry
experience, buy-side representatives,
independents, and members of DTCC’s
senior management or DTCC’s Board of
Directors, with the understanding that at
least two Board members will be DTCC
senior management or DTCC Board
members.29 DDR represents that DTCC
Deriv/SERV’s Nominating Committee
shall periodically review the Board’s
composition to assure that the DDR
directors possess the skills required to
direct and oversee management in the
best interests of its shareholders and
other stakeholders, with these skills
including derivatives industry
experience, risk management
experience, business specialization,
technical skills, industry stature, and
seniority and experience at their own
organizations.30
Additionally, DDR represents that it
welcomes suggestions from market
participants of proposed or alternative
candidates to serve on the DDR Board,
which may be submitted through the
notices procedures described in the
Operating Procedures of DDR’s
Rulebook.31
DDR’s Rulebook provides that its
Chief Compliance Officer (‘‘CCO’’) is
appointed by the Board and reports
directly to the chief executive officer of
DDR.32 The Board is responsible for the
appointment and removal of the CCO
and approval of CCO compensation,
which is at the discretion of the Board
and effected by majority vote.33 In
addition, the Board shall meet with the
26 See Exhibit D.2 (DDR Mission Statement and
Board Charter).
27 See Exhibits D (governance narrative), D.2, and
HH.2, Section 2.2.
28 See Exhibits D and D.2.
29 See id.; see also Exhibit HH.2, Section 2.2. DDR
states that the Board will include appropriate
representation by individuals who are independent
as specified by applicable regulations. See id.
30 See Exhibit D.
31 See Exhibit HH.2, Section 2.2 and attached
Operating Procedures.
32 See Exhibit HH.2, Section 2.3.
33 See id.
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CCO at least annually.34 According to
DDR, the CCO also works directly with
the Board in certain instances, for
example, when resolving conflicts of
interest.35 DDR represents that the
CCO’s responsibilities include, but are
not limited to, the following items: (i)
Oversee and review DDR’s compliance
with the applicable regulations; (ii)
establish and administer written
policies and procedures reasonably
designed to prevent violation of the
applicable regulations; (iii) take
reasonable steps to ensure compliance
with applicable regulations relating to
agreements, contracts or transactions;
(iv) establish procedures for the
remediation of non-compliance issues
identified by the CCO through a
compliance office review, look-back,
internal or external audit finding, selfreported error, or validated complaint;
(v) notify the Board as soon as
practicable upon becoming aware of a
circumstance indicating that DDR, or an
individual acting on its behalf, is in
non-compliance with the applicable
laws of a jurisdiction in which it
operates and either: (a) The noncompliance creates a risk to a DDR
User; 36 (b) the non-compliance creates a
risk of harm to the capital markets in
which it operates; (c) the noncompliance is part of a pattern of noncompliance; or (d) the non-compliance
may have an impact on DDR’s ability to
carry on business as a trade repository
in compliance with applicable law; (vi)
establish and follow appropriate
procedures for the handling,
management response, remediation,
retesting and closing of noncompliance
issues; (vii) establish and administer a
written code of ethics; and (viii) prepare
and sign an annual compliance report in
accordance with applicable regulations
and associated recordkeeping.37
DDR directors must comply with
DDR’s Board Code of Ethics and
Conflicts of Interest Policy (the ‘‘Code’’),
which is intended to focus directors on
their duties as fiduciaries and provide
guidance to directors to help them
recognize and deal with ethical issues,
provide mechanisms to report unethical
conduct, help foster a culture of honesty
and accountability, and address actual
and potential conflicts of interest.38 In
addition, each director is required to
complete a certificate attesting to
compliance with DDR’s Code upon
id.
id.
36 DDR defines the term ‘‘User’’ to mean an entity
that has executed a DDR User Agreement, which
allows for participation in one or more DDR
services or systems. See Exhibit HH.2, Section 12.
37 See Exhibit HH.2, Section 2.3.
38 See Exhibit D.4 (DDR Board Code of Ethics).
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34 See
44381
becoming a director, and, thereafter, on
an annual basis. According to DDR’s
Code, key responsibilities for directors
include: (i) Acting honestly, in good
faith and in the best interests of DDR
and all of the users of DDR; (ii) using
best efforts to avoid conflicts between
personal and professional interests as
they relate to DDR where possible; (iii)
disclosing any conflicts and otherwise
pursuing the ethical handling of
conflicts (whether actual or apparent)
when conflicts or the appearance of
conflicts are unavoidable; (iv)
complying with all applicable laws,
regulations and DDR policies; (v)
promptly reporting any violations of the
Code to the Chairman of DDR’s Board or
to DDR’s counsel and DDR’s CCO; (vi)
seeking guidance where necessary; and
(vii) being accountable personally for
adherence to the Code.39
B. Description of DDR’s SDR Service
DDR has applied to register as an SDR
with the Commission to accept data in
respect of all SBS transactions in the
credit, equity, and interest rates
derivatives asset classes.40
DDR represents that, if registered with
the Commission, it would, among other
things: (i) Perform all of the required
functions of an SDR under the
Commission’s Rules 13n–1 through
13n–11; (ii) accept, from or on behalf of
Users, transaction and life-cycle data for
SBS as specified in the Commission’s
Regulation SBSR, as and when required
to be reported to an SDR thereunder;
(iii) verify and maintain swap and SBS
data as required by such regulations; (iv)
publicly disseminate SBS data as and
when required under the Commission’s
Regulation SBSR, either directly or
through one or more third parties; (v)
provide access to swap and SBS data to
appropriate regulators; and (vi) generate
reports with respect to transaction data
maintained in DDR, in each case as
specified in further detail in DDR’s
Operating Procedures and applicable
publications.41
C. Access
DDR represents that it would provide
access to its SDR service on a fair, open
and equal basis.42 According to DDR,
access to and usage of its SDR service
would be available to all market
participants that engage in SBS
transactions, and DDR does not and
would not bundle or tie its SDR services
35 See
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Fmt 4703
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39 See
id.
DDR Form SDR, Item 6; see also Exhibit
HH.2, Section 3.1.
41 See Exhibit HH.2, SDR Appendix to the DDR
Operating Procedures.
42 See Exhibits U, V, Y, and HH.2, Section 1.1.
40 See
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with any other services.43 DDR
represents that to participate in its SDR
services, each User would be required to
(i) enter into a User Agreement in one
of the forms provided by DDR and (ii)
agree to be bound by the terms of the
User Agreement and DDR’s Operating
Procedures.44 According to DDR, an
entity would be permitted to view the
records relating to an individual
transaction if it is: (i) A counterparty or
an authorized agent of a counterparty to
the transaction; (ii) a regulator and the
transaction is reportable to that
regulator; or (iii) a third-party agent
submitter of the transaction, provided
that agents who are submitters will not
be able to view the current positions,
unless authorized by a counterparty to
the transaction, but will be able to see
the submission report only for the
purpose of viewing the success or
failure of messages submitted by such
agents.45 DDR represents that it shall
retain exclusive control over the system
through which its SDR services are
provided.46
DDR represents that it may summarily
terminate a User’s account and access to
SDR services when the Board
determines that: (a) The User has
materially breached its User Agreement,
DDR’s Operating Procedures, or the
rules contained in its Rulebook, which
threatens or may cause immediate harm
to the normal operation of DDR’s
system, or any applicable law including
those relating to the regulations
administered and enforced by the U.S.
Department of Treasury’s Office of
Foreign Assets Control or the Canadian
Government Office of the
Superintendent of Financial
Institutions; or (b) the User’s account or
User’s IT system is causing material
harm to the normal operation of DDR’s
system.47 According to DDR, the
following actions must take place before
DDR staff initiates any actions which
may result in a User’s termination of
access to the DDR system and,
specifically, SDR services: (i) DDR
senior management, as well as DDR’s
counsel and CCO, must be involved in
any decision to involuntarily terminate
a User; and (ii) the Chairman of the
Board of DDR must be notified in
advance of any involuntary
termination.48 DDR represents that,
upon a summary termination of a User’s
access pursuant to its rulebook, DDR
shall, as soon as possible, notify the
43 See
Exhibit HH.2, Section 1.1.
Exhibit HH.2, Section 1.2.
45 See Exhibit HH.2, Section 1.3.
46 See id.
47 See Exhibit HH.2, Section 10.3.1.
48 See id.
44 See
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impacted User of the termination in
writing or via email, with such notice
stating, to the extent practicable, in
general terms how pending transaction
submissions and other pending matters
will be affected and what steps are to be
taken in connection therewith.49
D. Use of Data
DDR represents that its services
would be available to all market
participants on a fair, open and equal
basis. DDR represents that a market
participant must be on-boarded as a
DDR User to be granted access to the
DDR system, receive trade information,
confirm or verify transactions, submit
messages, or receive reports.50 For those
market participants that on-board, DDR
would provide a mechanism for Users to
access the DDR system to confirm and
verify transactions and provide Unique
Identification Code (‘‘UIC’’) information
as required under its procedures.
Additionally, DDR represents that
access to U.S. swap or SBS data
maintained by DDR to market
participants is generally prohibited
except to: (i) Either counterparty to that
particular swap or SBS; (ii) authorized
third-party service providers or other
parties specifically authorized by the
User or counterparty pursuant to DDR’s
Rulebook; (iii) or to appropriate
domestic or foreign regulators in
accordance with applicable regulation
and DDR’s Rulebook.51
E. Asset Classes Accepted; Submission
Requirements; Validation
DDR has represented that it would
accept data in respect of all SBS trades
49 See id. Because persons applying to be SDRs
are also applying to be SIPs with the Commission,
the procedures for notifying the Commission of any
prohibitions or limitations of access to services as
provided in Section 11A(b)(5)(A) would apply. See
SDR Adopting Release, 80 FR at 14482 (‘‘Rule 909
of Regulation SBSR, which the Commission is
concurrently adopting in a separate release, requires
each registered SDR to register as a SIP, and, as
such, Exchange Act Section 11A(b)(5) governs
denials of access to services by an SDR. This section
provides that ‘[i]f any registered securities
information processor prohibits or limits any
person in respect of access to services offered,
directly or indirectly, by such securities
information processor, the registered securities
information processor shall promptly file notice
thereof with the Commission.’ Accordingly, an SDR
must promptly notify the Commission if it prohibits
or limits access to any of its services to any
person.’’).
50 See Exhibit HH.2, Section1.1.
51 See Exhibit HH.2, Section 6.3. With respect to
regulator access, DDR also represents that pursuant
to applicable law, the designated regulators (which
is defined to include regulators which supervise
DDR, including the Commission and CFTC) shall be
provided with direct electronic access to DDR data
reported to DDR in satisfaction of such regulator’s
regulatory mandate to satisfy their legal and
regulatory obligations. See id., Sections 6.2 and 12.
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in the credit equity, and interest rate 52
derivatives asset classes.53 DDR has
represented that Users would be
required to submit trade information in
the data format required by DDR. DDR
would accept data using the following
open-source structured data formats:
Financial Products Markup Language
(‘‘FpML’’) and Comma-separated Value
(‘‘CSV’’) file.54
Exhibits GG.2 (for credit derivatives),
GG.4 (for equity derivatives), and GG.6
(for interest rates) to DDR’s application
enumerate the required fields and
acceptable values for the submission of
trade information into the DDR system.
Upon submission of a transaction, DDR
will perform validation checks to ensure
that each submitted record is in the
proper format and will also perform
validation and consistency checks
against certain data elements, including,
for example, sequencing of time and
date fields (e.g., the termination date
must be greater than the trade date).55
These validation types include:
• Schema validations—check that a
submission is consistent with the
accepted format (i.e., CSV is valid, the
fields are formatted correctly);
• Core validations—the basic checks
that ensure the submission can be
accepted into the SDR (i.e., Permission,
USI/UTI lock, transaction and action
type consistency validations);
• Business validation—applied at the
point of in-bound submission
processing to ensure integrity and
logical consistency. These validations
will ensure that the messages are well
formed and provide a logical and
complete description of the core trade
economics and ensure that DDR does
not degrade the quality of the
information held within the repository
by allowing incomplete or illogical trade
descriptions to be accepted and stored;
and
• Regulatory validations—regulatoryspecific validations applied following
the normal business validations. (For
example, if the same field is required by
one jurisdiction and is optional for
another, the jurisdiction requiring the
field would have a regulatory validation
to check for the field.) 56
DDR further represents that it would
accept or reject transactions based on its
validation process.57 DDR’s policies and
procedures state that acceptance
messages are called ACKs (acceptance)
and rejection messages are called
52 See
n.3 supra.
Form SDR and Exhibit HH.2, Section 3.1.
54 See Exhibit GG.3.
55 See Exhibit HH.2, Section 10.1.1.
56 See Exhibit GG.3.
57 See Exhibit GG.3.
53 See
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NACKs (negative acceptance).58 Where
a transaction is accepted, both the
submitting party and its on-boarded
counterparty would receive electronic
ACK messages. Where a transaction was
not accepted, the submitting party
would receive an electronic NACK
message along with an associated error
code so that they can correct the
transaction and retransmit to DDR.
