Certain Swap Data Repository and Data Reporting Requirements, 21044-21124 [2019-08788]

Download as PDF 21044 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules COMMODITY FUTURES TRADING COMMISSION 17 CFR Parts 23, 43, 45, and 49 RIN Number 3038–AE32 Certain Swap Data Repository and Data Reporting Requirements Commodity Futures Trading Commission. ACTION: Notice of proposed rulemaking. AGENCY: The Commodity Futures Trading Commission (‘‘Commission’’ or ‘‘CFTC’’) is proposing amendments to parts 23, 43, 45, and 49 of the Commission’s regulations to improve the accuracy of data reported to, and maintained by, swap data repositories (‘‘SDRs’’). Among other changes, the proposed amendments would modify existing requirements for SDRs to establish policies and procedures to confirm the accuracy of swap data with both counterparties to a swap. The proposed amendments would further require reporting counterparties to verify the accuracy of swap data pursuant to those SDR procedures. The Commission is also proposing certain amendments to parts 23, 43, 45, and 49 to provide enhanced and streamlined oversight over SDRs and data reporting generally. DATES: Comments must be received on or before July 29, 2019. ADDRESSES: You may submit comments, identified by RIN number 3038–AE32, by any of the following methods: • The agency’s website, at https:// comments.cftc.gov. Follow the instructions for submitting comments through the website. • Mail: Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581. • Hand Delivery/Courier: Same as Mail above. Please submit your comments using only one method. All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to https:// www.cftc.gov. You should submit only information that you wish to make available publicly. If you wish the Commission to consider information that you believe is exempt from disclosure under the Freedom of Information Act, a petition for confidential treatment of the exempt information may be submitted according jbell on DSK3GLQ082PROD with PROPOSALS3 SUMMARY: VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 to the procedures established in § 145.9 of the Commission’s regulations.1 The Commission reserves the right, but shall have no obligation, to review, pre-screen, filter, redact, refuse or remove any or all of your submission from https://www.cftc.gov that it may deem to be inappropriate for publication, such as obscene language. All submissions that have been redacted or removed that contain comments on the merits of the rulemaking will be retained in the public comment file and will be considered as required under the Administrative Procedure Act and other applicable laws, and may be accessible under the Freedom of Information Act. FOR FURTHER INFORMATION CONTACT: Benjamin DeMaria, Special Counsel, 202–418–5988, bdemaria@cftc.gov or Meghan Tente, Lead Attorney-Advisor, 202–418–5785, mtente@cftc.gov, Division of Market Oversight, Data and Reporting Branch, Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st Street NW, Washington, DC 20581. SUPPLEMENTARY INFORMATION: Table of Contents I. Background A. Introduction B. Statutory Authority C. Regulatory History—Final Rulemakings II. Proposed Amendments to Part 49 A. § 49.2—Definitions B. § 49.3—Procedures for Registration C. § 49.5—Equity Interest Transfers D. § 49.6—Request for Transfer of Registration E. § 49.9—Open Swaps Reports Provided to the Commission F. § 49.10—Acceptance of Data G. § 49.11—Verification of Swap Data Accuracy H. § 49.12—Swap Data Repository Recordkeeping Requirements I. § 49.13—Monitoring, Screening, and Analyzing Data J. § 49.15—Real-Time Public Reporting by Swap Data Repositories K. § 49.16—Privacy and Confidentiality Requirements of Swap Data Repositories L. § 49.17—Access to SDR Data M. § 49.18—Confidentiality Arrangement N. § 49.20—Governance Arrangements (Core Principle 2) O. § 49.22—Chief Compliance Officer P. § 49.24—System Safeguards Q. § 49.25—Financial Resources R. § 49.26—Disclosure Requirements of Swap Data Repositories S. § 49.28—Operating Hours of Swap Data Repositories T. § 49.29—Information Relating to Swap Data Repository Compliance U. § 49.30—Form and Manner of Reporting and Submitting Information to the Commission V. § 49.31—Delegation of Authority to the Director of the Division of Market 1 17 PO 00000 CFR 145.9. Frm 00002 Fmt 4701 Sfmt 4702 Oversight Relating to Certain Part 49 Matters III. Proposed Amendments to Part 45 A. § 45.2—Swap Recordkeeping B. § 45.14—Verification of Swap Data Accuracy and Correcting Errors and Omissions in Swap Data IV. Proposed Amendments to Part 43 A. § 43.3—Method and Timing for RealTime Public Reporting V. Proposed Amendments to Part 23 A. § 23.204—Reports to Swap Data Repositories B. § 23.205—Real-Time Public Reporting VI. Request for Comments VII. Related Matters A. Regulatory Flexibility Act B. Paperwork Reduction Act C. Cost-Benefit Considerations D. Anti-Trust Considerations I. Background A. Introduction Pursuant to the Dodd-Frank Act,2 beginning in 2011, the Commission adopted parts 45 and 49 of its regulations to implement a swap data reporting and recordkeeping regime along with registration requirements and duties for SDRs.3 In 2012, the Commission adopted part 23 of its regulations, which sets forth requirements for swap dealers (‘‘SDs’’) and major swap participants (‘‘MSPs’’) related to the timely and accurate reporting, confirmation, and processing of swaps.4 The regulations the Commission is proposing to amend with this release concern data reporting and recordkeeping duties generally and other duties for SDRs. B. Statutory Authority Section 727 of the Dodd-Frank Act added section 2(a)(13)(G) to the Commodity Exchange Act (‘‘CEA’’ or ‘‘Act’’), which requires all swaps— whether cleared or uncleared—to be reported to SDRs,5 which are registered 2 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, 124 Stat. 1376 (2010), available at https://www.gpo.gov/ fdsys/pkg/PLAW-111publ203/pdf/PLAW111publ203.pdf. 3 Swap Data Repositories: Registration Standards, Duties and Core Principles, 76 FR 54538 (Sept. 1, 2011) (‘‘Part 49 Adopting Release’’); Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136 (Jan. 13, 2012) (‘‘Part 45 Adopting Release’’). 4 See Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules; Futures Commission Merchant and Introducing Broker Conflicts of Interest Rules; and Chief Compliance Officer Rules for Swap Dealers, Major Swap Participants, and Futures Commission Merchants, 77 FR 20128 (Apr. 3, 2012) (‘‘Part 23 Adopting Release’’). 5 Section 721 of the Dodd-Frank Act amended section 1a of the CEA to add the definition of SDR. Pursuant to section 1a(48) of the CEA, the term SDR ‘‘means any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, swaps entered into by third parties for the purpose E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 entities created by section 728 of the Dodd-Frank Act.6 Section 728 of the Dodd-Frank Act added section 21 to the CEA,7 which governs registration and regulation of SDRs, and directs the Commission to promulgate rules concerning those duties and responsibilities. To register and maintain registration with the Commission, SDRs are required to comply with specific duties and core principles enumerated in CEA section 21 as well as other requirements that the Commission may prescribe by rule. In particular, CEA section 21(c) mandates that SDRs: (1) Accept data; (2) confirm with both counterparties the accuracy of submitted data; (3) maintain data according to standards prescribed by the Commission; (4) provide direct electronic access to the Commission or any designee of the Commission (including another registered entity); (5) provide public reporting of data in the form and frequency required by the Commission; (6) establish automated systems for monitoring, screening, and analyzing data (including the use of end-user clearing exemptions) at the direction of the Commission; (7) maintain data privacy; (8) make data available to other specified regulators, on a confidential basis, pursuant to section 8 of the CEA,8 upon request and after notifying the Commission; and (9) establish and maintain emergency and business continuity-disaster recovery (‘‘BC–DR’’) procedures. CEA section 21(f)(4)(C) further requires the Commission to establish additional duties for SDRs to minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and security of the SDR.9 Section 21(b) of the CEA also directs the Commission to prescribe standards for data recordkeeping and reporting that apply to both registered entities and reporting counterparties.10 Section 4s(f) of the CEA,11 added by section 731 of the Dodd-Frank Act, established recordkeeping and reporting requirements for SDs and MSPs. CEA section 4s(f)(1)(A) 12 requires SDs and of providing a centralized recordkeeping facility for swaps.’’ 7 U.S.C. 1a(48). 6 The Commission notes that there are currently three SDRs provisionally registered with the Commission: CME Inc., DTCC Data Repository (U.S.) LLC (‘‘DDR’’), and ICE Trade Vault, LLC (‘‘ICE’’). 7 7 U.S.C. 24a. 8 7 U.S.C. 12(e). 9 Pursuant to this provision, the Commission may develop one or more additional duties applicable to SDRs. 7 U.S.C. 24a(f)(4). This provision is referred to as ‘‘Core Principle 4.’’ 10 See 7 U.S.C. 24a(b)(1)(B). 11 7 U.S.C. 6s(f). 12 7 U.S.C. 6s(f)(1)(A). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 21045 requested comments from the public on reporting issues.17 Throughout these ongoing efforts, the Commission has generally adhered to the view that verification of data accuracy can be achieved through: (i) SDR processes confirming the accuracy of data submitted; (ii) data reconciliation exercises by entities that C. Regulatory History—Final reported data; and (iii) the prompt Rulemakings reporting of errors and omissions when discovered.18 On August 4, 2011, the Commission Most recently, based in part on adopted part 49 of the Commission’s information received during the ongoing regulations.14 Part 49 implements the efforts described above, Commission requirements of section 21 of the CEA staff announced a comprehensive by setting forth the specific duties that review of swap reporting regulations SDRs are required to comply with to be and released the Roadmap to Achieve initially registered as an SDR and High Quality Swap Data (‘‘Roadmap’’) 19 maintain such registration as an SDR with the Commission. As part of the to solicit feedback on improvements to Part 49 Adopting Release, the data reporting and how the Commission, among other sections, Commission’s regulatory goals may be adopted § 49.11 regarding the achieved without imposing unnecessary confirmation of data accuracy. burdens on market participants. Commission staff requested comments Pursuant to CEA section 4s(f)(2), the in response to the Roadmap (‘‘Roadmap Commission promulgated swap Request for Comment’’) and received a reporting rules for SDs and MSPs, number of comment letters that including §§ 23.204–205, which were both adopted on April 3, 2012.15 Section addressed data accuracy and confirmation of data reported to SDRs, 23.204(a) requires SDs and MSPs to among other subjects.20 report all information and swap data in References to ‘‘commenters’’ in this accordance with part 45. Section release refer to those who submitted 23.204(b) requires SDs and MSPs to comment letters in response to the have the procedures and electronic Roadmap Request for Comment. systems necessary to report all Summaries and a discussion of the information and swap data required to relevant comments submitted by those be reported in accordance with part 45. commenters appear in the appropriate Sections 23.205(a) and (b) establish parallel requirements for SDs and MSPs section in this release.21 The revisions and additions proposed with respect to the real-time reporting in this release are intended to address requirements of part 43. the SDR Operations Review goals of the Since the Commission adopted part Roadmap related to confirming the 49 in 2011, Commission staff has led accuracy of swap data,22 to improve the many efforts to evaluate and improve clarity and consistency of regulations reporting issues relating to data governing SDRs, and to bolster the accuracy. Commission staff leads or Commission’s oversight of SDRs. This participates in several international regulatory working groups concentrating proposal is the first of three anticipated Roadmap rulemakings that, when all of on harmonization of data reporting and is incorporating in this release lessons 17 See, e.g., Review of Swap Data Recordkeeping learned from these undertakings and and Reporting Requirements, Request for Comment, best practices from the international 79 FR 16689 (Mar. 26, 2014). regulatory community. Commission 18 See id. at 16695. 19 See CFTC Letter 17–33, Division of Market staff’s efforts have also included the Oversight Announces Review of Swap Reporting formation of an interdivisional staff Rules in Parts 43, 45, and 49 of Commission working group to identify, and make Regulations (July 10, 2017), available at https:// recommendations to resolve, reporting www.cftc.gov/idc/groups/public/@lrlettergeneral/ challenges associated with certain swap documents/letter/17-33.pdf; Roadmap to Achieve High Quality Swap Data, available at https:// data recordkeeping and reporting www.cftc.gov/idc/groups/public/@newsroom/ provisions.16 The Commission has also MSPs, among other things, to provide transaction and position reports that the Commission requires by rule or regulation. CEA section 4s(f)(2) 13 requires the Commission to adopt rules governing, among other things, recordkeeping and reporting by SDs and MSPs. 13 7 U.S.C. 6s(f)(2). Part 49 Adopting Release. 15 See Part 23 Adopting Release. 16 See Press Release, CFTC to Form an Interdivisional Working Group to Review Regulatory Reporting (Jan. 21, 2014), available at https://www.cftc.gov/PressRoom/PressReleases/ pr6837-14. 14 See PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 documents/file/dmo_swapdataplan071017.pdf. 20 These comment letters are available at https:// comments.cftc.gov/PublicComments/ CommentList.aspx?id=1824. 21 See section II.G.1. 22 See Roadmap, p. 6 (stating the Commission’s intent to ‘‘Identify the most efficient and effective solution for swap counterparty(ies) to confirm the accuracy and completeness of data held in an SDR.’’). E:\FR\FM\13MYP3.SGM 13MYP3 21046 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 the planned rulemakings are complete, should achieve the Roadmap’s overall goals of improving the quality, accuracy, and completeness of the data reported to the Commission, streamlining data reporting, and clarifying obligations for market participants.23 When the Commission proposes the next two rulemakings, the Commission anticipates re-opening the comment period for this proposal to provide market participants with an opportunity to comment collectively on the three rulemakings together, because the proposals address interconnected issues. As the Roadmap rulemakings must all work in tandem to achieve these goals, the Commission also anticipates that key provisions of each rulemaking would have the same compliance date, regardless of when each rulemaking is released in final form. The Commission intends to provide a sufficient implementation period for these various rulemakings in order to give SDRs and market participants enough time to implement and test the changes that would be required. Where possible, in creating the proposed regulations set forth in this release, the Commission has taken into consideration certain pertinent rules adopted by other regulators, including the European Securities and Markets Authority (‘‘ESMA’’) and the U.S. Securities and Exchange Commission (‘‘SEC’’).24 This is particularly the case for the SEC’s regulations relating to the registration, duties, and core principles of Security-Based Swap Data Repositories (‘‘SBSDRs’’) 25 and reporting requirements for SecurityBased Swaps (‘‘SBSs’’) set forth in Regulation SBSR (‘‘Regulation SBSR’’).26 The Commission notes that 23 See id. at 3 (describing the Commission’s goals for the review of reporting regulations). 24 The Commission has also reviewed the SEC’s recent proposed rule on risk mitigation techniques for uncleared security-based swaps, which addresses issues related to reconciling securitybased swap transactions and confirming the transaction data. See generally Risk Mitigation Techniques for Uncleared Security-Based Swaps, 84 FR 4614 (Feb. 15, 2019). 25 See generally Security-Based Swap Data Repository Registration, Duties and Core Principles, 80 FR 11438 (Mar. 19, 2015) (‘‘SBSDR Adopting Release’’). The SEC adopted Rules 13n–1 through 13n–12 (17 CFR 240n–1 through 240n–12) under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) relating to the registration and operation of SBSDRs. 26 See generally Regulation SBSR—Reporting and Dissemination of Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015) (‘‘SBSR Adopting Release’’). The SEC adopted Regulation SBSR (Rules 900 through 909, 17 CFR 242.900 through 909) to create a reporting framework for SBSs. The SEC has also adopted additional regulations regarding the reporting and dissemination of certain VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 there are similarities between the regulatory framework for SBSDRs and the SDR regulations that are the subject of this proposal. II. Proposed Amendments to Part 49 A. § 49.2—Definitions 1. Formatting Change to § 49.2(a) The defined terms in § 49.2(a) currently are numbered and arranged in alphabetical order. The Commission is proposing to remove the numbering and instead arrange the defined terms in § 49.2(a) solely in alphabetical order. Arranging the defined terms in § 49.2(a) solely in alphabetical order would require the Commission to make fewer conforming changes to § 49.2(a) and other regulations when adding or removing defined terms in the future, as the Commission currently proposes to do.27 2. Proposed Changes to § 49.2 i. Conforming and Ministerial Changes to Some Definitions The Commission proposes nonsubstantive conforming and ministerial changes to certain definitions to provide clarity and for consistency with other Commission regulations.28 Specifically, the Commission is proposing the following changes to definitions in § 49.2(a): • ‘‘Asset class’’: Modify the definition to conform the wording to the definition of ‘‘asset class’’ used in part 43.29 • ‘‘Commercial use’’: Modify the definition to use active instead of passive voice, and to change use of swap data for regulatory purposes and/ or responsibilities to use of SDR data for regulatory purposes and/or to perform its regulatory responsibilities. • ‘‘Market participant’’: Change the term ‘‘swaps execution facilities’’ to information related to SBSs. See generally 81 FR 53546 (Aug. 12, 2016). 27 The Office of the Federal Register prefers the solely alphabetical approach to definitions sections. See Office of the Federal Register, Document Drafting Handbook May 2017 Update, Revision 5, 2–31 (2017) (‘‘Definitions. In sections or paragraphs containing only definitions, we recommend that you do not use paragraph designations if you list the terms in alphabetical order.’’). 28 Other than removing subsection numbering and ministerial corrections as discussed above in section II.A.1, the Commission is not proposing any substantive changes to the definitions of ‘‘affiliate,’’ ‘‘control,’’ ‘‘foreign regulator,’’ ‘‘independent perspective,’’ ‘‘position,’’ or ‘‘section 8 material,’’ as those terms are defined in current § 49.2(a). 29 See 17 CFR 43.2 (Asset class means a broad category of commodities including, without limitation, any ‘‘excluded commodity’’ as defined in section 1a(19) of the Act, with common characteristics underlying a swap. The asset classes include interest rate, foreign exchange, credit, equity, other commodity and such other asset classes as may be determined by the Commission.). PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 ‘‘swap execution facilities,’’ to conform to section 5h of the Act and other Commission regulations, and make the term counterparty singular. • ‘‘Non-affiliated third party’’: Clarify paragraph (3) to identify ‘‘a person jointly employed’’ by an SDR and any affiliate. • ‘‘Person associated with a swap data repository’’: Clarify that paragraph (3) includes a ‘‘jointly employed person.’’ • ‘‘Swap data’’: Modify the definition to more closely match the related definitions of ‘‘SDR data’’ and ‘‘swap transaction and pricing data’’ that are being added to § 49.2(a) and to incorporate the requirements to provide swap data to the Commission pursuant to part 49. Finally, the Commission proposes to remove the term ‘‘capitalized’’ from § 49.2(b), to reflect that most defined terms used in part 49 are not capitalized in the text of part 49. The Commission does not consider any of the above changes to be substantive. ii. ‘‘As Soon As Technologically Practicable’’ The Commission proposes to add the term ‘‘as soon as technologically practicable’’ as a defined term to standardize the meaning and use of this term across the Commission’s swap reporting regulations. The term as soon as technologically practicable would mean as soon as possible, taking into consideration the prevalence, implementation, and use of technology by comparable market participants. The term is intended to be identical to the use of the term as it is used in parts 43 and 45 of the Commission’s regulations.30 iii. ‘‘Non-Swap Dealer/Major Swap Participant/Derivatives Clearing Organization Reporting Counterparty’’ The Commission proposes to add the term ‘‘non-swap dealer/major swap participant/derivatives clearing organization reporting counterparty,’’ defined to mean a reporting counterparty that is not a swap dealer, major swap participant, derivatives clearing organization, or exempt derivatives clearing organization. The Commission believes the defined term would provide clarity in part 49. 30 See 17 CFR 43.2 (defining of as soon as technologically practicable). Part 45 of the Commission’s regulations also uses the term ‘‘as soon as technologically practicable’’ in the same way as part 43 and this proposed definition, but does not define the term. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules iv. ‘‘Open Swap’’ The Commission proposes to add the term ‘‘open swap’’ as a defined term and to define the term as an executed swap transaction that has not reached maturity or the final contractual settlement date, and has not been exercised, closed out, or terminated. The Commission considers an ‘‘open swap’’ to mean a swap that is still in force or ‘‘alive.’’ This definition is intended to function the same as the definitions of ‘‘open swap’’ 31 and ‘‘closed swap’’ 32 in part 20, but provides more clarity as to the Commission’s meaning of the term. v. ‘‘Reporting Counterparty’’ The Commission proposes to add the term ‘‘reporting counterparty’’ as a defined term to standardize its meaning and use across the Commission’s swap reporting regulations. Reporting counterparty would mean the counterparty responsible for reporting SDR data to an SDR pursuant to parts 43, 45, or 46 of the Commission’s regulations. The term is intended to be functionally equivalent to the term ‘‘reporting party,’’ as defined in part 43,33 the term ‘‘reporting counterparty,’’ as defined in part 45,34 and the term ‘‘reporting counterparty,’’ as defined in part 46.35 The Commission notes that the reporting counterparty may not always be the entity reporting SDR data to the SDR, particularly for transactions executed on swap execution facilities (‘‘SEFs’’) or designated contract markets (‘‘DCMs’’), but it is the counterparty responsible for the initial and subsequent SDR data reporting, as determined by parts 43, 45, or 46 of the Commission’s regulations, as applicable to a particular swap. jbell on DSK3GLQ082PROD with PROPOSALS3 vi. ‘‘SDR Data’’ The Commission proposes to add the term ‘‘SDR data’’ as a defined term. SDR data would mean the specific data elements and information required to be reported to an SDR or disseminated by an SDR, pursuant to two or more of parts 43, 45, 46, and/or 49, as 31 See 17 CFR 20.1 (Open swap or swaption means a swap or swaption that has not been closed.). 32 See 17 CFR 20.1 (Closed swap or closed swaption means a swap or swaption that has been settled, exercised, closed out, or terminated.). 33 See 17 CFR 43.2 (Reporting party means the party to a swap with the duty to report a publicly reportable swap transaction in accordance with part 43 and section 2(a)(13)(F) of the CEA.). 34 See 17 CFR 45.1 (Reporting counterparty means the counterparty required to report swap data pursuant to part 45, selected as provided in § 45.8.). 35 See 17 CFR 46.1 (Reporting counterparty means the counterparty required to report swap data pursuant to part 46, selected as provided in § 46.5.). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 applicable. The Commission notes that in this context, ‘‘disseminated’’ would include SDRs making swap data available to the Commission as required by part 49. The term SDR data would refer to multiple sources of data reported to the SDR or disseminated by the SDR. For example, SDR data could refer to all data reported or disseminated pursuant to parts 43, 45, and 46, or may refer to data reported or disseminated pursuant to parts 45 and 46, depending on the context in which the term is used. This is in contrast with the proposed term ‘‘swap transaction and pricing data,’’ discussed below, which would only refer to data reported to the SDR or publicly disseminated by the SDR pursuant to part 43 and the term ‘‘swap data,’’ which would only refer to data reported to the SDR or made available to the Commission pursuant to part 45. The Commission believes that consolidating references to the different types of data that must be reported to an SDR and data the SDR must make available to the public or to the Commission into a single term would provide clarity throughout part 49. vii. ‘‘SDR Information’’ The Commission proposes to amend the existing definition of ‘‘SDR information’’ to add ‘‘related to the business of the swap data repository that is not SDR data’’ to the end of the current definition. The Commission believes this change would make clear that the scope of SDR information is limited to information that the SDR receives or maintains related to its business that is not the SDR data reported to or disseminated by the SDR. SDR information would include, for example, SDR policies and procedures created pursuant to part 49.36 viii. ‘‘Swap Transaction and Pricing Data’’ and ‘‘As Soon as Technologically Practicable’’ The Commission proposes to add the terms ‘‘swap transaction and pricing data’’ and ‘‘as soon as technologically practicable’’ as defined terms from part 43. Swap transaction and pricing data would mean the data elements and information required to be reported to an SDR or publicly disseminated by an SDR, as applicable, pursuant to part 43. Though this phrase is not currently defined in part 43, it is used throughout that part to refer to the data that must be reported to an SDR and publicly disseminated by an SDR pursuant to 36 This clarification is particularly relevant for the SDR recordkeeping obligations in the proposed amendments to § 49.12, discussed below in section II.H. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 21047 part 43, and the meaning of the term added here is identical. The Commission is proposing to adopt the same definition of as soon as technologically practicable defined in part 43, which means as soon as possible, taking into consideration the prevalence, implementation, and use of technology by comparable market participants. The Commission is proposing to add both phrases as defined terms in part 49 to increase consistency in terminology used in the Commission’s swap reporting regulations. ix. Removal of ‘‘Reporting Entity’’ The Commission proposes to remove the term ‘‘reporting entity’’ from part 49. The Commission believes that ‘‘reporting entity’’ is no longer necessary with the proposed addition of the defined term for ‘‘reporting counterparty,’’ because reporting counterparties are also reporting entities under the current definition.37 SEFs and DCMs are the only entities that may have the responsibility to report data that are not included in the proposed definition of ‘‘reporting counterparty.’’ The Commission notes that this proposed rule would retain most requirements related to reporting entities, but would update the terminology used to describe the requirements. As a result, most obligations for reporting entities would still exist under the proposed amendments. x. Removal of ‘‘Registered Swap Data Repository’’ The Commission proposes to remove the term ‘‘registered swap data repository’’ from part 49. The Commission believes the term ‘‘registered swap data repository’’ is not needed in part 49 because the defined term ‘‘swap data repository’’ already exists in § 1.3.38 The definition of ‘‘swap data repository’’ in § 1.3 is identical to the definition contained in section 1a(48) of the CEA.39 This definition of 37 See 17 CFR 49.2(a)(12) (defining ‘‘reporting entity’’ as those entities that are required to report swap data to a registered swap data repository which includes derivatives clearing organizations, swap dealers, major swap participants and certain non-swap dealer/non-major swap participant counterparties.). 38 See 17 CFR 1.3 (defining ‘‘swap data repository’’ as ‘‘any person that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, swaps entered into by third parties for the purpose of providing a centralized recordkeeping facility for swaps.’’). 39 See 7 U.S.C. 1a(48) (‘‘The term ‘swap data repository’ means any person that collects and maintains information or records with respect to E:\FR\FM\13MYP3.SGM Continued 13MYP3 21048 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules ‘‘swap data repository’’ therefore already applies, and would continue to apply, to part 49 and all other Commission regulations and, when combined with § 49.1,40 removes the need for a separate defined term for ‘‘registered swap data repository.’’ The inclusion of the word ‘‘registered’’ in ‘‘registered swap data repository’’ and the definition of the term 41 also creates unnecessary confusion as to when the requirements of part 49 apply to entities that are in the process of registering as SDRs or are provisionally registered as SDRs under the requirements of § 49.3(b).42 Finally, the removal of the term ‘‘registered swap data repository’’ would decrease inconsistency in terms within part 49 and would also increase consistency between part 49 and other Commission regulations, which overwhelmingly use the term ‘‘swap data repository.’’ The Commission emphasizes that removing the defined term ‘‘registered swap data repository’’ is a non-substantive amendment that would not in any way modify the requirements applicable to current or future SDRs. Request for Comment. The Commission requests comment on all aspects of the proposed changes to § 49.2. The Commission also invites specific comment on the following: (1) Are there any proposed amendments to definitions in existing regulations in part 49 that are unclear or inaccurate? jbell on DSK3GLQ082PROD with PROPOSALS3 B. § 49.3—Procedures for Registration Section 49.3 of the Commission’s regulations establishes procedural and substantive requirements for SDR registration. In relevant part, § 49.3 requires persons seeking SDR registration to file an application for registration on Form SDR 43 and to amend it periodically.44 Specifically, current § 49.3(a)(5) requires that if any information in Form SDR or any amendment becomes inaccurate for any reason, whether before or after the registration application has been granted, the SDR shall promptly file an transactions or positions in, or the terms and conditions of, swaps entered into by third parties for the purpose of providing a centralized recordkeeping facility for swaps.’’). 40 See 17 CFR 49.1 (‘‘The provisions of this part apply to any swap data repository as defined under Section 1a(48) of the [CEA] which is registered or is required to register as such with the Commission pursuant to Section 21(a) of the [CEA].’’). 41 See 17 CFR 49.2(a)(11) (‘‘The term ‘registered swap data repository’ means a swap data repository that is registered under Section 21 of the [CEA].’’). 42 See 17 CFR 49.3(b) (creating standards for granting provisional registration to an SDR). 43 See 17 CFR 49.3(a)(1). 44 See 17 CFR 49.3(a)(5). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 amendment on Form SDR updating such information. In addition, § 49.3(a)(5) requires the SDR to submit an annual amendment to Form SDR within sixty days after the end of the SDR’s fiscal year. The Commission is proposing to amend § 49.3(a)(5) to remove the requirement for SDRs to: (i) File an annual amendment to Form SDR; and (ii) amend Form SDR after the registration application has been granted pursuant to § 49.3(a). Accordingly, as proposed, § 49.3(a)(5) would simply require an SDR to amend Form SDR to correct inaccuracies until its application for registration has been granted. The Commission no longer believes that the requirement to amend Form SDR after registration is needed because the SDRs registered under § 49.3(a) will have demonstrated the ability to meet initial registration and compliance requirements in order to receive registration and the registered SDRs will still submit changes to many of the items in Form SDR as rule filings under part 40.45 The Commission is also proposing new § 49.29, which would permit the Commission to request that SDRs produce information demonstrating compliance with the Commission’s regulations, as discussed further in section II.T. The Commission does, however, believe that updates to Form SDR are still necessary prior to the granting of registration under § 49.3(a), because the application would still be active and the applicant would still need to demonstrate the ability to meet initial registration and compliance requirements. Consistent with the above proposed amendments, the Commission is also proposing to amend Form SDR to remove the references to annual amendments and amendments after SDR registration.46 As discussed below in section II.O, current § 49.22(f)(2) requires that the annual compliance report be provided to the Commission concurrently with the filing of the annual amendment to Form SDR that must be submitted to the Commission pursuant to § 49.3(a)(5) of this part. The Commission is proposing removing the reference to § 49.3(a)(5) from § 49.22(f)(2), to reflect the removal 45 See 17 CFR 40.1, 40.5, and 40.6 (containing the filing and review provisions applicable to rules under the Commission’s regulations). 46 The Commission is proposing various nonsubstantive amendments to Form SDR. These amendments include making terminology consistent throughout Form SDR, fixing incorrect references and misspellings, and fixing grammatical and style errors. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 of the annual amendment requirement from § 49.3(a)(5). Request for Comment. The Commission requests comment on all aspects of the proposed changes to § 49.3(a)(5). C. § 49.5—Equity Interest Transfers The Commission is proposing to amend § 49.5 to streamline the requirements for equity interest transfers for SDRs. The Commission believes that the amendments to § 49.5 simplify the notification and timing requirements associated with transfers of equity interest for SDRs. 1. Notification of Intended Equity Interest Transfer—Proposed § 49.5(a) Current § 49.5(a) establishes the requirement for SDRs to provide the Commission an equity transfer notification. Specifically, current § 49.5(a) requires that: (i) Upon entering into any agreement that could result in an equity interest transfer of ten percent or more in the SDR, the SDR shall file a notification with the Secretary of the Commission in the manner specified by the Secretary, no later than the business day following the date on which the SDR enters into a firm obligation to transfer the equity interest; and (ii) that the SDR amend any information that is no longer accurate on Form SDR consistent with the procedures set forth in § 49.3. Proposed § 49.5 would revise current § 49.5(a) in several respects. First, proposed § 49.5 would make clear that the proposed rule would apply to both the direct and indirect transfers of ten percent or more of the equity interest in the SDR. The Commission believes that including both direct and indirect transfers of equity ownership in proposed § 49.5 is necessary for the Commission to properly oversee SDRs and to address any compliance concerns that may arise from the indirect transfer of equity interest in an SDR through transactions involving an SDR’s direct or indirect parent company, but not the SDR itself. Second, proposed § 49.5 would require that the SDR file the equity transfer notification at the earliest possible time but no later than the open of business ten business days following the date upon which a firm obligation is made to transfer, directly or indirectly, ten percent or more of the equity interest in the SDR. The Commission believes SDRs may need additional time to file the necessary documents, and ten business days would provide greater flexibility to SDRs without sacrificing the E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules information the Commission needs to conduct effective oversight of SDRs. Third, proposed § 49.5 would specify that the equity transfer notification be filed electronically with the Secretary of the Commission and the Director of the Division of Market Oversight (‘‘DMO’’) via email. The Commission is also proposing to remove the requirement to amend information that is no longer accurate on Form SDR due to the equity interest transfer because the requirement is duplicative in light of the requirements of both current and proposed § 49.3(a)(5).47 jbell on DSK3GLQ082PROD with PROPOSALS3 2. Documentation Requirements— Proposed § 49.5(b) Current § 49.5(b) sets forth the documentation requirements for the equity transfer notice. Current § 49.5(b) requires that: (i) The notification include any relevant agreements, corporate documents, charts outlining new ownership or corporate or organizational structure, a brief description of the purpose and any impact of the transfer, and a representation from the SDR that it meets all of the requirements of section 21 of the Act and Commission regulations; (ii) the SDR keep the Commission apprised of the projected date that the transaction will be consummated, and provide the Commission any new agreements or modifications to the original agreements filed pursuant to § 49.5; and (iii) the SDR notify the Commission of the consummation of the transaction on the day it occurs. The Commission is proposing to simplify current § 49.5(b) and instead simply provide that the Commission may, upon receiving an equity transfer notification from an SDR, request that the SDR provide supporting documentation for the transaction. The Commission believes that reserving the authority to request supporting documentation rather than compelling specific production would satisfy the Commission’s need for information without placing unnecessary burdens on SDRs. 3. Notification of Completed Equity Interest Transfer—Proposed § 49.5(c) Current § 49.5(c) requires that, upon the transfer, the SDR file with the Secretary of the Commission a certification that the registered SDR meets all of the requirements of section 21 of the Act and Commission 47 Proposed § 49.5(a) would continue to apply the requirement to update information in Form SDR that is no longer accurate due to an equity interest transfer to an SDR whose application for registration has not been granted under § 49.3(a). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 regulations, and state whether changes to any aspects of the SDR’s operations were made as a result of such change in ownership, with a description of any such change. The certification may rely on and be supported by reference to an SDR registration application or prior filings made pursuant to a rule submission requirement, along with any necessary new filings, including material updates of prior submissions. The certification must be filed within two business days of the date on which the equity interest was acquired. Proposed § 49.5(c) would instead require that upon the transfer of the equity interest, whether directly or indirectly, the SDR shall file electronically with the Secretary of the Commission and DMO a certification that the SDR meets all of the requirements of section 21 of the Act and Commission regulations, no later than two business days following the date on which the equity interest of ten percent or more was acquired. The Commission believes proposed § 49.5(a) and (c) would provide the Commission with the pertinent information it needs to assess the impact of an equity interest transfer on the SDR’s operations. Request for Comment. The Commission requests comment on all aspects of the proposed changes to § 49.5. D. § 49.6—Request for Transfer of Registration The Commission is proposing amendments to streamline the requirements for the transferring of SDR registration to a successor entity in § 49.6. As part of these amendments, the Commission is proposing to retitle the section ‘‘Request for transfer of registration,’’ to more accurately reflect the subject of the regulation. Proposed § 49.6(a) would require that an SDR seeking to transfer its registration from its legal entity as a result of a corporate change that creates a new legal entity file a request for approval to transfer such registration with the Secretary of the Commission in the form and manner specified by the Commission. Examples of such corporate changes could include, but are not limited to, re-organizations, mergers, acquisitions, bankruptcy, or other similar events that result in the creation of a new legal entity for the SDR. Proposed § 49.6(b) would specify that an SDR file a request for transfer of registration as soon as practicable prior to the anticipated corporate change. Proposed § 49.6(c) would set forth the information that must be included in the request for transfer of registration, including the underlying PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 21049 documentation that governs the corporate change, governance documents, and representations by the transferee entity, among other information. Proposed § 49.6(d) would specify that upon review of a request for transfer of registration, the Commission, as soon as practicable, shall issue an order either approving or denying the request for transfer of registration. Current § 49.6(a) requires that in the event of a corporate transaction that creates a new entity, an SDR must request a transfer of its registration, rules, and other matters no later than 30 days after the succession. Current § 49.6(a) also specifies that the registration shall be deemed to remain effective as the registration of the successor if the successor, within 30 days after such succession, files a Form SDR application for registration, and the predecessor files a Form SDR request for vacation, provided, however, that the registration of the predecessor SDR shall cease to be effective 90 days after the Form SDR registration application is filed by the successor SDR. Current § 49.6(b) requires that if the succession is based solely on a change in the predecessor’s date or state of incorporation, form of organization, or composition of a partnership, the successor may, within 30 days after the succession, amend the registration of the predecessor SDR on Form SDR to reflect these changes. The amendment shall be an application for registration filed by the predecessor and adopted by the successor. The Commission believes that the amendments to § 49.6 would simplify the process for requesting a transfer of SDR registration. The Commission believes the requirement, timing, content of requests, and format of a Commission determination in proposed § 49.6(a), (b), (c), and (d) respectively, would achieve the Commission’s information needs when an SDR seeks to transfer registration. These requirements would streamline the requirements for SDRs by setting forth a clear process for transfer that focuses on informing the Commission of changes relevant to the Commission in carrying out its oversight responsibilities, as opposed to requiring SDRs to file new Forms SDR, which would likely duplicate most of the transferor’s current Form SDR. Request for Comment. The Commission requests comment on all aspects of the proposed changes to § 49.6. E:\FR\FM\13MYP3.SGM 13MYP3 21050 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules E. § 49.9—Open Swaps Reports Provided to the Commission jbell on DSK3GLQ082PROD with PROPOSALS3 The Commission is proposing to replace current § 49.9 with requirements for SDRs to provide open swaps reports to the Commission.48 The Commission proposes renaming § 49.9 ‘‘Open swaps reports provided to the Commission’’ to reflect this change. Proposed § 49.9(a) would require SDRs to provide the Commission with open swaps reports that contain an accurate reflection of the swap data for every swap data field required to be reported under part 45 for every open swap maintained by the SDR, organized by the unique identifier created pursuant to § 45.5 of the Commission’s regulations associated with each open swap,49 as of the time the SDR compiles the open swaps report. Proposed § 49.9(b) would require SDRs to transmit all open swaps reports to the Commission as instructed by the Commission, and notes that such instructions may include, but would not be limited to, the method, timing, and frequency of transmission, as well as the format of the swap data to be transmitted.50 Current § 49.9 lists and briefly summarizes the duties of SDRs. Current § 49.9 does not contain any unique regulatory requirements, but instead references where the duties are found in other sections of part 49.51 The Commission believes that current § 49.9 is superfluous because all of the SDR duties listed in § 49.9 are also contained, in much greater detail, in the other sections of part 49. The Commission notes that removing current § 49.9 would be a nonsubstantive change that would not affect the requirements for SDRs found in the 48 As discussed above in section II.A, the Commission is proposing to define an open swap as an executed swap transaction that has not reached maturity or the final contractual settlement date, and has not been exercised, closed out, or terminated. 49 Proposed § 49.11 would also require SDRs to distribute open swaps reports to reporting counterparties. While a distinct report and separate requirement from proposed § 49.9, the Commission expects that the swap data contained in the open swaps reports provided to the Commission under proposed § 49.9 and the swap data provided to reporting counterparties under proposed § 49.11 would be identical, except for any data that is required to be kept confidential, if both reports reflect data as of the same moment. See section II.G below. 50 As discussed below in section II.V, proposed § 49.31 would delegate the Commission’s authority in proposed § 49.9, including the authority to create instructions for transmitting open swaps reports to the Commission, to the Director of DMO. 51 As discussed below in section II.Q, the Commission is proposing conforming amendments to § 49.25 to remove references to amended § 49.9. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 other sections of part 49, including the sections currently referenced in § 49.9. The Commission believes that regularly receiving accurate and up-todate information on the open swaps maintained by each SDR is necessary for the Commission to perform its regulatory functions. While the specific requirements in proposed § 49.9 are new to part 49, SDRs currently send open swaps reports to the Commission on a regular basis. The Commission currently uses open swaps reports to produce a weekly swaps report that is made available to the public 52 and for entitynetted notional calculations.53 The Commission also uses open swaps to perform market risk and position calculations, and for additional market research projects. SDRs currently provide open swaps reports that use different calculation approaches and different formats. These variations among SDRs reduce the Commission’s ability to effectively use the swap data. The Commission notes that the proposed regulations would standardize a type of report the SDRs already create for the Commission. The Commission believes that providing standards for how the swap data in open swaps reports should be provided to the Commission would help remedy issues the Commission faces in trying to reconcile open swaps reports across the SDRs. The Commission notes that it would have the ability to instruct SDRs as to all aspects of transmitting the open swaps reports to the Commission under proposed § 49.9. These instructions may include the method of transmission (e.g., file types and methods used for transmission), the timing of transmission, the frequency of transmission, and the formatting of the swap data included in the reports. The Commission believes that retaining the flexibility to determine how SDRs would provide open swaps reports to the Commission and the ability to modify the requirements over time as needed would allow the Commission to use the information in the reports to fulfill its regulatory responsibilities while not requiring unnecessary effort on the part of the SDRs. The Commission intends to work with the SDRs before creating or modifying any instructions pursuant to proposed § 49.9 and would provide a reasonable 52 The Commission’s various public reports, including the weekly swaps reports, are available at https://www.cftc.gov/MarketReports/index.htm. 53 See ‘‘Introducing ENNs: A Measure of the Size of Interest Rate Swaps Markets,’’ Jan. 2018, available at https://www.cftc.gov/sites/default/files/ idc/groups/public/@economicanalysis/documents/ file/oce_enns0118.pdf. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 amount of time for SDRs to adjust their systems before any instructions take effect. The Commission notes that it currently works with SDRs to implement changes to open swaps reports, with SDRs being given time to update their systems as needed. The Commission anticipates using a similar process when working with the SDRs on the new requirements for open swaps reports. Request for Comment. The Commission requests comment on all aspects of the proposed changes to § 49.9. F. § 49.10—Acceptance of Data The Commission proposes amending § 49.10 to add a new paragraph (e) to address correction of errors and omissions in SDR data. SDRs are currently required to publicly disseminate cancellations and corrections to swap transaction and pricing data as soon as technologically practicable after receipt of any cancellation or correction,54 and transmit corrections to errors and omissions in swap data previously transmitted to the Commission in the same format as the erroneous or omitted swap data was originally transmitted.55 Swap counterparties, SEFs, and DCMs currently have obligations to report errors and omissions to the reporting counterparty, SEF, DCM, or SDR, depending on whether they are reporting swap transaction and pricing data or swap data.56 The Commission is proposing to move the obligations for SDRs in correcting errors and omissions to § 49.10(e), to place all obligations for SDRs in part 49.57 The Commission believes proposed § 49.10(e) is consistent with the SDRs’ duty to correct errors and omissions that already exists in the CEA and current Commission regulations. Proposed § 49.10(e) would set forth the general requirement that an SDR correct errors and omissions in SDR 54 See 17 CFR 43.3(e)(1), (3), and (4) (requiring an SDR to publicly disseminate corrections and cancellations to data and containing requirements for cancellation and correction). 55 See 17 CFR 45.14(c) (requiring corrections to be transmitted to the Commission in the same format as the data was originally transmitted, unless otherwise approved). 56 See § 43.3(e) for swap transaction and pricing data, discussed below in section IV.A, and § 45.14 for swap data, discussed below in section III.B. The obligations for swap counterparties, SEFs, and DCMs to report errors and omissions in swap transaction and pricing data and swap data would remain in their current sections. 57 Parts 43 and 45, while containing provisions related to SDR acceptance and dissemination of data, concentrate on the reporting and dissemination of data by all market participants, while part 49 contains provisions that govern the registration and operations of SDRs more generally. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 data that was previously reported to the SDR or was not previously reported to the SDR as required,58 regardless of the state of the swap that is the subject of the SDR data. Proposed § 49.10(e)(1)–(4) would set forth the specific requirements SDRs would need to meet to fulfill the general requirement in § 49.10(e). Proposed § 49.10(e)(1) would require an SDR to accept corrections for errors and omissions reported to the SDR pursuant to parts 43, 45, and 46. Proposed § 49.10(e)(2) would require each SDR to correct the reported errors and omissions as soon as technologically practicable after the SDR receives a report of errors or omissions. Proposed § 49.10(e)(3) would require an SDR to disseminate corrected SDR data to the public and the Commission, as applicable, as soon as technologically practicable after the SDR corrects the SDR data. Proposed § 49.10(e)(4) would require SDRs to establish, maintain, and enforce policies and procedures designed for the SDR to fulfill its responsibilities under § 49.10(e)(1)– (3).59 As noted above, new § 49.10(e) is designed to complement the correction provisions of other parts of the Commission’s swap reporting regulations that apply to the entities reporting errors and omissions to SDRs, including proposed § 45.14(b), to ensure that errors and omissions in SDR data are corrected and disseminated as soon as possible.60 The Commission also notes that SDRs currently have the duty to correct all SDR data previously reported, and all SDR data that was erroneously not reported as required, and to properly disseminate the corrections as required, including making the corrected SDR data available 58 The Commission notes that the failure to perform the initial data reporting as required under parts 43, 45, or 46 is an ‘‘omission’’ for the purposes of those parts and proposed § 49.10. The SDR would be required to correct the omission pursuant to proposed § 49.10, just as it would be required to correct any other error or omission, regardless of the state of the swap, and disseminate the corrected data as required in proposed § 49.10. 59 The Commission notes that the policies and procedures for reporting corrections to the SDR created pursuant to § 49.10(e) would be subject to disclosure to SEFs, DCMs, and reporting counterparties under proposed § 49.26(j). See section II.R below. The Commission is aware of previous instances where market participants were not provided with SDR policies and procedures related to the reporting or correction of data and were unaware of the SDR’s requirements, which unnecessarily interfered with the reporting and correction processes. The requirements of proposed § 49.10(e)(4) and proposed § 49.26(j) are intended to prevent a similar situation from occurring in the context of data corrections. 60 See section III.B below. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 to the Commission as instructed,61 which will continue pursuant to proposed § 49.17.62 Finally, the Commission notes that, as specified in § 49.10(e), the requirements of new § 49.10(e) would apply regardless of the state of the swap, meaning SDRs would have to correct and disseminate SDR data for swaps that have matured or were otherwise terminated and are no longer open swaps. The Commission believes this requirement is necessary for SDRs to continue to maintain and disseminate SDR data that accurately reflects market activity to the public 63 and regulators. Further, SDRs currently do regularly make and disseminate corrections to previously-reported SDR data and SDR data that was not initially reported as required, including SDR data for previously matured or terminated swaps. In general, the Commission believes that specifying SDRs’ responsibilities to receive corrections to SDR data from market participants, make the corrections to the SDR data, and to provide the corrected SDR data to the public and the Commission, as applicable, would further the Commission’s goal of having accurate and complete SDR data available to both the Commission and the public by clearly delineating the SDRs’ responsibilities in the process. Request for Comment. The Commission requests comment on all aspects of proposed § 49.10(e). G. § 49.11—Verification of Swap Data Accuracy The Commission proposes to revise the current requirements of § 49.11 that set forth SDRs’ responsibilities to confirm the accuracy and completeness of swap data reported to SDRs. At the same time, the Commission is proposing to revise the requirements of § 45.14 for reporting counterparties, SEFs, and DCMs to verify swap data and correct errors in swap data.64 The Commission 61 See 17 CFR 43.3(e) (correction and dissemination requirements for swap transaction and pricing data); 17 CFR 45.14 (correction and dissemination requirements for swap data); see also 17 CFR 49.13(a) (requiring SDRs to transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission.). 62 See section II.L below. As discussed in that section, SDRs are currently required to provide the Commission with direct electronic access to SDR data, including scheduled data transfers to the Commission. 63 The Commission understands that market participants use the real-time swap transaction and pricing data disseminated by SDRs pursuant to part 43 for a variety of purposes, including modeling of the swaps markets that impacts their decisions related to transacting in swaps. 64 See section III.B below. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 21051 believes that revised § 49.11 and § 45.14 would provide SDRs, reporting counterparties, SEFs, and DCMs with a clear understanding of their respective responsibilities for verifying swap data. The Commission is proposing to change the name of § 49.11 to ‘‘Verification of swap data accuracy’’ from ‘‘Confirmation of data accuracy’’ in order to reduce the number of differing uses of the word ‘‘confirmation’’ within the Commission’s regulations. The Commission uses different tenses of the word ‘‘verify’’ 65 for the proposed requirement for the same reason. 1. General Requirement To Verify Swap Data Accuracy—Proposed § 49.11(a) The Commission proposes to amend § 49.11(a) to include a general requirement that SDRs verify the accuracy and completeness of swap data that the SDRs receive from SEFs, DCMs, and reporting counterparties, or thirdparty service providers acting on their behalf.66 Revised § 49.11(a) would also require each SDR to establish, maintain, and enforce policies and procedures reasonably designed to verify the accuracy and completeness of swap data that it receives from SEFs, DCMs, reporting counterparties, or third-party service providers.67 As noted above, proposed § 45.14(a) contains companion requirements to proposed § 49.11(a) that would require reporting counterparties to verify swap data with SDRs and to conform to the relevant SDR’s verification policies and procedures in fulfilling their verification responsibilities.68 Section 21(c)(2) of the CEA requires SDRs to confirm with both counterparties to the swap the accuracy of the data that was submitted.69 The Commission implemented section 21(c)(2) through adopting current § 49.11. Current § 49.11(a) requires that SDRs establish and adopt policies and procedures to ensure the accuracy of 65 The Commission recognizes that CEA section 21(c)(2) uses the term ‘‘confirm,’’ but for the reasons stated above believes ‘‘verification’’ and ‘‘verify’’ are necessary to avoid confusion. 66 The Commission notes that an SDR may receive swap data from any SEF, DCM, or reporting counterparty, as defined in proposed § 49.2, but that the SDR would, under the proposed regulations, verify the accuracy and completeness of swap data with the reporting counterparty for a given swap, as discussed in this section. Likewise, under proposed § 45.14(a), the reporting counterparty would be required to verify the accuracy and completeness of swap data as required by that section. 67 SDRs would be required make their policies and procedures created pursuant to proposed § 49.11(a) available to their users and potential users under the requirements of proposed § 49.26(j). 68 See section III.B below. 69 7 U.S.C. 24a(c)(2). E:\FR\FM\13MYP3.SGM 13MYP3 21052 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 swap data and other regulatory information that is reported to an SDR. Current § 49.11(b) generally requires an SDR to confirm the accuracy and completeness of all swap data submitted pursuant to part 45. The Commission provided an exception to the requirement that SDRs confirm with both counterparties to the swap the accuracy of the data that was submitted in § 49.11(b)(1)(ii) for swap creation data and § 49.11(b)(2)(ii) for swap continuation data when swap data is received from a SEF, DCM, derivatives clearing organization (‘‘DCO’’), or from a third-party service provider acting on behalf of the swap counterparty, under certain conditions.70 SDRs are required under current § 49.11(b)(1)(i) and § 49.11(b)(2)(i) to notify both counterparties to a swap when swap data is submitted directly via a swap counterparty, such as an SD, MSP, or non-SD/MSP counterparty, and not by a SEF, DCM, DCO, or a thirdparty service provider.71 However, because counterparties do not currently have a corollary obligation to respond to the SDRs’ notifications, SDRs have adopted rules based on the concept of negative affirmation: Reported swap data is presumed accurate and confirmed if a counterparty does not inform the SDR of errors or omissions or otherwise make modifications to a trade record for a certain period of time.72 When the Commission adopted current § 49.11, it did not believe that requiring an SDR to affirmatively communicate with both counterparties to a swap was necessary when the swap data was submitted to the SDR by a SEF, DCM, DCO, or third-party service provider.73 However, based on the Commission’s experience with swap data submitted by SEFs, DCMs, DCOs, and third-party service providers since the rule was adopted, the Commission believes that such swap data has not been consistently complete and accurate in some instances, and the swap data accuracy is not sufficient to justify the exception to the requirement that SDRs confirm the reported swap data’s accuracy with swap counterparties. The 70 In these cases, §§ 49.11(b)(1)(ii) and 49.11(b)(2)(ii) relax the general requirement that the SDR affirmatively notify both counterparties directly if: (1) The SDR has formed a reasonable belief that the swap data is accurate; (2) the swap data or accompanying information reflect that both counterparties agreed to the swap data; and (3) the counterparties were provided with a 48-hour correction period. 71 See 17 CFR 49.11(b). 72 See, e.g., CME Rules 604.A and 604.B; DTCC Data Repository (U.S.) LLC Rule 3.3.3.3; and ICE Trade Vault Rules 4.6 and 4.7. 73 See Part 49 Adopting Release at 54547 (describing the requirements of § 49.11). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 current requirements have had a negative effect on swap data accuracy and consistency, which has hampered the Commission’s ability to carry out its regulatory responsibilities. Commission staff received many comments on confirmation requirements for swap data reported to SDRs in response to the Roadmap Request for Comment.74 In general, the SDRs commented that they cannot meet their obligation to confirm data with both counterparties because nonreporting counterparties are not required to confirm data reported to the SDR under current regulations.75 The SDRs also stated that they often have no way to contact non-reporting counterparties because non-reporting counterparties are not obligated to connect to the SDRs’ services.76 SDRs also commented that the obligation to confirm data accuracy should generally reside with the entities that are in the best position to know whether the reported data is accurate and complete (i.e., the parties to the swap, not the SDRs).77 As a result, many SDRs advocated for removing some or all SDR obligations from § 49.11 of the Commission’s regulations.78 The Joint SDR letter commented that the Commission should clearly define the obligations of counterparties to confirm the accuracy and completeness of reported data, including requiring non-reporting counterparties to on-board with every SDR and to follow the SDRs’ processes and procedures, if the non-reporting 74 The following organizations submitted comments related to confirmation and reconciliation for data reported to SDRs: American Counsel of Life Insurers (‘‘ACLI’’); Commercial Energy Working Group (‘‘CEWG’’); Chatham Financial (‘‘Chatham’’); CME Group (‘‘CME’’); Coalition for Derivatives End-Users (‘‘Coalition’’); Depository Trust & Clearing Corporation (‘‘DTCC’’); Eurex Clearing AG (‘‘Eurex’’); a joint comment letter from BSDR LLC, Chicago Mercantile Exchange Inc., and ICE Trade Vault (‘‘Joint SDR’’); Global Financial Markets Association (‘‘GFMA’’); ICE Trade Vault (‘‘ICE’’); International Energy Credit Association (‘‘IECA’’); a joint letter comment letter from International Swaps and Derivatives Association, Inc. and the Securities Industry and Financial Markets Association (‘‘ISDA/SIFMA’’); Japanese Bankers Association (‘‘JBA’’); Natural Gas Supply Association (‘‘NGSA’’); a joint comment letter from National Rural Electric Cooperative Association and American Public Power Association (‘‘NRECA/ APPA’’); and Securities Industry and Financial Markets Association Asset Management Group (‘‘SIFMA AMG’’). 75 Joint SDR Letter at 5; ICE Letter at 2. 76 Joint SDR Letter at 5; DTCC Letter at 3; ICE Letter at 2. 77 Joint SDR Letter at 5 (listing CME and ICE as supporting this belief); CME Letter at 2; DTCC Letter at 3. 78 Joint SDR Letter at 5; CME Letter at 2; ICE Letter at 2. PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 counterparties have confirmation obligations.79 Other commenters, including enduser groups, opposed confirmation requirements for non-reporting counterparties.80 Chatham stated that non-reporting parties are rarely the cause of errors in the swap data and that reconciliation by reporting counterparties in conjunction with more robust validation of swap data would render reconciliation by non-reporting counterparties unnecessary.81 CEWG advocated against any periodic reconciliation, and suggested that if reconciliation is required, it only be required for position data.82 The Commission’s proposed revisions to § 49.11 and § 45.14(a) 83 should provide more detail on the responsibilities of SDRs, working in conjunction with reporting counterparties, to verify the accuracy and completeness of swap data. As described in the discussions of proposed § 49.11(b)–(d) below, the Commission is proposing that SDRs only verify swap data with reporting counterparties because the Commission believes this would be the most practical approach to verification. The Commission understands that SDRs are not parties to swaps and are therefore unable to verify the accuracy and completeness of swap data without the assistance of a swap counterparty. The Commission believes reporting counterparties are in the best position to verify swap data with SDRs. The CEA’s swap reporting framework is based on reporting counterparties reporting swap data on behalf of non-reporting counterparties.84 Because of the data reporting requirements for reporting counterparties, reporting counterparties are connected to SDRs for reporting, while non-reporting counterparties, especially those that are not SDs/MSPs, often lack such connections.85 For 79 Joint SDR Letter at 5 (listing CME and ICE as providing this recommendation). 80 Coalition Letter at 4 (noting that end-users do not have the dedicated systems, personnel, or resources to confirm swap details with SDRs); IECA Letter at 2; NRECA/APPA Letter at 3; Chatham Letter at 3–4; JBA Letter at 1–2; NGSA Letter at 3; ISDA/SIFMA Letter at 6; ACLI Letter at 2–3; SIFMA AMG Letter at 1–2. 81 Chatham Letter at 3–4. 82 CEWG Letter at 3. 83 See section III.B. 84 As discussed in the Part 45 Adopting Release, in designating reporting counterparties to report on behalf of non-reporting counterparties, Congress made a policy choice to place lesser burdens on non-reporting counterparties. See 77 FR 2136, 2166 (discussing the reporting counterparty hierarchy in CEA section 4r(a)(3)). 85 The Commission notes that under current and proposed § 45.14(b), a non-reporting counterparty’s correction responsibilities are limited to notifying E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules entities that never serve as reporting counterparties, such a requirement would mean the expense of building, maintaining, and operating systems to connect to SDRs purely for the purposes of verifying swap data. The Commission believes this outcome would be inconsistent with the CEA’s goal of placing swap data reporting responsibilities on reporting counterparties. 2. Distribution of Open Swaps Reports— Proposed § 49.11(b) jbell on DSK3GLQ082PROD with PROPOSALS3 To meet the requirement to verify swap data accuracy in proposed § 49.11(a), proposed § 49.11(b) would require an SDR to distribute to each reporting counterparty on a regular basis an open swaps report detailing the swap data maintained by the SDR for all open swaps.86 The Commission notes that the open swaps report would contain the same type of information that would be provided to the Commission in an open swaps report under proposed § 49.9, as of the time the SDR compiles the open swaps report, but limited to the open swaps for which the recipient of the open swaps report is the reporting counterparty.87 The Commission notes that an SDR would not be required to provide an open swaps report to an entity that does not have any open swaps at the time the SDR compiles a particular open swaps report, even if the entity has been the reporting counterparty for swaps previously maintained by the SDR. For example, if all of the swaps for which an entity was the reporting counterparty were terminated before the SDR begins compiling an open swaps report, the SDR need not provide an open swaps report to that reporting counterparty. The SDR would need to provide subsequent open swaps reports to the entity if the entity becomes the reporting counterparty for any swaps that are open as of the time of a the reporting counterparty of the errors and omissions, as opposed to notifying the SDR. See 17 CFR 45.14(b); section III.B below. Requiring nonreporting counterparties to verify swap data would be the only instance where a non-reporting counterparty has swap data responsibilities with SDRs outside of corrections. 86 Under proposed § 45.14(a), a reporting counterparty would then compare its books and records related to each swap for which it is the reporting counterparty against the report to determine if the swap data the SDR maintains is complete and accurate. See section III.B below. 87 The Commission anticipates that, because the SDR would be required to regularly distribute the open swaps report on the same day during the verification period for each individual reporting counterparty under proposed § 49.11(b)(1)–(2), the SDR would begin to compile the open swaps report at the same time before each distribution. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 subsequent regular compiling of open swaps reports. The Commission also notes that it is not proposing to prescribe how an SDR must distribute the open swaps reports to reporting counterparties. Commission staff understands some SDRs ‘‘push’’ or actively send information to reporting counterparties, while other SDRs typically have customers ‘‘pull’’ information by having those customers connect to SDR systems to retrieve the information. The Commission would not have a preference between these two approaches, provided that the SDR has instructed its customers on when and how the SDR would distribute the open swaps reports in the SDR’s swap data verification policies and procedures that it makes available to market participants pursuant to proposed § 49.26(j), such that the SDR’s customers are able to effectively access and utilize the open swaps reports. The Commission also notes that it does not have a preference as to the communication methods, such as file types and data languages, that the SDRs and reporting counterparties use when distributing the open swaps reports, as long as the communication methods are made clear in the SDR’s swap data verification policies and procedures and the entities can effectively communicate regarding the contents of each open swaps report, including accounting for all necessary automated systems, mapping of data fields, and potential data translation between data languages. The Commission would expect SDRs and reporting counterparties to work together to devise efficient and effective methods for successfully distributing the open swaps reports, with particular attention paid to creating a distribution system that minimizes the burden of distribution for non-SD/MSP/DCO reporting counterparties. Reporting counterparties are already connected to SDRs to fulfill their reporting responsibilities under part 45 and therefore the Commission anticipates that SDRs and reporting counterparties would be able to communicate easily, potentially through existing infrastructure for reporting swap data. 3. Content of Open Swaps Reports— Proposed § 49.11(b)(1) Proposed § 49.11(b)(1) would require an SDR to distribute an open swaps report that contains an accurate reflection of the swap data for every swap data field required to be reported for swaps pursuant to part 45 for every open swap maintained by the SDR for which the recipient of the report is the reporting counterparty, organized by the unique identifier created pursuant to PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 21053 § 45.5 of the Commission’s regulations associated with every open swap, as of the time the SDR compiles the open swaps report. The Commission notes that the swap data to be included in the open swaps report would need to include every data field required to be reported for swaps under part 45, unless access to a particular data field is prohibited by other Commission regulations.88 The Commission believes that having every reporting counterparty review the swap data and respond to the SDR as required in proposed § 45.14 would improve the quality of swap data by facilitating the discovery and correction of errors and omissions. Proposed § 49.11(b)(1) would facilitate this review by requiring the SDRs to provide the swap data for all of a reporting counterparty’s open swaps on a regular basis. The Commission anticipates this process would be largely automated and would become more efficient over time as reporting counterparties and SDRs gain experience with verification. The Commission is not proposing specific requirements for the formatting of the open swaps report provided pursuant to proposed § 49.11(b)(1), but the Commission expects that the swap data included in the open swaps report would be identical to the swap data provided to the Commission pursuant to proposed § 49.9 in all instances where the two reports reflect swap data as of the same time, except for any data that is required to be kept confidential.89 The Commission believes it is important that the reporting counterparty would be able to review the same swap data that is provided to the Commission as of the moment the SDR compiled the open swaps report, to help ensure data consistency. 4. Frequency of Open Swaps Reports for SD, MSP, and DCO Reporting Counterparties—Proposed § 49.11(b)(2) Proposed § 49.11(b)(2) would require SDRs to distribute the open swaps reports to all SD/MSP/DCO reporting counterparties on a weekly basis, no 88 The Commission notes that the confidentiality requirements, particularly § 49.17(f), would apply to the open swaps reports. Under § 49.17(f), for example, an SDR may not include the identity or legal entity identifier of the non-reporting counterparty to the swap (or the non-reporting counterparty’s clearing member for the swap) if the swap was executed anonymously on a SEF or DCM and cleared in accordance with the Commission regulations referenced in § 49.17(f)(2). See 17 CFR 49.17(f)(2) (providing the exception to the general prohibition on market participant access to swap data maintained by SDRs). 89 See section II.E above (discussing the proposed requirements for providing open swaps reports to the Commission). E:\FR\FM\13MYP3.SGM 13MYP3 21054 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules later than 11:59 p.m. Eastern Time 90 on the day of the week that the SDR chooses to regularly distribute the open swaps reports. The Commission notes that it is not prescribing the day that the SDR chooses to distribute the open swaps report, but would require that the SDR use the same day of the week for each distribution. The Commission would also require that the SDR distribute all of the open swaps reports to the relevant reporting counterparties on the same day. Distributing the open swaps reports irregularly may create the unnecessary risk of confusion and/or missed reports, and may lead to swap data not being properly verified. Regular distribution would also allow reporting counterparties to prepare for when they would be required to fulfill their verification responsibilities. The Commission believes that SDs, MSPs, and DCOs, as large, sophisticated Commission-registered entities that are accustomed to swap data regulatory compliance, and as the most likely entities to serve as reporting counterparties,91 can efficiently verify swap data on a weekly basis. Further, as SDs, MSPs, and DCOs are the reporting counterparty for the overwhelming majority of swaps,92 requiring these entities to review the swap data maintained for their open swaps on a weekly basis would ensure that the large majority of open swaps would be verified within a week of execution, which would also facilitate the prompt correction of any errors or omissions in the swap data for these swaps. jbell on DSK3GLQ082PROD with PROPOSALS3 5. Frequency of Open Swaps Reports for Non-SD/MSP/DCO Reporting Counterparties—Proposed § 49.11(b)(3) Proposed § 49.11(b)(3) would require SDRs to distribute the open swaps reports to non-SD/MSP/DCO reporting counterparties on a monthly basis, no later than 11:59 p.m. Eastern Time on the day of the month that the SDR chooses to regularly distribute the open swaps reports. For the reasons discussed above with respect to proposed 90 The Commission is specifying a time under proposed § 49.11 for consistency purposes. SDRs would need to account for the adjustments to Eastern Time that occur during the year in their verification policies and procedures and reporting counterparties would need to accommodate these adjustments in their verification practices. 91 Any swap involving at least one SD, MSP, or DCO as a counterparty will have a reporting counterparty that is a SD, MSP, or DCO. See 17 CFR 45.8 (providing the requirements for determining which counterparty to a swap is the reporting counterparty). 92 See De Minimis Exception to the Swap Dealer Definition, 83 FR 56666, 56674 (Nov. 13, 2018) (stating that, in 2017, approximately 98 percent of swap transactions involved at least one registered SD). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 § 49.11(b)(2), the Commission is not prescribing the day of the month that the SDR chooses to distribute the open swaps reports, but does require that the SDR use the same day of the month for each distribution. The Commission is also proposing to require that the SDR distribute all of the open swaps reports to the relevant reporting counterparties on the same day. The Commission believes that monthly distribution would satisfy the Commission’s need for accurate swap data. The Commission is aware that non-SD/MSP/DCO counterparties tend to be less active in the swaps markets with fewer resources to devote to regulatory compliance. The Commission understands that this is particularly true of swaps end-users that use swaps infrequently and are more likely to engage in swaps for hedging purposes. Non-SD/MSP/DCO counterparties are also the reporting counterparties for relatively few swaps; 93 therefore, the Commission believes that there would not be a significant risk of errors associated with less frequent verification for these reporting counterparties. 6. Receipt of Verification of Data Accuracy or Notice of Discrepancy— Proposed § 49.11(c) Proposed § 49.11(c) would require SDRs to receive from each reporting counterparty to which it sends an open swaps report, in response to the open swaps report, either a verification of data accuracy indicating that the swap data contained in the open swaps report distributed pursuant to § 49.11(b) is accurate and complete or a notice of discrepancy indicating that the data contained in an open swaps report contains one or more discrepancies.94 Proposed § 49.11(c) would also require SDRs to establish, maintain, and enforce policies and procedures reasonably designed for the SDR to successfully receive the verification of data accuracy or the notice of discrepancy. The Commission notes that an SDR would not fully satisfy the requirements of proposed § 49.11 until it receives the verification of data accuracy or notice of discrepancy. The Commission believes that proposed § 49.11(c) would help ensure that the reporting counterparty has received and reviewed the open 93 See id. (finding that, during the examination period, 98 percent of swap transactions involved at least one SD/MSP counterparty). 94 The Commission notes that an SDR receiving a notice of discrepancy should expect to—and be prepared to—receive corrections for the errors and omissions in the swap data close in time to when it receives the notice of discrepancy, due to the requirements of proposed § 45.14(b). PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 swaps report, which would aid the data correction process and improve the quality of swap data. The Commission also believes that proof of compliance would assist the SDRs and the Commission with any necessary compliance reviews. The requirement to establish, maintain, and enforce policies and procedures regarding this stage of verification would help ensure that the SDR is fully prepared to perform its verification duties and, because the policies and procedures would be made available to reporting counterparties pursuant to proposed § 49.26(j), would help ensure that the verification process is clear and efficient for reporting counterparties and SDRs. The Commission notes that it is not prescribing the methods for how SDRs fulfill their responsibilities under proposed § 49.11(c), but does expect that the SDRs would be reasonable in the requirements of their policies and would utilize methods that are as lowcost and efficient as possible. The Commission particularly encourages SDRs to be accommodating for non-SD/ MSP/DCO reporting counterparties. The Commission notes that proposed § 45.14 includes corresponding requirements for reporting counterparties to verify the accuracy and completeness of swap data in response to the open swaps reports and for reporting counterparties to follow an SDR’s verification policies and procedures in fulfilling their verification responsibilities, including analyzing and responding to open swaps reports. These corresponding requirements would help ensure that reporting counterparties respond to the open swaps reports in a timely and efficient manner, such that SDRs can fulfill their responsibilities under proposed § 49.11(c). The Commission also clarifies that, given the separate proposed companion requirements for reporting counterparties, an SDR would not be responsible for failing to satisfy the requirements of § 49.11 in the instance where an SDR made a full, good-faith effort to comply with proposed § 49.11, and followed its policies and procedures created pursuant to proposed § 49.11 in doing so, but was prevented from fulfilling the requirements because of a reporting counterparty failing to meet its responsibilities to respond to the open swaps report as required under proposed § 45.14(a). In such a situation, the reporting counterparty would be held responsible for its failure to satisfy the requirements of proposed § 45.14. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 7. Amending Verification Policies and Procedures—Proposed § 49.11(d) Proposed § 49.11(d) would require SDRs to comply with the requirements under part 40 of the Commission’s regulations when adopting or amending their verification policies and procedures.95 Request for Comment. The Commission requests comment on all aspects of proposed § 49.11. The Commission also invites specific comment on the following: (2) Is the Commission’s proposed approach, which does not involve nonreporting counterparties in the verification process, an effective approach to verification? Why or why not? Are there additional benefits or costs to involving non-reporting counterparties in the verification process that have not been considered? Please be specific. (3) Should the Commission be more prescriptive in how the SDRs must distribute the open swaps reports to reporting counterparties pursuant to proposed § 49.11(b)? If so, what should be the requirements included in the prescribed approach? Please be specific. (4) Should the Commission be more prescriptive for the distribution timing and formatting for the open swaps reports the SDRs would provide to the reporting counterparties pursuant to proposed § 49.11(b)(2) and (3)? If so, what should be the requirements in the prescribed approach? Please be specific. (5) Should the Commission prescribe any aspect of how SDRs must receive verifications of accuracy or notices of discrepancy pursuant to proposed § 49.11(c)? If so, what should be the requirements in the prescribed approach? Please be specific. (6) Should the Commission require the verification of all swap data messages, as opposed to open swaps reports? Please explain why or why not. If so, what would be the costs and benefits associated with requiring the verification of all swap data messages? Please be specific. (7) Should the Commission require verification of open swaps reports more or less frequently than weekly for reporting counterparties that are SDs, MSPs, or DCOs? If so, please explain why and suggest a more appropriate verification frequency. (8) Should the Commission require verification of open swaps reports more 95 Verification policies and procedures would be considered ‘‘rules’’ for the purposes of part 40 requirements. See 17 CFR 40.1, 40.5, and 40.6 (containing the filing and review provisions applicable to rules under the Commission’s regulations). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 or less frequently than monthly for reporting counterparties that are not SDs, MSPs, or DCOs? If so, please explain why and suggest a more appropriate verification frequency. (9) Should reporting counterparties also be required to verify the completeness and accuracy of swap transaction and pricing data submitted pursuant to part 43? Please explain why or why not. H. § 49.12—Swap Data Repository Recordkeeping Requirements Current recordkeeping requirements for SDRs are found in §§ 49.12, 45.2(f), and 45.2(g) of the Commission’s regulations. Current § 49.12 contains recordkeeping requirements for SDRs, which include both specific provisions and references to the recordkeeping requirements for SDRs included in parts 43 and 45.96 The Commission is proposing amendments to the SDR recordkeeping rules to clarify ambiguities, resolve inconsistencies, and move requirements for SDRs currently in part 45 to part 49. Proposed § 49.12(a) would require that SDRs keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the SDR, including, but not limited to, all SDR information and all SDR data that is reported to the SDR. Proposed § 49.12(b) would specify separate recordkeeping requirements for SDR information in proposed § 49.12(b)(1) and SDR data reported to the SDR in proposed § 49.12(b)(2). Proposed § 49.12(b)(1) would require that an SDR maintain all SDR information, including, but not limited to, all documents, policies, and procedures required to be kept by the Act and the Commission’s regulations, correspondence, memoranda, papers, books, notices, accounts, and other such records made or received by the SDR in the course of its business. All SDR information would be maintained in accordance with § 1.31 of this chapter. Proposed § 49.12(b)(2) would require an SDR to maintain all SDR data and timestamps reported to or created by the SDR, and all messages related to such reporting, throughout the existence of the swap that is the subject of the SDR data and for five years following final termination of the swap, during which time the records would be readily accessible by the SDR and available to the Commission via real-time electronic access, and for a period of at least ten additional years in archival storage from 96 See PO 00000 generally 17 CFR 43.3(h)(4), 17 CFR 45.2. Frm 00013 Fmt 4701 Sfmt 4702 21055 which such records are retrievable by the SDR within three business days.97 Proposed § 49.12(c) would require SDRs to create and maintain records of SDR validation errors and SDR data reporting errors and omissions. Proposed § 49.12(c)(1) would require an SDR to create and maintain an accurate record of all reported SDR data that fails to satisfy the SDR’s data validation procedures. The records would include, but would not be limited to, records of all of the SDR data reported to the SDR that failed to satisfy the SDR data validation procedures, all SDR validation errors, and all related messages and timestamps. Proposed § 49.12(c)(2) would require an SDR to create and maintain an accurate record of all SDR data errors and omissions reported to the SDR and all corrections disseminated by the SDR pursuant to parts 43, 45, and 46. SDRs would be required to make the records available to the Commission on request. The Commission is proposing to amend § 49.12(d) by replacing it with a revised version of current § 49.12(c) that would require that: (i) All records required to be kept pursuant to part 49 must be open to inspection upon request by any representative of the Commission or any representative of the U.S. Department of Justice; and (ii) an SDR must produce any record required to be kept, created, or maintained by the SDR in accordance with § 1.31. Finally, the Commission is proposing a technical change to move the current requirements of § 49.12(e) to the proposed revised requirements of SDRs to monitor, screen, and analyze SDR data in § 49.13, as discussed further below in section II.I. Current § 49.12 98 contains recordkeeping requirements for SDRs, which include both specific provisions and references to the recordkeeping requirements for SDRs included in parts 43 and 45.99 Current § 49.12(a) requires an SDR to maintain its books and records in accordance with the recordkeeping requirements of part 45.100 Current § 49.12(b) requires the SDR to maintain swap data (including historical 97 The propose retention period is the current requirement for SDR records retention. See 17 CFR 45.2(g) (requiring that all records required to be kept by an SDR be kept readily accessible and electronically available to the Commission throughout the existence of the swap and for five years after final termination of the swap and then kept in archival storage for an additional period of at least ten years). 98 See 17 CFR 49.12. 99 See generally 17 CFR 49.12, 17 CFR 45.2. 100 The recordkeeping requirements of part 45 for SDRs are found in § 45.2(f) and (g). See 17 CFR 45.2(f) and (g). E:\FR\FM\13MYP3.SGM 13MYP3 21056 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules positions) throughout the existence of the swap and for five years following the final termination of the swap, during which time the records must be readily accessible by the SDR, available to the Commission via real-time electronic access, and in archival storage from which the data is retrievable by the SDR within three business days.101 Current § 49.12(b) however does not fully account for the requirements of § 45.2(g)(2).102 Additionally, the sections of part 45 applicable to SDRs apply to all records, as opposed to current § 49.12(b), which only applies to swap data. Current § 49.12(c) requires all records that are required to be kept pursuant to part 49 be open to inspection upon request by any representative of the Commission and the U.S. Department of Justice. Current § 49.12(c) also requires that copies of all SDR records will be provided, at the expense of the SDR or person required to keep such records, to any representative of the Commission upon request, either by electronic means or in hard copy, or both, as requested by the Commission. Current § 49.12(d) requires an SDR to comply with the real time public reporting and recordkeeping requirements of § 49.15 and part 43. Current § 49.12(e) requires an SDR to establish policies and procedures to calculate positions for position limits and for any other purpose as required by the Commission. The Commission’s proposed amendments to § 49.12(a) incorporate the provisions of current § 45.2(f). Current § 49.12(a) implies that the recordkeeping requirements only apply to swap data 103 while § 45.2(f) clearly states that its requirements apply to records, not only data reported to the SDR.104 As discussed in section III.A, coupled with the deletion of § 45.2(f) and (g), this amendment would reduce confusion that may arise from having separate SDR recordkeeping requirements in two different rules. This amendment would also clearly state that an SDR is required to keep records beyond just the swap data that is 101 See 17 CFR 49.12(b). 45.2(g)(2) requires that all records required to be kept by an SDR must be kept in archival storage for ten years after the initial § 45.2(g)(1) retention period. Current § 49.12(b) only includes the initial retention period. 103 See 17 CFR 49.12(a) (regarding the swap data required to be reported to the swap data repository). 104 See 17 CFR 45.2(f) (Each swap data repository registered with the Commission shall keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the swap data repository and all swap data reported to the swap data repository, as prescribed by the Commission.). jbell on DSK3GLQ082PROD with PROPOSALS3 102 Section VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 reported to the SDR, which is consistent with the requirements of current § 45.2(f). The Commission notes that, despite the amendment to § 49.12(a), the actual requirements for an SDR would remain the same, because the amendments to § 49.12(a) are merely reproducing the § 45.2(f) requirements, which have applied to SDRs since the effective date for part 45 in 2012. The Commission is proposing to amend current § 49.12(b) because: (i) Current § 49.12(b) only applies to swap data,105 as opposed to all records required to be kept by an SDR; 106 (ii) current § 49.12(b) only fully includes the record retention and retrieval requirements of § 45.2(g)(1),107 though the requirements of § 45.2(g)(2) 108 also apply to all SDR records; and (iii) neither current § 49.12(b) nor § 45.2 distinguish between records of data related to swaps and other records required to be kept by SDRs in regards to the retention periods. Current § 49.12(b) and § 45.2 use the existence of the swap as the basis for the record retention timeframes, but this offers no guidance on how long to keep a record of SDR information, such as SDR policies and procedures. The Commission proposes to remove these inconsistencies and to clarify the scope of SDR recordkeeping, while also consolidating SDR recordkeeping obligations in one regulation. Proposed § 49.12(b)(1) also requires that the SDR information be maintained in accordance with § 1.31.109 The proposed changes to § 49.12(b) would also help harmonize the Commission’s regulations with the SEC’s regulations.110 The SDR information 105 See 17 CFR 49.12(b) (A registered swap data repository shall maintain swap data). 106 See 17 CFR 45.2(f) (Stating that SDRs are required to keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the swap data repository and all swap data reported to the swap data repository). 107 See 17 CFR 45.2(g)(1) (Throughout the existence of the swap and for five years following the final termination of the swap, during which time the records must be readily accessible by the swap data repository and available to the Commission via real time electronic access.). 108 See 17 CFR 45.2(g)(2) (Thereafter, for a period of at least ten additional years in archival storage from which they are retrievable by the swap data repository within three business days.). 109 Section 1.31 of the Commission’s regulations is the Commission’s general recordkeeping provision, which requires, among other requirements, that all regulatory records that do not pertain to specific transactions and are not retained oral communications be kept for no less than five years from the creation date of the record. See 17 CFR 1.31(b)(3). 110 The concept of separate recordkeeping requirements for information similar to SDR information and for SDR data reported to an SDR has already been adopted by the SEC in its PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 listed in the proposed changes to § 49.12(b)(1) largely matches the SEC’s requirement for SBSDR recordkeeping 111 and the retention provisions of § 1.31 of this chapter largely match the requirement for SBSDRs.112 Further, any SDR that also registers with the SEC as an SBSDR would have to comply with § 49.12 and § 240.13n–7, and therefore consistency between the recordkeeping provisions would be particularly beneficial to these SDRs. The SDR information records requirement is also similar to recordkeeping obligations for DCMs,113 SEFs,114 and DCOs.115 By specifically requiring records to be kept for all SDR data reported to the SDR, including all timestamps and messages to or from the SDR related to the reported SDR data, as opposed to only swap data,116 and requiring that the records be kept for ten years in archival storage,117 proposed § 49.12(b)(2) would reorganize current § 49.12(b). These ‘‘new’’ requirements are however already applicable to SDR recordkeeping by virtue of their inclusion in § 45.2(f) and (g).118 regulations governing SBSDRs. See 17 CFR 240.13n–7(b) (listing recordkeeping requirements for SBSDRs); 17 CFR 240.13n–7(d) (excluding ‘‘transaction data and positions’’ from the recordkeeping requirements and instead referring to 17 CFR 240.13n–5 for this recordkeeping). 111 See 17 CFR 240.13n–7(b)(1) (Every securitybased swap data repository shall keep and preserve at least one copy of all documents, including all documents and policies and procedures required by the Securities Exchange Act and the rules and regulations thereunder, correspondence, memoranda, papers, books, notices, accounts, and other such records as shall be made or received by it in the course of its business as such.). 112 Compare 17 CFR 1.31(b)(3) (A records entity shall keep each regulatory record for a period of not less than five years from the date on which the record was created.) and 17 CFR 1.31(b)(4) (A records entity shall keep regulatory records exclusively created and maintained on paper readily accessible for no less than two years. A records entity shall keep electronic regulatory records readily accessible for the duration of the required record keeping period.) with 17 CFR 240.13n–7(b)(2) (Every SBSDR shall keep all such documents for a period of not less than five years, the first two years in a place that is immediately available to representative of the Securities and Exchange Commission for inspection and examination.). 113 See 17 CFR 38.951. 114 See 17 CFR 37.1001. 115 See 17 CFR 39.20. 116 See 17 CFR 49.12(b) (A registered swap data repository shall maintain swap data throughout the existence of the swap and for five years following final termination of the swap). 117 Current § 49.12(b) does not specifically include the ten-year requirement, though current § 49.12(a) does state that books and records must be kept in accordance with the requirements of part 45, which does include the ten-year requirement. See 17 CFR 49.12(a) and (b); 17 CFR 45.2(g)(2). 118 See 17 CFR 45.2(f) and (g). Though the term ‘‘swap data’’ is defined in § 49.2(a) to mean the specific data elements and information set forth in E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 Proposed § 49.12(b)(2) would reproduce the requirements of § 45.2(f) and (g) in part 49 to minimize the number of regulatory sections that contain recordkeeping and retention requirements for SDRs. The Commission notes that though the Commission is specifically proposing recordkeeping requirements for SDR data validation errors and SDR data reporting errors in this proposed § 49.12(c), this would not in any way limit the scope of recordkeeping requirements in proposed § 49.12 to these records. The recordkeeping discussed in proposed § 49.12(c) would also be required under the more general recordkeeping provisions of proposed § 49.12. The Commission notes that it believes SDRs already receive the data validations information that would be required in proposed § 49.12(c) via regular interaction with SEFs, DCMs, and reporting counterparties, but emphasizes that it must be maintained in order to allow for assessments of reporting compliance, including the initial reporting and the correction of the SDR data. The Commission also notes that because the records addressed by proposed § 49.12(c) are all comprised of or relate to SDR data reported to SDRs, all records created and maintained by the SDR pursuant to proposed § 49.12(c) would be subject to the requirements of proposed § 49.12(b)(2). The Commission notes that current § 49.12(d) 119 is redundant because its requirements that an SDR comply with the real time public reporting and recordkeeping requirements prescribed in § 49.15 and part 43 are also required part 45 of this chapter, the Commission notes that the term ‘‘swap data’’ is not currently defined in part 45. Section 45.2(f) requires the SDR to keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities related to the business of the swap data repository and all swap data reported to the swap data repository, as prescribed by the Commission. This expansive requirement for ‘‘all pertinent data and memoranda’’ for all activities related to the business of the swap data repository and all swap data reported to the swap data repository shows that § 45.2(g) requires the SDRs to keep records of data from activities beyond reporting pursuant to part 45 of this chapter, including, for example, all of the required swap transaction and pricing data reporting pursuant to part 43 of this chapter. The ‘‘full, complete, and systematic records’’ that must be kept for ‘‘all activities related to the business’’ of the SDR also include all messages related to the reported data, including all messages sent from the SDR and to the SDR. This recordkeeping obligation on SDRs is analogous to recordkeeping obligations on DCMs, SEFs, and DCOs. See 17 CFR 38.950, 37.1001, and 39.20(a). 119 See 17 CFR 49.12(d) (A registered swap data repository shall comply with the real time public reporting and recordkeeping requirements prescribed in § 49.15 and part 43 of this chapter.). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 by revised §§ 49.12(b)(2) and 49.15, as well as part 43. The Commission further notes that though current § 49.12(d) is proposed to be removed, SDRs would still be subject to the real time public reporting and recordkeeping requirements of § 49.15 and part 43. Request for Comment. The Commission requests comment on all aspects of proposed § 49.12. The Commission also invites specific comment on the following: (10) Would SDRs be substantially impacted by changing the archival storage requirements of current § 45.2(g)(2) and proposed § 49.12(b)(2) from ten years to a different period of time? If so, what would be the correct length of time, and how would this change impact the SDRs? Please include specific facts and figures when providing comments. I. § 49.13—Monitoring, Screening, and Analyzing Data Section 21(c)(5) of the CEA specifically requires SDRs to, at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing swap data, including compliance and frequency of end-user clearing exemption claims by individuals and affiliated entities.120 The Commission believes, based on the text of section 21(c)(5) of the CEA, that SDRs function not only as repositories for swap data, but also as providers of data support for the Commission’s oversight of swaps markets and swap market participants. To implement section 21(c)(5), the Commission adopted current § 49.13 and § 49.14. Current § 49.13 requires SDRs to: (i) Monitor, screen, and analyze all swap data in their possession as the Commission may require, including for the purpose of any standing swap surveillance objectives that the Commission may establish as well as ad hoc requests; and (ii) develop systems and maintain sufficient resources as necessary to execute any monitoring, screening, or analyzing functions assigned by the Commission. In the Part 49 Adopting Release, the Commission received comments relating to §§ 49.13(a) and 49.14 indicating concerns that the then-proposed regulations did not sufficiently describe the specific tasks SDRs are expected to perform.121 In response, the 120 7 U.S.C. 24a(c)(5). letters from: (1) Americans for Financial Reform on February 22, 2011; (2) Chris Barnard on May 25, 2011; (3) Better Markets on February 22, 2011; (4) CME Group on February 22, 2011; (5) Depository Trust & Clearing Corporation on February 22, 2011; (6) Reval on February 18, 2011; (7) SunGard Energy & Commodities on February 22, 121 See PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 21057 Commission specifically stated that its intention in adopting §§ 49.13(a) and 49.14 was to codify the statutory requirements in CEA section 21(c)(5) and later establish specific monitoring, screening, and analyzing duties when its knowledge of the swaps markets was more fully-developed.122 The Commission has worked with SDRs to implement the Commission’s swap reporting regulations since 2011. In that time, SDRs have worked with Commission staff to produce reports that enable the Commission to perform oversight and monitoring of the swaps market. For instance, Commission staff uses the open swaps reports to monitor risk. In addition, reports on clearing exception elections provide the Commission with information on which entities are claiming exemptions from the Commission’s mandatory clearing requirement for swaps. As noted in the Part 49 Adopting Release, the Commission intended to establish specific monitoring, screening, and analyzing duties for SDRs separately. The Commission believes that, based on its experience working with SDRs to monitor, screen, and analyze swap data as directed by CEA section 21(c)(5) thus far, it is prepared to identify the specific duties. The Commission expects specifying these topic areas would not impose substantial new fixed costs on SDRs because SDRs have already established the technology and related infrastructure designed to monitor, screen, and analyze data at the request of the Commission as required under current § 49.13(a). Finally, the Commission notes that the requested tasks would only be performed by SDRs to provide the Commission with data and reports related to the listed topic areas that would assist the Commission in performing its regulatory functions. The Commission would not expect SDRs to perform any of the Commission’s regulatory functions or to provide recommendations to the Commission. The Commission proposes to amend § 49.13 to provide more detail on the monitoring, screening, and analyzing tasks that SDRs may be required to perform as directed by the Commission. The Commission is also proposing to amend § 49.13 to make clear that the requirements of proposed § 49.13 would apply to SDR data reported to the SDR pursuant to parts 43, 45, and 46. CEA section 21(c)(5) requires SDRs to 2011; and (8) TriOptima on February 22, 2011 available at https://comments.cftc.gov/ PublicComments/CommentList.aspx?id=939. 122 See Part 49 Adopting Release at 54548. E:\FR\FM\13MYP3.SGM 13MYP3 21058 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 establish automated systems for monitoring, screening, and analyzing swap data, but the term ‘‘swap data’’ is not defined in the CEA. The Commission believes that monitoring, screening, and analyzing tasks could be incomplete if limited to only swap data, as defined in § 49.2.123 Proposed § 49.13(a) would generally require that an SDR: (i) Establish automated systems for monitoring, screening, and analyzing all relevant SDR data in its possession in the form and manner as directed by the Commission, and (ii) routinely monitor, screen, and analyze relevant SDR data at the request of the Commission.124 Proposed § 49.13(a)(1) would require SDRs to utilize relevant SDR data maintained by the SDR to provide information to the Commission concerning such relevant SDR data. Proposed § 49.13(a)(1) would state that monitoring, screening, and analyzing requests may require the SDRs to compile and/or calculate the requested information within discrete categories, including comparing information among categories, and lists potential topics areas for which the Commission could request related data and reports: (i) The accuracy, timeliness, and quality of SDR data; (ii) updates and corrections to, and verification of the accuracy of, SDR data; (iii) currently open swaps and the consistency of SDR data related to individual swaps; (iv) the calculation of market participants’ swap positions, including for purposes of position limit compliance, risk assessment, and compliance with other regulatory requirements; 125 (v) swap counterparty exposure to other counterparties and standard market risk metrics; (vi) swap valuations and margining activities; (vii) audit trails for individual swaps, including post-transaction events such as allocation, novation, and compression, and all related messages; (viii) compliance with Commission regulations; (ix) market surveillance; (x) 123 Current and proposed § 49.2 limit ‘‘swap data’’ to data reported to an SDR pursuant to part 45. See 17 CFR 49.2(a)(15). The proposed amendments to § 49.2(a) do not substantively change the definition of ‘‘swap data’’ for the purposes of part 49. 124 As discussed further below, proposed § 49.13(a) would more closely track the language of CEA section 21(c)(5) that requires SDRs to at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing swap data, including compliance and frequency of end-user clearing exemption claims by individual and affiliated entities. 125 The Commission notes that the Commission regulations currently require SDRs to establish policies and procedures to calculate swap positions in § 49.12(e). The Commission is proposing to incorporate the current § 49.12(e) into proposed § 49.13(a), without substantively modifying the requirements for SDRs to calculate swap positions. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 the use of clearing exemptions and exceptions; and/or (xi) statistics on swaps market activity. Proposed § 49.13(a)(2) would state that all monitoring, screening, and analyzing requests shall be at the discretion of the Commission, which includes, but is not limited to, the content, scope, and frequency of each required response, and require that all information provided pursuant to a request conform to the form and manner requirements established for the request pursuant to proposed § 49.30.126 Proposed § 49.13(a)(3) would require that all monitoring, screening, and analyzing requests be fulfilled within the time specified by the Commission for the particular request.127 Proposed § 49.13(b) would require that SDRs establish, and at all times maintain, sufficient information technology, staff, and other resources to fulfill the requirements in § 49.13 in the manner prescribed by the Commission. The Commission is also proposing to create a new § 49.13(c) that would incorporate current § 49.15(c) 128 but also expand it to require SDRs to promptly notify the Commission of any swap transaction for which the SDR is aware that it did not receive swap data according to part 45, or data according to part 46, in addition to the current requirement to notify the Commission of any swap transaction and pricing data not received according to part 43. The Commission is providing the following list of examples of monitoring, screening, and analyzing tasks that the Commission could request in the future pursuant to proposed § 49.13(a)(1). All of the examples would 126 The Commission, as discussed below in section II.U, is proposing to adopt § 49.30 to establish a ‘‘form and manner’’ regulation applicable to how information reported to, and maintained by, SDRs would be formatted and delivered to the Commission. The term ‘‘formatted’’ refers to how the information would be presented and could include, but is not limited to, attributes such as data messaging standards, allowable values, and levels of precision, as well as instructions on how the information would be transmitted, including, but not limited to, direct electronic access by Commission staff or by the SDR sending the information to the Commission, and the frequency and timing of delivery. 