Where a transaction is accepted but fails
one of the jurisdictional (i.e., regulatory)
validations, the submitting party will
receive an electronic notification along
with the associated error code so it can
correct the transaction and retransmit to
DDR.59
DDR represents that DDR may reject a
transaction record submitted due to the
submission failing to meet DDR
validations, including but not limited to
the submission failing to be in a format
that can be ingested by DDR, failing to
meet jurisdictional (i.e., regulatory)
requirements or failing to provide
required data elements.60 DDR further
represents that a rejected submission is
deemed not to have been submitted at
all with respect to reporting to the
jurisdiction for which it was rejected,
and that it is possible that one
transmission is submitted to comply
with reporting in more than one
jurisdiction and may be acceptable for
one jurisdiction, but rejected for the
other.61
In connection with the reporting of
‘‘pre-enactment and transitional SBS,’’
DDR represents that it will accept the
following types of historical trades: (i)
‘‘Historical Expired,’’ which are preenactment SBS executed before July 21,
2010 but expired or terminated before
the compliance date for Regulation
SBSR, (ii) ‘‘Historical,’’ which are
transitional SBS executed after July 21,
2010 but expired or terminated before
the compliance date for Regulation
SBSR, and (iii) ‘‘Backload,’’ which are
pre-enactment SBS or transitional SBS
in existence on or after the compliance
date for Regulation SBSR.62 DDR states
that it does not validate whether or not
the historical expired trade satisfies the
Commission’s definition of an expired
pre-enactment or transitional swap, and
that the Historical and Historical
Expired trades will be subject to a
minimal set of validations in order for
the submission to be accepted by DDR,
which will focus on core fields
necessary for the system to ingest the
trade (including a valid Unique
58 See
id.
id.
60 See id.
61 See Exhibit HH.2, Section 1.2 and Exhibit GG.3.
62 See Exhibit GG.3.
59 See
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Transaction Identifier).63 DDR further
states that Backload trades will have the
standard validations that are applied on
all SBS submissions and must meet the
requirements in order for the
submission to be ingested and reported
to the Commission.64
F. Verification of Transaction Data
DDR represents that its SDR services
verification processes are designed to
reasonably establish that the transaction
data that has been submitted to DDR is
complete and accurate.65 Once a
position is established either through a
snapshot or DDR’s own calculation of
events from transaction records, the
terms of the position are designated as
either verified, disputed, pending
verification, or deemed verified.66
According to DDR, a transaction
record is verified if it (i) is submitted by
a Trusted Source (which is defined as
an entity, which has entered into a User
agreement, been recognized as a Trusted
Source by DDR and provides the
definitive report of a given position),67
(ii) is a trade between affiliated parties,
(iii) is submitted from an affirmation or
confirmation platform, or (iv) was
executed on an electronic trading
facility.68 In addition, the non-reporting
User is responsible for verifying the
accuracy of the information that has
been submitted by the reporting party
User. DDR represents that a nonreporting User can verify the accuracy of
such information by sending a
verification message indicating that it
verifies or disputes each position where
it is identified as the counterparty.69
DDR represents that it would attempt
to contact counterparties to a trade
reported to DDR who are not Users (a
‘‘Non-User’’), where such party’s LEI is
provided and there is email contact
information available to DDR in the
information or static data maintained by
the DTCC trade repositories 70 about
their Users, to notify the non-User that
a trade has been reported on which it
might have been named a counterparty
and it must on-board to DDR to verify
the accuracy of the information
submitted and provide any missing
information such as UICs, if
id.
id.
65 See Exhibit HH.2, Section 3.3.4.
66 See id. A ‘‘snapshot’’ refers to a message that
reflects the current state of the trade, which DDR
refers to as the trade’s position.
67 See Exhibit HH.2, Section 12.
68 See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1
and Exhibit GG.3.
69 See id.
70 DTCC operates trade repositories in a number
of other jurisdictions. See n.22 supra.
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64 See
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44383
applicable.71 DDR represents that, if no
LEI is provided or if the email
information is not available (for
example, under local privacy laws or
contractual obligations between the
counterparty and the trade repository
with which it has contracted as a User),
it would take no further action.72 In
addition, DDR will not verify the
accuracy of the email, nor follow up if
an email bounces back.73 DDR
represents that it will provide the
Commission and CFTC with a monthly
status of the outreach to Non-Users.74
The DDR system will provide trade
detail reports that will enable Users to
view all transaction records, which will
allow Users to reconcile the transaction
records in the SDR services to their own
risk systems.75 DDR’s policies and
procedures provide that, in the event
that both counterparties to a trade agree
that data submitted to DDR contains
erroneous information (e.g., through a
mutual mistake of fact), such Users may
each submit a cancel record, effectively
cancelling the incorrect transaction
record.76 If a trade record has been
submitted by only one counterparty and
it is determined by the submitting User
that it is erroneous, the submitting User
may submit a cancel record.77 A User
may cancel only its own submitted
record and cannot cancel a record where
it is not the submitting party of the
record.78 DDR shall maintain a record of
all corrected errors pursuant to
applicable regulations and such records
shall be available upon request to the
applicable designated regulator.79
G. Disputed Trade Data
Under DDR’s policies and procedures,
Users are responsible for resolving any
disputes between themselves uncovered
during any reconciliation process and,
as appropriate, for submitting correct
information.80 If a User disputes a
transaction record alleged to apply to it
by the counterparty, or disputes any of
the terms within the alleged transaction,
the User shall register such dispute by
submitting a ‘‘dispute’’ message.81 If
such User fails to register such dispute
within 48 hours of the relevant trade
detail report being issued, the record
will be marked as ‘‘deemed verified’’ in
71 See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1
and Exhibit GG.3.
72 See id.
73 See id.
74 See Exhibit HH.2, Section 3.3.4.1.
75 See Exhibit HH.2, Section 10.1.2.
76 See Exhibit HH.2, Section 10.1.1.
77 See id.
78 See Exhibit HH.2, Section 10.1.1.
79 See id.
80 See Exhibit HH.2, Section 10.1.2.
81 See id.
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the DDR system.82 All reports and trade
records provided to regulators will
include the status of these transaction
records, including dispute and
verification status.83 Where DDR has
received conflicting or inconsistent
records from more than one submitter in
respect of a particular transaction (such
as from a security-based swap execution
facility and a reporting party User), DDR
would maintain all such records (unless
cancelled or modified in accordance
with the terms of the Rulebook) and
make such records available to
designated regulators in accordance
with the terms of the User Agreement
and applicable law.84
H. Application and Dissemination of
Condition Flags
DDR represents that, with respect to
flags that are applied to publicly
disseminated reports to help prevent a
distorted view of the market, DDR has
established the following flags that
indicate that additional information is
needed to understand the publicly
disseminated price: Inter-affiliate,
Nonstandard flag, Off market flag,
Pricing context, and Compressed
trade.85 DDR also states that further
information regarding the flags is
available in its matrices under the
narrative column.86
I. Calculation and Maintenance of
Positions
DDR’s SDR service would allow DDR
to calculate open positions for persons
with open SBS for which DDR
maintains records. DDR’s policies and
procedures relating to its calculation of
positions are provided in Exhibit DD.
srobinson on DSK5SPTVN1PROD with NOTICES
J. Assignment of Unique Identification
Codes
DDR’s policies and procedures state
that pursuant to Commission regulation
(e.g., Regulation SBSR), all registered
SDRs must have a systemic means of
identifying and tracking all products
and persons involved in a SBS
transaction, and that Commission
regulation (e.g., Regulation SBSR) has
prescribed 10 identifiers where a UIC
shall be used.87 Further, DDR represents
that it requires all Users to obtain a
valid LEI where it exists, from an
internationally recognized standards82 See
id.
83 See id.
84 See id.
85 See Exhibit GG.1.
86 See id.; see also Exhibits GG.2, GG.4, and GG.6,
which are the matrices that enumerate the required
fields and acceptable values for the submission of
trade information into the DDR system.
87 See Exhibit GG.3; see also Exhibit HH.2,
Section 4.1.
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setting system (‘‘IRSS’’) that is
recognized by the Commission, and
that, where LEIs are populated, DDR
performs a digit check on the LEI.88
DDR has proposed that its Users will
be required to provide Legal Entity
Identifiers for the following fields:
Platform ID, ultimate parent ID,
counterparty ID, broker ID, and
execution agent ID.89 For other UICs
(transaction ID, branch ID, trading desk
ID, trader ID, and product ID) as
discussed further below, DDR has
further proposed that each User will be
required to create the identifiers in
prescribed formats, and that it shall be
each User’s responsibility to maintain
such identifiers (including, but not
limited to, any internal mapping of
static data) and to ensure their
continued accuracy.90
K. Transaction ID Methodology
DDR represents that it accepts
transaction IDs in the UTI field.91 To
validate the uniqueness of each
transaction ID, DDR would apply a
methodology, which it refers to as
‘‘Locks,’’ that prevents the transaction
ID from being used for another trade in
the same or another jurisdiction.92
However, DDR also represents that it is
the responsibility of the reporting party
User to create and provide the
transaction ID on each transaction.93
K. Ultimate Parent and Affiliate
Information
DDR represents that it captures the
UIC for ultimate parent ID in DDR’s
system at the time a User on–boards to
DDR as this is static information that
does not vary by trade. DDR requires
that each User provide the LEI of the
ultimate parent for each account that is
registered with DDR, with the exception
of (1) natural persons who are not
required to provide an LEI for ultimate
parent and (2) asset managers and the
funds they manage (for asset managers,
if the ultimate parent LEI of the fund is
unavailable, DDR will accept the LEI for
the fund).94
M. Branch, Trading Desk, and Trader ID
DDR represents that each User is
required to create, among other
88 See Exhibit GG.3. DDR also notes that the
Commission has recognized the global Legal Entity
Identifier (‘‘LEI’’) as an internationally recognized
standards-setting system (‘‘IRSS’’).
89 See id. For counterparty IDs for entities that do
not have an LEI (such as a natural person), DDR has
proposed alternative methods for providing a
counterparty ID.
90 See id.
91 See Exhibit GG.3.
92 See id.
93 See id.
94 See id.; see also Exhibit HH.2.
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identifiers, the branch ID, trading desk
ID, and trader ID. With respect to branch
ID, DDR represents that it requires the
User to provide the two digit ISO alpha
country code and the two digit
subdivision (city) code where the
branch or other unincorporated office is
located. DDR represents that if the User
has more than one branch in the same
subdivision (city), the branch ID will
also include a single digit following the
country and city code referencing the
specific branch, such as 1 or 2, for
example.95 DDR represents that it
requires that Users populate the trading
desk ID and trader ID fields using an
alphanumeric code with ten characters
or less.96
N. Product ID
DDR represents that each User is
required to create the product ID. DDR
represents that the product ID for all
asset classes will be the ISDA
taxonomy.97
O. Missing UIC Information
Rule 906(a) of Regulation SBSR
requires a registered SDR to identify any
SBS reported to it for which the
registered SDR does not have the
counterparty ID and (if applicable) the
broker ID, branch ID, execution agent
ID, trading desk ID, and trader ID of
each direct counterparty. Once a day,
the registered SDR must send a report to
each participant of the registered SDR
(or, if applicable, an execution agent)
identifying, for each SBS to which that
participant is a counterparty, the SBS(s)
for which the registered SDR lacks the
counterparty ID and (if applicable)
broker ID, branch ID, execution agent
ID, trading desk ID, or trader ID.
DDR’s policies and procedures
provide that to assist each User in
identifying and supplying missing UIC
information, the User’s position report,
which shall be made available each day
to all Users, can be used to identify each
SBS transaction for which DDR lacks
any of the required UICs.98 DDR further
represents that it will utilize a
procedure similar to its process for
contacting non–Users to confirm
transactions to attempt to obtain missing
UIC information.99
P. Public Dissemination
According to DDR, its public price
dissemination (‘‘PPD’’) solution
provides Users with a way to report
prices publicly pursuant to the
95 See
Exhibit GG.3.
id.
97 See id.
98 See Exhibit HH.2, Section 4.2.3.3.
99 See id.
96 See
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Commission regulations for SBS (e.g.,
Regulation SBSR). DDR’s policies and
procedures state that reporting sides are
provided with a specific message (the
‘‘PPD Message’’), with which to provide
information required to be
disseminated. The PPD Message is
available for dissemination if the fields
‘‘Reporting Obligation Party 1’’ or
‘‘Reporting Obligation Party 2’’ are
populated with ‘‘SEC’’ and the message
passes validations.100 According to
DDR, the PPD platform will perform
validations on every PPD Message
submitted, and based on the result of
that validation, it will issue a response
to the relevant parties indicating a
positive or negative validation result
(i.e., the ‘‘ACK’’ or ‘‘NACK’’ messages
discussed in Section III.E).
DDR’s policies and procedures state
that DDR requires a separate message for
public dissemination and for updating
the position record.101 DDR’s policies
and procedures also state that DDR
requires that PPD Messages be sent at
the same time as position messages (i.e.,
Primary Economic Terms (‘‘PET’’),
Confirmation, and/or Snapshot
messages).102 Further, DDR’s policies
and procedures provide that DDR does
not determine whether a PPD Message
should be disseminated publicly, and
that any such PPD Message received is
disseminated publicly if it passes
validations and is directed to the
Commission, as discussed above.103
Further, DDR states that it requires that
the reporting party User provide only
PPD Messages that are required to be
disseminated under the regulations.104
DDR represents that the PPD will
receive messages with the following
potential entries in the ‘‘Action’’ field
for a UTI: New, Modify, and Cancel.105
A New message will be the first report
for a trade event submission, and only
one UTI with an action of New will be
allowed.106 A Modify message will be a
valid modification or correction to an
existing trade event that has previously
been reported by a submitting party, and
the Modify action will be displayed to
the public as a Cancel of the original
submission and a Correction
representing the Modify submission.107
A cancel message will instruct the PPD
100 See
Exhibit GG.3.
Exhibit GG.3.
102 See id. DDR’s User Guide (Exhibit GG.3) also
provides descriptions of each of these types of
messages. For example, a PET message is used to
report the full details of the economic terms for
trade and lifecycle events prior to confirmation.
103 See id. and Exhibit HH.2, Section 5.1.2.
104 See id.
105 See Exhibit GG.3.
106 See id.
107 See id.
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101 See
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Platform to cancel the last submission
on a particular UTI, and, if the previous
submission has been disseminated, the
PPD Platform will disseminate the
cancel with the original dissemination
ID link.108
Q. Safeguarding Data, Operational
Reliability, and Emergency Authority
DDR represents that the DDR system
is supported by DTCC and relies on the
disaster recovery program maintained
by DTCC.109 DDR’s policies and
procedures provide the key principles
below for business continuity and
disaster recovery that DDR follows to
enable DDR to provide timely
resumption of critical services should
there be any disruption to DDR
business: (i) Achieve recovery of critical
services within a four-hour window
with faster recovery time in less extreme
situations; (ii) disperse staff across
geographically diverse operating
facilities; (iii) operate multiple back-up
data centers linked by a highly resilient
network technology; (iv) maintain
emergency command and out-of-region
operating control; (v) utilize new
technology which provides highvolume, high-speed, asynchronous data
transfer over distances of 1,000 miles or
more; (vi) maintain processes that
mitigate marketplace, operational and
cyber-attack risks; (vii) test continuity
plan readiness and connectivity on a
regular basis, ensuring that Users and
third-party vendors/service providers
can connect to DDR’s primary and backup sites; (viii) communicate on an
emergency basis with the market, Users,
and government agency decisionmakers; and (ix) evaluate, test, and
utilize best business continuity and
resiliency practices.110
DDR represents that it retains the right
to exercise emergency authority in the
event of circumstances determined by
DDR to require such response or upon
request by the designated regulators as
applicable, and that any exercise of
DDR’s emergency authority shall be
adequate to address the nature and
scope of any such emergency.111 DDR
further represents that its CEO shall
have the authority to exercise
emergency authority, and that in his/her
absence, any other officer of DDR shall
have such authority.112 DDR has stated
that circumstances requiring the
invocation of emergency authority
108 See id. The dissemination ID is a DDRgenerated identifier used to uniquely identify a
message without exposing the UTI and will be used
to manage cancellations and corrections.
109 See Exhibit HH.2, Section 8.1.
110 See id.
111 See Exhibit HH.2, Section 7.3.
112 See id.
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include, but are not limited to,
occurrences or circumstances: (a)
Determined by DDR to constitute an
emergency; (b) which threaten the
proper functioning of the DDR system
and the SDR services; or (c) which
materially and adversely affect the
performance of the DDR system and the
SDR services.113 DDR states that
emergencies include, but are not limited
to, natural, man-made and information
technology emergencies.114
Pursuant to its policies and
procedures, DDR shall notify the
designated regulators, as soon as
reasonably practicable, of an invocation
of emergency authority or a material
system outage is detected by DDR.115
Such notification shall be provided in
accordance with applicable regulations
and will include the reasons for taking
such emergency action, how potential
conflicts of interest were minimized and
documentation of the decision-making
process.116 Documentation underlying
the emergency shall be made available
to the designated regulators upon
request.117 DDR also represents that it
shall issue an ‘‘Important Notice’’ as to
all Users as soon as reasonably
practicable in the event such emergency
authority is exercised.118
DDR represents that it shall avoid
conflicts of interest in decision-making
with respect to emergency authority
taken.119 If a potential conflict of
interest arises, the CCO shall be notified
and consulted for the purpose of
resolving the potential conflict.120
DDR represents that any emergency
actions taken by DDR may be terminated
by the CEO and in his/her absence, any
other officer of DDR, and that any such
termination of an emergency action will
be followed by the issuance of an
Important Notice as soon as reasonably
practicable.121
R. Data Confidentiality; Sensitive
Information and Security
DDR represents that DTCC has
established a Technology Risk
Management Team, whose role is to
manage information security risk and
ensure the availability, integrity, and
confidentiality of the organization’s
information assets, but that DDR will be
113 See
id.
id.
115 See Exhibit HH.2, Section 7.3.
116 See id.
117 See id.
118 See id. An ‘‘Important Notice’’ is a formal
notice sent to Users describing significant changes
to DDR Rules, DDR Systems or other processes. See
id., Section 12.
119 See Exhibit HH.2, Section 7.3.
120 See id.
121 See id.
114 See
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responsible for monitoring the
performance of DTCC with regard to
implementation and maintenance of
information security within its
infrastructure.122 DDR further represents
that various policies have been
developed to provide the framework for
both physical and information security
and are routinely refreshed. The
Technology Risk Management Team
carries out a series of processes to
endeavor to ensure DDR is protected in
a cost-effective and comprehensive
manner. This includes preventative
controls such as firewalls, appropriate
encryption technology, and
authentication methods. Vulnerability
scanning is used to identify high risks
to be mitigated and managed and to
measure conformance against the
policies and standards.123
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning DDR’s Form SDR,
including whether DDR has satisfied the
requirements for registration as an SDR.
To the extent possible, commenters are
requested to provide empirical data and
other factual support for their views. In
addition, the Commission seeks
comment on the following issues:
1. Please provide your views as to
whether DDR’s application for
registration as an SDR demonstrates that
DDR is so organized, and has the
capacity, to be able to assure the
prompt, accurate, and reliable
performance of its functions as an SDR,
comply with any applicable provisions
of the securities laws and the rules and
regulations thereunder, and carry out its
functions in a manner consistent with
the purposes of Section 13(n) of the
Exchange Act and Commission’s SDR
rules.
2. Exchange Act Rule 13n–5(b)(1)(iii)
requires every SDR to establish,
maintain, and enforce written policies
and procedures reasonably designed to
satisfy itself that the transaction data
that has been submitted to the SDR is
complete and accurate. Please provide
your views as to whether DDR’s policies
and procedures concerning verification
of trade data are sufficiently detailed
and reasonably designed to satisfy DDR
that the transaction data that has been
submitted to DDR is complete and
accurate, as required by Exchange Act
Rule 13n–5(b)(1)(iii).
3. Please provide your views as to
whether DDR’s policies and procedures
to address confirmation of data accuracy
and completeness for bespoke, bilateral
122 See
123 See
Exhibit HH.2, Section 9.1.
Exhibit HH.2, Section 9.
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SBS transactions (i.e., DDR will attempt
to contact a non-User counterparty to
verify the accuracy of a trade if DDR has
been provided with the non-User
counterparty’s LEI and can access email
contact information for the non-User
counterparty in the static data
maintained by the DTCC trade
repositories about their Users) are
appropriate and reasonably designed to
meet its obligations under Exchange Act
Rule 13n–5(b)(1)(iii).
4. Please provide your views as to
whether DDR’s policies and procedures
are sufficiently detailed and reasonably
designed to ensure that the transaction
data and positions that it maintains are
complete and accurate, as required by
Exchange Act Rule 13n–5(b)(3).
5. Please provide your views as to
whether DDR’s policies and procedures
are sufficiently detailed and reasonably
designed to ensure that it has the ability
to protect the privacy of SBS transaction
information that it receives, as required
by Exchange Act Rule 13n–9.
6. Please provide your views as to
whether DDR’s policies and procedures
are sufficiently detailed and reasonably
designed to ensure that it has the ability
to calculate positions, as required by
Exchange Act Rule 13n–5(b)(2).
7. Please provide your views as to
whether DDR’s policies and procedures
are sufficiently detailed and reasonably
designed to provide a mechanism for
Users and their counterparties to
effectively resolve disputes over the
accuracy of SBS data that DDR would
maintain, as required by Exchange Act
Rule 13n–5(b)(6). Are DDR’s policies
and procedures, including with respect
to the specified timeframe, relating to
dispute resolution adequate? Why or
why not?
8. Please provide your views as to
whether DDR’s policies and procedures
are sufficiently detailed and reasonably
designed to ensure that its systems that
support or are integrally related to the
performance of its activities provides
adequate levels of capacity, integrity,
resiliency, availability, and security, as
required by Exchange Act Rule 13n–6.
9. Please provide your views as to
whether DDR’s policies and procedures
are sufficiently detailed and reasonably
designed for the CCO’s handling,
management response, remediation,
retesting, and closing of noncompliance
issues, as required by Exchange Act
Rule 13n–11(c)(7).
10. Please provide your views as to
whether DDR’s policies or procedures
could result in an unreasonable restraint
of trade or impose any material
anticompetitive burden on the trading,
clearing, or reporting of transactions.
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Frm 00129
Fmt 4703
Sfmt 4703
11. Please provide your views as to
whether DDR’s proposed dues, fees, or
other charges, discounts or rebates and
the process for setting dues, fees, or
other charges, discounts or rebates are
fair and reasonable and not
unreasonably discriminatory. Please
address whether such proposed dues,
fees, other charges, discounts, or rebates
are applied consistently across all
similarly situated users of DDR’s
services, including, but not limited to,
Users, market infrastructures (including
central counterparties), venues from
which data can be submitted to DDR
(including exchanges, SBS execution
facilities, electronic trading venues, and
matching and confirmation platforms),
and third party service providers.
12. Exchange Act Rule 13n–4(c)(2)(i)–
(iii) provides that each SDR (i) shall
establish governance arrangements that
are well defined and include a clear
organizational structure with effective
internal controls; (ii) must establish
governance arrangements that provide
for fair representation of market
participants; and (iii) must provide
representatives of market participants,
including end-users, with the
opportunity to participate in the process
for nominating directors and with the
right to petition for alternative
candidates. Please provide your views
as to whether DDR’s governance
arrangements are appropriate in light of
the requirements of Rule 13n–4(c)(2)(i)–
(iii).
13. Exchange Act Rule 13n–4(c)(3)(i)–
(ii) provides that each SDR must
establish, maintain, and enforce written
policies and procedures reasonably
designed to identify and mitigate
potential and existing conflicts of
interest in the SDR’s decision-making
process on an ongoing basis, and, with
respect to the decision-making process
for resolving any conflicts of interest,
each SDR shall require the recusal of
any person involved in such conflict
from such decision-making. Please
provide your views as to whether DDR’s
policies and procedures are appropriate
in light of the requirements of Exchange
Act Rule Exchange Act Rule 13n–
4(c)(3)(i)–(ii).
14. Rule 903(a) of Regulation SBSR
provides, in relevant part, that if no
system has been recognized by the
Commission, or a recognized system has
not assigned a UIC to a particular
person, unit of a person, or product, the
registered SDR shall assign a UIC to that
person, unit of person, or product using
its own methodology. Is the
methodology that DDR proposes to use
with respect to UICs as described in its
application materials appropriate in
light of the requirements under Rule
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903(a) of Regulation SBSR? Why or why
not?
15. Rule 907(c) of Regulation SBSR
requires a registered SDR to make its
Regulation SBSR policies and
procedures publicly available on its
Web site. The Commission has stated
that this public availability requirement
will allow all interested parties to
understand how the registered SDR is
utilizing the flexibility it has in
operating the transaction reporting and
dissemination system, and will provide
an opportunity for market participants
to make suggestions to the registered
SDR for altering and improving those
policies and procedures, in light of the
new products or circumstances,
consistent with the principles set out in
Regulation SBSR.124 DDR has proposed
to satisfy its obligation under Rule
907(c) of Regulation SBSR by making
the policies and procedures contained
in Exhibit GG (including GG.1 through
GG.6) and Exhibit HH.2, and the other
application exhibits referenced therein
available on its public Web site. Is the
information that is included in or
referenced in GG (including GG.1
through GG.6) and Exhibit HH.2
appropriate in light of the requirements
of Rule 907(c)?
16. Regulation SBSR imposes duties
on various market participants to report
SBS transaction information to a
registered SDR. Please provide your
views as to whether the DDR
application and the associated policies
and procedures (including technical
specifications for submission of data)
provide sufficient information to
potential participants of DDR about how
they would discharge these regulatory
duties when reporting to DDR. In
particular, please provide your views as
to whether DDR’s technical
specifications for submission of data are
sufficiently detailed, especially with
regard to historical SBSs (including preenactment and transitional SBS) and
bespoke SBS. Please describe in detail
what additional information you believe
is necessary to allow you to satisfy any
reporting obligation you may incur
under Regulation SBSR.
17. Rule 906(a) of Regulation SBSR
provides, in relevant part, that a
participant of a registered SDR must
provide the missing information with
respect to its side of each SBS
referenced in the report to the registered
SDR within 24 hours. DDR represents
that in order to be granted access to the
DDR system, receive trade information,
confirm or verify transactions, submit
messages, or receive reports, a market
124 See Regulation SBSR Adopting Release, 80 FR
at 14648.
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17:23 Jul 06, 2016
Jkt 238001
participant must be on-boarded as a
DDR User. Please provide your views as
to whether this form of access afforded
to the non-reporting-side is fair, open,
and not unreasonably discriminatory.
18. Please provide your views as to
whether DDR’s policies and procedures
relating to Rule 906(a) are sufficiently
detailed, appropriate and reasonably
designed to ensure data accuracy and
completeness, including with respect to
the requirement that once a day, a
registered SDR shall send a report to
each participant identifying, for each
SBS to which that participant is a
counterparty, the SBS for which the
registered SDR lacks counterparty ID
and (if applicable) broker ID, branch ID,
execution agent ID, desk ID, and trader
ID.