127 The Commission anticipates working with the SDRs and providing a reasonable time to fulfill each request based on the specific circumstances, including the volume of information requested and the complexity of the request. 128 See 17 CFR 49.15(c) (Duty to Notify the Commission of Untimely Data. A registered swap data repository must notify the Commission of any swap transaction for which the real-time swap data was not received by the swap data repository in accordance with part 43 of this chapter.). As discussed further below, the Commission believes moving § 49.15(c) to § 49.13 would help consolidate the information SDRs need to send to the Commission into one part. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 fall under at least one of the topic areas included in proposed § 49.13(a)(1). The Commission emphasizes that the following list is merely examples, is not exhaustive, and does not limit the Commission’s ability to request that SDRs perform other monitoring, screening, and analyzing tasks that would fall under the topics listed in proposed § 49.13(a). Examples of potential future monitoring, screening, and analyzing activities include reports or information concerning: (i) The reporting (or corrected non-reporting) of swap transactions and any subsequent changes related to the swap, such as life cycle events, as defined in part 45; (ii) the timeliness of reporting through the tracking of execution and reporting timestamps; (iii) the altering or amending of swap terms after the initial public reporting of the swap transaction and pricing data; (iv) the application of the SDR’s data validation procedures and information regarding data validation errors; (v) the identification and treatment of duplicate records; (vi) net and gross positions relating to unique product identifiers; (vii) positions of swap counterparties on an aggregate basis, including futuresequivalent positions identified with the legal entity to which a legal entity identifier is assigned; (viii) swap cancellations; (ix) accuracy and quality of reported SDR data; and (x) the positions of swap counterparties. The Commission notes that an information request under § 49.13(a)(1) could require an SDR to review a market participant’s open swap positions for swaps where that market participant elected a clearing exemption. Such a request would combine categories in § 49.13(a)(1)(iii) and (x). Proposed § 49.13(a)(1) also states that such monitoring, screening, and analyzing requests could require SDRs to provide information comparing certain metrics over a period of time. For instance, an information request could require SDRs to compare the accuracy, timeliness, and quality of SDR data submitted by one or more SEFs, DCMs, or reporting counterparties over a defined period of time. Finally, information requests could require SDRs to compare two or more categories of information across a defined period of time. The Commission understands that SDRs can only be expected to perform monitoring, screening, and analyzing tasks based on the SDR data available to each SDR and that the results of any task would be limited to the SDR data for swaps reported to each SDR. The Commission also expects that SDRs and Commission staff would work together E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules to design each task before a task is prescribed, as is current practice. Finally, the Commission believes that expanding the notice requirements of current § 49.15(c) under new proposed § 49.13(c) would improve the Commission’s ability to monitor compliance with its regulations and increase the Commission’s ability to efficiently respond to compliance issues by helping the Commission learn of compliance issues as soon as possible so that the issues can be remedied. SDRs are often in the best position to know of non-compliance with the data reporting requirements because of the information they receive from market participants. For example, SDRs would quickly know if a reporting counterparty has reported swap data pursuant to part 45 in an untimely manner because the SDR receives the swap data, including the execution timestamp, and can quickly compare when the swap was executed and when the swap data was received. The Commission acknowledges that SDRs can only identify and notify the Commission of SDR data reporting noncompliance based on the SDR data they receive and does not expect SDRs to inform the Commission of reporting issues of which they are not aware. Expanding the notice requirement to noncompliance with parts 45 and 46 would help the Commission to learn of a wider range of compliance issues when they first arise, which in turn would help the Commission to work with market participants and SDRs to fix issues as quickly as possible. Request for Comment. The Commission requests comment on all aspects of proposed § 49.13. The Commission also invites specific comment on the following: (11) Should the Commission require SDRs to calculate positions for market participants? Are there technological and/or regulatory limitations that would make such tasks difficult to perform and unlikely to achieve the desired results? Please be specific. (12) Should the SDRs create a process whereby the counterparties whose positions have been calculated based on data contained in the SDR have the opportunity to review and subsequently challenge and/or correct the results? Please explain why or why not. (13) Are there specific reports or sets of data that the Commission should consider obtaining from SDRs to monitor risk exposures of individual counterparties to swap transactions, to monitor concentrations of risk exposures, or for other purposes? Please be specific. (14) Are there specific reports or sets of data that the Commission should VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 consider obtaining from SDRs to evaluate systemic risk or that could be used for prudential supervision? Are there any other reports or sets of data that the Commission should consider obtaining from SDRs that would not be included in the categories listed in proposed § 49.13(a)(1)? Please be specific. (15) Are there any other tasks or functions that SDRs could perform related to swap data that could help the Commission better assess individual market participant risks and market risks generally? Please be specific. (16) Would any of the specific monitoring, screening, or analyzing topic areas enumerated under proposed § 49.13(a)(1) impose new or substantial costs on SDRs that are not present under the requirements of current § 49.13 and section 21(c)(5) of the CEA? If so, please describe and quantify these costs. (17) Is it sufficiently clear in this proposal that the Commission intends for SDRs to provide data and information under proposed § 49.13 solely to assist the Commission in performing its regulatory functions, rather than expecting SDRs to perform any direct oversight of market participants? If not, how should the Commission clarify that proposed § 49.13 would require SDRs to provide data and information solely to assist the Commission in performing its regulatory functions? J. § 49.15—Real-Time Public Reporting by Swap Data Repositories The Commission proposes to amend § 49.15 to conform to the proposed amended definitions in § 49.2 as described in section II.A. As discussed above in section II.I, the Commission is also proposing to move current § 49.15(c) to § 49.13(c). The Commission also proposes to amend current § 49.15(a) and § 49.15(b) to remove the term ‘‘swap data,’’ which is defined as part 45 data, and replace it with language clarifying that § 49.15 pertains to swap transaction and pricing data submitted to a registered SDR pursuant to part 43. These non-substantive changes do not affect the existing requirements of § 49.15. K. § 49.16—Privacy and Confidentiality Requirements of Swap Data Repositories In connection with the proposed amendments to multiple definitions in § 49.2,129 the Commission proposes to make conforming amendments to § 49.16. The Commission proposes to amend § 49.16(a)(1) to clarify that the policy and procedure requirements of 129 See PO 00000 section II.A above. Frm 00017 Fmt 4701 Sfmt 4702 21059 § 49.16 apply to SDR information and to any SDR data that is not swap transaction and pricing data disseminated under part 43. Such policies and procedures must include, but are not limited to, policies and procedures to protect the privacy and confidentiality of any and all SDR information and all SDR data (except for swap transaction and pricing data disseminated under part 43) that the SDR shares with affiliates and nonaffiliated third parties. The Commission is also making conforming amendments related to the proposed removal of the term ‘‘reporting entity’’ and the proposed definitions of ‘‘SDR data’’ and ‘‘swap data.’’ The Commission notes that these proposed amendments are nonsubstantive and would not affect the existing requirements or applicability of § 49.16. L. § 49.17—Access to SDR Data The Commission is proposing to amend § 49.17 to clarify some of the regulation’s requirements with respect to the Commission’s access to SDR data. Current § 49.17 sets forth the procedures by which the CFTC and other regulators may access SDR data. 1. Direct Electronic Access Definition— § 49.17(b) The Commission proposes to amend the § 49.17(b)(3) definition of ‘‘direct electronic access’’ to mean an electronic system, platform, framework, or other technology that provides internet-based or other form of access to real-time SDR data that is acceptable to the Commission and also provides scheduled data transfers to Commission electronic systems. Current § 49.17(b)(3) defines direct electronic access as an electronic system, platform or framework that provides internet or Web-based access to real-time swap transaction data and also provides scheduled data transfers to Commission electronic systems. Currently, § 49.17(b)(3) does not include the possibility of other types of technology and does not leave the Commission any discretion over access to the data. The Commission believes its proposed changes to the definition would allow more flexibility in regards to the potential methods and forms of direct electronic access that may be provided to the Commission, and would remove any confusion over the type of data to which the term ‘‘direct electronic access’’ applies. The Commission believes that adding ‘‘other technology’’ to the existing list of methods would make clear that the Commission may decide to accept other E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21060 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules methods of access, as long as the method is able to efficiently provide real-time access to SDR data and scheduled SDR data transfers to the Commission. The Commission believes flexibility in terms of the technology SDRs use to provide direct electronic access could accommodate rapid advances in technology and would not inadvertently prevent the use of future technological innovations that may provide more efficient direct electronic access to SDR data. In addition, the Commission proposes to change the current § 49.17(b)(3) text that provides internet or Web-based access to real-time swap transaction data to that provides internet-based or other forms of access to real-time SDR data. The Commission considers the removal of ‘‘Web-based’’ to be a nonsubstantive change, as the term is redundant with ‘‘internet-based.’’ The addition of ‘‘or other form of access’’ is, as with the addition of ‘‘other technology,’’ intended to provide more flexibility for providing direct electronic access to the Commission by making clear that the Commission may decide to accept other forms of access that are not internet-based, as long as the access to SDR data is real-time and provides for scheduled SDR data transfers to the Commission. The Commission believes that requiring that the method(s) and form(s) of direct electronic access be ‘‘acceptable to the Commission’’ would make it clear that the Commission anticipates working with SDRs to decide the acceptable methods and forms of direct electronic access. This amendment would codify the Commission’s current practice of working with SDRs to implement changes, as discussed above in section II.E. The Commission and SDRs routinely work together to provide both real-time internet-based access to SDR data and scheduled transfers of SDR data to the Commission. The Commission believes that the most important consideration in whether a form of access may be acceptable to the Commission would be whether the Commission can successfully utilize the method or form of access. The Commission believes this is necessary to help ensure that the direct electronic access provided is useful to the Commission and to help ensure that an SDR cannot unilaterally change the method or form of direct electronic access in a way that may prevent the Commission from performing its regulatory functions. Though the Commission intends to be flexible in regards to the methods and forms of direct electronic access, especially in VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 the context of technological advancement, the Commission believes it is important to retain the ability to decide the acceptable methods and forms for direct electronic access at its sole discretion. Nothing in the proposed revisions to § 49.17(b)(3) would prevent the SDRs from incorporating new technology into their systems for collecting SDR data or maintaining the SDR data within their own systems, as long as the SDR data is collected by the SDRs and provided to the Commission as required. The Commission would however expect SDRs to provide reporting counterparties with commonly-used methods for reporting SDR data to the SDR and not to force reporting counterparties to unnecessarily expend resources on the latest technology by unreasonably limiting available reporting methods. The Commission would also expect SDRs to be particularly accommodating of non-SD/ MSP/DCO reporting counterparties that may not have the resources to spend on technology. Finally, the current definition of ‘‘direct electronic access’’ includes an SDR providing access to ‘‘real-time swap transaction data.’’ 130 The correct defined term for the data being referenced is ‘‘SDR data.’’ In order to remove any confusion and increase the consistent use of terms, the Commission proposes to remove the word ‘‘transaction’’ and replace ‘‘swap’’ with ‘‘SDR’’ so that the phrase is instead ‘‘real-time SDR data.’’ 131 This nonsubstantive change does not change the current requirements or current SDR practice for providing the Commission with direct electronic access to SDR data. 2. Commission Access—§ 49.17(c) The Commission proposes to amend § 49.17(c) by incorporating the requirements of current § 45.13(a),132 along with additional clarifications to consolidate the requirements for Commission access to SDR data and to describe the SDRs’ responsibilities to provide SDR data to the Commission. 130 17 CFR 49.17(b)(3). Commission notes that the phrase ‘‘realtime’’ is often used to reference swap transaction and pricing data that is publicly reported pursuant to part 43. In this instance, the term refers to direct electronic access requiring that SDR data be available in real time to the entity granted direct electronic access (i.e., the Commission or its designee). 132 The Commission is not proposing to modify current § 45.13(a) in this rulemaking. The Commission expects that subsequent rulemakings based on the Roadmap would modify the requirements of § 45.13 in ways that are not inconsistent with proposed § 49.17. 131 The PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 The Commission is also proposing nonsubstantive edits to § 49.17 to conform terms used in the section with the rest of the Commission’s regulations (e.g., replacing ‘‘swap data and SDR Information’’ with ‘‘SDR data and SDR Information’’). Proposed § 49.17(c) would require SDRs to provide access to the Commission for all SDR data maintained by the SDR.133 Proposed § 49.17(c) would also incorporate all of the current requirements of § 49.17(c)(1). Current § 49.17(c)(1) requires SDRs to provide direct electronic access to the Commission or the Commission’s designee, including another registered entity, in order for the Commission to carry out its legal and statutory responsibilities under the Act and related regulations. The proposal would retain current § 49.17(c)(1) as § 49.17(c) and incorporate a modified version of current § 45.13(a). Specifically, proposed § 49.17(c)(1) would also require SDRs to maintain all SDR data reported to the SDR in a format acceptable to the Commission, and to transmit all SDR data requested by the Commission to the Commission as instructed by the Commission. Proposed § 49.17(c)(1) would also provide that the instructions may include, but are not limited to, the method, timing, and frequency of transmission, as well as the format and scope of the SDR data to be transmitted. Proposed § 49.17(c)(1) would change the requirements of current § 45.13(a) from maintaining and transmitting ‘‘swap data’’ to maintaining and transmitting ‘‘SDR data,’’ to make clear that the SDRs must maintain all SDR data reported to the SDRs in a format acceptable to the Commission and transmit all SDR data requested by the Commission, not just swap data.134 Proposed § 49.17(c)(1) would also broaden the requirements of current § 45.13(a) from transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission 135 to transmit all SDR data requested by the Commission to the Commission as instructed by the Commission, and 133 See 17 CFR 49.17(c)(1) (Direct Electronic Access. A registered swap data repository shall provide direct electronic access to the Commission or the Commission’s designee, including another registered entity, in order for the Commission to carry out its legal and statutory responsibilities under the Act and related regulations.). 134 The Commission does not believe this revision is a change from current SDR practice. 135 17 CFR 45.13(a). E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 explains what these instructions may include. The Commission believes that these revisions would make clear that the Commission’s ability to set the parameters of SDR data transmission is not limited to requiring electronic transfers in a particular format, as could be inferred from current § 45.13(a).136 The Commission believes it needs the ability to instruct SDRs as to all aspects of SDR data transfers to the Commission. These instructions could include, but are not necessarily limited to, method of transmission (e.g., electronic or non-electronic transmission and file types used for transmission), the timing of data transmission, the frequency of data transmission, the formatting of the data to be transmitted (e.g., data feeds or batch transmission), and the actual SDR data to be transmitted. While these revisions may appear to broaden the scope of the Commission’s ability to define the terms of data transfer to the Commission, current § 45.13(a) gives the Commission broad discretion in instructing SDRs on how to send data to the Commission to enable the Commission to perform its regulatory functions, increase market transparency, and mitigate systemic risk.137 Current SDR practice also reflects the Commission’s wide discretion in instructing SDRs in how to send data to the Commission, as the SDRs currently send large amounts of data to the Commission on a regular basis in various formats, based on instructions provided by the Commission. The Commission also believes incorporating the current § 45.13(a) requirements in § 49.17(c) would help SDRs by locating more of their SDR responsibilities located in part 49. Though SDRs may need to update their systems in response to changing Commission instructions over time, the Commission expects to work with the SDRs to ensure that any changes are practical and reasonable, and provide time for the SDRs to adjust their systems. 136 See id. (stating that SDRs shall transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission.). 137 See Part 45 Adopting Release at 2169 (requiring an SDR to maintain all swap data reported to it in a format acceptable to the Commission, and to transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission); see also Part 49 Adopting Release at 54552 (stating that the Commission does not believe that SDRs should have the discretion or ability to determine the appropriate data sets that should be provided to the Commission). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 3. Technical Correction—§ 49.17(f)(2) The Commission proposes to amend § 49.17 to replace an incorrect reference to ‘‘37.12(b)(7)’’ at the end of paragraph (f)(2) with the correct reference to ‘‘39.12(b)(7)’’ of the Commission’s regulations, as there is no § 37.12(b)(7) in the Commission’s regulations.138 The Commission also proposes nonsubstantive amendments to § 49.17(f)(2) to incorporate proposed changes in terminology used in § 49.17(f)(2) in order for the terms used to be consistent with the terms listed in proposed § 49.2(a). 4. Delegation of Authority—§ 49.17(i) The Commission proposes to move the delegation of authority in current § 49.17(i) to § 49.31(a)(7). Current § 49.17(i) delegates to the Director of DMO the authority reserved to the Commission in current § 49.17. This includes the authority to instruct SDRs on how to transmit SDR data to the Commission. As discussed further below in section II.V, the Commission is proposing to include as many delegations of authority as possible for part 49 in proposed § 49.31, including the delegation of authorities reserved to the Commission in § 49.17, to improve consistency within the part and remove confusion that may arise from listing delegations of authority in multiple sections. The Commission emphasizes that this change would not affect the current delegation of authority, as all functions reserved to the Commission in § 49.17 would still be delegated to the Director of DMO in proposed § 49.31. Request for Comment. The Commission requests comment on all aspects of proposed § 49.17. The Commission also invites specific comment on the following: (18) Is there a need to further clarify any of the requirements of the revised paragraphs of proposed § 49.17? If so, which requirements and what information need to be clarified? Please be specific. (19) Are there any aspects of current or proposed § 49.17 that would inhibit or in any way prevent experimentation with or development of new technological approaches to SDR operations or providing SDR data to the Commission? If so, what are these inhibitors and how can they be mitigated? M. § 49.18—Confidentiality Arrangement The Commission is proposing to move the delegation of authority in current § 49.18(e) to § 49.31(a)(8). Current 138 See PO 00000 17 CFR 37.12(b). Frm 00019 Fmt 4701 Sfmt 4702 21061 § 49.18(e) delegates to the Director of DMO all functions reserved to the Commission in § 49.18, including the authority to specify the form of confidentiality arrangements required prior to disclosure of swap data by an SDR to an appropriate domestic or foreign regulator, and the authority to limit, suspend, or revoke such appropriate domestic or foreign regulators’ access to swap data held by an SDR. As discussed further below in section II.V, the Commission believes market participants would benefit by being able to locate most delegations of authority in proposed § 49.31. All functions reserved to the Commission in current § 49.18 would continue to be delegated to the Director of DMO under this proposed amendment. N. § 49.20—Governance Arrangements (Core Principle 2) The Commission proposes to amend citations to § 49.2 within § 49.20 to conform to proposed changes in the numbering of the definitions contained in proposed § 49.2, as discussed above in section II.A. The Commission also proposes to make conforming changes to reflect the proposed changes to definitions in § 49.2. The Commission is proposing to amend current citations to § 49.2(a)(14) in § 49.20(b)(2)(v) and to § 49.2(a)(1) in § 49.20(c)(1)(ii)(B) to citations to § 49.2(a). The Commission also proposes to update these paragraphs and § 49.20(b)(2)(vii) to reflect proposed changes related to the definitions of ‘‘SDR data,’’ ‘‘SDR information,’’ ‘‘registered swap data repository,’’ and ‘‘reporting entity.’’ These non-substantive changes do not affect the existing requirements of § 49.20. O. § 49.22—Chief Compliance Officer The Commission is proposing to amend § 49.22 to clarify obligations, make technical corrections and nonsubstantive changes, and remove unnecessary requirements. The Commission is proposing to define senior officer in § 49.22(a) as the chief executive officer or other equivalent officer of the SDR.139 Proposed § 49.22(b)(1)(i) would specify that the chief compliance officer (‘‘CCO’’) of an SDR shall have the authority and resources to develop, in consultation with the board of directors or senior officer, the policies and procedures of the SDR and enforce such policies and procedures to fulfill the 139 The Commission notes that this amendment would define a term that is currently used throughout § 49.22. E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21062 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules duties set forth for CCOs in the CEA and Commission regulations. Proposed § 49.22(c)(1) would clarify that only the SDR’s board of directors or senior officer may appoint the CCO, and require that SDRs notify the Commission within two business days of the appointment, whether interim or permanent. Proposed § 49.22(c)(2) would require that the CCO report directly to the board of directors or the senior officer of the SDR. Proposed § 49.22(c)(3) would specify that only the board of directors or the senior officer may remove the CCO, and that the SDR shall notify the Commission within two business days of the removal, whether interim or permanent. Proposed § 49.22(c)(4) would contain the requirement currently found in § 49.22(c)(1) for the CCO to meet with the board of directors or senior officer of the SDR at least annually. Proposed § 49.22(d)(2) would provide more detail on conflicts of interest obligations by making clear that CCOs must take ‘‘reasonable steps,’’ in consultation with the board of directors or the senior officer of the SDR, to resolve any ‘‘material’’ conflicts of interest that may arise, and would no longer list specific types of conflicts. Proposed § 49.22(d)(4) would remove an unnecessary reference to § 49.18. Proposed § 49.22(d)(5)–(6) would specify that SDRs must establish procedures reasonably designed to handle, respond, remediate, retest, and resolve noncompliance issues identified by the CCO through any means, including any compliance office review, look-back, internal or external audit finding, self-reported error, or validated compliant, and establish and administer a compliance manual designed to promote compliance with the applicable laws, rules, and regulations and a written code of ethics for the SDR designed to prevent ethical violations and to promote honesty and ethical conduct by SDR personnel. Proposed § 49.22(e) would streamline, clarify, and rearrange the requirements of the SDR annual compliance report. The Commission is proposing to streamline and combine current § 49.22(e)(1) and (2) into proposed § 49.22(e)(1). The Commission is also proposing to remove many of the examples of how material compliance issues can be identified from current § 49.22(e)(5) so as not to imply any limits on the material compliance matters that must be described. Finally, the Commission proposes to add ‘‘in all material aspects’’ to the end of current § 49.22(e)(6) in proposed § 49.22(e)(5), in order to reduce CCOs’ concerns with VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 certifying the annual compliance report’s accuracy. Proposed § 49.22(f)(1) would remove the requirement for any discussion of the annual compliance report after submission to the board of directors or senior officer to be recorded in the board minutes or other similar record as evidence of compliance with the submission requirement.140 Proposed § 49.22(f)(2) would increase the amount of time that SDRs have to submit the annual compliance report to the Commission from 60 days to 90 calendar days after the end of the SDR’s fiscal year. As discussed above in section II.B, the Commission is also proposing to remove the annual amendment requirement in § 49.3(a)(5). The Commission is therefore also proposing to remove the reference to § 49.3(a)(5) from § 49.22(f)(2). Proposed § 49.22(f)(3) would include a requirement that, where an amendment to the annual compliance report must be submitted to the Commission, the CCO also submit the amended annual compliance report to the SDR’s board of directors or the senior officer.141 Proposed § 49.22(f)(4) would allow the Commission to more easily grant requests for an extension of time to file the annual compliance report by removing the requirement that SDRs must show ‘‘substantial, undue’’ hardship. Proposed § 49.22(g) would simplify the language and organization of the recordkeeping requirements for records related to the SDRs’ policies and records created related to the annual compliance report, and would no longer contain specific examples of records, but would still require the same records be maintained in accordance with proposed § 49.12. Current § 49.22 sets forth the requirements for SDR CCOs, including: Their designation and qualifications; their appointment, supervision, and removal; their duties; and their responsibilities with respect to the annual compliance report and recordkeeping. The Commission believes that the amendments discussed above would clarify and streamline the requirements for, and responsibilities of, CCOs in a manner that balances the Commission’s interest in providing CCOs discretion in fulfilling their duties against clearly specifying their responsibilities. The large majority of proposed amendments are non-substantive changes that would clarify the requirements, simplify the wording of the requirements, reorganize the requirements into a more logical order, or remove unnecessary text. Proposed § 49.22(d)(2) would change the duties for CCOs related to conflicts of interest to a more practical requirement. Current § 49.22(d)(2) implies that a CCO should resolve all conflicts of interest, regardless of their potential effect on the operations of the SDR.142 The Commission does not believe a CCO should be required to expend resources to resolve every conceivable conflict of interest that may affect an SDR and instead proposes to require CCOs to take reasonable steps to resolve any material conflicts of interest that may arise. This proposed requirement for taking reasonable steps to resolve material conflicts of interest reflects the CCO’s practical ability to detect and resolve conflicts. Moreover, the proposed amendment reflects the Commission’s belief that a CCO is well positioned to assess whether a potential conflict of interest is material to his or her SDR’s ability to comply with the Act and the Commission’s regulations. The Commission believes that proposed § 49.22(d)(2) would allow SDRs to address conflicts of interest while mitigating the burdens associated with addressing the conflicts. The Commission notes that, while proposed § 49.22(d)(2) removes the three examples of potential conflicts of interest from current § 49.22(d)(2)(i)– (iii),143 these three examples would still need to be addressed if they rise to the level of a material conflict of interest. The Commission also proposes to streamline the requirements on SDRs in preparing the annual compliance report in proposed § 49.22(e)(1). Proposed § 49.22(e)(1) would remove the current § 49.22(e)(2) 144 required comparison of all applicable Commission regulations and CEA requirements with each SDR 140 The Commission notes that, even with the removal of this requirement, the Commission may still require an SDR to provide a demonstration of compliance with the requirements of proposed § 49.22(f) under proposed § 49.29. See section II.T below. 141 The Commission is also proposing a change to § 49.22(f)(3) to correct the inaccurate reference to § 49.22(e)(67). There is no § 49.22(e)(67) and the proposed amendment would instead reference the correct § 49.22(e)(5). This technical amendment does not affect the existing requirements of § 49.22(f)(3). 142 See 17 CFR 49.22(d)(2) (requiring the CCO to, in consultation with the board of directors or senior officer, resolve any conflicts of interest that may arise). 143 See id. (including conflicts between (i) business considerations and compliance requirements, (ii) business considerations and the requirement that the SDR provide fair and open access, and (iii) SDR management and members of the SDR’s board of directors as examples of conflicts of interest to be addressed by the SDR’s CCO). 144 See 17 CFR 49.22(e)(2). PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules policy designed to satisfy each requirement and assessment of the effectiveness of each policy and areas for improvement. Proposed § 49.22(e)(1) would replace this requirement with a more targeted requirement to describe and assess the effectiveness of SDR policies and procedures designed to reasonably ensure compliance with the Act and applicable Commission regulations. Based on its experience in reviewing annual compliance reports, the Commission believes this more targeted requirement would focus on the most important and useful information in the annual compliance report and reduce the burden on SDRs in creating the assessment for the annual compliance report without any detrimental effects on SDR compliance or the Commission’s ability to perform its oversight functions. The Commission notes that it would also have the ability to request copies of any SDR policies and procedures and to request a demonstration of compliance with any SDR obligations under the Act or Commission regulations under proposed § 49.29. The Commission also believes that multiple proposed changes to § 49.22(f) would simplify requirements and reduce compliance burdens on SDRs related to submitting the annual compliance reports. The proposed amendments would remove the requirement to record the submission of the annual compliance report and any subsequent discussion of the report in the board minutes (proposed § 49.22(f)(1)) as this requirement would be incorporated into the general recordkeeping requirement in proposed § 49.22(g); extend the time to submit the annual compliance report to the Commission from 60 to 90 days (proposed § 49.22(f)(2)) in recognition that the CCO has to prepare other yearend reports, such as the fourth quarter financial report; and allow reasonable requests for additional time to file an annual compliance report to be granted (proposed § 49.22(f)(4)) to provide more flexibility. Each of these amendments would simplify requirements or reduce compliance burdens on SDRs, without any substantial effect on the Commission’s ability to oversee SDRs. Finally, the Commission notes that the proposed changes to § 49.22(g) would simplify the wording of the recordkeeping requirement by removing the lengthy examples of records to be kept.145 This proposed change does not, however, in any way limit the records that must be preserved under proposed § 49.22(g). All of the records listed in 145 See 17 CFR 49.22(g). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 current § 49.22(g) would still be required to be kept pursuant to proposed § 49.22(g) and proposed § 49.12(b)(1), along with any other qualifying records that are not listed. Request for Comment. The Commission requests comment on all aspects of the proposed amendments to § 49.22. The Commission also invites specific comment on the following: (20) Has the § 49.22(b)(2)(ii) prohibition on a CCO also serving as an SDR’s general counsel or as a member of the SDR’s legal department presented SDRs with any challenges or raised concerns that could be fixed by a change to the prohibition? (21) Does proposed § 49.22(d)(2) provide CCOs with sufficient clarity as to the conflicts of interest that are within the scope of their responsibilities under the proposed rule? (22) Does proposed § 49.22(d)(2) provide CCOs with sufficient authority to resolve any conflicts of interest that may arise as required by section 21(e)(2)(C) of the Act? P. § 49.24—System Safeguards The Commission proposes to make non-substantive amendments to § 49.24. Current § 49.24(d) governs SDR BC–DR plans, resources, and procedures. The proposed amendments to § 49.24 provide more detail as to the duties and obligations that SDRs must fulfill by expanding the non-exhaustive list of duties and obligations to include specific reference to §§ 49.10 to 49.21, § 49.23, and §§ 49.25 to 49.27. The Commission emphasizes that this list is provided merely for clarity purposes and would not in any way excuse any SDR from any of the duties and obligations included in other sections of the Commission’s regulations. As the duties and obligations of these sections currently apply to SDRs and would continue to apply to SDRs, this nonsubstantive change would not affect the requirements applicable to SDRs. The Commission also proposes to make technical amendments to § 49.24(i), to remove a reference to § 45.2. As described above in section II.H, the Commission is moving the SDR recordkeeping requirements contained in current § 45.2(f) and (g) to § 49.12 for consistence and clarity purposes. This proposed technical change would conform § 49.24(i) to the proposed changes to § 45.2 and § 49.12, but would not change any of the requirements applicable to SDRs. Q. § 49.25—Financial Resources As discussed above in section II.E, the Commission proposes conforming changes to § 49.25 to remove the PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 21063 reference to § 49.9 and to core principle obligations identified in § 49.19. Proposed § 49.25(a) would instead refer to SDR obligations under ‘‘this chapter,’’ to be broadly interpreted as any regulatory or statutory obligation specified in part 49. These technical changes do not impact existing obligations on SDRs. The Commission is proposing one specific change to § 49.25(f)(3). Current § 49.25(f)(3) requires SDRs to submit their financial resources reports no later than 17 business days after the end of the SDR’s fiscal quarter, or a later time that the Commission permits upon request. The Commission is proposing to amend § 49.25(f)(3) to extend the time SDRs have to submit their quarterly financial resources reports to not later than 40 calendar days after the end of the SDR’s first three fiscal quarters, and not later than 90 calendar days after the end of the SDR’s fourth fiscal quarter, or such later time as the Commission may permit in its discretion. The Commission believes aligning the 90 calendar day deadline with the amended timeframe for SDRs submitting CCO reports in § 49.22(f)(2) 146 would help SDRs in planning their yearly compliance obligations. Request for Comment. The Commission requests comment on all aspects of the proposed amendments to § 49.25. R. § 49.26—Disclosure Requirements of Swap Data Repositories The Commission proposes to amend § 49.26 to conform defined terms with the proposed amendments to § 49.2 discussed above in section II.A. The Commission also proposes to make updates to the introductory paragraph of § 49.26 to reflect updates to the terms ‘‘SDR data,’’ ‘‘registered swap data repository,’’ and ‘‘reporting entity.’’ Current § 49.26 requires SDRs to furnish SEFs, DCMs, and reporting counterparties with an SDR disclosure document that sets forth the risks and costs associated with using the services of the SDR, and contains the information enumerated in § 49.26(a) through (i). These non-substantive amendments would not change the current requirements of § 49.26. The Commission also proposes to add new § 49.26(j), which would require that the SDR disclosure document set forth the SDR’s policies and procedures regarding the reporting of SDR data to the SDR, including the SDR data validation procedures, swap data verification procedures, and procedures 146 Discussed E:\FR\FM\13MYP3.SGM above in section II.O. 13MYP3 21064 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules for correcting SDR data errors and omissions. The Commission believes that § 49.26(j) would assist market participants with acquiring information regarding SDR operations that would help inform their decision-making in regards to choosing which SDRs to use for swaps reporting. Disclosing the SDR data reporting policies and procedures, the SDR data validation procedures, the swap data verification procedures, and the SDR data correction procedures would also increase data quality by helping reduce the number of data errors and omissions by providing the SEFs, DCMs, and reporting counterparties with the information needed to properly design their reporting systems before any reporting occurs. The Commission notes that the requirements to provide the policies and procedures for reporting, validations, verification, and corrections would apply for all SDR data to be reported, as applicable. Request for Comment. The Commission requests comment on all aspects of proposed § 49.26. The Commission also invites specific comment on the following: (23) Should the Commission require any other specific information be disclosed by SDRs to facilitate market participants’ informed decision making? If so, please describe what other information should be disclosed and why. Please be specific. S. § 49.28—Operating Hours of Swap Data Repositories The Commission is proposing to add new § 49.28 to provide more detail on SDRs’ responsibilities with respect to hours of operation. The proposed amendments reflect the Commission’s belief that SDRs should operate as continuously as possible while still being afforded the opportunity to perform necessary testing, maintenance, and upgrades of their systems. jbell on DSK3GLQ082PROD with PROPOSALS3 1. General Requirements—§ 49.28(a) Proposed § 49.28(a) would require an SDR to have systems in place to continuously accept and promptly record all SDR data reported to the SDR, and, as applicable, publicly disseminate all swap transaction and pricing data reported to the SDR as required under part 43. Proposed § 49.28(a)(1) would allow an SDR to establish normal closing hours to perform system maintenance during periods when, in the SDR’s reasonable estimation, the SDR typically receives VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 the least amount of SDR data.147 Under proposed § 49.28(a)(1), an SDR would also have to provide reasonable advance notice of its normal closing hours to market participants and to the public. Proposed § 49.28(a)(2) would allow an SDR to declare, on an ad hoc basis, special closing hours to perform system maintenance that cannot wait until normal closing hours. Similar to proposed § 49.28(a)(1), proposed § 49.28(a)(2) instructs SDRs to schedule special closing hours during periods when, in the SDR’s reasonable estimation, the special closing hours would, to the extent possible given the circumstances prompting the special closing hours, be least disruptive to the SDR’s SDR data reporting responsibilities. Proposed § 49.28(a)(2) would also require the SDRs to provide reasonable advance notice of the special closing hours to market participants and the public whenever possible, and, if advance notice is not reasonably possible, to give notice to the public as soon as is reasonably possible after declaring special closing hours. Current § 43.3(f) regulates the hours during which SDRs that accept and publicly disseminate swap transaction and pricing data must operate. Current § 43.3(f) reflects the Commission’s beliefs that the global nature of the swaps market requires that SDRs be able to publicly disseminate swap transaction and pricing data at all times and that SDRs that publicly disseminate swap transaction and pricing data should generally be fully operational 24 hours a day, 7 days a week.148 While the Commission strongly encourages SDRs to adopt redundant systems to allow public reporting during closing hours, current § 43.3(f) allows SDRs to schedule downtime to perform system maintenance. Current § 43.3(g) addresses SDRs’ obligations regarding swap transaction and pricing data sent to an SDR for publicly reportable swap transactions during closing hours. The Commission proposes to include the requirements of current § 43.3(f) and 147 The Commission notes that this would be a minor change from the existing requirements of § 43.3(f)(2), which prescribes that SDRs avoiding scheduling closing hours during the time when the SDR reasonably estimates that the swaps markets are most active. The Commission believes times when SDRs receive less SDR data would be a better measure of when to schedule normal closing hours for SDRs. 148 See Real-Time Public Reporting of Swap Transaction Data, 77 FR 1182, 1204 (Jan. 9, 2012) (The Commission agrees that the global nature of the swaps market requires that an SDR be able to publicly disseminate swap transaction and pricing data at all times and believes that SDRs that publicly disseminate swap transaction and pricing data should be fully operational 24 hours a day, 7 days a week.). PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 § 43.3(g) in proposed § 49.28 and to expand the operating hours requirement beyond public reporting of swap transaction and pricing data to also explicitly include fulfilling an SDR’s responsibilities under parts 45, 46, and 49. This proposed change is intended to make clear that the obligations of SDRs to operate near continuously is not limited to the receipt and dissemination of swap transaction and pricing data pursuant to part 43, but instead SDRs must be able to continuously perform all of their data-related responsibilities required under the Commission’s regulations. The Commission also believes that it would help SDRs and market participants to move all SDR operating hours requirements to part 49. The proposed requirements discussed above would also include many of the requirements of the SEC’s operating hours regulations governing SBSDRs to increase consistency between the regulations for SDRs and SBSDRs.149 2. Part 40 Requirement for Closing Hours—§ 49.28(b) Proposed § 49.28(b) would require SDRs to comply with the requirements under part 40 of the Commission’s regulations when adopting or amending normal closing hours and special closing hours.150 The Commission anticipates that, due to the unexpected and emergency nature of special closing hours, rule filings related to special closing hours would typically qualify for the emergency rule certification provisions of § 40.6(a)(6).151 This requirement is already applicable to SDRs pursuant to current § 43.3(f)(3).152 149 The SEC’s operating hours regulations are contained in 17 CFR 242.904. While current § 43.3(f) allows SDRs to schedule closing hours while avoiding the times that, in an SDR’s estimation, U.S. markets and major foreign markets are most active, and requires the SDRs to provide advance notice of closing hours to market participants and the public, current § 43.3(f) does not make a distinction between regular closing hours and special closing hours. The distinction is present, however, in operating hours requirements for SBSDRs, and proposed § 49.28(a)(1)–(2) would largely adopt the SBSDR requirement. These requirements would make clear that an SDR may establish both normal and special closing hours and would allow an SDR that also registers with the SEC as an SBSDR to effectively follow the same operating hours requirements. 150 Closing hours would be considered ‘‘rules’’ for the purposes of part 40 requirements. See 17 CFR 40.1, et. seq. 151 See 17 CFR 40.6(a)(6) (containing the requirements for establishing standards for responding to an emergency and for emergency rule filings); see also 17 CFR 40.1(h) (defining ‘‘emergency’’ for the purposes of part 40). 152 See 17 CFR 43.3(f)(3) (A registered swap data repository shall comply with the requirements under part 40 of this chapter in setting closing hours and shall provide advance notice of its E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules 3. Acceptance of SDR Data During Closing Hours—§ 49.28(c) jbell on DSK3GLQ082PROD with PROPOSALS3 Proposed § 49.28(c) would require an SDR to have the capability to accept and hold in queue any and all SDR data reported to the SDR during normal closing hours and special closing hours. The Commission believes this requirement would help to avoid the loss of any SDR data that is reported to an SDR during closing hours and to facilitate the SDR’s prompt fulfillment of its data reporting responsibilities, including public dissemination of swap transaction and pricing data, as applicable, once the SDR reopens from closing hours. Proposed § 49.28(c) would expand the similar existing requirements for swap transaction and pricing data in § 43.3(g)153 to all SDR data and would largely follow the SBSDR requirements to receive and hold in queue information regarding security-based swaps.154 Proposed § 49.28(c)(1) would require an SDR, on reopening from normal or special closing hours, to promptly process all SDR data received during the closing hours and, pursuant to part 43, to publicly disseminate swap transaction and pricing data reported to the SDR that was held in queue during the closing hours. Proposed § 49.28(c)(1) would expand the similar existing requirements for the SDRs to disseminate swap transaction and pricing data pursuant to § 43.3(g)(1) 155 to also include the prompt processing of all other SDR data received and held in queue during closing hours. The proposed requirements would also largely follow the SBSDR requirements for disseminating transaction reports after reopening following closing hours.156 closing hours to market participants and the public.). 153 See 17 CFR 43.3(g) (During closing hours, a registered swap data repository shall have the capability to receive and hold in queue any data regarding publicly reportable swap transactions pursuant to this part.). 154 See 17 CFR 242.904(c) (During normal closing hours, and to the extent reasonably practicable during special closing hours, a registered securitybased swap data repository shall have the capability to receive and hold in queue information regarding security-based swaps that has been reported pursuant to §§ 242.900 through 242.909.). 155 See 17 CFR 43.3(g)(1) (Upon reopening after closing hours, a registered swap data repository shall promptly and publicly disseminate the swap transaction and pricing data of swaps held in queue, in accordance with the requirements of this part.). 156 See 17 CFR 242.904(d) (When a registered security-based swap data repository re-opens following normal closing hours or special closing hours, it shall disseminate transaction reports of security-based swaps held in queue, in accordance with the requirements of § 242.902.). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 The Commission believes SDR closing hours should disrupt the data reporting process as little as possible, and therefore believes that the SDRs should be responsible for receiving, holding, and then disseminating SDR data as required, as opposed to disrupting the reporting systems of SEFs, DCMs, and reporting counterparties. Proposed § 49.28(c)(2) would require SDRs to immediately issue notice to all SEFs, DCMs, reporting counterparties, and the public in the event that an SDR is unable to receive and hold in queue any SDR data reported during normal closing hours or special closing hours. Proposed § 49.28(c)(2) would also require SDRs to issue notice to all SEFs, DCMs, reporting counterparties, and the public that the SDR has resumed normal operations immediately on reopening.157 Proposed § 49.28(c)(2) would then require a SEF, DCM, or reporting counterparty that was not able to report SDR data to an SDR because of the SDR’s inability to receive and hold in queue any SDR data to immediately report the SDR data to the SDR. Proposed § 49.28(c)(2) would expand the similar existing requirements for swap transaction and pricing data in § 43.3(g)(2) 158 to all SDR data and would largely follow the SBSDR requirements to receive and hold in queue information regarding securitybased swaps.159 The Commission 157 Consistent with the current requirements under part 43, an SDR may issue such notices to its participants and the public by publicizing the notices that the SDR is unable to receive and hold in queue any SDR data and that the SDR has resumed normal operations in a conspicuous place on the SDR’s website. See 77 FR at 1205, n. 208 (allowing SDRs to provide reasonable advance notice of its closing hours to participants and the public by providing notices directly to its participants or publicizing its closing hours in a conspicuous place on its website). 158 See 17 CFR 43.3(g)(2) (If at any time during closing hours a registered swap data repository is unable to receive and hold in queue swap transaction and pricing data pursuant to this part, then the registered swap data repository shall immediately upon reopening issue notice that it has resumed normal operations. Any registered swap execution facility, designated contract market or reporting party that is obligated under this section to report data to the registered swap data repository shall report the data to the registered swap data repository immediately after receiving such notice.). 159 See 17 CFR 242.904(e) (If a registered securitybased swap data repository could not receive and hold in queue transaction information that was required to be reported pursuant to §§ 242.900 through 242.909, it must immediately upon reopening send a message to all participants that it has resumed normal operations. Thereafter, any participant that had an obligation to report information to the registered security-based swap data repository pursuant to §§ 242.900 through 242.909, but could not do so because of the registered security-based swap data repository’s inability to receive and hold in queue data, must promptly report the information to the registered security-based swap data repository.). PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 21065 emphasizes that it would expect SDRs to be able to accept and hold in queue SDR data that is reported during closing hours. The inability to accept and hold in queue SDR data would need to be a rare occurrence that results from unanticipated emergency situations. The provisions in § 49.28(c)(2) would only be included as a last resort to prevent data loss. Though proposed § 49.28 would apply to all SDR data, as opposed to only swap transaction and pricing data reported pursuant to part 43, the Commission believes that proposed § 49.28 would have little impact on the operations of SDRs. Proposed § 49.28 largely encompasses the requirements of current § 43.3(f) and (g), which already apply to SDRs, and the sections that largely conform to SEC regulations governing SBSDRs would allow an SDR that also registers with the SEC as an SBSDR to effectively comply with one set of regulations. The Commission also understands that SDRs currently routinely receive and hold in queue all SDR data submitted during declared SDR closing hours, regardless of whether that data is being submitted pursuant to part 43 or another Commission regulation. As a result, the Commission believes that expanding the operating hours requirements to all SDR data would have little practical impact on current SDR operations. Request for Comment. The Commission requests comment on all aspects of proposed § 49.28. The Commission also invites specific comment on the following: (24) Does proposed § 49.28 provide SDRs sufficient flexibility to conduct necessary maintenance on their electronic systems while still facilitating the availability of SDR data for the Commission and the public? Please be specific. T. § 49.29—Information Relating to Swap Data Repository Compliance The Commission is proposing to add new § 49.29 to provide for information requests from the Commission to SDRs regarding information the Commission needs to perform its duties and regarding SDR compliance with regulatory duties and core principles. Proposed § 49.29(a) would require SDRs, upon request by the Commission, to file certain information related to its business as an SDR or other such information as the Commission determines to be necessary or appropriate for the Commission to perform its regulatory duties. The SDRs would be required to provide the requested information in the form and E:\FR\FM\13MYP3.SGM 13MYP3 21066 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules manner and within the time specified by the Commission in its request. Proposed § 49.29(b) would require SDRs, upon request by the Commission, to demonstrate compliance with their obligations under the CEA and Commission regulations, as specified in the request. The Commission notes that the requests may include, but are not limited to, demonstrating compliance with the core principles applicable to SDRs under section 21(f) of the CEA and part 49. SDRs would be required to provide the requested information in the form and manner and within the time specified by the Commission in its request. The Commission notes that these requests may be made for any Commission oversight purpose. For example, the Commission may request SDRs to provide information relating to their operations or their practices in connection with their compliance with particular regulatory duties and core principles, other conditions of their registration, or in connection with the Commission’s general oversight responsibilities under the CEA. Proposed § 49.29 is based on existing Commission requirements applicable to SEFs and DCMs.160 The Commission notes that proposed § 49.29 facilitates the removal of the requirement for annual Form SDR updates from § 49.3(a)(5), as the Commission would be able to request the same information that would be contained in Form SDR and its exhibits as needed without the need for a regular full Form SDR update. Request for Comment. The Commission requests comment on all aspects of proposed § 49.29. jbell on DSK3GLQ082PROD with PROPOSALS3 U. § 49.30—Form and Manner of Reporting and Submitting Information to the Commission The Commission is proposing to add new § 49.30 to place the various requirements for form and manner requests to SDRs from the Commission in one section. The proposed changes to part 49 of the Commission’s regulations set forth in this proposal contain various regulatory provisions that would require SDRs to provide reports and other information to the Commission in ‘‘the form and manner’’ requested or directed by the Commission. In particular, proposed §§ 49.13(a) and 49.29 would require SDRs to provide reports and certain other information to the Commission in the ‘‘form and manner’’ requested or directed by the Commission. 160 See, e.g., 17 CFR 37.5 and 38.5. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Proposed § 49.30 would establish the broad parameters of the ‘‘form and manner’’ requirement. Unless otherwise instructed by the Commission, an SDR would have to submit SDR data reports and any other information required under part 49 to the Commission, within the time specified, using the format, coding structure, and electronic data transmission procedures approved in writing by the Commission. The ‘‘form and manner’’ requirement proposed in § 49.30 would not supplement or expand upon existing substantive provisions of part 49, but instead, would only allow the Commission to specify how existing information reported to, and maintained by, SDRs should be formatted and delivered to the Commission. Proposed § 49.30 provides that the Commission would specify, in writing, the format, coding structure, and electronic data transmission procedures for various reports and submissions that are required to be provided to the Commission under part 49. The Commission notes that these written instructions would include the most recent, and any future, ‘‘guidebooks’’ or other technical specifications published on the Commission’s website, as applicable.161 Request for Comment. The Commission requests comment on all aspects of proposed § 49.30. The Commission also invites specific comment on the following: (25) Should the Commission provide a single format or coding structure for each SDR to deliver reports and other information in a consistent manner? Are existing standards and formats sufficient for providing the Commission with requested information? Please explain why or why not. (26) Should the Commission require specific electronic data transmission methods and/or protocols for SDRs to disseminate reports and other information to the Commission? Please explain why or why not. V. § 49.31—Delegation of Authority to the Director of the Division of Market Oversight Relating to Certain Part 49 Matters The Commission is proposing to add new § 49.31 to consolidate delegations of authority for part 49. Current part 49 and many amendments to part 49 161 The Commission’s current published ‘‘guidebooks’’ include those published for reporting required by parts 15, 16, 17, 18, and 20 of the Commission’s regulations relating to ownership and control reports, large traders reports, and data reporting. These guidebooks are available on the Commission’s website at https://www.cftc.gov/ Forms/index.htm. PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 proposed in this release include provisions that require SDRs to perform various functions at the request of the Commission or to provide information as prescribed by the Commission or as instructed by the Commission. The Commission proposes to delegate the authority to exercise most of the listed part 49 functions to the Director of DMO to facilitate the Commission’s ability to respond to changes in the swaps market and technological developments, and to ensure the Commission’s ability to quickly and efficiently access information and data from the SDRs in order to efficiently fulfill its market surveillance responsibilities and other regulatory obligations. The Commission is proposing to delegate the functions in the below current and proposed regulations to the Director of DMO, and to such members of the Commission’s staff acting under his or her direction as he or she may see fit from time to time. Proposed § 49.31(a)(1) would delegate to the Director of DMO the authority to request documentation related to an SDR equity interest transfer pursuant to § 49.5.162 Proposed § 49.31(a)(2) would delegate to the Director of DMO the authority to instruct SDRs on how to transmit open swaps reports to the Commission pursuant to § 49.9.163 Proposed § 49.31(a)(3) would delegate to the Director of DMO the authority to modify the requirement for an SDR to accept all data from all swaps in an asset class once the SDR includes the asset class in its application for registration pursuant to § 49.10.164 Proposed § 49.31(a)(4) would delegate to the Director of DMO the authority to request records pursuant to § 49.12.165 Proposed § 49.31(a)(5) would delegate to the Director of DMO the authority to request SDRs monitor, screen, and analyze SDR data pursuant to § 49.13.166 Proposed § 49.31(a)(6) would delegate to the Director of DMO the authority to request SDRs disclose aggregated SDR data in the form and manner prescribed by the Commission pursuant to § 49.16.167 Proposed § 49.31(a)(7) would delegate to the Director of DMO the authority to prescribe the form of direct electronic access that SDRs make available to the Commission, prescribe the format by which SDRs maintain SDR data, to request SDRs transmit SDR data to the 162 See section II.C above. section II.E above. 164 See section II.F above. 165 See section II.H above. 166 See section II.I above. 167 See section II.K above. 163 See E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Commission, and to instruct SDRs on transmitting SDR data to the Commission pursuant to § 49.17.168 Proposed § 49.31(a)(8) would delegate to the Director of DMO the authority to permit SDRs to accept alternative forms of confidentiality arrangements and the ability to direct SDRs to limit, suspend, or revoke access to swap data pursuant to § 49.18.169 Proposed § 49.31(a)(9) would delegate to the Director of DMO the authority to grant extensions to the annual compliance report deadline pursuant to § 49.22.170 Proposed § 49.31(a)(10) would delegate to the Director of DMO the authority to require SDRs to exercise emergency authority or provide the documentation underlying an SDR’s decision to exercise its emergency authority pursuant to § 49.23.171 Proposed § 49.31(a)(11) would delegate to the Director of DMO the authority to determine an SDR to be a ‘‘critical SDR’’ and to request copies of BC–DR books and records, assessments, test results, plans, and reports pursuant to § 49.24.172 Proposed § 49.31(a)(12) would delegate to the Director of DMO the authority to determine the amount, value, and types of financial resources SDRs must maintain to perform their statutory duties set forth in part 49 and request reports of financial resources pursuant to § 49.25.173 Similar to provisions relating to demonstrations of compliance by SEFs,174 proposed § 49.31(a)(13) would delegate to the Director of DMO the authority to request information from SDRs related to their business as SDRs or information the Commission determines is necessary or appropriate to perform its statutory and regulatory responsibilities in the form and manner specified by the Commission, as well as written demonstrations of compliance by in the form and manner specified by the Commission pursuant to § 49.29.175 Proposed § 49.31(a)(14) would delegate to the Director of DMO the authority to establish such format, coding structure, and electronic data transmission procedures for SDR data reports and any other information 168 See section II.L above. section II.M above. 170 See section II.O above. 171 See 17 CFR 49.23. 172 See 17 CFR 49.24. 173 See 17 CFR 49.25. 174 See 17 CFR 37.5 (containing requirements for demonstrations of compliance by SEFs and delegating the authority contained in the section to the Director of DMO). 175 See section II.T above. jbell on DSK3GLQ082PROD with PROPOSALS3 169 See VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 21067 required by the Commission under part 49 pursuant to § 49.30.176 1. Verification of Swap Data Accuracy to a Swap Data Repository—§ 45.14(a) III. Proposed Amendments to Part 45 The Commission is proposing to move the requirements in current § 45.14(a) to § 45.14(b). In its place, the Commission is proposing the new requirements for reporting counterparties to verify swap data. Proposed § 45.14(a) would generally require that reporting counterparties verify the accuracy and completeness of swap data for swaps for which they are the reporting counterparty.179 Proposed § 45.14(a)(1) would require that a reporting counterparty reconcile its internal books and records for each open swap for which it is the reporting counterparty with every open swaps report provided to the reporting counterparty by an SDR pursuant to proposed § 49.11. Proposed § 45.14(a)(1) would further require that reporting counterparties conform to the swap data verification policies and procedures created by an SDR pursuant to proposed § 49.11. Proposed § 45.14(a)(2) would require that reporting counterparties submit either a verification of data accuracy or a notice of discrepancy in response to every open swaps report received from an SDR within the following timeframes: (i) 48 hours of the SDR providing the open swaps report if the reporting counterparty is an SD, MSP, or DCO; or (ii) 96 hours of the SDR providing the open swaps report for non-SD/MSP/DCO reporting counterparties.180 Proposed § 45.14(a)(3) would require that, if a reporting counterparty finds no discrepancies between the accurate and current swap data for a swap according to the reporting counterparty’s internal books and records and the swap data for the swap contained in the open swaps report provided by the SDR, the reporting counterparty submit a verification of data accuracy indicating A. § 45.2—Swap Recordkeeping The Commission is proposing a nonsubstantive change to remove current § 45.2(f) and (g). Current § 45.2 lists the general recordkeeping requirements of part 45, with § 45.2(f) and (g) applying specifically to SDRs.177 Current § 45.2(f) contains the SDR recordkeeping requirements and current § 45.2(g) includes the SDR record retention requirements. Part 45 generally focuses on duties to report swap data to SDRs, while part 49 addresses obligation of SDRs. Part 49 is therefore the more logical location for SDR recordkeeping requirements. As described above, the Commission is proposing to expand on the SDR recordkeeping requirements in § 49.12, which includes incorporating the requirements of current § 45.2(f) and (g), among other amendments.178 Current § 45.2(f) and (g) would be redundant, as their provisions are subsumed in proposed § 49.12, and keeping the paragraphs in part 45 could cause confusion as to the recordkeeping requirements that apply to SDRs. The Commission notes that all of the actual requirements contained in current § 45.2(f) and (g) would continue to apply to SDRs, because the requirements are included in proposed § 49.12. B. § 45.14—Verification of Swap Data Accuracy and Correcting Errors and Omissions in Swap Data The Commission is proposing to amend § 45.14 to facilitate the verification of swap data by reporting counterparties and to simplify and improve the requirements for correcting errors and omissions in swap data previously reported or erroneously not reported as required by Commission regulations. As discussed above in section II.G, the Commission is also amending the SDRs’ responsibilities to verify the accuracy and completeness of swap data reported to SDRs. The Commission believes that revised § 49.11 and proposed § 45.14(b) would provide SDRs, swap counterparties, SEFs, and DCMs with a clear understanding of their respective responsibilities in having errors or omissions in swap data corrected. 176 See section II.U above. generally 17 CFR 45.2. 178 See section II.H above. 177 See PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 179 This paragraph is the counterpart to the verification requirements for SDRs contained in proposed § 49.11. See section II.G above. The SDRs would provide their verification policies and procedures to their users and potential users pursuant to proposed § 49.26(j). 180 As explained above in section II.G, non-SD/ MSP/DCO reporting counterparties tend to be entities that are less active in the swaps markets and tend to have fewer resources that can be devoted to regulatory compliance, including verification systems, than would be expected for a larger registered entity such as an SD, MSP, or DCO. The Commission believes that requiring non-SD/ MSP/DCO reporting counterparties to respond to an open swaps report within 96 hours would fulfill the Commission’s needs to have swap data verified (and corrected, as needed) while also minimizing the burden on these reporting counterparties in a way that does not compromise swap data or the Commission’s ability to perform its regulatory functions. E:\FR\FM\13MYP3.SGM 13MYP3 21068 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 that the swap data is complete and accurate to the SDR in the form and manner required by the SDR’s swap data verification policies and procedures created pursuant to § 49.11. Finally, proposed § 45.14(a)(4) would require that, if a reporting counterparty finds any discrepancy between the accurate and current swap data for a swap according to the reporting counterparty’s internal books and records and the swap data for the swap contained in the open swaps report provided by the SDR, including, but not limited to, any over-reporting or underreporting of swap data for any swap, the reporting counterparty submit a notice of discrepancy to the SDR in the form and manner required by the SDR’s swap data verification policies and procedures created pursuant to § 49.11. The Commission is proposing the new verification rules in § 45.14(a) to help improve swap data quality by facilitating the resolution of any discrepancies between the reporting counterparties’ records of their open swaps and the swap data maintained by an SDR. The Commission believes the most effective way to accomplish verification is by having reporting counterparties compare their own records for each open swap as of the moment captured in the open swaps report with the swap data included for each swap in an open swaps report. The Commission believes that these requirements would help ensure that reporting counterparties perform the reconciliation promptly and provide a response to the SDR, which would ensure that swap data is reviewed in a timely manner and that SDRs can fulfill their verification responsibilities under proposed § 49.11. The Commission notes that a reporting counterparty would be required to perform this reconciliation for every open swap included in each open swaps report provided to the reporting counterparty by any SDR.181 The Commission also notes that not receiving an expected open swaps report from an SDR that the reporting counterparty believes maintains swap data for open swaps for which it is the reporting counterparty would constitute an error or omission that the reporting counterparty must correct with the SDR 181 The SDRs would provide open swaps reports to the individual reporting counterparties in accordance with the frequency and timing requirements included in proposed § 49.11. An entity would only be required to verify the accuracy and completeness of swap data for open swaps to which it is the reporting counterparty, such that if a reporting counterparty did not have any open swaps with an SDR, it would not receive an open swaps report from that SDR and would not be required to verify swap data with that SDR. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 pursuant to proposed § 45.14(b). Likewise, receiving an open swaps report for swaps that are no longer open would also constitute an error that would require correction under proposed § 45.14(b). The Commission also notes that for all reporting counterparties the timing requirement of proposed § 45.14(a) is based on when the SDR makes the open swaps report available to the reporting counterparty, not when the reporting counterparty receives or accesses the open swaps report. A reporting counterparty’s failure to receive or access, and analyze, an open swaps report that was properly provided by an SDR would not excuse the reporting counterparty from the requirements of proposed § 45.14(a). This standard would help ensure that reporting counterparties maintain properly functioning systems for the timely receipt and review of open swaps reports that conform to SDR verification policies and procedures. The Commission is not proposing a form or manner for the verification of data accuracy in proposed § 45.14(a)(3) or the notice of discrepancy in proposed § 45.14(a)(4), but is instead proposing that the reporting counterparty provide a verification or notice that meets the requirements of the SDR’s verification policies and procedures created pursuant to § 49.11. This requirement would help ensure that reporting counterparties provide verifications of data accuracy or notices of discrepancy to the SDRs that the SDRs can use to complete the verification process. As reporting counterparties already report information to SDRs under other Commission regulations, the Commission expects that SDRs and reporting counterparties would work together to design the method for submitting verifications and notifications that is the most efficient and convenient for both parties, with particular attention to creating a system that is not unnecessarily burdensome for non-SD/MSP/DCO reporting counterparties. The Commission notes that the notice of discrepancy is not the means by which the reporting counterparty would correct errors or omissions in swap data. The process of error correction would be governed by proposed § 45.14(b), as discussed below. The notice of discrepancy would merely be a notice that the reporting counterparty does not believe that one or more elements of swap data contained, or missing, in the open swaps report are correct. Finding any discrepancy in the swap data would however prompt a reporting counterparty’s responsibility to correct PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 all discrepancies in the swap data pursuant to proposed § 45.14(b). The Commission emphasizes the importance of robust and thorough verification processes under proposed § 45.14(a). For clarity, examples of unsatisfactory verification would include, but are not limited to: (i) Failure to perform the verification in a timely manner as required by proposed § 45.14(a); and (ii) providing a verification of data accuracy indicating that the swap data was complete and accurate for swap data that was not correct when verified. The Commission would consider any error or omission that reasonably could have been discovered during the verification process to have been discovered by the reporting counterparty, and therefore providing a verification of data accuracy in response to an open swaps report that contains an error or omission would not comply with the proposed requirements. The Commission also notes that each incorrect verification, including the failure to recognize the same error or omission in swap data over time and allowing the error or omission to persist over multiple open swaps reports and verifications, would also not comply with the proposed requirements. Finally, the Commission expects that a reporting counterparty repeatedly discovering errors or omissions in the open swaps reports, especially if there is a discernable pattern in the errors or omissions, would prompt the reporting counterparty to evaluate its reporting systems to discover any potential systemic errors or omissions, including working with the SDR to improve its data reporting, as needed. The Commission notes that a pattern of failures may implicate other requirements for further action and disclosure of non-compliance by registered entities, such as SDs, MSPs, SEFs, DCMs, or DCOs. 2. Corrections of Errors and Omissions in Swap Data—§ 45.14(b) The Commission is proposing amendments to the § 45.14(b) requirements for correcting errors and omissions in swap data that was previously reported to an SDR or that was not reported as required.182 These 182 The Commission notes that the failure to perform the initial reporting of swap data as required under § 45.3 is an ‘‘omission’’ for the purposes of current and proposed § 45.14. The omission must be corrected pursuant to the same requirements as any other error or omission, regardless of the state of the swap, by reporting the swap data as soon as technologically practicable after discovery of the failure to report. This includes reporting the omitted swap data to the SDR as E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 error and omission correction requirements are effectively the same as the correction requirement in current § 45.14, but the Commission is proposing to clarify which entities have the correction reporting responsibilities. Proposed § 45.14(b)(1) would require any SEF, DCM, or reporting counterparty that by any means becomes aware of any error or omission in swap data previously reported to an SDR by the SEF, DCM, or reporting counterparty to submit corrected swap data to the SDR.183 Proposed § 45.14(b)(1) would also require any SEF, DCM, or reporting counterparty that by any means becomes aware of any swap data not reported to an SDR by the SEF, DCM, or reporting counterparty as required to submit corrected swap data to the SDR.184 Awareness of errors and omissions to be corrected would include, but would not be limited to, errors or omissions present in the swap data in the open swaps reports provided as part of the verification process specified in proposed § 45.14(a).185 The error and omission correction requirements would apply regardless of the state of the swap, and include the correction of swaps that are no longer open or ‘‘alive.’’ Proposed § 45.14(b)(1)(i) would retain the current § 45.14(a)(2) requirement that SEFs, DCMs, and reporting counterparties correct swap data ‘‘as soon as technologically practicable following discovery of the errors or omissions,’’ but would backstop ‘‘as soon as technologically practicable’’ for required by the SDR for an initial report of swap data. 183 See 17 CFR 45.14(a) (Each registered entity and swap counterparty required by this part to report swap data to a swap data repository, to any other registered entity or swap counterparty, or to the Commission shall report any errors and omissions in the data so reported.). 184 The Commission notes that successful reporting of swap data that was not previously reported as required would entail the relevant SEF, DCM, or reporting counterparty completing the reporting process for the omitted swap data as instructed in the relevant SDR’s policies and procedures for reporting omitted swap data created pursuant to proposed § 49.10(e). 185 This would include any open swaps that should be in the open swaps report but were omitted or swaps that are no longer open but still remain listed in the report, in addition to any errors or omissions in the swap data contained in the report. The requirement would also include, for example, a SEF, DCM, or reporting counterparty being informed of errors or omissions by an outside source, such as a non-reporting counterparty, a SEF or DCM, or the Commission; errors or omissions discovered by a SEF, DCM, or reporting counterparty during a review of its own records or voluntary review of swap data maintained by the SDR, including the discovery of any over- or underreporting of swap data; and the discovery of errors or omissions during the investigation of a separate issue. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 corrections at three business days after discovery of the error or omission. Proposed § 45.14(b)(1)(ii) would require that if a SEF, DCM, or reporting counterparty is unable to correct errors or omissions within three business days of discovery, the SEF, DCM, or reporting counterparty must immediately inform the Director of DMO, or such other Commission employees whom the Director of DMO may designate, in writing, of the errors or omissions and provide an initial assessment of the scope of the errors or omissions 186 and an initial remediation plan for correcting the errors or omissions. Proposed § 45.14(b)(1)(iii) would require that a SEF, DCM, or reporting counterparty conform to the SDR’s policies and procedures for corrections of errors and omissions that the SDRs would be required to create under proposed § 49.10.187 By following the relevant SDR’s policies and procedures for swap data correction, provided to users by the SDRs pursuant to proposed § 49.26(j), SEFs, DCMs, and reporting counterparties would be able to correct swap data with as little effort as necessary. Proposed § 45.14(b)(2) would require a non-reporting counterparty that by any means becomes aware of any error or omission in swap data previously reported to an SDR, or the omission of swap data for a swap that was not previously reported to an SDR as required, to notify the reporting counterparty for the swap of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. Proposed § 45.14(b)(2) would also specify that a non-reporting counterparty that does not know the identity of the reporting counterparty for a swap must notify the SEF or DCM where the swap was executed of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days after the discovery. Proposed § 45.14(b)(2) would also require that if the reporting counterparty, SEF, or DCM, as applicable, and the non-reporting counterparty agree that the swap data 186 The Commission anticipates that this would include the causes of the errors or omissions, the number of swaps affected, the USIs for the affected swaps, and the date range for the affected swaps, among other information. 187 See section II.F above. The Commission expects that SEFs, DCMs, reporting counterparties, and SDRs would work together to devise effective correction policies, with particular attention paid to minimizing the effort needed to correct swap data for non-SD/MSP/DCO reporting counterparties. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 21069 for a swap is incorrect or incomplete, the reporting counterparty, SEF, or DCM, as applicable, must correct the swap data in accordance with proposed § 45.14(b)(1).188 Current § 45.14(a) generally requires that each registered entity and swap counterparty required to report swap data must also report any errors and omissions discovered in the swap data as soon as technologically practicable after the errors or omissions are discovered and contains specific instructions for reporting errors or omissions in continuation data reported using the snapshot method. Current § 45.14(b) requires the nonreporting counterparty to promptly notify the reporting counterparty of any errors or omissions and requires the reporting counterparty to correct the errors or omissions under the terms of current § 45.14(a). Current § 45.14(c) requires: (i) Registered entities or swap counterparties to report corrections in the same format as the original reporting of the swap data, unless otherwise approved by the Commission’s Chief Information Officer (‘‘CIO’’); and (ii) the SDR to transmit the corrections for errors and omissions in swap data in the same format used to originally disseminate the swap data, unless otherwise approved by the Commission’s CIO. The Commission is proposing to clarify that swap data must be corrected ‘‘regardless of the state of the swap that is the subject of the swap data’’ so market participants are aware that all incorrect or omitted swap data must be corrected, even if the swap that the swap data described has been terminated, matured, or otherwise ceased to be an open swap. The Commission does not believe this is a new requirement, as the current correction requirements of § 45.14 do not have time restrictions. Many of the Commission’s regulatory responsibilities involve using swap data for swaps that were executed months or years earlier, including terminated, matured, or otherwise no-longer-open swaps. Incorrect swap data for these swaps, or a lack of any required reporting, would interfere with the Commission’s ability to generate holistic, accurate, data-driven policies, analyses, and reports. The requirement to correct all swap data, regardless of status, also helps 188 This requirement is largely the same as the requirements of current § 45.14(b). See 17 CFR 45.14(b) (Upon receiving such notice, the reporting counterparty shall report a correction of each such error or omission to the swap data repository as provided in paragraph (a) of this section.). E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21070 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules ensure that SEFs, DCMs, and reporting counterparties would establish and maintain properly functioning reporting systems to prevent reporting errors or omissions, as correcting swap data for swaps, including terminated swaps, would require effort that can be avoided by initially reporting correct swap data. Proper and thorough system design and testing during the implementation process for these proposed rules would benefit market participants in the form of less time and resources spent on later error and omission corrections. The Commission expects that, as swap data reporting improves over time, the resources needed to correct swap data would decrease. As with the verification requirements discussed above, the Commission also expects that a SEF, DCM, or reporting counterparty that repeatedly discovers errors or omissions, especially repeated errors or omissions that follow a pattern, such as the reporting for a certain type of swap regularly resulting in errors, would evaluate its reporting systems to discover and correct any issues. This would include working with the relevant SDR to address any reporting issues. A SEF, DCM, or reporting counterparty that fails to perform such an evaluation and improvement in light of repeated errors may not be in compliance with the Commission’s regulations. The Commission is aware that some errors or omissions may not be able to be corrected within three business days of discovery, depending on the gravity and complexity of the reporting problems. The Commission believes having the SEF, DCM, or reporting counterparty notify the Commission of such errors and omissions pursuant to proposed § 45.14(b)(1)(ii), formulate a plan to correct the errors or omissions, and perform the corrections as soon as possible would help alert the Commission to swap data that is unreliable, particularly if it may be unreliable for an extended period of time, and facilitates the fastest correction of the swap data. The Commission also believes that the requirements of proposed § 45.14(b)(1)(ii) would incentivize SEFs, DCMs, and reporting counterparties to fix reporting errors and omissions as quickly as possible, and to invest the resources to prevent reporting errors and omissions from occurring in the first place. The Commission notes that these proposed requirements are similar to current industry practice, as SEFs, DCMs, and reporting counterparties regularly inform Commission staff of reporting errors or omissions and work with Commission staff as they correct VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 the errors and omissions, which typically includes detailed remediation plans and specific timelines for completion. The Commission is retaining the requirement from current § 45.14(b) that the non-reporting counterparty inform the reporting counterparty of the errors or omissions, instead of the nonreporting counterparty reporting the errors or omissions itself.189 The Commission believes that it is not necessary for a non-reporting counterparty to undertake reporting corrections to an SDR because the nonreporting counterparty is often not a user of the SDR or any SDR, and may never serve as a reporting counterparty for swaps. In contrast, the reporting counterparties would already be users of the relevant SDR, and would have continuation data reporting responsibilities for the swap. The reporting counterparty is therefore the logical counterparty to perform the error and omission corrections without the need for the non-reporting counterparty to expend resources on error and omission reporting. The Commission notes that the proposed requirement for the reporting counterparty and non-reporting counterparty to agree that the swap data is incorrect or incomplete before the reporting counterparty must correct errors discovered by the non-reporting counterparty is included in § 45.14(b)(2) to reduce the likelihood of the reporting of corrections when there is a legitimate dispute over whether swap data contains an error or omission. Neither party may arbitrarily or falsely withhold agreement that an error or omission exists, particularly if a reporting counterparty is withholding agreement in order to avoid its responsibility to correct errors or omissions. The parties would be expected to resolve any dispute before the error or omission is corrected. Similarly, when the non-reporting counterparty does not know the identity of the reporting counterparty and instead reports the errors or omissions to the SEF or DCM, if the SEF or DCM and the non-reporting counterparty agree that the relevant swap data is incorrect or incomplete, then the SEF or DCM would correct the errors or omissions in accordance with proposed § 45.14(b)(2). Also, no SEF, DCM, or non-reporting counterparty may arbitrarily or falsely withhold agreement 189 See 17 CFR 45.14(b) (Each counterparty to a swap that is not the reporting counterparty . . . and that discovers any error or omission with respect to any swap data reported to a swap data repository for that swap, shall promptly notify the reporting counterparty of such error or omission.). PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 that an error or omission exists, particularly if the SEF or DCM is withholding agreement to avoid its responsibility to correct errors or omissions. The entities would be expected to resolve any dispute with each other before the error or omission is corrected. The Commission expects that a SEF of DCM, when necessary, would be capable of contacting a reporting counterparty to confirm whether the error or omission reported by the non-reporting counterparty exists without revealing the identity of the non-reporting counterparty to the reporting counterparty. The Commission is also proposing to remove the Commission’s ability under current § 45.14(c) to approve the use of different data formats for corrections because the Commission does not believe that the use of different data formats for corrections is necessary and believes that the possibility adds uncertainty and potential delays to the correction process. SEFs, DCMs, reporting counterparties, and SDRs are all capable of reporting corrections using the same format as initial swap data reporting and would all know the correct format in advance of reporting under the requirements of proposed §§ 49.17 190 and 49.26(j).191 Additionally, proposed § 45.14(b)(1)(iii) would require SEFs, DCMs, and reporting counterparties to report corrections of errors or omissions in conformity with the SDR’s policies and procedures for correcting errors and omissions created pursuant to proposed § 49.10, which would include how to properly format swap data in order for the SDR to successfully complete the correction process. The Commission believes that this approach would be more flexible than the current requirements, as the SDRs would be able to require a different format for reporting errors and omissions without requiring approval from the Commission. Finally, the current § 45.14(c) requirement for an SDR to transmit corrections to errors or omissions in swap data in the same format as the SDR typically transmits swap data to the Commission would be redundant, because the requirement does still effectively apply to all SDRs under proposed § 49.17, which requires SDRs to transmit all SDR data requested by the Commission to the Commission as instructed by the Commission.192 190 See section II.L above. section II.R above. 192 See section II.L above (describing the proposed requirements for SDRs to transmit data to the Commission). 191 See E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Request for Comment. The Commission requests comment on all aspects of proposed § 45.14. The Commission also invites specific comment on the following: (27) Should the Commission be more prescriptive in how reporting counterparties must complete the verification process? If so, please describe in detail. IV. Proposed Amendments to Part 43 A. § 43.3—Method and Timing for RealTime Public Reporting jbell on DSK3GLQ082PROD with PROPOSALS3 1. Correction of Errors and Omissions in Swap Transaction and Pricing Data— § 43.3(e) The Commission is proposing to amend the error and omission correction requirements for swap transaction and pricing data under § 43.3(e) to conform with the proposed amendments to § 45.14(b) for swap data discussed above in section III.B. Proposed § 43.3(e)(1) would require any SEF, DCM, or reporting counterparty that by any means becomes aware of any errors or omissions in swap transaction and pricing data previously reported to an SDR by the SEF, DCM, or reporting counterparty to submit corrected swap transaction and pricing data to the SDR. Proposed § 43.3(e)(1) would also require any SEF, DCM, or reporting counterparty that by any means becomes aware of the omission 193 of swap transaction and pricing data previously not reported to an SDR by the SEF, DCM, or reporting counterparty as required, to submit corrected swap transaction and pricing data to the SDR.194 As with proposed § 45.14(b), the error and omission correction requirements would apply regardless of the state of the swap, and include the correction of swaps that are no longer open or ‘‘alive.’’ 195 193 The Commission notes that the failure to perform the initial reporting of swap transaction and pricing data as required under current and proposed § 43.3 is an ‘‘omission’’ for the purposes of both current and proposed § 43.3(e). The omission must be corrected pursuant to the same requirements as any other error or omission, regardless of the state of the swap, by reporting the swap transaction and pricing data as soon as technologically practicable after discovery of the failure to report. This includes reporting the omitted swap transaction and pricing data to the SDR as required by the SDR for an initial report of swap transaction and pricing data. 194 The Commission notes that successful reporting of swap transaction and pricing data that was erroneously not previously reported as required would entail the relevant SEF, DCM, or reporting counterparty completing the reporting process for the omitted swap data as instructed in the relevant SDR’s policies and procedures created pursuant to proposed § 49.10(e). 195 This requirement is effectively the same as current § 43.3(e)(1). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Proposed § 43.3(e)(1)(i) would adopt the same timing requirements as proposed § 45.14(b)(1)(i) for SEFs, DCMs, and reporting counterparties to correct swap transaction and pricing data ‘‘as soon as technologically practicable following discovery of the errors or omissions,’’ with a three business day backstop following the discovery of the errors or omissions. Similar to proposed § 45.14(b)(1)(ii), proposed § 43.3(e)(1)(ii) would provide that if a SEF, DCM, or reporting counterparty is unable to correct the errors or omissions within three business days following discovery of the errors or omissions, the SEF, DCM, or reporting counterparty must immediately inform the Director of DMO, or such other employees of the Commission that the Director of DMO may designate, in writing, of such errors or omissions and provide an initial assessment of the scope of the errors or omissions 196 and an initial remediation plan for correcting the errors or omissions.197 Proposed § 43.3(e)(1)(iii) would require that a SEF, DCM, or reporting counterparty conform to an SDR’s policies and procedures for corrections of errors and omissions in previously reported swap transaction and pricing data and reporting of omitted swap transaction and pricing data that the SDRs would be required to create under proposed § 49.10.198 By following the relevant SDR’s policies and procedures for swap data correction, which would be provided to users by the SDRs pursuant to proposed § 49.26(j), the Commission expects that SEFs, DCMs, or reporting counterparties would know how to correct swap data before correction is required and would be able to properly correct swap data with as little effort as necessary.199 Proposed § 43.3(e)(2) would require a non-reporting counterparty that by any means becomes aware of any error or omission in swap transaction and pricing data previously reported to an SDR, or the omission of swap transaction and pricing data for a swap 196 The Commission anticipates that this would include the causes of the errors or omissions, the number of swaps affected, the USIs for the affected swaps, the date range for the affected swaps, among other information. 197 The Commission needs to know as soon as possible if swap transaction and pricing data is unreliable, particularly if for an extended period of time, so that the Commission may alert the public as needed. 198 See section II.F above. 199 The Commission expects that SEFs, DCMs, reporting counterparties, and SDRs would work together to devise effective correction policies, with particular attention paid to minimizing the effort needed to correct swap data for non-SD/MSP/DCO reporting counterparties. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 21071 that was not previously reported to an SDR as required, to notify the reporting counterparty for the swap of the errors and omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. Proposed § 43.3(e)(2) would also specify that a non-reporting counterparty that does not know the identity of the reporting counterparty for a swap must notify the SEF or DCM where the swap was executed of the errors and omissions as soon as technologically practicable after discovery of the errors or omissions, but no later than three business days after the discovery. Proposed § 43.3(e)(2) would also require that, if the reporting counterparty, SEF, or DCM, as applicable, and the non-reporting counterparty agree that the swap transaction and pricing data for a swap is incorrect or incomplete, the reporting counterparty, SEF, or DCM, as applicable, must correct the swap transaction and pricing data in accordance with proposed § 43.3(e)(1). The Commission believes that the amendments to § 43.3(e) would help ensure that errors or omissions in swap transaction and pricing data are corrected as soon as possible. The proposed rule would also clarify that swap transaction and pricing data must be corrected regardless of the state of the swap that is the subject of the swap transaction and pricing data to ensure that all incorrect or omitted swap transaction and pricing data is corrected, even if the swap that the swap transaction and pricing data relates to has been terminated, matured, or otherwise ceased to be an open swap. This is not a new requirement, as the current correction requirements in § 43.3(e) do not have time restrictions. The Commission also believes that proposed § 43.3(e) would help ensure that the public has access to the most accurate and complete swap transaction and pricing data possible. Incorrect swap transaction and pricing data harms market integrity and price discovery, long after the swap has been executed. The requirement to correct all swap transaction and pricing data, regardless of status, also helps ensure that SEFs, DCMs, and reporting counterparties would maintain properly functioning reporting systems to prevent reporting errors or omissions, as correcting swap transaction and pricing data for swaps, including terminated swaps, would require effort that can be avoided by initially reporting correct swap transaction and pricing data. Proper and E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21072 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules thorough system design and testing during the implementation process for these proposed regulations would benefit market participants in the form of less time and resources spent on error corrections in the future. The Commission expects that, as data reporting improves over time, the resources needed to correct swaps, including swaps that are no longer open, would diminish. The Commission also notes that the discovery of errors under proposed § 43.3(e)(1) includes any errors or omissions revealed when reporting counterparties are reconciling swap data during the verification process required under proposed § 45.14(a) that would also be errors or omissions in swap transaction and pricing data. The means of discovery are unlimited, however, and would also include, for example, a SEF, DCM, or reporting counterparty being informed of errors or omissions by an outside source, such as a nonreporting counterparty, an exchange, or the Commission; errors or omissions discovered by a SEF, DCM, or reporting counterparty during a review of its own records or voluntary review of swap transaction and pricing data maintained by the SDR, including the discovery of any over- or under-reporting of swap transaction and pricing data; and the of discovery of errors or omissions during the investigation of a separate issue. The Commission expects that a SEF, DCM, or reporting counterparty that repeatedly discovers errors or omissions, especially repeated errors or omissions that follow a pattern, such as the reporting for a certain type of swap regularly resulting in errors, would evaluate its reporting systems to attempt to find and promptly correct any issues discovered. This would include working with the relevant SDR to address any reporting issues. A SEF, DCM, or reporting counterparty that fails to perform such an evaluation and improvement in light of repeated errors may not be in compliance with the Commission’s regulations. The Commission is aware that some errors and omissions may not be able to be corrected within three business days of discovery. The Commission believes having the SEF, DCM, or reporting counterparty notify the Commission of such errors and omissions pursuant to proposed § 43.3(e)(1)(ii), formulate a plan to correct the errors and omissions, and to perform the corrections as soon as possible would help alert the Commission to swap transaction and pricing data that is unreliable, particularly if it may be unreliable for an extended period of time, and facilitates the fastest correction of swap VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 transaction and pricing data. The Commission also believes that proposed § 43.3(e)(1)(ii) would incentivize SEFs, DCMs, and reporting counterparties to fix reporting errors and omissions as quickly as possible. The Commission notes that these proposed requirements are consistent with industry practice, as SEFs, DCMs, and reporting counterparties regularly inform Commission staff of reporting errors or omissions and work with Commission staff as they correct the errors and omissions, which typically includes remediation plans and timelines for completion. The Commission is proposing to require, as with proposed § 45.14(b)(2), that the non-reporting counterparty inform the reporting counterparty of the errors or omissions. The Commission believes that it is not necessary for a non-reporting counterparty to undertake the burden of reporting corrections to an SDR because the non-reporting counterparty is often not a user of the SDR, and may never serve as a reporting counterparty for any swaps. In contrast, reporting counterparties would already by definition be users of the relevant SDR, and would have continuation data reporting responsibilities for the swap. The reporting counterparty is therefore the logical counterparty to perform the error and omission corrections without the need for the non-reporting counterparty to use additional resources on error and omission reporting. The Commission notes that the proposed requirement for the reporting counterparty and non-reporting counterparty to agree that the swap transaction and pricing data is incorrect or incomplete before the reporting counterparty must correct errors discovered by the non-reporting counterparty is included to avoid the reporting of corrections when there is a legitimate dispute over whether the swap transaction and pricing data contains an error or omission. Neither party may arbitrarily or falsely withhold agreement that an error or omission exists, particularly if a reporting counterparty is withholding agreement in order to avoid its responsibility to correct errors or omissions. The parties would be expected to resolve any dispute with each other before the error or omission is corrected. Similarly, in the instance where the non-reporting counterparty does not know the identity of the reporting counterparty and instead reports the errors or omissions to the SEF or DCM, if the SEF or DCM and the non-reporting counterparty agree that the relevant swap transaction and pricing data is incorrect or incomplete, then the SEF or PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 DCM must correct the errors or omissions in accordance with proposed § 43.3(e)(1). No SEF, DCM, or nonreporting counterparty may arbitrarily or falsely withhold agreement that an error or omission exists, particularly if the SEF or DCM is withholding agreement to avoid its responsibility to correct errors or omissions. The entities would be expected to resolve any dispute with each other before the error or omissions is corrected. The Commission expects that a SEF or DCM, when necessary, would be capable of contacting a reporting counterparty to confirm whether the error or omission reported by the non-reporting counterparty exists without revealing the identity of the non-reporting counterparty to the reporting counterparty. 2. Proposed Deletions—§ 43.3(f) and (g) The Commission is proposing to delete current § 43.3(f) and (g). The Commission is proposing to include the operating hours requirements for SDRs in new § 49.28,200 which includes incorporating the requirements of current § 43.3(f) and (g). Current § 43.3(f) contains the hours of operations requirements 201 and current § 43.3(g) contains the requirements for SDRs to accept swap transaction and pricing data during closing hours.202 Keeping the paragraphs in part 43 could also cause confusion as to the requirements that apply to SDRs, because proposed § 49.28 would apply to all SDR data and also incorporates provisions from SBSDR operating hours requirements. The Commission notes that most of the requirements contained in current § 43.3(f) and (g) would continue to apply to SDRs, because the requirements are included in proposed § 49.28. Request for Comment. The Commission requests comment on all aspects of proposed § 43.3. V. Proposed Amendments to Part 23 A. § 23.204—Reports to Swap Data Repositories Proposed § 23.204(c) would require each SD and MSP to establish, maintain, and enforce written policies and procedures that are reasonably designed to ensure that the SD or MSP complies with all obligations to report swap data to an SDR consistent with part 45. Proposed § 23.204(c) also would require an SD or MSP to review its policies and procedures on an annual basis and to update its policies and procedures as 200 See section II.S above. 17 CFR 43.3(f). 202 See 17 CFR 43.3(g). 201 See E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules needed to reflect the requirements in part 45. As part of the SD/MSP requirements set forth in part 23 of the Commission’s regulations, the Commission currently requires SDs/MSPs to report all information and swap data required for swap transactions as set forth in part 45.203 The Commission also currently requires that SDs/MSPs have in place the electronic systems and procedures necessary to transmit electronically all information and swap data required to be reported in accordance with part 45.204 The Commission notes that, pursuant to other Commission regulations, SDs and MSPs are already expected to establish policies and procedures related to their swap market activities, including but not limited to, swaps reporting obligations.205 The proposed amendments would make that expectation explicit with respect to swap data reporting obligations. The Commission believes that the annual review requirement in proposed § 23.204(c) would help ensure that SD/ MSP policies and procedures remain current and effective over time. The proposal is also substantially similar to the requirements that the SEC has enacted for SBSDs and SBS MSPs.206 As part of the goal to increase the reliability, accuracy, and completeness of SDR data reported to and maintained by SDRs, the Commission believes that it is important to make clear the responsibilities of SDs and MSPs to ensure proper reporting of swaps for which they act as reporting counterparties. Accordingly, the Commission proposes that SDs/MSPs that report to an SDR should be explicitly required to adopt policies and procedures reasonably designed to ensure compliance with their reporting obligations under parts 43 and 45.207 The policies and procedures required by proposed § 23.204(c) should address how the SD or MSP would comply with the requirements of part 45, including, but not necessarily limited to: (i) The reporting process and designation of 203 See 17 CFR 23.204(a). 17 CFR 23.204(b). 205 See, e.g., 17 CFR 3.3(d)(1)(requiring a chief compliance officer to administer each of the registrant’s policies and procedures relating to its business as an SD/MSP that are required to be establish pursuant to the Act and the Commission’s regulations); 17 CFR 3.2(c)(3)(ii) (requiring the National Futures Association to assess whether an entity’s SD/MSP documentation demonstrates compliance with the Section 4s Implementing Regulation to which it pertains which includes § 23.204 and § 23.205). 206 See SBSDR Adopting Release at 14647–14648; see also 17 CFR 242.906(c). 207 The amendments for part 43 reporting are discussed below in section IV.A. jbell on DSK3GLQ082PROD with PROPOSALS3 204 See VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 responsibility for reporting swap data; (ii) reporting system outages or malfunctions, and when and how backup systems are to be used in connection with required reporting; (iii) verification of all swap data reported to an SDR pursuant to proposed § 45.14(a) and in accordance with the policies and procedures of such SDR established under proposed § 49.11; (iv) a training program for employees responsible for swap data reporting; (v) control procedures relating to swap data reporting and designation of personnel responsible for testing and verifying such policies and procedures; and (vi) reviewing and assessing the performance and operational capability of any third party that carries out any duty required by part 45 on behalf of the SD or MSP. These issues are also generally the issues that the SEC contemplated being addressed by SBSDs and SBS MSPs in their policies and procedures adopted pursuant to the SBSR Adopting Release.208 In conjunction with ‘‘know your counterparty’’ obligations under current § 23.402(b), such policies should also ensure that the SD/MSP would have all necessary counterparty information, including, but not limited to, legal entity identifier (‘‘LEI’’) or acceptable counterparty identifier, U.S. Person status, and SD/MSP status, to accurately report all swap data required by part 45 for swaps for which the SD/ MSP has reporting obligations. B. § 23.205—Real-Time Public Reporting Similar to the requirements of proposed § 23.204(c) discussed above in section V.A, the Commission is proposing § 23.205(c), which would require SDs and MSPs to establish, maintain, and enforce written policies and procedures that are reasonably designed to ensure that the SD or MSP complies with any obligations to report swap transaction and pricing data to an SDR consistent with part 43 of the Commission’s regulations. As with swap data under § 23.204(c), proposed § 23.205(c) is intended to promote complete and accurate reporting of swap transaction and pricing data by SDs and MSPs, consistent with their obligations under part 43 and the CEA.209 The Commission believes that the addition of this proposed requirement would help to improve the extent and quality of overall compliance with the reporting requirements of part 43. Similar to 208 See SBSDR Adopting Release at 14648; see also 17 CFR 242.906(c). 209 Section 2(a)(13) of the CEA directs the Commission to adopt regulations for the public availability of swap transaction and pricing data. See 7 U.S.C. 2(a)(13). PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 21073 proposed § 23.204(c), proposed § 23.205(c) would require an SD or MSP to review its policies and procedures on an annual basis and to update its policies and procedures as needed to reflect the requirements of part 43. The periodic review requirement would help ensure that these policies and procedures remain current and effective over time. The proposal is also substantially similar to the requirements that the SEC has enacted for SBSDs and SBS MSPs.210 The SD/MSP recordkeeping and reporting requirements in part 23 also currently require SDs/MSPs to report all information and swap transaction and pricing data required in accordance with the real-time public reporting requirements as set forth in part 43.211 The Commission also requires that SDs/ MSPs have in place the electronic systems and procedures necessary to transmit electronically all information and swap transaction and pricing data required to be reported in accordance with part 43.212 The policies and procedures required by proposed § 23.205(c) should address how the SD or MSP will comply with the requirements of part 43, including, but not necessarily limited to: (i) The reporting process and designation of responsibility for reporting swap transaction and pricing data; (ii) reporting system outages or malfunctions, and when and how backup systems are to be used in connection with required reporting; (iii) a training program for employees responsible for real-time reporting; (iv) control procedures relating to real-time reporting and designation of personnel responsible for testing and verifying such policies and procedures; (v) reviewing and assessing the performance and operational capability of any third party that carries out any duty required by part 43 of the Commission’s regulations on behalf of the SD or MSP; and (vi) the determination of whether a new swap transaction or amendment, cancelation, novation, termination, or other lifecycle event of an existing swap, is subject to the real time reporting requirements of part 43. These issues are a subset of the general issues that the SEC contemplated being addressed by SBSDs and SBS MSPs in their policies and procedures adopted pursuant to the SBSR Adopting Release.213 Request for Comment. The Commission requests comment on all 210 See SBSDR Adopting Release at 14647–14648. 17 CFR 23.205(a). 212 See 17 CFR 23.205(b). 213 See SBSDR Adopting Release at 14648. 211 See E:\FR\FM\13MYP3.SGM 13MYP3 21074 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules aspects of proposed §§ 23.204(c) and 23.205(c). The Commission also invites specific comment on the following: (28) Should proposed § 23.204(c) and § 23.205(c) specify the elements to be included in the required policies and procedures? If so, what specific elements should be included in the proposed regulation, and why? Please be specific. VI. Request for Comments The Commission requests comments concerning all aspects of the proposed regulations, including, without limitation, all of the aspects of the proposed regulations on which comments have been requested specifically herein. The Commission also invites comments on the following: (29) Please describe the nature of any changes necessary, i.e., operational, technological, administrative, etc., for SDRs, other registered entities, and swap counterparties to comply with the regulations proposed in this release, including the length of time needed to implement each type of change, whether a phase-in period is needed, and how any phase in of any final rules should be structured. Please describe how any changes to systems made by one type of entity, such as the SDRs, would require changes to systems by other entities within the swaps reporting environment, and what sequencing of changes would need to occur. (30) Would the proposed amendments and additions to parts 23, 43, 45, and 49 adequately improve the data quality and accuracy of reported SDR data maintained by SDRs? If not, please explain. (31) Are additional changes necessary to parts 23, 43, 45, and 49 (or other parts of the regulations) to ensure the quality of reported SDR data held and maintained by SDRs? If so, please explain. jbell on DSK3GLQ082PROD with PROPOSALS3 VII. Related Matters A. Regulatory Flexibility Act The Regulatory Flexibility Act (‘‘RFA’’) requires federal agencies, in promulgating rules, to consider the impact of those rules on small entities.214 The Commission has previously established certain definitions of ‘‘small entities’’ to be used by the Commission in evaluating the impact of its rules on small entities in accordance with the RFA.215 The amendments to part 49 proposed herein 214 See 5 U.S.C. 601 et seq. Policy Statement and Establishment of ‘‘Small Entities’’ for purposes of the Regulatory Flexibility Act, 47 FR 18618, 18618–21 (Apr. 30, 1982). 215 See VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 would have a direct effect on the operations of SDRs. The Commission has previously certified that SDRs are not small entities for purpose of the RFA.216 Proposed §§ 23.204(c) and 23.205(c), which require SDs and MSPs to have policies and procedures to ensure compliance with requirements of parts 45 and 43, respectively, would have a direct impact on the operation of SDs and MSPs. The Commission has previously certified that SDs and MSPs are also not small entities for purpose of the RFA.217 Proposed § 45.14(a), which requires all reporting counterparties to verify the accuracy of swap data with the SDR, would have a direct impact on all reporting counterparties. These reporting counterparties may include SDs, MSPs, DCOs,218 and non-SD/MSP/ DCO counterparties. Regarding whether non-SD/MSP/DCO reporting counterparties are small entities for RFA purposes, the Commission notes that section 2(e) of the Act prohibits entities from entering into swaps unless the entity qualifies as an eligible contract participant (‘‘ECP’’), except for swaps executed on or pursuant to the rules of a DCM.219 The Commission has previously certified that ECPs are not small entities for purposes of the RFA.220 The vast majority of swap are not conducted on DCMs, and therefore must involve ECPs. A recent Commission staff review of swap data, including swaps executed on or pursuant to the rules of a DCM, identified nearly 1,600 non-SD/MSP/ DCO reporting counterparties. Based on 216 See Swap Data Repositories, Proposed Rule, 75 FR 80898, 80926 (Dec. 23, 2010) (basing determination in part on the central role of SDRs in swaps reporting regime, and on the financial resource obligations imposed on SDRs). 217 See Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules, Final Rule, 77 FR 20128, 20194 (Apr. 3, 2012) (basing determination in part on minimum capital requirements). 218 The Commission has previously certified that DCOs are not small entities for purposes of the RFA. See Derivatives Clearing Organization General Provisions and Core Principles, Final Rule, 76 FR 69334, 69428 (Nov. 8, 2011). 219 See 7 U.S.C. 2(e). 220 See Opting Out of Segregation, Final Rule, 66 FR 20740, 20743 (Apr. 25, 2001). The Commission also notes that this determination was based on the definition of ECP as provided in the Commodity Futures Modernization Act of 2000. The DoddFrank Act amended the definition of ECP as to the threshold for individuals to qualify as ECPs, changing an individual who has total assets in an amount in excess of to an individual who has amounts invested on a discretionary basis, the aggregate of which is in excess of. Therefore, the threshold for ECP status is currently higher than was in place when the Commission certified that ECPs are not small entities for RFA purposes, meaning that there are likely fewer entities that could qualify as ECPs than when the Commission first made the determination. PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 its review of publicly available data, the Commission believes that the overwhelming majority of these non-SD/ MSP/DCO reporting counterparties are either ECPs or do not meet the definition of ‘‘small entity’’ established in the RFA. Accordingly, the Commission does not believe the proposed rule would affect a substantial number of small entities. Therefore, the Chairman, on behalf of the Commission, pursuant to 5 U.S.C. 605(b), hereby certifies that the proposed rules will not have a significant economic impact on a substantial number of small entities. B. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (‘‘PRA’’) 221 imposes certain requirements on federal agencies, including the Commission, in connection with their conducting or sponsoring any collection of information, as defined by the PRA. This proposed rulemaking would result in the collection of information within the meaning of the PRA, as discussed below. The proposed rulemaking contains collections of information for which the Commission has previously received three control numbers from OMB: (1) OMB Control Number 3038– 0096 (relating to swap data recordkeeping and reporting by market participants); (2) OMB Control Number 3038–0070 (relating to real-time swap transaction and pricing data); and (3) OMB Control Number 3038–0086 (relating to obligations of SDRs). The Commission is proposing to amend information collections 3038– 0096, 3038–0070, and 3038–0086 to accommodate new information collection requirements for swap market participants and SDRs that require approval from OMB under the PRA. The following amendments to the obligations of market participants and SDRs are expected to modify the existing annual burden for complying with the requirements of parts 43, 45, and 49. The proposed amendments to § 45.2 would move the requirements of paragraphs (f) and (g) to proposed § 49.12, in order to better organize regulations related to SDRs. The proposed amendments to § 45.14 would require reporting counterparties to verify swap data reported to an SDR pursuant to the policies and procedures established by that SDR and would require SEFs, DCMs, and reporting counterparties to provide additional information to the Commission regarding correction of errors and 221 See E:\FR\FM\13MYP3.SGM 44 U.S.C. 3501. 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules omissions in swap data in certain circumstances. The proposed amendments to § 43.3 would require SEFs, DCMs, and reporting counterparties to provide additional information to the Commission regarding correction of errors and omissions in swap transaction and pricing data in certain circumstances and would move the requirements of paragraphs (f) and (g) to proposed § 49.28. The proposed amendments to part 49 would require SDRs to: (i) Continue to amend Form SDR as required, but remove the annual amendment requirement and limit the amendment requirement to before an application for registration is granted, as set forth in proposed § 49.3(a)(5); (ii) provide notifications and certifications to the Commission related to equity interest transfers, as set forth in proposed § 49.5; (iii) request transfer of registration, as set forth in proposed § 49.6; (iv) provide open swaps reports to the Commission, as set forth in proposed § 49.9; (v) correct errors and omissions in SDR data and create policies and procedures to accomplish the corrections, as set forth in proposed § 49.10(e); (vi) compile and distribute to each applicable reporting counterparty an open swaps report and to receive a response to each open swaps report, as set forth in proposed § 49.11; (vii) establish automated systems for monitoring, screening, and analyzing all SDR data in their possession in the form and manner as may be directed by the Commission under proposed § 49.13(a); (viii) provide SDR users and potential users with SDR policies and procedures related to reporting SDR data, as provided in proposed § 49.26(j); (ix) operate continuously, except for normal closing hours and special closing hours, as provided in proposed § 49.28; and (x) provide the Commission with information related to their business as an SDR and such information as the Commission determines to be necessary to perform its duties under the CEA and Commission regulations and provide the Commission with information and/or SDR data as requested to demonstrate SDR compliance with the CEA and Commission regulations, as set forth in proposed § 49.29. The Commission therefore is submitting this proposal to the Office of Management and Budget (‘‘OMB’’) for its review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. Responses to this collection of information would be mandatory. The Commission will protect proprietary information according to the Freedom of Information Act (‘‘FOIA’’) and 17 CFR 145, VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 ‘‘Commission Records and Information.’’ In addition, section 8(a)(1) of the CEA strictly prohibits the Commission, unless specifically authorized by the Act, from making public data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.222 The Commission is also required to protect certain information contained in a government system of records according to the Privacy Act of 1974.223 1. Revisions to Collection 3038–0096 (Swap Data Reporting) i. Amended § 45.2 The Commission is proposing to remove paragraphs (f) and (g) from § 45.2 in order to move the requirements of these paragraphs to proposed § 49.12. Paragraphs (f) and (g) contain recordkeeping requirements specific to SDRs. Current § 49.12 already incorporates the requirements of current § 45.2(f) and (g), and proposed § 49.12 would include the same requirements, but this proposed deletion and move is intended to better organize regulations for SDRs by locating as many SDR requirements as possible in part 49 of the Commission’s regulations. Moving the requirements would however modify collection 3038–0096 because it would remove these recordkeeping requirements from part 45 of the Commission’s regulations. As a result, the Commission estimates that moving these requirements would result in a reduction of 50 annual burden hours for each SDR in collection 3038–0096, for a total reduction of 150 annual burden hours across all three SDRs. ii. Amended § 45.14 Proposed § 45.14(a) would require all reporting counterparties to verify the accuracy and completeness of all swap data for all open swaps to which they are the reporting counterparty. Reporting counterparties would comply with this provision by conforming to the verification policies and procedures of the relevant SDR(s) established pursuant to proposed § 49.11(a), including receiving and responding to the open swaps reports provided by the SDR(s). Section 21(c)(2) 224 of the Act requires SDRs to confirm the accuracy of reported swap data with the counterparties to the swap. Compliance with proposed § 45.14(a) would constitute a collection of information not currently included in collection 222 7 U.S.C. 12. U.S.C. 552a. 224 7 U.S.C. 24a(c)(2). 223 5 PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 21075 3038–0096, and therefore would require a revision of that collection. Compliance with proposed § 45.14(a) would be based on compliance with SDR verification policies and procedures, but would require reporting counterparties to receive and respond to open swaps reports on a weekly or monthly basis, depending on the registration status of the reporting counterparty. The Commission expects that compliance with this section would include: (1) A one-time hours burden to establish internal systems needed to perform their verification responsibilities, and (2) an ongoing hours burden to complete the verification process for each report provided by an SDR. In order to comply with the relevant SDR verification policies and procedures as required to complete the verification process, the Commission believes that reporting counterparties would be required to create their own verification systems or modify their existing connections to the SDRs. The Commission estimates that each reporting counterparty would incur an initial, one-time burden of 100 hours to build, test, and implement their verification systems based on SDR instructions. This burden may be reduced, if complying with SDR verification requirements only requires reporting counterparties to make small modifications to their existing SDR reporting systems, but the Commission is estimating the burden based on the creation of a new system. The Commission also estimates an ongoing annual burden of 10 hours per reporting counterparty to maintain their verification systems and to make any needed updates to verification systems to conform to any changes to SDR verification policies and procedures. As there are approximately 1,702 reporting counterparties based on data available to the Commission, the Commission estimates a one-time overall hours burden of 170,200 hours to build reporting counterparty verification systems and an ongoing annual overall hours burden of 17,020 hours to maintain the reporting counterparty verification systems. Proposed § 45.14(a) would also require reporting counterparties to reconcile the swap data in their internal books and records with the swap data in each open swaps report provided by an SDR and to respond to each open swaps report with a verification of data accuracy or a notice of discrepancy, as instructed by the relevant SDR verification policies and procedures. For SD, MSP, or DCO reporting counterparties, data verification would E:\FR\FM\13MYP3.SGM 13MYP3 21076 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 be at most a weekly occurrence for each SDR where the reporting counterparty maintains any open swaps. For non-SD/ MSP/DCO reporting counterparties, data verification would be at most a monthly occurrence for each SDR where the reporting counterparty maintains any opens swaps. The Commission also expects, based on discussions with SDRs and reporting counterparties, that the verification process will be largely automated for all parties involved. The Commission is therefore estimating an ongoing average burden of two hours per open swaps report per reporting counterparty. As there are 117 SDs, MSPs, or DCOs that clear swaps registered with the Commission, the Commission estimates225 that these 117 reporting counterparties would, at maximum, be required to verify data 52 times per year, for an overall additional annual hours burden of 12,168 ongoing burden hours related to the verification process for these reporting counterparties. The Commission also estimates, based on data available to the Commission, that there are 1,585 non-SD/MSP/DCO reporting counterparties.226 The Commission estimates that these 1,585 reporting counterparties would be required to, at maximum, verify data 12 times per year, for an overall additional annual hours burden of 38,040 burden hours related to verification process for these reporting counterparties. Proposed § 45.14(b) would, similar to current § 45.14, require SEFs, DCMs, and reporting counterparties to correct errors and omissions in swap data previously reported to an SDR, or erroneously not reported to an SDR as required, as soon as technologically practicable after discovery of the errors or omissions. Proposed § 45.14(b) would also require a non-reporting counterparty to report a discovered error or omission to the relevant SEF, DCM, or reporting counterparty as soon as technologically practicable after discovery of the error or omission.227 225 Though there are 117 SDs, MSPs, or DCOs that clear swaps registered with the Commission that could be a reporting counterparty, not all potential reporting counterparties would be performing data verification for any given verification cycle. Only those reporting counterparties with open swaps as of the moment the SDRs create the open swaps reports would perform data verification for that verification cycle. 226 Though there are 1,585 non-SD/MSP/DCOs that could be a reporting counterparty, not all potential reporting counterparties would be performing data verification for any given verification cycle. Only those reporting counterparties with open swaps as of the moment the SDRs create the open swaps reports would perform data verification for that verification cycle. 227 The Commission notes that proposed § 45.14(b)(2) does add provisions that are not VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 These proposed requirements, being effectively the same as the requirements in current § 45.14, do not require amendments to the collection. Proposed § 45.14(b)(1)(ii) does, however, include the new requirement for SEFs, DCMs, and reporting counterparties to notify the Director of DMO when errors or omissions cannot be corrected within three business days and, in such case, to provide the Director of DMO with an initial assessment of the errors and omissions and an initial remediation plan. This requirement would constitute a new collection of information. The Commission estimates that each SEF, DCM, and reporting counterparty would, on average need to provide notice and initial assessments to the Commission under proposed § 45.14(b)(1)(ii) once per year and that each instance would require 30 burden hours.228 As there are approximately 1,729 SEFs, DCMs, and reporting counterparties that handle swaps, the Commission estimates an overall additional annual hours burden of 51,870 hours related to this requirement. This estimate is based on the Commission’s experience with the current practices of SEFs, DCMs, and reporting counterparties regarding the reporting of errors and omissions, including the initial assessments and remediation plans that SEFs, DCMs, and reporting counterparties provide to the Commission under current practice. The Commission does not anticipate any one-time, initial burdens related to proposed § 45.14(b)(1)(ii). The Commission therefore estimates that the overall burden for updated Information Collection 3038–0096 will be as follows: Estimated number of respondents affected: 1,732 SEFs, DCMs, DCOs, SDRs, and reporting counterparties. present in current § 45.14(b) to address the situation where a non-reporting counterparty does not know the identity of the reporting counterparty. The Commission does not believe that these additions have PRA implications, as the amount of information the non-reporting counterparty must provide and the frequency with which it must be provided remain the same and are de minimis. The only change is the requirement that non-reporting counterparties inform the SEF or DCM of errors, instead of the reporting counterparty. SEFs and DCMs have correction responsibilities under current § 45.14(b) and proposed § 45.14(b)(2) does not change these responsibilities. 228 The Commission notes that, currently, it receives significantly less than one notice and initial assessment of reporting errors and omissions per SEF, DCM, or reporting counterparty per year, but is estimating one notice and initial assessment here, as the proposed requirements of § 45.14(a) may reveal more reporting errors to reporting counterparties that would then prompt corrections pursuant to proposed § 45.14(b). PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 Estimated annual number of responses per respondent: 257,595. Estimated total annual responses: 446,154,518. Estimated burden hours per response: 0.005. Estimated total annual burden hours per respondent: 1,316. Estimated aggregate total burden hours for all respondents: 2,279,202. 2. Revisions to Collection 3038–0070 (Real-Time Transaction Reporting)— Amended § 43.3 Proposed § 43.3(e) would, as with swap data under proposed § 45.14(b), require SEFs, DCMs, and reporting counterparties to correct errors and omissions in swap transaction and pricing data previous reported to an SDR or erroneously not reported to an SDR as soon as technologically practicable after discovery of the errors or omissions. Proposed § 43.3(e) would also require a non-reporting counterparty to report a discovered error or omission to the relevant SEF, DCM, or reporting counterparty as soon as technologically practicable after discovery of the error or omission. These proposed requirements are intend to match the requirements in proposed § 45.14(b), but are also effectively the same as the requirements of current § 43.3(e).229 These proposed requirements therefore do not require amendments to the collection. Proposed § 43.3(e)(1)(ii) does, however, include the new requirement for SEFs, DCMs, and reporting counterparties to notify the Director of DMO when errors or omissions cannot be corrected within three business days and, in such case, to provide the Director of DMO with an initial assessment of the errors and omissions and an initial remediation plan. This requirement would constitute a new collection of information. The Commission estimates that each SEF, DCM, and reporting counterparty would, on average need to provide notice and initial assessments to the Commission under proposed 229 The Commission notes that proposed § 43.3(e)(2) does add provisions that are not present in current § 43.3(e)(1) to address the situation where a non-reporting counterparty does not know the identity of the reporting counterparty. The Commission does not believe that these additions have PRA implications, as the amount of information the non-reporting counterparty must provide and the frequency with which it must be provided remain the same as the current requirement and are de minimis. The only change is the requirement that non-reporting counterparties inform the SEF or DCM of errors, instead of the reporting counterparty. SEFs and DCMs have correction responsibilities under current § 43.3(e)(1) and proposed § 43.3(e)(2) does not change these responsibilities. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 § 43.3(e)(1)(ii) once per year and that each instance would require 30 burden hours.230 As there are approximately 1,729 SEFs, DCMs, and reporting counterparties that handle swaps, the Commission estimates an overall additional annual hours burden of 51,870 hours related to this requirement. This estimate is based on the Commission’s experience with SEFs, DCMs, and reporting counterparties current practices regarding the reporting of errors and omissions, including the initial assessments and remediation plans that SEFs, DCMs, and reporting counterparties provide to the Commission under current practice. The Commission does not anticipate any one-time, initial burdens related to proposed § 43.3(e)(1)(ii). The Commission is also proposing to remove paragraphs (f) and (g) from § 43.3 in order to move the requirements of these paragraphs to proposed § 49.28. Paragraphs (f) and (g) contain requirements for SDRs related to their operating hours. Proposed § 49.28 would include all of the current § 43.3(f) and (g) requirements, because this proposed deletion and move is intended to better organize regulations for SDRs by locating as many SDR requirements as possible in part 49 of the Commission’s regulations. Moving the requirements would modify collections 3038–0070 and 3038–0086 because it will remove these recordkeeping requirements from part 43 of the Commission’s regulations and add them to part 49 of the Commission’s regulations. The Commission estimates that the public notice requirements of § 43.3(f) and (g) require SDRs to issue three notices per year and spend five hours creating and disseminating each notice, for a total of 15 hours annually for each SDR, for a total of 45 annual burden hours being moved across all three SDRs. As a result, the Commission estimates that moving these requirements would result in a total reduction of 45 annual burden hours for SDRs in collection 3038–0070. The Commission therefore estimates that the total overall burdens for updated Information Collection 3038– 0070 will be as follows: Estimated number of respondents affected: 1,732 SEFs, DCMs, DCOs, SDRs, and reporting counterparties. 230 The Commission notes that, currently, it receives significantly less than one notice and initial assessment of reporting errors and omissions per SEF, DCM, or reporting counterparty per year, but is conservatively estimating one notice and initial assessment annually here, as the proposed requirements of § 45.14(a) may reveal more reporting errors to reporting counterparties that would then prompt corrections pursuant to proposed § 43.3(e). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Estimated annual number of responses per respondent: 21,247. Estimated total annual responses: 36,799,804. Estimated burden hours per response: 0.033. Estimated total annual burden hours per respondent: 701. Estimated aggregate total burden hours for all respondents: 1,214,392. 3. Revisions to Collection 3038–0086 (SDR Registration and Regulatory Requirements) 231 The Commission proposes to revise collection 3038–0086 to account for changes in certain SDR responsibilities under proposed amendments to §§ 49.3, 49.5, 49.6, 49.9, 49.10, 49.11, 49.13, and 49.26, and to the proposed addition of §§ 49.28, 49.29, and 49.30. The estimated hours burdens and costs provided below would be in addition to or subtracted from the existing hours burdens and costs in collection 3038– 0086. The Commission also describes a number of proposed changes to sections that do not have PRA implications below, for clarity purposes. The Commission will also reduce the estimated number of SDRs from four to three, as there are currently three SDRs provisionally registered with the Commission that would be subject to the proposed collection requirements. i. Amended § 49.3 The proposed amendments to § 49.3(a)(5) would remove the requirement for each SDR to file an annual amendment to its Form SDR and, once an SDR’s application for registration is granted, the requirement for SDRs to amend the Form SDR whenever any of the information in the Form SDR becomes inaccurate. The proposed amendments would reduce the PRA burden for SDRs by lowering the number of filings required for each SDR. The Commission estimates that the PRA burden for each SDR would remain at 15 hours per filing, but that the number of filings per year would be reduced from three to two, meaning that the proposed amendments to § 49.3(a)(5) would reduce the burden on SDRs by 15 hours per year, for a total reduction of 45 annual burden hours across all three SDRs. This estimate is based on the Commission’s experience with current SDR practices and the original supporting statement for collection 231 The Commission is also proposing to reduce the number of SDRs used in collection 3038–0086 to calculate burdens and costs from 4 to 3. There are currently three SDRs provisionally registered with the Commission. The Commission has not received any applications for SDR registration since 2012. PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 21077 3038–0086.232 The Commission does not anticipate any one-time, initial burden changes related to proposed § 49.3(a)(5). ii. Amended § 49.5 The proposed amendments to § 49.5 would require SDRs to file a notification with the Commission for each transaction involving the direct or indirect transfer of ten percent or more of the equity interest in the SDR within ten business days of the firm obligation to transfer the equity interest, to provide the Commission with supporting documentation for the transaction on request, and to file a certification with the Commission that the SDR will meet all of its obligations under the Act and the Commission’s regulations within two business days of the completion of the equity interest transfer. The Commission estimates that the requirements of proposed § 49.5 would create a burden of 15 hours per SDR for each qualifying equity interest transfer. Equity interest transfers for SDR are rare, so the Commission conservatively estimates that each SDR would provide information pursuant to proposed § 49.5 no more often than once every three years. As a result, the estimated average annual PRA burden related to proposed § 49.5 would be 5 hours per SDR, or 15 hours total for all three SDRs. The Commission does not anticipate any one-time, initial burdens related to proposed § 49.5. iii. Amended § 49.6 The proposed amendments to § 49.6 would require an SDR seeking to transfer its registration to another legal entity due to a corporate change to file a request for approval with the Commission before the anticipated corporate change, including the specific documents and information listed in proposed § 49.6(c). The Commission estimates that the requirements of proposed § 49.6 would create a burden of 15 hours per SDR for each transfer of registration. Transfers of registration for SDR are rare, so the Commission conservatively estimates that each SDR would provide information pursuant to proposed § 49.6 no more often than once every three years. As a result, the estimated average annual PRA burden related to proposed § 49.6 would be 5 hours per SDR, or 15 hours total for all three SDRs. The Commission does not anticipate any one-time, initial burdens related to proposed § 49.6. 232 The original supporting statement for collection 3038–0086 estimated that the requirements of current § 49.3(a)(5) would necessitate three filings per year and 15 hours per filing. E:\FR\FM\13MYP3.SGM 13MYP3 21078 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules iv. Amended § 49.9 The proposed amendments to § 49.9 would remove the current text of the section and replace it with requirements related to SDRs providing open swaps reports to the Commission. The new § 49.9 would require SDRs to provide reports to the Commission with swap data for every open swap an SDR maintains, as instructed by the Commission. The instructions may include the method, timing, frequency, and format of the open swaps reports. The Commission estimates that SDRs would incur a one-time initial burden of 250 hours per SDR for SDRs to create or modify their systems to provide the open swaps reports to the Commission as instructed, for a total estimated hours burden of 750 hours. This burden may be mitigated by the fact that SDRs currently have systems in place to provide similar information to the Commission, which would reduce the effort needed to create or modify SDR systems. The Commission additionally estimates 30 hours per SDR annually to perform any needed maintenance or adjustments to SDR reporting systems. The Commission expects that the process for providing the open swaps reports to the Commission would be largely automated and therefore estimates a burden on the SDRs of 2 hours per report. Though the Commission is not prescribing the frequency of the open swaps reports at this time, the Commission estimates, only for the purposes of this burden calculation, that the SDRs would provide the Commission with 365 open swaps reports per year, meaning that the estimated ongoing annual additional hours burden for generating the open swaps reports and providing the reports to the Commission is 730 hours per SDR. The Commission therefore estimates a total ongoing additional annual hours burden related to proposed § 49.9 of 760 hours per SDR, for a total estimated ongoing annual burden of 2,280 hours. jbell on DSK3GLQ082PROD with PROPOSALS3 v. Amended § 49.10 Proposed § 49.10(e) would require SDRs to accept, process, and disseminate corrections to SDR data errors and omissions. Proposed § 49.10(e) would also require SDRs to have policies and procedures in place to accomplish the corrections. The Commission estimates that SDRs would incur a one-time initial burden of 100 hours per SDR to update and implement the systems, policies, and procedures necessary to complete the corrections process, for a total increased initial hours burden of 300 hours across VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 all three SDRs. This burden may be mitigated by the fact that SDRs already have systems, policies, and procedures in place to accomplish corrections to SDR data and that the SDRs currently make such corrections on a regular basis. The Commission additionally estimates 30 hours per SDR annually to perform any needed maintenance on correction systems and to update corrections policies and procedures as needed. The Commission anticipates that the process for SDRs to perform corrections would be largely automated, as this is the case with current SDR corrections. Based on swap data available to the Commission and discussions with the SDRs, the Commission estimates that an SDR would perform an average of approximately 2,652,000 data corrections per year. Based on the same information, the Commission estimates that performing each correction would require 2 seconds from an SDR. As a result, the Commission estimates that the ongoing burden of performing the actual corrections to SDR data would be approximately 1,473 hours per SDR annually, on average. The Commission therefore estimates a total additional ongoing hours burden related to proposed § 49.10(e) of 1,503 hours per SDR annually, for a total estimated ongoing burden of 4,509 hours. vi. Amended § 49.11 The proposed amendments to § 49.11 modify the existing obligations on SDRs to confirm the accuracy and completeness of swap data. Proposed § 49.11(b) would require SDRs to distribute open swaps reports to reporting counterparties on a weekly or monthly basis, depending on the registration status of a reporting counterparty. Proposed § 49.11(c) would require SDRs to receive a verification of data accuracy or a notice of discrepancy from the reporting counterparties in order to complete the verification process. Proposed § 49.11(a) and § 49.11(d) 233 do not have PRA implications beyond the burdens discussed for paragraphs (b) and (c) below. While SDRs are already required to confirm the accuracy and completeness 233 The Commission notes that requirements of part 40 of the Commission’s regulations would apply to SDRs amending their verification policies and procedures regardless of proposed § 49.11(d), because verification policies and procedures would fall under the part 40 definition of a ‘‘rule.’’ See 17 CFR 40.1(i) (definition of rule for the purposes of part 40). PRA implications for proposed § 49.11(d) would be included under the existing approved PRA collection for part 40 of the Commission’s regulations. PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 of swap data under current § 49.11, the Commission anticipates that the requirements in proposed § 49.11 would impose different burdens on the SDRs than the current regulation. The Commission estimates that each SDR would incur an initial, one-time burden of 500 hours to build, test, and implement updated verification systems that would generate and disseminate the open swaps reports and receive the verifications of data accuracy or notices of discrepancy, for a total of 1,500 initial burden hours across all SDRs. The Commission also estimates 50 hours per SDR annually for SDRs to maintain their verification systems and make any needed updates to verification policies and procedures required under proposed § 49.11(a) and (c). Currently, SDRs are required to confirm swap data by contacting both counterparties for swaps that are not submitted by a SEF, DCM, DCO, or third-party service provider every time the SDR receives swap data related to the swap. For swaps reported by a SEF, DCM, DCO, or third-party service provider, the SDRs must currently assess the swap data to form a reasonable belief that the swap data is accurate every time swap data is submitted for a swap. Under proposed § 49.11(b) and (c), SDRs would only generate the open swaps reports at most once a week for any reporting counterparty, regardless of how often swap data is submitted for an open swap, and would only be required to provide the open swaps reports to the reporting counterparties, without needing to contact the non-reporting counterparty or evaluate the swap data. The Commission also anticipates, based on discussions with SDRs and other market participants, that the verification process would be largely automated once the processes are in place. At maximum, the SDRs would be required to create open swaps reports for the 117 SD/MSP/DCO reporting counterparties every week (6,084 reports per year) and open swaps reports for the 1,585 non-SD/MSP/DCO reporting counterparties every month (19,020 reports per year) for a total of 25,104 reports per year overall. The Commission estimates that creating each report would require 2 hours, for a total of 50,208 hours per SDR per year or 150,624 hours overall across all SDRs. vii. Amended § 49.12 Proposed amendments to § 49.12(a) and (b) would incorporate existing SDR recordkeeping obligations from § 45.2(f) and (g) respectively, which are already applicable to SDRs under current § 49.12(a). As the recordkeeping E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 requirements being moved from § 45.2 already apply to SDRs under current § 49.12, the Commission does not believe that amended § 49.12(a) or (b) would require any revision to hours burden related to § 49.12 already included in collection 3038–0086. Proposed amendments to § 49.12(c) would require SDRs to maintain records of data validation errors and of data reporting errors, which would include records of data subsequently corrected by a SEF, DCM, or reporting counterparty pursuant to parts 43, 45, and 46. Proposed § 49.12(c) does not however add any new requirement to part 49, as all of the records to be kept would already be required to be kept by existing recordkeeping obligations as data submitted under parts 43, 45, or 46. As a result, the Commission does not believe that amended § 49.12(c) would require an additional PRA burden beyond that already included in collection 3038–0086. viii. Amended § 49.13 Proposed § 49.13(a) would require SDRs to monitor, screen, and analyze SDR data in the form and manner determined by the Commission. This would involve generating reports and other information at the request of the Commission by calculating or compiling information and SDR data maintained by the SDR. Proposed § 49.13(b) would require SDRs to have sufficient resources to perform such obligations. The Commission proposes to amend existing collection 3038–0086 to account for any burdens associated with responding to Commission requests to monitor, screen, and analyze SDR data. While SDRs are currently required to perform monitoring, screening, and analyzing tasks as required by the Commission, the proposed amendments would facilitate more frequent requests from the Commission, which may increase the burden on SDRs. The Commission anticipates that requests would be both one-time requests and requests to establish periodic reports. The Commission estimates that it would make 10 new requests per SDR per year, and that each request would require an average of 40 hours to respond, for a total burden of 400 hours per SDR per year, or 1,200 hours per year overall. The Commission anticipates that the number of new requests would decrease over time as the Commission’s resources for utilizing SDR data improve. The Commission does not anticipate any one-time, initial burdens related to proposed § 49.13(a). Proposed § 49.13(c) would require SDRs to notify the Commission of any SDR data that the SDR receives that is VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 not reported in accordance with parts 43, 45, or 46, as applicable. Currently, under § 49.15(c), SDRs are only required to notify the Commission when swap transaction and pricing data is not reported in compliance with the obligations under part 43. Proposed § 49.13(c) would expand this obligation to also include SDRs notifying the Commission when a transaction is reported that is not in accordance with part 45 or part 46. The Commission anticipates that the notification provisions in proposed § 49.13(c) would create little or no PRA burden on SDRs beyond those existing under current § 49.15(c), as the SDRs would already have the necessary systems and procedures in place due to the existing requirements in current § 49.15(c). ix. Amended § 49.26 Proposed new § 49.26(j) would require SDRs to provide their users and potential users with the SDR’s policies and procedures on reporting SDR data, including SDR data validation procedures, swap data verification procedures, and SDR data correction procedures. The Commission anticipates that SDRs would incur a one-time burden of 20 burden hours to draft written documents that they would provide to their users and potential users, for a total increase of 60 one-time burden hours across SDRs. The Commission also anticipates that SDRs would update their policies once per year and incur a recurring burden of 10 hours annually from providing any updated reporting policies and procedures to their users and potential users, as needed, for a total increase of 30 ongoing burden hours across SDRs. x. New § 49.28 Proposed new § 49.28 incorporates existing provisions of § 43.3(f) and (g) with respect to hours of operation with minor changes and clarifications. Proposed § 49.28 extends the provisions of current § 43.3(f) and (g) to include all SDR data and clarifies the different treatment of regular closing hours and special closing hours. SDRs currently have closing hours systems, policies, and procedures that apply to all SDR functions and all SDR data under the current requirements. The proposed requirements related to declaring regular closing hours and special closing hours would also effectively follow current requirements, without necessitating changes to current SDR systems or practices. The Commission does however anticipate that the SDRs would need to issue notices to the public related to closing hours under proposed § 49.28(a) and (c). The PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 21079 Commission estimates that each SDR would issue three notices per year and spend five hours creating and disseminating each notice, for a total of 15 hours per year preparing and providing public notices per SDR, and a total of 45 hours per year across all SDRs. xi. New § 49.29 Proposed new § 49.29 would require each SDR to provide, upon request by the Commission, information relating to its business as an SDR, and such other information that the Commission needs to perform its regulatory duties. This provision also requires each SDR, upon request by the Commission, to provide a written demonstration of compliance with the SDR core principles and other regulatory obligations. The PRA burden associated with such responses is dependent on the number of requests made and the complexity of such requests. Based on its experience with requests to DCMs, the Commission would estimate that each SDR would likely receive on average between three and five requests per year, considering that an SDR is a newer type of registered entity than a DCM. The Commission anticipates that the number of requests would decrease over time. The Commission also anticipates that each such request would require the SDR to spend 20 hours to gather information and formulate a response, and bases its estimate of burden hours assuming five such requests per year, for a total additional hours burden of 100 hours per SDR per year, or 300 hours per year across all SDRs. The Commission does not anticipate that SDRs would incur any one-time hours burden or costs in complying with this regulation. The Commission therefore estimates that the total overall burdens for updated Information Collection 3038– 0086 will be as follows: Estimated number of respondents affected: 3 SDRs. Estimated annual number of responses per respondent: 154,327,169. Estimated total annual responses: 462,981,508. Estimated burden hours per response: 0.0006. Estimated total annual burden hours per respondent: 99,197. Estimated aggregate total burden hours for all respondents: 297,526. 4. Request for Comment The Commission invites the public and other Federal agencies to comment on any aspect of the proposed information collection requirements discussed above. The Commission will E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21080 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules consider public comments on this proposed collection of information in: (1) Evaluating whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have a practical use; (2) evaluating the accuracy of the estimated burden of the proposed collection of information, including the degree to which the methodology and the assumptions that the Commission employed were valid; (3) enhancing the quality, utility, and clarity of the information proposed to be collected; and (4) minimizing the burden of the proposed information collection requirements on registered entities, including through the use of appropriate automated, electronic, mechanical, or other technological information collection techniques, e.g., permitting electronic submission of responses. Copies of the submission from the Commission to OMB are available from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC 20581, (202) 418–5160 or from https://RegInfo.gov. Organizations and individuals desiring to submit comments on the proposed information collection requirements should send those comments to: • The Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10235, New Executive Office Building, Washington, DC 20503, Attn: Desk Officer of the Commodity Futures Trading Commission; • (202) 395–6566 (fax); or • OIRAsubmissions@omb.eop.gov (email). Please provide the Commission with a copy of submitted comments so that all comments can be summarized and addressed in the final rulemaking, and please refer to the ADDRESSES section of this rulemaking for instructions on submitting comments to the Commission. OMB is required to make a decision concerning the proposed information collection requirements between 30 and 60 days after publication of this Release in the Federal Register. Therefore, a comment to OMB is best assured of receiving full consideration if OMB receives it within 30 calendar days of publication of this Release. Nothing in the foregoing affects the deadline enumerated above for public comment to the Commission on the proposed rules. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 C. Cost-Benefit Considerations 1. Introduction Section 15(a) 234 of the CEA requires the Commission to consider the costs and benefits of its actions before promulgating a regulation under the CEA or issuing certain orders. Section 15(a) further specifies that the costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. The Commission considers the costs and benefits resulting from its discretionary determinations with respect to the section 15(a) factors. In this release, the Commission is proposing revisions to existing regulations in parts 23, 43, 45, and 49. The Commission also is proposing new regulations in part 49. Together, these proposed revisions and additions are intended to address swap data verification and to improve the quality of data reporting generally. Some of the proposed amendments are substantive. A number of amendments, however, are non-substantive or technical, and therefore would not have associated cost-benefits implications.235 To the extent costs are quantifiable, they have been discussed in two places: The PRA section in this release and in the PRA-related information collection requests filed with OMB. In general, however, given the small number of existing SDRs and their differences in size and operations, many of the costs associated with this proposed rulemaking were not readily quantifiable without relying on and potentially divulging confidential information. The Commission therefore specifically requests comments to help quantify the costs of this rulemaking. 2. Background In 2011, the Commission issued the Part 49 Adopting Release. The duties and requirements included in the Part 49 Adopting Release require SDRs to, among other requirements, accept and confirm data reported to the SDRs. The Commission also believed that the Commission would be better able to monitor the overall swaps market and individual market participants through SDR collection and maintenance of 234 7 U.S.C. 19(a). Commission believes there are no costbenefit implications for proposed §§ 49.2, 49.15, 49.16, 49.18, 49.20, 49.24, and 49.31. swap data as required in parts 45 and 49. Before the adoption of the DoddFrank Act and its implementing regulations, the swaps market generally, and transactions and positions of individual market participants in particular, were not transparent to regulators or to the public. Due to these requirements for SDRs to collect and maintain SDR data, the Commission has now had the opportunity to work directly with SDR data reported to, and held by, SDRs. Based on its experience working with SDR data, along with extensive feedback received from market participants, the Commission believes that improving data quality would help enhance the data’s usefulness. In this release, the Commission has focused on the operation and implementation of CEA section 21,236 which contains requirements related to SDRs, including the requirement to confirm data.237 The Commission is also proposing to modify a number of other regulations for clarity and consistency and to enhance the Commission’s ability to monitor and supervise the swaps market. Prior to discussing the proposed rule changes, the Commission describes below the current environment that would be impacted by these changes. Three SDRs are currently provisionally registered with the Commission: CME, DDR, and ICE. Each SDR has unique characteristics and structures that determine how the proposed rule changes would impact its operations. For example, SDRs affiliated with DCOs tend to receive a large proportion of their SDR data from swaps cleared through those affiliated DCOs, while independent SDRs tend to receive SDR data from a wider range of market participants. The current reporting environment also involves third-party service providers. These entities assist market participants with fulfilling the applicable data reporting requirements, though the reporting requirements do not apply to third-party service providers directly. Given that data quality depends on the underlying data reporting requirements, the proposed changes should be considered in context with other planned improvements to parts 43 and 45. As discussed in the Roadmap, the Commission is in the process of improving data reporting requirements, including modifying the requirements to be more clear and consistent with other regulators’ requirements. The amendments proposed in this 235 The PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 236 See 237 See E:\FR\FM\13MYP3.SGM 7 U.S.C. 24a. 7 U.S.C. 24a(c)(2). 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules rulemaking are one part of this larger effort to ensure that better-quality data is available to market participants and the Commission. Current regulations have not created results that meet the Commission’s expectations for data quality. For example, current regulations do not include a specific affirmative obligation for swap counterparties to review reported swap data for errors, but instead require swap counterparties to correct errors and omissions only after the discovery of inaccurate data.238 The result has been that market participants too often have not acted to review and correct reported swap data. It is not uncommon for Commission staff to find discrepancies between open swaps information available to the Commission and reported data for the same swaps. In the processing of swap data to generate the CFTC’s Weekly Swaps Report,239 for example, there are instances when the notional amount differs between the Commission’s open swaps information and the swap data reported for the same swap. Other common examples of discrepancies include incorrect references to an underlying currency, such as a notional value incorrectly linked to U.S. dollars instead of Japanese Yen. These examples, among others, strongly suggest a need for better verification of reported swap data. Improved verification could lead to these errors being discovered and corrected in a timely manner. SDR policies and procedures have also created additional challenges for swap data accuracy. As discussed above, certain SDR policies and procedures for swap data have been based on negative affirmation, i.e., predicated on the concept that reported swap data is accurate and confirmed if a reporting counterparty does not inform the SDR of errors or omissions, or otherwise make subsequent modifications to data reported for a swap within a certain period of time.240 As reporting counterparties are typically not reviewing their reported swap data maintained by the SDRs, the data is effectively assumed to be accurate and errors and omissions are not sufficiently discovered and corrected. As described in more detail in the section VII.C.8.iii discussion of price discovery below, the volume of inaccurate swap data that is discovered by market participants or the Commission shows that current 238 See 17 CFR 43.3(e); 17 CFR 45.14. CFTC’s Weekly Swaps Report, https:// www.cftc.gov/MarketReports/SwapsReports/ index.htm. 240 See 17 CFR 49.11(b)(1)(ii) and (b)(2)(ii). 239 See VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 regulations are insufficient to produce the quality of swap data the Commission expects and needs to fulfill its regulatory responsibilities. Based on its experience with data reporting, the Commission believes that certain regulations, particularly in parts 43, 45, and 49, should be amended to improve swap data accuracy and completeness. The regulatory changes being proposed to meet this objective include requiring SDRs and reporting counterparties to verify the accuracy and completeness of reported swap data. Many of the proposed regulations have costs and benefits that must be considered. These will be discussed individually below. This release also includes amendments to part 49 to improve and streamline the Commission’s oversight of SDRs. These proposed regulations include allowing the Commission to request demonstrations of compliance and other reports from SDRs. For each proposed amendment discussed below, the Commission summarizes the changes,241 and identifies and discusses the costs and benefits attributable to the proposed changes. The Commission then considers alternatives to the rules proposed in this release. Finally, the Commission considers the costs and benefits of all of the proposed rules jointly in light of the five public interest considerations in CEA section 15(a). The Commission notes that this consideration of costs and benefits is based on the understanding that the swaps market functions internationally. Many swaps transactions involving U.S. firms occur across international borders and some Commission registrants are organized outside of the United States, with leading industry members often conducting operations both within and outside the United States, and with market participants commonly following substantially similar business practices wherever located. Where the Commission does not specifically refer to matters of location, the discussion of costs and benefits refers to the proposed rules’ effects on all swaps activity, whether by virtue of the activity’s physical location in the United States or by virtue of the activity’s connection with or effect on U.S. commerce under 241 As described throughout this release, the Commission is also proposing a number of nonsubstantive, conforming rule amendments in this release, such as renumbering certain provisions and modifying the wording of existing provisions. Nonsubstantive amendments of this nature may be described in the cost-benefit portion of this release, but the Commission will note that there are no costs or benefits to consider. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 21081 CEA section 2(i).242 The Commission contemplated this cross-border perspective in 2011 when it adopted § 49.7, which applies to trade repositories located in foreign jurisdictions.243 3. Baseline There are separate baselines for the costs and benefits that might arise from the proposed regulations in this release. The Commission believes that for proposed paragraphs (c) added to §§ 23.204 and 23.205, the baseline is the current practice. The baseline for proposed § 45.14 is current § 45.14. The baseline for proposed amendments to current part 49 regulations is the existing part 49 and current practices. For proposed § 49.12, the baseline is current § 49.12, as well as § 45.2(f) and (g), which would be replaced by proposed § 49.12. For proposed § 49.17, the baseline is current §§ 49.17 and 45.13. In this release, the Commission is proposing to adopt four new regulations: §§ 49.28, 49.29, 49.30, and 49.31. For proposed new § 49.28 the baseline is current § 43.3(f) and (g), because the requirements in § 43.3(f) and (g) are being moved to proposed § 49.28. For proposed new §§ 49.29 and 49.30, the baselines are current practices. Proposed new § 49.31 concerns internal Commission practices and is not subject to consideration of costs and benefits. 4. Costs and Benefits of Proposed Amendments to Part 49 i. § 49.3—Procedures for Registration The Commission is proposing to amend § 49.3 to remove the requirements for SDRs to: (i) file an annual amendment to Form SDR; and (ii) amend Form SDR after the Commission grants the application for registration under § 49.3(a), as required in current § 49.3(a)(5). The Commission believes the annual filing requirement and the requirement to continuously update Form SDR once the application 242 See 7 U.S.C. 2(i). CEA section 2(i) limits the applicability of the CEA provisions enacted by the Dodd-Frank Act, and Commission regulations promulgated under those provisions, to activities within the U.S., unless the activities have a direct and significant connection with activities in, or effect on, commerce of the U.S.; or contravene such rules or regulations as the Commission may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of the CEA enacted by Dodd-Frank Act. Application of section 2(i)(1) to the existing regulations under part 45 with respect to SDs/MSPs and non-SD/MSP counterparties is discussed in the Commission’s Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations, 78 FR 45292 (July 26, 2013). 243 See 17 CFR 49.7. E:\FR\FM\13MYP3.SGM 13MYP3 21082 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules for registration has been granted currently in § 49.3(a)(5) are unnecessary for the Commission to successfully perform its regulatory functions. (A) Costs and Benefits The proposed amendments to § 49.3(a)(5) would benefit SDRs by reducing the amount of information that SDRs must provide to the Commission and the frequency with which the SDRs must provide the information. By removing the annual Form SDR amendment requirement and the requirement to update Form SDR after registration is granted, SDRs would be required to expend fewer resources to provide this information to the Commission. The Commission believes that current § 49.3(a)(5) is unnecessary as SDRs already submit much of the information in Form SDR in rule filings under part 40 or as required per other SDR regulations. The Commission also believes that this requirement would be unnecessary with new proposed § 49.29, which would provide the Commission with the ability to request the same information on an as-needed basis. The costs of proposed § 49.3(a)(5) would not be significant and would largely be associated with any needed adjustments to SDRs policies and procedures related to reducing the number of updates to Form SDR. jbell on DSK3GLQ082PROD with PROPOSALS3 (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.3(a)(5). Are there additional costs or benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.3(a)(5). Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? ii. § 49.5—Equity Interest Transfers Proposed § 49.5(a) would require that SDRs: (i) Notify the Commission of each transaction involving the direct or indirect transfer of ten percent or more of the equity interest in the SDR; and (ii) provide the Commission with supporting documentation upon request. Proposed § 49.5(b) would require that the notice in § 49.5(a) be filed electronically with the Secretary of the Commission and DMO at the earliest possible time but in no event later than the open of business ten business days VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 following the date upon which a firm obligation is made for the equity interest transfer. Proposed § 49.5(c) would require that upon the transfer, whether directly or indirectly, the SDR shall file electronically with the Secretary of the Commission and DMO a certification that the SDR meets all of the requirements of section 21 of the CEA and the Commission regulations, no later than two business days following the date on which the equity interest was acquired. (A) Costs and Benefits The Commission believes that the proposed amendments would benefit SDRs by lowering the burdens related to notifying the Commission of equity interest transfers and by extending the time SDRs have to file transfer-related materials with the Commission. The proposed changes lower the burdens by removing the obligations in current § 49.5(a) to update Form SDR for an SDR that has been granted registration under § 49.3(a) and in current § 49.5(b) to provide specific information to the Commission with the equity interest transfer notification and replacing them with the ability for the Commission to request supporting documentation for the transfer as needed under proposed § 49.5(a). This would likely result in SDRs only providing the information the Commission deems necessary for any particular equity interest transfer, which may not include all of the documents or information required by current § 49.5. The proposed amendments also lower the burdens on SDRs by extending the notification timing requirement under current § 49.5(a) from one business day to ten business days. More time would allow SDRs more flexibility in time and resources needed to file the required notice. The costs of proposed § 49.5 would be lower than the current requirements and would largely be associated with any needed adjustments to SDRs policies and procedures related to notification of equity interest transfer and the resources needed to provide the Commission with requested documentation. The costs would also include any additional costs stemming from the inclusion of ‘‘indirect transfers’’ of equity ownership in proposed § 49.5. This could increase the costs to SDRs, if the inclusion of indirect transfers results in more frequent equity interest transfers and the associated need to provide information to the Commission, but the inclusion of indirect transfers would benefit the Commission by providing more insight PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 into equity interest transfers that could affect the business of an SDR, even though the equity interest transfer does not involve the SDR directly. As equity interest transfers are rare occurrences and the Commission does not anticipate that including indirect transfers would result in substantially more equity interest transfers, the Commission expects these potential additional costs to be small. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.5. Are there additional costs or benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these benefits. The Commission requests comment on its consideration of alternatives to proposed § 49.5. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? iii. § 49.6—Request for Transfer of Registration Proposed § 49.6(a) would require an SDR seeking to transfer its SDR registration following a corporate change to file a request for approval to transfer the registration with the Secretary of the Commission in the form and manner specified by the Commission. Proposed § 49.6(b) would specify that an SDR file a request for transfer of registration as soon as practicable before the anticipated corporate change. Proposed § 49.6(c) would set forth the information that must be included in the request for transfer of registration, including the documentation underlying the corporate change, the impact of the change on the SDR, governance documents, updated rulebooks, and representations by the transferee entity, among other things. Proposed § 49.6(d) would specify that upon review of a request for transfer of registration, the Commission, as soon as practicable, shall issue an order either approving or denying the request for transfer of registration. (A) Costs and Benefits The Commission believes that proposed § 49.6 would benefit SDRs by reducing the burdens on SDRs for successfully transferring an SDR registration to a successor entity. Proposed § 49.6 would require a more limited scope of information and representations from the transferor and E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules transferee entities than current § 49.6, which requires a full application for registration on Form SDR, including all Form SDR exhibits. This limited scope of information and representations would require less time and resources to prepare and submit than the current requirements. The Commission does not believe that proposed § 49.6 would impose any additional costs on SDRs compared to the current requirement. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.6. Are there additional costs or benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.6. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? jbell on DSK3GLQ082PROD with PROPOSALS3 iv. § 49.9—Open Swaps Reports Provided to the Commission Proposed § 49.9(a) would require SDRs to provide the Commission with open swaps reports that contain an accurate reflection of the swap data for every swap data field required to be reported under part 45 for every open swap maintained by the SDR. Proposed § 49.9(b) would require SDRs to transmit all open swaps reports to the Commission as instructed by the Commission. (A) Costs and Benefits The costs imposed by this proposed requirement would include the resources SDRs must use to develop the infrastructure to create and deliver the open swaps reports as instructed by the Commission. In practice, the costs are expected to be mitigated by the fact that SDRs currently send open swaps reports to the Commission on a regular basis, which would help limit the costs. The SDRs may incur some costs from needing to provide open swaps reports in the standardized format required by the Commission, but the Commission does not expect the format of these reports to change frequently. The Commission believes the proposed amendments would standardize the reports SDRs already provide, which would ensure that the reports will be delivered in a usable format, which will assist the Commission’s regulatory oversight VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 efforts. The Commission believes the largest cost imposed by these amendments would be the upfront costs to implement open swaps reporting systems, with incremental costs to maintain or modify SDR systems on an ongoing basis. The underlying information contained in the reports would also be similar to information SDRs would be required to send to reporting counterparties for verification purposes under proposed § 49.11(b). The Commission currently uses open swaps reports to create and publish Commission papers and reports, including the weekly swaps report. These reports benefit market participants by analyzing SDR data sourced directly from the SDRs. This information on open swaps is unique because it is not available to the public until the Commission publishes its reports. The Commission also believes that market participants would indirectly benefit from the improved data quality of open swaps that would result from proposed § 49.9, as the information in the reports would help the Commission to better perform its regulatory functions. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.9. Are there additional costs or benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.9. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? v. § 49.10—Acceptance of Data New § 49.10(e) would require SDRs to correct errors and omissions in SDR data that was previously reported, or erroneously not reported, to SDRs. Proposed § 49.10(e)(1)–(4) would set forth the specific requirements SDRs would need to meet to fulfill the general requirement in § 49.10(e): (i) Accept corrections for errors and omissions reported to, or erroneously not reported to, the SDR; (ii) correct errors and omissions as soon as technologically practicable after receiving a report of the errors or omissions; (iii) disseminate corrected SDR data to the public and the Commission, as applicable, as soon as technologically practicable after correcting the SDR data; and (iv) establish, maintain, and enforce policies PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 21083 and procedures designed to fulfill its correction responsibilities under § 49.10(e)(1)–(3). (A) Costs and Benefits Proposed § 49.10(e) could impose some costs on SDRs, but the Commission believes that the costs would not be significant and largely related to any needed updates to their error and omission correction systems. SDRs are currently required to identify cancellations, corrections, and omissions under parts 43 and 45.244 Proposed § 49.10(e) is largely clarifying the SDRs’ existing duties, and, for organizational purposes, placing the obligations in part 49, which is the Commission’s main regulations governing SDRs. The costs of the proposed paragraph would be mitigated by the fact that SDRs currently routinely correct data errors and omissions and disseminate the corrections as required. The Commission also expects there would be costs associated with establishing, maintaining, and enforcing the policies and procedures required by the proposed paragraph, but believes that these costs would not be significant and would be limited to initial creation costs and update costs for the policies and procedures as needed. The Commission believes that one of the benefits from proposed § 49.10(e) is improved data quality resulting from collecting and disseminating accurate swap data. Proposed § 49.10(e) is intended to work in concert with proposed § 45.14 and proposed § 49.11, along with the data correction requirements of § 43.3(e). The Commission believes that market participants and the public would benefit from more complete and accurate swap transaction and pricing data that enhances price discovery. In addition, the Commission uses swap transaction and pricing data to produce public information on the swaps markets, such as the weekly swaps reports. The Commission also believes that market participants would benefit from the Commission using more accurate data to inform swaps markets policy and perform its other regulatory functions. SDRs would also benefit from greater clarity in their requirements to correct errors and omissions in SDR data. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.10. Are there additional costs and benefits that the Commission should 244 See E:\FR\FM\13MYP3.SGM 17 CFR 43.3(e)(1), (3), (4); 17 CFR 45.14(c). 13MYP3 21084 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.10. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? vi. § 49.11—Verification of Swap Data Accuracy Proposed § 49.11(a) would generally require that SDRs: (i) Verify the accuracy and completeness of swap data that the SDRs receive from SEFs, DCMs, and reporting counterparties, or thirdparty service providers acting on their behalf; and (ii) establish, maintain, and enforce policies and procedures reasonably designed to verify the accuracy and completeness of that swap data. Proposed § 49.11(b) would require SDRs to regularly distribute to each reporting counterparty an open swaps report detailing the swap data maintained by the SDR that contains the same information provided to the Commission in an open swaps report under proposed § 49.9. Proposed § 49.11(b)(1) would require SDRs to distribute open swaps reports that accurately reflect the swap data the SDR maintains for each of a particular reporting counterparty’s open swaps, unless other Commission regulations prohibit the disclosure of certain swap data. Proposed § 49.11(b)(2) would require SDRs to distribute the open swaps reports to SD/MSP/DCO reporting counterparties on a weekly basis, no later than 11:59 p.m. Eastern Time on the day of the week that the SDR chooses to regularly distribute the open swaps reports. Proposed § 49.11(b)(3) would require SDRs to distribute the open swaps reports to non-SD/MSP/ DCO reporting counterparties on a monthly basis, no later than 11:59 p.m. Eastern Time on the day of the month that the SDR chooses to regularly distribute the open swaps reports. Proposed § 49.11(c) would require SDRs to receive from each reporting counterparty to which it sends an open swaps report, in response to the open swaps report, either a verification of data accuracy signifying that the swap data contained in the distributed open swaps report is accurate and complete or a notice of discrepancy signifying that the swap data in the open swaps report contains one or more errors or omissions. Proposed § 49.11(c) would also require SDRs to establish, maintain, VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 and enforce policies and procedures reasonably designed for the SDR to receive the notices. Proposed § 49.11(d) would require SDRs to comply with the requirements under part 40 of the Commission’s regulations when creating and amending their verification policies and procedures. (A) Costs and Benefits The costs associated with the proposed amendments to § 49.11 would largely be borne by the three existing SDRs. The Commission expects that SDRs would incur initial costs from establishing systems to generate open swaps reports and to successfully distribute these reports to all reporting counterparties. The Commission also expects SDR to incur recurring costs related to any needed adjustments to their systems over time and to accommodate the arrival or departure of reporting counterparties. SDRs would also incur the cost of generating and distributing the particular open swaps reports, and receiving the responses from the reporting counterparties, but does not believe these changes would be significant because, based on discussions with the SDRs and other market participants, the Commission believes SDRs would largely automate the verification process. The Commission believes that the benefits of the proposed amendments to § 49.11 would result from verification improving data accuracy and completeness. When paired with the proposed requirements of § 45.14 and the correction requirements of § 43.3(e), verification would alert reporting counterparties to errors and omission in SDR data for their open swaps. Reporting counterparties would be required to correct any errors or omissions discoverable in the open swaps reports the SDRs provide, including errors in trade-specific details, such as notional amounts and price. The Commission believes that SDRs and reporting counterparties would benefit from having clearer regulations. The Commission also believes that the proposed verification requirements would improve the Commission’s ability to monitor, measure, and regulate the swaps market, such as using more accurate data to improve monitoring for potential systemic risks and surveillance for potential threats to market integrity. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 § 49.11. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.11. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? vii. § 49.12—Swap Data Repository Recordkeeping Requirements Proposed § 49.12(a) would require that SDRs keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the SDR, including, but not limited to, all SDR information and all SDR data reported to the SDR. Proposed § 49.12(b)(1) would require that an SDR maintain all SDR information received by the SDR in the course of its business. Proposed § 49.12(b)(2) would require an SDR to maintain all SDR data and timestamps, and all messages to and from an SDR related to SDR data reported to the SDR throughout the existence of the swap to which the SDR data relates and for five years following final termination of the swap, during which time the records must be readily accessible by the SDR and available to the Commission via real-time electronic access, and then for an additional period of at least ten years in archival storage from which such records are retrievable by the SDR within three business days. Proposed § 49.12(c) would require SDRs to create and maintain records of errors related to SDR data validations and errors related to SDR data reporting. Proposed § 49.12(c)(1) would require an SDR to create and maintain an accurate record of all SDR data that fails to satisfy the SDR’s data validation procedures. Proposed § 49.12(c)(2) would require an SDR to create and maintain an accurate record of all SDR data errors and omissions reported to the SDR and all corrections disseminated by the SDR pursuant to parts 43, 45, and 46. SDRs must make the records available to the Commission on request. Proposed § 49.12(d) would contain the requirements of current § 49.12(c) and would require that: (i) All records required to be kept pursuant to part 49 must be open to inspection upon request by any representative of the Commission or any representative of the U.S. Department of Justice; and (ii) an SDR must produce any record required E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 to be kept, created, or maintained by the SDR in accordance with § 1.31. Finally, the Commission is proposing a non-substantive change to incorporate the current requirements of § 49.12(e) into the revised requirements of SDRs to monitor, screen, and analyze SDR data under § 49.13. This non-substantive change does not have any cost or benefit implications. (A) Costs and Benefits The costs of proposed amendments to § 49.12 would primarily be incurred by the three existing SDRs as they make any needed adjustments to create and maintain all required records. The Commission does not believe these costs would be significant, as the recordkeeping requirements in proposed § 49.12 are largely similar to the requirements in current § 49.12 and current § 45.2(f) and (g). The proposed § 49.12(c) requirements are intended to serve as specific examples of records required to be created and maintained pursuant to current requirements and proposed § 49.12, in order to emphasize the importance of retaining records related to reporting errors, and would include such information as all reported SDR data and reports of errors and omissions. Proposed § 49.12(d) further specifies that SDRs must make all records included in proposed § 49.12 available to the Commission on request, which is the current requirement applicable to SDR in current § 45.2(h) and current § 49.12(c). Finally, the proposed amendments to § 49.12 related to SDR information would be substantially similar to the SEC’s requirements for its SBSDRs.245 The Commission expects that there would be substantial overlap in these requirements for SDRs that are also SBSDRs and these entities would be able to leverage resources to reduce any duplicative costs. The Commission believes that the proposed amendments to § 49.12 would provide greater clarity to SDRs in regards to their recordkeeping responsibilities and would allow for improvements in tracking errors in data reporting and the collecting of records related to SDR information. Better recordkeeping related to SDR data should lead to increased awareness for the SDRs and the Commission of any reporting issues experienced by reporting counterparties. Data recordkeeping should lead to better quality data by allowing the SDRs and the Commission to look for patterns in records that may lead to adjustments to 245 See 17 CFR 240.13n–7 (detailing the SBSDR recordkeeping requirements). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 SDR systems or future data reporting requirements. The availability of quality records is also crucial for the Commission to effectively perform its market surveillance and enforcement functions, which benefit the public by protecting market integrity and identifying risks within the swaps markets. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.12. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.12. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? viii. § 49.13—Monitoring, Screening, and Analyzing Data Proposed § 49.13(a) would generally require: (i) SDRs to establish automated systems for monitoring, screening, and analyzing all relevant SDR data in their possession in the form and manner as directed by the Commission; and (ii) SDRs to routinely monitor, screen, and analyze relevant SDR data at the request of the Commission. Proposed § 49.13(a)(1) would: (i) Specify that the requirements for monitoring, screening, and analyzing SDR data require SDRs to utilize relevant SDR data maintained by the SDR to provide information to the Commission concerning the SDR data; and (ii) state that monitoring, screening, and analyzing requests may require the SDRs to compile or calculate information within certain categories, or to compare information among categories, and lists the potential topic areas for requests. Proposed § 49.13(a)(1) also provides a list of topic areas for monitoring, screening, and analyzing tasks that the Commission may require. Proposed § 49.13(a)(2) would specify that all monitoring, screening, and analyzing requests are at the discretion of the Commission and require that all information provided pursuant to a request conform to the form and manner requirements established for the request pursuant to proposed § 49.30. Proposed § 49.13(a)(3) would require that all monitoring, screening, and analyzing requests be fulfilled within a time specified by the Commission for the particular request. PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 21085 Proposed § 49.13(b) would require SDRs to establish and at all times maintain sufficient technology, staff, and resources to fulfill the requirements in § 49.13 in the manner prescribed by the Commission. Proposed § 49.13(c) would incorporate current § 49.15(c) but also expand it to require SDRs to promptly notify the Commission of any swap transaction for which the SDR is aware that it did not receive SDR data in accordance with the requirements of parts 43, 45, and 46. (A) Costs and Benefits The costs imposed by the proposed amendments to § 49.13 would largely be borne by the three SDRs. The Commission expects these SDRs to incur costs as they may need to develop or modify and maintain the requisite automated systems to monitor, screen, and analyze the reported SDR data to respond to requests from the Commission. Each requested task would need to be evaluated independently to determine the SDRs’ ability to perform the task and then to determine the exact content of the report and the delivery requirements. The Commission is not prescribing any specific tasks with this proposal. Section 21(c)(5) of the CEA currently requires SDRs to ‘‘at the direction of the Commission, establish automated systems for monitoring, screening, and analyzing’’ the data maintained by the SDRs,246 and current § 49.13(a) codifies this requirement by requiring the SDRs to monitor, screen, and analyze all data in their possession as the Commission may require for ongoing data surveillance activities or ad hoc requests.247 Proposed § 49.13(a) retains this general requirement, but also provides broad topic areas for tasks that the Commission may request in order to provide SDRs with more information for the monitoring, screening, and analyzing requirement. The Commission expects that the costs for SDRs would vary depending on the scope and frequency of the data requested. The Commission also expects that the costs would be mitigated by the fact that SDRs currently perform monitoring, screening, and analyzing tasks at the request of Commission staff and therefore have systems and resources in place that may be leveraged for any new requests. Current § 49.13(b) also requires SDRs to maintain sufficient information technology to carry out their duties to monitor, screen, and analyze the data 246 7 U.S.C. 24a(c)(5). 17 CFR 49.13(a). 247 See E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21086 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules they collect. SDRs also currently routinely perform monitoring, screening, and analyzing tasks at the request of Commission staff. While the Commission expects that the SDRs may incur costs to modify and maintain their systems to comply with the requirements of proposed § 49.13 and to respond to requests from the Commission, the Commission believes that the incremental costs would not be significant compared to the applicable baseline of the current requirements to perform monitoring, screening, and analyzing tasks. These costs would also be mitigated by the fact that SDRs are currently performing a variety of monitoring, screening, and analyzing tasks at the request of Commission staff, and therefore already have resources devoted to monitoring, screening, and analyzing SDR data that could be leveraged for any additional requests. The Commission acknowledges that the cost burdens of the proposed changes for any specific SDR would depend on the current systems established and maintained by the SDR. While current § 49.13 includes requirements to monitor, screen, and analyze data and establish and maintain sufficient information technology, staff, and other resources, the resources expended by an SDR necessarily depends on the parameters of the specific requests. The Commission does not expect SDRs to expend resources without a pending request from the Commission. SDRs currently perform tasks, such as tracking the timeliness of swaps reporting, but costs from other tasks facilitated by the proposed rule may require new or modified systems to perform requested tasks. The Commission further acknowledges that costs related to each task would likely vary with the complexity of the requested task. The costs associated with responding to each task would depend on the information requested and the frequency of the reports. The Commission expects the requests would be reasonable based on available SDR resources and would take into account an understanding of what is possible given the data maintained by the SDRs. The Commission understands that SDRs can only be expected to perform monitoring, screening, and analyzing tasks based on the SDR data available to each SDR and that the results of any task would be limited to the SDR data for swaps reported to each SDR. The Commission also expects that SDRs and Commission staff would work together to design each task before a task is prescribed, as is current practice. This may also be a source of costs for SDRs, as each pending request may VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 require multiple conversations between SDRs and the Commission to design each task based on the Commission’s needs and what is feasible given the SDRs’ abilities and the available SDR data. After the costs have been incurred for any initial development or updates to SDR automated systems related to any specific task, the Commission expects recurring costs as SDRs’ systems would need to be monitored and adjusted as needed. Given that the Commission expects most requested tasks would be largely automated, the per-report production costs would not be substantial. In addition, because the information submitted to the Commission must reflect and adhere to established form and manner specifications pursuant to proposed § 49.30, the Commission anticipates many of the reports resulting from the tasks would share a common form and manner, which would result in reduced incremental costs for additional reports. Proposed § 49.13(c) would not create any costs other than those associated with the requirement to promptly notify the Commission. The Commission believes those costs would not be significant, because SDRs have already established systems to send electronic information to the Commission and the Commission is not requiring SDRs to actively search for reporting noncompliance as part of this proposed section. The Commission expects amended § 49.13 would improve data quality and enhance the Commission’s surveillance and other regulatory capabilities. Market participants and the public would benefit from these improvements. As SDRs analyze the SDR data to complete requested tasks, for example, inconsistencies and anomalies within the data would become more apparent, which may lead to improvements in market practices, data quality, and Commission regulations. The reports may also assist the Commission with timely analyses that would help the Commission perform its regulatory functions. To the extent that the tasks enable the Commission to act more quickly, or with greater accuracy, to identify abusive market practices, compliance issues, or systemic risks, and address these concerns more quickly and with greater precision, market participants and the public would benefit. These monitoring, screening, and analyzing tasks should lead to more robust, improved analyses performed by or available to the Commission staff, and the findings from such analyses should help the PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 Commission better perform its regulatory functions, improve its policy decisions, and allow the Commission to better inform the public about the swaps markets. The Commission recognizes that not detailing specific tasks in the rule text may create certain costs for SDRs, as the tasks the Commission requests them to perform may change over time and therefore may not be perfectly predictable. At the same time, the Commission believes that not assigning tasks in the rule text itself would encourage the SDRs and the Commission to work together to devise the best approaches for any needed tasks. Adding specific tasks to the rule text would also curtail the Commission’s ability to remove or modify the task in the future, as the Commission’s needs and the SDRs’ capabilities change. Allowing more flexibility by not including tasks in the proposed rulemaking would benefit both the SDRs and the Commission, and is the Commission’s preferred approach. Additionally, the examples of the types of tasks the Commission envisions asking of SDRs provide above should help reduce any costs associated with uncertainty. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.13. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.13. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? Please describe the qualitative and quantitative costs (including, but not limited to, personnel costs, technological costs, and costs related to on-going discussions with Commission staff) that SDRs may incur in needing to make any updates to current systems related to the proposed changes to § 49.13. Please describe (both qualitatively and quantitatively) how costs or benefits (including, but not limited to, personnel costs, technological costs, and costs related to on-going discussions with Commission staff) may change depending on whether more or fewer categories are included in § 49.13(a)(1). Are there additional categories that the Commission should include or are there E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 categories that the Commission should remove? If so, please explain in detail. Please describe (both qualitatively and quantitatively) how costs and benefits (including, but not limited to, personnel costs, technological costs, and costs related to on-going discussions with Commission staff) may change depending on the length of time period to be analyzed for a task or the frequency of repetition for a task. ix. § 49.17—Access to SDR Data The Commission proposes to amend the § 49.17(b)(3) definition of ‘‘direct electronic access’’ to mean an electronic system, platform, framework, or other technology that provides internet-based or other form of access to real-time SDR data that is acceptable to the Commission and also provides scheduled data transfers to Commission electronic systems. Proposed § 49.17(c) would require SDRs to provide access to the Commission for all SDR data maintained by the SDR pursuant to the Commission’s regulations. Proposed § 49.17(c)(1) would require that SDRs provide direct electronic access to the Commission or its designee in order for the Commission to carry out its legal and statutory responsibilities under the CEA and Commission regulations. Proposed § 49.17(c)(1) would also require that SDRs maintain all SDR data reported to the SDR in a format acceptable to the Commission, and transmit all SDR data requested by the Commission to the Commission as instructed by the Commission. Proposed § 49.17(c)(1) would amend the requirements of current § 45.13(a) from maintaining and transmitting ‘‘swap data’’ to maintaining and transmitting ‘‘SDR data,’’ to make clear that the SDRs must maintain all SDR data reported to the SDRs in a format acceptable to the Commission and transmit all SDR data requested by the Commission, not just swap data. Proposed § 49.17(c)(1) would also broaden the requirements of current § 45.13(a) from ‘‘transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission’’ to ‘‘transmit all SDR data requested by the Commission to the Commission as instructed by the Commission,’’ and explains what these instructions may include. The Commission proposes to amend § 49.17(f) to correct the incorrect reference to ‘‘37.12(b)(7)’’ at the end of paragraph (f)(2) with a correct reference to ‘‘39.12(b)(7)’’ of the Commission’s regulations, as there is no § 37.12(b)(7) in the Commission’s regulations. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 The Commission proposes to move the delegation of authority in current § 49.17(i) to proposed § 49.31(a)(7). (A) Costs and Benefits The costs imposed by the proposed changes to § 49.17(c) would fall mainly on SDRs, because the SDRs would incur costs to provide the Commission with direct electronic access to all SDR data and to provide access to SDR data as instructed. The costs associated with the use of the term ‘‘direct electronic access’’ in proposed § 49.17(c) are negligible, as the definition is being modified to allow the SDR’s more flexibility in providing the Commission with direct electronic access to SDR data, subject to the Commission’s approval. The other proposed amendments to § 49.17(c) grant the Commission greater flexibility to instruct SDRs on how to transfer SDR data to the Commission at the Commission’s request. The SDRs may experience some costs based on the need to update systems to be able to transfer SDR data to the Commission as instructed. These incremental costs would not be significant because SDRs are already required to provide scheduled data transfers to the Commission under current § 49.17(b)(3) and (c)(1) and are required to transmit all swap data requested by the Commission to the Commission in an electronic file in a format acceptable to the Commission under current § 45.13(a). It is also current market practice for SDRs to regularly provide SDR data to the Commission as instructed by Commission staff. The Commission expects that the SDRs would continue to work with Commission staff to devise the most efficient and effective ways to meet the Commission’s data needs.248 The Commission believes that the proposed amendments to § 49.17 would provide clarity and certainty to SDRs regarding their responsibilities to the Commission, by including the data access requirements in one section and by more clearly stating the Commission’s ability to instruct SDRs on all aspects of providing SDR data to the Commission. This clarity would help the SDRs work with Commission staff to devise the most efficient and effective ways for the SDRs to transfer data to the Commission, ensuring that the Commission would have the SDR data that it needs to perform its regulatory functions without undue burden on SDRs. 248 The proposed changes to § 49.17(f)(2) and (i) are non-substantive and do not have cost-benefit implications. PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 21087 The proposed changes to § 49.17(b)(3) that modify the definition of ‘‘direct electronic access’’ to allow for more technological flexibility would reduce future costs for SDRs because the amendment allows the Commission to consider any technology that may provide direct electronic access more efficiently than the current requirement. This would allow the Commission to adapt to changing technology more quickly and may allow the SDRs to save costs by having more efficient technology and processes approved in the future. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.17. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of the costs and benefits, as well as other information to support such assessments. The Commission requests comments on its consideration of alternatives to proposed § 49.17. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? x. § 49.22—Chief Compliance Officer The Commission proposes to amend § 49.22 to reduce regulatory compliance burdens on SDRs and to make a number of non-substantive organizational and conforming changes. The Commission is proposing a nonsubstantive change to define ‘‘senior officer’’ in proposed § 49.22(a). Both current § 49.22 and the CEA 249 use the term ‘‘senior officer’’ in the context of CCO requirements. Proposed § 49.22(a) also makes non-substantive organizational changes to the paragraph. Proposed § 49.22(b) removes an unnecessary reference establishing the position of CCO from § 49.22(b)(1) and adds in consultation with the board of directors or senior officer to § 49.22(b)(1)(i), along with other conforming changes to terminology. Proposed § 49.22(c) rearranges some parts of the section and simplifies the wording of current § 49.22(c) in order to clarify the requirements related to the appointment, supervision, and removal of the CCO, but makes few substantive changes to the current requirements. Proposed § 49.22(c)(3)(i) clarifies that the senior officer can also remove a CCO, in addition to the board of 249 See E:\FR\FM\13MYP3.SGM 7 U.S.C. 24a(e). 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21088 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules directors, in order to provide more flexibility to the SDRs. Proposed § 49.22(d) rearranges some parts of the section and simplifies the wording of current § 49.22(d), while also making a few substantive changes related to CCO duties. Proposed § 49.22(d)(2) changes ‘‘any conflicts of interest that may arise’’ to ‘‘any material conflicts of interest’’ to contain a more practical requirement on SDRs than having CCOs resolve every potential conflict of interest, which would also reduce burdens. The proposed changes also remove the three examples of conflicts of interest from current § 49.22(d)(2) 250 in order to not imply a limit as to the types of material conflicts of interest that may arise. The Commission notes that material conflict of interest may still arise in the three areas listed in current § 49.22(d)(2), and the CCO would have to address such material conflicts, even with the examples removed from proposed § 49.22(d). Proposed § 49.22(e) rearranges some parts of the section and simplifies the wording of current § 49.22(e), while making a few substantive changes related to the preparation of the annual compliance report. The Commission is proposing to curtail the line-by-line review of Commission regulations and the CEA requirements with SDR policies, as required by current § 49.22(e)(2), in order to streamline the SDRs’ preparation of the annual compliance report. The Commission notes, however, that proposed § 49.22(e)(1) and (e)(2) would focus on the most important and useful information in the annual compliance report based on the Commission’s experience. The Commission is also proposing to remove many of the examples of how material compliance issues can be identified from current § 49.22(e)(5) so as not to imply any limits on the material compliance matters that must be described. The Commission notes that removing the examples from current § 49.22(e)(5) in proposed § 49.22(e)(4) does not in any way limit the material compliance matters that must be described, regardless of how the matter are identified. Finally, the Commission proposes to add ‘‘in all material aspects’’ to the end of current § 49.22(e)(6) in proposed § 49.22(e)(5), in order to reduce CCOs’ concerns with certifying the annual compliance report’s accuracy. The Commission is proposing to remove the requirement in current § 49.22(f)(1) that requires the 250 See 17 CFR 49.22(d)(2)(i)–(iii). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 submission of the annual compliance report to the SDR’s board of directors or the senior officer and any subsequent discussion of the report to be recorded in the board minutes or other similar record as evidence of compliance with the submission requirement, as this requirement would be incorporated into the general recordkeeping requirement in proposed § 49.22(g). The Commission is proposing to amend § 49.22(f)(2) by increasing the amount of time that SDRs have to submit the annual compliance report to the Commission from 60 days to 90 calendar days after the end of the SDR’s fiscal year. The Commission is also proposing to remove the annual Form SDR amendment requirement in § 49.3(a)(5) and is therefore proposing to remove the reference to § 49.3(a)(5) from § 49.22(f)(2). The Commission proposes to amend § 49.22(f)(3) to include a requirement that, in the instance where an amendment to the annual compliance report must be submitted to the Commission, the CCO must also submit the amended annual compliance report to the SDR’s board of directors or the senior officer. The Commission is proposing to amend § 49.22(f)(4) to allow the Commission to more easily grant requests for an extension of time to file the annual compliance report by removing the requirement that SDRs must show ‘‘substantial, undue’’ hardship. The Commission believes this current requirement is too strict and is instead proposing to allow the Commission to grant extensions based on ‘‘reasonable and valid requests.’’ The Commission is proposing to amend § 49.22(g) to simplify the recordkeeping requirements for records related to the SDRs’ policies and records created related to the annual compliance report. The Commission is removing the specific examples of records listed in current § 49.22(g) from proposed § 49.22(g), but proposed § 49.22(g) still requires all of the same records to be maintained in accordance with proposed § 49.12. As a result, the proposed amendments to § 49.22(g) are non-substantive. (A) Costs and Benefits The proposed amendments to § 49.22(a), (b), and (g) are nonsubstantive and therefore do not have cost-benefit implications. Similarly, the conforming amendments related to the terms proposed in § 49.2, the rearranging of paragraphs within proposed § 49.22, and other changes to text that do not substantively change the PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 requirements of § 49.22 do not have cost-benefit implications. The only substantive change in proposed § 49.22(c) is the addition of the senior officer’s ability to remove the CCO. The Commission believes that adding the senior officer to this provision would benefit SDRs by allowing more flexibility in how the SDRs manage their personnel and their compliance activities. The Commission believes that any costs associated with proposed § 49.22(c) would not be significant and consist of any resources needed to update SDR policies and procedures, if the SDRs choose to enable the senior officer to remove the CCO. The Commission believes that the proposed change to the conflicts of interest provision in proposed § 49.22(d)(2) would benefit SDRs by including a more practical requirement while still requiring important conflicts of interest to be addressed. By changing the requirement from ‘‘resolving any conflicts of interest that may arise’’ to ‘‘taking reasonable steps . . . to resolve any material conflicts of interest that may arise,’’ an SDR’s CCO would not need to spend resources to address every conceivable conflict of interest and can instead concentrate resources on resolving conflicts of interest that have a material effect on an SDR’s operations. The Commission does not expect the SDRs to incur any significant costs as a result of these proposed changes. The Commission believes that the changes to the requirements for the information to be included in the annual compliance report in proposed § 49.22(e)(1) would benefit SDRs by allowing SDRs to focus on the most important and useful information in the annual compliance report, which would also reduce their burdens. The Commission believes that the proposed removal of the assessment of all applicable Commission regulations and CEA requirements with SDR policies and replacement with a more general requirement to describe and assess the SDR’s policies and procedures would save SDRs effort without detrimental effects on the Commission’s ability to perform its oversight functions. The Commission does not believe there are any incremental costs associated with this proposed amendment. The remaining changes to § 49.22(e) are not substantive and do not have cost-benefit implications. The Commission believes that the proposed amendments to § 49.22(f) would benefit SDRs by simplifying requirements or reducing the costs on SDRs to submit annual compliance reports to the Commission. By providing E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules more time to submit the annual compliance report and by reducing the burden to request a further extension in time to file an annual compliance report, the amendments to § 49.22(f)(2) and (4) would reduce the cost of complying and submitting the report for SDRs. Requirements are also simplified by removing the board or meeting minutes requirement in proposed § 49.22(f)(1), as this requirement would be incorporated into the general recordkeeping requirement in proposed § 49.22(g). The requirement to submit an amended annual compliance report to the board of directors or senior officer may slightly increase costs for SDRs, but only in the sense of the time burden required to submit the amended report. This cost is further mitigated by the fact that CCOs are already capable of submitting the annual compliance reports to their board of directors or senior officer because of existing requirements. The benefits of the proposed amendments for SDRs would result from the lower burdens related to annual compliance reports. The SDRs would have more time to complete the annual compliance reports and the Commission would be more able to grant requests for extensions of filing time, which should make complying and submitting annual compliance reports easier for SDRs. Removing the requirement to record the submission and discussions of the annual compliance reports from board of directors meeting minutes and similar documents would streamline the requirements as this requirement would be incorporated into the general recordkeeping requirement in proposed § 49.22(g). Overall, the amendments would make the submission process for annual compliance reports under § 49.22(f) easier for SDRs. jbell on DSK3GLQ082PROD with PROPOSALS3 (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.22. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of the costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.22. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 xi. § 49.25—Financial Resources The Commission proposes conforming changes to § 49.25 to remove the reference to § 49.9 and to core principle obligations identified in § 49.19. Proposed § 49.25(a) would instead refer to SDR obligations under ‘‘this chapter,’’ to be broadly interpreted as any regulatory or statutory obligation specified in part 49. The Commission considers these to be non-substantive changes that do not impact existing obligations on SDRs, and therefore have no cost-benefit implications. The Commission is also proposing to amend § 49.25(f)(3) to extend the time SDRs have to submit their quarterly financial resources reports to 40 calendar days after the end of the SDR’s first three fiscal quarters, and 90 days after the end of the SDR’s fourth fiscal quarter, or a later time that the Commission permits upon request. (A) Costs and Benefits The Commission believes that giving SDRs more time to file their quarterly financial resources reports would benefit SDRs with little impact on the Commission’s oversight of SDRs. In addition, the Commission notes that the 90 calendar day deadline for fourth quarter financial reports would align with the amended timeframe for SDRs submitting annual compliance reports in proposed § 49.22(f)(2). The Commission believes that SDRs would benefit from extended, harmonized deadlines. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.25. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of the costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.25. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? xii. § 49.26—Disclosure Requirements of Swap Data Repositories The Commission proposes to amend § 49.26 to make updates to the introductory paragraph of § 49.26 to reflect updates to the terms ‘‘SDR data,’’ ‘‘registered swap data repository,’’ and ‘‘reporting entity’’ in proposed § 49.2. The Commission also proposes to update other defined terms used in the section to conform to the proposed PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 21089 amendments to § 49.2. These nonsubstantive amendments do not change the requirements of § 49.26 and do not have cost-benefit implications. The Commission also proposes to add § 49.26(j) that would require that the SDR disclosure document set forth the SDR’s policies and procedures regarding the reporting of SDR data to the SDR, including the SDR data validation and swap data verification procedures implemented by the SDR and the SDR’s procedures for correcting SDR data errors and omissions (including the failure to report SDR data as required pursuant to the Commission’s regulations). (A) Costs and Benefits The Commission believes that costs of proposed § 49.26 would not be significant. The costs would entail the costs of adding the information required under proposed § 49.26(j) to the required SDR disclosure document and updating the document as needed. The Commission expects that the proposed addition of § 49.26(j) would benefit market participants by providing clearer information regarding data reporting to SDR users, which should improve data reporting by providing SDR users with information that would allow them to align their data reporting systems with the SDRs’ data reporting systems before using the SDRs’ services, thereby reducing reporting errors and potential confusion. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.26. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of the costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.26. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? xiii. § 49.28—Operating Hours of Swap Data Repositories The Commission is proposing to add new § 49.28 to provide more detail on the SDRs’ responsibilities with respect to hours of operation. Proposed § 49.28(a) would require an SDR to have systems in place to continuously accept, promptly record, and, as applicable pursuant to part 43, publicly disseminate all SDR data reported to the SDR. Proposed § 49.28(a)(1) would E:\FR\FM\13MYP3.SGM 13MYP3 21090 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 allow an SDR to establish normal closing hours to perform system maintenance when, in the SDRs’ reasonable estimation, the SDR typically receives the least amount of SDR data, as long as the SDR provides reasonable advance notice of its normal closing hours to market participants and the public. Proposed § 49.28(a)(2) would allow an SDR to declare, on an ad hoc basis, special closing hours to perform system maintenance that cannot wait until normal closing hours. Proposed § 49.28(a)(2) instructs SDRs to schedule special closing hours during periods when, in an SDR’s reasonable estimation, the special closing hours would, to the extent possible, be least disruptive to the SDR’s SDR data reporting responsibilities. Proposed § 49.28(a)(2) would also require the SDRs to provide reasonable advance notice of the special closing hours to market participants and the public whenever possible, and, if advance notice is not reasonably possible, to give notice to the public as soon as is reasonably possible after declaring special closing hours. Proposed § 49.28(b) would require SDRs to comply with the requirements under part 40 of the Commission’s regulations when adopting or amending normal closing hours or special closing hours.251 Proposed § 49.28(c) would require an SDR to have the capability to accept and hold in queue any and all SDR data reported to the SDR during normal closing hours and special closing hours 252 Proposed § 49.28(c)(1) would require an SDR, on reopening from normal or special closing hours, to promptly process all SDR data received during the closing hours and, pursuant to part 43, publicly disseminate swap transaction and pricing data reported to the SDR that was held in queue during the closing hours.253 Proposed § 49.28(c)(2) would require SDRs to immediately issue notice to all SEFs, 251 This requirement already applies to SDRs pursuant to current § 43.3(f)(3). See 17 CFR 43.3(f)(3). 252 Proposed § 49.28(c) would expand the similar existing requirements for swap transaction and pricing data in current § 43.3(g) to all SDR data and would largely follow the SBSDR requirements to receive and hold in queue information regarding security-based swaps. 253 Proposed § 49.28(c)(1) would expand the similar existing requirements for the SDRs to disseminate swap transaction and pricing data pursuant to current § 43.3(g)(1) to also include the prompt processing of all other SDR data received and held in queue during closing hours. The proposed requirements would also largely follow the SBSDR requirements for disseminating transaction reports after reopening following closing hours. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 DCMs, reporting counterparties, and the public in the event that an SDR is unable to receive and hold in queue any SDR data reported during normal closing hours or special closing hours. Proposed § 49.28(c)(2) would also require SDRs to issue notice to all SEFs, DCMs, reporting counterparties, and the public that the SDR has resumed normal operations immediately on reopening. Proposed § 49.28(c)(2) would then require a SEF, DCM, or reporting counterparty that was not able to report SDR data to an SDR because of the SDR’s inability to receive and hold in queue SDR data to immediately report the SDR data to the SDR.254 (A) Costs and Benefits The Commission believes that the above requirements, which are largely based on existing rule text found in current § 43.3(f) and (g), would not have significant cost implications for SDRs. The costs would be those associated with any needed modification to SDR systems to accommodate all SDR data during closing hours, as opposed to only swap transaction and pricing data. These costs would not be significant because all SDRs currently have policies, procedures, and systems in place to accommodate all SDR data during closing hours because of the current requirements. The SDRs, market participants, and the public benefit from proposed § 49.28 because the requirements for setting closing hours and handling SDR data during closing hours would be clearer. Proposed § 49.28 also removes discrepancies between current requirements for SDRs and SBSDRs related to closing hours, which would allow SDRs that are also registered as SBSDRs to comply with one requirement. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.28. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of the costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 49.28. Are there any other alternatives that may provide preferable costs or benefits than the costs and 254 Proposed § 49.28(c)(2) would expand the similar existing requirements for swap transaction and pricing data in current § 43.3(g)(2) to all SDR data and would largely follow the SBSDR requirements to receive and hold in queue information regarding security-based swaps. PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 benefits related to the proposed amendments? xiv. § 49.29—Information Relating To Swap Data Repository Compliance The Commission is proposing to add new § 49.29 to provide for information requests to SDRs regarding compliance with an SDR’s regulatory duties and core principles. Proposed § 49.29(a) would require SDRs, upon request of the Commission, to file certain information related to its business as an SDR or other such information as the Commission determines to be necessary or appropriate for the Commission to perform its regulatory duties. The SDRs would be required to provide the requested information in the form and manner and within the time specified by the Commission in its request. Proposed § 49.29(b) would require SDRs, upon the request of the Commission, to demonstrate compliance with their obligations under the CEA and Commission regulations, as specified in the request. SDRs would be required to provide the requested information in the form and manner and within the time specified by the Commission in its request. Proposed § 49.29 is based on existing Commission requirements applicable to SEFs and DCMs.255 (A) Costs and Benefits The costs associated with responding to requests for information would include the staff hours required to prepare and submit materials related to the requests. These costs would vary among SDRs depending upon the nature and frequency of Commission inquiries. The Commission expects these requests to be limited in both size and scope, which would constrain the cost burden on SDRs. While proposed § 49.29 allows the Commission to make requests on an ad hoc basis, the Commission expects that the need for these requests would decrease over time as data quality and SDR compliance with Commission regulations improves.256 The Commission acknowledges that there would be an incremental cost for each response, given the time required by the SDR to collect and/or summarize the requested information. The Commission believes that these costs would be mitigated by the fact that current practice is for SDRs to provide similar information to the Commission on 255 See, e.g., 17 CFR 37.5 and 38.5. Commission currently exercises similar authority fewer than ten times per year in total with other registered entities, such as SEFs, DCMs, and DCOs. 256 The E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 request and that the SDRs do so regularly. Information submitted to the Commission would be required to reflect and adhere to form and manner specifications established pursuant to proposed § 49.30. The Commission expects that clearly defining the form and manner for each response would mitigate the cost burden to the SDRs from any uncertainty as to the information to be provided. Benefits attributed to proposed § 49.29 would include improving the Commission’s oversight of SDRs. The Commission expects that this oversight would lead to improved data quality and SDR compliance with Commission regulations due to Commission inquiries. Better data quality should improve the Commission’s ability to fulfill its regulatory responsibilities and help to increase the Commission’s understanding of the swaps market. These improvements are expected to benefit the public through more accurate and complete SDR data reporting, improved Commission analyses and oversight of the swaps markets, and increased market integrity due to the Commission’s improved ability to detect and investigate noncompliance issues and oversee their correction. Proposed § 49.29 would also help the Commission to obtain the information it needs to perform its regulatory functions as needed, as opposed to requiring the information on a set schedule, such as with the proposed removal of the requirement for annual Form SDR updates in proposed § 49.3(a)(5). Proposed § 49.29 would allow the Commission to request the same information that would be contained in Form SDR and its exhibits when the Commission needs the information, as opposed to requiring the SDRs to update Form SDR and the exhibits annually. This would reduce the burden on SDRs from annual filings for any information that the Commission requests less frequently than annually. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.29. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits, as well as other information to support such assessments. The Commission requests comments on its consideration of alternatives to VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 proposed § 49.29. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? xv. § 49.30—Form and Manner of Reporting and Submitting Information to the Commission The Commission is proposing to add new § 49.30 to address the form and manner of information the Commission requests from SDRs. Proposed § 49.30 would establish the broad parameters of the ‘‘form and manner’’ requirements found throughout part 49 in different regulations. The ‘‘form and manner’’ requirement proposed in § 49.30 would not supplement or expand upon existing substantive provisions of part 49, but instead, would only allow the Commission to specify how existing information reported to, and maintained by, SDRs should be formatted and delivered to the Commission. Proposed § 49.30 would provide that the Commission would specify, in writing, the format, coding structure, and electronic data transmission procedures for various reports and submissions that are required to be provided to the Commission under part 49. (A) Costs and Benefits The Commission believes that the form and manner requirements would have costs associated with conforming reports and information to Commission specifications, including labor, time, and potentially technology costs for formatting reports. In practice, the incremental costs are not likely to be significant, because SDRs have extensive experience working with Commission staff to deliver data and reports in the form and manner requested by Commission staff. The Commission believes that, in practice, this experience would significantly mitigate the costs of this amendment. The Commission believes that the Commission would benefit through increased standardization of information provided by SDRs, thereby aiding the Commission in the performance of its regulatory obligations by ensuring the provided information is useable by the Commission and allowing the Commission to alter the form and manner over time, as standards and technologies change. The ability to standardize the form and manner of information provided to the Commission would also help SDRs to efficiently fulfill their obligations to provide this information to the Commission. PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 21091 (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 49.30. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of the costs and benefits, as well as other information to support such assessments. The Commission requests comments on its consideration of alternatives to proposed § 49.30. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? 5. Costs and Benefits of Proposed Amendments to Part 45 i. § 45.2—Swap Recordkeeping The Commission is proposing to move current § 45.2(f) and (g) (SDR recordkeeping and SDR records retention, respectively) to proposed new § 49.12. As such, all costs and benefits associated with this change are discussed above in section 4.viii regarding proposed new § 49.12. ii. § 45.14—Verification of Swap Data Accuracy and Correcting Errors and Omissions in Swap Data Proposed § 45.14(a) would generally require that reporting counterparties verify the accuracy and completeness of swap data for swaps for which they are the reporting counterparty. Proposed § 45.14(a)(1) would require that a reporting counterparty reconcile its internal books and records for each open swap for which it is the reporting counterparty with every open swaps report provided to the reporting counterparty by an SDR pursuant to proposed § 49.11. Proposed § 45.14(a)(1) would further require that reporting counterparties conform to the verification policies and procedures created by an SDR pursuant to § 49.11 for swap data verification. Proposed § 45.14(a)(2) would require that reporting counterparties submit either a verification of data accuracy or a notice of discrepancy in response to every open swaps report received from an SDR within the following timeframes: (i) 48 hours of the SDR providing the open swaps report if the reporting counterparty is an SD, MSP, or DCO; or (ii) 96 hours of the SDR providing the open swaps report for non-SD/MSP/DCO reporting counterparties. Proposed § 45.14(a)(3) would require that when a reporting counterparty does E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21092 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules not find any discrepancies between the swap data it reported to an SDR according to its internal books and records for the swaps included in the open swaps report and the swap data provided by the SDR in the open swaps report, the reporting counterparty would submit a verification of data accuracy to the SDR indicating that the swap data is complete and accurate, within the timeframe applicable to the reporting counterparty under proposed § 45.14(a)(2). Proposed § 45.14(a)(4) would require that when a reporting counterparty finds discrepancies between the swap data it reported to an SDR according to its internal books and records for the swap data included, or erroneously not included, in an open swaps report and the swap data provided by the SDR in the open swaps report, the reporting counterparty must submit a notice of discrepancy to the SDR in the form and manner required by the SDR’s policies and procedures created pursuant to § 49.11, within the timeframe applicable to the reporting counterparty under proposed § 45.14(a)(2). Proposed § 45.14(b)(1) would require any SEF, DCM, or reporting counterparty that by any means becomes aware of any errors or omissions in swap data previously reported to an SDR by the SEF, DCM, or reporting counterparty to submit corrected swap data to the SDR. Proposed § 45.14(b)(1) would also require any SEF, DCM, or reporting counterparty that by any means becomes aware of any swap data not reported to an SDR by the SEF, DCM, or reporting counterparty as required to submit the omitted swap data to the SDR. The error and omission correction requirements include, but are not limited to, errors or omissions present during the verification process specified in § 45.14(a). These error and omission correction requirements also apply regardless of the state of the swap. Proposed § 45.14(b)(1)(i) would require that SEFs, DCMs, and reporting counterparties correct swap data as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days after discovery of the error or omission. Proposed § 45.14(b)(1)(ii) would require that if a SEF, DCM, or reporting counterparty is unable to correct errors or omissions within three business days of discovery, the SEF, DCM, or reporting counterparty must immediately inform the Director of DMO, or such other Commission employees whom the Director of DMO may designate, in writing, of the errors or omissions and provide an initial assessment of the VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 scope of the errors or omissions and an initial remediation plan for correcting the errors or omissions. Proposed § 45.14(b)(1)(iii) would require that a SEF, DCM, or reporting counterparty conform to the SDR’s policies and procedures for corrections of errors and omissions. Proposed § 45.14(b)(2) would require a non-reporting counterparty that by any means becomes aware of any error or omission in swap data previously reported to an SDR, or the omission of swap data for a swap that was not previously reported to an SDR as required, to notify the reporting counterparty for the swap of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. Proposed § 45.14(b)(2) would also specify that a non-reporting counterparty that does not know the identity of the reporting counterparty for a swap must notify the SEF or DCM where the swap was executed of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days after the discovery. Proposed § 45.14(b)(2) would also require that if the reporting counterparty and the non-reporting counterparty agree that the swap data for a swap is incorrect or incomplete, the reporting counterparty, SEF, or DCM must correct the swap data in accordance with proposed § 45.14(b)(1). (A) Costs and Benefits The proposed changes to § 45.14 would result in administrative and compliance costs for reporting counterparties to establish technological systems to review and reconcile open swaps reports provided by SDRs. To verify open swaps, the reporting counterparties would be required to maintain records of all data elements reported pursuant to part 45. This is already a requirement under parts 23 (for SD and MSP reporting counterparties) and 45 of the Commission’s regulations and as such, the Commission does not believe maintaining such records would produce additional costs.257 The Commission is not proposing to require particular methods for reporting counterparties to complete the verification process, but based on 257 See 17 CFR 23.201 (listing the recordkeeping requirements for SDs and MSPs, including transaction records); 17 CFR 45.2 (listing recordkeeping requirements for swaps, including requiring SDs and MSPs to keep all records required to be kept pursuant to part 23). PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 discussions with market participants, the Commission anticipates that the process would be largely automated. Reporting counterparties would incur costs in creating these automated systems to receive the open swaps reports and to complete the verification process in a timely fashion, but once the verification systems are in place, the additional costs stemming from the verification process would not be significant and would be confined to maintaining and updating the verification system as needed. A few commenters to the Commission’s Roadmap suggested that commercial end-users and other nonSD/MSP/DCO reporting counterparties would incur greater costs for reporting and verifying swap data because swaps are not their primary business.258 The Commission has taken these comments into account and has proposed different requirements for non-SD/MSP/DCO reporting counterparties that would provide them with more time to complete the verification process than is permitted for SD or MSP reporting counterparties. Reporting counterparties may also incur costs in meeting the requirements of proposed § 45.14(b)(1), which is largely similar to current § 45.14(a), but with more specific requirements related to timing. Additional costs may be incurred by SEFs, DCMs, or reporting counterparties from correcting errors and omissions within three business days of discovery and from informing the Director of DMO in writing with a remediation plan, if necessary. The Commission believes that these costs would not be significant, however, because the three business day requirement merely adds a timeframe to the current ‘‘as soon as technologically practicable after discovery’’ requirement,259 and reporting counterparties already typically provide a remediation plan to the Commission for reporting errors and omissions as part of current practice, which would mitigate the costs of the proposed requirement, as many reporting counterparties will have experience with creating and providing remediation plans. SEFs, DCMs, and reporting counterparties may also incur costs from updating their error and omission reporting systems or practices in order to maintain consistency with SDR error and omission policies and procedures created pursuant to proposed § 49.10(e). 258 See, e.g., NRECA/APPA Letter at 3, 5; IECA Letter at 3. These commenters did not provide details on the additional costs. 259 See 17 CFR 45.14(a). E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Non-reporting counterparties may also incur additional costs related to the requirements in proposed § 45.14(b)(2), which are effectively the same as current § 45.14(b), except for the inclusion of the three business day time limit for informing the reporting counterparty or SEF or DCM of discovered errors or omissions and the additional requirement to inform the SEF or DCM when the non-reporting counterparty does not know the identity of the reporting counterparty. The time limit merely adds a boundary to the current ‘‘promptly’’ requirement for informing the reporting counterparty of discovered errors and omissions.260 The additional requirement to inform a SEF or DCM is intended to accommodate the non-reporting counterparties in fulfilling their role in the data correction process for swaps executed anonymously and the Commission expects that non-reporting counterparties would not incur many costs for notifying a SEF or DCM of errors and omissions beyond the cost currently incurred when notifying reporting counterparties. The Commission believes verification of swap data accuracy helps ensure that the Commission has access to the most accurate and complete swap data possible to fulfill its various regulatory responsibilities. Accurate swap data enables the Commission to monitor and surveil market activity and risks within the swaps markets, as well as provide assessments of the swaps markets to the public. Additionally, the Commission believes that complete and accurate swap data is necessary for effective risk management for swap counterparties, and the proposed verification and correction requirements would assist swap counterparties with ensuring that the data they possess is accurate and complete. The Commission believes that complete and accurate swap data would benefit market participants and the public by improving the Commission’s ability to monitor the swaps markets and maintain market integrity through market oversight, analysis, and providing information to the public. jbell on DSK3GLQ082PROD with PROPOSALS3 (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 45.14. Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. 260 See 17 CFR 45.14(b). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 The Commission requests comments on its consideration of alternatives to proposed § 45.14. Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? 6. Costs and Benefits of Proposed Amendments to Part 43 i. § 43.3—Method and Timing for RealTime Public Reporting The Commission is proposing to amend the error and omission correction requirements of current § 43.3(e) to make the requirements consistent with the error and omissions correction requirements in proposed § 45.14(b). The Commission believes these amendments would create consistency between the error and omission correction requirements for swap data and swap transaction and pricing data, which would reduce confusion surrounding the error and omissions corrections process. Proposed § 43.3(e)(1) would require any SEF, DCM, or reporting counterparty that by any means becomes aware of any errors or omissions in swap transaction and pricing data previously reported to an SDR by the SEF, DCM, or reporting counterparty to submit corrected swap transaction and pricing data to the SDR, regardless of the state of the swap. Proposed § 43.3(e)(1) would also require any SEF, DCM, or reporting counterparty that by any means becomes aware of the omission of swap transaction and pricing data previously not reported to an SDR by the SEF, DCM, or reporting counterparty as required, to submit corrected swap transaction and pricing data to the SDR regardless of the state of the swap. Proposed § 43.3(e)(1)(i) would require SEFs, DCMs, and reporting counterparties to correct swap transaction and pricing data as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the error or omission. Proposed § 43.3(e)(1)(ii) would provide that if a SEF, DCM, or reporting counterparty is unable to correct the errors or omissions within three business days following discovery of the errors or omissions, the SEF, DCM, or reporting counterparty must immediately inform the Director of DMO, or his or her designee, in writing, of such errors or omissions and provide an initial assessment of the scope of the errors or omissions and an initial PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 21093 remediation plan for correcting the errors or omissions. Proposed § 43.3(e)(1)(iii) would require that a SEF, DCM, or reporting counterparty conform to an SDR’s policies and procedures for corrections of errors and omissions in previously reported swap transaction and pricing data and reporting of omitted swap transaction and pricing data. Proposed § 43.3(e)(2) would require a non-reporting counterparty that by any means becomes aware of any error or omission in swap transaction and pricing data previously reported to an SDR, or the omission of swap transaction and pricing data for a swap that was not previously reported to an SDR as required, to notify the reporting counterparty as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. Proposed § 43.3(e)(2) would also require that a non-reporting counterparty that does not know the identity of the reporting counterparty for a swap to notify the SEF or DCM where the swap was executed of the errors and omissions as soon as technologically practicable after discovery of the errors or omissions, but no later than three business days after the discovery. Proposed § 43.3(e)(2) would also require that, if the nonreporting counterparty and the reporting counterparty, SEF, or DCM, as applicable, agree that the swap transaction and pricing data for a swap is incorrect or incomplete, the reporting counterparty, SEF, or DCM, as applicable, must correct the swap transaction and pricing data in accordance with proposed § 43.3(e)(1). The Commission is proposing to move all of the requirements of current § 43.3(f) and (g) to proposed new § 49.28. As such, all costs and benefits associated with this change are discussed above in section VII.C.4.xiii. (A) Costs and Benefits The costs and benefits for the proposed changes to § 43.3(e) are similar to the costs and benefits previously discussed for the proposed changes to § 45.14(b), as the proposed changes to each section are intended to be consistent in all respects, aside from the verification requirements. Therefore, the proposed changes to § 43.3(e) may also result in administrative and compliance costs for reporting counterparties. These costs would, however, be mitigated by the fact that the requirements of proposed § 43.3(e) are similar to the requirements of current § 43.3(e). E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21094 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Additional costs may be incurred by SEFs, DCMs, or reporting counterparties from correcting errors and omissions within three business days of discovery and from informing the Director of DMO in writing with an initial assessment and initial remediation plan if necessary under proposed § 43.3(e)(1)(i) and (ii). The Commission believes that these costs would not be significant, however, because the three-day requirement merely adds a specific timeframe to the current ‘‘promptly’’ requirement,261 and reporting counterparties typically provide a remediation plan to the Commission for reporting errors and omissions as part of current practice. SEFs, DCMs, and reporting counterparties may also incur costs from updating their error and omission reporting systems or practices in order to maintain consistency with SDR error and omission policies and procedures created pursuant to proposed § 49.10(e), as would be required under proposed § 43.3(e)(1)(iii). Non-reporting counterparties may also incur additional costs related to the requirements in proposed § 43.3(e)(2), which are similar to the requirements of current § 43.3(e)(1)(i), except for the proposed inclusion of the three business day time limit for informing the reporting counterparty, SEF, or DCM of discovered errors or omissions and the additional requirement to inform the SEF or DCM when the non-reporting counterparty does not know the identity of the reporting counterparty. The time limit merely adds a boundary to the current ‘‘promptly’’ requirement for informing the reporting counterparty of discovered errors and omissions.262 The additional requirement to inform a SEF or DCM is intended to accommodate the non-reporting counterparties in fulfilling their role in the data correction process for swaps executed anonymously and the Commission expects that non-reporting counterparties would not incur many costs for notifying a SEF or DCM of errors and omissions beyond the cost currently incurred when notifying reporting counterparties. As with the benefits described above in section 5.ii, the Commission believes consistent error and omission correction requirements for swap data and swap transaction and pricing data helps ensure that the Commission has access to the most accurate and complete swap transaction and pricing data possible to fulfill its various regulatory responsibilities. Accurate swap transaction and pricing data helps the 261 See 262 See generally 17 CFR 43.3(e). 17 CFR 43.3(e)(i). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Commission to monitor and surveil market activity and risks within the swaps markets. Accurate and complete swap transaction and pricing data is also beneficial to market participants and the public who rely on the data in their swaps-related decision-making. Additionally, the Commission believes that complete and accurate swap transaction and pricing data is necessary for effective risk management for swap counterparties, and the proposed correction requirements would assist swap counterparties with ensuring that the swap transaction and pricing data they possess is accurate and complete. SDRs and counterparties also benefit from proposed § 43.3(e) creating consistency between the error and omission correction requirements for swap data and for swap transaction and pricing data. Inconsistent requirements could lead to confusion, improper correction, and unnecessary effort for counterparties and SDRs. The consistency created by the proposed amendments to § 43.3(e) would help avoid those issues. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to § 43.3(e). Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. The Commission requests comments on its consideration of alternatives to proposed § 43.3(e). Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? 7. Costs and Benefits of Proposed Amendments to Part 23 i. §§ 23.204 and 23.205—Reports to Swap Data Repositories and Real-Time Public Reporting Proposed amendments to §§ 23.204 and 23.205 add a paragraph (c) to each section requiring SDs and MSPs to establish, maintain, and enforce written policies and procedures reasonably designed to ensure that SDs and MSPs comply with their swap reporting obligations pursuant to parts 45 and 43, respectively. The proposed amendments also require SDs and MSPs to perform annual reviews of these policies and procedures. For proposed § 23.204, the policies and procedures related to reporting under part 45 of the Commission’s regulations would need to contain PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 details related to their responsibilities to verify swap data. This would include policies and procedures related to regularly accepting open swap reports from SDRs, cross-checking with internal records to ensure the swap data is accurate and complete, and responding to the SDR, as required. SDs and MSPs are already responsible for keeping upto-date records on all swaps to which they are a counterparty under parts 23 and 45 of the Commission’s regulations.263 (A) Costs and Benefits The Commission believes that the costs associated with the proposed amendment to §§ 23.204 and 23.205 for SDs and MSPs 264 would be associated with creating and enforcing the policies and procedures, and would consist mostly of administrative efforts to draft, review, implement, and update policies and procedures. The Commission expects that SDs and MSPs that are participants of more than one SDR may incur higher associated costs than those entities that are participants of only one SDR, as the SD and MSP policies and procedures would need to contemplate the reporting requirements for each SDR.265 Even though SDs and MSPs may incur upfront costs related to the proposed amendments, the Commission believes that these financial outlays would be mitigated for two reasons. First, SDs and MSPs have experience with establishing and enforcing policies and procedures related to other Commission regulations.266 Second, the proposed amendments to §§ 23.204 and 23.205 are substantially similar to the SEC’s requirements for its security-based SDs/ MSPs.267 While not all SDs and MSPs covered by the proposed amendments would be subject to these SEC requirements, the Commission expects that there would be significant overlap. 263 See 17 CFR 23.201–23.203 (detailing the recordkeeping requirements for SDs and MSPs); 17 CFR 45.2 (containing swap recordkeeping requirements for SDs and MSPs and referencing the part 23 recordkeeping requirements). 264 There are 103 provisionally-registered SDs as of February 28, 2019, all of which are expected to be a participant on at least one of the three existing SDRs. See https://www.nfa.futures.org/NFA-swapsinformation/regulatory-info-sd-and-msp/SD-MSPregistry.HTML. 265 For additional discussion of the costs and benefits related to part 23, see generally Part 23 Adopting Release. 266 See, e.g., 17 CFR 23.501 (confirmations with counterparty); 17 CFR 23.504 (counterparty onboarding documentation); 17 CFR 23.602 (supervision policies). 267 See 17 CFR 242.906 (requiring security-based SDs and security-based MSPs to establish, maintain, and enforce policies and procedures reasonably designed to ensure compliance with reporting requirements). E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Consequently, these SDs and MSPs should be able to leverage resources and reduce duplicative costs. The Commission believes the proposed amendments would also provide important benefits. SD and MSP policies and procedures reasonably designed to ensure compliance with the reporting requirements of parts 43 and 45 would help improve compliance with the reporting rules. For example, policies and procedures designating the responsibility for reporting swap transactions should reduce confusion as to who within the organizations is responsible for reporting the required SDR data, according to the reporting procedures of the different SDRs. The Commission expects that there would also likely be fewer reporting errors (and less subsequent ad hoc work, with its associated costs, by SD/MSP staff to correct these errors) because SD/MSP employees would be able to follow the policies and procedures to perform their functions correctly. The Commission also expects that the proposed amendments would help lead to enhanced communication between reporting counterparties and SDRs. Increased communication that is focused on improving the accuracy of SDR data would help to identify areas that require special attention that might not be specifically addressed in these proposed regulations. Hence, this enhanced working relationship between market participants and SDRs may lead to improved data reporting beyond that specifically contemplated by the regulations. The Commission also believes that, because SDs and MSPs submit the large majority of the reported SDR data, the requirements for policies and procedures related to reporting would improve the overall quality of reported data. SDs and MSPs generate a considerable majority of the total number of transactions reported to SDRs and serve as the reporting counterparty for the overwhelming majority of swaps.268 A Commission analysis of SDR data indicates that from January 1, 2017 through December 31, 2017, almost all swap transactions involved at least one registered SD as a counterparty—greater than 99 percent for interest rate, credit default, foreign exchange, and equity swaps. For nonfinancial commodity swaps, approximately 86 percent of transactions involved at least one 268 Based on the requirements of § 45.8, any swap with at least one SD or MSP counterparty will have an SD or MSP serving as the reporting counterparty. See 17 CFR 45.8 (detailing the requirements for determining which counterparty must report swap data). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 registered SD as a counterparty. Overall, approximately 98 percent of transactions involved at least one registered SD.269 The Commission expects that these additional requirements for SDs and MSPs, and the attendant benefits to data quality, would have a substantial impact on the overall quality of the data reported to SDRs because of the important role these reporting counterparties perform in the swaps market. The Commission also expects that the requirement for SDs and MSPs to have policies and procedures relating to realtime reporting under part 43 would improve swap transaction and pricing information that SDRs would then provide the public. Hence, the Commission believes the proposed amendments would also improve transparency in the swaps markets and provide benefits to market participants and the public in general. (B) Request for Comment The Commission requests comment on its considerations of the costs and benefits of the proposed amendments to §§ 23.204(c) and 23.205(c). Are there additional costs and benefits that the Commission should consider? Commenters are encouraged to include both qualitative and quantitative assessments of these costs and benefits. The Commission requests comments on its consideration of alternatives to proposed §§ 23.204(c) and 23.205(c). Are there any other alternatives that may provide preferable costs or benefits than the costs and benefits related to the proposed amendments? 8. Section 15(a) Factors The Dodd-Frank Act sought to promote the financial stability of the United States, in part, by improving financial system accountability and transparency. More specifically, Title VII of the Dodd-Frank Act directs the Commission to promulgate regulations to increase swaps markets’ transparency and thereby reduce the potential for counterparty and systemic risk.270 Transaction-based reporting is a fundamental component of the legislation’s objectives to increase transparency, reduce risk, and promote market integrity within the financial system generally, and the swaps market 269 83 FR at 56674. Congressional Research Service Report for Congress, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title VII, Derivatives, by Mark Jickling and Kathleen Ann Ruane (August 30, 2010); Dep’t of the Treasury, Financial Regulatory Reform: A New Foundation: Rebuilding Financial Supervision and Regulation 1 (June 17, 2009) at 47– 48. 270 See PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 21095 in particular. The SDRs and the SEFs, DCMs, and reporting counterparties that submit data to SDRs are central to achieving the legislation’s objectives related to swap reporting. Section 15(a) of the Act requires the Commission to consider the costs and benefits of the proposed amendments to parts 23, 43, 45, and 49 with respect to the following factors: • Protection of market participants and the public; • Efficiency, competitiveness, and financial integrity of markets; • Price discovery; • Sound risk management practices; and • Other public interest considerations. A discussion of these proposed amendments in light of section 15(a) factors is set out immediately below. i. Protection of Market Participants and the Public In the Part 49 Adopting Release, the Commission noted that it believed that the registration and regulation of SDRs would serve to better protect market participants by providing the Commission and other regulators with important oversight tools to monitor, measure, and comprehend the swaps markets. Inaccurate and incomplete data reporting hinders the Commission’s ability to oversee the swaps market. The Commission believes that the adoption of all the proposed amendments to parts 23, 43, 45, and 49 would improve the quality of the data reported, increase transparency, and enhance the Commission’s ability to fulfill its regulatory responsibilities, including its market surveillance and enforcement capabilities. In addition, the Commission believes that monitoring of potential risks to financial stability would be more effective with more accurate data. More accurate data would therefore lead to improved protection of market participants and the public. ii. Efficiency, Competitiveness, and Financial Integrity of Markets The Commission believes that the adoption of the proposed amendments to parts 23, 43, 45, and 49, together with the swap data recordkeeping and reporting requirements in parts 43 and 45, would provide a robust source of information on the swaps market that is expected to promote increased efficiency and competition. The Commission believes that more accurate swap transaction and pricing data would lead to greater efficiencies for market participants executing swap transactions due to a better understanding of their overall positions E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21096 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules within the context of the broader market. This improved understanding would be facilitated by two distinct channels. First, amendments that result in improved part 43 swap transaction and pricing data being made available to the public would improve the ability of market participants to monitor real-time activity by other participants and to respond appropriately. Second, amendments that result in improved swap data would improve the Commission’s ability to monitor the swaps markets for abusive practices and improve the Commission’s ability to create policies that ensure the integrity of the swaps markets. This improvement would be facilitated by the Commission’s oversight and enforcement capabilities and the reports and studies published by the Commission’s research and information programs. In particular, the proposed amendments to §§ 23.204, 45.14, 49.2, 49.10, 49.11, 49.12, 49.13, and 49.26 would help improve the financial integrity of markets. For example, the verification and correction of swap data would improve the accuracy and completeness of swap data available to the Commission and would assist the Commission with, among other things, improving monitoring of risk exposures of individual counterparties, monitoring concentrations of risk exposure, and evaluating systemic risk. In addition, the SDRs’ requirement to perform monitoring, screening, and analyzing tasks, as proposed in the amendments to § 49.13, would support the Commission’s other regulatory functions, including market surveillance. The efficient oversight and accurate data reporting enabled by these proposed amendments would improve the financial integrity of the swaps markets. In the Part 49 Adopting Release, the Commission expected that the introduction of SDRs would further automate the reporting of swap data. The Commission expected that automation would benefit market participants and reduce transactional risks through the SDRs and other service providers offering important ancillary services, such as confirmation and matching services, valuations, pricing, reconciliation functions, position limits management, and dispute resolution. These benefits to market participants and related service providers also enhance the efficiency, competitiveness, and financial integrity of markets.271 271 See Part 49 Adopting Release at 54573. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 The proposed amendments would help to further enhance these benefits. iii. Price Discovery The CEA requires that swap transaction and pricing data be made publicly available. The CEA and its existing implementing regulations in part 43 also require swap transaction and pricing data to be available to the public in real-time. Combined, parts 23, 43, and 49 achieve the statutory objective of providing transparency and enhanced price discovery to swap markets in a timely manner. The proposed amendments to §§ 23.205, 43.3, 49.2, 49.10, 49.11, 49.12, 49.13, and 49.26 improve the fulfillment of these objectives. The proposed amendments would both directly and indirectly upgrade the quality of realtime public reporting of swap transaction and pricing data by improving the quality of information that is reported to the SDRs and disseminated to the public. As with the swap data reported for use by regulators, the Commission believes that inaccurate and incomplete swap transaction and pricing data hinders the public’s use of the data, which harms transparency and price discovery. The Commission is aware of at least three publicly available studies that support this point. The studies examined data and remarked on incomplete, inaccurate, and unreliable data. The first study analyzed the potential impact of the Dodd-Frank Act on OTC transaction costs and liquidity using real-time CDS trade data and stated that more than 5,000 reports had missing prices and more than 15,000 reports included a price of zero, leaving a usable sample of 180,149 reports.272 The second study reported a number of fields that were routinely null or missing making it difficult to analyze swap market volumes.273 The third study assessed the size of the agricultural swaps market and described problems identifying the underlying commodity as well as other errors in the reported data that made some data unusable, including, for example, swaps with a reported notional quantity roughly equal to the size of the entire U.S. soybean crop.274 Market 272 Y.C. Loon, Z. (Ken) Zhong, ‘‘Does Dodd-Frank affect OTC transaction costs and liquidity? Evidence from real-time trade reports,’’ Journal of Financial Economics (2016), available at https:// dx.doi.org/10.1016/j.jfineco.2016.01.019. 273 See Financial Stability Report, Office of Financial Research (Dec. 15, 2015) at 84–85, available at https://financialresearch.gov/financialstability-reports/files/OFR_2015-Financial-StabilityReport_12-15-2015.pdf. 274 Peterson, P.E. 2014. ‘‘How Large is the Agricultural Swaps Market?’’ Proceedings of the PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 participants would be better able to analyze swap transaction and pricing data because it is more accurate and complete due to the proposed amendments, and as a result, transparency and price discovery should improve. iv. Sound Risk Management Practices In the Part 49 Adopting Release, the Commission stated that part 49 and part 45 would greatly strengthen the risk management practices of the swaps market.275 Prior to the adoption of the Dodd-Frank Act, participants in the swaps markets operated without obligations to disclose transactions to regulators or to the public. The DoddFrank Act specifically changed the transparency of the swaps market with the adoption of CEA section 21 and the establishment of SDRs as the entities to which swap data and swap transaction and pricing data is reported and maintained for use by regulators or disseminated to the public. The Commission believes that the improved reporting of SDR data to SDRs would serve to improve risk management practices by market participants. To the extent that better swap transaction and pricing data improves the ability of market participants to gauge their risks in the context of the overall market, risk management practices should improve. Earlier and more informed discussions between relevant market participants and regulators regarding systemic risk facilitated by accurate swap data would also lead to improved risk management outcomes. Market participants should also see improvements in their risk management practices, as improved swap data allows for more accurate and timely market analyses that are publicly disseminated by the Commission. The Commission believes that the proposed amendments to parts 23, 43, 45, and 49 would improve the quality of SDR data reported to SDRs and, hence, improve the Commission’s ability to monitor the swaps market, react to potential market emergencies, and fulfill its regulatory responsibilities generally. The Commission believes that regulator access to high-quality SDR data is essential for appropriate risk management and is especially important for regulators’ ability to monitor the swaps market for systemic risk. Moreover, the Commission expects that efforts to improve data quality would increase market participants’ confidence in the SDR data and therefore their NCCC–134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management. St. Louis, MO, available at https:// www.farmdoc.illinois.edu/nccc134. 275 See Part 49 Adopting Release at 54574. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules confidence in any subsequent analyses based on the data. v. Other Public Interest Considerations The Commission believes that the increased transparency resulting from improvements to the SDR data collected by SDRs via the proposed amendments to parts 23, 43, 45, and 49 has other public interest considerations including: • Creating greater understanding for the public, market participants, and the Commission of the interaction between the swaps market, other financial markets, and the overall economy; • Improved regulatory oversight and enforcement capabilities; and • More information for regulators so that they may establish more effective public policies to reduce overall systemic risk. 9. Request for Comment The Commission requests comment on all aspects of the proposed rules. Beyond specific questions interspersed throughout this discussion, the Commission generally requests comment on all aspects of its consideration of costs and benefits, including: identification and assessment of any costs and benefits not discussed herein; the potential costs and benefits of the alternatives that the Commission discussed in this release; data and any other information to assist or otherwise inform the Commission’s ability to quantify or qualitatively describe the benefits and costs of the proposed rules; and substantiating data, statistics, and any other information to support statements by commenters with respect to the Commission’s consideration of costs and benefits. Commenters also may suggest other alternatives to the proposed approach where the commenters believe that the alternatives would be appropriate under the CEA and provide a superior cost-benefit profile. D. Anti-trust Considerations Section 15(b) of the CEA requires the Commission to take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means of achieving the objectives of the CEA, in issuing any order or adopting any Commission rule or regulation. The Commission does not anticipate that the proposed amendments to parts 23, 43, 45, and 49 would result in anticompetitive behavior. However, the Commission encourages comments from the public on any aspect of the proposal that may have the potential to be inconsistent with the anti-trust laws or anti-competitive in nature. List of Subjects 17 CFR Part 23 Swap dealers and major swap participants. Section 23.204(a) 23.204(a) 23.204(b) 23.204(b) 23.205(a) 23.205(a) 23.205(b) 23.205(b) .............................. .............................. .............................. .............................. .............................. .............................. .............................. .............................. Swaps; data recordkeeping requirements; data reporting requirements. 17 CFR Part 49 Swap data repositories; registration and regulatory requirements. For the reasons stated in the preamble, the Commodity Futures Trading Commission proposes to amend 17 CFR parts 23, 43, 45, and 49 as set forth below: PART 23—SWAP DEALERS AND MAJOR SWAP PARTICIPANTS 1. The authority citation for part 23 is revised to read as follows: ■ Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21, and 24a as amended by Pub. L. 111–203, 124 Stat. 1376 (2010) PART 23 [AMENDED] 2. In the table below, for each section indicated in the left column, remove the term indicated in the middle column from wherever it appears in the section, and add in its place the term indicated in the right column: ■ * * * * * (c) Each swap dealer and major swap participant shall establish, maintain, and enforce written policies and procedures that are reasonably designed to ensure that it complies with all obligations to report swap data to a swap data repository in accordance with part 45 of this chapter. Each such swap dealer and major swap participant shall review its policies and procedures at least annually and update the policies and procedures to reflect the 16:54 May 10, 2019 Jkt 247001 swap data. swap data. swap data. swap data. swap transaction and pricing data. public reporting. swap transaction and pricing data. swap transaction and pricing data. requirements of part 45 of this chapter as needed. ■ 4. In § 23.205, add paragraph (c) to read as follows: § 23.204 Reports to swap data repositories. jbell on DSK3GLQ082PROD with PROPOSALS3 Real-time public swap reporting. 17 CFR Part 45 Add swap transaction data ..................................................... information and data ....................................................... swap transaction data ..................................................... information and data ....................................................... information and swap transaction and pricing data ........ public recording ............................................................... swap transaction data ..................................................... information and data ....................................................... 3. In § 23.204, add paragraph (c) to read as follows: VerDate Sep<11>2014 17 CFR Part 43 Remove ■ § 23.205 Real-time public reporting. * * * * * (c) Each swap dealer and major swap participant shall establish, maintain, and enforce written policies and procedures that are reasonably designed to ensure that it complies with all obligations to report swap transaction and pricing data to a swap data repository in accordance with part 43 of this chapter. Each such swap dealer and major swap participant shall review its policies and procedures at least annually and update the policies and PO 00000 Frm 00055 21097 Fmt 4701 Sfmt 4702 procedures to reflect the requirements of part 43 of this chapter as needed. PART 43—REAL-TIME PUBLIC REPORTING 5. The authority citation for Part 43 continues to read as follows: ■ Authority: 7 U.S.C. 2(a), 12a(5), and 24a, as amended by Pub. L. 111–203, 124 Stat. 1376 (2010). 6. In § 43.3 revise paragraph (e) and remove and reserve paragraphs (f) and (g) to read as follows: ■ § 43.3 Method and timing for real-time public reporting. * * * * * (e) Correction of errors and omissions in swap transaction and pricing data. E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21098 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules (1) Any swap execution facility, designated contract market, or reporting counterparty that by any means becomes aware of any error or omission in swap transaction and pricing data previously reported to a swap data repository by the swap execution facility, designated contract market, or reporting counterparty, or of the omission of swap transaction and pricing data for a swap that was not previously reported to a swap data repository as required under this part by the swap execution facility, designated contract market, or reporting counterparty, shall, as applicable, submit corrected swap transaction and pricing data to the swap data repository that maintains the swap transaction and pricing data for the relevant swap or correctly report swap transaction and pricing data for a swap that was not previously reported to a swap data repository as required under this part, regardless of the state of the swap that is the subject of the swap transaction and pricing data. (i) The swap execution facility, designated contract market, or reporting counterparty shall submit the corrections for errors or submit the omitted swap transaction and pricing data to the swap data repository as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. (ii) If the swap execution facility, designated contract market, or reporting counterparty is unable to correct the errors or omissions within three business days following discovery of the errors or omissions, the swap execution facility, designated contract market, or reporting counterparty shall immediately inform the Director of the Division of Market Oversight, or such other employee or employees of the Commission as the Director may designate from time to time, in writing, of such errors or omissions and provide an initial assessment of the scope of the errors or omissions and an initial remediation plan for correcting the errors or omissions. (iii) In order to satisfy the requirements of this section, a swap execution facility, designated contract market, or reporting counterparty shall conform to a swap data repository’s policies and procedures created pursuant to § 49.10 of this chapter for correction of errors and omissions in previously-reported swap transaction and pricing data and reporting of omitted swap transaction and pricing data. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 (2) Any non-reporting counterparty that by any means becomes aware of any error or omission in swap transaction and pricing data previously reported to a swap data repository, or of the omission of swap transaction and pricing data for a swap that was not previously reported to a swap data repository as required under this part, for a swap to which it is the nonreporting counterparty shall notify the reporting counterparty for the swap of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. If the non-reporting counterparty does not know the identity of the reporting counterparty, the nonreporting counterparty shall notify the swap execution facility or designated contract market where the swap was executed of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. If, as applicable, the reporting counterparty and nonreporting counterparty, or the swap execution facility or designated contract market and non-reporting counterparty, agree that the swap transaction and pricing data for a swap is incorrect or incomplete, the reporting counterparty, swap execution facility, or designated contract market, as applicable, shall correct the swap transaction and pricing data in accordance with paragraph (e)(1) of this section. * * * * * PART 45—SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS 7. The authority citation for Part 45 continues to read as follows: ■ Authority: 7 U.S.C. 6r, 7, 7a-1, 7b-3, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111–203, 124 Stat. 1376 (2010), unless otherwise noted. § 45.2 [Amended]. 8. In § 45.2, remove and reserve paragraphs (f) and (g ■ 9. Revise § 45.14 to read as follows: ■ § 45.14 Verification of swap data accuracy and correcting errors and omissions in swap data. (a) Verification of swap data accuracy to a swap data repository. A reporting counterparty shall verify the accuracy and completeness of swap data for swaps for which it is the reporting counterparty in accordance with this paragraph (a). PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 (1) In order to verify the accuracy and completeness of swap data for swaps for which it is the reporting counterparty as required by this section, a reporting counterparty shall reconcile its internal books and records for each open swap for which it is the reporting counterparty with every open swaps report provided to the reporting counterparty by a swap data repository pursuant to § 49.11 of this chapter. In order to satisfy the requirements of this section, a reporting counterparty shall conform to a swap data repository’s policies and procedures created pursuant to § 49.11 of this chapter for verification of swap data. (2) For every open swaps report provided to a reporting counterparty by a swap data repository pursuant to § 49.11 of this chapter, the reporting counterparty shall submit to the swap data repository either a verification of data accuracy in accordance with paragraph (3) of this section or a notice of discrepancy in accordance with paragraph (4) of this section within: (i) 48 hours of the swap data repository providing the open swaps report to the reporting counterparty pursuant to § 49.11 of this chapter, if the reporting counterparty is a swap dealer, major swap participant, or a derivatives clearing organization; or (ii) 96 hours of the swap data repository providing the open swaps report to the reporting counterparty pursuant to § 49.11 of this chapter, if the reporting counterparty is not a swap dealer, major swap participant, or a derivatives clearing organization. (3) If a reporting counterparty finds no discrepancies between the accurate and current swap data for a swap according to the reporting counterparty’s internal books and records and the swap data for the swap contained in the open swaps report provided by the swap data repository, the reporting counterparty shall submit a verification of data accuracy indicating that the swap data is complete and accurate to the swap data repository in the form and manner required by the swap data repository’s policies and procedures created pursuant to § 49.11 of this chapter. (4) If the reporting counterparty finds any discrepancy between the accurate and current swap data for a swap according to the reporting counterparty’s internal books and records and the swap data for the swap contained in the open swaps report provided by the swap data repository, including, but not limited to, any overreporting or under-reporting of swap data for any swap, the reporting counterparty shall submit a notice of discrepancy to the swap data repository E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 in the form and manner required by the swap data repository’s policies and procedures created pursuant to § 49.11 of this chapter. (b) Correction of errors and omissions in swap data. (1) Any swap execution facility, designated contract market, or reporting counterparty that by any means becomes aware of any error or omission in swap data previously reported to a swap data repository by the swap execution facility, designated contract market, or reporting counterparty, or of the omission of swap data for a swap that was not previously reported to a swap data repository as required under this part by the swap execution facility, designated contract market, or reporting counterparty, including, but not limited to, errors or omissions present during the verification process specified in paragraph (a) of this section, shall, as applicable, submit corrected swap data to the swap data repository that maintains the swap data for the relevant swap or correctly report swap data for a swap that was not previously reported to a swap data repository as required under this part, regardless of the state of the swap that is the subject of the swap data. (i) The swap execution facility, designated contract market, or reporting counterparty shall submit the corrections for errors or submit the omitted swap data to the swap data repository as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. (ii) If the swap execution facility, designated contract market, or reporting counterparty is unable to correct the errors or omissions within three business days following discovery of the errors or omissions, the swap execution facility, designated contract market, or reporting counterparty shall immediately inform the Director of the Division of Market Oversight, or such other employee or employees of the Commission as the Director may designate from time to time, in writing, of such errors or omissions and provide an initial assessment of the scope of the errors or omissions and an initial remediation plan for correcting the errors or omissions. (iii) In order to satisfy the requirements of this section, a swap execution facility, designated contract market, or reporting counterparty shall conform to a swap data repository’s policies and procedures created pursuant to § 49.10 of this chapter for correction of errors or omissions in previously-reported swap data and reporting of omitted swap data. (2) Any non-reporting counterparty that by any means becomes aware of any error or omission in swap data previously reported to a swap data repository, or of the omission of swap data for a swap that was not previously reported to a swap data repository as required under this part, for a swap to which it is the non-reporting counterparty, shall notify the reporting counterparty for the swap of the errors or omissions as soon as technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. If the non-reporting counterparty does not know the identity of the reporting counterparty, the non-reporting counterparty shall notify the swap execution facility or designated contract market where the swap was executed of the errors or omissions as soon as Section Remove 49.3(d) ................................. 49.3(d) ................................. 49.4(c) (heading) ................. 49.16(a)(2)(i) ....................... 49.16(a)(2)(ii) ...................... 49.16(a)(2)(iii) ...................... 49.16(a)(2)(iii) ...................... 49.16(a)(2)(iii)(A) ................. 49.16(a)(2)(iii)(A) ................. 49.16(a)(2)(iii)(B) ................. 49.17(a) ............................... 49.17(a) ............................... 49.17(b)(1)(heading) ........... 49.17(b)(1) .......................... 49.17(b)(2)(heading) ........... 49.17(b)(2) .......................... 49.17(b)(2) .......................... 49.17(c)(2) ........................... 49.17(c)(2) ........................... 49.17(c)(3) ........................... 49.17(c)(3) ........................... swap transaction data § 40.1(e) Revocation of Registration for False Application. Section 8 Material Other SDR Information Intellectual person associated with the swap data repository Section 8 Material other SDR Information persons associated with the swap data repository swap data Section 8 of the Act Appropriate Domestic Regulator. The term ‘‘Appropriate Domestic Regulator’’ shall mean: Appropriate Foreign Regulator. The term ‘‘Appropriate Foreign Regulator’’ shall mean those Foreign Regulators analyzing of swap data transfer of data swap data provided authorizedusers VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00057 21099 technologically practicable following discovery of the errors or omissions, but no later than three business days following the discovery of the errors or omissions. If, as applicable, the reporting counterparty and nonreporting counterparty, or the swap execution facility or designated contract market and non-reporting counterparty, agree that the swap data for a swap is incorrect or incomplete, the reporting counterparty, swap execution facility, or designated contract market, as applicable, shall correct the swap data in accordance with paragraph (b)(1) of this section. PART 49—SWAP DATA REPOSITORIES 10. The authority citation for Part 49 is revised to read as follows: ■ Authority: 7 U.S.C. 1a, 2(a), 6r, 12a, and 24a, as amended by Title VII of the Wall Street Reform and Consumer Protection Act of 2010, Pub. L. 111–203, 124 Stat. 1376 (Jul. 21, 2010), unless otherwise noted. PART 49 [AMENDED] 11. In part 49: a. Remove the phrase to ‘‘registered swap data repository’’ and add in its place ‘‘swap data repository’’; ■ b. Remove the phrase ‘‘Registered Swap Data Repository’’ and add in its place ‘‘Swap Data Repository’’; and ■ c. Remove the phrase ‘‘registered swap data repositories’’ and add in its place ‘‘swap data repositories.’’ ■ 12. In the table below, for each section and paragraph indicated in the left column, remove the term indicated in the middle column from wherever it appears in the section or paragraph, and add in its place the term indicated in the right column: ■ ■ Add Fmt 4701 Sfmt 4702 SDR data § 40.1 Revocation of registration for false application. section 8 material other SDR information or SDR data intellectual person associated with a swap data repository section 8 material SDR information or SDR data persons associated with a swap data repository SDR data section 8 of the Act Appropriate domestic regulator. The term ‘‘appropriate domestic regulator’’ shall mean: Appropriate foreign regulator. The term ‘‘appropriate foreign regulator’’ shall mean those foreign regulators analyzing of SDR data transfer of SDR data SDR data provided authorized users E:\FR\FM\13MYP3.SGM 13MYP3 21100 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Section Remove Add 49.17(d)(1)(heading) ........... General Procedure for Gaining Access to Registered Swap Data Repository Data. Appropriate Domestic Regulator Appropriate Foreign Regulator Appropriate Domestic Regulators and Appropriate Foreign Regulators seeking applicable to Appropriate Domestic Regulators and Appropriate Foreign Regulators Foreign Regulator Foreign Regulator Foreign Regulator’s requests for data access Appropriate Domestic Regulator or Appropriate Foreign Regulator Appropriate Domestic Regulator’s or Appropriate Foreign Regulator’s Appropriate Domestic Regulator or Appropriate Foreign Regulator Appropriate Domestic Regulator’s or Appropriate Foreign Regulator’s Timing; Limitation, Suspension or Revocation of Swap Data Access. Appropriate Domestic Regulator or Appropriate Foreign Regulator Confidentiality Arrangement. Appropriate Domestic Regulator or Appropriate Foreign Regulator swap data and SDR Information swap data and SDR Information swap data or SDR Information swap data and SDR Information swap data maintained Commercial uses of data Swap data accepted swap data required The swap dealer, counterparty, or any other registered entity swap data maintained swap transaction data reporting party any reported data real-time swap data CEA section 21(c)(7) Appropriate Domestic Regulator or Appropriate Foreign Regulator Appropriate Domestic Regulator or Appropriate Foreign Regulator. Appropriate Domestic Regulator or Appropriate Foreign Regulator Appropriate Domestic Regulator’s or Appropriate Foreign Regulator’s Appropriate Domestic Regulator or Appropriate Foreign Regulator Appropriate Domestic Regulator’s or Appropriate Foreign Regulator’s paragraph Transparency of Governance Arrangements. Regulation Independent Perspective Independent Perspective Regulation swap transaction data commission all swap data in its custody dissemination of swap data normal swap data reporting, all swap data contained data and information General procedure for gaining access to swap data repository swap data. appropriate domestic regulator appropriate foreign regulator Appropriate domestic regulators and appropriate foreign regulators seeking applicable to appropriate domestic regulators and appropriate foreign regulators Foreign regulator foreign regulator foreign regulator’s requests for swap data access appropriate domestic regulator or appropriate foreign regulator appropriate domestic regulator’s or appropriate foreign regulator’s appropriate domestic regulator or appropriate foreign regulator appropriate domestic regulator’s or appropriate foreign regulator’s Timing, limitation, suspension, or revocation of swap data access. appropriate domestic regulator or appropriate foreign regulator Confidentiality arrangement. appropriate domestic regulator or appropriate foreign regulator SDR data and SDR information SDR data and SDR information SDR data or SDR information SDR data and SDR information SDR data maintained Commercial uses of SDR data SDR data accepted SDR data required The swap execution facility, designated contract market, or reporting counterparty SDR data maintained SDR data swap execution facility, designated contract market, or reporting counterparty any reported SDR data swap transaction and pricing data section 21(c)(7) of the Act appropriate domestic regulator or appropriate foreign regulator appropriate domestic regulator or appropriate foreign regulator. appropriate domestic regulator or appropriate foreign regulator appropriate domestic regulator’s or appropriate foreign regulator’s appropriate domestic regulator or appropriate foreign regulator appropriate domestic regulator’s or appropriate foreign regulator’s section Transparency of governance arrangements. section independent perspective independent perspective section SDR data Commission all SDR data in its custody dissemination of SDR data normal SDR data reporting, all SDR data contained SDR data and SDR information data and information SDR data and SDR information 49.17(d)(1)(i) ....................... 49.17(d)(1)(i) ....................... 49.17(d)(1)(ii) ...................... 49.17(d)(1)(ii) ...................... 49.17(d)(3)(heading) ........... 49.17(d)(3) .......................... 49.17(d)(3) .......................... 49.17(d)(4)(heading) ........... 49.17(d)(4)(i) ....................... 49.17(d)(4)(i) ....................... 49.17(d)(4)(iii) ...................... 49.17(d)(4)(iii) ...................... 49.17(d)(5)(heading) ........... 49.17(d)(5) .......................... 49.17(d)(6)(heading) ........... 49.17(d)(6) .......................... 49.17(e) ............................... 49.17(e)(1) .......................... 49.17(e)(2) .......................... 49.17(e)(2) .......................... 49.17(f)(1) ........................... 49.17(g) (heading) .............. 49.17(g) ............................... 49.17(g)(1) .......................... 49.17(g)(2)(A) ...................... 49.17(g)(2)(A) ...................... 49.17(g)(2)(B) ...................... 49.17(g)(2)(B) ...................... 49.17(g)(2)(B) ...................... 49.17(g)(3) .......................... 49.17(h)(3) .......................... 49.17(h)(4) .......................... 49.18(a)(heading) ................ 49.18(a) ............................... 49.18(a) ............................... 49.18(d) ............................... jbell on DSK3GLQ082PROD with PROPOSALS3 49.18(d) ............................... 49.19(a) ............................... 49.20(b)(heading) ................ 49.20(c)(1)(i) ....................... 49.20(c)(1)(i)(A)(2) .............. 49.20(c)(1)(i)(B) ................... 49.20(c)(5) ........................... 49.23(a) ............................... 49.23(e)(heading) ................ 49.24(a) ............................... 49.24(e)(3)(i) ....................... 49.24(e)(3)(ii) ...................... 49.24(f)(2) ........................... 49.24(j)(1) Definition of ‘‘Controls’’. 49.24(j)(1) Definition of ‘‘Enterprise technology risk assessment’’. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Section Add 49.24(j)(1) Definition of ‘‘Security incident’’. 49.24(k)(1) ........................... 49.24(k)(2) ........................... 49.24(l)(3) ............................ 49.24(m) .............................. 49.26(a) ............................... 49.26(c) ............................... 49.26(d) ............................... 49.26(d) ............................... integrity of data integrity of SDR data report swap data report swap data any data related to Board of Directors swap data maintained safeguarding of swap data any and all swap data reporting entity 49.26(e) ............................... 49.26(e) ............................... swap data that it receives market participant, any registered entity, or any other person; rebates; and arrangements. Regulation reporting of swap data Registered Swap Data Respositories report SDR data report SDR data any SDR data related to board of directors SDR data maintained safeguarding of SDR data any and all SDR data swap execution facility, designated contract market, or reporting counterparty SDR data that it receives swap execution facility, designated contract market, or reporting counterparty; rebates; arrangements; and section reporting of SDR data Swap Data Repositories 49.26(h) ............................... 49.26(i) ................................ 49.27(a)(2) .......................... 49.27(b) ............................... Part 49, App. B (heading) ... ■ 13. Revise § 49.2 to read as follows: § 49.2 jbell on DSK3GLQ082PROD with PROPOSALS3 Remove 21101 Definitions. (a) As used in this part: Affiliate. The term ‘‘affiliate’’ means a person that directly, or indirectly, controls, is controlled by, or is under common control with, the swap data repository. As soon as technologically practicable. The term ‘‘as soon as technologically practicable’’ means as soon as possible, taking into consideration the prevalence, implementation, and use of technology by comparable market participants. Asset class. The term ‘‘asset class’’ means a broad category of commodities including, without limitation, any ‘‘excluded commodity’’ as defined in section 1a(19) of the Act, with common characteristics underlying a swap. The asset classes include interest rate, foreign exchange, credit, equity, other commodity, and such other asset classes as may be determined by the Commission. Commercial use. The term ‘‘commercial use’’ means the use of SDR data held and maintained by a swap data repository for a profit or business purposes. A swap data repository’s use of SDR data for regulatory purposes and/or to perform its regulatory responsibilities would not be considered a commercial use regardless of whether the swap data repository charges a fee for reporting such SDR data. Control. The term ‘‘control’’ (including the terms ‘‘controlled by’’ and ‘‘under common control with’’) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 the ownership of voting securities, by contract, or otherwise. Foreign regulator. The term ‘‘foreign regulator’’ means a foreign futures authority as defined in section 1a(26) of the Act, foreign financial supervisors, foreign central banks, foreign ministries, and other foreign authorities. Independent perspective. The term ‘‘independent perspective’’ means a viewpoint that is impartial regarding competitive, commercial, or industry concerns and contemplates the effect of a decision on all constituencies involved. Market participant. The term ‘‘market participant’’ means any person participating in the swap market, including, but not limited to, designated contract markets, derivatives clearing organizations, swap execution facilities, swap dealers, major swap participants, and any other counterparty to a swap transaction. Non-affiliated third party. The term ‘‘non-affiliated third party’’ means any person except: (1) The swap data repository; (2) The swap data repository’s affiliate; or (3) A person jointly employed by a swap data repository and any entity that is not the swap data repository’s affiliate (the term ‘‘non-affiliated third party’’ includes such entity that jointly employs the person). Non-swap dealer/major swap participant/derivatives clearing organization reporting counterparty. The term ‘‘non-swap dealer/major swap participant/derivatives clearing organization reporting counterparty’’ means a reporting counterparty that is not a swap dealer, major swap participant, derivatives clearing organization, or exempt derivatives clearing organization. PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 Open swap. The term ‘‘open swap’’ means an executed swap transaction that has not reached maturity or the final contractual settlement date, and has not been exercised, closed out, or terminated. Person associated with a swap data repository. The term ‘‘person associated with a swap data repository’’ means: (1) Any partner, officer, or director of such swap data repository (or any person occupying a similar status or performing similar functions); (2) Any person directly or indirectly controlling, controlled by, or under common control with such swap data repository; or (3) Any person employed by such swap data repository, including a jointly employed person. Position. The term ‘‘position’’ means the gross and net notional amounts of open swap transactions aggregated by one or more attributes, including, but not limited to, the: (1) Underlying instrument; (2) Index, or reference entity; (3) Counterparty; (4) Asset class; (5) Long risk of the underlying instrument, index, or reference entity; and (6) Short risk of the underlying instrument, index, or reference entity. Reporting counterparty. The term ‘‘reporting counterparty’’ means the counterparty responsible for reporting SDR data to a swap data repository pursuant to parts 43, 45, or 46 of this chapter. SDR data. The term ‘‘SDR data’’ means the specific data elements and information required to be reported to a swap data repository or disseminated by a swap data repository pursuant to two or more of parts 43, 45, 46, and/or 49 E:\FR\FM\13MYP3.SGM 13MYP3 21102 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules of this chapter, as applicable in the context. SDR information. The term ‘‘SDR information’’ means any information that the swap data repository receives or maintains related to the business of the swap data repository that is not SDR data. Section 8 material. The term ‘‘section 8 material’’ means the business transactions, SDR data, or market positions of any person and trade secrets or names of customers. Swap data. The term ‘‘swap data’’ means the specific data elements and information required to be reported to a swap data repository pursuant to part 45 of this chapter or made available to the Commission pursuant to this part, as applicable. Swap transaction and pricing data. The term ‘‘swap transaction and pricing data’’ means the specific data elements and information required to be reported to a swap data repository or publicly disseminated by a swap data repository pursuant to part 43 of this chapter, as applicable. (b) Other defined terms. Terms not defined in this part have the meanings assigned to the terms in § 1.3 of this chapter. ■ 14. In § 49.3, revise paragraph (a)(5) to read as follows: § 49.3 Procedures for registration. (a) * * * (5) Amendments. If any information reported on Form SDR or in any amendment thereto is or becomes inaccurate for any reason before the application for registration has been granted under this paragraph (a), the swap data repository shall promptly file an amendment on Form SDR updating such information. * * * * * ■ 15. Revise § 49.5 to read as follows: jbell on DSK3GLQ082PROD with PROPOSALS3 § 49.5 Equity interest transfers. (a) Equity interest transfer notification. A swap data repository shall file with the Commission a notification of each transaction involving the direct or indirect transfer of ten percent or more of the equity interest in the swap data repository. The Commission may, upon receiving such notification, request that the swap data repository provide supporting documentation of the transaction. (b) Timing of notification. The equity interest transfer notice described in paragraph (a) of this section shall be filed electronically with the Secretary of the Commission at its Washington, DC headquarters at submissions@cftc.gov and the Division of Market Oversight at DMOSubmissions@cftc.gov, at the VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 earliest possible time but in no event later than the open of business ten business days following the date upon which a firm obligation is made to transfer, directly or indirectly, ten percent or more of the equity interest in the swap data repository. (c) Certification. Upon a transfer, whether directly or indirectly, of an equity interest of ten percent or more in a swap data repository, the swap data repository shall file electronically with the Secretary of the Commission at its Washington, DC headquarters at submissions@cftc.gov and the Division of Market Oversight at DMOSubmissions@cftc.gov, a certification that the swap data repository meets all of the requirements of section 21 of the Act and the Commission regulations adopted thereunder, no later than two business days following the date on which the equity interest of ten percent or more was acquired. ■ 16. Revise § 49.6 to read as follows: § 49.6 Request for transfer of registration. (a) Request for approval. A swap data repository seeking to transfer its registration from its current legal entity to a new legal entity as a result of a corporate change shall file a request for approval to transfer such registration with the Secretary of the Commission in the form and manner specified by the Commission. (b) Timing for filing a request for transfer of registration. A swap data repository shall file a request for transfer of registration as soon as practicable prior to the anticipated corporate change. (c) Required information. The request for transfer of registration shall include the following: (1) The underlying documentation that governs the corporate change; (2) A description of the corporate change, including the reason for the change and its impact on the swap data repository, including the swap data repository’s governance and operations, and its impact on the rights and obligations of market participants; (3) A discussion of the transferee’s ability to comply with the Act, including the core principles applicable to swap data repositories and the Commission’s regulations; (4) The governance documents adopted by the transferee, including a copy of any constitution; articles or certificate of incorporation, organization, formation, or association with all amendments thereto; partnership or limited liability agreements; and any existing bylaws, PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 operating agreement, or rules or instruments corresponding thereto; (5) The transferee’s rules marked to show changes from the current rules of the swap data repository; and (6) A representation by the transferee that it: (i) Will be the surviving entity and successor-in-interest to the transferor swap data repository and will retain and assume the assets and liabilities of the transferor, except if otherwise indicated in the request; (ii) Will assume responsibility for complying with all applicable provisions of the Act and the Commission’s regulations; and (iii) Will notify market participants of all changes to the transferor’s rulebook prior to the transfer, including those changes that may affect the rights and obligations of market participants, and will further notify market participants of the concurrent transfer of the registration to the transferee upon Commission approval and issuance of an order permitting the transfer. (d) Commission determination. Upon review of a request for transfer of registration, the Commission, as soon as practicable, shall issue an order either approving or denying the request for transfer of registration. ■ 17. Revise § 49.9 to read as follows: § 49.9 Open swaps reports provided to the Commission. Each swap data repository shall provide reports of open swaps to the Commission in accordance with this section. (a) Content of the open swaps report. In order to satisfy the requirements of this section, each swap data repository shall provide the Commission with open swaps reports that contain an accurate reflection of the swap data for every swap data field required to be reported for swaps pursuant to part 45 of this chapter for every open swap maintained by the swap data repository, organized by the unique identifier created pursuant to § 45.5 of this chapter associated with each open swap, as of the time the swap data repository compiles the open swaps report. (b) Transmission of the open swaps report. A swap data repository shall transmit all open swaps reports to the Commission as instructed by the Commission. Such instructions may include, but are not limited to, the method, timing, and frequency of transmission as well as the format of the swap data to be transmitted. ■ 18. In § 49.10, add paragraph (e) to read as follows: E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules § 49.10 Acceptance of data. * * * * * (e) Errors and omissions. In accordance with this paragraph (e), a swap data repository shall correct errors and omissions in SDR data previously reported to the swap data repository pursuant to parts 43, 45, and 46 of this chapter and shall correct omissions in reporting SDR data for swaps that were not previously reported to the swap data repository as required under parts 43, 45, or 46 of this chapter, regardless of the state of the swap that is the subject of the SDR data. (1) A swap data repository shall accept corrections for errors and omissions reported to the swap data repository pursuant to parts 43, 45, or 46 of this chapter. (2) A swap data repository shall correct the reported errors and omissions as soon as technologically practicable after the swap data repository receives a report of errors or omissions. (3) A swap data repository shall disseminate corrected SDR data to the public and the Commission, as applicable, in accordance with this chapter, as soon as technologically practicable after the swap data repository corrects the SDR data. (4) A swap data repository shall establish, maintain, and enforce policies and procedures designed for the swap data repository to accept corrections for errors and omissions, to correct the errors and omissions as soon as technologically practicable after the swap data repository receives a report of errors or omissions, and to disseminate such corrected SDR data to the public and to the Commission, as applicable, in accordance with this chapter. ■ 19. Revise § 49.11 to read as follows: jbell on DSK3GLQ082PROD with PROPOSALS3 § 49.11 Verification of swap data accuracy. (a) General requirement. Each swap data repository shall verify the accuracy and completeness of swap data that it receives from swap execution facilities, designated contract markets, or reporting counterparties, or third-party service providers acting on their behalf, in accordance with paragraph (b) of this section. A swap data repository shall also establish, maintain, and enforce policies and procedures reasonably designed to verify the accuracy and completeness of swap data that it receives from swap execution facilities, designated contract markets, or reporting counterparties, or third-party service providers acting on their behalf. (b) Distribution of open swaps reports. In order to verify the accuracy and completeness of swap data as required by this section, a swap data repository VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 shall, on a regular basis, distribute to each reporting counterparty an open swaps report detailing the swap data maintained by the swap data repository for all open swaps as of the time the swap data repository compiles the open swaps report for which the recipient of the open swaps report is the reporting counterparty. (1) Content of open swaps reports. In order to satisfy the requirements of this section, the swap data repository shall distribute an open swaps report that contains an accurate reflection of the swap data for every swap data field required to be reported for swaps pursuant to part 45 of this chapter, unless access to a particular data field is prohibited by other Commission regulations, for every open swap maintained by the swap data repository for which the recipient of the report is the reporting counterparty, organized by the unique identifier created pursuant to § 45.5 of this chapter associated with every open swap, as of the time the swap data repository compiles the open swaps report. (2) Frequency of open swaps reports for swap dealer, major swap participant, and derivatives clearing organization reporting counterparties. In order to satisfy the requirements of this section, the swap data repository shall distribute an open swaps report to all reporting counterparties that are swap dealers, major swap participants, or derivatives clearing organizations on a weekly basis, no later than 11:59 p.m. Eastern time on the day of the week that the swap data repository chooses to regularly distribute the open swaps reports. The swap data repository shall distribute all open swaps reports on the same day of the week. (3) Frequency of open swaps reports for non-swap dealer/major swap participant/derivatives clearing organization reporting counterparties. In order to satisfy the requirements of this section, the swap data repository shall distribute an open swaps report to all non-swap dealer/major swap participant/derivatives clearing organization reporting counterparties on a monthly basis, no later than 11:59 p.m. Eastern time on the day of the month that the swap data repository chooses to regularly distribute the open swaps report. The swap data repository shall distribute all open swaps reports on the same day of the month. (c) Receipt of verification of data accuracy or notice of discrepancy. In order to satisfy the requirements of this section, the swap data repository shall receive from each reporting counterparty for each open swaps report (i) a verification of data accuracy PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 21103 indicating that the swap data contained in an open swaps report distributed pursuant to paragraph (b) of this section is accurate and complete or (ii) a notice of discrepancy indicating that the swap data contained in an open swaps report contains one or more discrepancies, in accordance with § 45.14 of this chapter. The swap data repository shall establish, maintain, and enforce policies and procedures reasonably designed for the swap data repository to successfully receive the verification of data accuracy or notice of discrepancy. (d) Amending verification policies and procedures. A swap data repository shall comply with the requirements under part 40 of this chapter in adopting or amending the policies and procedures required by this section. ■ 20. Revise § 49.12 to read as follows: § 49.12 Swap data repository recordkeeping requirements. (a) General requirement. A swap data repository shall keep full, complete, and systematic records, together with all pertinent data and memoranda, of all activities relating to the business of the swap data repository, including, but not limited to, all SDR information and all SDR data that is reported to the swap data repository pursuant to this chapter. (b) Maintenance of records. A swap data repository shall maintain all records required to be kept by this section in accordance with this paragraph (b). (1) A swap data repository shall maintain all SDR information, including, but not limited to, all documents, policies, and procedures required by the Act and the Commission’s regulations, correspondence, memoranda, papers, books, notices, accounts, and other such records made or received by the swap data repository in the course of its business. All SDR information shall be maintained in accordance with § 1.31 of this chapter. (2) A swap data repository shall maintain all SDR data and timestamps reported to or created by the swap data repository pursuant to this chapter, and all messages related to such reporting, throughout the existence of the swap that is the subject of the SDR data and for five years following final termination of the swap, during which time the records shall be readily accessible by the swap data repository and available to the Commission via real-time electronic access, and for a period of at least ten additional years in archival storage from which such records are retrievable by the swap data repository within three business days. E:\FR\FM\13MYP3.SGM 13MYP3 21104 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules (c) Records of data errors and omissions. A swap data repository shall create and maintain records of data validation errors and SDR data reporting errors and omissions in accordance with this paragraph (c). (1) A swap data repository shall create and maintain an accurate record of all reported SDR data that fails to satisfy the swap data repository’s data validation procedures including, but not limited to, all SDR data reported to the swap data repository that fails to satisfy the data validation procedures, all data validation errors, and all related messages and timestamps. A swap data repository shall make these records available to the Commission on request. (2) A swap data repository shall create and maintain an accurate record of all SDR data errors and omissions reported to the swap data repository and all corrections disseminated by the swap data repository pursuant to parts 43, 45, and 46 of this chapter. A swap data repository shall make these records available to the Commission on request. (d) Availability of records. All records required to be kept pursuant to this part shall be open to inspection upon request by any representative of the Commission or the United States Department of Justice in accordance with the provisions of § 1.31 of this chapter. A swap data repository required to keep, create, or maintain records pursuant to this section shall provide such records in accordance with the provisions of § 1.31 of this chapter, unless otherwise provided in this part. ■ 21. Revise § 49.13 to read as follows: jbell on DSK3GLQ082PROD with PROPOSALS3 § 49.13 Monitoring, screening, and analyzing data. (a) Duty to monitor, screen, and analyze data. A swap data repository shall establish automated systems for monitoring, screening, and analyzing all relevant SDR data in its possession in the form and manner as may be directed by the Commission. A swap data repository shall routinely monitor, screen, and analyze relevant SDR data at the request of the Commission. (1) Monitoring, screening, and analyzing. Monitoring, screening, and analyzing requirements shall include utilizing relevant SDR data maintained by the swap data repository to provide information to the Commission concerning such relevant SDR data. Monitoring, screening, and analyzing requests may require the compiling and/ or calculation of requested information within discrete categories and/or over periods of time, including the comparison of information from different categories and/or over multiple VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 periods of time. Requests for monitoring, screening, and analyzing may require swap data repositories to provide information to the Commission related to: (i) The accuracy, timeliness, and quality of SDR data reported pursuant to this chapter; (ii) Updates and corrections to, and verification of the accuracy of, SDR data reported pursuant to this chapter; (iii) Currently open swaps and the consistency of SDR data related to individual swaps; (iv) The calculation of market participant swap positions, including for purposes of position limit compliance, risk assessment, and compliance with other regulatory requirements; (v) Swap counterparty exposure to other counterparties and standard market risk metrics; (vi) Swap valuations and margining activities; (vii) Audit trails for individual swaps, including post-transaction events such as allocation, novation, and compression, and all related messages; (viii) Compliance with Commission regulations; (ix) Market surveillance; (x) The use of clearing exemptions and exceptions; and/or (xi) Statistics on swaps market activity. (2) Discretion of the Commission. All monitoring, screening, and analyzing requests shall be at the discretion of the Commission. Such discretion includes, but is not limited to, the content, scope, and frequency of each required response. All information provided by a swap data repository pursuant to this section shall conform to the form and manner requirements established pursuant to § 49.30 for a particular request. (3) Timing. All monitoring, screening, and analyzing requests shall be fulfilled within the time specified by the Commission for the particular request. (b) Capacity to monitor, screen, and analyze SDR data. A swap data repository shall establish and at all times maintain sufficient information technology, staff, and other resources to fulfill the requirements in this section in the manner prescribed by the Commission. (c) Duty to notify the Commission of noncompliance. A swap data repository shall promptly notify the Commission of any swap transaction for which the swap data repository is aware that: (1) The swap transaction and pricing data was not received by the swap data repository in accordance with part 43 of this chapter; PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 (2) The swap data was not received by the swap data repository in accordance with part 45 of this chapter; or (3) Data was not received by the swap data repository in accordance with part 46 of this chapter. ■ 22. Revise § 49.15 to read as follows: § 49.15 Real-time public reporting by swap data repositories. (a) Scope. The provisions of this section apply to the real-time public reporting of swap transaction and pricing data submitted to a swap data repository pursuant to part 43 of this chapter. (b) Systems to accept and disseminate data in connection with real-time public reporting. A swap data repository shall establish such electronic systems as are necessary to accept and publicly disseminate swap transaction and pricing data submitted to the swap data repository pursuant to part 43 of this chapter in order to meet the real-time public reporting obligations of part 43 of this chapter. Any electronic system established for this purpose shall be capable of accepting and ensuring the public dissemination of all data fields required by part 43 this chapter. ■ 23. Amend § 49.16 by revising paragraphs (a)(1), (b), and (c) to read as follows: § 49.16 Privacy and confidentiality requirements of swap data repositories. (a) * * * (1) Establish, maintain, and enforce written policies and procedures reasonably designed to protect the privacy and confidentiality of any and all SDR information and all SDR data that is not swap transaction and pricing data disseminated under part 43 of this chapter. Such policies and procedures shall include, but are not limited to, policies and procedures to protect the privacy and confidentiality of any and all SDR information and all SDR data (except for swap transaction and pricing data disseminated under part 43 of this chapter) that the swap data repository shares with affiliates and non-affiliated third parties; and * * * * * (b) A swap data repository shall not, as a condition of accepting SDR data from any swap execution facility, designated contract market, or reporting counterparty, require the waiver of any privacy rights by such swap execution facility, designated contract market, or reporting counterparty. (c) Subject to section 8 of the Act, a swap data repository may disclose aggregated SDR data on a voluntary basis or as requested, in the form and manner prescribed by the Commission. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules 24. In § 49.17, revise paragraph (b)(3), the introductory text of paragraph (c), paragraphs (c)(1) and (f)(2) to read as follows and remove paragraph (i). ■ § 49.17 Access to SDR data. jbell on DSK3GLQ082PROD with PROPOSALS3 * * * * * (b) * * * (3) Direct electronic access. For the purposes of this section, the term ‘‘direct electronic access’’ shall mean an electronic system, platform, framework, or other technology that provides internet-based or other form of access to real-time SDR data that is acceptable to the Commission and also provides scheduled data transfers to Commission electronic systems. (c) Commission access. A swap data repository shall provide access to the Commission for all SDR data maintained by the swap data repository pursuant to this chapter in accordance with this paragraph (c). (1) Direct electronic access requirements. A swap data repository shall provide direct electronic access to the Commission or the Commission’s designee, including another registered entity, in order for the Commission to carry out its legal and statutory responsibilities under the Act and the Commission’s regulations thereunder. A swap data repository shall maintain all SDR data reported to the swap data repository in a format acceptable to the Commission, and shall transmit all SDR data requested by the Commission to the Commission as instructed by the Commission. Such instructions may include, but are not limited to, the method, timing, and frequency of transmission, as well as the format and scope of the SDR data to be transmitted. * * * * * (f) * * * (2) Exception. SDR data and SDR information related to a particular swap transaction that is maintained by the swap data repository may be accessed by either counterparty to that particular swap. However, the SDR data and SDR information maintained by the swap data repository that may be accessed by either counterparty to a particular swap shall not include the identity or the legal entity identifier (as such term is used in part 45 of this chapter) of the other counterparty to the swap, or the other counterparty’s clearing member for the swap, if the swap is executed anonymously on a swap execution facility or designated contract market, and cleared in accordance with §§ 1.74, 23.610, and 39.12(b)(7) of this chapter. * * * * * VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 § 49.18 [Amended] 25. Amend § 49.18 by removing paragraph (e). ■ 26. In § 49.20, revise paragraphs (b)(2)(v), (b)(2)(vii), and (c)(1)(ii)(B) to read as follows: ■ § 49.20 Governance arrangements (Core Principle 2). * * * * * (b) * * * (2) * * * (v) A description of the manner in which the board of directors, as well as any committee referenced in paragraph (b)(2)(ii) of this section, considers an independent perspective in its decisionmaking process, as § 49.2(a) defines such term; * * * * * (vii) Summaries of significant decisions impacting the public interest, the rationale for such decisions, and the process for reaching such decisions. Such significant decisions shall include decisions relating to pricing of repository services, offering of ancillary services, access to SDR data, and use of section 8 material, SDR information, and intellectual property (as referenced in § 49.16). Such summaries of significant decisions shall not require the swap data repository to disclose section 8 material or, where appropriate, information that the swap data repository received on a confidential basis from a swap execution facility, designated contract market, or reporting counterparty. * * * * * (c) * * * (1) * * * (ii) * * * (B) A description of the relationship, if any, between such members and the swap data repository or any swap execution facility, designated contract market, or reporting counterparty user thereof (or, in each case, affiliates thereof, as § 49.2(a) defines such term); and * * * * * ■ 27. In § 49.22 revise paragraph (a), (b)(1) introductory text, paragraphs (b)(1)(i), (c), (d)(2) through (6), (e), (f), and (g) to read as follows and remove paragraph (d)(7). § 49.22 Chief compliance officer. (a) Definitions. For purposes of this section, the term— Board of directors means the board of directors of a swap data repository, or for those swap data repositories whose organizational structure does not include a board of directors, a body performing a function similar to a board of directors. PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 21105 Senior officer means the chief executive officer or other equivalent officer of the swap data repository. (b) * * * (1) Chief compliance officer required. Each swap data repository shall designate an individual to serve as a chief compliance officer. (i) The position of chief compliance officer shall carry with it the authority and resources to develop, in consultation with the board of directors or senior officer, the policies and procedures of the swap data repository and enforce such policies and procedures to fulfill the duties set forth for chief compliance officers in the Act and Commission regulations. * * * * * (c) Appointment, supervision, and removal of chief compliance officer. (1) Appointment and compensation of chief compliance officer. (i) Only the board of directors or senior officer may appoint the chief compliance officer. (ii) The board of directors or senior officer shall approve the compensation of the chief compliance officer. (iii) The swap data repository shall notify the Commission within two business days of the appointment, whether interim or permanent, of a chief compliance officer. (2) Supervision of chief compliance officer. The chief compliance officer shall report directly to the board of directors or the senior officer of the swap data repository. (3) Removal of chief compliance officer. (i) Only the board of directors or the senior officer may remove the chief compliance officer. (ii) The swap data repository shall notify the Commission within two business days of the removal, whether interim or permanent, of a chief compliance officer. (4) Annual meeting with the chief compliance officer. The chief compliance officer shall meet with the board of directors or senior officer of the swap data repository at least annually. (d) * * * (2) Taking reasonable steps, in consultation with the board of directors or the senior officer of the swap data repository, to resolve any material conflicts of interest that may arise; (3) Establishing and administering written policies and procedures reasonably designed to prevent violations of the Act and the rules of the Commission; (4) Taking reasonable steps to ensure compliance with the Act and Commission regulations relating to agreements, contracts, or transactions, and with Commission regulations E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21106 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules created pursuant to section 21 of the Act; (5) Establish procedures reasonably designed to handle, respond, remediate, retest, and resolve noncompliance issues identified by the chief compliance officer through any means, including any compliance office review, look-back, internal or external audit finding, self-reported error, or validated compliant; and (6) Establishing and administering a compliance manual designed to promote compliance with the applicable laws, rules, and regulations and a written code of ethics for the swap data repository designed to prevent ethical violations and to promote honesty and ethical conduct by swap data repository personnel. (e) Preparation of annual compliance report. The chief compliance officer shall, not less than annually, prepare and sign an annual compliance report that covers the prior fiscal year. The report shall, at a minimum, contain: (1) A description and self-assessment of the effectiveness of the written policies and procedures of the swap data repository, including the code of ethics and conflict of interest policies, designed to reasonably ensure compliance with the Act and applicable Commission regulations; (2) A list of any material changes made to compliance policies and procedures during the coverage period for the report and any areas of improvement or recommended changes to the compliance program; (3) A description of the financial, managerial, and operational resources set aside for compliance with the Act and applicable Commission regulations; (4) A description of any material noncompliance matters identified and an explanation of the corresponding action taken to resolve such non-compliance matters; and (5) A certification by the chief compliance officer that, to the best of his or her knowledge and reasonable belief, and under penalty of law, the annual compliance report is accurate and complete in all material respects. (f) Submission of annual compliance report and related matters—(1) Furnishing the annual compliance report prior to submission to the Commission. Prior to submission to the Commission, the chief compliance officer shall provide the annual compliance report for review to the board of directors of the swap data repository or, in the absence of a board of directors, to the senior officer of the swap data repository. Members of the board of directors and the senior officer shall not require the chief compliance VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 officer to make any changes to the annual compliance report. (2) Submission of annual compliance report to the Commission. The annual compliance report shall be submitted electronically to the Commission not later than 90 calendar days after the end of the swap data repository’s fiscal year. The swap data repository shall concurrently file the annual compliance report with the fourth quarter financial report pursuant to § 49.25(f)(3). (3) Amendments to annual compliance report. Promptly upon discovery of any material error or omission made in a previously filed annual compliance report, the chief compliance officer shall file an amendment with the Commission to correct the material error or omission. The chief compliance officer shall submit the amended annual compliance report to the board of directors, or in the absence of a board of directors, to the senior officer of the swap data repository, pursuant to paragraph (f)(1) of this section. An amendment shall contain the certification required under paragraph (e)(5) of this section. (4) Requests for extension. A swap data repository may request an extension of time to file its annual compliance report from the Commission. Reasonable and valid requests for extensions of the filing deadline may be granted at the discretion of the Commission. (g) Recordkeeping. The swap data repository shall maintain all records demonstrating compliance with the duties of the chief compliance officer and the preparation and submission of annual compliance reports consistent with § 49.12(b)(1). ■ 28. In § 49.24, revise paragraphs (d), the introductory text of (i), and (i)(5) to read as follows: § 49.24 System safeguards. * * * * * (d) A swap data repository shall maintain a business continuity-disaster recovery plan and business continuitydisaster recovery resources, emergency procedures, and backup facilities sufficient to enable timely recovery and resumption of its operations and resumption of its ongoing fulfillment of its duties and obligations as a swap data repository following any disruption of its operations. Such duties and obligations include, without limitation, the duties set forth in §§ 49.10 to 49.18, § 49.23, and the core principles set forth in §§ 49.19 to 49.21 and 49.25 to 49.27, and maintenance of a comprehensive audit trail. The swap data repository’s business continuity-disaster recovery plan and resources generally should PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 enable resumption of the swap data repository’s operations and resumption of ongoing fulfillment of the swap data repository’s duties and obligation during the next business day following the disruption. A swap data repository shall update its business continuitydisaster recovery plan and emergency procedures at a frequency determined by an appropriate risk analysis, but at a minimum no less frequently than annually. * * * * * (i) As part of a swap data repository’s obligation to produce books and records in accordance with § 1.31 of this chapter and § 49.12, a swap data repository shall provide to the Commission the following system safeguards-related books and records, promptly upon the request of any Commission representative: * * * (5) Nothing in paragraph (i) of this section shall be interpreted as reducing or limiting in any way a swap data repository’s obligation to comply with § 1.31 of this chapter or with § 49.12. * * * * * ■ 29. In § 49.25, revise paragraphs (a)(1) and (f)(3) to read as follows: § 49.25 Financial resources. (a) * * * (1) A swap data repository shall maintain sufficient financial resources to perform its statutory and regulatory duties set forth in this chapter. * * * * * (f) * * * (3) The reports and any supporting documentation required by this section shall be filed not later than 40 calendar days after the end of the swap data repository’s first three fiscal quarters, and not later than 90 calendar days after the end of the swap data repository’s fourth fiscal quarter, or at such later time as the Commission may permit, in its discretion, upon request by the swap data repository. ■ 30. In § 49.26, ■ a. Revise the introductory text; and ■ b. Add paragraph (j). The revisions and additions read as follows: § 49.26 Disclosure requirements of swap data repositories. Before accepting any SDR data from a swap execution facility, designated contract market, or reporting counterparty; or upon a swap execution facility’s, designated contract market’s, or reporting counterparty’s request; a swap data repository shall furnish to the swap execution facility, designated contract market, or reporting counterparty a disclosure document that E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules contains the following written information, which shall reasonably enable the swap execution facility, designated contract market, or reporting counterparty to identify and evaluate accurately the risks and costs associated with using the services of the swap data repository: * * * * * (j) The swap data repository’s policies and procedures regarding the reporting of SDR data to the swap data repository, including the swap data repository’s SDR data validation procedures, swap data verification procedures, and procedures for correcting SDR data errors and omissions. ■ 31. Add § 49.28 to read as follows: jbell on DSK3GLQ082PROD with PROPOSALS3 § 49.28 Operating hours of swap data repositories. (a) Except as otherwise provided in this paragraph (a), a swap data repository shall have systems in place to continuously accept and promptly record all SDR data reported to the swap data repository as required in this chapter and, as applicable, publicly disseminate all swap transaction and pricing data reported to the swap data repository as required in part 43 of this chapter. (1) A swap data repository may establish normal closing hours to perform system maintenance during periods when, in the reasonable estimation of the swap data repository, the swap data repository typically receives the least amount of SDR data. A swap data repository shall provide reasonable advance notice of its normal closing hours to market participants and to the public. (2) A swap data repository may declare, on an ad hoc basis, special closing hours to perform system maintenance that cannot wait until normal closing hours. A swap data repository shall schedule special closing hours during periods when, in the reasonable estimation of the swap data repository in the context of the circumstances prompting the special closing hours, the special closing hours will be the least disruptive to the swap data repository’s SDR data reporting responsibilities. A swap data repository shall provide reasonable advance notice of its special closing hours to market participants and to the public whenever possible, and, if advance notice is not reasonably possible, shall provide notice of its special closing hours to market participants and to the public as soon as reasonably possible after declaring special closing hours. (b) A swap data repository shall comply with the requirements under part 40 of this chapter in adopting or VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 amending normal closing hours and special closing hours. (c) During normal closing hours and special closing hours, a swap data repository shall have the capability to accept and hold in queue any and all SDR data reported to the swap data repository during the normal closing hours or special closing hours. (1) Upon reopening after normal closing hours or special closing hours, a swap data repository shall promptly process all SDR data received during normal closing hours or special closing hours, as required pursuant to this chapter, and, pursuant to part 43 of this chapter, publicly disseminate all swap transaction and pricing data reported to the swap data repository that was held in queue during the normal closing hours or special closing hours. (2) If at any time during normal closing hours or special closing hours a swap data repository is unable to receive and hold in queue any SDR data reported pursuant to this chapter, then the swap data repository shall immediately issue notice to all swap execution facilities, designated contract markets, reporting counterparties, and the public that it is unable to receive and hold in queue SDR data. Immediately upon reopening, the swap data repository shall issue notice to all swap execution facilities, designated contract markets, reporting counterparties, and the public that it has resumed normal operations. Any swap execution facility, designated contract market, or reporting counterparty that was obligated to report SDR data pursuant to this chapter to the swap data repository, but could not do so because of the swap data repository’s inability to receive and hold in queue SDR data, shall report the SDR data to the swap data repository immediately after receiving such notice. ■ 32. Add § 49.29 to read as follows: § 49.29 Information relating to swap data repository compliance. (a) Requests for information. Upon the Commission’s request, a swap data repository shall file with the Commission information related to its business as a swap data repository and such information as the Commission determines to be necessary or appropriate for the Commission to perform the duties of the Commission under the Act and regulations thereunder. The swap data repository shall file the information requested in the form and manner and within the time period the Commission specifies in the request. (b) Demonstration of compliance. Upon the Commission’s request, a swap PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 21107 data repository shall file with the Commission a written demonstration, containing supporting data, information, and documents, that it is in compliance with its obligations under the Act and the Commission’s regulations thereunder, as the Commission specifies in the request. The swap data repository shall file the written demonstration in the form and manner and within the time period the Commission specifies in the request. ■ 33. Add § 49.30 to read as follows: § 49.30 Form and manner of reporting and submitting information to the Commission. Unless otherwise instructed by the Commission, a swap data repository shall submit SDR data reports and any other information required under this part to the Commission, within the time specified, using the format, coding structure, and electronic data transmission procedures approved in writing by the Commission. ■ 34. Add § 49.31 to read as follows: § 49.31 Delegation of authority to the Director of the Division of Market Oversight relating to certain part 49 matters. (a) The Commission hereby delegates, until such time as the Commission orders otherwise, the following functions to the Director of the Division of Market Oversight and to such members of the Commission staff acting under his or her direction as he or she may designate from time to time: (1) All functions reserved to the Commission in § 49.5. (2) All functions reserved to the Commission in § 49.9. (3) All functions reserved to the Commission in § 49.10. (4) All functions reserved to the Commission in § 49.12. (5) All functions reserved to the Commission in § 49.13. (6) All functions reserved to the Commission in § 49.16. (7) All functions reserved to the Commission in § 49.17. (8) All functions reserved to the Commission in § 49.18. (9) All functions reserved to the Commission in § 49.22. (10) All functions reserved to the Commission in § 49.23. (11) All functions reserved to the Commission in § 49.24. (12) All functions reserved to the Commission in § 49.25. (13) All functions reserved to the Commission in § 49.29. (14) All functions reserved to the Commission in § 49.30. (b) The Director of the Division of Market Oversight may submit to the Commission for its consideration any E:\FR\FM\13MYP3.SGM 13MYP3 21108 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules matter that has been delegated under paragraph (a) of this section. (c) Nothing in this section may prohibit the Commission, at its election, from exercising the authority delegated in this section. ■ 35. Revise Appendix A to Part 49 to read as follows: Appendix A to Part 49—Form SDR COMMODITY FUTURES TRADING COMMISSION FORM SDR SWAP DATA REPOSITORY APPLICATION OR AMENDMENT TO APPLICATION FOR REGISTRATION REGISTRATION INSTRUCTIONS Intentional misstatements or omissions of material fact may constitute federal criminal violations (7 U.S.C. 13 and 18 U.S.C. 1001) or grounds for disqualification from registration. DEFINITIONS Unless the context requires otherwise, all terms used in this Form SDR have the same meaning as in the Commodity Exchange Act, as amended (‘‘Act’’), and in the General Rules and Regulations of the Commodity Futures Trading Commission (‘‘Commission’’) thereunder (17 CFR chapter I). For the purposes of this Form SDR, the term ‘‘Applicant’’ shall include any applicant for registration as a swap data repository or any applicant amending a pending application. jbell on DSK3GLQ082PROD with PROPOSALS3 GENERAL INSTRUCTIONS 1. This Form SDR, which includes instructions, a Cover Sheet, and required Exhibits (together ‘‘Form SDR’’), is to be filed with the Commission by all Applicants, pursuant to section 21 of the Act and the Commission’s regulations thereunder. Upon the filing of an application for registration in accordance with the instructions provided herein, the Commission will publish notice of the filing and afford interested persons an opportunity to submit written comments concerning such application. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 No application for registration shall be effective unless the Commission, by order, grants such registration. 2. Individuals’ names, except the executing signature, shall be given in full (Last Name, First Name, Middle Name). 3. Signatures on all copies of the Form SDR filed with the Commission can be executed electronically. If this Form SDR is filed by a corporation, it shall be signed in the name of the corporation by a principal officer duly authorized; if filed by a limited liability company, it shall be signed in the name of the limited liability company by a manager or member duly authorized to sign on the limited liability company’s behalf; if filed by a partnership, it shall be signed in the name of the partnership by a general partner duly authorized; if filed by an unincorporated organization or association that is not a partnership, it shall be signed in the name of such organization or association by the managing agent, i.e., a duly authorized person who directs manages or who participates in the directing or managing of its affairs. 4. If this Form SDR is being filed as an application for registration, all applicable items must be answered in full. If any item is inapplicable, indicate by ‘‘none,’’ ‘‘not applicable,’’ or ‘‘N/A,’’ as appropriate. 5. Under section 21 of the Act and the Commission’s regulations thereunder, the Commission is authorized to solicit the information required to be supplied by this Form SDR from any Applicant seeking registration as a swap data repository. Disclosure by the Applicant of the information specified in this Form SDR is mandatory prior to the start of the processing of an application for registration as a swap data repository. The information provided in this Form SDR will be used for the principal purpose of determining whether the Commission should grant or deny registration to an Applicant. The Commission may determine that additional information is required from an Applicant in order to process its PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 application. A Form SDR that is not prepared and executed in compliance with applicable requirements and instructions may be returned as not acceptable for filing. Acceptance of this Form SDR, however, shall not constitute a finding that the Form SDR has been filed as required or that the information submitted is true, current, or complete. 6. Except in cases where confidential treatment is requested by the Applicant and granted by the Commission pursuant to the Freedom of Information Act and Commission Regulation § 145.9, information supplied on this Form SDR will be included in the public files of the Commission and will be available for inspection by any interested person. The Applicant must identify with particularity the information in these exhibits that will be subject to a request for confidential treatment and supporting documentation for such request pursuant to Commission Regulations § 40.8 and § 145.9. APPLICATION AMENDMENTS 1. An Applicant amending a pending application for registration as a swap data repository shall file an amended Form SDR electronically with the Secretary of the Commission in the manner specified by the Commission. 2. When filing this Form SDR for purposes of amending a pending application, an Applicant must re-file the entire Cover Sheet, amended if necessary, include an executing signature, and attach thereto revised Exhibits or other materials marked to show any amendments. The submission of an amendment to a pending application represents that all unamended items and Exhibits remain true, current, and complete as previously filed. WHERE TO FILE This Form SDR shall be filed electronically with the Secretary of the Commission in the manner specified by the Commission. BILLING CODE 6351–01–P E:\FR\FM\13MYP3.SGM 13MYP3 21109 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules COMMODITY FUTURES TRADING COMMISSION FORMSDR SWAP DATA REPOSITORY APPLICATION OR AMENDMENT TO APPLICATION FOR REGISTRATION COVER SHEET Exact name of Applicant as specified in charter Address of principal executive offices D If this is an APPLICATION for registration, complete in full and check here. D If this is an AMENDMENT to a pending application, complete in full, list all items that are amended and check here. GENERAL INFORMATION 1. Name under which business is or will be conducted, if different than name specified above: 2. If name of business is being amended, state previous business name: 3. Contact information, including mailing address if different than address specified above: Number and Street City State Fax E-mail Address Website URL VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Zip Code PO 00000 Frm 00067 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.002</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 Main Phone Number Country 21110 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules 4. List of principal office(s) and address(es) where swap data repositories activities are or will be conducted: Address 5. If the Applicant is a successor to a previously registered swap data repository, please complete the following: a. Date of succession b. Full name and address of predecessor registrant Name Number and Street City State Phone Number 6. Country Fax Number Zip Code E-mail Address Furnish a description of the function(s) that the Applicant performs or proposes to perform: Please indicate which asset class(es) the Applicant intends to serve: D D D D D D Interest Rate Equity Credit Foreign Currency Commodity (Specify) _ _ _ _ _ _ _ __ Other (Specify) _ _ _ _ _ _ _ _ _ __ BUSINESS ORGANIZATION Applicant is a: D D D VerDate Sep<11>2014 16:54 May 10, 2019 Corporation Partnership Limited Liability Company Jkt 247001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.003</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 7. 21111 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules D 8. Other (Specify) _ _ _ _ _ _ _ _ _ __ Date of incorporation or formation: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ State of incorporation or jurisdiction of organization: _ _ _ _ _ _ _ _ _ _ _ _ __ List all other jurisdictions in which Applicant is qualified to do business (including non-US jurisdictions): 9. 10. List all other regulatory licenses or registrations of Applicant (or exemptions from any licensing requirement) including with non-US regulators: 11. Date of fiscal year end: _ _ _ _ _ _ _ _ _ _ __ 12. Applicant agrees and consents that the notice of any proceeding before the Commission in connection with its application may be given by sending such notice by certified mail to the person named below at the address given. Print Name and Title Number and Street City State Phone Number Fax Number Zip Code E-mail Address SIGNATURES 13. The Applicant had duly caused this application or amendment to be signed on its behalf by the , 20 undersigned, hereunto duly authorized, this day of The Applicant and the undersigned represent hereby that all information contained herein is true, current, and complete. It is understood that all required items and Exhibits are considered integral parts of this Form SDR and that the submission of any amendment represents that all unamended items and Exhibits remain true, current, and complete as previously filed. Name of Applicant Print Name and Title of Signatory VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00069 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.004</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 Signature of Duly Authorized Person 21112 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules EXHIBITS INSTRUCTIONS The following Exhibits must be included as part ofF orm SDR and filed with the Commission by each Applicant seeking registration as a swap data repository pursuant to section 21 of the Act and the Commission's regulations thereunder. Such Exhibits must be labeled according to the items specified in this Form SDR. If any Exhibit is inapplicable, please specify the Exhibit letter and indicate by "none," "not applicable," or "N/A," as appropriate. The Applicant must identify with particularity the information in these Exhibits that will be subject to a request for confidential treatment and supporting documentation for such request pursuant to Commission Regulations § 40.8 and§ 145.9. If the Applicant is a newly formed enterprise and does not have the financial statements required pursuant to Items 27 and 28 of this form, the Applicant should provide pro fomw financial statements for the most recent six months or since inception, whichever is less. EXHIBITS I- BUSINESS ORGANIZATION 14. Attach as Exhibit A, any person who owns ten (10) percent or more of Applicant's equity or possesses voting power of any class, either directly or indirectly, through agreement or otherwise, in any other manner, may control or direct the management or policies of Applicant. "Control" for this purpose is defined in Commission Regulation§ 49.2(a). State in Exhibit A the full name and address of each such person and attach a copy of the agreement or, if there is none written, describe the agreement or basis upon which such person exercises or may exercise such control or direction. 15. Attach as Exhibit B, a narrative that sets forth the fitness standards for the board of directors and its composition including the number or percentage of public directors. Attach a list of the present officers, directors (including an identification of the public directors), governors (and, in the case of an Applicant not a corporation, the members of all standing committees grouped by committee), or persons performing functions similar to any of the foregoing, of the swap data repository or of the entity identified in Item 16 that performs the swap data repository activities of the Applicant, indicating for each a. Name b. Title c. Date of commencement and, if appropriate, terruination of present term of position d. Length of time each present officer, director, or governor has held the same position e. Brief account of the business experience of each officer and director over the last five (5) years f. Any other business affiliations in the securities industry or OTC derivatives industry g. A description of: (1) any order of the Commission with respect to such person pursuant to section 5e of the Act; (2) any conviction or injunction within the past 10 years; (3) any disciplinary action with respect to such person within the last five (5) years; (4) any disqualification lmder sections 8b and 8d of the Act; (5) any disciplinary action under section 8c of the Act; and (6) any violation pmsuant to section 9 of the Act. h. VerDate Sep<11>2014 Attach as Exhibit C, the following information about the chief compliance officer who has been appointed by the board of directors of the swap data repository or a person or group performing a function similar to such board of directors: a. Name b. Title 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.005</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 16. For directors, list any committees on which they serve and any compensation received by virtue of their directorship. Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules 21113 c. Dates of commencement and termination of present term of office or position d. T,ength of time the chief compliance officer has held the same office or position e. Brief account of the business experience of the chief compliance officer over the last five (5) years f. Any other business affiliations in the derivatives/securities industry or swap data repository industry g. A description of: (1) any order of the Commission with respect to such person pursuant to section 5e of the Act; (2) any conviction or injunction within the past 10 years; (3) any disciplinary action with respect to such person within the last five (5) years; (4) any disqualification under sections 8b, and 8d of the Act; (5) any disciplinary action under section 8c of the Act; and VerDate Sep<11>2014 17. Attach as Exhibit D, a copy of documents relating to the governance arrangements of the Applicant, including, but not limited to: a. the nomination and selection process of the members on the Applicant's board of directors, a person or group performing a function similar to a board of directors (collectively, "board"), or any committee that has the authority to act on behalf of the board, the responsibilities of each of the board and such committee, and the composition of each board and such committee; b. a description of the mmmer in which the composition of the board allows the Applicant comply with applicable core principles, regulations, as well as the mles of the Applicant; and c. a description of the procedures to remove a member of the board of directors, where the conduct of such member is likely to be prejudicial to the sound and pmdent management of the swap data repository. 18. Attach as Exhibit E, a narrative or graphic description of the organizational stmcture of the Applicant. Note: If the swap data repository activities are conducted primarily by a division, subdivision, or other segregable entity within the Applicant's corporation or organization, describe the relationship of such entity within the overall organizational stmcture and attach as Exhibit E only such description as applies to the segregable entity. Additionally, provide any relevant jurisdictional information, including any and all jurisdictions in which the Applicant or any affiliated entity is doing business and registration status, including pending application (e.g., cmmtry, regulator, registration category, date of registration). In addition, include a description of the lines of responsibility and accountability for each operational unit of the Applicant to (i) any committee thereof and/or (ii) the board. 19. Attach as Exhibit F, a copy of the conflicts of interest policies and procedures implemented by the Applicant to minimize conflicts of interest in the decision-making process of the swap data repository and to establish a process for the resolution of any such conflicts of interest. 20. Attach as Exhibit G, a list of all affiliates of the swap data repository and indicate the general nature of the affiliation Provide a copy of any agreements entered into or to be entered by the swap data repository, including partnerships or joint ventures, or its participants, that will enable the Applicant to comply with the registration requirements and core principles specified in section 21 of the Act. With regard to an affiliate that is a parent company of the Applicant, if such parent controls the Applicant, an Applicant must provide (i) the board composition of the parent, including public directors, and (ii) all ownership information requested in Exhibit A for the parent. "Control" for this purpose is defined in Commission Regulation§ 49.2(a). 21. Attach as Exhibit H, a copy of the constitution, articles of incorporation or association with all amendments thereto, and existing hy-laws, mles or instmments corresponding thereto, of the Applicant. A certificate of good standing dated within one week of the date of the application shall be provided. 22. Where the Applicant is a foreign entity seeking registration or filing an amendment to an existing registration, attach as Exhibit I, an opinion of counsel that the swap data repository, as a matter of law, 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00071 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.006</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 (6) any violation pursuant to section 9 of the Act. 21114 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules is able to provide the Commission with prompt access to the books and records of such swap data repository and that the swap data repository can submit to onsite inspection and examination by the Commission. 23. Where the Applicant is a foreign entity seeking registration, attach as Exhibit I-1, a form that designates and authorizes an agent in the United States, other than a Commission official, to accept any notice or service of process, pleadings, or other documents in any action or proceedings brought against the swap data repository to enforce the Act and the regulations thereunder. 24. Attach as Exhibit J, a current copy of the Applicant's rules as defined in Commission Regulation§ 40.1, consisting of all the rules necessary to carry out the duties as a swap data repository. 25. Attach as Exhibit K, a description of the Applicant's internal disciplinary and enforcement protocols, tools, and procedures. Include the procedures for dispute resolution. 26. Attach as Exhibit L, a brief description of any material pending legal proceeding(s), other than ordinary and routine litigation incidental to the business, to which the Applicant or any of its affiliates is a party or to which any of its or their property is the subject. Include the name of the court or agency in which the proceeding(s) are pending, the date(s) instituted, and the principal parties thereto, a description of the factual basis alleged to underlie the proceeding(s) and the relief sought. Include similar information as to any such proceeding(s) known to be contemplated by the governmental agenc1es. EXHIBITS II- FINANCIAL INFORMATION 27. Attach as Exhibit M, a balance sheet, statement of income and expenses, statement of sources and application of revenues and all notes or schedules thereto, as of the most recent fiscal year of the Applicant. If a balance sheet and statements certified by an independent public accountant are available, such balance sheet and statement shall be submitted as Exhibit M. 28. Attach as Exhibit N, a balance sheet and an income and expense statement for each affiliate of the swap data repository that also engages in swap data repository activities as of the end of the most recent fiscal year of each such affiliate. 29. Attach as Exhibit 0, the following: a. A complete list of all dues, fees, and other charges imposed, or to be imposed, by or on behalf of Applicant for its swap data repository services and identify the service or services provided for each such due, fee, or other charge. b. Furnish a description of the basis and methods used in determining the level and structure of the dues, fees, and other charges listed in paragraph a of this item. c. If the Applicant differentiates, or proposes to differentiate, among its customers, or classes of customers in the amount of any dues, fees, or other charges imposed for the same or similar services, so state and indicate the amount of each differential. In addition, identify and describe any differences in the cost of providing such services, and any other factors, that account for such differentiations. EXHIBITS III- OPERATIONAL CAPABILITY VerDate Sep<11>2014 Attach as Exhibit P, copies of all material contracts with any swap execution facility, designated contract market, clearing agency, central counterparty, or third party service provider. To the extent that form contracts are used by the Applicant, submit a sample of each type of form contract used. In addition, include a list of swap execution facilities, designated contract markets, clearing agencies, central counterparties, and third party service providers with whom the Applicant has entered into material contracts. Where swap data repository functions are performed by a third-party, attach any agreements between or among the Applicant and such third party, and identify the services that will be provided. 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.007</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 30. 31. Attach as Exhibit Q, any technical manuals, other guides or instructions for users of, or participants in, the market. 32. Attach as Exhibit R, a description of system test procedures, test conducted or test results that will enable the Applicant to comply, or demonstrate the Applicant's ability to comply, with the core principles for swap data repositories. 3 3. Attach as Exhibit S, a description in narrative form or by the inclusion of functional specifications, of each service or function performed as a swap data repository. Include in ExhibitS a description of all procedures utilized for the collection, processing, distribution, publication and retention (e.g., magnetic tape) of information with respect to transactions or positions in, or the terms and conditions of, swaps entered into by market participants. 34. Attach as Exhibit T, a list of all computer hardware utilized by the Applicant to perform swap data repository functions, indicating where such equipment (terminals and other access devices) is physically located. 3 5. Attach as Exhibit U, a description of the personnel qualifications for each category of professional employees employed by the swap data repository or the division, subdivision, or other segregable entity within the swap data repository as described in Item 16. 36. Attach as Exhibit V, a description of the measures or procedures implemented by Applicant to provide for the security of any system employed to perform the ftmctions of a swap data repository. Include a general description of any physical and operational safeguards designed to prevent unauthorized access (whether by input or retrieval) to the system. Describe any circumstances within the past year in which the described security measures or safeguards failed to prevent any such unauthorized access to the system and any measures taken to prevent a reoccurrence. Describe any measures used to verify the accuracy of information received or disseminated by the system. 37. Attach as Exhibit W, copies of emergency policies and procedures and Applicant's business continuity-disaster recovery plan. Include a general description of any business continuity-disaster recovery resources, emergency procedures, and backup facilities sufficient to enable timely recovery and resumption of its operations and resumption of its ongoing fulfillment of its duties and obligations as a swap data repository following any disruption of its operations. 38. Where swap data repository functions are performed by automated facilities or systems, attach as Exhibit X, a description of all backup systems or subsystems that are designed to prevent interruptions in the performance of any swap data repository function as a result of technical malfunctions or otherwise in the system itself, in any permitted input or output system connection, or as a result of any independent source. Include a narrative description of each type of interruption that has lasted for more than two minutes and has occurred within the six (6) months preceding the date of the filing, including the date of each interruption, the cause and duration. Also state the total number of interruptions that have lasted two minutes or less. 39. Attach as Exhibit Y, the following: a. For each of the swap data repository functions: b. VerDate Sep<11>2014 (1) quantify in appropriate units of measure the limits on the swap data repository's capacity to receive (or collect), process, store or display (or disseminate for display or other use) the data elements included within each function (e.g., number of inquiries from remote terminals); (2) identify the factors (mechanical, electronic or other) that account for the current limitations reported in answer to (1) on the swap data repository's capacity to receive (or collect), process, store or display (or disseminate for display or other use) the data elements included within each function; 21115 If the Applicant is able to employ, or presently employs, the central processing units of its system(s) for any use other than for performing the functions of a swap data repository, state the 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.008</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules 21116 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules priorities of assignment of capacity between such functions and such other uses, and state the methods used or able to be used to divert capacity between such functions and such other uses. EXHIBITS IV- ACCESS TO SERVICES 40. Attach as Exhibit Z, the following: a. As to each swap data repository service that the Applicant provides, state the number of persons who presently utilize, or who have notified the Applicant of their intention to utilize, the services of the swap data repository. b. For each instance during the past year in which any person has been prohibited or limited in respect of access to services offered by the Applicant as a swap data repository, indicate the name of each such person and the reason for the prohibition or limitation. c. Define the data elements for purposes of the swap data repository's real-time public reporting obligation. Appendix A to Part 43 of the Commission's Regulations (Data Elements and Form for Real-Time Reporting for Particular Markets and Contracts) sets forth the specific data elements for real-time public reporting. 41. Attach as Exhibit AA, copies of any agreements governing the terms by which information may be shared by the swap data repository, including with market participants. To the extent that form contracts are used by the Applicant, submit a sample of each type of form contract used. 42. Attach as Exhibit BB, a description of any specifications, qualifications or other criteria that limit, are interpreted to limit, or have the effect of limiting access to or use of any swap data repository services furnished by the Applicant and state the reasons for imposing such specifications, qualifications, or other criteria, including whether such specifications, qualifications, or other criteria are imposed. 43. Attach as Exhibit CC, any specifications, qualifications, or other criteria required of participants who utilize the services of the Applicant for collection, processing, preparing for distribution, or public dissemination by the Applicant. 44. Attach as Exhibit DD, any specifications, qualifications, or other criteria required of any person, including, but not limited to, regulators, market participants, market infrastructures, venues from which data could be submitted to the Applicant, and third party service providers who request access to data maintained by the Applicant. 45. Attach as Exhibit EE, policies and procedures implemented by the Applicant to review any prohibition or limitation of any person with respect to access to services offered or data maintained by the Applicant and to grant such person access to such services or data if such person has been discriminated against unfairly. 46. Attach as Exhibit FF, a narrative and supporting documents that may be provided under other Exhibits herein, that describe the manner in which the Applicant is able to comply with each core principle and other requirements pursuant to Commission Regulation§ 49.19. 47. Attach as Exhibit GG, policies and procedures implemented by the Applicant to protect the privacy of any and all swap information that the swap data repository receives from reporting entities. 48. Attach as Exhibit HH, a description of safeguards, policies, and procedures implemented by the Applicant to prevent the misappropriation or misuse of (a) any confidential information received by the Applicant, including, but not limited to "section 8 material" and "SDR information," as those terms are defined in Commission Regulation§ 49.2, about a market participant or any of its customers; and/or (c) intellectual property by Applicant or any person associated with the Applicant for their personal benefit or the benefit of others. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4725 E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.009</GPH> jbell on DSK3GLQ082PROD with PROPOSALS3 EXHIBITS- OTHER POLICIES AND PROCEDURES Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules Completion of these and the other changes proposed by the Roadmap will result in more complete, more accurate, and higher-quality data available to the CFTC and to the public; streamline data reporting; and help the CFTC perform its regulatory responsibilities. The time has come to revisit this important postcrisis reform and ensure the CFTC is fulfilling its commitments. Issued in Washington, DC, on April 25, 2019, by the Commission. Robert Sidman, Deputy Secretary of the Commission. Note: The following appendices will not appear in the Code of Federal Regulations. Appendices to Proposed Amendments to the Commission’s Regulations Relating to Certain Swap Data Repository and Data Reporting Requirements Appendix 1—Commission Voting Summary On this matter, Chairman Giancarlo and Commissioners Quintenz and Berkovitz voted in the affirmative. Commissioners Behnam and Stump voted to concur. No Commissioner voted in the negative. jbell on DSK3GLQ082PROD with PROPOSALS3 Appendix 2—Statement of Chairman J. Christopher Giancarlo A critical component of the 2008 financial crisis was the inability of regulators to assess and quantify the counterparty credit risk of large banks and swaps dealers. To address this shortcoming, the Dodd-Frank Act gave the CFTC broad responsibility to enhance regulatory transparency and price discovery for market participants through trade reporting to swap data repositories (SDRs). In 2011 and 2012, the CFTC adopted rules for swap data reporting, recordkeeping and SDRs. Unfortunately, these initial rules lacked technological detail and specification. Under my direction in 2017, CFTC staff began the process of assessing the effectiveness of the swap reporting rules in Parts 43, 45, and 49 of the CFTC’s regulations. The 2017 Roadmap to Achieve High Quality Swaps Data (Roadmap) outlined a series of steps to improve data reporting requirements. The CFTC received a wide range of feedback on the Roadmap, via written comments and discussions with SDRs and market participants. I am pleased to see the first part of the Roadmap, the proposed changes to Part 49, issued today. These proposed changes update the requirements for SDRs and swap counterparties to verify the accuracy and completeness of swap data reported to SDRs. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Appendix 3—Statement of Concrrence of Commissioner Rostin Behnam I respectfully concur with the Commodity Futures Trading Commission’s (the ‘‘Commission’’ or ‘‘CFTC’’) approval of its proposed rule regarding amendments to the Commission’s Regulations Relating to Certain Swap Data Repository and Swap Data Reporting Requirements (the ‘‘Proposal’’). In 2011, the Commission adopted part 49 of the Commission’s Regulations 1 to implement the requirements of section 21 of the Commodity Exchange Act (the ‘‘Act’’ or ‘‘CEA’’).2 Section 21 describes the registration regime for and operation of swap data repositories (‘‘SDRs’’) by setting out applicable registration rules, data standards, duties, core principles, and requirements regarding confidentiality and chief compliance officers as envisioned by Congress in the Dodd-Frank Act to implement the key trade reporting provisions laid out at the 2009 G20 Pittsburgh Summit.3 Similarly, part 49 builds out a regulatory framework aimed at ensuring the legal and operational stability and soundness of SDRs in support of post-trade transparency in the swaps market. The Proposal aims to improve upon the quality, accuracy, and completeness of swap data reported to the Commission via SDRs and generally follows a plan laid out in the Commission’s 2017 Roadmap to Achieve High Quality Swap Data.4 This Proposal purports to be the first step in following that Roadmap. While true, I prefer 1 Swap Data Repositories: Registration Standards, Duties and Core Principles, 76 FR 54538 (Sept. 1, 2011). 2 7 U.S.C. 24a. 3 Id. 4 Roadmap to Achieve High Quality Swap Data, available at https://www.cftc.gov/idc/groups/public/ @newsroom/documents/file/dmo_ swapdataplan071017.pdf. PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 to view this as a part of the Commission’s ongoing duties to regularly review its Regulations to increase efficiencies and avoid unintended consequences, and to be certain that our SDR rules further the goals of increasing transparency and identifying risk. As I have stated several times during my tenure as a Commissioner, as we engage in strategic regulatory decisions, our policy goals from 2010 remain unchanged. As we endeavor to provide surgical flexibility and a more principles-based approach, I will continue to oppose any roll backs of DoddFrank initiatives.5 While I do not believe that today’s Proposal would be considered a rollback per se, I would like to call attention to a section of the Proposal where we deviate from the language of section 21 regarding the role of the chief compliance officer (‘‘CCO’’) at an SDR. Section 21(e)(2)(C) affirmatively requires an SDR’s CCO, in consultation with the board of directors or similar body, to ‘‘resolve any conflicts of interest that may arise.’’ The Commission’s current part 49 rules mirror the language of the CEA exactly. Regulation 49.22(d)(2) affirmatively requires an SDR’s CCO to ‘‘resolve any conflicts of interest that may arise,’’ using precisely the same language as the Act. However, today’s Proposal would amend 49.22(d)(2) in a way that deviates from the plain language of the statute. While the statute requires that CCOs actually resolve any conflicts of interest, today’s Proposal would simply require a CCO to take ‘‘reasonable steps’’ to resolve any conflict of interest. In addition, the Proposal would only apply to ‘‘material’’ conflicts of interest. Neither this new reasonableness standard nor this new materiality standard appear in the language of the statute. My concern is that adding these new standards may deviate from Congressional intent. This potentially dilutes the CCO’s obligation to address conflicts of interest, but perhaps more importantly, it dilutes the CCO’s ability to do 5 Rostin Behnam, Commissioner, U.S. Comm. Fut. Trading Comm’n, Remarks of Rostin Behnam before FIA/SIFMA Asset Management Group, Asset Management Derivatives Forum 2018, Dana Point, California (Feb. 8, 2018), https://www.cftc.gov/ PressRoom/SpeechesTestimony/opabehnam2. E:\FR\FM\13MYP3.SGM 13MYP3 EP13MY19.010</GPH> BILLING CODE 6351–01–C 21117 21118 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules so. Under the language of the Act and the current Regulation, a CCO can point to their statutory obligation in working to resolve conflicts of interest. Imposing a new reasonableness standard may have the real world impact of making it more difficult for a CCO to actually resolve conflicts of interest. I note that the same statutory language appears elsewhere in the Act regarding CCO resolution of conflicts of interest at other types of Commission registrants, and the Commission has issued a final rule implementing the same new reasonableness and materiality standards regarding CCOs of futures commission merchants, swap dealers and major swap participants.6 The Commission also has recently proposed adding these new standards for CCOs of swap execution facilities.7 However, in contrast, this week the Commission is issuing amendments to the Part 39 regulations for Derivatives Clearing Organizations (‘‘DCO’’) (the ‘‘Part 39 Proposal’’). Current regulation 39.10(c)(2)(ii) requires a DCO’s CCO to resolve conflicts of interest. Regulation 39.10(c)(2)(ii) exactly follows the language of Section 5b(i)(2)(C). While the Part 39 Proposal makes amendments to 39.10, the Commission does not alter the CCO’s current duty to resolve conflicts of interest. In other words, for DCOs the Commission is choosing to maintain the statutory language. I believe that this may be the more appropriate approach for CCOs generally. The Commission has, of late, begun a practice of re-interpreting statutory provisions with a somewhat flippant regard for their underlying purpose and rationales in order to lessen the burdens that are rarely substantiated by anything more than a call for change. While it is not out of the ordinary for an independent agency to reexamine whether its regulatory approach remains fit for purpose, I believe that we should be mindful that our role is not to bend too easily to unsupported claims of burden or complexity. This is particularly true when the re-interpretation seems to be at odds with the express language of the statute itself. I look forward to reading the comments on this CCO issue. I am particularly interested to learn whether various stakeholders believe that the statute itself is diluted by the addition of the reasonableness and materiality standards to CCO obligations in this and other rulemakings. jbell on DSK3GLQ082PROD with PROPOSALS3 Appendix 4—Statement of Concurrence of Commissioner Dawn D. Stump The Commission is publishing for public comment ‘‘Proposed Amendments to the Commission’s Regulations Relating to Certain Swap Data Repository and Swap Data Reporting Requirements’’ (Proposal). Accurate swap data reporting is vital to our ability to make appropriate policy choices. I very much look forward to receiving feedback from all parties impacted by this Proposal to assure that the Commission has 6 Chief Compliance Officer Duties and Annual Report Requirements for Futures Commission Merchants, Swap Dealers, and Major Swap Participants, 83 FR 43510 (Aug. 27, 2018). 7 Swap Execution Facilities and Trade Execution Requirement, 83 FR 61946 (Nov. 30, 2018). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 robust and accurate data, which is a lynchpin of future Commission decision-making. However, a Latin proverb reads: Qui tacet consentire videtur, ubi loqui debuit ac potuit (he who is silent, when he ought to have spoken and was able to, is taken to agree). While I share the Commission’s desire for accurate swap data, I do not agree with all the policy and procedural choices in this Proposal. I question certain of the underlying assumptions driving these policy changes, and the promulgation of this rulemaking in isolation and without corresponding changes to other swap data reporting rules. I am uncomfortable with the lack of details and nebulous description of certain obligations in many parts of the Proposal, which I believe will make it difficult for the public to comment in an informed fashion. And I disagree with imposing immense additional burdens on swap data repositories (SDRs) and all types of reporting counterparties (RCPs), particularly without commensurate streamlining of regulatory obligations in the rest of the Commission’s swap data reporting rule set. Because I share the Commission’s ultimate goal of accurate swaps data, I support the Proposal going out for comment, with the caveat that the other aspects of the swaps data ‘‘Roadmap’’ 1 are published in quick succession. I look forward to feedback from all interested parties as to how that goal can best be achieved in light of my concerns about the Proposal discussed below and other options that may be at the Commission’s disposal to enhance data accuracy while appropriately balancing costs and benefits. I. Verification: Solution in Search of a Problem? This Proposal is predicated upon a view that new verification procedures are needed because the swap data currently being reported to SDRs is substantially wrong and inaccurate. Yet, the Commission has recently proffered positive reviews of the role of SDR data in enhancing its understanding of swaps markets, citing the ‘‘more complete information now available regarding certain portions of the swap market, [and] the data analytical capabilities developed since the [swap dealer] regulations were adopted’’ 2 as supporting its policy decision making. Specifically, the Commission cited analysis based upon a year of SDR data sourced from data reported to the registered SDRs in its recent rulemaking concerning the de minimis exception to the swap dealer definition relating to insured depository institutions 1 See Roadmap to Achieve High Quality Swaps Data (DMO July 10, 2017), available at https:// www.cftc.gov/sites/default/files/idc/groups/public/ @newsroom/documents/file/dmo_ swapdataplan071017.pdf, published with CFTC Letter 17–33, Division of Market Oversight Announces Review of Swap Reporting Rules in Parts 43, 45, and 49 of Commission Regulations (DMO July 10, 2017), available at https:// www.cftc.gov/sites/default/files/idc/groups/public/ @lrlettergeneral/documents/letter/17-33.pdf. 2 De Minimis Exception to the Swap Dealer Definition—Swaps Entered Into by Insured Depository Institutions in Connection With Loans to Customers, 81 FR 12450, 12452 (April 1, 2019) (IDI De Minimis Rulemaking). PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 (IDIs).3 Given that the Commission has not voiced concern about widespread discrepancies or inaccuracies in swaps data reported to SDRs in relying upon that data in our rulemakings, I am not convinced that it is necessary to add new layers of complexity to swaps data reporting and create new burdens on market participants via the steps outlined in the Proposal. Taken in isolation, asking RCPs to verify the accuracy of data reported to SDRs is appealing. But how does the Commission know that a substantial portion of that data is actually incorrect? The Proposal attempts to depict a data accuracy problem by referencing that it is not uncommon for discrepancies to be found in SDR data. However, from the universe of reported swap data that contains millions of swap transactions and exponentially more messages sent to SDRs over the course of the last five years, the Proposal mentions only two examples of errors: ‘‘In the processing of swap data to generate the CFTC’s Weekly Swaps Report, for example, there are instances when the notional amount differs between the Commission’s open swaps information and the swap data reported for the same swap. Other common examples of discrepancies include incorrect references to an underlying currency, such as a notional value incorrectly linked to U.S. dollars instead of Japanese Yen.’’ 4 I would expect a much more extensive and egregious list of systemic, recurring errors in reported swaps data to warrant the expansive new obligations contained in the Proposal. The Proposal strains to quantify the number of inaccuracies in reported SDR data by opining that, ‘‘[b]ased on swap data available to the Commission and discussions with the SDRs, the Commission estimates that an SDR would perform an average of approximately 2,652,000 data corrections per year.’’ 5 The Proposal does not explain exactly how this figure was derived, identify the interaction between SDRs and RCPs referenced in its corrections estimate, indicate whether the ‘‘correction’’ refers to incomplete or inaccurate data,6 or provide critical context as to the percentage of messages that this number represents. Indeed, it is impossible to know for certain that an RCP was intending to correct erroneously reported data based on the data schema utilized by SDRs to address changes in swaps data—which include actions such as ‘‘snapshot,’’ ‘‘amendment,’’ and 3 Id. at 12454 and n.59 (‘‘The Commission believes that end-users would primarily benefit from the IDI De Minimis Provision by entering into [interest rate swaps, or ‘IRS’], [foreign exchange, or ‘FX’] swaps, and [non-financial commodity, or ‘NFC’] swaps with IDIs to hedge loan-related risks. SDR data indicates that IDIs that have between $1 billion and $50 billion in [aggregate gross notional amount, or ‘AGNA’] of swaps activity primarily enter into IRS, FX swaps, and NFC swaps, as measured by AGNA and transaction count. 4 Proposal, text accompanying n.239. 5 Id., at section VII.B.3.v. 6 Incomplete data is not the same things as inaccurate data. Thus, ‘‘corrections’’ of incomplete data would not be relevant to the verification with respect to inaccurate data that is the subject of this Proposal. E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules ‘‘modify,’’ 7 but may not actually include a category of ‘‘correction’’ messages. While the Proposal posits the annual number of corrections across all SDRs to be about 8 million ‘‘corrections’’ (3 provisionally registered SDRs * 2,652,000 annual data corrections per SDR), it lacks the total number of data submissions that are received by the SDRs. The Paperwork Reduction Act portion of the Proposal does provide one potentially related data point, as it includes an estimate of 462,981,508 total annual responses across all SDRs for the relevant information collection.8 Without the benefit of further clarity, the corrections could apply to the entire universe of the collections associated with the Proposal. If the figures are roughly rounded for the sake of simplicity, and it is stipulated for the sake of argument that all the corrections cited by the Proposal reveal data inaccuracies, then does this suggest that only approximately 2% (400 million responses/8 million corrections) of all messages might be inaccurate? In my opinion, the burdens that this Proposal would impose on SDRs and RCPs (including commercial end users) may be difficult to justify if the problem the Commission is attempting to rectify may equate to 2% of all messages delivered to SDRs. I share the view that has been stated by some of my colleagues recently that the Commission should strive to make datadriven policy determinations and should avoid relying on assumptions or anecdotes when engaged in rulemaking activity.9 Yet, the same is true when it comes to imposing costs and burdens on market participants that are already heavily encumbered by a broad swath of regulatory obligations that continue to shift and expand. Our recent rulemakings have referenced data driven policy making, learning from experience with Dodd-Frank implementation, and demonstrating supporting evidence for regulatory change, but the verification provisions of this Proposal deviate from that approach. The Commission should delay this rulemaking until the other aspects of the Roadmap critical to improving swaps data reporting and lessening unnecessary regulatory burdens were ready to be proposed. But, short of that, I welcome public comment and data evaluating the breadth and depth of inaccuracies in SDR data.10 Such information would help to determine how much reported SDR data is actually incorrect before the Commission requires SDRs and RCPs to build additional systems and undertake significant new compliance burdens and obligations to address an accuracy problem that, at this point, has not been proved. I look forward to comments and data that demonstrate the actual need for the proposed changes. 7 DTCC SDR templates, for instance, include the following message and action types. The modify action type allows for the valid modification or correction to an existing trade that has previously been reported by the submitting party. However, firms could reflect a correction using other methods. The snapshot message allows participants to report the current state of the swap in their portfolio as a ‘‘point-in-time’’ view of the position. The reported position should reflect all post-trade events and non-position forming amendments that the submitter may wish to reflect on their trade record. The amendment transaction type could be utilized as an indication of a confirmable amendment, via a negotiated agreement, to a previously confirmed and reported trade. As a result, it would be difficult to conclude with any certainty the actual number of corrections without a critical review of contrasting terms related to a particular trade on each type of action, message, or transaction type submission. 8 Proposal at section VII.B.3.xi. 9 See, e.g., IDI De Minimis Rulemaking at 12467 (Statement of Chairman J. Christopher Giancarlo) (‘‘As I have said many times before, I believe that CFTC policy is best when it is driven by data and not assumptions.’’). 10 The cost-benefit consideration in the Proposal loosely references and mischaracterizes information contained in three public studies that allude to challenges in SDR data. Unfortunately, these studies are from 2015 or earlier and are based upon data from the initial roll-out of SDR reporting. These studies address incomplete rather than inaccurate data and do not belong in this Proposal that focuses on verification of data. See fn. 6, supra. The Roadmap explained that validations should be utilized to reject swap data reports with missing data fields, and these issues would be better served by a holistic implementation of the Roadmap and do not require the onerous verification aspects of the Proposal. Furthermore, some of these identified issues also would be resolved by the technical specification detailed in the Roadmap and, again, if proposed in unison, would provide RCPs with clear definition, form and manner, and allowable values. The reference to the third study also fails to mention that the two soybean swaps referred to were removed from a universe of 39,622 agricultural swaps. 11 Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983). 12 7 U.S.C. 19(a). 13 See APA, 7 U.S.C. 706(2)(A). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 II. Insufficient Level of Detail for Appropriate Public Comment and CostBenefit Consideration The Administrative Procedure Act (APA) requires that, in issuing its rules, the Commission ‘‘examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choices made.’’ 11 Section 15(a) of the Commodity Exchange Act (CEA) further requires that in doing so, the Commission must consider the costs and benefits of its proposed action.12 A notice of proposed rulemaking affords the Commission the opportunity to gather information and build a record that will provide the reasons for the conclusions that it ultimately draws when final rules are issued. If the Commission fails to properly exercise this responsibility, we risk having our rules set aside as arbitrary and capricious agency action.13 While I support the purposes and intent underlying the Proposal, I am concerned that some of the proposed rules are too vague to enable the public to provide the Commission with information necessary to adopt a sound final rule set. For RCPs, the Proposal informs them of their general obligations, but leaves a tremendous amount of the details to future action by the Commission (often delegated to staff) and the SDRs to dictate the operational work flows that RCPs will have to adhere to in order to comply with the Commission’s rules. RCPs reading the proposed rules still would not know what changes are being proposed in what they have to report, when PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 21119 they must report by, and how they are to deliver that information to SDRs. The proposed rules are often amorphous, lacking specificity as to the actual processes and procedures to be imposed, with RCPs left to comment without really knowing what much of this would actually require of them in the future. The same is true for SDRs. For example, proposed § 49.9 covering open swaps reports to be provided to the Commission is quite opaque, and provides no detail as to any potential future instructions from the Commission that ‘‘may include, but are not limited to, the method, timing, and frequency of transmission as well as the format of the swap data to be transmitted.’’ Similarly, proposed § 49.17(c)(1) would require an SDR to transmit all swap data requested by the Commission, but provides that the SDR will receive instructions that may include, but are not limited to, the method, timing, and frequency of transmission, and the format and scope of the SDR data to be transmitted, at a later time. How can RCPs and SDRs prepare for, budget, build, test, and implement systems to comply with these requirements without ample information ahead of time as to what these requirements entail? Indeed, it is not clear to me how RCPs and SDRs can even meaningfully comment on either the merits or the costs and benefits of the proposed rules when these critical elements of the requirements are left for future determination. But the proposed rule that troubles me most in this regard is proposed § 49.13, which addresses an SDR’s duty to monitor, screen, and analyze data upon the request of the Commission. The Proposal explains that in its original consideration of current Regulation 49.13,14 the Commission received comments that the rule does not sufficiently describe the specific tasks that SDRs are expected to perform. The Commission decided to later establish specific monitoring, screening, and analyzing duties when its knowledge was more fully developed, and that is where we find ourselves presently. Yet, despite the Commission’s experience with swaps data over the last five plus years, this Proposal still fails to delineate specific duties that would enable an SDR to provide appropriate budget, technological development, and staff resources to assure an ability to comply with the demands that may be made upon it. Proposed § 49.13(a)(1) requires SDRs to be prepared to comply with Commission requests for monitoring, screening, and analyzing of data. Several of the tasks alluded to in the proposal rule could impose significant, albeit wholly undefined, obligations on SDRs. For example, proposed § 49.13(a)(1)(iv) contemplates assessments of risk, which is not particularly an SDR function and which can be a very complicated exercise that is defined and calculated differently by different market participants. Proposed § 49.13(a)(1)(viii) would appear to render SDRs an arm of the Commission’s enforcement program, as it would require them to provide information 14 17 E:\FR\FM\13MYP3.SGM CFR 49.13. 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21120 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules about compliance with Commission regulations without clarifying how SDRs could do so, and despite the fact that SDRs are not self-regulatory organizations. Proposed § 49.13(b), in turn, requires SDRs to ‘‘establish and at all times maintain sufficient information technology, staff, and other resources to fulfill’’ these Commission requests. Yet, proposed § 49.13(a)(2) provides that the content, scope, and frequency of all monitoring, screening, and analyzing requests shall be at the discretion of the Commission (to be exercised by staff pursuant to delegated authority); further, in addition to the 11 types of potential Commission requests identified in the proposal, SDRs also would have to be prepared to comply with other, unspecified, types of requests for monitoring, screening, and analyzing as well. How can an SDR be expected to efficiently allocate capital and meet the standards of proposed § 49.13(b) with respect to information technology, staff, and ‘‘other’’ (undefined) resources when it does not know what the actual requirements will be, when it will be expected to deliver, at what frequency, and the exact form and manner of the deliverable? Finally, proposed § 49.30 would mandate that ‘‘a swap data repository shall submit SDR data reports and any other information required under this part to the Commission, within the time specified, using the format, coding structure, and electronic data transmission procedures approved in writing by the Commission.’’ I cannot begin to fathom the uncomfortable (and unenviable) position of an SDR under rules whereby the Commission can ask for almost anything under proposed § 49.13, and then demand its submission whenever and however it wishes under proposed § 49.30. The Proposal states, somewhat incredibly, that it ‘‘expects specifying these topic areas [in proposed § 49.13] would not impose substantial new fixed costs on SDRs. . .’’ 15 It is wishful thinking to claim that the extensive list of undefined, open-ended tasks hypothesized in proposed § 49.13(a)(1) that SDRs must prepare to build and deliver will not represent a meaningful burden. Although it is not clear how SDRs could quantify the costs of compliance with such vague obligations, it is likely that the costs incurred by SDRs will be significant—and that their clients, including commercial end-users, ultimately will pay the price. I appreciate that it is not possible to foresee all future circumstances when proposing a rulemaking, and I recognize the need for flexibility in aspects of the Commission’s day-to-day administration of the Dodd-Frank swap regulatory regime. Nevertheless, I am concerned that the Proposal fails to inform the public as to the full nature of the responsibilities that the Commission intends to impose upon RCPs and SDRs so that they can provide appropriate comment and feedback to drive the best final rule outcome possible. I wonder how the Commission can produce a complete cost-benefit consideration without specifying the actual scope and technical details of the requirements it is proposing to impose, particularly with respect to requests to SDRs to be made via proposed § 49.13. In sum, I fear that in proposing several rules where critical elements are left for future specification (often by staff), the Commission will not receive informed and meaningful public comments (including comments on costs and benefits) that are necessary to provide the foundation on which our rules ultimately must rest. III. Suboptimal Policy Choices Certain elements of the Proposal rest on questionable policy choices that I wish to highlight in order to garner public input as part of the comment process. First, the Proposal would remove a longstanding market practice of trusted sources when it comes to verification of data accuracy without demonstrating why such a change is necessary, or appropriate. The Proposal states: ‘‘The Commission provided an exception to the requirement that SDRs ‘confirm with both counterparties to the swap the accuracy of the data that was submitted’ in § 49.11(b)(1)(ii) for swap creation data and § 49.11(b)(2)(ii) for swap continuation data when swap data is received from a [swap execution facility, or ‘SEF’], [designated contract market, or ‘DCM’], derivatives clearing organization (‘DCO’), or from a third-party service provider acting on behalf of the swap counterparty, under certain conditions.’’ 16 The Proposal’s departure from this policy means that SDRs would no longer be able to rely on an exception from the requirement to affirmatively confirm with both counterparties where (1) the SDR forms a reasonable belief that the data is accurate, (2) the reporting identifies that both counterparties agreed to the data submitted, and (3) the SDR provides both counterparties with a 48-hour correction window. The Proposal argues, without citing any evidence, that, ‘‘based on the Commission’s experience with swap data submitted by SEFs, DCMs, DCOs, and third-party service providers since the rule was adopted, the Commission believes that such swap data has not been consistently complete and accurate in some instances, and the swap data accuracy is not sufficient to justify the exception to the requirement that SDRs confirm the reported swap data’s accuracy with swap counterparties. The current requirements have had a negative effect on swap data accuracy and consistency, which has hampered the Commission’s ability to carry out its regulatory responsibilities.’’ 17 I do not believe that trading venues, which value execution certainty and must deliver accurate trade details to clients, or clearing organizations, which must have verified trade details available for risk management purposes, would report systematically or consistently inaccurate swaps data to SDRs, given their level of technological expertise and concern for reputational risk. At a minimum, I would not eliminate the existing exception absent evidence establishing that this is the case. Second, the Proposal would mandate in proposed §§ 43.3(e) and 45.14(b) that 16 Id., 15 Proposal at section II.I. VerDate Sep<11>2014 16:54 May 10, 2019 17 Id., Jkt 247001 PO 00000 text accompanying n.70. text immediately following n.73. Frm 00078 Fmt 4701 Sfmt 4702 corrections of errors and omissions be performed by SEFs, DCMs, and RCPs ‘‘regardless of the state of the swap that is the subject of the swap data.’’ The Proposal defines an ‘‘open swap’’ as ‘‘an executed swap transaction that has not reached maturity or the final contractual settlement date, and has not been exercised, closed out, or terminated.’’ Thus, the Proposal is requiring additional reporting for ‘‘dead’’ swaps without demonstrating a relevant usecase to warrant such a requirement. It is more difficult for RCPs to correct dead/expired swaps that are no longer on their books and records. SDRs also face additional challenges and complexity in modifying swaps that are no longer what the Proposal defines as an ‘‘open swap.’’ The Proposal does not identify a Commission or public use-case that justifies the increased burden and challenge associated with correcting data on dead/expired swaps. The financial crisis that precipitated Dodd-Frank was not caused by, nor could it have been prevented by, regulatory oversight of dead swaps, but rather was the result of active risk. Again, absent an identified justification with evidentiary support, I do not support imposing additional regulatory burdens that force market participants to shift resources from the management of active risks to the reporting of dead swaps. Third, I would prefer a more sensible approach to the duration of the recordkeeping requirements for SDRs. Proposed § 49.12(b)(2) would require SDR records—including SDR data, timestamps, and messages—to be readily accessible following final termination of the swap for five years, and then for a period of ten additional years in archival storage, which, of course, has an associated cost. Unless the Commission can clearly articulate the usecase and regulatory purpose that would justify requiring archival storage up to 15 years after the expiration of the swap, I believe the Commission should consider reducing the recordkeeping time frame for SDRs. IV. Process Foul To Address Only One Aspect of the Complex Swap Data Reporting Puzzle I also am uncomfortable with the sequencing of this Proposal and the rush to publication on a stand-alone basis rather than as part of the contemplated overhaul of all the swaps data reporting rules. I expressed a similar view about the application of a holistic approach to interrelated regulations during last November’s Open Meeting concerning SEFs when I noted that ‘‘I would prefer that the Commission be able to opine on a final SEF rule and a final rule on name give-up at the same time. Acting on all aspects impacting SEF trading contemporaneously would benefit all entities involved.’’ 18 The same principles apply to swap data reporting, as both the public and the Commission would benefit from holistically addressing the 18 See Opening Statement of Commissioner Dawn D. Stump before the CFTC Open Meeting, November 5, 2018, available at https:// www.cftc.gov/PressRoom/SpeechesTestimony/ stumpstatement110518. E:\FR\FM\13MYP3.SGM 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 entirety of the swap data reporting universe. Unfortunately, the Commission continues to propose regulations that are interrelated and that would govern the same activity in an inefficient, piecemeal manner. Swap data reporting is a complex web of interrelated processes and systems that must all work in sync in order to generate complete and accurate data in a timely and cost effective manner. Many tasks in reporting are sequential in nature, and it takes all participants in the reporting ecosystem to coordinate and cooperate with a complete understanding of all the swap data reporting regulations from the Commission. For example, SDRs have to scope out and create policies and procedures and build systems/templates for any new requirement. RCPs cannot adequately prepare for, much less build and test, systems on how to comply until they receive final feedback and instructions from the SDR. For this reason, implementing reporting changes— which invariably is quite costly to both SDRs and RCPs in terms of the expenditure of time, energy, and money—must be orchestrated and timed very carefully. SDRs and RCPs have previously expressed to the Commission the importance of being made aware of anticipated future modifications to reporting so that they can understand the expected end-game that the Commission has in mind.19 Market participants also have commented on the need to understand the entire policy idea and all the associated pieces before committing time and energy to provide the Commission with meaningful comments and input.20 19 In late 2015, CFTC staff issued a request for comment on draft technical specifications for certain prioritized swap data elements and sought input on 80 enumerated questions addressing 120 data elements for several swap data reporting topics. See Draft Technical Specifications for Certain Swap Data Elements (December 22, 2015), available at https://www.cftc.gov/sites/default/files/ idc/groups/public/@newsroom/documents/file/ specificationsswapdata122215.pdf and https:// www.cftc.gov/PressRoom/PressReleases/pr7298-15. In responding to staff’s request for comment, SIFMA stated that it ‘‘view[s] the Draft Technical Specifications as one component of a broader initiative to enhance swap data reporting’’ and that the ‘‘interrelationships among the Draft Technical Specifications and these other workstreams, as well as their shared dependencies on the same technology and human resources, necessitate a well-planned and sequenced approach to enhancing swap data reporting requirements. Prioritizing among the various enhancements under consideration will help to avoid inadvertent inconsistencies and associated potential for erroneous data and unnecessary infrastructure costs.’’ Letter from Kyle Brandon, SIFMA, at 2 (March 7, 2016), available at https:// comments.cftc.gov/PublicComments/ ViewComment.aspx?id=60702&SearchText=. 20 SIFMA and ISDA jointly commented on the swaps data Roadmap and suggested that the Commission align the anticipated timeframes for swaps data reporting changes: ‘‘[G]iven the interconnection between SDR functions and the counterparties’ reporting workflows, we believe that any proposed rule amendments and final rules associated with Tranche 1 and Tranche 2 should be issued at the same time.’’ Their letter then went on to comment: ‘‘Alternatively, should the Commission decide to publish the proposed rule amendments to the SDR rules first in Tranche 1, VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 I appreciate that the Proposal states that ‘‘[w]hen the Commission proposes the next two rulemakings, the Commission anticipates re-opening the comment period for this proposal to provide market participants with an opportunity to comment collectively on the three rulemakings together, because the proposals address interconnected issues.’’ 21 But I do not see the benefit of proceeding in such an inefficient manner. Issuing the Proposal now does provide notice of the Commission’s intentions with respect to one piece of the swaps data Roadmap, but no notice of what else from the Roadmap might come to pass. Such ‘‘partial notice’’ does not enable parties to evaluate, and comment upon, the full picture of their new compliance obligations, including their costs and burdens.22 Under these circumstances, I would not be surprised if market participants simply waited for all of the reporting rules to be proposed before providing feedback to the Commission on the whole of what is being proposed. In addition, if, as the Proposal suggests, there actually is a significant problem with inaccurate swap data being reported to SDRs, the piecemeal issuance of these rulemakings makes it more difficult for the Commission to evaluate whether that problem can be rectified by allowing other facets of the swaps data Roadmap to gain traction. Query whether the Commission generating a technical specification removing uncertainty as to what must be reported and how, harmonizing with other regulators and implementing unique identifiers (Unique Transaction Identifiers and Unique Product Identifiers) and critical data elements from CPMI–IOSCO work streams, minimizing the number of fields required to be reported, and affording RCPs more time to report would organically resolve a large proportion of any inaccurate data reporting problem that may exist. The manner in which the Commission then we recommend that the public comment period for this release remain open for at least 90 days following publication of the proposed rule amendments to the reporting workflow rules in Tranche 2. This extended comment period would provide market participants with a comprehensive and holistic understanding of whether the two proposals achieve the desired policy outcomes and account for operational costs and possible additional builds to comply with a modified reporting regime.’’ Letter from Steven Kennedy, ISDA, and Kyle Brandon, SIFMA, at 3–4 (August 21, 2017) (footnote omitted), available at https:// comments.cftc.gov/PublicComments/ ViewComment.aspx?id=61288&SearchText=. 21 Proposal, text immediately following n.23. 22 The Commission’s disjointed delivery of proposed changes to its swap data reporting rules also raises questions as to its consideration of relevant costs and benefits. Cost-benefit considerations, by their very nature, must evaluate the proposed changes in comparison to the status quo—including the present state of other relevant regulations. As a result, the cost-benefit portion of the Proposal could be deemed obsolete to the extent it does not incorporate any of the modifications to other swap data reporting requirements in parts 43 and 45 of the Commission’s regulations that the Commission intends to propose and act upon. The failure to propose all the swaps data reporting rule amendments in unison would seem to necessitate a refresh of the accompanying cost-benefit portion of this Proposal, and further public comment. PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 21121 has elected to proceed will make it challenging for SDRs and RCPs to comment appropriately on these questions, and I fear will place the Commission in a predicament as it attempts to make informed policy decisions on how best to proceed. V. Lack of Harmonization With the SEC Market participants of all shapes-andsizes—even those that are often on opposing sides of most regulatory debates—all agree on a common theme that has been repeatedly urged upon the Commission via every imaginable medium since the enactment of Dodd-Frank: The Commission and the Securities and Exchange Commission (SEC) should coordinate and harmonize their respective derivatives regulations to the maximum extent possible, and especially concerning entities that have already incurred systems and compliance costs in connection with the corresponding requirements of the related agency. All types of market participants have implored both the Commission and the SEC to minimize compliance burdens on potential dual registrants in connection with the derivatives rules, such as swap data reporting. And yet, notwithstanding the current emphasis on CFTC–SEC harmonization,23 the Commission is proposing a swap data reporting rule that appears to take an approach that is the opposite of, and in direct contrast to, the SEC’s thinking on the same issue. The SEC published a proposed rulemaking in December 2018 24 that specifically discusses, among other things, verification of the terms of reported security-based swaps— as does the Proposal. Yet, while the Proposal would increase regulatory burdens on all entities in its amended regulatory reporting scheme, the SEC is considering a more pragmatic approach. The SEC, in its proposal, ‘‘believes it to be an appropriate time to revisit and request comment on an issue previously identified in connection with the rules . . . [that] require[] each registered SDR to ‘confirm with both counterparties to the security-based swap the accuracy of the data that was submitted.’ ’’ 25 Specifically, the SEC in its proposal states that ‘‘SDRs may be able to reasonably rely on certain third parties to address the accuracy of the transaction data. For example, the Commission previously stated that if an SDR develops reasonable policies and procedures that rely on confirmations completed by another entity, such as a third-party confirmation provider, as long as such reliance is reasonable the SDR could use such confirmation to fulfill its obligations under certain SDR rules. Because the two 23 See, e.g., Memorandum of Understanding Between the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission Regarding Coordination in Areas of Common Regulatory Interest and Information Sharing (July 11, 2018) (specifically addressing the regulatory regime for swaps and security-based swaps), available at https:// www.cftc.gov/sites/default/files/2018-07/CFTC_ MOU_InformationSharing062818.pdf and https:// www.cftc.gov/PressRoom/PressReleases/7745-18. 24 Risk Mitigation Techniques for Uncleared Security-Based Swaps, 84 FR 4614 (February 15, 2019) (proposed rules). 25 Id. at 4633–4634 (footnote omitted). E:\FR\FM\13MYP3.SGM 13MYP3 jbell on DSK3GLQ082PROD with PROPOSALS3 21122 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules relevant provisions that we are proposing today generally relate to the obligation of [Security-Based Swap, or ‘SBS’] Entities to take certain steps in the reconciliation and documentation processes related specifically to the reporting of the relevant security-based swap data to an SDR . . . the Commission believes that . . . these measures, taken together, could provide an SDR with a set of factors to assess the reasonableness of relying on an SBS Entity’s ability to independently provide the definitive report of a given security-based swap position, thereby providing a basis for the SDR to satisfy its statutory and regulatory obligations to verify the accuracy of the reported data when the SBS Entity’s counterparty is not a member of the SDR.’’ 26 In other words, the SEC is considering whether the reconciliation process undertaken by security-based swap dealers of their swaps portfolios could satisfy the statutory obligation to confirm the accuracy of data reported to SDRs. This sensible approach being considered demonstrates deference to trusted sources for swap data accuracy when a third-party service provider is employed to address the confirmation of swaps data, similar to the exceptions in Regulations 49.11(b)(1)(ii) and 49.11(b)(2)(ii) that the Proposal would eliminate. As discussed more fully in Section VI below, based on the Commission’s reporting hierarchy in Regulation 45.8,27 swap dealers (SDs) are the RCP and transmit required swap data elements to an SDR for the vast preponderance of swap transactions. These same SDs are already subject to another regulatory obligation relating to verification of the terms of their swap transactions, as they must conduct a portfolio reconciliation exercise on a regularly recurring basis via Regulation 23.502.28 Portfolio reconciliation forces the ‘‘[e]xchange [of] the material terms of all swaps in the swap portfolio between the counterparties’’ and requires the parties to ‘‘[r]esolve any discrepancy in material terms and valuations.’’ 29 Since SDs already must check the accuracy of their portfolios through a reconciliation exercise, and since SDs report almost all swaps, then the Commission, like the SEC, should consider leveraging this existing process and afford SDs that undertake such an exercise enough time for it to run its course and then submit that same accurate and verified data set for SDR reporting purposes. Leveraging this existing regulatory process, rather than creating yet another process that compliance officers and operations staff must adhere to, may offer a ‘‘good government’’ solution, assuming the existence of a systemic problem with SDR data accuracy. If SDs represent that the same data reconciled with counterparties per Rule 23.502 is reported to SDRs, then the Commission might not need to impose the burdensome new requirements set out in the Proposal. It is unfortunate that the Commission did not propose—or even request comment on— the less burdensome approach to verification 26 Id. at 4634 (footnotes omitted). CFR 45.8. 28 17 CFR 23.502. 29 17 CFR 23.500(i)(1), (3). 27 17 VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 that the SEC is considering in light of our stated commitment to harmonizing the agencies’ derivatives rules. And it is even more mystifying to me why we are proposing these rule amendments in the inefficient, piecemeal manner described above when delaying the issuance of this Proposal would not only enable us to issue the various proposed amendments to our swap data reporting rules as a unified package, but also to learn from comments on the SEC’s data verification discussion (the comment period closed on April 16) whether the SEC may have identified a better option for fostering accurate reported swaps data. VI. Outsized Burden Placed Upon SDRs and RCPs, Including End-Users Swap market participants have repeatedly emphasized to the Commission that the swap data reporting rules are overly complicated, difficult to implement, and a significant operational burden and compliance challenge for all concerned, including endusers.30 Yet, the Proposal would add more layers of complexity to reporting workflows, and require SDRs and RCPs to commit more time and money to submit more reports and undertake additional obligations. In particular, the Commission has heard from many end-users about the immense nature of their reporting burdens, how regulatory capture on end-users has impacted their business models and their ability to hedge via derivatives markets, and the unintended consequences of the initial implementation of the Dodd-Frank swap reporting regime. In response, the Commission, commendably, has made considerable progress in addressing reporting issues and limiting burdens on end-users via the various tools at our disposal when consistent with our regulatory responsibilities. It is not clear to me why this 30 In responding to staff’s request for comment on the Draft Technical Specifications, see fn. 19, supra, ISDA stated: ‘‘End-users which either have reporting obligations or which would be compelled to provide data to the reporting counterparty necessitated by the proposed fields would be particularly burdened by the requirements and many will lack the technological capability to capture, transform and report or provide data as required. The small to mid-sized commodity producers, processors, merchants and other end-users that use swaps to mitigate commodity, interest rates, foreign exchange or other price risks will require additional technology, compliance and legal support in order to accommodate additional reporting requirements. This will impose significant, unjustified costs to end-users . . . . ISDA, on behalf of commercial end-users, requests the CFTC to avoid imposing changes and additional reporting requirements on end-users by maintaining their obligations under the current Reporting Regulations to the greatest extent possible.’’ Letter from Tara Kruse, ISDA, at 7–8 (March 7, 2016), available at https://comments.cftc.gov/ PublicComments/ViewComment.aspx? id=60713&SearchText=. ISDA continued to advocate against placing additional burdens on endusers through its joint comment letter with SIFMA to the Swap Data Roadmap and suggested the Commission ‘‘should not require non-reporting counterparties, end-users, and smaller firms to perform reconciliations because these entities generally do not have the resources to effectively validate their swap transactions.’’ See fn. 20, supra, at 6. PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 Proposal would break from those efforts and go in the opposite direction by placing new and burdensome swap data reporting obligations on end-users. End-user RCPs would bear several onerous obligations under this Proposal. End-user RCPs would have to commit considerable resources to create more sophisticated and elaborate reporting systems in order to be compliant. The Proposal estimates that 1,585 RCPs are neither SDs, major swap participants (MSPs), nor DCOs.31 As a result of the Proposal, all of these end-user RCPs would have to acquire or build additional processes and hire more staff to comply with these new reporting regulations, regardless of the number, notional amount, asset class, or risk profile of the swaps for which they are the RCP. To provide some perspective, staff has indicated that of new transactions in January 2019, trades with at least one SD counterparty (which would serve as the RCP) per asset class represented 99.6183% of the 22,446 CDS trades; 98.2466% of the 137,499 IRS trades; 97.0540% of the 603,696 FX trades; 99.9998% of the 471,657 Equity trades; and 85.3056% of the 60,021 Commodity trades. In other words, the 1,585 RCPs that are not SDs, MSPs, or DCOs reported, at most, 86 CDS, 2,454 IRS, 18,325 FX, 1 Equity, and 10,339 Commodity swaps during this time period. Given the limited number of swaps for which end-users are RCPs compared to the overall swaps market, I question whether imposing on all end-users that may serve as an RCP the additional burdens of preparing for compliance with the requirements of this Proposal reflects an appropriate consideration of costs and benefits. The Commission has made strides post the initial roll-out of its Dodd-Frank rulemakings to fix unintended consequences of its swap data reporting rules and minimize the burdens on end-users where appropriate. This Proposal, unfortunately, errs in the other direction. I welcome suggestions via the public comment process on the appropriate role for end-user RCPs to play in assuring the accuracy of reported swap data short of imposing the burdens set out in the Proposal. VII. Alternate Approaches for Further Consideration To be clear, my concern with the Proposal is not simply that it would impose costs on market participants; all necessary regulatory requirements do so. Rather, my concern is with the extent of the burdens that the Proposal would impose on market participants, including end-users, in light of the prospects that the Proposal will meaningfully improve the quality of reported swap data. As discussed above, the Proposal does not establish that there actually is a systemic problem in that regard. But assuming that to be the case, consider the following fact pattern and whether any errors would be found and rectified under the Proposal: • RCP submits data to an SDR from its regulatory reporting databases; • SDR creates Open Swaps reports based upon the data received; 31 Proposal, E:\FR\FM\13MYP3.SGM text accompanying n.226. 13MYP3 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS3 • SDR provides a mechanism for the RCP to verify the accuracy of the Open Swaps report; and • RCP checks the Open Swaps report against the data that it submitted to the SDR. In other words, if the original data set utilized by the RCP contains an inaccuracy, the Proposal could simply impose a futile exercise based on circular logic. The end result of the new burdens placed upon RCPs and SDRs would merely be a false positive in this scenario. If the RCP’s data is inaccurate in the first place, then the Proposal would be successful only in making swap data reporting more complicated and expensive, without actually improving the accuracy of the data reported to the SDR.32 Accurately reported swap data is, of course, crucial to the Commission’s performance of its regulatory responsibilities and the effective operation of the Dodd-Frank swap regime. That is why I am concurring in the issuance of the Proposal—because I support the Commission’s efforts to determine whether appropriate improvements can be made to its swap data reporting rule set. This Proposal provides an opportunity for the public to suggest other, perhaps better, solutions to more efficiently produce the desired outcome of accurate swap data for purposes of conducting the Commission’s work, facilitating risk oversight and management, and fostering robust swaps markets. I strongly encourage SDRs, SDs, DCOs, end-users, and the public in general to take advantage of this opportunity and provide not only feedback on the Proposal, but also their ideas on how to appropriately balance the need for accurately reported swap data with the costs and burdens associated with obtaining it. The Commission should consider any alternate approaches that can satisfy the policy goal of improving the quality of SDR data while limiting the impact on market participants already saturated with complex and repetitive reporting obligations. I would like to offer, and invite comment on, a few alternatives with respect to RCPs. CEA Section 21(c)(2) provides that SDRs shall ‘‘confirm with both counterparties to the swap the accuracy of the data that was submitted.’’ 33 As a result, a clear obligation exists as to what SDRs must do. The statute is less clear on what RCPs must do, if anything. Under the Commission’s current regulations, all RCPs must submit hundreds of fields per transaction to their respective SDRs. Some RCPs have thousands of open swaps that would be captured under this 32 To be sure, the Proposal might identify situations in which the SDR inexplicably alters the data that it receives from an RCP. But current Regulation 49.10(c), 17 CFR 49.10(c), already prohibits such activity since an SDR ‘‘shall establish policies and procedures reasonably designed to prevent any provision in a valid swap from being invalidated or modified through the confirmation or recording process of the swap data repository. The policies and procedures must ensure that the swap data repository’s user agreements are designed to prevent any such invalidation or modification.’’ 33 7 U.S.C. 24a(c)(2). VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 Proposal and require recurring verification. I hope that commenters will address whether a smaller number of swaps and/or a limited subset of essential fields that must be verified would enable the Commission to conduct its regulatory functions without indiscriminately requiring verification of all swap data elements. Another option on which public comment would be helpful is requiring RCPs to verify only the accuracy of a statistically significant portion of their Open Swaps report and then decide, based on the level of accuracy, whether the entirety of Open Swaps must be analyzed. Still another option might be to require verification of only a limited set of the most important fields required to understand the basic terms of plain-vanilla swap transactions. Finally, commenters could address a possible de minimis level that must be exceeded before the new reporting obligations in this Proposal would apply. For example, if an RCP has less than X swaps per year, or less than Y notional transacted per year, then it would not have to perform these verification functions. With respect to end-user RCPs in particular, where the ability to build reporting systems and the cost of doing so on a per swap basis is much different than for SDs, MSPs, and DCOs, comment would be beneficial on whether end-user RCPs should have more time than proposed, both for replying to Open Swaps reports with a ‘‘verification’’ or ‘‘notification of discrepancy’’ message and correcting errors and omissions. Also, commenters may wish to address the frequency of how often enduser RCPs should be required to participate in this labor-intensive process. I recognize that the Proposal includes less stringent obligations on end-user RCPs in comparison to SDs, MSPs, and DCOs that are RCPs, but I welcome comment on whether the Commission should strive to do more in this regard. As written, the Proposal would impose a number of new, often undefined, obligations with respect to swap data reporting. The potential alternatives noted above, together with others that commenters may suggest, could represent a common sense approach to addressing concerns regarding swap data accuracy while appropriately calibrating the costs and burdens associated with verification of SDR data. Appendix 5—Statement of Commissioner Dan. M. Berkovitz I am pleased to support the Commission’s notice of proposed rulemaking (‘‘NPRM’’) to amend its rules for swap data repositories (‘‘SDRs’’) and data reporting requirements.1 1 The NPRM notes that it is the first of three rulemakings anticipated pursuant to the Commission’s 2017 ‘‘Roadmap to Achieve High Quality Swaps Data’’ (‘‘Roadmap’’). See NPRM section I(C). Information regarding the Roadmap is available in CFTC Letter 17–33 (Division of Market Oversight Announces Review of Swap Reporting Rules in Parts 43, 45, and 49 of Commission Regulations) (July 10, 2017), available at https:// www.cftc.gov/idc/groups/public/@lrlettergeneral/ documents/letter/17-33.pdf. The Roadmap itself is available at https://www.cftc.gov/idc/groups/public/ @newsroom/documents/file/dmo_swapdataplan 071017.pdf. PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 21123 The proposed amendments reflect the Commission’s commitment to accurate, detailed, and timely swaps data for regulators, market participants, and the public through enhanced data verification and error correction procedures, among other amendments. They are an important step in achieving the Dodd-Frank Act’s mandate of swap data reporting as an integral part of OTC derivatives reform and financial market stability. 2 The Dodd-Frank Act codified important new swap data reporting obligations, 3 and established SDRs as the vehicles for reporting and retaining swaps data. 4 It recognized the role of regulatory reporting and real-time public reporting in enhancing transparency and reducing systemic risk in the U.S. financial system. Consistent with these foundational principles, the Commission has focused on swap data reporting since the very inception of its Dodd-Frank efforts. In 2011, it began finalizing a series of coordinated reporting rules that provide for both regulatory and real-time public reporting of swap transaction and pricing data (Parts 45 and 43); 5 establish SDRs to receive data and make it available to regulators and the public (Part 49); 6 and define certain swap dealer and major swap participant reporting obligations (Part 23). 7 The Commission’s regulations leverage real-time public reporting to help increase transparency, fairness, and efficiency in swaps markets, 8 while regulatory reporting assists the Commission and other financial regulators in market oversight and systemic risk mitigation. 9 In this regard, SDRs provide a more consolidated view 10 of market 2 See also G20, Leaders’ Statement: The Pittsburgh Summit (Sept. 24–25, 2009), paragraph 13, available at https://www.treasury.gov/resourcecenter/international/g7-g20/Documents/pittsburgh_ summit_leaders_statement_250909.pdf. 3 See Dodd-Frank Wall Street Reform and Consumer Protection Act, section 727, Public Law 111–203, 124 Stat. 1376 (2010) (the ‘‘Dodd-Frank Act’’), available at https://www.gpo.gov/fdsys/pkg/ PLAW-111publ203/pdf/PLAW-111publ203.pdf. 4 See Dodd-Frank Act, section 728. 5 Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136 (Jan. 13, 2012) (‘‘Part 45 Adopting Release’’) and Real-Time Public Reporting of Swap Transaction Data, 77 FR 1182 (‘‘Part 43 Adopting Release’’). 6 Swap Data Repositories: Registration Standards, Duties and Core Principles, 76 FR 54538 (Sept. 1, 2011). 7 Swap Dealer and Major Swap Participant Recordkeeping, Reporting, and Duties Rules; Futures Commission Merchant and Introducing Broker Conflicts of Interest Rules; and Chief Compliance Officer Rules for Swap Dealers, Major Swap Participants, and Futures Commission Merchants, 77 FR 20128 (Apr. 3, 2012). 8 See Part 43 Adopting Release, 77 FR 1182, 1183. 9 See Part 45 Adopting Release, 77 FR 2136, 2138. 10 However, in a jurisdiction with multiple SDRs, such as the United States, regulators’ view into market participants’ swap positions is not fully consolidated. The presence of different SDRs in jurisdictions across the globe also impinges on full consolidation. These limitations give added import to standardizing data reporting, data fields, and regulators’ access to data. Aggregation by regulators in a jurisdiction with multiple SDRs, for example, is greatly facilitated by agreed reporting conventions. E:\FR\FM\13MYP3.SGM 13MYP3 21124 Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed Rules participants’ exposures across their swaps portfolios, and can help to identify concentrations and other potential risks that are dispersed across individual portfolios, trading platforms, and clearinghouses. Accurate, complete, and timely information is therefore vital to any successful swaps data reporting regime. These objectives were central to post-crisis reform efforts, and they must remain the primary considerations as the Commission moves to enhance its reporting rules. It is important to note that the existing reporting rules have already achieved important successes. Currently, three provisionally registered SDRs 11 facilitate regulatory reporting and real-time public reporting, and CFTC staff estimates that SDRs processed approximately 13 million unique swaps in 2018. SDRs provide online systems where any member of the public can track transaction-by-transaction information as swaps are executed and publicly reported. SDRs have also designed portals and other resources to provide CFTC staff with more complete regulatory access. While building on this solid foundation, the NPRM and the proposed amendments acknowledge areas where the Commission’s existing swap data reporting rules are not working as effectively as they might. Registered swap dealers began reporting swap data on December 31, 2012, and the proposed amendments are therefore based on over six years of Commission experience with SDRs and swap data reporting. In this jbell on DSK3GLQ082PROD with PROPOSALS3 11 Chicago Mercantile Exchange Inc. Swap Data Repository; DTCC Data Repository (U.S.); and ICE Trade Vault. VerDate Sep<11>2014 16:54 May 10, 2019 Jkt 247001 regard, the NPRM addresses several areas that the Commission identified for improvement in its 2017 Roadmap. For example, the NPRM addresses swap data verification and the prompt correction of errors or omissions in previously reported data. It proposes to clarify and strengthen the obligations of SDRs and reporting counterparties by requiring SDRs to provide reporting counterparties with regular reports on open swaps to ‘‘verify the accuracy and completeness of swap data reported to SDRs.’’ 12 In turn, reporting counterparties must respond affirmatively by indicating that the records in the reports they receive are accurate, or otherwise correcting any errors or omissions.13 Reporting counterparties must respond within timeframes specified in the NPRM, and they must do so pursuant to standards established by SDRs. The NPRM also proposes that SDRs provide open swap reports to the Commission. SDRs must provide such reports pursuant to timing, method, frequency, content, and other instructions that the Commission may issue.14 While working with SDRs, open swaps reports will help the Commission to perform its regulatory functions more effectively and efficiently through reports that SDRs standardize in content, format, calculation methods, and other variables. 12 See NPRM section II(G) (discussing proposed section 49.11). 13 See NPRM section III(B) (discussing proposed section 45.14). 14 See NRPM section II(E) (discussing proposed section 49.9). PO 00000 Frm 00082 Fmt 4701 Sfmt 9990 In addition to these important data-focused amendments, the NPRM also proposes amendments to rules in Part 49 of the Commission’s regulations that govern the internal operations of SDRs, particularly as they pertain to an SDR’s chief compliance officer (‘‘CCO’’), conflicts of interest, and annual compliance reports. I am interested in receiving comments regarding these proposed amendments, including areas where the Commission’s existing CCOrelated rules for SDRs are working well and where they could be improved. In this regard, the Commission should be vigilant that changes to compliance or other requirements made in the name of efficiency do not diminish the self-regulatory foundation of the Commission’s oversight of derivatives markets. I thank the staff of the Division of Market Oversight for their dedicated work on both this NPRM and potential future proposals related to swaps data reporting. I also thank staff for their responsiveness to questions and comments from my office, including their willingness to consider changes that have improved the NPRM before the Commission today. While swap data reporting is not always the most glamorous area of the Commission’s work, it is vitally important that we get it right. I look forward to public comments on the NPRM, and to continued efforts by market participants and the Commission to achieve the most effective swap data reporting possible. [FR Doc. 2019–08788 Filed 5–10–19; 8:45 am] BILLING CODE 6351–01–P E:\FR\FM\13MYP3.SGM 13MYP3