19. Please provide your views as to
whether DDR’s policies and procedures
relating to Rule 905(b) are sufficiently
detailed, appropriate and reasonably
designed to ensure data accuracy and
completeness.
20. Please provide your views as to
whether DDR has provided sufficient
information to explain the SBS
transaction information that it would
publicly disseminate to discharge its
duties under Rule 902 of Regulation
SBSR. Please describe any additional
information that you feel is necessary.
Please offer any suggestions generally
for how the publicly disseminated
information could be made more useful.
21. Please provide your views as to
whether DDR has provided sufficient
information to explain how Users would
be required to report life cycle events
under Rule 901(e). Please describe any
additional information that you feel is
necessary. In particular, please indicate
whether you believe DDR’s
specifications are reasonably designed
to identify the specific data element(s)
that change and thus that trigger the
report of the life cycle event.
22. Please provide your views as to
whether DDR has provided sufficient
information about how an agent could
report SBS transaction information to
DDR on behalf of a principal (i.e., a
person who has a duty under Regulation
SBSR to report). Please describe any
additional information that is necessary.
In particular, please provide your views
as to whether DDR should differentiate
between agents who are Users of DDR
because they themselves at times are
principals (i.e., they are counterparties
to one or more SBSs that are reported
to DDR on a mandatory basis) and
agents who are never principals (e.g., a
vendor).
23. Please provide your views as to
whether DDR’s policies and procedures
for the use of condition flags for
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Fmt 4703
Sfmt 4703
44387
transactions having special
characteristics under Rule 907(a)(4) of
Regulation SBSR are consistent with the
goal of preventing market participants
without knowledge of these
characteristics receiving a distorted
view of the market. Are there additional
condition flags that you believe DDR
should utilize? If so, please describe
them and why you believe they are
appropriate.
24. Exchange Act Rule 13n–10
requires that, before accepting any SBS
data from a market participant or upon
a market participant’s request, an SDR
shall furnish to the market participant a
disclosure document that contains
certain written information, which must
reasonably enable the market
participant to identify and evaluate
accurately the risks and costs associated
with using the SDR’s services. This
written information includes the SDR’s
criteria for providing others with access
to its services and data it maintains, its
criteria for those seeking to connect to
or link with it, its description of its
policies and procedures regarding its
noncommercial and/or commercial use
of the SBS transaction information that
it receives from a participant, any
registered entity, or any other person, its
description of all the SDR’s services,
including any ancillary services, and its
description of its governance
arrangements. Based on the materials
provided in DDR’s Form SDR
application, please provide your views
as to whether the disclosures provided
by the application are sufficiently
detailed to meet the objectives of
Exchange Act Rule 13n–10.
25. In addition to serving as an SDR
for the credit and equity derivatives
asset classes, DDR has applied to serve
as an SDR for what it describes as SBS
transactions in the interest rates
derivatives asset class. Please provide
your views about DDR’s description of
this asset class. Please also provide your
views as to whether DDR has provided
sufficient information about how a User
reports SBS transaction information in
this asset class. Is this information
provided sufficient? Why or why not?
Please describe any additional
information that you believe should be
provided.
26. Exchange Act Rule 13n–4(b)(5)
requires that an SDR shall provide
direct electronic access to the
Commission (or any designee of the
Commission, including another
registered entity). Based on the
materials provided in DDR’s Form SDR
application, please provide your views
as to whether DDR’s policies and
procedures are sufficient to meet the
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objectives of Exchange Act Rule 13n–
4(b)(5).
27. Rule 901(i) of Regulation SBSR
provides that a person must report
information about a pre-enactment SBS
or transitional SBS ‘‘to the extent that
information about such transaction is
available.’’ Is it clear that DDR’s policies
and procedures, including regarding
validations, will allow parties to submit
transaction records for pre-enactment
SBS and transitional SBS with data
elements missing, pursuant to Rule
901(i)?
28. Please provide your views as to
whether DDR’s policies and procedures
relating to how it would conduct
validations of transaction records for
historic and newly executed SBS are
sufficiently detailed to meet the
objectives of Exchange Act Rule 13n–
5(b)(1)(iii), and what further
clarifications, if any, you believe would
be appropriate.
Comments may be submitted by any
of the following methods:
srobinson on DSK5SPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/proposed.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number
SBSDR–2016–02 on the subject line.
Paper Comments
• Send paper comments to Brent J.
Fields, Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090. All
submissions should refer to File
Number SBSDR–2016–02.
To help the Commission process and
review your comments more efficiently,
please use only one method of
submission. The Commission will post
all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/other.shtml).
Copies of the Form SDR, all
subsequent amendments, all written
statements with respect to the Form
SDR that are filed with the Commission,
and all written communications relating
to the Form SDR between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
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17:23 Jul 06, 2016
Jkt 238001
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SBSDR–2016–02 and should be
submitted on or before August 8, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016–16112 Filed 7–6–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78206; File No. SR–FICC–
2016–002]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change To
Suspend the Interbank Service of the
GCF Repo® Service
June 30, 2016.
On May 5, 2016, the Fixed Income
Clearing Corporation (‘‘FICC’’ or the
‘‘Corporation’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) proposed rule change
SR–FICC–2016–002 pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder.2 The proposed rule change
was published for comment in the
Federal Register on May 20, 2016.3 The
Commission received no comments on
the proposed rule change. For the
reasons discussed below, the
Commission is approving the proposed
rule change.
I. Description of the Proposed Rule
Change
FICC seeks the Commission’s
approval to suspend the interbank
service of the GCF Repo® service, as
described more fully below. The
suspension does not require changes to
the text of the Government Securities
Division (‘‘GSD’’) Rulebook (the ‘‘GSD
Rules’’), however, the suspension
requires changes to FICC’s Real-Time
Trade Matching (‘‘RTTM®’’) system.
A. The GCF Repo Service
The GCF Repo service allows dealer
members of FICC’s Government Services
Division to trade general collateral
finance repos (‘‘GCF Repos’’) 4
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–77840
(May 16, 2016), 81 FR 31996 (May 20, 2016) (SR–
FICC–2016–002).
4 A GCF Repo is one in which the lender of funds
is willing to accept any of a class of U.S. Treasuries,
U.S. government agency securities, and certain
mortgage-backed securities as collateral for the
repurchase obligation. This is in contrast to a
specific collateral repo.
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1 15
2 17
Frm 00131
Fmt 4703
Sfmt 4703
throughout the day without requiring
intraday, trade-for-trade settlement on a
delivery-versus-payment basis.5 The
service allows dealers to trade GCF
Repos, based on rate and term, with
inter-dealer broker netting members on
a blind basis. Standardized, generic
CUSIP numbers have been established
exclusively for GCF Repo processing,
and are used to specify the type of
underlying security that is eligible to
serve as collateral for GCF Repos. Only
Fedwire eligible, book-entry securities
may serve as collateral for GCF Repos.
Acceptable collateral for GCF Repos
include most U.S. Treasury securities,
non-mortgage-backed federal agency
securities, fixed and adjustable rate
mortgage-backed securities, Treasury
Inflation-Protected Securities and
separate trading of registered interest
and principal securities.6
The GCF Repo service has operated
on both an ‘‘interbank’’ and ‘‘intrabank’’
basis. ‘‘Interbank’’ means that the two
GCF Repo Participants which have been
matched in a GCF Repo transaction each
clear at a different clearing bank.
‘‘Intrabank’’ means that the two GCF
Repo Participants which have been
matched in a GCF Repo transaction
clear at the same clearing bank.
B. Suspension of the Interbank Service
of the GCF Repo Service
Since 2011, FICC has made several
changes to its GCF Repo service in order
to comply with recommendations made
by the Tri-Party Repo Infrastructure
Reform Task Force (‘‘TPR’’), an industry
group formed and sponsored by the
Federal Reserve Bank of New York. The
main purpose of the TPR was to develop
recommendations to address the risk
presented by triparty repo transactions
due to the morning reversal (commonly
referred to as the ‘‘unwind’’) process, by
replacing it with a process by which
transactions are collateralized all day.
The GCF Repo service was originally
designed to have transactions ‘‘unwind’’
every morning in order to mirror the
transactions in the triparty repo market.
Prior to Triparty Reform, transactions
submitted on ‘‘Day 1’’ unwound on the
morning of ‘‘Day 2.’’ To ‘‘unwind’’
means that the securities are returned to
the lender of securities in the
transaction and the cash is returned to
the borrower of securities. Because of
certain changes to the way in which the
Triparty Reform effort was to proceed
5 Delivery-versus-payment is a settlement
procedure in which the buyer’s cash payment for
the securities it has purchased is due at the time
the securities are delivered.
6 See Securities Exchange Act Release No. 34–
58696 (September 30, 2008), 73 FR 58698, 58699
(October 7, 2008) (SR–FICC–2008–04).
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Agencies
[Federal Register Volume 81, Number 130 (Thursday, July 7, 2016)]
[Notices]
[Pages 44379-44388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16112]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78216; File No. SBSDR-2016-02]
Security-Based Swap Data Repositories; DTCC Data Repository
(U.S.) LLC; Notice of Filing of Application for Registration as a
Security-Based Swap Data Repository
June 30, 2016.
I. Introduction
On April 6, 2016 and as amended on April 25, 2016, DTCC Data
Repository (U.S.) LLC (``DDR'') filed with the Securities and Exchange
Commission (``Commission'') a Form SDR seeking registration as a
security-based swap data repository (``SDR'') under Section 13(n) of
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ and the
Commission's rules promulgated thereunder.\2\ DDR states that it
proposes to operate as a registered SDR for security-based swap
(``SBS'') transactions in the credit, equity, and interest rates \3\
derivatives asset classes. The Commission is publishing this notice to
solicit comments from interested persons regarding DDR's Form SDR,\4\
and the Commission will consider any comments it receives in making its
determination whether to grant DDR registration as an SDR.\5\
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\1\ 15 U.S.C. 78m(n)(3).
\2\ 17 CFR 240.13n-1 through 240.13n-12.
\3\ DDR seeks to include in its application the ``rates'' asset
class based on feedback from potential DDR participants who have
identified certain types of transactions which will be reported
through the interest rate infrastructure within the industry and
that the industry participants have identified as falling under the
definition of a SBS. The Commission notes that DDR's application is
for registration as a SBS data repository, which the Exchange Act
defines as a ``person that collects and maintains information or
records with respect to transactions or positions in, or the terms
and conditions of, security-based swaps entered into by third
parties for the purpose of providing a centralized recordkeeping
facility for security-based swaps.'' 15 U.S.C. 78c(a)(75).
\4\ DDR filed its Form SDR, including the exhibits thereto,
electronically with the Commission. The descriptions set forth in
this notice regarding the structure and operations of DDR have been
derived, excerpted, and/or summarized from information in DDR's Form
SDR application, and principally from DDR's Rulebook (Exhibit HH.2),
which outlines the applicant's policies and procedures designed to
address its statutory and regulatory obligations as an SDR
registered with the Commission. DDR's Form SDR application and non-
confidential exhibits thereto are available on [appropriate EDGAR
reference to be inserted]. In addition, the public may access copies
of these materials on the Commission's Web site at: [appropriate Web
site address to be inserted].
\5\ DDR's Form SDR application also constitutes an application
for registration as a securities information processor. See Exchange
Act Release No. 74246 (Feb. 11, 2015), 80 FR 14438, 14458 (Mar. 19,
2015) (``SDR Adopting Release'').
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II. Background
A. SDR Registration, Duties and Core Principles, and Regulation SBSR
Section 763(i) of the Dodd-Frank Act added Section 13(n) to the
Exchange Act, which requires an SDR to register with the Commission and
provides that, to be registered and maintain registration as an SDR, an
SDR must comply with certain requirements and ``core principles''
described in Section 13(n) and any requirement that the Commission may
impose by rule or regulation.\6\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78m(n).
---------------------------------------------------------------------------
The Commission adopted Exchange Act Rules 13n-1 through 13n-12
(``SDR rules''), which require an SDR to register with the Commission
and comply with certain ``duties and core principles.'' \7\ Among other
requirements, the SDR rules require an SDR to collect and maintain
accurate SBS data and make such data available to the Commission and
other authorities so that relevant authorities will be better able to
monitor the buildup and concentration of risk exposure in the SBS
market.\8\
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\7\ See SDR Adopting Release, 80 FR 14438.
\8\ See SDR Adopting Release, 80 FR at 14450.
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Concurrent with the Commission's adoption of the SDR rules, the
Commission adopted Regulation SBSR,\9\ which, among other things,
provides for the reporting of SBS information to registered SDRs, and
the public dissemination of SBS transaction, volume, and pricing
information by registered SDRs. In addition, Regulation SBSR requires
each registered SDR to register with the Commission as a securities
information processor.\10\
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\9\ See Exchange Act Release No. 74244 (Feb. 11, 2015), 80 FR
14563 (Mar. 19, 2015) (``Regulation SBSR Adopting Release'').
\10\ See Regulation SBSR Adopting Release, 80 FR at 14567.