Agencies

Commodity Futures Trading Commission

[Federal Register Volume 84, Number 92 (Monday, May 13, 2019)]
[Proposed Rules]
[Pages 21044-21124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08788]



[[Page 21043]]

Vol. 84

Monday,

No. 92

May 13, 2019

Part III





 Commodity Futures Trading Commission





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17 CFR Parts 23, 43, 45, and 49





Certain Swap Data Repository and Data Reporting Requirements; Proposed 
Rule

Federal Register / Vol. 84, No. 92 / Monday, May 13, 2019 / Proposed 
Rules

[[Page 21044]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 23, 43, 45, and 49

RIN Number 3038-AE32


Certain Swap Data Repository and Data Reporting Requirements

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is proposing amendments to parts 23, 43, 45, and 49 of the 
Commission's regulations to improve the accuracy of data reported to, 
and maintained by, swap data repositories (``SDRs''). Among other 
changes, the proposed amendments would modify existing requirements for 
SDRs to establish policies and procedures to confirm the accuracy of 
swap data with both counterparties to a swap. The proposed amendments 
would further require reporting counterparties to verify the accuracy 
of swap data pursuant to those SDR procedures. The Commission is also 
proposing certain amendments to parts 23, 43, 45, and 49 to provide 
enhanced and streamlined oversight over SDRs and data reporting 
generally.

DATES: Comments must be received on or before July 29, 2019.

ADDRESSES: You may submit comments, identified by RIN number 3038-AE32, 
by any of the following methods:
     The agency's website, at https://comments.cftc.gov. Follow 
the instructions for submitting comments through the website.
     Mail: Secretary of the Commission, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street NW, 
Washington, DC 20581.
     Hand Delivery/Courier: Same as Mail above.
    Please submit your comments using only one method.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
https://www.cftc.gov. You should submit only information that you wish 
to make available publicly. If you wish the Commission to consider 
information that you believe is exempt from disclosure under the 
Freedom of Information Act, a petition for confidential treatment of 
the exempt information may be submitted according to the procedures 
established in Sec.  145.9 of the Commission's regulations.\1\
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    \1\ 17 CFR 145.9.
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    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from https://www.cftc.gov that it may deem to be 
inappropriate for publication, such as obscene language. All 
submissions that have been redacted or removed that contain comments on 
the merits of the rulemaking will be retained in the public comment 
file and will be considered as required under the Administrative 
Procedure Act and other applicable laws, and may be accessible under 
the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT: Benjamin DeMaria, Special Counsel, 
202-418-5988, [email protected] or Meghan Tente, Lead Attorney-Advisor, 
202-418-5785, [email protected], Division of Market Oversight, Data and 
Reporting Branch, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1151 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Introduction
    B. Statutory Authority
    C. Regulatory History--Final Rulemakings
II. Proposed Amendments to Part 49
    A. Sec.  49.2--Definitions
    B. Sec.  49.3--Procedures for Registration
    C. Sec.  49.5--Equity Interest Transfers
    D. Sec.  49.6--Request for Transfer of Registration
    E. Sec.  49.9--Open Swaps Reports Provided to the Commission
    F. Sec.  49.10--Acceptance of Data
    G. Sec.  49.11--Verification of Swap Data Accuracy
    H. Sec.  49.12--Swap Data Repository Recordkeeping Requirements
    I. Sec.  49.13--Monitoring, Screening, and Analyzing Data
    J. Sec.  49.15--Real-Time Public Reporting by Swap Data 
Repositories
    K. Sec.  49.16--Privacy and Confidentiality Requirements of Swap 
Data Repositories
    L. Sec.  49.17--Access to SDR Data
    M. Sec.  49.18--Confidentiality Arrangement
    N. Sec.  49.20--Governance Arrangements (Core Principle 2)
    O. Sec.  49.22--Chief Compliance Officer
    P. Sec.  49.24--System Safeguards
    Q. Sec.  49.25--Financial Resources
    R. Sec.  49.26--Disclosure Requirements of Swap Data 
Repositories
    S. Sec.  49.28--Operating Hours of Swap Data Repositories
    T. Sec.  49.29--Information Relating to Swap Data Repository 
Compliance
    U. Sec.  49.30--Form and Manner of Reporting and Submitting 
Information to the Commission
    V. Sec.  49.31--Delegation of Authority to the Director of the 
Division of Market Oversight Relating to Certain Part 49 Matters
III. Proposed Amendments to Part 45
    A. Sec.  45.2--Swap Recordkeeping
    B. Sec.  45.14--Verification of Swap Data Accuracy and 
Correcting Errors and Omissions in Swap Data
IV. Proposed Amendments to Part 43
    A. Sec.  43.3--Method and Timing for Real-Time Public Reporting
V. Proposed Amendments to Part 23
    A. Sec.  23.204--Reports to Swap Data Repositories
    B. Sec.  23.205--Real-Time Public Reporting
VI. Request for Comments
VII. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Cost-Benefit Considerations
    D. Anti-Trust Considerations

I. Background

A. Introduction

    Pursuant to the Dodd-Frank Act,\2\ beginning in 2011, the 
Commission adopted parts 45 and 49 of its regulations to implement a 
swap data reporting and recordkeeping regime along with registration 
requirements and duties for SDRs.\3\ In 2012, the Commission adopted 
part 23 of its regulations, which sets forth requirements for swap 
dealers (``SDs'') and major swap participants (``MSPs'') related to the 
timely and accurate reporting, confirmation, and processing of 
swaps.\4\ The regulations the Commission is proposing to amend with 
this release concern data reporting and recordkeeping duties generally 
and other duties for SDRs.
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    \2\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010), available at https://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf.
    \3\ Swap Data Repositories: Registration Standards, Duties and 
Core Principles, 76 FR 54538 (Sept. 1, 2011) (``Part 49 Adopting 
Release''); Swap Data Recordkeeping and Reporting Requirements, 77 
FR 2136 (Jan. 13, 2012) (``Part 45 Adopting Release'').
    \4\ See Swap Dealer and Major Swap Participant Recordkeeping, 
Reporting, and Duties Rules; Futures Commission Merchant and 
Introducing Broker Conflicts of Interest Rules; and Chief Compliance 
Officer Rules for Swap Dealers, Major Swap Participants, and Futures 
Commission Merchants, 77 FR 20128 (Apr. 3, 2012) (``Part 23 Adopting 
Release'').
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B. Statutory Authority

    Section 727 of the Dodd-Frank Act added section 2(a)(13)(G) to the 
Commodity Exchange Act (``CEA'' or ``Act''), which requires all swaps--
whether cleared or uncleared--to be reported to SDRs,\5\ which are 
registered

[[Page 21045]]

entities created by section 728 of the Dodd-Frank Act.\6\ Section 728 
of the Dodd-Frank Act added section 21 to the CEA,\7\ which governs 
registration and regulation of SDRs, and directs the Commission to 
promulgate rules concerning those duties and responsibilities.
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    \5\ Section 721 of the Dodd-Frank Act amended section 1a of the 
CEA to add the definition of SDR. Pursuant to section 1a(48) of the 
CEA, the term SDR ``means any person that collects and maintains 
information or records with respect to transactions or positions in, 
or the terms and conditions of, swaps entered into by third parties 
for the purpose of providing a centralized recordkeeping facility 
for swaps.'' 7 U.S.C. 1a(48).
    \6\ The Commission notes that there are currently three SDRs 
provisionally registered with the Commission: CME Inc., DTCC Data 
Repository (U.S.) LLC (``DDR''), and ICE Trade Vault, LLC (``ICE'').
    \7\ 7 U.S.C. 24a.
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    To register and maintain registration with the Commission, SDRs are 
required to comply with specific duties and core principles enumerated 
in CEA section 21 as well as other requirements that the Commission may 
prescribe by rule. In particular, CEA section 21(c) mandates that SDRs: 
(1) Accept data; (2) confirm with both counterparties the accuracy of 
submitted data; (3) maintain data according to standards prescribed by 
the Commission; (4) provide direct electronic access to the Commission 
or any designee of the Commission (including another registered 
entity); (5) provide public reporting of data in the form and frequency 
required by the Commission; (6) establish automated systems for 
monitoring, screening, and analyzing data (including the use of end-
user clearing exemptions) at the direction of the Commission; (7) 
maintain data privacy; (8) make data available to other specified 
regulators, on a confidential basis, pursuant to section 8 of the 
CEA,\8\ upon request and after notifying the Commission; and (9) 
establish and maintain emergency and business continuity-disaster 
recovery (``BC-DR'') procedures. CEA section 21(f)(4)(C) further 
requires the Commission to establish additional duties for SDRs to 
minimize conflicts of interest, protect data, ensure compliance, and 
guarantee the safety and security of the SDR.\9\ Section 21(b) of the 
CEA also directs the Commission to prescribe standards for data 
recordkeeping and reporting that apply to both registered entities and 
reporting counterparties.\10\
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    \8\ 7 U.S.C. 12(e).
    \9\ Pursuant to this provision, the Commission may develop one 
or more additional duties applicable to SDRs. 7 U.S.C. 24a(f)(4). 
This provision is referred to as ``Core Principle 4.''
    \10\ See 7 U.S.C. 24a(b)(1)(B).
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    Section 4s(f) of the CEA,\11\ added by section 731 of the Dodd-
Frank Act, established recordkeeping and reporting requirements for SDs 
and MSPs. CEA section 4s(f)(1)(A) \12\ requires SDs and MSPs, among 
other things, to provide transaction and position reports that the 
Commission requires by rule or regulation. CEA section 4s(f)(2) \13\ 
requires the Commission to adopt rules governing, among other things, 
recordkeeping and reporting by SDs and MSPs.
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    \11\ 7 U.S.C. 6s(f).
    \12\ 7 U.S.C. 6s(f)(1)(A).
    \13\ 7 U.S.C. 6s(f)(2).
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C. Regulatory History--Final Rulemakings

    On August 4, 2011, the Commission adopted part 49 of the 
Commission's regulations.\14\ Part 49 implements the requirements of 
section 21 of the CEA by setting forth the specific duties that SDRs 
are required to comply with to be initially registered as an SDR and 
maintain such registration as an SDR with the Commission. As part of 
the Part 49 Adopting Release, the Commission, among other sections, 
adopted Sec.  49.11 regarding the confirmation of data accuracy.
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    \14\ See Part 49 Adopting Release.
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    Pursuant to CEA section 4s(f)(2), the Commission promulgated swap 
reporting rules for SDs and MSPs, including Sec. Sec.  23.204-205, 
which were both adopted on April 3, 2012.\15\ Section 23.204(a) 
requires SDs and MSPs to report all information and swap data in 
accordance with part 45. Section 23.204(b) requires SDs and MSPs to 
have the procedures and electronic systems necessary to report all 
information and swap data required to be reported in accordance with 
part 45. Sections 23.205(a) and (b) establish parallel requirements for 
SDs and MSPs with respect to the real-time reporting requirements of 
part 43.
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    \15\ See Part 23 Adopting Release.
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    Since the Commission adopted part 49 in 2011, Commission staff has 
led many efforts to evaluate and improve reporting issues relating to 
data accuracy. Commission staff leads or participates in several 
international regulatory working groups concentrating on harmonization 
of data reporting and is incorporating in this release lessons learned 
from these undertakings and best practices from the international 
regulatory community. Commission staff's efforts have also included the 
formation of an interdivisional staff working group to identify, and 
make recommendations to resolve, reporting challenges associated with 
certain swap data recordkeeping and reporting provisions.\16\ The 
Commission has also requested comments from the public on reporting 
issues.\17\
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    \16\ See Press Release, CFTC to Form an Interdivisional Working 
Group to Review Regulatory Reporting (Jan. 21, 2014), available at 
https://www.cftc.gov/PressRoom/PressReleases/pr6837-14.
    \17\ See, e.g., Review of Swap Data Recordkeeping and Reporting 
Requirements, Request for Comment, 79 FR 16689 (Mar. 26, 2014).
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    Throughout these ongoing efforts, the Commission has generally 
adhered to the view that verification of data accuracy can be achieved 
through: (i) SDR processes confirming the accuracy of data submitted; 
(ii) data reconciliation exercises by entities that reported data; and 
(iii) the prompt reporting of errors and omissions when discovered.\18\
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    \18\ See id. at 16695.
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    Most recently, based in part on information received during the 
ongoing efforts described above, Commission staff announced a 
comprehensive review of swap reporting regulations and released the 
Roadmap to Achieve High Quality Swap Data (``Roadmap'') \19\ to solicit 
feedback on improvements to data reporting and how the Commission's 
regulatory goals may be achieved without imposing unnecessary burdens 
on market participants. Commission staff requested comments in response 
to the Roadmap (``Roadmap Request for Comment'') and received a number 
of comment letters that addressed data accuracy and confirmation of 
data reported to SDRs, among other subjects.\20\
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    \19\ See CFTC Letter 17-33, Division of Market Oversight 
Announces Review of Swap Reporting Rules in Parts 43, 45, and 49 of 
Commission Regulations (July 10, 2017), available at https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-33.pdf; Roadmap to Achieve High Quality Swap Data, available at 
https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.
    \20\ These comment letters are available at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1824.
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    References to ``commenters'' in this release refer to those who 
submitted comment letters in response to the Roadmap Request for 
Comment. Summaries and a discussion of the relevant comments submitted 
by those commenters appear in the appropriate section in this 
release.\21\
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    \21\ See section II.G.1.
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    The revisions and additions proposed in this release are intended 
to address the SDR Operations Review goals of the Roadmap related to 
confirming the accuracy of swap data,\22\ to improve the clarity and 
consistency of regulations governing SDRs, and to bolster the 
Commission's oversight of SDRs. This proposal is the first of three 
anticipated Roadmap rulemakings that, when all of

[[Page 21046]]

the planned rulemakings are complete, should achieve the Roadmap's 
overall goals of improving the quality, accuracy, and completeness of 
the data reported to the Commission, streamlining data reporting, and 
clarifying obligations for market participants.\23\ When the Commission 
proposes the next two rulemakings, the Commission anticipates re-
opening the comment period for this proposal to provide market 
participants with an opportunity to comment collectively on the three 
rulemakings together, because the proposals address interconnected 
issues. As the Roadmap rulemakings must all work in tandem to achieve 
these goals, the Commission also anticipates that key provisions of 
each rulemaking would have the same compliance date, regardless of when 
each rulemaking is released in final form. The Commission intends to 
provide a sufficient implementation period for these various 
rulemakings in order to give SDRs and market participants enough time 
to implement and test the changes that would be required.
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    \22\ See Roadmap, p. 6 (stating the Commission's intent to 
``Identify the most efficient and effective solution for swap 
counterparty(ies) to confirm the accuracy and completeness of data 
held in an SDR.'').
    \23\ See id. at 3 (describing the Commission's goals for the 
review of reporting regulations).
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    Where possible, in creating the proposed regulations set forth in 
this release, the Commission has taken into consideration certain 
pertinent rules adopted by other regulators, including the European 
Securities and Markets Authority (``ESMA'') and the U.S. Securities and 
Exchange Commission (``SEC'').\24\ This is particularly the case for 
the SEC's regulations relating to the registration, duties, and core 
principles of Security-Based Swap Data Repositories (``SBSDRs'') \25\ 
and reporting requirements for Security-Based Swaps (``SBSs'') set 
forth in Regulation SBSR (``Regulation SBSR'').\26\ The Commission 
notes that there are similarities between the regulatory framework for 
SBSDRs and the SDR regulations that are the subject of this proposal.
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    \24\ The Commission has also reviewed the SEC's recent proposed 
rule on risk mitigation techniques for uncleared security-based 
swaps, which addresses issues related to reconciling security-based 
swap transactions and confirming the transaction data. See generally 
Risk Mitigation Techniques for Uncleared Security-Based Swaps, 84 FR 
4614 (Feb. 15, 2019).
    \25\ See generally Security-Based Swap Data Repository 
Registration, Duties and Core Principles, 80 FR 11438 (Mar. 19, 
2015) (``SBSDR Adopting Release''). The SEC adopted Rules 13n-1 
through 13n-12 (17 CFR 240n-1 through 240n-12) under the Securities 
Exchange Act of 1934 (``Exchange Act'') relating to the registration 
and operation of SBSDRs.
    \26\ See generally Regulation SBSR--Reporting and Dissemination 
of Security-Based Swap Information, 80 FR 14740 (Mar. 19, 2015) 
(``SBSR Adopting Release''). The SEC adopted Regulation SBSR (Rules 
900 through 909, 17 CFR 242.900 through 909) to create a reporting 
framework for SBSs. The SEC has also adopted additional regulations 
regarding the reporting and dissemination of certain information 
related to SBSs. See generally 81 FR 53546 (Aug. 12, 2016).
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II. Proposed Amendments to Part 49

A. Sec.  49.2--Definitions

1. Formatting Change to Sec.  49.2(a)
    The defined terms in Sec.  49.2(a) currently are numbered and 
arranged in alphabetical order. The Commission is proposing to remove 
the numbering and instead arrange the defined terms in Sec.  49.2(a) 
solely in alphabetical order. Arranging the defined terms in Sec.  
49.2(a) solely in alphabetical order would require the Commission to 
make fewer conforming changes to Sec.  49.2(a) and other regulations 
when adding or removing defined terms in the future, as the Commission 
currently proposes to do.\27\
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    \27\ The Office of the Federal Register prefers the solely 
alphabetical approach to definitions sections. See Office of the 
Federal Register, Document Drafting Handbook May 2017 Update, 
Revision 5, 2-31 (2017) (``Definitions. In sections or paragraphs 
containing only definitions, we recommend that you do not use 
paragraph designations if you list the terms in alphabetical 
order.'').
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2. Proposed Changes to Sec.  49.2
i. Conforming and Ministerial Changes to Some Definitions
    The Commission proposes non-substantive conforming and ministerial 
changes to certain definitions to provide clarity and for consistency 
with other Commission regulations.\28\ Specifically, the Commission is 
proposing the following changes to definitions in Sec.  49.2(a):
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    \28\ Other than removing subsection numbering and ministerial 
corrections as discussed above in section II.A.1, the Commission is 
not proposing any substantive changes to the definitions of 
``affiliate,'' ``control,'' ``foreign regulator,'' ``independent 
perspective,'' ``position,'' or ``section 8 material,'' as those 
terms are defined in current Sec.  49.2(a).
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     ``Asset class'': Modify the definition to conform the 
wording to the definition of ``asset class'' used in part 43.\29\
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    \29\ See 17 CFR 43.2 (Asset class means a broad category of 
commodities including, without limitation, any ``excluded 
commodity'' as defined in section 1a(19) of the Act, with common 
characteristics underlying a swap. The asset classes include 
interest rate, foreign exchange, credit, equity, other commodity and 
such other asset classes as may be determined by the Commission.).
---------------------------------------------------------------------------

     ``Commercial use'': Modify the definition to use active 
instead of passive voice, and to change use of swap data for regulatory 
purposes and/or responsibilities to use of SDR data for regulatory 
purposes and/or to perform its regulatory responsibilities.
     ``Market participant'': Change the term ``swaps execution 
facilities'' to ``swap execution facilities,'' to conform to section 5h 
of the Act and other Commission regulations, and make the term 
counterparty singular.
     ``Non-affiliated third party'': Clarify paragraph (3) to 
identify ``a person jointly employed'' by an SDR and any affiliate.
     ``Person associated with a swap data repository'': Clarify 
that paragraph (3) includes a ``jointly employed person.''
     ``Swap data'': Modify the definition to more closely match 
the related definitions of ``SDR data'' and ``swap transaction and 
pricing data'' that are being added to Sec.  49.2(a) and to incorporate 
the requirements to provide swap data to the Commission pursuant to 
part 49.
    Finally, the Commission proposes to remove the term ``capitalized'' 
from Sec.  49.2(b), to reflect that most defined terms used in part 49 
are not capitalized in the text of part 49. The Commission does not 
consider any of the above changes to be substantive.
ii. ``As Soon As Technologically Practicable''
    The Commission proposes to add the term ``as soon as 
technologically practicable'' as a defined term to standardize the 
meaning and use of this term across the Commission's swap reporting 
regulations. The term as soon as technologically practicable would mean 
as soon as possible, taking into consideration the prevalence, 
implementation, and use of technology by comparable market 
participants. The term is intended to be identical to the use of the 
term as it is used in parts 43 and 45 of the Commission's 
regulations.\30\
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    \30\ See 17 CFR 43.2 (defining of as soon as technologically 
practicable). Part 45 of the Commission's regulations also uses the 
term ``as soon as technologically practicable'' in the same way as 
part 43 and this proposed definition, but does not define the term.
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iii. ``Non-Swap Dealer/Major Swap Participant/Derivatives Clearing 
Organization Reporting Counterparty''
    The Commission proposes to add the term ``non-swap dealer/major 
swap participant/derivatives clearing organization reporting 
counterparty,'' defined to mean a reporting counterparty that is not a 
swap dealer, major swap participant, derivatives clearing organization, 
or exempt derivatives clearing organization. The Commission believes 
the defined term would provide clarity in part 49.

[[Page 21047]]

iv. ``Open Swap''
    The Commission proposes to add the term ``open swap'' as a defined 
term and to define the term as an executed swap transaction that has 
not reached maturity or the final contractual settlement date, and has 
not been exercised, closed out, or terminated. The Commission considers 
an ``open swap'' to mean a swap that is still in force or ``alive.'' 
This definition is intended to function the same as the definitions of 
``open swap'' \31\ and ``closed swap'' \32\ in part 20, but provides 
more clarity as to the Commission's meaning of the term.
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    \31\ See 17 CFR 20.1 (Open swap or swaption means a swap or 
swaption that has not been closed.).
    \32\ See 17 CFR 20.1 (Closed swap or closed swaption means a 
swap or swaption that has been settled, exercised, closed out, or 
terminated.).
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v. ``Reporting Counterparty''
    The Commission proposes to add the term ``reporting counterparty'' 
as a defined term to standardize its meaning and use across the 
Commission's swap reporting regulations. Reporting counterparty would 
mean the counterparty responsible for reporting SDR data to an SDR 
pursuant to parts 43, 45, or 46 of the Commission's regulations. The 
term is intended to be functionally equivalent to the term ``reporting 
party,'' as defined in part 43,\33\ the term ``reporting 
counterparty,'' as defined in part 45,\34\ and the term ``reporting 
counterparty,'' as defined in part 46.\35\ The Commission notes that 
the reporting counterparty may not always be the entity reporting SDR 
data to the SDR, particularly for transactions executed on swap 
execution facilities (``SEFs'') or designated contract markets 
(``DCMs''), but it is the counterparty responsible for the initial and 
subsequent SDR data reporting, as determined by parts 43, 45, or 46 of 
the Commission's regulations, as applicable to a particular swap.
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    \33\ See 17 CFR 43.2 (Reporting party means the party to a swap 
with the duty to report a publicly reportable swap transaction in 
accordance with part 43 and section 2(a)(13)(F) of the CEA.).
    \34\ See 17 CFR 45.1 (Reporting counterparty means the 
counterparty required to report swap data pursuant to part 45, 
selected as provided in Sec.  45.8.).
    \35\ See 17 CFR 46.1 (Reporting counterparty means the 
counterparty required to report swap data pursuant to part 46, 
selected as provided in Sec.  46.5.).
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vi. ``SDR Data''
    The Commission proposes to add the term ``SDR data'' as a defined 
term. SDR data would mean the specific data elements and information 
required to be reported to an SDR or disseminated by an SDR, pursuant 
to two or more of parts 43, 45, 46, and/or 49, as applicable. The 
Commission notes that in this context, ``disseminated'' would include 
SDRs making swap data available to the Commission as required by part 
49.
    The term SDR data would refer to multiple sources of data reported 
to the SDR or disseminated by the SDR. For example, SDR data could 
refer to all data reported or disseminated pursuant to parts 43, 45, 
and 46, or may refer to data reported or disseminated pursuant to parts 
45 and 46, depending on the context in which the term is used. This is 
in contrast with the proposed term ``swap transaction and pricing 
data,'' discussed below, which would only refer to data reported to the 
SDR or publicly disseminated by the SDR pursuant to part 43 and the 
term ``swap data,'' which would only refer to data reported to the SDR 
or made available to the Commission pursuant to part 45. The Commission 
believes that consolidating references to the different types of data 
that must be reported to an SDR and data the SDR must make available to 
the public or to the Commission into a single term would provide 
clarity throughout part 49.
vii. ``SDR Information''
    The Commission proposes to amend the existing definition of ``SDR 
information'' to add ``related to the business of the swap data 
repository that is not SDR data'' to the end of the current definition. 
The Commission believes this change would make clear that the scope of 
SDR information is limited to information that the SDR receives or 
maintains related to its business that is not the SDR data reported to 
or disseminated by the SDR. SDR information would include, for example, 
SDR policies and procedures created pursuant to part 49.\36\
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    \36\ This clarification is particularly relevant for the SDR 
recordkeeping obligations in the proposed amendments to Sec.  49.12, 
discussed below in section II.H.
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viii. ``Swap Transaction and Pricing Data'' and ``As Soon as 
Technologically Practicable''
    The Commission proposes to add the terms ``swap transaction and 
pricing data'' and ``as soon as technologically practicable'' as 
defined terms from part 43. Swap transaction and pricing data would 
mean the data elements and information required to be reported to an 
SDR or publicly disseminated by an SDR, as applicable, pursuant to part 
43. Though this phrase is not currently defined in part 43, it is used 
throughout that part to refer to the data that must be reported to an 
SDR and publicly disseminated by an SDR pursuant to part 43, and the 
meaning of the term added here is identical. The Commission is 
proposing to adopt the same definition of as soon as technologically 
practicable defined in part 43, which means as soon as possible, taking 
into consideration the prevalence, implementation, and use of 
technology by comparable market participants. The Commission is 
proposing to add both phrases as defined terms in part 49 to increase 
consistency in terminology used in the Commission's swap reporting 
regulations.
ix. Removal of ``Reporting Entity''
    The Commission proposes to remove the term ``reporting entity'' 
from part 49. The Commission believes that ``reporting entity'' is no 
longer necessary with the proposed addition of the defined term for 
``reporting counterparty,'' because reporting counterparties are also 
reporting entities under the current definition.\37\ SEFs and DCMs are 
the only entities that may have the responsibility to report data that 
are not included in the proposed definition of ``reporting 
counterparty.'' The Commission notes that this proposed rule would 
retain most requirements related to reporting entities, but would 
update the terminology used to describe the requirements. As a result, 
most obligations for reporting entities would still exist under the 
proposed amendments.
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    \37\ See 17 CFR 49.2(a)(12) (defining ``reporting entity'' as 
those entities that are required to report swap data to a registered 
swap data repository which includes derivatives clearing 
organizations, swap dealers, major swap participants and certain 
non-swap dealer/non-major swap participant counterparties.).
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x. Removal of ``Registered Swap Data Repository''
    The Commission proposes to remove the term ``registered swap data 
repository'' from part 49. The Commission believes the term 
``registered swap data repository'' is not needed in part 49 because 
the defined term ``swap data repository'' already exists in Sec.  
1.3.\38\ The definition of ``swap data repository'' in Sec.  1.3 is 
identical to the definition contained in section 1a(48) of the CEA.\39\ 
This definition of

[[Page 21048]]

``swap data repository'' therefore already applies, and would continue 
to apply, to part 49 and all other Commission regulations and, when 
combined with Sec.  49.1,\40\ removes the need for a separate defined 
term for ``registered swap data repository.'' The inclusion of the word 
``registered'' in ``registered swap data repository'' and the 
definition of the term \41\ also creates unnecessary confusion as to 
when the requirements of part 49 apply to entities that are in the 
process of registering as SDRs or are provisionally registered as SDRs 
under the requirements of Sec.  49.3(b).\42\ Finally, the removal of 
the term ``registered swap data repository'' would decrease 
inconsistency in terms within part 49 and would also increase 
consistency between part 49 and other Commission regulations, which 
overwhelmingly use the term ``swap data repository.'' The Commission 
emphasizes that removing the defined term ``registered swap data 
repository'' is a non-substantive amendment that would not in any way 
modify the requirements applicable to current or future SDRs.
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    \38\ See 17 CFR 1.3 (defining ``swap data repository'' as ``any 
person that collects and maintains information or records with 
respect to transactions or positions in, or the terms and conditions 
of, swaps entered into by third parties for the purpose of providing 
a centralized recordkeeping facility for swaps.'').
    \39\ See 7 U.S.C. 1a(48) (``The term `swap data repository' 
means any person that collects and maintains information or records 
with respect to transactions or positions in, or the terms and 
conditions of, swaps entered into by third parties for the purpose 
of providing a centralized recordkeeping facility for swaps.'').
    \40\ See 17 CFR 49.1 (``The provisions of this part apply to any 
swap data repository as defined under Section 1a(48) of the [CEA] 
which is registered or is required to register as such with the 
Commission pursuant to Section 21(a) of the [CEA].'').
    \41\ See 17 CFR 49.2(a)(11) (``The term `registered swap data 
repository' means a swap data repository that is registered under 
Section 21 of the [CEA].'').
    \42\ See 17 CFR 49.3(b) (creating standards for granting 
provisional registration to an SDR).
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    Request for Comment. The Commission requests comment on all aspects 
of the proposed changes to Sec.  49.2. The Commission also invites 
specific comment on the following:
    (1) Are there any proposed amendments to definitions in existing 
regulations in part 49 that are unclear or inaccurate?