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B. Standard for Granting SDR Registration
To be registered with the Commission as an SDR and maintain such
[[Page 44380]]
registration, an SDR is required (absent an exemption) to comply with
the requirements and core principles described in Exchange Act Section
13(n), as well as with any requirements that the Commission adopts by
rule or regulation.\11\ Exchange Act Rule 13n-1(c)(3) provides that the
Commission shall grant the registration of an SDR if it finds that the
SDR is so organized, and has the capacity, to be able to (i) assure the
prompt, accurate, and reliable performance of its functions as an SDR;
(ii) comply with any applicable provisions of the securities laws and
the rules and regulations thereunder; and (iii) carry out its functions
in a manner consistent with the purposes of Section 13(n) of the
Exchange Act and the rules and regulations thereunder.\12\ The
Commission must deny registration of an SDR if it does not make such a
finding.\13\
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\11\ See Exchange Act Section 13(n)(3), 15 U.S.C. 78m(n)(3).
\12\ See 17 CFR 240.13n-1(c)(3).
\13\ See id.
---------------------------------------------------------------------------
In determining whether an applicant meets the criteria set forth in
Rule 13n-1(c), the Commission will consider the information reflected
by the applicant on its Form SDR, as well as any additional information
obtained from the applicant. For example, Form SDR requires an
applicant to provide, among other things, contact information, a list
of the asset class(es) for which the applicant is collecting and
maintaining data or for which it proposes to collect and maintain data,
a description of the functions that it performs or proposes to perform,
and general information regarding its business organization.\14\ This,
and other information reflected on the Form SDR, will assist the
Commission in understanding the basis for registration as well as the
SDR applicant's overall business structure, financial condition, track
record in providing access to its services and data, technological
reliability, and policies and procedures to comply with its statutory
and regulatory obligations.\15\ Furthermore, the information requested
in Form SDR will enable the Commission to assess whether the SDR
applicant would be able to comply with the federal securities laws and
the rules and regulations thereunder, and ultimately whether to grant
or deny an application for registration.\16\
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\14\ See SDR Adopting Release, 80 FR at 14458.
\15\ See id.
\16\ See SDR Adopting Release, 80 FR at 14458-59.
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III. DDR Application for Registration
DDR currently operates as a trade repository under the regulatory
framework of other authorities. Specifically, DDR is a swap data
repository regulated and provisionally registered by the Commodity
Futures Trading Commission (``CFTC'').\17\ In that capacity, DDR has
been accepting derivatives data for the commodity, foreign exchange,
interest rate, and credit asset classes in the United States since
December 2012.\18\ Additionally, in 2014, DDR was approved by the
Ontario Securities Commission,\19\ the Autorit[eacute] des
march[eacute]s financiers,\20\ and the Manitoba Securities Commission
\21\ as a Canadian Trade Repository to serve the commodity, credit,
equity, interest rate, and foreign exchange asset classes.\22\
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\17\ See Order of Provisional Registration, In the Matter of the
Request of DTCC Data Repository (U.S.), LLC for Provisional
Registration as a Swap Data Repository Pursuant to Section 21 of the
Commodity Exchange Act and Part 49 of the Commodity Futures Trading
Commission's Regulations (Sept. 19, 2012), available at https://www.cftc.gov/stellent/groups/public/@otherif/documents/ifdocs/dtccbodsonletter091912.pdf; Order Adding Asset Class, In the Matter
of the Request of DTCC Data Repository (U.S.) LLC to Amend Its Form
SDR to Add the Other Commodity Asset Class Pursuant to Part 49 of
the Commission's Regulations (Dec. 3, 2012), available at https://www.cftc.gov/stellent/groups/public/@otherif/documents/ifdocs/dtccsdrbodsonltr120312.pdf.
\18\ See Press Release, DTCC, DTCC Swap Data Repository Real-
Time Reporting Now Live (Jan. 03, 2013), available at https://www.dtcc.com/news/2013/january/03/swap-data-repository-real-time.
\19\ See Ontario Securities Commission, Order (Section 21.2.2 of
the Securities Act), in the Matter of the Securities Act, R.S.O.
1990, Chapter S.5, as amended, and in the Matter of DTCC Data
Repository (U.S.) LLC (Sept. 19, 2014), available at https://www.osc.gov.on.ca/en/SecuritiesLaw_ord_20140923_dtcc-data-repository.htm.
\20\ See Autorit[eacute] des march[eacute]s financiers, Decision
2014-PDG-0110, Bulletin 2014-09-25, Vol. 11, n[deg]38 (Sept. 23,
2014), available at https://www.lautorite.qc.ca/files/pdf/bulletin/2014/vol11no38/vol11no38_7.pdf.
\21\ See Manitoba Securities Commission, Order No. 7013 (Oct.
23, 2014), available at https://docs.mbsecurities.ca/msc/oe/en/105125/1/document.do.
\22\ Other trade repository subsidiaries of the Depository Trust
& Clearing Corporation (``DTCC'') operate in Europe, Japan, Hong
Kong, Singapore, and Australia. See generally https://dtcc.com/derivatives-services/global-trade-repository.
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A. Corporate Structure and Governance Arrangements
DDR is a New York limited liability company, and is a wholly owned
subsidiary of DTCC Deriv/SERV LLC, which, in turn, is a wholly owned
subsidiary of The Depository Trust & Clearing Corporation
(``DTCC'').\23\ DDR is managed by a Board of Directors (``Board'')
responsible for overseeing its operations.\24\ The Board (directly or
by delegating certain responsibilities to its committees) fulfills its
responsibilities under its charter and DDR's mission statement by: (i)
Overseeing management's activities in managing, operating, and
developing DDR as a firm and evaluating management's performance of its
responsibilities; (ii) ratifying management's selection of the CEO and
providing advice and counsel to the CEO; (iii) providing oversight of
the performance of the CEO and of DDR to evaluate whether the business
is being appropriately managed; (iv) setting expectations about DDR's
tone and ethical culture and reviewing management efforts to instill an
appropriate tone and culture; (v) reviewing and approving DDR's
financial objectives and major corporate plans and actions; (vi)
providing guidance to the CEO and to management in formulating
corporate strategy and approving strategic plans; (vii) providing
oversight of risk assessment and risk management monitoring processes;
(viii) providing input and direction to governance structures and
practices to position the Board to fulfill its duties effectively and
efficiently consistent with DDR's principles of governance; (ix)
providing oversight and guidance regarding the design of informational
reporting to the Board and relevant regulators; (x) adopting principles
governing new initiative approval processes and overseeing DDR's
processes relating to new business selection and development of new
businesses and new or expanded products and services, including
guidelines for the analyses supporting any material operational or risk
management changes that are proposed by management; (xi) providing
oversight of DDR's internal and external audit processes, financial
reporting, and disclosure controls and procedures, including approving
major changes in auditing and accounting principles and practices;
(xii) fostering DDR's ability to ensure compliance with applicable laws
and regulations including derivatives, securities, and corporation laws
and other applicable regulatory guidance and international standards;
(xiii) ensuring that in DDR's decision-making process an Independent
Perspective as defined in Section 49.2 of the CFTC's regulations, is
considered; \25\ and (xiv)
[[Page 44381]]
performing such other functions as the Board believes appropriate or
necessary, or as otherwise prescribed by rules or regulations.\26\
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\23\ See Exhibit HH.2, Section 2.1. DTCC is the parent company
of a variety of entities, including three clearing agencies
registered under Section 17A of the Exchange Act and that have been
designated as systemically important by the Financial Stability
Oversight Council under Title VIII of the Dodd-Frank Act (i.e., the
National Securities Clearing Corporation, the Fixed Income Clearing
Corporation, and the Depository Trust Company).
\24\ See id.
\25\ The CFTC has defined the term ``Independent Perspective''
to mean ``a viewpoint that is impartial regarding competitive,
commercial, or industry concerns and contemplates the effect of a
decision on all constituencies involved.'' 17 CFR 49.2(a)(6).
\26\ See Exhibit D.2 (DDR Mission Statement and Board Charter).
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According to DDR, the number of directors on the Board is
determined by DTCC Deriv/SERV LLC (``DTCC Deriv/SERV'') as the sole LLC
member of DDR.\27\ DDR represents that DTCC Deriv/SERV will strive to
include on the Board an equal number of representatives of U.S. and
non-U.S. domiciled firms.\28\ DDR represents that the Board is composed
of individuals from the following groups: Employees of DDR's users
(either fees-paying users or end users) with derivatives industry
experience, buy-side representatives, independents, and members of
DTCC's senior management or DTCC's Board of Directors, with the
understanding that at least two Board members will be DTCC senior
management or DTCC Board members.\29\ DDR represents that DTCC Deriv/
SERV's Nominating Committee shall periodically review the Board's
composition to assure that the DDR directors possess the skills
required to direct and oversee management in the best interests of its
shareholders and other stakeholders, with these skills including
derivatives industry experience, risk management experience, business
specialization, technical skills, industry stature, and seniority and
experience at their own organizations.\30\
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\27\ See Exhibits D (governance narrative), D.2, and HH.2,
Section 2.2.
\28\ See Exhibits D and D.2.
\29\ See id.; see also Exhibit HH.2, Section 2.2. DDR states
that the Board will include appropriate representation by
individuals who are independent as specified by applicable
regulations. See id.
\30\ See Exhibit D.
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Additionally, DDR represents that it welcomes suggestions from
market participants of proposed or alternative candidates to serve on
the DDR Board, which may be submitted through the notices procedures
described in the Operating Procedures of DDR's Rulebook.\31\
---------------------------------------------------------------------------
\31\ See Exhibit HH.2, Section 2.2 and attached Operating
Procedures.
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DDR's Rulebook provides that its Chief Compliance Officer (``CCO'')
is appointed by the Board and reports directly to the chief executive
officer of DDR.\32\ The Board is responsible for the appointment and
removal of the CCO and approval of CCO compensation, which is at the
discretion of the Board and effected by majority vote.\33\ In addition,
the Board shall meet with the CCO at least annually.\34\ According to
DDR, the CCO also works directly with the Board in certain instances,
for example, when resolving conflicts of interest.\35\ DDR represents
that the CCO's responsibilities include, but are not limited to, the
following items: (i) Oversee and review DDR's compliance with the
applicable regulations; (ii) establish and administer written policies
and procedures reasonably designed to prevent violation of the
applicable regulations; (iii) take reasonable steps to ensure
compliance with applicable regulations relating to agreements,
contracts or transactions; (iv) establish procedures for the
remediation of non-compliance issues identified by the CCO through a
compliance office review, look-back, internal or external audit
finding, self-reported error, or validated complaint; (v) notify the
Board as soon as practicable upon becoming aware of a circumstance
indicating that DDR, or an individual acting on its behalf, is in non-
compliance with the applicable laws of a jurisdiction in which it
operates and either: (a) The non-compliance creates a risk to a DDR
User; \36\ (b) the non-compliance creates a risk of harm to the capital
markets in which it operates; (c) the non-compliance is part of a
pattern of non-compliance; or (d) the non-compliance may have an impact
on DDR's ability to carry on business as a trade repository in
compliance with applicable law; (vi) establish and follow appropriate
procedures for the handling, management response, remediation,
retesting and closing of noncompliance issues; (vii) establish and
administer a written code of ethics; and (viii) prepare and sign an
annual compliance report in accordance with applicable regulations and
associated recordkeeping.\37\
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\32\ See Exhibit HH.2, Section 2.3.
\33\ See id.
\34\ See id.
\35\ See id.
\36\ DDR defines the term ``User'' to mean an entity that has
executed a DDR User Agreement, which allows for participation in one
or more DDR services or systems. See Exhibit HH.2, Section 12.
\37\ See Exhibit HH.2, Section 2.3.
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DDR directors must comply with DDR's Board Code of Ethics and
Conflicts of Interest Policy (the ``Code''), which is intended to focus
directors on their duties as fiduciaries and provide guidance to
directors to help them recognize and deal with ethical issues, provide
mechanisms to report unethical conduct, help foster a culture of
honesty and accountability, and address actual and potential conflicts
of interest.\38\ In addition, each director is required to complete a
certificate attesting to compliance with DDR's Code upon becoming a
director, and, thereafter, on an annual basis. According to DDR's Code,
key responsibilities for directors include: (i) Acting honestly, in
good faith and in the best interests of DDR and all of the users of
DDR; (ii) using best efforts to avoid conflicts between personal and
professional interests as they relate to DDR where possible; (iii)
disclosing any conflicts and otherwise pursuing the ethical handling of
conflicts (whether actual or apparent) when conflicts or the appearance
of conflicts are unavoidable; (iv) complying with all applicable laws,
regulations and DDR policies; (v) promptly reporting any violations of
the Code to the Chairman of DDR's Board or to DDR's counsel and DDR's
CCO; (vi) seeking guidance where necessary; and (vii) being accountable
personally for adherence to the Code.\39\
---------------------------------------------------------------------------
\38\ See Exhibit D.4 (DDR Board Code of Ethics).
\39\ See id.
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B. Description of DDR's SDR Service
DDR has applied to register as an SDR with the Commission to accept
data in respect of all SBS transactions in the credit, equity, and
interest rates derivatives asset classes.\40\
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\40\ See DDR Form SDR, Item 6; see also Exhibit HH.2, Section
3.1.
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DDR represents that, if registered with the Commission, it would,
among other things: (i) Perform all of the required functions of an SDR
under the Commission's Rules 13n-1 through 13n-11; (ii) accept, from or
on behalf of Users, transaction and life-cycle data for SBS as
specified in the Commission's Regulation SBSR, as and when required to
be reported to an SDR thereunder; (iii) verify and maintain swap and
SBS data as required by such regulations; (iv) publicly disseminate SBS
data as and when required under the Commission's Regulation SBSR,
either directly or through one or more third parties; (v) provide
access to swap and SBS data to appropriate regulators; and (vi)
generate reports with respect to transaction data maintained in DDR, in
each case as specified in further detail in DDR's Operating Procedures
and applicable publications.\41\
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\41\ See Exhibit HH.2, SDR Appendix to the DDR Operating
Procedures.
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C. Access
DDR represents that it would provide access to its SDR service on a
fair, open and equal basis.\42\ According to DDR, access to and usage
of its SDR service would be available to all market participants that
engage in SBS transactions, and DDR does not and would not bundle or
tie its SDR services
[[Page 44382]]
with any other services.\43\ DDR represents that to participate in its
SDR services, each User would be required to (i) enter into a User
Agreement in one of the forms provided by DDR and (ii) agree to be
bound by the terms of the User Agreement and DDR's Operating
Procedures.\44\ According to DDR, an entity would be permitted to view
the records relating to an individual transaction if it is: (i) A
counterparty or an authorized agent of a counterparty to the
transaction; (ii) a regulator and the transaction is reportable to that
regulator; or (iii) a third-party agent submitter of the transaction,
provided that agents who are submitters will not be able to view the
current positions, unless authorized by a counterparty to the
transaction, but will be able to see the submission report only for the
purpose of viewing the success or failure of messages submitted by such
agents.\45\ DDR represents that it shall retain exclusive control over
the system through which its SDR services are provided.\46\
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\42\ See Exhibits U, V, Y, and HH.2, Section 1.1.
\43\ See Exhibit HH.2, Section 1.1.
\44\ See Exhibit HH.2, Section 1.2.
\45\ See Exhibit HH.2, Section 1.3.
\46\ See id.
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DDR represents that it may summarily terminate a User's account and
access to SDR services when the Board determines that: (a) The User has
materially breached its User Agreement, DDR's Operating Procedures, or
the rules contained in its Rulebook, which threatens or may cause
immediate harm to the normal operation of DDR's system, or any
applicable law including those relating to the regulations administered
and enforced by the U.S. Department of Treasury's Office of Foreign
Assets Control or the Canadian Government Office of the Superintendent
of Financial Institutions; or (b) the User's account or User's IT
system is causing material harm to the normal operation of DDR's
system.\47\ According to DDR, the following actions must take place
before DDR staff initiates any actions which may result in a User's
termination of access to the DDR system and, specifically, SDR
services: (i) DDR senior management, as well as DDR's counsel and CCO,
must be involved in any decision to involuntarily terminate a User; and
(ii) the Chairman of the Board of DDR must be notified in advance of
any involuntary termination.\48\ DDR represents that, upon a summary
termination of a User's access pursuant to its rulebook, DDR shall, as
soon as possible, notify the impacted User of the termination in
writing or via email, with such notice stating, to the extent
practicable, in general terms how pending transaction submissions and
other pending matters will be affected and what steps are to be taken
in connection therewith.\49\
---------------------------------------------------------------------------
\47\ See Exhibit HH.2, Section 10.3.1.
\48\ See id.
\49\ See id. Because persons applying to be SDRs are also
applying to be SIPs with the Commission, the procedures for
notifying the Commission of any prohibitions or limitations of
access to services as provided in Section 11A(b)(5)(A) would apply.
See SDR Adopting Release, 80 FR at 14482 (``Rule 909 of Regulation
SBSR, which the Commission is concurrently adopting in a separate
release, requires each registered SDR to register as a SIP, and, as
such, Exchange Act Section 11A(b)(5) governs denials of access to
services by an SDR. This section provides that `[i]f any registered
securities information processor prohibits or limits any person in
respect of access to services offered, directly or indirectly, by
such securities information processor, the registered securities
information processor shall promptly file notice thereof with the
Commission.' Accordingly, an SDR must promptly notify the Commission
if it prohibits or limits access to any of its services to any
person.'').
---------------------------------------------------------------------------
D. Use of Data
DDR represents that its services would be available to all market
participants on a fair, open and equal basis. DDR represents that a
market participant must be on-boarded as a DDR User to be granted
access to the DDR system, receive trade information, confirm or verify
transactions, submit messages, or receive reports.\50\ For those market
participants that on-board, DDR would provide a mechanism for Users to
access the DDR system to confirm and verify transactions and provide
Unique Identification Code (``UIC'') information as required under its
procedures. Additionally, DDR represents that access to U.S. swap or
SBS data maintained by DDR to market participants is generally
prohibited except to: (i) Either counterparty to that particular swap
or SBS; (ii) authorized third-party service providers or other parties
specifically authorized by the User or counterparty pursuant to DDR's
Rulebook; (iii) or to appropriate domestic or foreign regulators in
accordance with applicable regulation and DDR's Rulebook.\51\
---------------------------------------------------------------------------
\50\ See Exhibit HH.2, Section1.1.
\51\ See Exhibit HH.2, Section 6.3. With respect to regulator
access, DDR also represents that pursuant to applicable law, the
designated regulators (which is defined to include regulators which
supervise DDR, including the Commission and CFTC) shall be provided
with direct electronic access to DDR data reported to DDR in
satisfaction of such regulator's regulatory mandate to satisfy their
legal and regulatory obligations. See id., Sections 6.2 and 12.
---------------------------------------------------------------------------
E. Asset Classes Accepted; Submission Requirements; Validation
DDR has represented that it would accept data in respect of all SBS
trades in the credit equity, and interest rate \52\ derivatives asset
classes.\53\ DDR has represented that Users would be required to submit
trade information in the data format required by DDR. DDR would accept
data using the following open-source structured data formats: Financial
Products Markup Language (``FpML'') and Comma-separated Value (``CSV'')
file.\54\
---------------------------------------------------------------------------
\52\ See n.3 supra.
\53\ See Form SDR and Exhibit HH.2, Section 3.1.
\54\ See Exhibit GG.3.
---------------------------------------------------------------------------
Exhibits GG.2 (for credit derivatives), GG.4 (for equity
derivatives), and GG.6 (for interest rates) to DDR's application
enumerate the required fields and acceptable values for the submission
of trade information into the DDR system. Upon submission of a
transaction, DDR will perform validation checks to ensure that each
submitted record is in the proper format and will also perform
validation and consistency checks against certain data elements,
including, for example, sequencing of time and date fields (e.g., the
termination date must be greater than the trade date).\55\ These
validation types include:
---------------------------------------------------------------------------
\55\ See Exhibit HH.2, Section 10.1.1.
---------------------------------------------------------------------------
Schema validations--check that a submission is consistent
with the accepted format (i.e., CSV is valid, the fields are formatted
correctly);
Core validations--the basic checks that ensure the
submission can be accepted into the SDR (i.e., Permission, USI/UTI
lock, transaction and action type consistency validations);
Business validation--applied at the point of in-bound
submission processing to ensure integrity and logical consistency.
These validations will ensure that the messages are well formed and
provide a logical and complete description of the core trade economics
and ensure that DDR does not degrade the quality of the information
held within the repository by allowing incomplete or illogical trade
descriptions to be accepted and stored; and
Regulatory validations--regulatory-specific validations
applied following the normal business validations. (For example, if the
same field is required by one jurisdiction and is optional for another,
the jurisdiction requiring the field would have a regulatory validation
to check for the field.) \56\
---------------------------------------------------------------------------
\56\ See Exhibit GG.3.
---------------------------------------------------------------------------
DDR further represents that it would accept or reject transactions
based on its validation process.\57\ DDR's policies and procedures
state that acceptance messages are called ACKs (acceptance) and
rejection messages are called
[[Page 44383]]
NACKs (negative acceptance).\58\ Where a transaction is accepted, both
the submitting party and its on-boarded counterparty would receive
electronic ACK messages. Where a transaction was not accepted, the
submitting party would receive an electronic NACK message along with an
associated error code so that they can correct the transaction and
retransmit to DDR. Where a transaction is accepted but fails one of the
jurisdictional (i.e., regulatory) validations, the submitting party
will receive an electronic notification along with the associated error
code so it can correct the transaction and retransmit to DDR.\59\
---------------------------------------------------------------------------
\57\ See Exhibit GG.3.
\58\ See id.
\59\ See id.
---------------------------------------------------------------------------
DDR represents that DDR may reject a transaction record submitted
due to the submission failing to meet DDR validations, including but
not limited to the submission failing to be in a format that can be
ingested by DDR, failing to meet jurisdictional (i.e., regulatory)
requirements or failing to provide required data elements.\60\ DDR
further represents that a rejected submission is deemed not to have
been submitted at all with respect to reporting to the jurisdiction for
which it was rejected, and that it is possible that one transmission is
submitted to comply with reporting in more than one jurisdiction and
may be acceptable for one jurisdiction, but rejected for the other.\61\
---------------------------------------------------------------------------
\60\ See id.
\61\ See Exhibit HH.2, Section 1.2 and Exhibit GG.3.
---------------------------------------------------------------------------
In connection with the reporting of ``pre-enactment and
transitional SBS,'' DDR represents that it will accept the following
types of historical trades: (i) ``Historical Expired,'' which are pre-
enactment SBS executed before July 21, 2010 but expired or terminated
before the compliance date for Regulation SBSR, (ii) ``Historical,''
which are transitional SBS executed after July 21, 2010 but expired or
terminated before the compliance date for Regulation SBSR, and (iii)
``Backload,'' which are pre-enactment SBS or transitional SBS in
existence on or after the compliance date for Regulation SBSR.\62\ DDR
states that it does not validate whether or not the historical expired
trade satisfies the Commission's definition of an expired pre-enactment
or transitional swap, and that the Historical and Historical Expired
trades will be subject to a minimal set of validations in order for the
submission to be accepted by DDR, which will focus on core fields
necessary for the system to ingest the trade (including a valid Unique
Transaction Identifier).\63\ DDR further states that Backload trades
will have the standard validations that are applied on all SBS
submissions and must meet the requirements in order for the submission
to be ingested and reported to the Commission.\64\
---------------------------------------------------------------------------
\62\ See Exhibit GG.3.
\63\ See id.
\64\ See id.
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F. Verification of Transaction Data
DDR represents that its SDR services verification processes are
designed to reasonably establish that the transaction data that has
been submitted to DDR is complete and accurate.\65\ Once a position is
established either through a snapshot or DDR's own calculation of
events from transaction records, the terms of the position are
designated as either verified, disputed, pending verification, or
deemed verified.\66\
---------------------------------------------------------------------------
\65\ See Exhibit HH.2, Section 3.3.4.
\66\ See id. A ``snapshot'' refers to a message that reflects
the current state of the trade, which DDR refers to as the trade's
position.
---------------------------------------------------------------------------
According to DDR, a transaction record is verified if it (i) is
submitted by a Trusted Source (which is defined as an entity, which has
entered into a User agreement, been recognized as a Trusted Source by
DDR and provides the definitive report of a given position),\67\ (ii)
is a trade between affiliated parties, (iii) is submitted from an
affirmation or confirmation platform, or (iv) was executed on an
electronic trading facility.\68\ In addition, the non-reporting User is
responsible for verifying the accuracy of the information that has been
submitted by the reporting party User. DDR represents that a non-
reporting User can verify the accuracy of such information by sending a
verification message indicating that it verifies or disputes each
position where it is identified as the counterparty.\69\
---------------------------------------------------------------------------
\67\ See Exhibit HH.2, Section 12.
\68\ See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1 and Exhibit
GG.3.
\69\ See id.
---------------------------------------------------------------------------
DDR represents that it would attempt to contact counterparties to a
trade reported to DDR who are not Users (a ``Non-User''), where such
party's LEI is provided and there is email contact information
available to DDR in the information or static data maintained by the
DTCC trade repositories \70\ about their Users, to notify the non-User
that a trade has been reported on which it might have been named a
counterparty and it must on-board to DDR to verify the accuracy of the
information submitted and provide any missing information such as UICs,
if applicable.\71\ DDR represents that, if no LEI is provided or if the
email information is not available (for example, under local privacy
laws or contractual obligations between the counterparty and the trade
repository with which it has contracted as a User), it would take no
further action.\72\ In addition, DDR will not verify the accuracy of
the email, nor follow up if an email bounces back.\73\ DDR represents
that it will provide the Commission and CFTC with a monthly status of
the outreach to Non-Users.\74\
---------------------------------------------------------------------------
\70\ DTCC operates trade repositories in a number of other
jurisdictions. See n.22 supra.
\71\ See Exhibit HH.2. Sections 3.3.4 and 3.3.2.1 and Exhibit
GG.3.
\72\ See id.
\73\ See id.
\74\ See Exhibit HH.2, Section 3.3.4.1.
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The DDR system will provide trade detail reports that will enable
Users to view all transaction records, which will allow Users to
reconcile the transaction records in the SDR services to their own risk
systems.\75\ DDR's policies and procedures provide that, in the event
that both counterparties to a trade agree that data submitted to DDR
contains erroneous information (e.g., through a mutual mistake of
fact), such Users may each submit a cancel record, effectively
cancelling the incorrect transaction record.\76\ If a trade record has
been submitted by only one counterparty and it is determined by the
submitting User that it is erroneous, the submitting User may submit a
cancel record.\77\ A User may cancel only its own submitted record and
cannot cancel a record where it is not the submitting party of the
record.\78\ DDR shall maintain a record of all corrected errors
pursuant to applicable regulations and such records shall be available
upon request to the applicable designated regulator.\79\
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\75\ See Exhibit HH.2, Section 10.1.2.