B. Sec.  49.3--Procedures for Registration

    Section 49.3 of the Commission's regulations establishes procedural 
and substantive requirements for SDR registration. In relevant part, 
Sec.  49.3 requires persons seeking SDR registration to file an 
application for registration on Form SDR \43\ and to amend it 
periodically.\44\ Specifically, current Sec.  49.3(a)(5) requires that 
if any information in Form SDR or any amendment becomes inaccurate for 
any reason, whether before or after the registration application has 
been granted, the SDR shall promptly file an amendment on Form SDR 
updating such information. In addition, Sec.  49.3(a)(5) requires the 
SDR to submit an annual amendment to Form SDR within sixty days after 
the end of the SDR's fiscal year.
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    \43\ See 17 CFR 49.3(a)(1).
    \44\ See 17 CFR 49.3(a)(5).
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    The Commission is proposing to amend Sec.  49.3(a)(5) to remove the 
requirement for SDRs to: (i) File an annual amendment to Form SDR; and 
(ii) amend Form SDR after the registration application has been granted 
pursuant to Sec.  49.3(a). Accordingly, as proposed, Sec.  49.3(a)(5) 
would simply require an SDR to amend Form SDR to correct inaccuracies 
until its application for registration has been granted.
    The Commission no longer believes that the requirement to amend 
Form SDR after registration is needed because the SDRs registered under 
Sec.  49.3(a) will have demonstrated the ability to meet initial 
registration and compliance requirements in order to receive 
registration and the registered SDRs will still submit changes to many 
of the items in Form SDR as rule filings under part 40.\45\ The 
Commission is also proposing new Sec.  49.29, which would permit the 
Commission to request that SDRs produce information demonstrating 
compliance with the Commission's regulations, as discussed further in 
section II.T. The Commission does, however, believe that updates to 
Form SDR are still necessary prior to the granting of registration 
under Sec.  49.3(a), because the application would still be active and 
the applicant would still need to demonstrate the ability to meet 
initial registration and compliance requirements.
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    \45\ See 17 CFR 40.1, 40.5, and 40.6 (containing the filing and 
review provisions applicable to rules under the Commission's 
regulations).
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    Consistent with the above proposed amendments, the Commission is 
also proposing to amend Form SDR to remove the references to annual 
amendments and amendments after SDR registration.\46\
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    \46\ The Commission is proposing various non-substantive 
amendments to Form SDR. These amendments include making terminology 
consistent throughout Form SDR, fixing incorrect references and 
misspellings, and fixing grammatical and style errors.
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    As discussed below in section II.O, current Sec.  49.22(f)(2) 
requires that the annual compliance report be provided to the 
Commission concurrently with the filing of the annual amendment to Form 
SDR that must be submitted to the Commission pursuant to Sec.  
49.3(a)(5) of this part. The Commission is proposing removing the 
reference to Sec.  49.3(a)(5) from Sec.  49.22(f)(2), to reflect the 
removal of the annual amendment requirement from Sec.  49.3(a)(5).
    Request for Comment. The Commission requests comment on all aspects 
of the proposed changes to Sec.  49.3(a)(5).

C. Sec.  49.5--Equity Interest Transfers

    The Commission is proposing to amend Sec.  49.5 to streamline the 
requirements for equity interest transfers for SDRs. The Commission 
believes that the amendments to Sec.  49.5 simplify the notification 
and timing requirements associated with transfers of equity interest 
for SDRs.
1. Notification of Intended Equity Interest Transfer--Proposed Sec.  
49.5(a)
    Current Sec.  49.5(a) establishes the requirement for SDRs to 
provide the Commission an equity transfer notification. Specifically, 
current Sec.  49.5(a) requires that: (i) Upon entering into any 
agreement that could result in an equity interest transfer of ten 
percent or more in the SDR, the SDR shall file a notification with the 
Secretary of the Commission in the manner specified by the Secretary, 
no later than the business day following the date on which the SDR 
enters into a firm obligation to transfer the equity interest; and (ii) 
that the SDR amend any information that is no longer accurate on Form 
SDR consistent with the procedures set forth in Sec.  49.3.
    Proposed Sec.  49.5 would revise current Sec.  49.5(a) in several 
respects. First, proposed Sec.  49.5 would make clear that the proposed 
rule would apply to both the direct and indirect transfers of ten 
percent or more of the equity interest in the SDR. The Commission 
believes that including both direct and indirect transfers of equity 
ownership in proposed Sec.  49.5 is necessary for the Commission to 
properly oversee SDRs and to address any compliance concerns that may 
arise from the indirect transfer of equity interest in an SDR through 
transactions involving an SDR's direct or indirect parent company, but 
not the SDR itself.
    Second, proposed Sec.  49.5 would require that the SDR file the 
equity transfer notification at the earliest possible time but no later 
than the open of business ten business days following the date upon 
which a firm obligation is made to transfer, directly or indirectly, 
ten percent or more of the equity interest in the SDR. The Commission 
believes SDRs may need additional time to file the necessary documents, 
and ten business days would provide greater flexibility to SDRs without 
sacrificing the

[[Page 21049]]

information the Commission needs to conduct effective oversight of 
SDRs.
    Third, proposed Sec.  49.5 would specify that the equity transfer 
notification be filed electronically with the Secretary of the 
Commission and the Director of the Division of Market Oversight 
(``DMO'') via email. The Commission is also proposing to remove the 
requirement to amend information that is no longer accurate on Form SDR 
due to the equity interest transfer because the requirement is 
duplicative in light of the requirements of both current and proposed 
Sec.  49.3(a)(5).\47\
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    \47\ Proposed Sec.  49.5(a) would continue to apply the 
requirement to update information in Form SDR that is no longer 
accurate due to an equity interest transfer to an SDR whose 
application for registration has not been granted under Sec.  
49.3(a).
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2. Documentation Requirements--Proposed Sec.  49.5(b)
    Current Sec.  49.5(b) sets forth the documentation requirements for 
the equity transfer notice. Current Sec.  49.5(b) requires that: (i) 
The notification include any relevant agreements, corporate documents, 
charts outlining new ownership or corporate or organizational 
structure, a brief description of the purpose and any impact of the 
transfer, and a representation from the SDR that it meets all of the 
requirements of section 21 of the Act and Commission regulations; (ii) 
the SDR keep the Commission apprised of the projected date that the 
transaction will be consummated, and provide the Commission any new 
agreements or modifications to the original agreements filed pursuant 
to Sec.  49.5; and (iii) the SDR notify the Commission of the 
consummation of the transaction on the day it occurs.
    The Commission is proposing to simplify current Sec.  49.5(b) and 
instead simply provide that the Commission may, upon receiving an 
equity transfer notification from an SDR, request that the SDR provide 
supporting documentation for the transaction. The Commission believes 
that reserving the authority to request supporting documentation rather 
than compelling specific production would satisfy the Commission's need 
for information without placing unnecessary burdens on SDRs.
3. Notification of Completed Equity Interest Transfer--Proposed Sec.  
49.5(c)
    Current Sec.  49.5(c) requires that, upon the transfer, the SDR 
file with the Secretary of the Commission a certification that the 
registered SDR meets all of the requirements of section 21 of the Act 
and Commission regulations, and state whether changes to any aspects of 
the SDR's operations were made as a result of such change in ownership, 
with a description of any such change. The certification may rely on 
and be supported by reference to an SDR registration application or 
prior filings made pursuant to a rule submission requirement, along 
with any necessary new filings, including material updates of prior 
submissions. The certification must be filed within two business days 
of the date on which the equity interest was acquired.
    Proposed Sec.  49.5(c) would instead require that upon the transfer 
of the equity interest, whether directly or indirectly, the SDR shall 
file electronically with the Secretary of the Commission and DMO a 
certification that the SDR meets all of the requirements of section 21 
of the Act and Commission regulations, no later than two business days 
following the date on which the equity interest of ten percent or more 
was acquired. The Commission believes proposed Sec.  49.5(a) and (c) 
would provide the Commission with the pertinent information it needs to 
assess the impact of an equity interest transfer on the SDR's 
operations.
    Request for Comment. The Commission requests comment on all aspects 
of the proposed changes to Sec.  49.5.

D. Sec.  49.6--Request for Transfer of Registration

    The Commission is proposing amendments to streamline the 
requirements for the transferring of SDR registration to a successor 
entity in Sec.  49.6. As part of these amendments, the Commission is 
proposing to retitle the section ``Request for transfer of 
registration,'' to more accurately reflect the subject of the 
regulation.
    Proposed Sec.  49.6(a) would require that an SDR seeking to 
transfer its registration from its legal entity as a result of a 
corporate change that creates a new legal entity file a request for 
approval to transfer such registration with the Secretary of the 
Commission in the form and manner specified by the Commission. Examples 
of such corporate changes could include, but are not limited to, re-
organizations, mergers, acquisitions, bankruptcy, or other similar 
events that result in the creation of a new legal entity for the SDR.
    Proposed Sec.  49.6(b) would specify that an SDR file a request for 
transfer of registration as soon as practicable prior to the 
anticipated corporate change.
    Proposed Sec.  49.6(c) would set forth the information that must be 
included in the request for transfer of registration, including the 
underlying documentation that governs the corporate change, governance 
documents, and representations by the transferee entity, among other 
information. Proposed Sec.  49.6(d) would specify that upon review of a 
request for transfer of registration, the Commission, as soon as 
practicable, shall issue an order either approving or denying the 
request for transfer of registration.
    Current Sec.  49.6(a) requires that in the event of a corporate 
transaction that creates a new entity, an SDR must request a transfer 
of its registration, rules, and other matters no later than 30 days 
after the succession. Current Sec.  49.6(a) also specifies that the 
registration shall be deemed to remain effective as the registration of 
the successor if the successor, within 30 days after such succession, 
files a Form SDR application for registration, and the predecessor 
files a Form SDR request for vacation, provided, however, that the 
registration of the predecessor SDR shall cease to be effective 90 days 
after the Form SDR registration application is filed by the successor 
SDR.
    Current Sec.  49.6(b) requires that if the succession is based 
solely on a change in the predecessor's date or state of incorporation, 
form of organization, or composition of a partnership, the successor 
may, within 30 days after the succession, amend the registration of the 
predecessor SDR on Form SDR to reflect these changes. The amendment 
shall be an application for registration filed by the predecessor and 
adopted by the successor.
    The Commission believes that the amendments to Sec.  49.6 would 
simplify the process for requesting a transfer of SDR registration. The 
Commission believes the requirement, timing, content of requests, and 
format of a Commission determination in proposed Sec.  49.6(a), (b), 
(c), and (d) respectively, would achieve the Commission's information 
needs when an SDR seeks to transfer registration. These requirements 
would streamline the requirements for SDRs by setting forth a clear 
process for transfer that focuses on informing the Commission of 
changes relevant to the Commission in carrying out its oversight 
responsibilities, as opposed to requiring SDRs to file new Forms SDR, 
which would likely duplicate most of the transferor's current Form SDR.
    Request for Comment. The Commission requests comment on all aspects 
of the proposed changes to Sec.  49.6.

[[Page 21050]]

E. Sec.  49.9--Open Swaps Reports Provided to the Commission

    The Commission is proposing to replace current Sec.  49.9 with 
requirements for SDRs to provide open swaps reports to the 
Commission.\48\ The Commission proposes renaming Sec.  49.9 ``Open 
swaps reports provided to the Commission'' to reflect this change.
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    \48\ As discussed above in section II.A, the Commission is 
proposing to define an open swap as an executed swap transaction 
that has not reached maturity or the final contractual settlement 
date, and has not been exercised, closed out, or terminated.
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    Proposed Sec.  49.9(a) would require SDRs to provide the Commission 
with open swaps reports that contain an accurate reflection of the swap 
data for every swap data field required to be reported under part 45 
for every open swap maintained by the SDR, organized by the unique 
identifier created pursuant to Sec.  45.5 of the Commission's 
regulations associated with each open swap,\49\ as of the time the SDR 
compiles the open swaps report.
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    \49\ Proposed Sec.  49.11 would also require SDRs to distribute 
open swaps reports to reporting counterparties. While a distinct 
report and separate requirement from proposed Sec.  49.9, the 
Commission expects that the swap data contained in the open swaps 
reports provided to the Commission under proposed Sec.  49.9 and the 
swap data provided to reporting counterparties under proposed Sec.  
49.11 would be identical, except for any data that is required to be 
kept confidential, if both reports reflect data as of the same 
moment. See section II.G below.
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    Proposed Sec.  49.9(b) would require SDRs to transmit all open 
swaps reports to the Commission as instructed by the Commission, and 
notes that such instructions may include, but would not be limited to, 
the method, timing, and frequency of transmission, as well as the 
format of the swap data to be transmitted.\50\
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    \50\ As discussed below in section II.V, proposed Sec.  49.31 
would delegate the Commission's authority in proposed Sec.  49.9, 
including the authority to create instructions for transmitting open 
swaps reports to the Commission, to the Director of DMO.
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    Current Sec.  49.9 lists and briefly summarizes the duties of SDRs. 
Current Sec.  49.9 does not contain any unique regulatory requirements, 
but instead references where the duties are found in other sections of 
part 49.\51\ The Commission believes that current Sec.  49.9 is 
superfluous because all of the SDR duties listed in Sec.  49.9 are also 
contained, in much greater detail, in the other sections of part 49. 
The Commission notes that removing current Sec.  49.9 would be a non-
substantive change that would not affect the requirements for SDRs 
found in the other sections of part 49, including the sections 
currently referenced in Sec.  49.9.
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    \51\ As discussed below in section II.Q, the Commission is 
proposing conforming amendments to Sec.  49.25 to remove references 
to amended Sec.  49.9.
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    The Commission believes that regularly receiving accurate and up-
to-date information on the open swaps maintained by each SDR is 
necessary for the Commission to perform its regulatory functions. While 
the specific requirements in proposed Sec.  49.9 are new to part 49, 
SDRs currently send open swaps reports to the Commission on a regular 
basis. The Commission currently uses open swaps reports to produce a 
weekly swaps report that is made available to the public \52\ and for 
entity-netted notional calculations.\53\ The Commission also uses open 
swaps to perform market risk and position calculations, and for 
additional market research projects.
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    \52\ The Commission's various public reports, including the 
weekly swaps reports, are available at https://www.cftc.gov/MarketReports/index.htm.
    \53\ See ``Introducing ENNs: A Measure of the Size of Interest 
Rate Swaps Markets,'' Jan. 2018, available at https://www.cftc.gov/sites/default/files/idc/groups/public/@economicanalysis/documents/file/oce_enns0118.pdf.
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    SDRs currently provide open swaps reports that use different 
calculation approaches and different formats. These variations among 
SDRs reduce the Commission's ability to effectively use the swap data. 
The Commission notes that the proposed regulations would standardize a 
type of report the SDRs already create for the Commission. The 
Commission believes that providing standards for how the swap data in 
open swaps reports should be provided to the Commission would help 
remedy issues the Commission faces in trying to reconcile open swaps 
reports across the SDRs.
    The Commission notes that it would have the ability to instruct 
SDRs as to all aspects of transmitting the open swaps reports to the 
Commission under proposed Sec.  49.9. These instructions may include 
the method of transmission (e.g., file types and methods used for 
transmission), the timing of transmission, the frequency of 
transmission, and the formatting of the swap data included in the 
reports. The Commission believes that retaining the flexibility to 
determine how SDRs would provide open swaps reports to the Commission 
and the ability to modify the requirements over time as needed would 
allow the Commission to use the information in the reports to fulfill 
its regulatory responsibilities while not requiring unnecessary effort 
on the part of the SDRs.
    The Commission intends to work with the SDRs before creating or 
modifying any instructions pursuant to proposed Sec.  49.9 and would 
provide a reasonable amount of time for SDRs to adjust their systems 
before any instructions take effect. The Commission notes that it 
currently works with SDRs to implement changes to open swaps reports, 
with SDRs being given time to update their systems as needed. The 
Commission anticipates using a similar process when working with the 
SDRs on the new requirements for open swaps reports.
    Request for Comment. The Commission requests comment on all aspects 
of the proposed changes to Sec.  49.9.

F. Sec.  49.10--Acceptance of Data

    The Commission proposes amending Sec.  49.10 to add a new paragraph 
(e) to address correction of errors and omissions in SDR data. SDRs are 
currently required to publicly disseminate cancellations and 
corrections to swap transaction and pricing data as soon as 
technologically practicable after receipt of any cancellation or 
correction,\54\ and transmit corrections to errors and omissions in 
swap data previously transmitted to the Commission in the same format 
as the erroneous or omitted swap data was originally transmitted.\55\
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    \54\ See 17 CFR 43.3(e)(1), (3), and (4) (requiring an SDR to 
publicly disseminate corrections and cancellations to data and 
containing requirements for cancellation and correction).
    \55\ See 17 CFR 45.14(c) (requiring corrections to be 
transmitted to the Commission in the same format as the data was 
originally transmitted, unless otherwise approved).
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    Swap counterparties, SEFs, and DCMs currently have obligations to 
report errors and omissions to the reporting counterparty, SEF, DCM, or 
SDR, depending on whether they are reporting swap transaction and 
pricing data or swap data.\56\ The Commission is proposing to move the 
obligations for SDRs in correcting errors and omissions to Sec.  
49.10(e), to place all obligations for SDRs in part 49.\57\ The 
Commission believes proposed Sec.  49.10(e) is consistent with the 
SDRs' duty to correct errors and omissions that already exists in the 
CEA and current Commission regulations.
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    \56\ See Sec.  43.3(e) for swap transaction and pricing data, 
discussed below in section IV.A, and Sec.  45.14 for swap data, 
discussed below in section III.B. The obligations for swap 
counterparties, SEFs, and DCMs to report errors and omissions in 
swap transaction and pricing data and swap data would remain in 
their current sections.
    \57\ Parts 43 and 45, while containing provisions related to SDR 
acceptance and dissemination of data, concentrate on the reporting 
and dissemination of data by all market participants, while part 49 
contains provisions that govern the registration and operations of 
SDRs more generally.
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    Proposed Sec.  49.10(e) would set forth the general requirement 
that an SDR correct errors and omissions in SDR

[[Page 21051]]

data that was previously reported to the SDR or was not previously 
reported to the SDR as required,\58\ regardless of the state of the 
swap that is the subject of the SDR data.
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    \58\ The Commission notes that the failure to perform the 
initial data reporting as required under parts 43, 45, or 46 is an 
``omission'' for the purposes of those parts and proposed Sec.  
49.10. The SDR would be required to correct the omission pursuant to 
proposed Sec.  49.10, just as it would be required to correct any 
other error or omission, regardless of the state of the swap, and 
disseminate the corrected data as required in proposed Sec.  49.10.
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    Proposed Sec.  49.10(e)(1)-(4) would set forth the specific 
requirements SDRs would need to meet to fulfill the general requirement 
in Sec.  49.10(e). Proposed Sec.  49.10(e)(1) would require an SDR to 
accept corrections for errors and omissions reported to the SDR 
pursuant to parts 43, 45, and 46.
    Proposed Sec.  49.10(e)(2) would require each SDR to correct the 
reported errors and omissions as soon as technologically practicable 
after the SDR receives a report of errors or omissions.
    Proposed Sec.  49.10(e)(3) would require an SDR to disseminate 
corrected SDR data to the public and the Commission, as applicable, as 
soon as technologically practicable after the SDR corrects the SDR 
data. Proposed Sec.  49.10(e)(4) would require SDRs to establish, 
maintain, and enforce policies and procedures designed for the SDR to 
fulfill its responsibilities under Sec.  49.10(e)(1)-(3).\59\
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    \59\ The Commission notes that the policies and procedures for 
reporting corrections to the SDR created pursuant to Sec.  49.10(e) 
would be subject to disclosure to SEFs, DCMs, and reporting 
counterparties under proposed Sec.  49.26(j). See section II.R 
below. The Commission is aware of previous instances where market 
participants were not provided with SDR policies and procedures 
related to the reporting or correction of data and were unaware of 
the SDR's requirements, which unnecessarily interfered with the 
reporting and correction processes. The requirements of proposed 
Sec.  49.10(e)(4) and proposed Sec.  49.26(j) are intended to 
prevent a similar situation from occurring in the context of data 
corrections.
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    As noted above, new Sec.  49.10(e) is designed to complement the 
correction provisions of other parts of the Commission's swap reporting 
regulations that apply to the entities reporting errors and omissions 
to SDRs, including proposed Sec.  45.14(b), to ensure that errors and 
omissions in SDR data are corrected and disseminated as soon as 
possible.\60\ The Commission also notes that SDRs currently have the 
duty to correct all SDR data previously reported, and all SDR data that 
was erroneously not reported as required, and to properly disseminate 
the corrections as required, including making the corrected SDR data 
available to the Commission as instructed,\61\ which will continue 
pursuant to proposed Sec.  49.17.\62\
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    \60\ See section III.B below.
    \61\ See 17 CFR 43.3(e) (correction and dissemination 
requirements for swap transaction and pricing data); 17 CFR 45.14 
(correction and dissemination requirements for swap data); see also 
17 CFR 49.13(a) (requiring SDRs to transmit all swap data requested 
by the Commission to the Commission in an electronic file in a 
format acceptable to the Commission.).
    \62\ See section II.L below. As discussed in that section, SDRs 
are currently required to provide the Commission with direct 
electronic access to SDR data, including scheduled data transfers to 
the Commission.
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    Finally, the Commission notes that, as specified in Sec.  49.10(e), 
the requirements of new Sec.  49.10(e) would apply regardless of the 
state of the swap, meaning SDRs would have to correct and disseminate 
SDR data for swaps that have matured or were otherwise terminated and 
are no longer open swaps. The Commission believes this requirement is 
necessary for SDRs to continue to maintain and disseminate SDR data 
that accurately reflects market activity to the public \63\ and 
regulators. Further, SDRs currently do regularly make and disseminate 
corrections to previously-reported SDR data and SDR data that was not 
initially reported as required, including SDR data for previously 
matured or terminated swaps.
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    \63\ The Commission understands that market participants use the 
real-time swap transaction and pricing data disseminated by SDRs 
pursuant to part 43 for a variety of purposes, including modeling of 
the swaps markets that impacts their decisions related to 
transacting in swaps.
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    In general, the Commission believes that specifying SDRs' 
responsibilities to receive corrections to SDR data from market 
participants, make the corrections to the SDR data, and to provide the 
corrected SDR data to the public and the Commission, as applicable, 
would further the Commission's goal of having accurate and complete SDR 
data available to both the Commission and the public by clearly 
delineating the SDRs' responsibilities in the process.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.10(e).

G. Sec.  49.11--Verification of Swap Data Accuracy

    The Commission proposes to revise the current requirements of Sec.  
49.11 that set forth SDRs' responsibilities to confirm the accuracy and 
completeness of swap data reported to SDRs. At the same time, the 
Commission is proposing to revise the requirements of Sec.  45.14 for 
reporting counterparties, SEFs, and DCMs to verify swap data and 
correct errors in swap data.\64\ The Commission believes that revised 
Sec.  49.11 and Sec.  45.14 would provide SDRs, reporting 
counterparties, SEFs, and DCMs with a clear understanding of their 
respective responsibilities for verifying swap data.
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    \64\ See section III.B below.
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    The Commission is proposing to change the name of Sec.  49.11 to 
``Verification of swap data accuracy'' from ``Confirmation of data 
accuracy'' in order to reduce the number of differing uses of the word 
``confirmation'' within the Commission's regulations. The Commission 
uses different tenses of the word ``verify'' \65\ for the proposed 
requirement for the same reason.
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    \65\ The Commission recognizes that CEA section 21(c)(2) uses 
the term ``confirm,'' but for the reasons stated above believes 
``verification'' and ``verify'' are necessary to avoid confusion.
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1. General Requirement To Verify Swap Data Accuracy--Proposed Sec.  
49.11(a)
    The Commission proposes to amend Sec.  49.11(a) to include a 
general requirement that SDRs verify the accuracy and completeness of 
swap data that the SDRs receive from SEFs, DCMs, and reporting 
counterparties, or third-party service providers acting on their 
behalf.\66\ Revised Sec.  49.11(a) would also require each SDR to 
establish, maintain, and enforce policies and procedures reasonably 
designed to verify the accuracy and completeness of swap data that it 
receives from SEFs, DCMs, reporting counterparties, or third-party 
service providers.\67\
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    \66\ The Commission notes that an SDR may receive swap data from 
any SEF, DCM, or reporting counterparty, as defined in proposed 
Sec.  49.2, but that the SDR would, under the proposed regulations, 
verify the accuracy and completeness of swap data with the reporting 
counterparty for a given swap, as discussed in this section. 
Likewise, under proposed Sec.  45.14(a), the reporting counterparty 
would be required to verify the accuracy and completeness of swap 
data as required by that section.
    \67\ SDRs would be required make their policies and procedures 
created pursuant to proposed Sec.  49.11(a) available to their users 
and potential users under the requirements of proposed Sec.  
49.26(j).
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    As noted above, proposed Sec.  45.14(a) contains companion 
requirements to proposed Sec.  49.11(a) that would require reporting 
counterparties to verify swap data with SDRs and to conform to the 
relevant SDR's verification policies and procedures in fulfilling their 
verification responsibilities.\68\
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    \68\ See section III.B below.
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    Section 21(c)(2) of the CEA requires SDRs to confirm with both 
counterparties to the swap the accuracy of the data that was 
submitted.\69\ The Commission implemented section 21(c)(2) through 
adopting current Sec.  49.11. Current Sec.  49.11(a) requires that SDRs 
establish and adopt policies and procedures to ensure the accuracy of

[[Page 21052]]

swap data and other regulatory information that is reported to an SDR. 
Current Sec.  49.11(b) generally requires an SDR to confirm the 
accuracy and completeness of all swap data submitted pursuant to part 
45. The Commission provided an exception to the requirement that SDRs 
confirm with both counterparties to the swap the accuracy of the data 
that was submitted in Sec.  49.11(b)(1)(ii) for swap creation data and 
Sec.  49.11(b)(2)(ii) for swap continuation data when swap data is 
received from a SEF, DCM, derivatives clearing organization (``DCO''), 
or from a third-party service provider acting on behalf of the swap 
counterparty, under certain conditions.\70\
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    \69\ 7 U.S.C. 24a(c)(2).
    \70\ In these cases, Sec. Sec.  49.11(b)(1)(ii) and 
49.11(b)(2)(ii) relax the general requirement that the SDR 
affirmatively notify both counterparties directly if: (1) The SDR 
has formed a reasonable belief that the swap data is accurate; (2) 
the swap data or accompanying information reflect that both 
counterparties agreed to the swap data; and (3) the counterparties 
were provided with a 48-hour correction period.
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    SDRs are required under current Sec.  49.11(b)(1)(i) and Sec.  
49.11(b)(2)(i) to notify both counterparties to a swap when swap data 
is submitted directly via a swap counterparty, such as an SD, MSP, or 
non-SD/MSP counterparty, and not by a SEF, DCM, DCO, or a third-party 
service provider.\71\ However, because counterparties do not currently 
have a corollary obligation to respond to the SDRs' notifications, SDRs 
have adopted rules based on the concept of negative affirmation: 
Reported swap data is presumed accurate and confirmed if a counterparty 
does not inform the SDR of errors or omissions or otherwise make 
modifications to a trade record for a certain period of time.\72\
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    \71\ See 17 CFR 49.11(b).
    \72\ See, e.g., CME Rules 604.A and 604.B; DTCC Data Repository 
(U.S.) LLC Rule 3.3.3.3; and ICE Trade Vault Rules 4.6 and 4.7.
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    When the Commission adopted current Sec.  49.11, it did not believe 
that requiring an SDR to affirmatively communicate with both 
counterparties to a swap was necessary when the swap data was submitted 
to the SDR by a SEF, DCM, DCO, or third-party service provider.\73\ 
However, based on the Commission's experience with swap data submitted 
by SEFs, DCMs, DCOs, and third-party service providers since the rule 
was adopted, the Commission believes that such swap data has not been 
consistently complete and accurate in some instances, and the swap data 
accuracy is not sufficient to justify the exception to the requirement 
that SDRs confirm the reported swap data's accuracy with swap 
counterparties. The current requirements have had a negative effect on 
swap data accuracy and consistency, which has hampered the Commission's 
ability to carry out its regulatory responsibilities.
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    \73\ See Part 49 Adopting Release at 54547 (describing the 
requirements of Sec.  49.11).
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    Commission staff received many comments on confirmation 
requirements for swap data reported to SDRs in response to the Roadmap 
Request for Comment.\74\ In general, the SDRs commented that they 
cannot meet their obligation to confirm data with both counterparties 
because non-reporting counterparties are not required to confirm data 
reported to the SDR under current regulations.\75\ The SDRs also stated 
that they often have no way to contact non-reporting counterparties 
because non-reporting counterparties are not obligated to connect to 
the SDRs' services.\76\ SDRs also commented that the obligation to 
confirm data accuracy should generally reside with the entities that 
are in the best position to know whether the reported data is accurate 
and complete (i.e., the parties to the swap, not the SDRs).\77\
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    \74\ The following organizations submitted comments related to 
confirmation and reconciliation for data reported to SDRs: American 
Counsel of Life Insurers (``ACLI''); Commercial Energy Working Group 
(``CEWG''); Chatham Financial (``Chatham''); CME Group (``CME''); 
Coalition for Derivatives End-Users (``Coalition''); Depository 
Trust & Clearing Corporation (``DTCC''); Eurex Clearing AG 
(``Eurex''); a joint comment letter from BSDR LLC, Chicago 
Mercantile Exchange Inc., and ICE Trade Vault (``Joint SDR''); 
Global Financial Markets Association (``GFMA''); ICE Trade Vault 
(``ICE''); International Energy Credit Association (``IECA''); a 
joint letter comment letter from International Swaps and Derivatives 
Association, Inc. and the Securities Industry and Financial Markets 
Association (``ISDA/SIFMA''); Japanese Bankers Association 
(``JBA''); Natural Gas Supply Association (``NGSA''); a joint 
comment letter from National Rural Electric Cooperative Association 
and American Public Power Association (``NRECA/APPA''); and 
Securities Industry and Financial Markets Association Asset 
Management Group (``SIFMA AMG'').
    \75\ Joint SDR Letter at 5; ICE Letter at 2.
    \76\ Joint SDR Letter at 5; DTCC Letter at 3; ICE Letter at 2.
    \77\ Joint SDR Letter at 5 (listing CME and ICE as supporting 
this belief); CME Letter at 2; DTCC Letter at 3.
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    As a result, many SDRs advocated for removing some or all SDR 
obligations from Sec.  49.11 of the Commission's regulations.\78\ The 
Joint SDR letter commented that the Commission should clearly define 
the obligations of counterparties to confirm the accuracy and 
completeness of reported data, including requiring non-reporting 
counterparties to on-board with every SDR and to follow the SDRs' 
processes and procedures, if the non-reporting counterparties have 
confirmation obligations.\79\
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    \78\ Joint SDR Letter at 5; CME Letter at 2; ICE Letter at 2.
    \79\ Joint SDR Letter at 5 (listing CME and ICE as providing 
this recommendation).
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    Other commenters, including end-user groups, opposed confirmation 
requirements for non-reporting counterparties.\80\ Chatham stated that 
non-reporting parties are rarely the cause of errors in the swap data 
and that reconciliation by reporting counterparties in conjunction with 
more robust validation of swap data would render reconciliation by non-
reporting counterparties unnecessary.\81\ CEWG advocated against any 
periodic reconciliation, and suggested that if reconciliation is 
required, it only be required for position data.\82\
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    \80\ Coalition Letter at 4 (noting that end-users do not have 
the dedicated systems, personnel, or resources to confirm swap 
details with SDRs); IECA Letter at 2; NRECA/APPA Letter at 3; 
Chatham Letter at 3-4; JBA Letter at 1-2; NGSA Letter at 3; ISDA/
SIFMA Letter at 6; ACLI Letter at 2-3; SIFMA AMG Letter at 1-2.
    \81\ Chatham Letter at 3-4.
    \82\ CEWG Letter at 3.
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    The Commission's proposed revisions to Sec.  49.11 and Sec.  
45.14(a) \83\ should provide more detail on the responsibilities of 
SDRs, working in conjunction with reporting counterparties, to verify 
the accuracy and completeness of swap data. As described in the 
discussions of proposed Sec.  49.11(b)-(d) below, the Commission is 
proposing that SDRs only verify swap data with reporting counterparties 
because the Commission believes this would be the most practical 
approach to verification. The Commission understands that SDRs are not 
parties to swaps and are therefore unable to verify the accuracy and 
completeness of swap data without the assistance of a swap 
counterparty.
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    \83\ See section III.B.
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    The Commission believes reporting counterparties are in the best 
position to verify swap data with SDRs. The CEA's swap reporting 
framework is based on reporting counterparties reporting swap data on 
behalf of non-reporting counterparties.\84\ Because of the data 
reporting requirements for reporting counterparties, reporting 
counterparties are connected to SDRs for reporting, while non-reporting 
counterparties, especially those that are not SDs/MSPs, often lack such 
connections.\85\ For

[[Page 21053]]

entities that never serve as reporting counterparties, such a 
requirement would mean the expense of building, maintaining, and 
operating systems to connect to SDRs purely for the purposes of 
verifying swap data. The Commission believes this outcome would be 
inconsistent with the CEA's goal of placing swap data reporting 
responsibilities on reporting counterparties.
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    \84\ As discussed in the Part 45 Adopting Release, in 
designating reporting counterparties to report on behalf of non-
reporting counterparties, Congress made a policy choice to place 
lesser burdens on non-reporting counterparties. See 77 FR 2136, 2166 
(discussing the reporting counterparty hierarchy in CEA section 
4r(a)(3)).
    \85\ The Commission notes that under current and proposed Sec.  
45.14(b), a non-reporting counterparty's correction responsibilities 
are limited to notifying the reporting counterparty of the errors 
and omissions, as opposed to notifying the SDR. See 17 CFR 45.14(b); 
section III.B below. Requiring non-reporting counterparties to 
verify swap data would be the only instance where a non-reporting 
counterparty has swap data responsibilities with SDRs outside of 
corrections.
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2. Distribution of Open Swaps Reports--Proposed Sec.  49.11(b)
    To meet the requirement to verify swap data accuracy in proposed 
Sec.  49.11(a), proposed Sec.  49.11(b) would require an SDR to 
distribute to each reporting counterparty on a regular basis an open 
swaps report detailing the swap data maintained by the SDR for all open 
swaps.\86\
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    \86\ Under proposed Sec.  45.14(a), a reporting counterparty 
would then compare its books and records related to each swap for 
which it is the reporting counterparty against the report to 
determine if the swap data the SDR maintains is complete and 
accurate. See section III.B below.
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    The Commission notes that the open swaps report would contain the 
same type of information that would be provided to the Commission in an 
open swaps report under proposed Sec.  49.9, as of the time the SDR 
compiles the open swaps report, but limited to the open swaps for which 
the recipient of the open swaps report is the reporting 
counterparty.\87\ The Commission notes that an SDR would not be 
required to provide an open swaps report to an entity that does not 
have any open swaps at the time the SDR compiles a particular open 
swaps report, even if the entity has been the reporting counterparty 
for swaps previously maintained by the SDR. For example, if all of the 
swaps for which an entity was the reporting counterparty were 
terminated before the SDR begins compiling an open swaps report, the 
SDR need not provide an open swaps report to that reporting 
counterparty. The SDR would need to provide subsequent open swaps 
reports to the entity if the entity becomes the reporting counterparty 
for any swaps that are open as of the time of a subsequent regular 
compiling of open swaps reports.
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    \87\ The Commission anticipates that, because the SDR would be 
required to regularly distribute the open swaps report on the same 
day during the verification period for each individual reporting 
counterparty under proposed Sec.  49.11(b)(1)-(2), the SDR would 
begin to compile the open swaps report at the same time before each 
distribution.
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    The Commission also notes that it is not proposing to prescribe how 
an SDR must distribute the open swaps reports to reporting 
counterparties. Commission staff understands some SDRs ``push'' or 
actively send information to reporting counterparties, while other SDRs 
typically have customers ``pull'' information by having those customers 
connect to SDR systems to retrieve the information. The Commission 
would not have a preference between these two approaches, provided that 
the SDR has instructed its customers on when and how the SDR would 
distribute the open swaps reports in the SDR's swap data verification 
policies and procedures that it makes available to market participants 
pursuant to proposed Sec.  49.26(j), such that the SDR's customers are 
able to effectively access and utilize the open swaps reports.
    The Commission also notes that it does not have a preference as to 
the communication methods, such as file types and data languages, that 
the SDRs and reporting counterparties use when distributing the open 
swaps reports, as long as the communication methods are made clear in 
the SDR's swap data verification policies and procedures and the 
entities can effectively communicate regarding the contents of each 
open swaps report, including accounting for all necessary automated 
systems, mapping of data fields, and potential data translation between 
data languages. The Commission would expect SDRs and reporting 
counterparties to work together to devise efficient and effective 
methods for successfully distributing the open swaps reports, with 
particular attention paid to creating a distribution system that 
minimizes the burden of distribution for non-SD/MSP/DCO reporting 
counterparties. Reporting counterparties are already connected to SDRs 
to fulfill their reporting responsibilities under part 45 and therefore 
the Commission anticipates that SDRs and reporting counterparties would 
be able to communicate easily, potentially through existing 
infrastructure for reporting swap data.
3. Content of Open Swaps Reports--Proposed Sec.  49.11(b)(1)
    Proposed Sec.  49.11(b)(1) would require an SDR to distribute an 
open swaps report that contains an accurate reflection of the swap data 
for every swap data field required to be reported for swaps pursuant to 
part 45 for every open swap maintained by the SDR for which the 
recipient of the report is the reporting counterparty, organized by the 
unique identifier created pursuant to Sec.  45.5 of the Commission's 
regulations associated with every open swap, as of the time the SDR 
compiles the open swaps report.
    The Commission notes that the swap data to be included in the open 
swaps report would need to include every data field required to be 
reported for swaps under part 45, unless access to a particular data 
field is prohibited by other Commission regulations.\88\
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    \88\ The Commission notes that the confidentiality requirements, 
particularly Sec.  49.17(f), would apply to the open swaps reports. 
Under Sec.  49.17(f), for example, an SDR may not include the 
identity or legal entity identifier of the non-reporting 
counterparty to the swap (or the non-reporting counterparty's 
clearing member for the swap) if the swap was executed anonymously 
on a SEF or DCM and cleared in accordance with the Commission 
regulations referenced in Sec.  49.17(f)(2). See 17 CFR 49.17(f)(2) 
(providing the exception to the general prohibition on market 
participant access to swap data maintained by SDRs).
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    The Commission believes that having every reporting counterparty 
review the swap data and respond to the SDR as required in proposed 
Sec.  45.14 would improve the quality of swap data by facilitating the 
discovery and correction of errors and omissions. Proposed Sec.  
49.11(b)(1) would facilitate this review by requiring the SDRs to 
provide the swap data for all of a reporting counterparty's open swaps 
on a regular basis. The Commission anticipates this process would be 
largely automated and would become more efficient over time as 
reporting counterparties and SDRs gain experience with verification.
    The Commission is not proposing specific requirements for the 
formatting of the open swaps report provided pursuant to proposed Sec.  
49.11(b)(1), but the Commission expects that the swap data included in 
the open swaps report would be identical to the swap data provided to 
the Commission pursuant to proposed Sec.  49.9 in all instances where 
the two reports reflect swap data as of the same time, except for any 
data that is required to be kept confidential.\89\ The Commission 
believes it is important that the reporting counterparty would be able 
to review the same swap data that is provided to the Commission as of 
the moment the SDR compiled the open swaps report, to help ensure data 
consistency.
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    \89\ See section II.E above (discussing the proposed 
requirements for providing open swaps reports to the Commission).
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4. Frequency of Open Swaps Reports for SD, MSP, and DCO Reporting 
Counterparties--Proposed Sec.  49.11(b)(2)
    Proposed Sec.  49.11(b)(2) would require SDRs to distribute the 
open swaps reports to all SD/MSP/DCO reporting counterparties on a 
weekly basis, no

[[Page 21054]]

later than 11:59 p.m. Eastern Time \90\ on the day of the week that the 
SDR chooses to regularly distribute the open swaps reports. The 
Commission notes that it is not prescribing the day that the SDR 
chooses to distribute the open swaps report, but would require that the 
SDR use the same day of the week for each distribution. The Commission 
would also require that the SDR distribute all of the open swaps 
reports to the relevant reporting counterparties on the same day. 
Distributing the open swaps reports irregularly may create the 
unnecessary risk of confusion and/or missed reports, and may lead to 
swap data not being properly verified. Regular distribution would also 
allow reporting counterparties to prepare for when they would be 
required to fulfill their verification responsibilities.
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    \90\ The Commission is specifying a time under proposed Sec.  
49.11 for consistency purposes. SDRs would need to account for the 
adjustments to Eastern Time that occur during the year in their 
verification policies and procedures and reporting counterparties 
would need to accommodate these adjustments in their verification 
practices.
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    The Commission believes that SDs, MSPs, and DCOs, as large, 
sophisticated Commission-registered entities that are accustomed to 
swap data regulatory compliance, and as the most likely entities to 
serve as reporting counterparties,\91\ can efficiently verify swap data 
on a weekly basis. Further, as SDs, MSPs, and DCOs are the reporting 
counterparty for the overwhelming majority of swaps,\92\ requiring 
these entities to review the swap data maintained for their open swaps 
on a weekly basis would ensure that the large majority of open swaps 
would be verified within a week of execution, which would also 
facilitate the prompt correction of any errors or omissions in the swap 
data for these swaps.
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    \91\ Any swap involving at least one SD, MSP, or DCO as a 
counterparty will have a reporting counterparty that is a SD, MSP, 
or DCO. See 17 CFR 45.8 (providing the requirements for determining 
which counterparty to a swap is the reporting counterparty).
    \92\ See De Minimis Exception to the Swap Dealer Definition, 83 
FR 56666, 56674 (Nov. 13, 2018) (stating that, in 2017, 
approximately 98 percent of swap transactions involved at least one 
registered SD).
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5. Frequency of Open Swaps Reports for Non-SD/MSP/DCO Reporting 
Counterparties--Proposed Sec.  49.11(b)(3)
    Proposed Sec.  49.11(b)(3) would require SDRs to distribute the 
open swaps reports to non-SD/MSP/DCO reporting counterparties on a 
monthly basis, no later than 11:59 p.m. Eastern Time on the day of the 
month that the SDR chooses to regularly distribute the open swaps 
reports. For the reasons discussed above with respect to proposed Sec.  
49.11(b)(2), the Commission is not prescribing the day of the month 
that the SDR chooses to distribute the open swaps reports, but does 
require that the SDR use the same day of the month for each 
distribution. The Commission is also proposing to require that the SDR 
distribute all of the open swaps reports to the relevant reporting 
counterparties on the same day.
    The Commission believes that monthly distribution would satisfy the 
Commission's need for accurate swap data. The Commission is aware that 
non-SD/MSP/DCO counterparties tend to be less active in the swaps 
markets with fewer resources to devote to regulatory compliance. The 
Commission understands that this is particularly true of swaps end-
users that use swaps infrequently and are more likely to engage in 
swaps for hedging purposes. Non-SD/MSP/DCO counterparties are also the 
reporting counterparties for relatively few swaps; \93\ therefore, the 
Commission believes that there would not be a significant risk of 
errors associated with less frequent verification for these reporting 
counterparties.
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    \93\ See id. (finding that, during the examination period, 98 
percent of swap transactions involved at least one SD/MSP 
counterparty).
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6. Receipt of Verification of Data Accuracy or Notice of Discrepancy--
Proposed Sec.  49.11(c)
    Proposed Sec.  49.11(c) would require SDRs to receive from each 
reporting counterparty to which it sends an open swaps report, in 
response to the open swaps report, either a verification of data 
accuracy indicating that the swap data contained in the open swaps 
report distributed pursuant to Sec.  49.11(b) is accurate and complete 
or a notice of discrepancy indicating that the data contained in an 
open swaps report contains one or more discrepancies.\94\ Proposed 
Sec.  49.11(c) would also require SDRs to establish, maintain, and 
enforce policies and procedures reasonably designed for the SDR to 
successfully receive the verification of data accuracy or the notice of 
discrepancy.
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    \94\ The Commission notes that an SDR receiving a notice of 
discrepancy should expect to--and be prepared to--receive 
corrections for the errors and omissions in the swap data close in 
time to when it receives the notice of discrepancy, due to the 
requirements of proposed Sec.  45.14(b).
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    The Commission notes that an SDR would not fully satisfy the 
requirements of proposed Sec.  49.11 until it receives the verification 
of data accuracy or notice of discrepancy. The Commission believes that 
proposed Sec.  49.11(c) would help ensure that the reporting 
counterparty has received and reviewed the open swaps report, which 
would aid the data correction process and improve the quality of swap 
data. The Commission also believes that proof of compliance would 
assist the SDRs and the Commission with any necessary compliance 
reviews.
    The requirement to establish, maintain, and enforce policies and 
procedures regarding this stage of verification would help ensure that 
the SDR is fully prepared to perform its verification duties and, 
because the policies and procedures would be made available to 
reporting counterparties pursuant to proposed Sec.  49.26(j), would 
help ensure that the verification process is clear and efficient for 
reporting counterparties and SDRs. The Commission notes that it is not 
prescribing the methods for how SDRs fulfill their responsibilities 
under proposed Sec.  49.11(c), but does expect that the SDRs would be 
reasonable in the requirements of their policies and would utilize 
methods that are as low-cost and efficient as possible. The Commission 
particularly encourages SDRs to be accommodating for non-SD/MSP/DCO 
reporting counterparties.
    The Commission notes that proposed Sec.  45.14 includes 
corresponding requirements for reporting counterparties to verify the 
accuracy and completeness of swap data in response to the open swaps 
reports and for reporting counterparties to follow an SDR's 
verification policies and procedures in fulfilling their verification 
responsibilities, including analyzing and responding to open swaps 
reports. These corresponding requirements would help ensure that 
reporting counterparties respond to the open swaps reports in a timely 
and efficient manner, such that SDRs can fulfill their responsibilities 
under proposed Sec.  49.11(c).
    The Commission also clarifies that, given the separate proposed 
companion requirements for reporting counterparties, an SDR would not 
be responsible for failing to satisfy the requirements of Sec.  49.11 
in the instance where an SDR made a full, good-faith effort to comply 
with proposed Sec.  49.11, and followed its policies and procedures 
created pursuant to proposed Sec.  49.11 in doing so, but was prevented 
from fulfilling the requirements because of a reporting counterparty 
failing to meet its responsibilities to respond to the open swaps 
report as required under proposed Sec.  45.14(a). In such a situation, 
the reporting counterparty would be held responsible for its failure to 
satisfy the requirements of proposed Sec.  45.14.

[[Page 21055]]

7. Amending Verification Policies and Procedures--Proposed Sec.  
49.11(d)
    Proposed Sec.  49.11(d) would require SDRs to comply with the 
requirements under part 40 of the Commission's regulations when 
adopting or amending their verification policies and procedures.\95\
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    \95\ Verification policies and procedures would be considered 
``rules'' for the purposes of part 40 requirements. See 17 CFR 40.1, 
40.5, and 40.6 (containing the filing and review provisions 
applicable to rules under the Commission's regulations).
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    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.11. The Commission also invites specific comment 
on the following:
    (2) Is the Commission's proposed approach, which does not involve 
non-reporting counterparties in the verification process, an effective 
approach to verification? Why or why not? Are there additional benefits 
or costs to involving non-reporting counterparties in the verification 
process that have not been considered? Please be specific.
    (3) Should the Commission be more prescriptive in how the SDRs must 
distribute the open swaps reports to reporting counterparties pursuant 
to proposed Sec.  49.11(b)? If so, what should be the requirements 
included in the prescribed approach? Please be specific.
    (4) Should the Commission be more prescriptive for the distribution 
timing and formatting for the open swaps reports the SDRs would provide 
to the reporting counterparties pursuant to proposed Sec.  49.11(b)(2) 
and (3)? If so, what should be the requirements in the prescribed 
approach? Please be specific.
    (5) Should the Commission prescribe any aspect of how SDRs must 
receive verifications of accuracy or notices of discrepancy pursuant to 
proposed Sec.  49.11(c)? If so, what should be the requirements in the 
prescribed approach? Please be specific.
    (6) Should the Commission require the verification of all swap data 
messages, as opposed to open swaps reports? Please explain why or why 
not. If so, what would be the costs and benefits associated with 
requiring the verification of all swap data messages? Please be 
specific.
    (7) Should the Commission require verification of open swaps 
reports more or less frequently than weekly for reporting 
counterparties that are SDs, MSPs, or DCOs? If so, please explain why 
and suggest a more appropriate verification frequency.
    (8) Should the Commission require verification of open swaps 
reports more or less frequently than monthly for reporting 
counterparties that are not SDs, MSPs, or DCOs? If so, please explain 
why and suggest a more appropriate verification frequency.
    (9) Should reporting counterparties also be required to verify the 
completeness and accuracy of swap transaction and pricing data 
submitted pursuant to part 43? Please explain why or why not.

H. Sec.  49.12--Swap Data Repository Recordkeeping Requirements

    Current recordkeeping requirements for SDRs are found in Sec. Sec.  
49.12, 45.2(f), and 45.2(g) of the Commission's regulations. Current 
Sec.  49.12 contains recordkeeping requirements for SDRs, which include 
both specific provisions and references to the recordkeeping 
requirements for SDRs included in parts 43 and 45.\96\ The Commission 
is proposing amendments to the SDR recordkeeping rules to clarify 
ambiguities, resolve inconsistencies, and move requirements for SDRs 
currently in part 45 to part 49.
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    \96\ See generally 17 CFR 43.3(h)(4), 17 CFR 45.2.
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    Proposed Sec.  49.12(a) would require that SDRs keep full, 
complete, and systematic records, together with all pertinent data and 
memoranda, of all activities relating to the business of the SDR, 
including, but not limited to, all SDR information and all SDR data 
that is reported to the SDR.
    Proposed Sec.  49.12(b) would specify separate recordkeeping 
requirements for SDR information in proposed Sec.  49.12(b)(1) and SDR 
data reported to the SDR in proposed Sec.  49.12(b)(2). Proposed Sec.  
49.12(b)(1) would require that an SDR maintain all SDR information, 
including, but not limited to, all documents, policies, and procedures 
required to be kept by the Act and the Commission's regulations, 
correspondence, memoranda, papers, books, notices, accounts, and other 
such records made or received by the SDR in the course of its business. 
All SDR information would be maintained in accordance with Sec.  1.31 
of this chapter.
    Proposed Sec.  49.12(b)(2) would require an SDR to maintain all SDR 
data and timestamps reported to or created by the SDR, and all messages 
related to such reporting, throughout the existence of the swap that is 
the subject of the SDR data and for five years following final 
termination of the swap, during which time the records would be readily 
accessible by the SDR and available to the Commission via real-time 
electronic access, and for a period of at least ten additional years in 
archival storage from which such records are retrievable by the SDR 
within three business days.\97\
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    \97\ The propose retention period is the current requirement for 
SDR records retention. See 17 CFR 45.2(g) (requiring that all 
records required to be kept by an SDR be kept readily accessible and 
electronically available to the Commission throughout the existence 
of the swap and for five years after final termination of the swap 
and then kept in archival storage for an additional period of at 
least ten years).
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    Proposed Sec.  49.12(c) would require SDRs to create and maintain 
records of SDR validation errors and SDR data reporting errors and 
omissions. Proposed Sec.  49.12(c)(1) would require an SDR to create 
and maintain an accurate record of all reported SDR data that fails to 
satisfy the SDR's data validation procedures. The records would 
include, but would not be limited to, records of all of the SDR data 
reported to the SDR that failed to satisfy the SDR data validation 
procedures, all SDR validation errors, and all related messages and 
timestamps.
    Proposed Sec.  49.12(c)(2) would require an SDR to create and 
maintain an accurate record of all SDR data errors and omissions 
reported to the SDR and all corrections disseminated by the SDR 
pursuant to parts 43, 45, and 46. SDRs would be required to make the 
records available to the Commission on request.
    The Commission is proposing to amend Sec.  49.12(d) by replacing it 
with a revised version of current Sec.  49.12(c) that would require 
that: (i) All records required to be kept pursuant to part 49 must be 
open to inspection upon request by any representative of the Commission 
or any representative of the U.S. Department of Justice; and (ii) an 
SDR must produce any record required to be kept, created, or maintained 
by the SDR in accordance with Sec.  1.31.
    Finally, the Commission is proposing a technical change to move the 
current requirements of Sec.  49.12(e) to the proposed revised 
requirements of SDRs to monitor, screen, and analyze SDR data in Sec.  
49.13, as discussed further below in section II.I.
    Current Sec.  49.12 \98\ contains recordkeeping requirements for 
SDRs, which include both specific provisions and references to the 
recordkeeping requirements for SDRs included in parts 43 and 45.\99\ 
Current Sec.  49.12(a) requires an SDR to maintain its books and 
records in accordance with the recordkeeping requirements of part 
45.\100\
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    \98\ See 17 CFR 49.12.
    \99\ See generally 17 CFR 49.12, 17 CFR 45.2.
    \100\ The recordkeeping requirements of part 45 for SDRs are 
found in Sec.  45.2(f) and (g). See 17 CFR 45.2(f) and (g).
---------------------------------------------------------------------------

    Current Sec.  49.12(b) requires the SDR to maintain swap data 
(including historical

[[Page 21056]]

positions) throughout the existence of the swap and for five years 
following the final termination of the swap, during which time the 
records must be readily accessible by the SDR, available to the 
Commission via real-time electronic access, and in archival storage 
from which the data is retrievable by the SDR within three business 
days.\101\ Current Sec.  49.12(b) however does not fully account for 
the requirements of Sec.  45.2(g)(2).\102\ Additionally, the sections 
of part 45 applicable to SDRs apply to all records, as opposed to 
current Sec.  49.12(b), which only applies to swap data.
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    \101\ See 17 CFR 49.12(b).
    \102\ Section 45.2(g)(2) requires that all records required to 
be kept by an SDR must be kept in archival storage for ten years 
after the initial Sec.  45.2(g)(1) retention period. Current Sec.  
49.12(b) only includes the initial retention period.
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    Current Sec.  49.12(c) requires all records that are required to be 
kept pursuant to part 49 be open to inspection upon request by any 
representative of the Commission and the U.S. Department of Justice. 
Current Sec.  49.12(c) also requires that copies of all SDR records 
will be provided, at the expense of the SDR or person required to keep 
such records, to any representative of the Commission upon request, 
either by electronic means or in hard copy, or both, as requested by 
the Commission.
    Current Sec.  49.12(d) requires an SDR to comply with the real time 
public reporting and recordkeeping requirements of Sec.  49.15 and part 
43. Current Sec.  49.12(e) requires an SDR to establish policies and 
procedures to calculate positions for position limits and for any other 
purpose as required by the Commission.
    The Commission's proposed amendments to Sec.  49.12(a) incorporate 
the provisions of current Sec.  45.2(f). Current Sec.  49.12(a) implies 
that the recordkeeping requirements only apply to swap data \103\ while 
Sec.  45.2(f) clearly states that its requirements apply to records, 
not only data reported to the SDR.\104\ As discussed in section III.A, 
coupled with the deletion of Sec.  45.2(f) and (g), this amendment 
would reduce confusion that may arise from having separate SDR 
recordkeeping requirements in two different rules. This amendment would 
also clearly state that an SDR is required to keep records beyond just 
the swap data that is reported to the SDR, which is consistent with the 
requirements of current Sec.  45.2(f). The Commission notes that, 
despite the amendment to Sec.  49.12(a), the actual requirements for an 
SDR would remain the same, because the amendments to Sec.  49.12(a) are 
merely reproducing the Sec.  45.2(f) requirements, which have applied 
to SDRs since the effective date for part 45 in 2012.
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    \103\ See 17 CFR 49.12(a) (regarding the swap data required to 
be reported to the swap data repository).
    \104\ See 17 CFR 45.2(f) (Each swap data repository registered 
with the Commission shall keep full, complete, and systematic 
records, together with all pertinent data and memoranda, of all 
activities relating to the business of the swap data repository and 
all swap data reported to the swap data repository, as prescribed by 
the Commission.).
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    The Commission is proposing to amend current Sec.  49.12(b) 
because: (i) Current Sec.  49.12(b) only applies to swap data,\105\ as 
opposed to all records required to be kept by an SDR; \106\ (ii) 
current Sec.  49.12(b) only fully includes the record retention and 
retrieval requirements of Sec.  45.2(g)(1),\107\ though the 
requirements of Sec.  45.2(g)(2) \108\ also apply to all SDR records; 
and (iii) neither current Sec.  49.12(b) nor Sec.  45.2 distinguish 
between records of data related to swaps and other records required to 
be kept by SDRs in regards to the retention periods. Current Sec.  
49.12(b) and Sec.  45.2 use the existence of the swap as the basis for 
the record retention timeframes, but this offers no guidance on how 
long to keep a record of SDR information, such as SDR policies and 
procedures. The Commission proposes to remove these inconsistencies and 
to clarify the scope of SDR recordkeeping, while also consolidating SDR 
recordkeeping obligations in one regulation.
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    \105\ See 17 CFR 49.12(b) (A registered swap data repository 
shall maintain swap data).
    \106\ See 17 CFR 45.2(f) (Stating that SDRs are required to keep 
full, complete, and systematic records, together with all pertinent 
data and memoranda, of all activities relating to the business of 
the swap data repository and all swap data reported to the swap data 
repository).
    \107\ See 17 CFR 45.2(g)(1) (Throughout the existence of the 
swap and for five years following the final termination of the swap, 
during which time the records must be readily accessible by the swap 
data repository and available to the Commission via real time 
electronic access.).
    \108\ See 17 CFR 45.2(g)(2) (Thereafter, for a period of at 
least ten additional years in archival storage from which they are 
retrievable by the swap data repository within three business 
days.).
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    Proposed Sec.  49.12(b)(1) also requires that the SDR information 
be maintained in accordance with Sec.  1.31.\109\ The proposed changes 
to Sec.  49.12(b) would also help harmonize the Commission's 
regulations with the SEC's regulations.\110\ The SDR information listed 
in the proposed changes to Sec.  49.12(b)(1) largely matches the SEC's 
requirement for SBSDR recordkeeping \111\ and the retention provisions 
of Sec.  1.31 of this chapter largely match the requirement for 
SBSDRs.\112\ Further, any SDR that also registers with the SEC as an 
SBSDR would have to comply with Sec.  49.12 and Sec.  240.13n-7, and 
therefore consistency between the recordkeeping provisions would be 
particularly beneficial to these SDRs. The SDR information records 
requirement is also similar to recordkeeping obligations for DCMs,\113\ 
SEFs,\114\ and DCOs.\115\
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    \109\ Section 1.31 of the Commission's regulations is the 
Commission's general recordkeeping provision, which requires, among 
other requirements, that all regulatory records that do not pertain 
to specific transactions and are not retained oral communications be 
kept for no less than five years from the creation date of the 
record. See 17 CFR 1.31(b)(3).
    \110\ The concept of separate recordkeeping requirements for 
information similar to SDR information and for SDR data reported to 
an SDR has already been adopted by the SEC in its regulations 
governing SBSDRs. See 17 CFR 240.13n-7(b) (listing recordkeeping 
requirements for SBSDRs); 17 CFR 240.13n-7(d) (excluding 
``transaction data and positions'' from the recordkeeping 
requirements and instead referring to 17 CFR 240.13n-5 for this 
recordkeeping).
    \111\ See 17 CFR 240.13n-7(b)(1) (Every security-based swap data 
repository shall keep and preserve at least one copy of all 
documents, including all documents and policies and procedures 
required by the Securities Exchange Act and the rules and 
regulations thereunder, correspondence, memoranda, papers, books, 
notices, accounts, and other such records as shall be made or 
received by it in the course of its business as such.).
    \112\ Compare 17 CFR 1.31(b)(3) (A records entity shall keep 
each regulatory record for a period of not less than five years from 
the date on which the record was created.) and 17 CFR 1.31(b)(4) (A 
records entity shall keep regulatory records exclusively created and 
maintained on paper readily accessible for no less than two years. A 
records entity shall keep electronic regulatory records readily 
accessible for the duration of the required record keeping period.) 
with 17 CFR 240.13n-7(b)(2) (Every SBSDR shall keep all such 
documents for a period of not less than five years, the first two 
years in a place that is immediately available to representative of 
the Securities and Exchange Commission for inspection and 
examination.).
    \113\ See 17 CFR 38.951.
    \114\ See 17 CFR 37.1001.
    \115\ See 17 CFR 39.20.
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    By specifically requiring records to be kept for all SDR data 
reported to the SDR, including all timestamps and messages to or from 
the SDR related to the reported SDR data, as opposed to only swap 
data,\116\ and requiring that the records be kept for ten years in 
archival storage,\117\ proposed Sec.  49.12(b)(2) would reorganize 
current Sec.  49.12(b). These ``new'' requirements are however already 
applicable to SDR recordkeeping by virtue of their inclusion in Sec.  
45.2(f) and (g).\118\

[[Page 21057]]

Proposed Sec.  49.12(b)(2) would reproduce the requirements of Sec.  
45.2(f) and (g) in part 49 to minimize the number of regulatory 
sections that contain recordkeeping and retention requirements for 
SDRs.
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    \116\ See 17 CFR 49.12(b) (A registered swap data repository 
shall maintain swap data throughout the existence of the swap and 
for five years following final termination of the swap).
    \117\ Current Sec.  49.12(b) does not specifically include the 
ten-year requirement, though current Sec.  49.12(a) does state that 
books and records must be kept in accordance with the requirements 
of part 45, which does include the ten-year requirement. See 17 CFR 
49.12(a) and (b); 17 CFR 45.2(g)(2).
    \118\ See 17 CFR 45.2(f) and (g). Though the term ``swap data'' 
is defined in Sec.  49.2(a) to mean the specific data elements and 
information set forth in part 45 of this chapter, the Commission 
notes that the term ``swap data'' is not currently defined in part 
45. Section 45.2(f) requires the SDR to keep full, complete, and 
systematic records, together with all pertinent data and memoranda, 
of all activities related to the business of the swap data 
repository and all swap data reported to the swap data repository, 
as prescribed by the Commission. This expansive requirement for 
``all pertinent data and memoranda'' for all activities related to 
the business of the swap data repository and all swap data reported 
to the swap data repository shows that Sec.  45.2(g) requires the 
SDRs to keep records of data from activities beyond reporting 
pursuant to part 45 of this chapter, including, for example, all of 
the required swap transaction and pricing data reporting pursuant to 
part 43 of this chapter. The ``full, complete, and systematic 
records'' that must be kept for ``all activities related to the 
business'' of the SDR also include all messages related to the 
reported data, including all messages sent from the SDR and to the 
SDR. This recordkeeping obligation on SDRs is analogous to 
recordkeeping obligations on DCMs, SEFs, and DCOs. See 17 CFR 
38.950, 37.1001, and 39.20(a).
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    The Commission notes that though the Commission is specifically 
proposing recordkeeping requirements for SDR data validation errors and 
SDR data reporting errors in this proposed Sec.  49.12(c), this would 
not in any way limit the scope of recordkeeping requirements in 
proposed Sec.  49.12 to these records. The recordkeeping discussed in 
proposed Sec.  49.12(c) would also be required under the more general 
recordkeeping provisions of proposed Sec.  49.12.
    The Commission notes that it believes SDRs already receive the data 
validations information that would be required in proposed Sec.  
49.12(c) via regular interaction with SEFs, DCMs, and reporting 
counterparties, but emphasizes that it must be maintained in order to 
allow for assessments of reporting compliance, including the initial 
reporting and the correction of the SDR data. The Commission also notes 
that because the records addressed by proposed Sec.  49.12(c) are all 
comprised of or relate to SDR data reported to SDRs, all records 
created and maintained by the SDR pursuant to proposed Sec.  49.12(c) 
would be subject to the requirements of proposed Sec.  49.12(b)(2).
    The Commission notes that current Sec.  49.12(d) \119\ is redundant 
because its requirements that an SDR comply with the real time public 
reporting and recordkeeping requirements prescribed in Sec.  49.15 and 
part 43 are also required by revised Sec. Sec.  49.12(b)(2) and 49.15, 
as well as part 43. The Commission further notes that though current 
Sec.  49.12(d) is proposed to be removed, SDRs would still be subject 
to the real time public reporting and recordkeeping requirements of 
Sec.  49.15 and part 43.
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    \119\ See 17 CFR 49.12(d) (A registered swap data repository 
shall comply with the real time public reporting and recordkeeping 
requirements prescribed in Sec.  49.15 and part 43 of this 
chapter.).
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    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.12. The Commission also invites specific comment 
on the following:
    (10) Would SDRs be substantially impacted by changing the archival 
storage requirements of current Sec.  45.2(g)(2) and proposed Sec.  
49.12(b)(2) from ten years to a different period of time? If so, what 
would be the correct length of time, and how would this change impact 
the SDRs? Please include specific facts and figures when providing 
comments.

I. Sec.  49.13--Monitoring, Screening, and Analyzing Data

    Section 21(c)(5) of the CEA specifically requires SDRs to, at the 
direction of the Commission, establish automated systems for 
monitoring, screening, and analyzing swap data, including compliance 
and frequency of end-user clearing exemption claims by individuals and 
affiliated entities.\120\ The Commission believes, based on the text of 
section 21(c)(5) of the CEA, that SDRs function not only as 
repositories for swap data, but also as providers of data support for 
the Commission's oversight of swaps markets and swap market 
participants. To implement section 21(c)(5), the Commission adopted 
current Sec.  49.13 and Sec.  49.14.
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    \120\ 7 U.S.C. 24a(c)(5).
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    Current Sec.  49.13 requires SDRs to: (i) Monitor, screen, and 
analyze all swap data in their possession as the Commission may 
require, including for the purpose of any standing swap surveillance 
objectives that the Commission may establish as well as ad hoc 
requests; and (ii) develop systems and maintain sufficient resources as 
necessary to execute any monitoring, screening, or analyzing functions 
assigned by the Commission.
    In the Part 49 Adopting Release, the Commission received comments 
relating to Sec. Sec.  49.13(a) and 49.14 indicating concerns that the 
then-proposed regulations did not sufficiently describe the specific 
tasks SDRs are expected to perform.\121\ In response, the Commission 
specifically stated that its intention in adopting Sec. Sec.  49.13(a) 
and 49.14 was to codify the statutory requirements in CEA section 
21(c)(5) and later establish specific monitoring, screening, and 
analyzing duties when its knowledge of the swaps markets was more 
fully-developed.\122\
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    \121\ See letters from: (1) Americans for Financial Reform on 
February 22, 2011; (2) Chris Barnard on May 25, 2011; (3) Better 
Markets on February 22, 2011; (4) CME Group on February 22, 2011; 
(5) Depository Trust & Clearing Corporation on February 22, 2011; 
(6) Reval on February 18, 2011; (7) SunGard Energy & Commodities on 
February 22, 2011; and (8) TriOptima on February 22, 2011 available 
at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=939.
    \122\ See Part 49 Adopting Release at 54548.
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    The Commission has worked with SDRs to implement the Commission's 
swap reporting regulations since 2011. In that time, SDRs have worked 
with Commission staff to produce reports that enable the Commission to 
perform oversight and monitoring of the swaps market. For instance, 
Commission staff uses the open swaps reports to monitor risk. In 
addition, reports on clearing exception elections provide the 
Commission with information on which entities are claiming exemptions 
from the Commission's mandatory clearing requirement for swaps.
    As noted in the Part 49 Adopting Release, the Commission intended 
to establish specific monitoring, screening, and analyzing duties for 
SDRs separately. The Commission believes that, based on its experience 
working with SDRs to monitor, screen, and analyze swap data as directed 
by CEA section 21(c)(5) thus far, it is prepared to identify the 
specific duties. The Commission expects specifying these topic areas 
would not impose substantial new fixed costs on SDRs because SDRs have 
already established the technology and related infrastructure designed 
to monitor, screen, and analyze data at the request of the Commission 
as required under current Sec.  49.13(a).
    Finally, the Commission notes that the requested tasks would only 
be performed by SDRs to provide the Commission with data and reports 
related to the listed topic areas that would assist the Commission in 
performing its regulatory functions. The Commission would not expect 
SDRs to perform any of the Commission's regulatory functions or to 
provide recommendations to the Commission.
    The Commission proposes to amend Sec.  49.13 to provide more detail 
on the monitoring, screening, and analyzing tasks that SDRs may be 
required to perform as directed by the Commission. The Commission is 
also proposing to amend Sec.  49.13 to make clear that the requirements 
of proposed Sec.  49.13 would apply to SDR data reported to the SDR 
pursuant to parts 43, 45, and 46. CEA section 21(c)(5) requires SDRs to

[[Page 21058]]

establish automated systems for monitoring, screening, and analyzing 
swap data, but the term ``swap data'' is not defined in the CEA. The 
Commission believes that monitoring, screening, and analyzing tasks 
could be incomplete if limited to only swap data, as defined in Sec.  
49.2.\123\
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    \123\ Current and proposed Sec.  49.2 limit ``swap data'' to 
data reported to an SDR pursuant to part 45. See 17 CFR 49.2(a)(15). 
The proposed amendments to Sec.  49.2(a) do not substantively change 
the definition of ``swap data'' for the purposes of part 49.
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    Proposed Sec.  49.13(a) would generally require that an SDR: (i) 
Establish automated systems for monitoring, screening, and analyzing 
all relevant SDR data in its possession in the form and manner as 
directed by the Commission, and (ii) routinely monitor, screen, and 
analyze relevant SDR data at the request of the Commission.\124\
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    \124\ As discussed further below, proposed Sec.  49.13(a) would 
more closely track the language of CEA section 21(c)(5) that 
requires SDRs to at the direction of the Commission, establish 
automated systems for monitoring, screening, and analyzing swap 
data, including compliance and frequency of end-user clearing 
exemption claims by individual and affiliated entities.
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    Proposed Sec.  49.13(a)(1) would require SDRs to utilize relevant 
SDR data maintained by the SDR to provide information to the Commission 
concerning such relevant SDR data. Proposed Sec.  49.13(a)(1) would 
state that monitoring, screening, and analyzing requests may require 
the SDRs to compile and/or calculate the requested information within 
discrete categories, including comparing information among categories, 
and lists potential topics areas for which the Commission could request 
related data and reports: (i) The accuracy, timeliness, and quality of 
SDR data; (ii) updates and corrections to, and verification of the 
accuracy of, SDR data; (iii) currently open swaps and the consistency 
of SDR data related to individual swaps; (iv) the calculation of market 
participants' swap positions, including for purposes of position limit 
compliance, risk assessment, and compliance with other regulatory 
requirements; \125\ (v) swap counterparty exposure to other 
counterparties and standard market risk metrics; (vi) swap valuations 
and margining activities; (vii) audit trails for individual swaps, 
including post-transaction events such as allocation, novation, and 
compression, and all related messages; (viii) compliance with 
Commission regulations; (ix) market surveillance; (x) the use of 
clearing exemptions and exceptions; and/or (xi) statistics on swaps 
market activity.
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    \125\ The Commission notes that the Commission regulations 
currently require SDRs to establish policies and procedures to 
calculate swap positions in Sec.  49.12(e). The Commission is 
proposing to incorporate the current Sec.  49.12(e) into proposed 
Sec.  49.13(a), without substantively modifying the requirements for 
SDRs to calculate swap positions.
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    Proposed Sec.  49.13(a)(2) would state that all monitoring, 
screening, and analyzing requests shall be at the discretion of the 
Commission, which includes, but is not limited to, the content, scope, 
and frequency of each required response, and require that all 
information provided pursuant to a request conform to the form and 
manner requirements established for the request pursuant to proposed 
Sec.  49.30.\126\
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    \126\ The Commission, as discussed below in section II.U, is 
proposing to adopt Sec.  49.30 to establish a ``form and manner'' 
regulation applicable to how information reported to, and maintained 
by, SDRs would be formatted and delivered to the Commission. The 
term ``formatted'' refers to how the information would be presented 
and could include, but is not limited to, attributes such as data 
messaging standards, allowable values, and levels of precision, as 
well as instructions on how the information would be transmitted, 
including, but not limited to, direct electronic access by 
Commission staff or by the SDR sending the information to the 
Commission, and the frequency and timing of delivery.
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    Proposed Sec.  49.13(a)(3) would require that all monitoring, 
screening, and analyzing requests be fulfilled within the time 
specified by the Commission for the particular request.\127\ Proposed 
Sec.  49.13(b) would require that SDRs establish, and at all times 
maintain, sufficient information technology, staff, and other resources 
to fulfill the requirements in Sec.  49.13 in the manner prescribed by 
the Commission.
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    \127\ The Commission anticipates working with the SDRs and 
providing a reasonable time to fulfill each request based on the 
specific circumstances, including the volume of information 
requested and the complexity of the request.
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    The Commission is also proposing to create a new Sec.  49.13(c) 
that would incorporate current Sec.  49.15(c) \128\ but also expand it 
to require SDRs to promptly notify the Commission of any swap 
transaction for which the SDR is aware that it did not receive swap 
data according to part 45, or data according to part 46, in addition to 
the current requirement to notify the Commission of any swap 
transaction and pricing data not received according to part 43.
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    \128\ See 17 CFR 49.15(c) (Duty to Notify the Commission of 
Untimely Data. A registered swap data repository must notify the 
Commission of any swap transaction for which the real-time swap data 
was not received by the swap data repository in accordance with part 
43 of this chapter.). As discussed further below, the Commission 
believes moving Sec.  49.15(c) to Sec.  49.13 would help consolidate 
the information SDRs need to send to the Commission into one part.
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    The Commission is providing the following list of examples of 
monitoring, screening, and analyzing tasks that the Commission could 
request in the future pursuant to proposed Sec.  49.13(a)(1). All of 
the examples would fall under at least one of the topic areas included 
in proposed Sec.  49.13(a)(1). The Commission emphasizes that the 
following list is merely examples, is not exhaustive, and does not 
limit the Commission's ability to request that SDRs perform other 
monitoring, screening, and analyzing tasks that would fall under the 
topics listed in proposed Sec.  49.13(a).
    Examples of potential future monitoring, screening, and analyzing 
activities include reports or information concerning: (i) The reporting 
(or corrected non-reporting) of swap transactions and any subsequent 
changes related to the swap, such as life cycle events, as defined in 
part 45; (ii) the timeliness of reporting through the tracking of 
execution and reporting timestamps; (iii) the altering or amending of 
swap terms after the initial public reporting of the swap transaction 
and pricing data; (iv) the application of the SDR's data validation 
procedures and information regarding data validation errors; (v) the 
identification and treatment of duplicate records; (vi) net and gross 
positions relating to unique product identifiers; (vii) positions of 
swap counterparties on an aggregate basis, including futures-equivalent 
positions identified with the legal entity to which a legal entity 
identifier is assigned; (viii) swap cancellations; (ix) accuracy and 
quality of reported SDR data; and (x) the positions of swap 
counterparties.
    The Commission notes that an information request under Sec.  
49.13(a)(1) could require an SDR to review a market participant's open 
swap positions for swaps where that market participant elected a 
clearing exemption. Such a request would combine categories in Sec.  
49.13(a)(1)(iii) and (x). Proposed Sec.  49.13(a)(1) also states that 
such monitoring, screening, and analyzing requests could require SDRs 
to provide information comparing certain metrics over a period of time. 
For instance, an information request could require SDRs to compare the 
accuracy, timeliness, and quality of SDR data submitted by one or more 
SEFs, DCMs, or reporting counterparties over a defined period of time. 
Finally, information requests could require SDRs to compare two or more 
categories of information across a defined period of time.
    The Commission understands that SDRs can only be expected to 
perform monitoring, screening, and analyzing tasks based on the SDR 
data available to each SDR and that the results of any task would be 
limited to the SDR data for swaps reported to each SDR. The Commission 
also expects that SDRs and Commission staff would work together

[[Page 21059]]

to design each task before a task is prescribed, as is current 
practice.
    Finally, the Commission believes that expanding the notice 
requirements of current Sec.  49.15(c) under new proposed Sec.  
49.13(c) would improve the Commission's ability to monitor compliance 
with its regulations and increase the Commission's ability to 
efficiently respond to compliance issues by helping the Commission 
learn of compliance issues as soon as possible so that the issues can 
be remedied. SDRs are often in the best position to know of non-
compliance with the data reporting requirements because of the 
information they receive from market participants. For example, SDRs 
would quickly know if a reporting counterparty has reported swap data 
pursuant to part 45 in an untimely manner because the SDR receives the 
swap data, including the execution timestamp, and can quickly compare 
when the swap was executed and when the swap data was received. The 
Commission acknowledges that SDRs can only identify and notify the 
Commission of SDR data reporting non-compliance based on the SDR data 
they receive and does not expect SDRs to inform the Commission of 
reporting issues of which they are not aware. Expanding the notice 
requirement to noncompliance with parts 45 and 46 would help the 
Commission to learn of a wider range of compliance issues when they 
first arise, which in turn would help the Commission to work with 
market participants and SDRs to fix issues as quickly as possible.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.13. The Commission also invites specific comment 
on the following:
    (11) Should the Commission require SDRs to calculate positions for 
market participants? Are there technological and/or regulatory 
limitations that would make such tasks difficult to perform and 
unlikely to achieve the desired results? Please be specific.
    (12) Should the SDRs create a process whereby the counterparties 
whose positions have been calculated based on data contained in the SDR 
have the opportunity to review and subsequently challenge and/or 
correct the results? Please explain why or why not.
    (13) Are there specific reports or sets of data that the Commission 
should consider obtaining from SDRs to monitor risk exposures of 
individual counterparties to swap transactions, to monitor 
concentrations of risk exposures, or for other purposes? Please be 
specific.
    (14) Are there specific reports or sets of data that the Commission 
should consider obtaining from SDRs to evaluate systemic risk or that 
could be used for prudential supervision? Are there any other reports 
or sets of data that the Commission should consider obtaining from SDRs 
that would not be included in the categories listed in proposed Sec.  
49.13(a)(1)? Please be specific.
    (15) Are there any other tasks or functions that SDRs could perform 
related to swap data that could help the Commission better assess 
individual market participant risks and market risks generally? Please 
be specific.
    (16) Would any of the specific monitoring, screening, or analyzing 
topic areas enumerated under proposed Sec.  49.13(a)(1) impose new or 
substantial costs on SDRs that are not present under the requirements 
of current Sec.  49.13 and section 21(c)(5) of the CEA? If so, please 
describe and quantify these costs.
    (17) Is it sufficiently clear in this proposal that the Commission 
intends for SDRs to provide data and information under proposed Sec.  
49.13 solely to assist the Commission in performing its regulatory 
functions, rather than expecting SDRs to perform any direct oversight 
of market participants? If not, how should the Commission clarify that 
proposed Sec.  49.13 would require SDRs to provide data and information 
solely to assist the Commission in performing its regulatory functions?