\76\ See Exhibit HH.2, Section 10.1.1.
\77\ See id.
\78\ See Exhibit HH.2, Section 10.1.1.
\79\ See id.
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G. Disputed Trade Data
Under DDR's policies and procedures, Users are responsible for
resolving any disputes between themselves uncovered during any
reconciliation process and, as appropriate, for submitting correct
information.\80\ If a User disputes a transaction record alleged to
apply to it by the counterparty, or disputes any of the terms within
the alleged transaction, the User shall register such dispute by
submitting a ``dispute'' message.\81\ If such User fails to register
such dispute within 48 hours of the relevant trade detail report being
issued, the record will be marked as ``deemed verified'' in
[[Page 44384]]
the DDR system.\82\ All reports and trade records provided to
regulators will include the status of these transaction records,
including dispute and verification status.\83\ Where DDR has received
conflicting or inconsistent records from more than one submitter in
respect of a particular transaction (such as from a security-based swap
execution facility and a reporting party User), DDR would maintain all
such records (unless cancelled or modified in accordance with the terms
of the Rulebook) and make such records available to designated
regulators in accordance with the terms of the User Agreement and
applicable law.\84\
---------------------------------------------------------------------------
\80\ See Exhibit HH.2, Section 10.1.2.
\81\ See id.
\82\ See id.
\83\ See id.
\84\ See id.
---------------------------------------------------------------------------
H. Application and Dissemination of Condition Flags
DDR represents that, with respect to flags that are applied to
publicly disseminated reports to help prevent a distorted view of the
market, DDR has established the following flags that indicate that
additional information is needed to understand the publicly
disseminated price: Inter-affiliate, Nonstandard flag, Off market flag,
Pricing context, and Compressed trade.\85\ DDR also states that further
information regarding the flags is available in its matrices under the
narrative column.\86\
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\85\ See Exhibit GG.1.
\86\ See id.; see also Exhibits GG.2, GG.4, and GG.6, which are
the matrices that enumerate the required fields and acceptable
values for the submission of trade information into the DDR system.
---------------------------------------------------------------------------
I. Calculation and Maintenance of Positions
DDR's SDR service would allow DDR to calculate open positions for
persons with open SBS for which DDR maintains records. DDR's policies
and procedures relating to its calculation of positions are provided in
Exhibit DD.
J. Assignment of Unique Identification Codes
DDR's policies and procedures state that pursuant to Commission
regulation (e.g., Regulation SBSR), all registered SDRs must have a
systemic means of identifying and tracking all products and persons
involved in a SBS transaction, and that Commission regulation (e.g.,
Regulation SBSR) has prescribed 10 identifiers where a UIC shall be
used.\87\ Further, DDR represents that it requires all Users to obtain
a valid LEI where it exists, from an internationally recognized
standards-setting system (``IRSS'') that is recognized by the
Commission, and that, where LEIs are populated, DDR performs a digit
check on the LEI.\88\
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\87\ See Exhibit GG.3; see also Exhibit HH.2, Section 4.1.
\88\ See Exhibit GG.3. DDR also notes that the Commission has
recognized the global Legal Entity Identifier (``LEI'') as an
internationally recognized standards-setting system (``IRSS'').
---------------------------------------------------------------------------
DDR has proposed that its Users will be required to provide Legal
Entity Identifiers for the following fields: Platform ID, ultimate
parent ID, counterparty ID, broker ID, and execution agent ID.\89\ For
other UICs (transaction ID, branch ID, trading desk ID, trader ID, and
product ID) as discussed further below, DDR has further proposed that
each User will be required to create the identifiers in prescribed
formats, and that it shall be each User's responsibility to maintain
such identifiers (including, but not limited to, any internal mapping
of static data) and to ensure their continued accuracy.\90\
---------------------------------------------------------------------------
\89\ See id. For counterparty IDs for entities that do not have
an LEI (such as a natural person), DDR has proposed alternative
methods for providing a counterparty ID.
\90\ See id.
---------------------------------------------------------------------------
K. Transaction ID Methodology
DDR represents that it accepts transaction IDs in the UTI
field.\91\ To validate the uniqueness of each transaction ID, DDR would
apply a methodology, which it refers to as ``Locks,'' that prevents the
transaction ID from being used for another trade in the same or another
jurisdiction.\92\ However, DDR also represents that it is the
responsibility of the reporting party User to create and provide the
transaction ID on each transaction.\93\
---------------------------------------------------------------------------
\91\ See Exhibit GG.3.
\92\ See id.
\93\ See id.
---------------------------------------------------------------------------
K. Ultimate Parent and Affiliate Information
DDR represents that it captures the UIC for ultimate parent ID in
DDR's system at the time a User on-boards to DDR as this is static
information that does not vary by trade. DDR requires that each User
provide the LEI of the ultimate parent for each account that is
registered with DDR, with the exception of (1) natural persons who are
not required to provide an LEI for ultimate parent and (2) asset
managers and the funds they manage (for asset managers, if the ultimate
parent LEI of the fund is unavailable, DDR will accept the LEI for the
fund).\94\
---------------------------------------------------------------------------
\94\ See id.; see also Exhibit HH.2.
---------------------------------------------------------------------------
M. Branch, Trading Desk, and Trader ID
DDR represents that each User is required to create, among other
identifiers, the branch ID, trading desk ID, and trader ID. With
respect to branch ID, DDR represents that it requires the User to
provide the two digit ISO alpha country code and the two digit
subdivision (city) code where the branch or other unincorporated office
is located. DDR represents that if the User has more than one branch in
the same subdivision (city), the branch ID will also include a single
digit following the country and city code referencing the specific
branch, such as 1 or 2, for example.\95\ DDR represents that it
requires that Users populate the trading desk ID and trader ID fields
using an alphanumeric code with ten characters or less.\96\
---------------------------------------------------------------------------
\95\ See Exhibit GG.3.
\96\ See id.
---------------------------------------------------------------------------
N. Product ID
DDR represents that each User is required to create the product ID.
DDR represents that the product ID for all asset classes will be the
ISDA taxonomy.\97\
---------------------------------------------------------------------------
\97\ See id.
---------------------------------------------------------------------------
O. Missing UIC Information
Rule 906(a) of Regulation SBSR requires a registered SDR to
identify any SBS reported to it for which the registered SDR does not
have the counterparty ID and (if applicable) the broker ID, branch ID,
execution agent ID, trading desk ID, and trader ID of each direct
counterparty. Once a day, the registered SDR must send a report to each
participant of the registered SDR (or, if applicable, an execution
agent) identifying, for each SBS to which that participant is a
counterparty, the SBS(s) for which the registered SDR lacks the
counterparty ID and (if applicable) broker ID, branch ID, execution
agent ID, trading desk ID, or trader ID.
DDR's policies and procedures provide that to assist each User in
identifying and supplying missing UIC information, the User's position
report, which shall be made available each day to all Users, can be
used to identify each SBS transaction for which DDR lacks any of the
required UICs.\98\ DDR further represents that it will utilize a
procedure similar to its process for contacting non-Users to confirm
transactions to attempt to obtain missing UIC information.\99\
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\98\ See Exhibit HH.2, Section 4.2.3.3.
\99\ See id.
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P. Public Dissemination
According to DDR, its public price dissemination (``PPD'') solution
provides Users with a way to report prices publicly pursuant to the
[[Page 44385]]
Commission regulations for SBS (e.g., Regulation SBSR). DDR's policies
and procedures state that reporting sides are provided with a specific
message (the ``PPD Message''), with which to provide information
required to be disseminated. The PPD Message is available for
dissemination if the fields ``Reporting Obligation Party 1'' or
``Reporting Obligation Party 2'' are populated with ``SEC'' and the
message passes validations.\100\ According to DDR, the PPD platform
will perform validations on every PPD Message submitted, and based on
the result of that validation, it will issue a response to the relevant
parties indicating a positive or negative validation result (i.e., the
``ACK'' or ``NACK'' messages discussed in Section III.E).
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\100\ See Exhibit GG.3.
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DDR's policies and procedures state that DDR requires a separate
message for public dissemination and for updating the position
record.\101\ DDR's policies and procedures also state that DDR requires
that PPD Messages be sent at the same time as position messages (i.e.,
Primary Economic Terms (``PET''), Confirmation, and/or Snapshot
messages).\102\ Further, DDR's policies and procedures provide that DDR
does not determine whether a PPD Message should be disseminated
publicly, and that any such PPD Message received is disseminated
publicly if it passes validations and is directed to the Commission, as
discussed above.\103\ Further, DDR states that it requires that the
reporting party User provide only PPD Messages that are required to be
disseminated under the regulations.\104\
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\101\ See Exhibit GG.3.
\102\ See id. DDR's User Guide (Exhibit GG.3) also provides
descriptions of each of these types of messages. For example, a PET
message is used to report the full details of the economic terms for
trade and lifecycle events prior to confirmation.
\103\ See id. and Exhibit HH.2, Section 5.1.2.
\104\ See id.
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DDR represents that the PPD will receive messages with the
following potential entries in the ``Action'' field for a UTI: New,
Modify, and Cancel.\105\ A New message will be the first report for a
trade event submission, and only one UTI with an action of New will be
allowed.\106\ A Modify message will be a valid modification or
correction to an existing trade event that has previously been reported
by a submitting party, and the Modify action will be displayed to the
public as a Cancel of the original submission and a Correction
representing the Modify submission.\107\ A cancel message will instruct
the PPD Platform to cancel the last submission on a particular UTI,
and, if the previous submission has been disseminated, the PPD Platform
will disseminate the cancel with the original dissemination ID
link.\108\
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\105\ See Exhibit GG.3.
\106\ See id.
\107\ See id.
\108\ See id. The dissemination ID is a DDR-generated identifier
used to uniquely identify a message without exposing the UTI and
will be used to manage cancellations and corrections.
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Q. Safeguarding Data, Operational Reliability, and Emergency Authority
DDR represents that the DDR system is supported by DTCC and relies
on the disaster recovery program maintained by DTCC.\109\ DDR's
policies and procedures provide the key principles below for business
continuity and disaster recovery that DDR follows to enable DDR to
provide timely resumption of critical services should there be any
disruption to DDR business: (i) Achieve recovery of critical services
within a four-hour window with faster recovery time in less extreme
situations; (ii) disperse staff across geographically diverse operating
facilities; (iii) operate multiple back-up data centers linked by a
highly resilient network technology; (iv) maintain emergency command
and out-of-region operating control; (v) utilize new technology which
provides high-volume, high-speed, asynchronous data transfer over
distances of 1,000 miles or more; (vi) maintain processes that mitigate
marketplace, operational and cyber-attack risks; (vii) test continuity
plan readiness and connectivity on a regular basis, ensuring that Users
and third-party vendors/service providers can connect to DDR's primary
and back-up sites; (viii) communicate on an emergency basis with the
market, Users, and government agency decision-makers; and (ix)
evaluate, test, and utilize best business continuity and resiliency
practices.\110\
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\109\ See Exhibit HH.2, Section 8.1.
\110\ See id.
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DDR represents that it retains the right to exercise emergency
authority in the event of circumstances determined by DDR to require
such response or upon request by the designated regulators as
applicable, and that any exercise of DDR's emergency authority shall be
adequate to address the nature and scope of any such emergency.\111\
DDR further represents that its CEO shall have the authority to
exercise emergency authority, and that in his/her absence, any other
officer of DDR shall have such authority.\112\ DDR has stated that
circumstances requiring the invocation of emergency authority include,
but are not limited to, occurrences or circumstances: (a) Determined by
DDR to constitute an emergency; (b) which threaten the proper
functioning of the DDR system and the SDR services; or (c) which
materially and adversely affect the performance of the DDR system and
the SDR services.\113\ DDR states that emergencies include, but are not
limited to, natural, man-made and information technology
emergencies.\114\
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\111\ See Exhibit HH.2, Section 7.3.
\112\ See id.
\113\ See id.
\114\ See id.
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Pursuant to its policies and procedures, DDR shall notify the
designated regulators, as soon as reasonably practicable, of an
invocation of emergency authority or a material system outage is
detected by DDR.\115\ Such notification shall be provided in accordance
with applicable regulations and will include the reasons for taking
such emergency action, how potential conflicts of interest were
minimized and documentation of the decision-making process.\116\
Documentation underlying the emergency shall be made available to the
designated regulators upon request.\117\ DDR also represents that it
shall issue an ``Important Notice'' as to all Users as soon as
reasonably practicable in the event such emergency authority is
exercised.\118\
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\115\ See Exhibit HH.2, Section 7.3.
\116\ See id.
\117\ See id.
\118\ See id. An ``Important Notice'' is a formal notice sent to
Users describing significant changes to DDR Rules, DDR Systems or
other processes. See id., Section 12.
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DDR represents that it shall avoid conflicts of interest in
decision-making with respect to emergency authority taken.\119\ If a
potential conflict of interest arises, the CCO shall be notified and
consulted for the purpose of resolving the potential conflict.\120\
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\119\ See Exhibit HH.2, Section 7.3.
\120\ See id.
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DDR represents that any emergency actions taken by DDR may be
terminated by the CEO and in his/her absence, any other officer of DDR,
and that any such termination of an emergency action will be followed
by the issuance of an Important Notice as soon as reasonably
practicable.\121\
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\121\ See id.
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R. Data Confidentiality; Sensitive Information and Security
DDR represents that DTCC has established a Technology Risk
Management Team, whose role is to manage information security risk and
ensure the availability, integrity, and confidentiality of the
organization's information assets, but that DDR will be
[[Page 44386]]
responsible for monitoring the performance of DTCC with regard to
implementation and maintenance of information security within its
infrastructure.\122\ DDR further represents that various policies have
been developed to provide the framework for both physical and
information security and are routinely refreshed. The Technology Risk
Management Team carries out a series of processes to endeavor to ensure
DDR is protected in a cost-effective and comprehensive manner. This
includes preventative controls such as firewalls, appropriate
encryption technology, and authentication methods. Vulnerability
scanning is used to identify high risks to be mitigated and managed and
to measure conformance against the policies and standards.\123\
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\122\ See Exhibit HH.2, Section 9.1.
\123\ See Exhibit HH.2, Section 9.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning DDR's Form SDR, including whether DDR has
satisfied the requirements for registration as an SDR. To the extent
possible, commenters are requested to provide empirical data and other
factual support for their views. In addition, the Commission seeks
comment on the following issues:
1. Please provide your views as to whether DDR's application for
registration as an SDR demonstrates that DDR is so organized, and has
the capacity, to be able to assure the prompt, accurate, and reliable
performance of its functions as an SDR, comply with any applicable
provisions of the securities laws and the rules and regulations
thereunder, and carry out its functions in a manner consistent with the
purposes of Section 13(n) of the Exchange Act and Commission's SDR
rules.
2. Exchange Act Rule 13n-5(b)(1)(iii) requires every SDR to
establish, maintain, and enforce written policies and procedures
reasonably designed to satisfy itself that the transaction data that
has been submitted to the SDR is complete and accurate. Please provide
your views as to whether DDR's policies and procedures concerning
verification of trade data are sufficiently detailed and reasonably
designed to satisfy DDR that the transaction data that has been
submitted to DDR is complete and accurate, as required by Exchange Act
Rule 13n-5(b)(1)(iii).
3. Please provide your views as to whether DDR's policies and
procedures to address confirmation of data accuracy and completeness
for bespoke, bilateral SBS transactions (i.e., DDR will attempt to
contact a non-User counterparty to verify the accuracy of a trade if
DDR has been provided with the non-User counterparty's LEI and can
access email contact information for the non-User counterparty in the
static data maintained by the DTCC trade repositories about their
Users) are appropriate and reasonably designed to meet its obligations
under Exchange Act Rule 13n-5(b)(1)(iii).
4. Please provide your views as to whether DDR's policies and
procedures are sufficiently detailed and reasonably designed to ensure
that the transaction data and positions that it maintains are complete
and accurate, as required by Exchange Act Rule 13n-5(b)(3).
5. Please provide your views as to whether DDR's policies and
procedures are sufficiently detailed and reasonably designed to ensure
that it has the ability to protect the privacy of SBS transaction
information that it receives, as required by Exchange Act Rule 13n-9.
6. Please provide your views as to whether DDR's policies and
procedures are sufficiently detailed and reasonably designed to ensure
that it has the ability to calculate positions, as required by Exchange
Act Rule 13n-5(b)(2).
7. Please provide your views as to whether DDR's policies and
procedures are sufficiently detailed and reasonably designed to provide
a mechanism for Users and their counterparties to effectively resolve
disputes over the accuracy of SBS data that DDR would maintain, as
required by Exchange Act Rule 13n-5(b)(6). Are DDR's policies and
procedures, including with respect to the specified timeframe, relating
to dispute resolution adequate? Why or why not?
8. Please provide your views as to whether DDR's policies and
procedures are sufficiently detailed and reasonably designed to ensure
that its systems that support or are integrally related to the
performance of its activities provides adequate levels of capacity,
integrity, resiliency, availability, and security, as required by
Exchange Act Rule 13n-6.
9. Please provide your views as to whether DDR's policies and
procedures are sufficiently detailed and reasonably designed for the
CCO's handling, management response, remediation, retesting, and
closing of noncompliance issues, as required by Exchange Act Rule 13n-
11(c)(7).
10. Please provide your views as to whether DDR's policies or
procedures could result in an unreasonable restraint of trade or impose
any material anticompetitive burden on the trading, clearing, or
reporting of transactions.
11. Please provide your views as to whether DDR's proposed dues,
fees, or other charges, discounts or rebates and the process for
setting dues, fees, or other charges, discounts or rebates are fair and
reasonable and not unreasonably discriminatory. Please address whether
such proposed dues, fees, other charges, discounts, or rebates are
applied consistently across all similarly situated users of DDR's
services, including, but not limited to, Users, market infrastructures
(including central counterparties), venues from which data can be
submitted to DDR (including exchanges, SBS execution facilities,
electronic trading venues, and matching and confirmation platforms),
and third party service providers.
12. Exchange Act Rule 13n-4(c)(2)(i)-(iii) provides that each SDR
(i) shall establish governance arrangements that are well defined and
include a clear organizational structure with effective internal
controls; (ii) must establish governance arrangements that provide for
fair representation of market participants; and (iii) must provide
representatives of market participants, including end-users, with the
opportunity to participate in the process for nominating directors and
with the right to petition for alternative candidates. Please provide
your views as to whether DDR's governance arrangements are appropriate
in light of the requirements of Rule 13n-4(c)(2)(i)-(iii).
13. Exchange Act Rule 13n-4(c)(3)(i)-(ii) provides that each SDR
must establish, maintain, and enforce written policies and procedures
reasonably designed to identify and mitigate potential and existing
conflicts of interest in the SDR's decision-making process on an
ongoing basis, and, with respect to the decision-making process for
resolving any conflicts of interest, each SDR shall require the recusal
of any person involved in such conflict from such decision-making.
Please provide your views as to whether DDR's policies and procedures
are appropriate in light of the requirements of Exchange Act Rule
Exchange Act Rule 13n-4(c)(3)(i)-(ii).
14. Rule 903(a) of Regulation SBSR provides, in relevant part, that
if no system has been recognized by the Commission, or a recognized
system has not assigned a UIC to a particular person, unit of a person,
or product, the registered SDR shall assign a UIC to that person, unit
of person, or product using its own methodology. Is the methodology
that DDR proposes to use with respect to UICs as described in its
application materials appropriate in light of the requirements under
Rule
[[Page 44387]]
903(a) of Regulation SBSR? Why or why not?
15. Rule 907(c) of Regulation SBSR requires a registered SDR to
make its Regulation SBSR policies and procedures publicly available on
its Web site. The Commission has stated that this public availability
requirement will allow all interested parties to understand how the
registered SDR is utilizing the flexibility it has in operating the
transaction reporting and dissemination system, and will provide an
opportunity for market participants to make suggestions to the
registered SDR for altering and improving those policies and
procedures, in light of the new products or circumstances, consistent
with the principles set out in Regulation SBSR.\124\ DDR has proposed
to satisfy its obligation under Rule 907(c) of Regulation SBSR by
making the policies and procedures contained in Exhibit GG (including
GG.1 through GG.6) and Exhibit HH.2, and the other application exhibits
referenced therein available on its public Web site. Is the information
that is included in or referenced in GG (including GG.1 through GG.6)
and Exhibit HH.2 appropriate in light of the requirements of Rule
907(c)?
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\124\ See Regulation SBSR Adopting Release, 80 FR at 14648.
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16. Regulation SBSR imposes duties on various market participants
to report SBS transaction information to a registered SDR. Please
provide your views as to whether the DDR application and the associated
policies and procedures (including technical specifications for
submission of data) provide sufficient information to potential
participants of DDR about how they would discharge these regulatory
duties when reporting to DDR. In particular, please provide your views
as to whether DDR's technical specifications for submission of data are
sufficiently detailed, especially with regard to historical SBSs
(including pre-enactment and transitional SBS) and bespoke SBS. Please
describe in detail what additional information you believe is necessary
to allow you to satisfy any reporting obligation you may incur under
Regulation SBSR.
17. Rule 906(a) of Regulation SBSR provides, in relevant part, that
a participant of a registered SDR must provide the missing information
with respect to its side of each SBS referenced in the report to the
registered SDR within 24 hours. DDR represents that in order to be
granted access to the DDR system, receive trade information, confirm or
verify transactions, submit messages, or receive reports, a market
participant must be on-boarded as a DDR User. Please provide your views
as to whether this form of access afforded to the non-reporting-side is
fair, open, and not unreasonably discriminatory.
18. Please provide your views as to whether DDR's policies and
procedures relating to Rule 906(a) are sufficiently detailed,
appropriate and reasonably designed to ensure data accuracy and
completeness, including with respect to the requirement that once a
day, a registered SDR shall send a report to each participant
identifying, for each SBS to which that participant is a counterparty,
the SBS for which the registered SDR lacks counterparty ID and (if
applicable) broker ID, branch ID, execution agent ID, desk ID, and
trader ID.
19. Please provide your views as to whether DDR's policies and
procedures relating to Rule 905(b) are sufficiently detailed,
appropriate and reasonably designed to ensure data accuracy and
completeness.
20. Please provide your views as to whether DDR has provided
sufficient information to explain the SBS transaction information that
it would publicly disseminate to discharge its duties under Rule 902 of
Regulation SBSR. Please describe any additional information that you
feel is necessary. Please offer any suggestions generally for how the
publicly disseminated information could be made more useful.
21. Please provide your views as to whether DDR has provided
sufficient information to explain how Users would be required to report
life cycle events under Rule 901(e). Please describe any additional
information that you feel is necessary. In particular, please indicate
whether you believe DDR's specifications are reasonably designed to
identify the specific data element(s) that change and thus that trigger
the report of the life cycle event.
22. Please provide your views as to whether DDR has provided
sufficient information about how an agent could report SBS transaction
information to DDR on behalf of a principal (i.e., a person who has a
duty under Regulation SBSR to report). Please describe any additional
information that is necessary. In particular, please provide your views
as to whether DDR should differentiate between agents who are Users of
DDR because they themselves at times are principals (i.e., they are
counterparties to one or more SBSs that are reported to DDR on a
mandatory basis) and agents who are never principals (e.g., a vendor).
23. Please provide your views as to whether DDR's policies and
procedures for the use of condition flags for transactions having
special characteristics under Rule 907(a)(4) of Regulation SBSR are
consistent with the goal of preventing market participants without
knowledge of these characteristics receiving a distorted view of the
market. Are there additional condition flags that you believe DDR
should utilize? If so, please describe them and why you believe they
are appropriate.
24. Exchange Act Rule 13n-10 requires that, before accepting any
SBS data from a market participant or upon a market participant's
request, an SDR shall furnish to the market participant a disclosure
document that contains certain written information, which must
reasonably enable the market participant to identify and evaluate
accurately the risks and costs associated with using the SDR's
services. This written information includes the SDR's criteria for
providing others with access to its services and data it maintains, its
criteria for those seeking to connect to or link with it, its
description of its policies and procedures regarding its noncommercial
and/or commercial use of the SBS transaction information that it
receives from a participant, any registered entity, or any other
person, its description of all the SDR's services, including any
ancillary services, and its description of its governance arrangements.
Based on the materials provided in DDR's Form SDR application, please
provide your views as to whether the disclosures provided by the
application are sufficiently detailed to meet the objectives of
Exchange Act Rule 13n-10.
25. In addition to serving as an SDR for the credit and equity
derivatives asset classes, DDR has applied to serve as an SDR for what
it describes as SBS transactions in the interest rates derivatives
asset class. Please provide your views about DDR's description of this
asset class. Please also provide your views as to whether DDR has
provided sufficient information about how a User reports SBS
transaction information in this asset class. Is this information
provided sufficient? Why or why not? Please describe any additional
information that you believe should be provided.
26. Exchange Act Rule 13n-4(b)(5) requires that an SDR shall
provide direct electronic access to the Commission (or any designee of
the Commission, including another registered entity). Based on the
materials provided in DDR's Form SDR application, please provide your
views as to whether DDR's policies and procedures are sufficient to
meet the
[[Page 44388]]
objectives of Exchange Act Rule 13n-4(b)(5).
27. Rule 901(i) of Regulation SBSR provides that a person must
report information about a pre-enactment SBS or transitional SBS ``to
the extent that information about such transaction is available.'' Is
it clear that DDR's policies and procedures, including regarding
validations, will allow parties to submit transaction records for pre-
enactment SBS and transitional SBS with data elements missing, pursuant
to Rule 901(i)?
28. Please provide your views as to whether DDR's policies and
procedures relating to how it would conduct validations of transaction
records for historic and newly executed SBS are sufficiently detailed
to meet the objectives of Exchange Act Rule 13n-5(b)(1)(iii), and what
further clarifications, if any, you believe would be appropriate.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/proposed.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SBSDR-2016-02 on the subject line.
Paper Comments
Send paper comments to Brent J. Fields, Secretary,
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-1090. All submissions should refer to File Number SBSDR-2016-02.
To help the Commission process and review your comments more
efficiently, please use only one method of submission. The Commission
will post all comments on the Commission's Internet Web site (https://www.sec.gov/rules/other.shtml).
Copies of the Form SDR, all subsequent amendments, all written
statements with respect to the Form SDR that are filed with the
Commission, and all written communications relating to the Form SDR
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for Web site viewing and printing in the
Commission's Public Reference Section, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SBSDR-2016-02 and
should be submitted on or before August 8, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-16112 Filed 7-6-16; 8:45 am]
BILLING CODE 8011-01-P