J. Sec.  49.15--Real-Time Public Reporting by Swap Data Repositories

    The Commission proposes to amend Sec.  49.15 to conform to the 
proposed amended definitions in Sec.  49.2 as described in section 
II.A. As discussed above in section II.I, the Commission is also 
proposing to move current Sec.  49.15(c) to Sec.  49.13(c). The 
Commission also proposes to amend current Sec.  49.15(a) and Sec.  
49.15(b) to remove the term ``swap data,'' which is defined as part 45 
data, and replace it with language clarifying that Sec.  49.15 pertains 
to swap transaction and pricing data submitted to a registered SDR 
pursuant to part 43. These non-substantive changes do not affect the 
existing requirements of Sec.  49.15.

K. Sec.  49.16--Privacy and Confidentiality Requirements of Swap Data 
Repositories

    In connection with the proposed amendments to multiple definitions 
in Sec.  49.2,\129\ the Commission proposes to make conforming 
amendments to Sec.  49.16. The Commission proposes to amend Sec.  
49.16(a)(1) to clarify that the policy and procedure requirements of 
Sec.  49.16 apply to SDR information and to any SDR data that is not 
swap transaction and pricing data disseminated under part 43. Such 
policies and procedures must include, but are not limited to, policies 
and procedures to protect the privacy and confidentiality of any and 
all SDR information and all SDR data (except for swap transaction and 
pricing data disseminated under part 43) that the SDR shares with 
affiliates and non-affiliated third parties.
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    \129\ See section II.A above.
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    The Commission is also making conforming amendments related to the 
proposed removal of the term ``reporting entity'' and the proposed 
definitions of ``SDR data'' and ``swap data.''
    The Commission notes that these proposed amendments are non-
substantive and would not affect the existing requirements or 
applicability of Sec.  49.16.

L. Sec.  49.17--Access to SDR Data

    The Commission is proposing to amend Sec.  49.17 to clarify some of 
the regulation's requirements with respect to the Commission's access 
to SDR data. Current Sec.  49.17 sets forth the procedures by which the 
CFTC and other regulators may access SDR data.
1. Direct Electronic Access Definition--Sec.  49.17(b)
    The Commission proposes to amend the Sec.  49.17(b)(3) definition 
of ``direct electronic access'' to mean an electronic system, platform, 
framework, or other technology that provides internet-based or other 
form of access to real-time SDR data that is acceptable to the 
Commission and also provides scheduled data transfers to Commission 
electronic systems.
    Current Sec.  49.17(b)(3) defines direct electronic access as an 
electronic system, platform or framework that provides internet or Web-
based access to real-time swap transaction data and also provides 
scheduled data transfers to Commission electronic systems. Currently, 
Sec.  49.17(b)(3) does not include the possibility of other types of 
technology and does not leave the Commission any discretion over access 
to the data. The Commission believes its proposed changes to the 
definition would allow more flexibility in regards to the potential 
methods and forms of direct electronic access that may be provided to 
the Commission, and would remove any confusion over the type of data to 
which the term ``direct electronic access'' applies.
    The Commission believes that adding ``other technology'' to the 
existing list of methods would make clear that the Commission may 
decide to accept other

[[Page 21060]]

methods of access, as long as the method is able to efficiently provide 
real-time access to SDR data and scheduled SDR data transfers to the 
Commission. The Commission believes flexibility in terms of the 
technology SDRs use to provide direct electronic access could 
accommodate rapid advances in technology and would not inadvertently 
prevent the use of future technological innovations that may provide 
more efficient direct electronic access to SDR data.
    In addition, the Commission proposes to change the current Sec.  
49.17(b)(3) text that provides internet or Web-based access to real-
time swap transaction data to that provides internet-based or other 
forms of access to real-time SDR data. The Commission considers the 
removal of ``Web-based'' to be a non-substantive change, as the term is 
redundant with ``internet-based.'' The addition of ``or other form of 
access'' is, as with the addition of ``other technology,'' intended to 
provide more flexibility for providing direct electronic access to the 
Commission by making clear that the Commission may decide to accept 
other forms of access that are not internet-based, as long as the 
access to SDR data is real-time and provides for scheduled SDR data 
transfers to the Commission.
    The Commission believes that requiring that the method(s) and 
form(s) of direct electronic access be ``acceptable to the Commission'' 
would make it clear that the Commission anticipates working with SDRs 
to decide the acceptable methods and forms of direct electronic access. 
This amendment would codify the Commission's current practice of 
working with SDRs to implement changes, as discussed above in section 
II.E. The Commission and SDRs routinely work together to provide both 
real-time internet-based access to SDR data and scheduled transfers of 
SDR data to the Commission. The Commission believes that the most 
important consideration in whether a form of access may be acceptable 
to the Commission would be whether the Commission can successfully 
utilize the method or form of access. The Commission believes this is 
necessary to help ensure that the direct electronic access provided is 
useful to the Commission and to help ensure that an SDR cannot 
unilaterally change the method or form of direct electronic access in a 
way that may prevent the Commission from performing its regulatory 
functions. Though the Commission intends to be flexible in regards to 
the methods and forms of direct electronic access, especially in the 
context of technological advancement, the Commission believes it is 
important to retain the ability to decide the acceptable methods and 
forms for direct electronic access at its sole discretion.
    Nothing in the proposed revisions to Sec.  49.17(b)(3) would 
prevent the SDRs from incorporating new technology into their systems 
for collecting SDR data or maintaining the SDR data within their own 
systems, as long as the SDR data is collected by the SDRs and provided 
to the Commission as required. The Commission would however expect SDRs 
to provide reporting counterparties with commonly-used methods for 
reporting SDR data to the SDR and not to force reporting counterparties 
to unnecessarily expend resources on the latest technology by 
unreasonably limiting available reporting methods. The Commission would 
also expect SDRs to be particularly accommodating of non-SD/MSP/DCO 
reporting counterparties that may not have the resources to spend on 
technology.
    Finally, the current definition of ``direct electronic access'' 
includes an SDR providing access to ``real-time swap transaction 
data.'' \130\ The correct defined term for the data being referenced is 
``SDR data.'' In order to remove any confusion and increase the 
consistent use of terms, the Commission proposes to remove the word 
``transaction'' and replace ``swap'' with ``SDR'' so that the phrase is 
instead ``real-time SDR data.'' \131\ This non-substantive change does 
not change the current requirements or current SDR practice for 
providing the Commission with direct electronic access to SDR data.
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    \130\ 17 CFR 49.17(b)(3).
    \131\ The Commission notes that the phrase ``real-time'' is 
often used to reference swap transaction and pricing data that is 
publicly reported pursuant to part 43. In this instance, the term 
refers to direct electronic access requiring that SDR data be 
available in real time to the entity granted direct electronic 
access (i.e., the Commission or its designee).
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2. Commission Access--Sec.  49.17(c)
    The Commission proposes to amend Sec.  49.17(c) by incorporating 
the requirements of current Sec.  45.13(a),\132\ along with additional 
clarifications to consolidate the requirements for Commission access to 
SDR data and to describe the SDRs' responsibilities to provide SDR data 
to the Commission. The Commission is also proposing non-substantive 
edits to Sec.  49.17 to conform terms used in the section with the rest 
of the Commission's regulations (e.g., replacing ``swap data and SDR 
Information'' with ``SDR data and SDR Information'').
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    \132\ The Commission is not proposing to modify current Sec.  
45.13(a) in this rulemaking. The Commission expects that subsequent 
rulemakings based on the Roadmap would modify the requirements of 
Sec.  45.13 in ways that are not inconsistent with proposed Sec.  
49.17.
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    Proposed Sec.  49.17(c) would require SDRs to provide access to the 
Commission for all SDR data maintained by the SDR.\133\ Proposed Sec.  
49.17(c) would also incorporate all of the current requirements of 
Sec.  49.17(c)(1). Current Sec.  49.17(c)(1) requires SDRs to provide 
direct electronic access to the Commission or the Commission's 
designee, including another registered entity, in order for the 
Commission to carry out its legal and statutory responsibilities under 
the Act and related regulations. The proposal would retain current 
Sec.  49.17(c)(1) as Sec.  49.17(c) and incorporate a modified version 
of current Sec.  45.13(a).
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    \133\ See 17 CFR 49.17(c)(1) (Direct Electronic Access. A 
registered swap data repository shall provide direct electronic 
access to the Commission or the Commission's designee, including 
another registered entity, in order for the Commission to carry out 
its legal and statutory responsibilities under the Act and related 
regulations.).
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    Specifically, proposed Sec.  49.17(c)(1) would also require SDRs to 
maintain all SDR data reported to the SDR in a format acceptable to the 
Commission, and to transmit all SDR data requested by the Commission to 
the Commission as instructed by the Commission. Proposed Sec.  
49.17(c)(1) would also provide that the instructions may include, but 
are not limited to, the method, timing, and frequency of transmission, 
as well as the format and scope of the SDR data to be transmitted.
    Proposed Sec.  49.17(c)(1) would change the requirements of current 
Sec.  45.13(a) from maintaining and transmitting ``swap data'' to 
maintaining and transmitting ``SDR data,'' to make clear that the SDRs 
must maintain all SDR data reported to the SDRs in a format acceptable 
to the Commission and transmit all SDR data requested by the 
Commission, not just swap data.\134\
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    \134\ The Commission does not believe this revision is a change 
from current SDR practice.
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    Proposed Sec.  49.17(c)(1) would also broaden the requirements of 
current Sec.  45.13(a) from transmit all swap data requested by the 
Commission to the Commission in an electronic file in a format 
acceptable to the Commission \135\ to transmit all SDR data requested 
by the Commission to the Commission as instructed by the Commission, 
and

[[Page 21061]]

explains what these instructions may include.
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    \135\ 17 CFR 45.13(a).
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    The Commission believes that these revisions would make clear that 
the Commission's ability to set the parameters of SDR data transmission 
is not limited to requiring electronic transfers in a particular 
format, as could be inferred from current Sec.  45.13(a).\136\ The 
Commission believes it needs the ability to instruct SDRs as to all 
aspects of SDR data transfers to the Commission. These instructions 
could include, but are not necessarily limited to, method of 
transmission (e.g., electronic or non-electronic transmission and file 
types used for transmission), the timing of data transmission, the 
frequency of data transmission, the formatting of the data to be 
transmitted (e.g., data feeds or batch transmission), and the actual 
SDR data to be transmitted.
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    \136\ See id. (stating that SDRs shall transmit all swap data 
requested by the Commission to the Commission in an electronic file 
in a format acceptable to the Commission.).
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    While these revisions may appear to broaden the scope of the 
Commission's ability to define the terms of data transfer to the 
Commission, current Sec.  45.13(a) gives the Commission broad 
discretion in instructing SDRs on how to send data to the Commission to 
enable the Commission to perform its regulatory functions, increase 
market transparency, and mitigate systemic risk.\137\ Current SDR 
practice also reflects the Commission's wide discretion in instructing 
SDRs in how to send data to the Commission, as the SDRs currently send 
large amounts of data to the Commission on a regular basis in various 
formats, based on instructions provided by the Commission. The 
Commission also believes incorporating the current Sec.  45.13(a) 
requirements in Sec.  49.17(c) would help SDRs by locating more of 
their SDR responsibilities located in part 49.
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    \137\ See Part 45 Adopting Release at 2169 (requiring an SDR to 
maintain all swap data reported to it in a format acceptable to the 
Commission, and to transmit all swap data requested by the 
Commission to the Commission in an electronic file in a format 
acceptable to the Commission); see also Part 49 Adopting Release at 
54552 (stating that the Commission does not believe that SDRs should 
have the discretion or ability to determine the appropriate data 
sets that should be provided to the Commission).
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    Though SDRs may need to update their systems in response to 
changing Commission instructions over time, the Commission expects to 
work with the SDRs to ensure that any changes are practical and 
reasonable, and provide time for the SDRs to adjust their systems.
3. Technical Correction--Sec.  49.17(f)(2)
    The Commission proposes to amend Sec.  49.17 to replace an 
incorrect reference to ``37.12(b)(7)'' at the end of paragraph (f)(2) 
with the correct reference to ``39.12(b)(7)'' of the Commission's 
regulations, as there is no Sec.  37.12(b)(7) in the Commission's 
regulations.\138\ The Commission also proposes non-substantive 
amendments to Sec.  49.17(f)(2) to incorporate proposed changes in 
terminology used in Sec.  49.17(f)(2) in order for the terms used to be 
consistent with the terms listed in proposed Sec.  49.2(a).
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    \138\ See 17 CFR 37.12(b).
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4. Delegation of Authority--Sec.  49.17(i)
    The Commission proposes to move the delegation of authority in 
current Sec.  49.17(i) to Sec.  49.31(a)(7). Current Sec.  49.17(i) 
delegates to the Director of DMO the authority reserved to the 
Commission in current Sec.  49.17. This includes the authority to 
instruct SDRs on how to transmit SDR data to the Commission. As 
discussed further below in section II.V, the Commission is proposing to 
include as many delegations of authority as possible for part 49 in 
proposed Sec.  49.31, including the delegation of authorities reserved 
to the Commission in Sec.  49.17, to improve consistency within the 
part and remove confusion that may arise from listing delegations of 
authority in multiple sections. The Commission emphasizes that this 
change would not affect the current delegation of authority, as all 
functions reserved to the Commission in Sec.  49.17 would still be 
delegated to the Director of DMO in proposed Sec.  49.31.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.17. The Commission also invites specific comment 
on the following:
    (18) Is there a need to further clarify any of the requirements of 
the revised paragraphs of proposed Sec.  49.17? If so, which 
requirements and what information need to be clarified? Please be 
specific.
    (19) Are there any aspects of current or proposed Sec.  49.17 that 
would inhibit or in any way prevent experimentation with or development 
of new technological approaches to SDR operations or providing SDR data 
to the Commission? If so, what are these inhibitors and how can they be 
mitigated?

M. Sec.  49.18--Confidentiality Arrangement

    The Commission is proposing to move the delegation of authority in 
current Sec.  49.18(e) to Sec.  49.31(a)(8). Current Sec.  49.18(e) 
delegates to the Director of DMO all functions reserved to the 
Commission in Sec.  49.18, including the authority to specify the form 
of confidentiality arrangements required prior to disclosure of swap 
data by an SDR to an appropriate domestic or foreign regulator, and the 
authority to limit, suspend, or revoke such appropriate domestic or 
foreign regulators' access to swap data held by an SDR.
    As discussed further below in section II.V, the Commission believes 
market participants would benefit by being able to locate most 
delegations of authority in proposed Sec.  49.31. All functions 
reserved to the Commission in current Sec.  49.18 would continue to be 
delegated to the Director of DMO under this proposed amendment.

N. Sec.  49.20--Governance Arrangements (Core Principle 2)

    The Commission proposes to amend citations to Sec.  49.2 within 
Sec.  49.20 to conform to proposed changes in the numbering of the 
definitions contained in proposed Sec.  49.2, as discussed above in 
section II.A. The Commission also proposes to make conforming changes 
to reflect the proposed changes to definitions in Sec.  49.2. The 
Commission is proposing to amend current citations to Sec.  49.2(a)(14) 
in Sec.  49.20(b)(2)(v) and to Sec.  49.2(a)(1) in Sec.  
49.20(c)(1)(ii)(B) to citations to Sec.  49.2(a). The Commission also 
proposes to update these paragraphs and Sec.  49.20(b)(2)(vii) to 
reflect proposed changes related to the definitions of ``SDR data,'' 
``SDR information,'' ``registered swap data repository,'' and 
``reporting entity.'' These non-substantive changes do not affect the 
existing requirements of Sec.  49.20.

O. Sec.  49.22--Chief Compliance Officer

    The Commission is proposing to amend Sec.  49.22 to clarify 
obligations, make technical corrections and non-substantive changes, 
and remove unnecessary requirements.
    The Commission is proposing to define senior officer in Sec.  
49.22(a) as the chief executive officer or other equivalent officer of 
the SDR.\139\
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    \139\ The Commission notes that this amendment would define a 
term that is currently used throughout Sec.  49.22.
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    Proposed Sec.  49.22(b)(1)(i) would specify that the chief 
compliance officer (``CCO'') of an SDR shall have the authority and 
resources to develop, in consultation with the board of directors or 
senior officer, the policies and procedures of the SDR and enforce such 
policies and procedures to fulfill the

[[Page 21062]]

duties set forth for CCOs in the CEA and Commission regulations.
    Proposed Sec.  49.22(c)(1) would clarify that only the SDR's board 
of directors or senior officer may appoint the CCO, and require that 
SDRs notify the Commission within two business days of the appointment, 
whether interim or permanent. Proposed Sec.  49.22(c)(2) would require 
that the CCO report directly to the board of directors or the senior 
officer of the SDR. Proposed Sec.  49.22(c)(3) would specify that only 
the board of directors or the senior officer may remove the CCO, and 
that the SDR shall notify the Commission within two business days of 
the removal, whether interim or permanent.
    Proposed Sec.  49.22(c)(4) would contain the requirement currently 
found in Sec.  49.22(c)(1) for the CCO to meet with the board of 
directors or senior officer of the SDR at least annually.
    Proposed Sec.  49.22(d)(2) would provide more detail on conflicts 
of interest obligations by making clear that CCOs must take 
``reasonable steps,'' in consultation with the board of directors or 
the senior officer of the SDR, to resolve any ``material'' conflicts of 
interest that may arise, and would no longer list specific types of 
conflicts. Proposed Sec.  49.22(d)(4) would remove an unnecessary 
reference to Sec.  49.18. Proposed Sec.  49.22(d)(5)-(6) would specify 
that SDRs must establish procedures reasonably designed to handle, 
respond, remediate, retest, and resolve noncompliance issues identified 
by the CCO through any means, including any compliance office review, 
look-back, internal or external audit finding, self-reported error, or 
validated compliant, and establish and administer a compliance manual 
designed to promote compliance with the applicable laws, rules, and 
regulations and a written code of ethics for the SDR designed to 
prevent ethical violations and to promote honesty and ethical conduct 
by SDR personnel.
    Proposed Sec.  49.22(e) would streamline, clarify, and rearrange 
the requirements of the SDR annual compliance report. The Commission is 
proposing to streamline and combine current Sec.  49.22(e)(1) and (2) 
into proposed Sec.  49.22(e)(1). The Commission is also proposing to 
remove many of the examples of how material compliance issues can be 
identified from current Sec.  49.22(e)(5) so as not to imply any limits 
on the material compliance matters that must be described. Finally, the 
Commission proposes to add ``in all material aspects'' to the end of 
current Sec.  49.22(e)(6) in proposed Sec.  49.22(e)(5), in order to 
reduce CCOs' concerns with certifying the annual compliance report's 
accuracy.
    Proposed Sec.  49.22(f)(1) would remove the requirement for any 
discussion of the annual compliance report after submission to the 
board of directors or senior officer to be recorded in the board 
minutes or other similar record as evidence of compliance with the 
submission requirement.\140\
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    \140\ The Commission notes that, even with the removal of this 
requirement, the Commission may still require an SDR to provide a 
demonstration of compliance with the requirements of proposed Sec.  
49.22(f) under proposed Sec.  49.29. See section II.T below.
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    Proposed Sec.  49.22(f)(2) would increase the amount of time that 
SDRs have to submit the annual compliance report to the Commission from 
60 days to 90 calendar days after the end of the SDR's fiscal year. As 
discussed above in section II.B, the Commission is also proposing to 
remove the annual amendment requirement in Sec.  49.3(a)(5). The 
Commission is therefore also proposing to remove the reference to Sec.  
49.3(a)(5) from Sec.  49.22(f)(2).
    Proposed Sec.  49.22(f)(3) would include a requirement that, where 
an amendment to the annual compliance report must be submitted to the 
Commission, the CCO also submit the amended annual compliance report to 
the SDR's board of directors or the senior officer.\141\
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    \141\ The Commission is also proposing a change to Sec.  
49.22(f)(3) to correct the inaccurate reference to Sec.  
49.22(e)(67). There is no Sec.  49.22(e)(67) and the proposed 
amendment would instead reference the correct Sec.  49.22(e)(5). 
This technical amendment does not affect the existing requirements 
of Sec.  49.22(f)(3).
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    Proposed Sec.  49.22(f)(4) would allow the Commission to more 
easily grant requests for an extension of time to file the annual 
compliance report by removing the requirement that SDRs must show 
``substantial, undue'' hardship.
    Proposed Sec.  49.22(g) would simplify the language and 
organization of the recordkeeping requirements for records related to 
the SDRs' policies and records created related to the annual compliance 
report, and would no longer contain specific examples of records, but 
would still require the same records be maintained in accordance with 
proposed Sec.  49.12.
    Current Sec.  49.22 sets forth the requirements for SDR CCOs, 
including: Their designation and qualifications; their appointment, 
supervision, and removal; their duties; and their responsibilities with 
respect to the annual compliance report and recordkeeping.
    The Commission believes that the amendments discussed above would 
clarify and streamline the requirements for, and responsibilities of, 
CCOs in a manner that balances the Commission's interest in providing 
CCOs discretion in fulfilling their duties against clearly specifying 
their responsibilities. The large majority of proposed amendments are 
non-substantive changes that would clarify the requirements, simplify 
the wording of the requirements, reorganize the requirements into a 
more logical order, or remove unnecessary text.
    Proposed Sec.  49.22(d)(2) would change the duties for CCOs related 
to conflicts of interest to a more practical requirement. Current Sec.  
49.22(d)(2) implies that a CCO should resolve all conflicts of 
interest, regardless of their potential effect on the operations of the 
SDR.\142\ The Commission does not believe a CCO should be required to 
expend resources to resolve every conceivable conflict of interest that 
may affect an SDR and instead proposes to require CCOs to take 
reasonable steps to resolve any material conflicts of interest that may 
arise. This proposed requirement for taking reasonable steps to resolve 
material conflicts of interest reflects the CCO's practical ability to 
detect and resolve conflicts. Moreover, the proposed amendment reflects 
the Commission's belief that a CCO is well positioned to assess whether 
a potential conflict of interest is material to his or her SDR's 
ability to comply with the Act and the Commission's regulations. The 
Commission believes that proposed Sec.  49.22(d)(2) would allow SDRs to 
address conflicts of interest while mitigating the burdens associated 
with addressing the conflicts.
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    \142\ See 17 CFR 49.22(d)(2) (requiring the CCO to, in 
consultation with the board of directors or senior officer, resolve 
any conflicts of interest that may arise).
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    The Commission notes that, while proposed Sec.  49.22(d)(2) removes 
the three examples of potential conflicts of interest from current 
Sec.  49.22(d)(2)(i)-(iii),\143\ these three examples would still need 
to be addressed if they rise to the level of a material conflict of 
interest.
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    \143\ See id. (including conflicts between (i) business 
considerations and compliance requirements, (ii) business 
considerations and the requirement that the SDR provide fair and 
open access, and (iii) SDR management and members of the SDR's board 
of directors as examples of conflicts of interest to be addressed by 
the SDR's CCO).
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    The Commission also proposes to streamline the requirements on SDRs 
in preparing the annual compliance report in proposed Sec.  
49.22(e)(1). Proposed Sec.  49.22(e)(1) would remove the current Sec.  
49.22(e)(2) \144\ required comparison of all applicable Commission 
regulations and CEA requirements with each SDR

[[Page 21063]]

policy designed to satisfy each requirement and assessment of the 
effectiveness of each policy and areas for improvement. Proposed Sec.  
49.22(e)(1) would replace this requirement with a more targeted 
requirement to describe and assess the effectiveness of SDR policies 
and procedures designed to reasonably ensure compliance with the Act 
and applicable Commission regulations. Based on its experience in 
reviewing annual compliance reports, the Commission believes this more 
targeted requirement would focus on the most important and useful 
information in the annual compliance report and reduce the burden on 
SDRs in creating the assessment for the annual compliance report 
without any detrimental effects on SDR compliance or the Commission's 
ability to perform its oversight functions.
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    \144\ See 17 CFR 49.22(e)(2).
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    The Commission notes that it would also have the ability to request 
copies of any SDR policies and procedures and to request a 
demonstration of compliance with any SDR obligations under the Act or 
Commission regulations under proposed Sec.  49.29.
    The Commission also believes that multiple proposed changes to 
Sec.  49.22(f) would simplify requirements and reduce compliance 
burdens on SDRs related to submitting the annual compliance reports. 
The proposed amendments would remove the requirement to record the 
submission of the annual compliance report and any subsequent 
discussion of the report in the board minutes (proposed Sec.  
49.22(f)(1)) as this requirement would be incorporated into the general 
recordkeeping requirement in proposed Sec.  49.22(g); extend the time 
to submit the annual compliance report to the Commission from 60 to 90 
days (proposed Sec.  49.22(f)(2)) in recognition that the CCO has to 
prepare other year-end reports, such as the fourth quarter financial 
report; and allow reasonable requests for additional time to file an 
annual compliance report to be granted (proposed Sec.  49.22(f)(4)) to 
provide more flexibility. Each of these amendments would simplify 
requirements or reduce compliance burdens on SDRs, without any 
substantial effect on the Commission's ability to oversee SDRs.
    Finally, the Commission notes that the proposed changes to Sec.  
49.22(g) would simplify the wording of the recordkeeping requirement by 
removing the lengthy examples of records to be kept.\145\ This proposed 
change does not, however, in any way limit the records that must be 
preserved under proposed Sec.  49.22(g). All of the records listed in 
current Sec.  49.22(g) would still be required to be kept pursuant to 
proposed Sec.  49.22(g) and proposed Sec.  49.12(b)(1), along with any 
other qualifying records that are not listed.
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    \145\ See 17 CFR 49.22(g).
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    Request for Comment. The Commission requests comment on all aspects 
of the proposed amendments to Sec.  49.22. The Commission also invites 
specific comment on the following:
    (20) Has the Sec.  49.22(b)(2)(ii) prohibition on a CCO also 
serving as an SDR's general counsel or as a member of the SDR's legal 
department presented SDRs with any challenges or raised concerns that 
could be fixed by a change to the prohibition?
    (21) Does proposed Sec.  49.22(d)(2) provide CCOs with sufficient 
clarity as to the conflicts of interest that are within the scope of 
their responsibilities under the proposed rule?
    (22) Does proposed Sec.  49.22(d)(2) provide CCOs with sufficient 
authority to resolve any conflicts of interest that may arise as 
required by section 21(e)(2)(C) of the Act?
P. Sec.  49.24--System Safeguards
    The Commission proposes to make non-substantive amendments to Sec.  
49.24. Current Sec.  49.24(d) governs SDR BC-DR plans, resources, and 
procedures. The proposed amendments to Sec.  49.24 provide more detail 
as to the duties and obligations that SDRs must fulfill by expanding 
the non-exhaustive list of duties and obligations to include specific 
reference to Sec. Sec.  49.10 to 49.21, Sec.  49.23, and Sec. Sec.  
49.25 to 49.27. The Commission emphasizes that this list is provided 
merely for clarity purposes and would not in any way excuse any SDR 
from any of the duties and obligations included in other sections of 
the Commission's regulations. As the duties and obligations of these 
sections currently apply to SDRs and would continue to apply to SDRs, 
this non-substantive change would not affect the requirements 
applicable to SDRs.
    The Commission also proposes to make technical amendments to Sec.  
49.24(i), to remove a reference to Sec.  45.2. As described above in 
section II.H, the Commission is moving the SDR recordkeeping 
requirements contained in current Sec.  45.2(f) and (g) to Sec.  49.12 
for consistence and clarity purposes. This proposed technical change 
would conform Sec.  49.24(i) to the proposed changes to Sec.  45.2 and 
Sec.  49.12, but would not change any of the requirements applicable to 
SDRs.
Q. Sec.  49.25--Financial Resources
    As discussed above in section II.E, the Commission proposes 
conforming changes to Sec.  49.25 to remove the reference to Sec.  49.9 
and to core principle obligations identified in Sec.  49.19. Proposed 
Sec.  49.25(a) would instead refer to SDR obligations under ``this 
chapter,'' to be broadly interpreted as any regulatory or statutory 
obligation specified in part 49. These technical changes do not impact 
existing obligations on SDRs.
    The Commission is proposing one specific change to Sec.  
49.25(f)(3). Current Sec.  49.25(f)(3) requires SDRs to submit their 
financial resources reports no later than 17 business days after the 
end of the SDR's fiscal quarter, or a later time that the Commission 
permits upon request. The Commission is proposing to amend Sec.  
49.25(f)(3) to extend the time SDRs have to submit their quarterly 
financial resources reports to not later than 40 calendar days after 
the end of the SDR's first three fiscal quarters, and not later than 90 
calendar days after the end of the SDR's fourth fiscal quarter, or such 
later time as the Commission may permit in its discretion.
    The Commission believes aligning the 90 calendar day deadline with 
the amended timeframe for SDRs submitting CCO reports in Sec.  
49.22(f)(2) \146\ would help SDRs in planning their yearly compliance 
obligations.
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    \146\ Discussed above in section II.O.
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    Request for Comment. The Commission requests comment on all aspects 
of the proposed amendments to Sec.  49.25.
R. Sec.  49.26--Disclosure Requirements of Swap Data Repositories
    The Commission proposes to amend Sec.  49.26 to conform defined 
terms with the proposed amendments to Sec.  49.2 discussed above in 
section II.A. The Commission also proposes to make updates to the 
introductory paragraph of Sec.  49.26 to reflect updates to the terms 
``SDR data,'' ``registered swap data repository,'' and ``reporting 
entity.'' Current Sec.  49.26 requires SDRs to furnish SEFs, DCMs, and 
reporting counterparties with an SDR disclosure document that sets 
forth the risks and costs associated with using the services of the 
SDR, and contains the information enumerated in Sec.  49.26(a) through 
(i). These non-substantive amendments would not change the current 
requirements of Sec.  49.26.
    The Commission also proposes to add new Sec.  49.26(j), which would 
require that the SDR disclosure document set forth the SDR's policies 
and procedures regarding the reporting of SDR data to the SDR, 
including the SDR data validation procedures, swap data verification 
procedures, and procedures

[[Page 21064]]

for correcting SDR data errors and omissions.
    The Commission believes that Sec.  49.26(j) would assist market 
participants with acquiring information regarding SDR operations that 
would help inform their decision-making in regards to choosing which 
SDRs to use for swaps reporting. Disclosing the SDR data reporting 
policies and procedures, the SDR data validation procedures, the swap 
data verification procedures, and the SDR data correction procedures 
would also increase data quality by helping reduce the number of data 
errors and omissions by providing the SEFs, DCMs, and reporting 
counterparties with the information needed to properly design their 
reporting systems before any reporting occurs. The Commission notes 
that the requirements to provide the policies and procedures for 
reporting, validations, verification, and corrections would apply for 
all SDR data to be reported, as applicable.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.26. The Commission also invites specific comment 
on the following:
    (23) Should the Commission require any other specific information 
be disclosed by SDRs to facilitate market participants' informed 
decision making? If so, please describe what other information should 
be disclosed and why. Please be specific.
S. Sec.  49.28--Operating Hours of Swap Data Repositories
    The Commission is proposing to add new Sec.  49.28 to provide more 
detail on SDRs' responsibilities with respect to hours of operation. 
The proposed amendments reflect the Commission's belief that SDRs 
should operate as continuously as possible while still being afforded 
the opportunity to perform necessary testing, maintenance, and upgrades 
of their systems.
1. General Requirements--Sec.  49.28(a)
    Proposed Sec.  49.28(a) would require an SDR to have systems in 
place to continuously accept and promptly record all SDR data reported 
to the SDR, and, as applicable, publicly disseminate all swap 
transaction and pricing data reported to the SDR as required under part 
43.
    Proposed Sec.  49.28(a)(1) would allow an SDR to establish normal 
closing hours to perform system maintenance during periods when, in the 
SDR's reasonable estimation, the SDR typically receives the least 
amount of SDR data.\147\ Under proposed Sec.  49.28(a)(1), an SDR would 
also have to provide reasonable advance notice of its normal closing 
hours to market participants and to the public.
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    \147\ The Commission notes that this would be a minor change 
from the existing requirements of Sec.  43.3(f)(2), which prescribes 
that SDRs avoiding scheduling closing hours during the time when the 
SDR reasonably estimates that the swaps markets are most active. The 
Commission believes times when SDRs receive less SDR data would be a 
better measure of when to schedule normal closing hours for SDRs.
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    Proposed Sec.  49.28(a)(2) would allow an SDR to declare, on an ad 
hoc basis, special closing hours to perform system maintenance that 
cannot wait until normal closing hours. Similar to proposed Sec.  
49.28(a)(1), proposed Sec.  49.28(a)(2) instructs SDRs to schedule 
special closing hours during periods when, in the SDR's reasonable 
estimation, the special closing hours would, to the extent possible 
given the circumstances prompting the special closing hours, be least 
disruptive to the SDR's SDR data reporting responsibilities. Proposed 
Sec.  49.28(a)(2) would also require the SDRs to provide reasonable 
advance notice of the special closing hours to market participants and 
the public whenever possible, and, if advance notice is not reasonably 
possible, to give notice to the public as soon as is reasonably 
possible after declaring special closing hours.
    Current Sec.  43.3(f) regulates the hours during which SDRs that 
accept and publicly disseminate swap transaction and pricing data must 
operate. Current Sec.  43.3(f) reflects the Commission's beliefs that 
the global nature of the swaps market requires that SDRs be able to 
publicly disseminate swap transaction and pricing data at all times and 
that SDRs that publicly disseminate swap transaction and pricing data 
should generally be fully operational 24 hours a day, 7 days a 
week.\148\ While the Commission strongly encourages SDRs to adopt 
redundant systems to allow public reporting during closing hours, 
current Sec.  43.3(f) allows SDRs to schedule downtime to perform 
system maintenance. Current Sec.  43.3(g) addresses SDRs' obligations 
regarding swap transaction and pricing data sent to an SDR for publicly 
reportable swap transactions during closing hours.
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    \148\ See Real-Time Public Reporting of Swap Transaction Data, 
77 FR 1182, 1204 (Jan. 9, 2012) (The Commission agrees that the 
global nature of the swaps market requires that an SDR be able to 
publicly disseminate swap transaction and pricing data at all times 
and believes that SDRs that publicly disseminate swap transaction 
and pricing data should be fully operational 24 hours a day, 7 days 
a week.).
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    The Commission proposes to include the requirements of current 
Sec.  43.3(f) and Sec.  43.3(g) in proposed Sec.  49.28 and to expand 
the operating hours requirement beyond public reporting of swap 
transaction and pricing data to also explicitly include fulfilling an 
SDR's responsibilities under parts 45, 46, and 49. This proposed change 
is intended to make clear that the obligations of SDRs to operate near 
continuously is not limited to the receipt and dissemination of swap 
transaction and pricing data pursuant to part 43, but instead SDRs must 
be able to continuously perform all of their data-related 
responsibilities required under the Commission's regulations.
    The Commission also believes that it would help SDRs and market 
participants to move all SDR operating hours requirements to part 49. 
The proposed requirements discussed above would also include many of 
the requirements of the SEC's operating hours regulations governing 
SBSDRs to increase consistency between the regulations for SDRs and 
SBSDRs.\149\
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    \149\ The SEC's operating hours regulations are contained in 17 
CFR 242.904. While current Sec.  43.3(f) allows SDRs to schedule 
closing hours while avoiding the times that, in an SDR's estimation, 
U.S. markets and major foreign markets are most active, and requires 
the SDRs to provide advance notice of closing hours to market 
participants and the public, current Sec.  43.3(f) does not make a 
distinction between regular closing hours and special closing hours. 
The distinction is present, however, in operating hours requirements 
for SBSDRs, and proposed Sec.  49.28(a)(1)-(2) would largely adopt 
the SBSDR requirement. These requirements would make clear that an 
SDR may establish both normal and special closing hours and would 
allow an SDR that also registers with the SEC as an SBSDR to 
effectively follow the same operating hours requirements.
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2. Part 40 Requirement for Closing Hours--Sec.  49.28(b)
    Proposed Sec.  49.28(b) would require SDRs to comply with the 
requirements under part 40 of the Commission's regulations when 
adopting or amending normal closing hours and special closing 
hours.\150\ The Commission anticipates that, due to the unexpected and 
emergency nature of special closing hours, rule filings related to 
special closing hours would typically qualify for the emergency rule 
certification provisions of Sec.  40.6(a)(6).\151\ This requirement is 
already applicable to SDRs pursuant to current Sec.  43.3(f)(3).\152\
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    \150\ Closing hours would be considered ``rules'' for the 
purposes of part 40 requirements. See 17 CFR 40.1, et. seq.
    \151\ See 17 CFR 40.6(a)(6) (containing the requirements for 
establishing standards for responding to an emergency and for 
emergency rule filings); see also 17 CFR 40.1(h) (defining 
``emergency'' for the purposes of part 40).
    \152\ See 17 CFR 43.3(f)(3) (A registered swap data repository 
shall comply with the requirements under part 40 of this chapter in 
setting closing hours and shall provide advance notice of its 
closing hours to market participants and the public.).

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[[Page 21065]]

3. Acceptance of SDR Data During Closing Hours--Sec.  49.28(c)
    Proposed Sec.  49.28(c) would require an SDR to have the capability 
to accept and hold in queue any and all SDR data reported to the SDR 
during normal closing hours and special closing hours. The Commission 
believes this requirement would help to avoid the loss of any SDR data 
that is reported to an SDR during closing hours and to facilitate the 
SDR's prompt fulfillment of its data reporting responsibilities, 
including public dissemination of swap transaction and pricing data, as 
applicable, once the SDR reopens from closing hours. Proposed Sec.  
49.28(c) would expand the similar existing requirements for swap 
transaction and pricing data in Sec.  43.3(g)\153\ to all SDR data and 
would largely follow the SBSDR requirements to receive and hold in 
queue information regarding security-based swaps.\154\
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    \153\ See 17 CFR 43.3(g) (During closing hours, a registered 
swap data repository shall have the capability to receive and hold 
in queue any data regarding publicly reportable swap transactions 
pursuant to this part.).
    \154\ See 17 CFR 242.904(c) (During normal closing hours, and to 
the extent reasonably practicable during special closing hours, a 
registered security-based swap data repository shall have the 
capability to receive and hold in queue information regarding 
security-based swaps that has been reported pursuant to Sec. Sec.  
242.900 through 242.909.).
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    Proposed Sec.  49.28(c)(1) would require an SDR, on reopening from 
normal or special closing hours, to promptly process all SDR data 
received during the closing hours and, pursuant to part 43, to publicly 
disseminate swap transaction and pricing data reported to the SDR that 
was held in queue during the closing hours. Proposed Sec.  49.28(c)(1) 
would expand the similar existing requirements for the SDRs to 
disseminate swap transaction and pricing data pursuant to Sec.  
43.3(g)(1) \155\ to also include the prompt processing of all other SDR 
data received and held in queue during closing hours. The proposed 
requirements would also largely follow the SBSDR requirements for 
disseminating transaction reports after reopening following closing 
hours.\156\
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    \155\ See 17 CFR 43.3(g)(1) (Upon reopening after closing hours, 
a registered swap data repository shall promptly and publicly 
disseminate the swap transaction and pricing data of swaps held in 
queue, in accordance with the requirements of this part.).
    \156\ See 17 CFR 242.904(d) (When a registered security-based 
swap data repository re-opens following normal closing hours or 
special closing hours, it shall disseminate transaction reports of 
security-based swaps held in queue, in accordance with the 
requirements of Sec.  242.902.).
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    The Commission believes SDR closing hours should disrupt the data 
reporting process as little as possible, and therefore believes that 
the SDRs should be responsible for receiving, holding, and then 
disseminating SDR data as required, as opposed to disrupting the 
reporting systems of SEFs, DCMs, and reporting counterparties.
    Proposed Sec.  49.28(c)(2) would require SDRs to immediately issue 
notice to all SEFs, DCMs, reporting counterparties, and the public in 
the event that an SDR is unable to receive and hold in queue any SDR 
data reported during normal closing hours or special closing hours. 
Proposed Sec.  49.28(c)(2) would also require SDRs to issue notice to 
all SEFs, DCMs, reporting counterparties, and the public that the SDR 
has resumed normal operations immediately on reopening.\157\ Proposed 
Sec.  49.28(c)(2) would then require a SEF, DCM, or reporting 
counterparty that was not able to report SDR data to an SDR because of 
the SDR's inability to receive and hold in queue any SDR data to 
immediately report the SDR data to the SDR.
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    \157\ Consistent with the current requirements under part 43, an 
SDR may issue such notices to its participants and the public by 
publicizing the notices that the SDR is unable to receive and hold 
in queue any SDR data and that the SDR has resumed normal operations 
in a conspicuous place on the SDR's website. See 77 FR at 1205, n. 
208 (allowing SDRs to provide reasonable advance notice of its 
closing hours to participants and the public by providing notices 
directly to its participants or publicizing its closing hours in a 
conspicuous place on its website).
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    Proposed Sec.  49.28(c)(2) would expand the similar existing 
requirements for swap transaction and pricing data in Sec.  43.3(g)(2) 
\158\ to all SDR data and would largely follow the SBSDR requirements 
to receive and hold in queue information regarding security-based 
swaps.\159\ The Commission emphasizes that it would expect SDRs to be 
able to accept and hold in queue SDR data that is reported during 
closing hours. The inability to accept and hold in queue SDR data would 
need to be a rare occurrence that results from unanticipated emergency 
situations. The provisions in Sec.  49.28(c)(2) would only be included 
as a last resort to prevent data loss.
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    \158\ See 17 CFR 43.3(g)(2) (If at any time during closing hours 
a registered swap data repository is unable to receive and hold in 
queue swap transaction and pricing data pursuant to this part, then 
the registered swap data repository shall immediately upon reopening 
issue notice that it has resumed normal operations. Any registered 
swap execution facility, designated contract market or reporting 
party that is obligated under this section to report data to the 
registered swap data repository shall report the data to the 
registered swap data repository immediately after receiving such 
notice.).
    \159\ See 17 CFR 242.904(e) (If a registered security-based swap 
data repository could not receive and hold in queue transaction 
information that was required to be reported pursuant to Sec. Sec.  
242.900 through 242.909, it must immediately upon re-opening send a 
message to all participants that it has resumed normal operations. 
Thereafter, any participant that had an obligation to report 
information to the registered security-based swap data repository 
pursuant to Sec. Sec.  242.900 through 242.909, but could not do so 
because of the registered security-based swap data repository's 
inability to receive and hold in queue data, must promptly report 
the information to the registered security-based swap data 
repository.).
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    Though proposed Sec.  49.28 would apply to all SDR data, as opposed 
to only swap transaction and pricing data reported pursuant to part 43, 
the Commission believes that proposed Sec.  49.28 would have little 
impact on the operations of SDRs. Proposed Sec.  49.28 largely 
encompasses the requirements of current Sec.  43.3(f) and (g), which 
already apply to SDRs, and the sections that largely conform to SEC 
regulations governing SBSDRs would allow an SDR that also registers 
with the SEC as an SBSDR to effectively comply with one set of 
regulations. The Commission also understands that SDRs currently 
routinely receive and hold in queue all SDR data submitted during 
declared SDR closing hours, regardless of whether that data is being 
submitted pursuant to part 43 or another Commission regulation. As a 
result, the Commission believes that expanding the operating hours 
requirements to all SDR data would have little practical impact on 
current SDR operations.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.28. The Commission also invites specific comment 
on the following:
    (24) Does proposed Sec.  49.28 provide SDRs sufficient flexibility 
to conduct necessary maintenance on their electronic systems while 
still facilitating the availability of SDR data for the Commission and 
the public? Please be specific.

T. Sec.  49.29--Information Relating to Swap Data Repository Compliance

    The Commission is proposing to add new Sec.  49.29 to provide for 
information requests from the Commission to SDRs regarding information 
the Commission needs to perform its duties and regarding SDR compliance 
with regulatory duties and core principles.
    Proposed Sec.  49.29(a) would require SDRs, upon request by the 
Commission, to file certain information related to its business as an 
SDR or other such information as the Commission determines to be 
necessary or appropriate for the Commission to perform its regulatory 
duties. The SDRs would be required to provide the requested information 
in the form and

[[Page 21066]]

manner and within the time specified by the Commission in its request.
    Proposed Sec.  49.29(b) would require SDRs, upon request by the 
Commission, to demonstrate compliance with their obligations under the 
CEA and Commission regulations, as specified in the request. The 
Commission notes that the requests may include, but are not limited to, 
demonstrating compliance with the core principles applicable to SDRs 
under section 21(f) of the CEA and part 49. SDRs would be required to 
provide the requested information in the form and manner and within the 
time specified by the Commission in its request.
    The Commission notes that these requests may be made for any 
Commission oversight purpose. For example, the Commission may request 
SDRs to provide information relating to their operations or their 
practices in connection with their compliance with particular 
regulatory duties and core principles, other conditions of their 
registration, or in connection with the Commission's general oversight 
responsibilities under the CEA. Proposed Sec.  49.29 is based on 
existing Commission requirements applicable to SEFs and DCMs.\160\
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    \160\ See, e.g., 17 CFR 37.5 and 38.5.
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    The Commission notes that proposed Sec.  49.29 facilitates the 
removal of the requirement for annual Form SDR updates from Sec.  
49.3(a)(5), as the Commission would be able to request the same 
information that would be contained in Form SDR and its exhibits as 
needed without the need for a regular full Form SDR update.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.29.

U. Sec.  49.30--Form and Manner of Reporting and Submitting Information 
to the Commission

    The Commission is proposing to add new Sec.  49.30 to place the 
various requirements for form and manner requests to SDRs from the 
Commission in one section. The proposed changes to part 49 of the 
Commission's regulations set forth in this proposal contain various 
regulatory provisions that would require SDRs to provide reports and 
other information to the Commission in ``the form and manner'' 
requested or directed by the Commission. In particular, proposed 
Sec. Sec.  49.13(a) and 49.29 would require SDRs to provide reports and 
certain other information to the Commission in the ``form and manner'' 
requested or directed by the Commission.
    Proposed Sec.  49.30 would establish the broad parameters of the 
``form and manner'' requirement. Unless otherwise instructed by the 
Commission, an SDR would have to submit SDR data reports and any other 
information required under part 49 to the Commission, within the time 
specified, using the format, coding structure, and electronic data 
transmission procedures approved in writing by the Commission. The 
``form and manner'' requirement proposed in Sec.  49.30 would not 
supplement or expand upon existing substantive provisions of part 49, 
but instead, would only allow the Commission to specify how existing 
information reported to, and maintained by, SDRs should be formatted 
and delivered to the Commission.
    Proposed Sec.  49.30 provides that the Commission would specify, in 
writing, the format, coding structure, and electronic data transmission 
procedures for various reports and submissions that are required to be 
provided to the Commission under part 49. The Commission notes that 
these written instructions would include the most recent, and any 
future, ``guidebooks'' or other technical specifications published on 
the Commission's website, as applicable.\161\
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    \161\ The Commission's current published ``guidebooks'' include 
those published for reporting required by parts 15, 16, 17, 18, and 
20 of the Commission's regulations relating to ownership and control 
reports, large traders reports, and data reporting. These guidebooks 
are available on the Commission's website at https://www.cftc.gov/Forms/index.htm.
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    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  49.30. The Commission also invites specific comment 
on the following:
    (25) Should the Commission provide a single format or coding 
structure for each SDR to deliver reports and other information in a 
consistent manner? Are existing standards and formats sufficient for 
providing the Commission with requested information? Please explain why 
or why not.
    (26) Should the Commission require specific electronic data 
transmission methods and/or protocols for SDRs to disseminate reports 
and other information to the Commission? Please explain why or why not.

V. Sec.  49.31--Delegation of Authority to the Director of the Division 
of Market Oversight Relating to Certain Part 49 Matters

    The Commission is proposing to add new Sec.  49.31 to consolidate 
delegations of authority for part 49. Current part 49 and many 
amendments to part 49 proposed in this release include provisions that 
require SDRs to perform various functions at the request of the 
Commission or to provide information as prescribed by the Commission or 
as instructed by the Commission. The Commission proposes to delegate 
the authority to exercise most of the listed part 49 functions to the 
Director of DMO to facilitate the Commission's ability to respond to 
changes in the swaps market and technological developments, and to 
ensure the Commission's ability to quickly and efficiently access 
information and data from the SDRs in order to efficiently fulfill its 
market surveillance responsibilities and other regulatory obligations.
    The Commission is proposing to delegate the functions in the below 
current and proposed regulations to the Director of DMO, and to such 
members of the Commission's staff acting under his or her direction as 
he or she may see fit from time to time.
    Proposed Sec.  49.31(a)(1) would delegate to the Director of DMO 
the authority to request documentation related to an SDR equity 
interest transfer pursuant to Sec.  49.5.\162\
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    \162\ See section II.C above.
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    Proposed Sec.  49.31(a)(2) would delegate to the Director of DMO 
the authority to instruct SDRs on how to transmit open swaps reports to 
the Commission pursuant to Sec.  49.9.\163\
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    \163\ See section II.E above.
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    Proposed Sec.  49.31(a)(3) would delegate to the Director of DMO 
the authority to modify the requirement for an SDR to accept all data 
from all swaps in an asset class once the SDR includes the asset class 
in its application for registration pursuant to Sec.  49.10.\164\
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    \164\ See section II.F above.
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    Proposed Sec.  49.31(a)(4) would delegate to the Director of DMO 
the authority to request records pursuant to Sec.  49.12.\165\
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    \165\ See section II.H above.
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    Proposed Sec.  49.31(a)(5) would delegate to the Director of DMO 
the authority to request SDRs monitor, screen, and analyze SDR data 
pursuant to Sec.  49.13.\166\
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    \166\ See section II.I above.
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    Proposed Sec.  49.31(a)(6) would delegate to the Director of DMO 
the authority to request SDRs disclose aggregated SDR data in the form 
and manner prescribed by the Commission pursuant to Sec.  49.16.\167\
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    \167\ See section II.K above.
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    Proposed Sec.  49.31(a)(7) would delegate to the Director of DMO 
the authority to prescribe the form of direct electronic access that 
SDRs make available to the Commission, prescribe the format by which 
SDRs maintain SDR data, to request SDRs transmit SDR data to the

[[Page 21067]]

Commission, and to instruct SDRs on transmitting SDR data to the 
Commission pursuant to Sec.  49.17.\168\
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    \168\ See section II.L above.
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    Proposed Sec.  49.31(a)(8) would delegate to the Director of DMO 
the authority to permit SDRs to accept alternative forms of 
confidentiality arrangements and the ability to direct SDRs to limit, 
suspend, or revoke access to swap data pursuant to Sec.  49.18.\169\
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    \169\ See section II.M above.
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    Proposed Sec.  49.31(a)(9) would delegate to the Director of DMO 
the authority to grant extensions to the annual compliance report 
deadline pursuant to Sec.  49.22.\170\
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    \170\ See section II.O above.
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    Proposed Sec.  49.31(a)(10) would delegate to the Director of DMO 
the authority to require SDRs to exercise emergency authority or 
provide the documentation underlying an SDR's decision to exercise its 
emergency authority pursuant to Sec.  49.23.\171\
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    \171\ See 17 CFR 49.23.
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    Proposed Sec.  49.31(a)(11) would delegate to the Director of DMO 
the authority to determine an SDR to be a ``critical SDR'' and to 
request copies of BC-DR books and records, assessments, test results, 
plans, and reports pursuant to Sec.  49.24.\172\
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    \172\ See 17 CFR 49.24.
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    Proposed Sec.  49.31(a)(12) would delegate to the Director of DMO 
the authority to determine the amount, value, and types of financial 
resources SDRs must maintain to perform their statutory duties set 
forth in part 49 and request reports of financial resources pursuant to 
Sec.  49.25.\173\
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    \173\ See 17 CFR 49.25.
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    Similar to provisions relating to demonstrations of compliance by 
SEFs,\174\ proposed Sec.  49.31(a)(13) would delegate to the Director 
of DMO the authority to request information from SDRs related to their 
business as SDRs or information the Commission determines is necessary 
or appropriate to perform its statutory and regulatory responsibilities 
in the form and manner specified by the Commission, as well as written 
demonstrations of compliance by in the form and manner specified by the 
Commission pursuant to Sec.  49.29.\175\
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    \174\ See 17 CFR 37.5 (containing requirements for 
demonstrations of compliance by SEFs and delegating the authority 
contained in the section to the Director of DMO).
    \175\ See section II.T above.
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    Proposed Sec.  49.31(a)(14) would delegate to the Director of DMO 
the authority to establish such format, coding structure, and 
electronic data transmission procedures for SDR data reports and any 
other information required by the Commission under part 49 pursuant to 
Sec.  49.30.\176\
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    \176\ See section II.U above.
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III. Proposed Amendments to Part 45

A. Sec.  45.2--Swap Recordkeeping

    The Commission is proposing a non-substantive change to remove 
current Sec.  45.2(f) and (g). Current Sec.  45.2 lists the general 
recordkeeping requirements of part 45, with Sec.  45.2(f) and (g) 
applying specifically to SDRs.\177\ Current Sec.  45.2(f) contains the 
SDR recordkeeping requirements and current Sec.  45.2(g) includes the 
SDR record retention requirements.
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    \177\ See generally 17 CFR 45.2.
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    Part 45 generally focuses on duties to report swap data to SDRs, 
while part 49 addresses obligation of SDRs. Part 49 is therefore the 
more logical location for SDR recordkeeping requirements. As described 
above, the Commission is proposing to expand on the SDR recordkeeping 
requirements in Sec.  49.12, which includes incorporating the 
requirements of current Sec.  45.2(f) and (g), among other 
amendments.\178\ Current Sec.  45.2(f) and (g) would be redundant, as 
their provisions are subsumed in proposed Sec.  49.12, and keeping the 
paragraphs in part 45 could cause confusion as to the recordkeeping 
requirements that apply to SDRs. The Commission notes that all of the 
actual requirements contained in current Sec.  45.2(f) and (g) would 
continue to apply to SDRs, because the requirements are included in 
proposed Sec.  49.12.
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    \178\ See section II.H above.
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B. Sec.  45.14--Verification of Swap Data Accuracy and Correcting 
Errors and Omissions in Swap Data

    The Commission is proposing to amend Sec.  45.14 to facilitate the 
verification of swap data by reporting counterparties and to simplify 
and improve the requirements for correcting errors and omissions in 
swap data previously reported or erroneously not reported as required 
by Commission regulations. As discussed above in section II.G, the 
Commission is also amending the SDRs' responsibilities to verify the 
accuracy and completeness of swap data reported to SDRs. The Commission 
believes that revised Sec.  49.11 and proposed Sec.  45.14(b) would 
provide SDRs, swap counterparties, SEFs, and DCMs with a clear 
understanding of their respective responsibilities in having errors or 
omissions in swap data corrected.
1. Verification of Swap Data Accuracy to a Swap Data Repository--Sec.  
45.14(a)
    The Commission is proposing to move the requirements in current 
Sec.  45.14(a) to Sec.  45.14(b). In its place, the Commission is 
proposing the new requirements for reporting counterparties to verify 
swap data.
    Proposed Sec.  45.14(a) would generally require that reporting 
counterparties verify the accuracy and completeness of swap data for 
swaps for which they are the reporting counterparty.\179\ Proposed 
Sec.  45.14(a)(1) would require that a reporting counterparty reconcile 
its internal books and records for each open swap for which it is the 
reporting counterparty with every open swaps report provided to the 
reporting counterparty by an SDR pursuant to proposed Sec.  49.11. 
Proposed Sec.  45.14(a)(1) would further require that reporting 
counterparties conform to the swap data verification policies and 
procedures created by an SDR pursuant to proposed Sec.  49.11.
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    \179\ This paragraph is the counterpart to the verification 
requirements for SDRs contained in proposed Sec.  49.11. See section 
II.G above. The SDRs would provide their verification policies and 
procedures to their users and potential users pursuant to proposed 
Sec.  49.26(j).
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    Proposed Sec.  45.14(a)(2) would require that reporting 
counterparties submit either a verification of data accuracy or a 
notice of discrepancy in response to every open swaps report received 
from an SDR within the following timeframes: (i) 48 hours of the SDR 
providing the open swaps report if the reporting counterparty is an SD, 
MSP, or DCO; or (ii) 96 hours of the SDR providing the open swaps 
report for non-SD/MSP/DCO reporting counterparties.\180\
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    \180\ As explained above in section II.G, non-SD/MSP/DCO 
reporting counterparties tend to be entities that are less active in 
the swaps markets and tend to have fewer resources that can be 
devoted to regulatory compliance, including verification systems, 
than would be expected for a larger registered entity such as an SD, 
MSP, or DCO. The Commission believes that requiring non-SD/MSP/DCO 
reporting counterparties to respond to an open swaps report within 
96 hours would fulfill the Commission's needs to have swap data 
verified (and corrected, as needed) while also minimizing the burden 
on these reporting counterparties in a way that does not compromise 
swap data or the Commission's ability to perform its regulatory 
functions.
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    Proposed Sec.  45.14(a)(3) would require that, if a reporting 
counterparty finds no discrepancies between the accurate and current 
swap data for a swap according to the reporting counterparty's internal 
books and records and the swap data for the swap contained in the open 
swaps report provided by the SDR, the reporting counterparty submit a 
verification of data accuracy indicating

[[Page 21068]]

that the swap data is complete and accurate to the SDR in the form and 
manner required by the SDR's swap data verification policies and 
procedures created pursuant to Sec.  49.11.
    Finally, proposed Sec.  45.14(a)(4) would require that, if a 
reporting counterparty finds any discrepancy between the accurate and 
current swap data for a swap according to the reporting counterparty's 
internal books and records and the swap data for the swap contained in 
the open swaps report provided by the SDR, including, but not limited 
to, any over-reporting or under-reporting of swap data for any swap, 
the reporting counterparty submit a notice of discrepancy to the SDR in 
the form and manner required by the SDR's swap data verification 
policies and procedures created pursuant to Sec.  49.11.
    The Commission is proposing the new verification rules in Sec.  
45.14(a) to help improve swap data quality by facilitating the 
resolution of any discrepancies between the reporting counterparties' 
records of their open swaps and the swap data maintained by an SDR. The 
Commission believes the most effective way to accomplish verification 
is by having reporting counterparties compare their own records for 
each open swap as of the moment captured in the open swaps report with 
the swap data included for each swap in an open swaps report. The 
Commission believes that these requirements would help ensure that 
reporting counterparties perform the reconciliation promptly and 
provide a response to the SDR, which would ensure that swap data is 
reviewed in a timely manner and that SDRs can fulfill their 
verification responsibilities under proposed Sec.  49.11.
    The Commission notes that a reporting counterparty would be 
required to perform this reconciliation for every open swap included in 
each open swaps report provided to the reporting counterparty by any 
SDR.\181\ The Commission also notes that not receiving an expected open 
swaps report from an SDR that the reporting counterparty believes 
maintains swap data for open swaps for which it is the reporting 
counterparty would constitute an error or omission that the reporting 
counterparty must correct with the SDR pursuant to proposed Sec.  
45.14(b). Likewise, receiving an open swaps report for swaps that are 
no longer open would also constitute an error that would require 
correction under proposed Sec.  45.14(b).
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    \181\ The SDRs would provide open swaps reports to the 
individual reporting counterparties in accordance with the frequency 
and timing requirements included in proposed Sec.  49.11. An entity 
would only be required to verify the accuracy and completeness of 
swap data for open swaps to which it is the reporting counterparty, 
such that if a reporting counterparty did not have any open swaps 
with an SDR, it would not receive an open swaps report from that SDR 
and would not be required to verify swap data with that SDR.
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    The Commission also notes that for all reporting counterparties the 
timing requirement of proposed Sec.  45.14(a) is based on when the SDR 
makes the open swaps report available to the reporting counterparty, 
not when the reporting counterparty receives or accesses the open swaps 
report. A reporting counterparty's failure to receive or access, and 
analyze, an open swaps report that was properly provided by an SDR 
would not excuse the reporting counterparty from the requirements of 
proposed Sec.  45.14(a). This standard would help ensure that reporting 
counterparties maintain properly functioning systems for the timely 
receipt and review of open swaps reports that conform to SDR 
verification policies and procedures.
    The Commission is not proposing a form or manner for the 
verification of data accuracy in proposed Sec.  45.14(a)(3) or the 
notice of discrepancy in proposed Sec.  45.14(a)(4), but is instead 
proposing that the reporting counterparty provide a verification or 
notice that meets the requirements of the SDR's verification policies 
and procedures created pursuant to Sec.  49.11. This requirement would 
help ensure that reporting counterparties provide verifications of data 
accuracy or notices of discrepancy to the SDRs that the SDRs can use to 
complete the verification process. As reporting counterparties already 
report information to SDRs under other Commission regulations, the 
Commission expects that SDRs and reporting counterparties would work 
together to design the method for submitting verifications and 
notifications that is the most efficient and convenient for both 
parties, with particular attention to creating a system that is not 
unnecessarily burdensome for non-SD/MSP/DCO reporting counterparties.
    The Commission notes that the notice of discrepancy is not the 
means by which the reporting counterparty would correct errors or 
omissions in swap data. The process of error correction would be 
governed by proposed Sec.  45.14(b), as discussed below. The notice of 
discrepancy would merely be a notice that the reporting counterparty 
does not believe that one or more elements of swap data contained, or 
missing, in the open swaps report are correct. Finding any discrepancy 
in the swap data would however prompt a reporting counterparty's 
responsibility to correct all discrepancies in the swap data pursuant 
to proposed Sec.  45.14(b).
    The Commission emphasizes the importance of robust and thorough 
verification processes under proposed Sec.  45.14(a). For clarity, 
examples of unsatisfactory verification would include, but are not 
limited to: (i) Failure to perform the verification in a timely manner 
as required by proposed Sec.  45.14(a); and (ii) providing a 
verification of data accuracy indicating that the swap data was 
complete and accurate for swap data that was not correct when verified. 
The Commission would consider any error or omission that reasonably 
could have been discovered during the verification process to have been 
discovered by the reporting counterparty, and therefore providing a 
verification of data accuracy in response to an open swaps report that 
contains an error or omission would not comply with the proposed 
requirements. The Commission also notes that each incorrect 
verification, including the failure to recognize the same error or 
omission in swap data over time and allowing the error or omission to 
persist over multiple open swaps reports and verifications, would also 
not comply with the proposed requirements.
    Finally, the Commission expects that a reporting counterparty 
repeatedly discovering errors or omissions in the open swaps reports, 
especially if there is a discernable pattern in the errors or 
omissions, would prompt the reporting counterparty to evaluate its 
reporting systems to discover any potential systemic errors or 
omissions, including working with the SDR to improve its data 
reporting, as needed. The Commission notes that a pattern of failures 
may implicate other requirements for further action and disclosure of 
non-compliance by registered entities, such as SDs, MSPs, SEFs, DCMs, 
or DCOs.
2. Corrections of Errors and Omissions in Swap Data--Sec.  45.14(b)
    The Commission is proposing amendments to the Sec.  45.14(b) 
requirements for correcting errors and omissions in swap data that was 
previously reported to an SDR or that was not reported as 
required.\182\ These

[[Page 21069]]

error and omission correction requirements are effectively the same as 
the correction requirement in current Sec.  45.14, but the Commission 
is proposing to clarify which entities have the correction reporting 
responsibilities.
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    \182\ The Commission notes that the failure to perform the 
initial reporting of swap data as required under Sec.  45.3 is an 
``omission'' for the purposes of current and proposed Sec.  45.14. 
The omission must be corrected pursuant to the same requirements as 
any other error or omission, regardless of the state of the swap, by 
reporting the swap data as soon as technologically practicable after 
discovery of the failure to report. This includes reporting the 
omitted swap data to the SDR as required by the SDR for an initial 
report of swap data.
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    Proposed Sec.  45.14(b)(1) would require any SEF, DCM, or reporting 
counterparty that by any means becomes aware of any error or omission 
in swap data previously reported to an SDR by the SEF, DCM, or 
reporting counterparty to submit corrected swap data to the SDR.\183\ 
Proposed Sec.  45.14(b)(1) would also require any SEF, DCM, or 
reporting counterparty that by any means becomes aware of any swap data 
not reported to an SDR by the SEF, DCM, or reporting counterparty as 
required to submit corrected swap data to the SDR.\184\ Awareness of 
errors and omissions to be corrected would include, but would not be 
limited to, errors or omissions present in the swap data in the open 
swaps reports provided as part of the verification process specified in 
proposed Sec.  45.14(a).\185\ The error and omission correction 
requirements would apply regardless of the state of the swap, and 
include the correction of swaps that are no longer open or ``alive.''
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    \183\ See 17 CFR 45.14(a) (Each registered entity and swap 
counterparty required by this part to report swap data to a swap 
data repository, to any other registered entity or swap 
counterparty, or to the Commission shall report any errors and 
omissions in the data so reported.).
    \184\ The Commission notes that successful reporting of swap 
data that was not previously reported as required would entail the 
relevant SEF, DCM, or reporting counterparty completing the 
reporting process for the omitted swap data as instructed in the 
relevant SDR's policies and procedures for reporting omitted swap 
data created pursuant to proposed Sec.  49.10(e).
    \185\ This would include any open swaps that should be in the 
open swaps report but were omitted or swaps that are no longer open 
but still remain listed in the report, in addition to any errors or 
omissions in the swap data contained in the report. The requirement 
would also include, for example, a SEF, DCM, or reporting 
counterparty being informed of errors or omissions by an outside 
source, such as a non-reporting counterparty, a SEF or DCM, or the 
Commission; errors or omissions discovered by a SEF, DCM, or 
reporting counterparty during a review of its own records or 
voluntary review of swap data maintained by the SDR, including the 
discovery of any over- or under-reporting of swap data; and the 
discovery of errors or omissions during the investigation of a 
separate issue.
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    Proposed Sec.  45.14(b)(1)(i) would retain the current Sec.  
45.14(a)(2) requirement that SEFs, DCMs, and reporting counterparties 
correct swap data ``as soon as technologically practicable following 
discovery of the errors or omissions,'' but would backstop ``as soon as 
technologically practicable'' for corrections at three business days 
after discovery of the error or omission.
    Proposed Sec.  45.14(b)(1)(ii) would require that if a SEF, DCM, or 
reporting counterparty is unable to correct errors or omissions within 
three business days of discovery, the SEF, DCM, or reporting 
counterparty must immediately inform the Director of DMO, or such other 
Commission employees whom the Director of DMO may designate, in 
writing, of the errors or omissions and provide an initial assessment 
of the scope of the errors or omissions \186\ and an initial 
remediation plan for correcting the errors or omissions.
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    \186\ The Commission anticipates that this would include the 
causes of the errors or omissions, the number of swaps affected, the 
USIs for the affected swaps, and the date range for the affected 
swaps, among other information.
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    Proposed Sec.  45.14(b)(1)(iii) would require that a SEF, DCM, or 
reporting counterparty conform to the SDR's policies and procedures for 
corrections of errors and omissions that the SDRs would be required to 
create under proposed Sec.  49.10.\187\ By following the relevant SDR's 
policies and procedures for swap data correction, provided to users by 
the SDRs pursuant to proposed Sec.  49.26(j), SEFs, DCMs, and reporting 
counterparties would be able to correct swap data with as little effort 
as necessary.
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    \187\ See section II.F above. The Commission expects that SEFs, 
DCMs, reporting counterparties, and SDRs would work together to 
devise effective correction policies, with particular attention paid 
to minimizing the effort needed to correct swap data for non-SD/MSP/
DCO reporting counterparties.
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    Proposed Sec.  45.14(b)(2) would require a non-reporting 
counterparty that by any means becomes aware of any error or omission 
in swap data previously reported to an SDR, or the omission of swap 
data for a swap that was not previously reported to an SDR as required, 
to notify the reporting counterparty for the swap of the errors or 
omissions as soon as technologically practicable following discovery of 
the errors or omissions, but no later than three business days 
following the discovery of the errors or omissions.
    Proposed Sec.  45.14(b)(2) would also specify that a non-reporting 
counterparty that does not know the identity of the reporting 
counterparty for a swap must notify the SEF or DCM where the swap was 
executed of the errors or omissions as soon as technologically 
practicable following discovery of the errors or omissions, but no 
later than three business days after the discovery. Proposed Sec.  
45.14(b)(2) would also require that if the reporting counterparty, SEF, 
or DCM, as applicable, and the non-reporting counterparty agree that 
the swap data for a swap is incorrect or incomplete, the reporting 
counterparty, SEF, or DCM, as applicable, must correct the swap data in 
accordance with proposed Sec.  45.14(b)(1).\188\
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    \188\ This requirement is largely the same as the requirements 
of current Sec.  45.14(b). See 17 CFR 45.14(b) (Upon receiving such 
notice, the reporting counterparty shall report a correction of each 
such error or omission to the swap data repository as provided in 
paragraph (a) of this section.).
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    Current Sec.  45.14(a) generally requires that each registered 
entity and swap counterparty required to report swap data must also 
report any errors and omissions discovered in the swap data as soon as 
technologically practicable after the errors or omissions are 
discovered and contains specific instructions for reporting errors or 
omissions in continuation data reported using the snapshot method.
    Current Sec.  45.14(b) requires the non-reporting counterparty to 
promptly notify the reporting counterparty of any errors or omissions 
and requires the reporting counterparty to correct the errors or 
omissions under the terms of current Sec.  45.14(a).
    Current Sec.  45.14(c) requires: (i) Registered entities or swap 
counterparties to report corrections in the same format as the original 
reporting of the swap data, unless otherwise approved by the 
Commission's Chief Information Officer (``CIO''); and (ii) the SDR to 
transmit the corrections for errors and omissions in swap data in the 
same format used to originally disseminate the swap data, unless 
otherwise approved by the Commission's CIO.
    The Commission is proposing to clarify that swap data must be 
corrected ``regardless of the state of the swap that is the subject of 
the swap data'' so market participants are aware that all incorrect or 
omitted swap data must be corrected, even if the swap that the swap 
data described has been terminated, matured, or otherwise ceased to be 
an open swap. The Commission does not believe this is a new 
requirement, as the current correction requirements of Sec.  45.14 do 
not have time restrictions. Many of the Commission's regulatory 
responsibilities involve using swap data for swaps that were executed 
months or years earlier, including terminated, matured, or otherwise 
no-longer-open swaps. Incorrect swap data for these swaps, or a lack of 
any required reporting, would interfere with the Commission's ability 
to generate holistic, accurate, data-driven policies, analyses, and 
reports.
    The requirement to correct all swap data, regardless of status, 
also helps

[[Page 21070]]

ensure that SEFs, DCMs, and reporting counterparties would establish 
and maintain properly functioning reporting systems to prevent 
reporting errors or omissions, as correcting swap data for swaps, 
including terminated swaps, would require effort that can be avoided by 
initially reporting correct swap data. Proper and thorough system 
design and testing during the implementation process for these proposed 
rules would benefit market participants in the form of less time and 
resources spent on later error and omission corrections. The Commission 
expects that, as swap data reporting improves over time, the resources 
needed to correct swap data would decrease.
    As with the verification requirements discussed above, the 
Commission also expects that a SEF, DCM, or reporting counterparty that 
repeatedly discovers errors or omissions, especially repeated errors or 
omissions that follow a pattern, such as the reporting for a certain 
type of swap regularly resulting in errors, would evaluate its 
reporting systems to discover and correct any issues. This would 
include working with the relevant SDR to address any reporting issues. 
A SEF, DCM, or reporting counterparty that fails to perform such an 
evaluation and improvement in light of repeated errors may not be in 
compliance with the Commission's regulations.
    The Commission is aware that some errors or omissions may not be 
able to be corrected within three business days of discovery, depending 
on the gravity and complexity of the reporting problems. The Commission 
believes having the SEF, DCM, or reporting counterparty notify the 
Commission of such errors and omissions pursuant to proposed Sec.  
45.14(b)(1)(ii), formulate a plan to correct the errors or omissions, 
and perform the corrections as soon as possible would help alert the 
Commission to swap data that is unreliable, particularly if it may be 
unreliable for an extended period of time, and facilitates the fastest 
correction of the swap data. The Commission also believes that the 
requirements of proposed Sec.  45.14(b)(1)(ii) would incentivize SEFs, 
DCMs, and reporting counterparties to fix reporting errors and 
omissions as quickly as possible, and to invest the resources to 
prevent reporting errors and omissions from occurring in the first 
place. The Commission notes that these proposed requirements are 
similar to current industry practice, as SEFs, DCMs, and reporting 
counterparties regularly inform Commission staff of reporting errors or 
omissions and work with Commission staff as they correct the errors and 
omissions, which typically includes detailed remediation plans and 
specific timelines for completion.
    The Commission is retaining the requirement from current Sec.  
45.14(b) that the non-reporting counterparty inform the reporting 
counterparty of the errors or omissions, instead of the non-reporting 
counterparty reporting the errors or omissions itself.\189\ The 
Commission believes that it is not necessary for a non-reporting 
counterparty to undertake reporting corrections to an SDR because the 
non-reporting counterparty is often not a user of the SDR or any SDR, 
and may never serve as a reporting counterparty for swaps. In contrast, 
the reporting counterparties would already be users of the relevant 
SDR, and would have continuation data reporting responsibilities for 
the swap. The reporting counterparty is therefore the logical 
counterparty to perform the error and omission corrections without the 
need for the non-reporting counterparty to expend resources on error 
and omission reporting.
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    \189\ See 17 CFR 45.14(b) (Each counterparty to a swap that is 
not the reporting counterparty . . . and that discovers any error or 
omission with respect to any swap data reported to a swap data 
repository for that swap, shall promptly notify the reporting 
counterparty of such error or omission.).
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    The Commission notes that the proposed requirement for the 
reporting counterparty and non-reporting counterparty to agree that the 
swap data is incorrect or incomplete before the reporting counterparty 
must correct errors discovered by the non-reporting counterparty is 
included in Sec.  45.14(b)(2) to reduce the likelihood of the reporting 
of corrections when there is a legitimate dispute over whether swap 
data contains an error or omission. Neither party may arbitrarily or 
falsely withhold agreement that an error or omission exists, 
particularly if a reporting counterparty is withholding agreement in 
order to avoid its responsibility to correct errors or omissions. The 
parties would be expected to resolve any dispute before the error or 
omission is corrected.
    Similarly, when the non-reporting counterparty does not know the 
identity of the reporting counterparty and instead reports the errors 
or omissions to the SEF or DCM, if the SEF or DCM and the non-reporting 
counterparty agree that the relevant swap data is incorrect or 
incomplete, then the SEF or DCM would correct the errors or omissions 
in accordance with proposed Sec.  45.14(b)(2). Also, no SEF, DCM, or 
non-reporting counterparty may arbitrarily or falsely withhold 
agreement that an error or omission exists, particularly if the SEF or 
DCM is withholding agreement to avoid its responsibility to correct 
errors or omissions. The entities would be expected to resolve any 
dispute with each other before the error or omission is corrected. The 
Commission expects that a SEF of DCM, when necessary, would be capable 
of contacting a reporting counterparty to confirm whether the error or 
omission reported by the non-reporting counterparty exists without 
revealing the identity of the non-reporting counterparty to the 
reporting counterparty.
    The Commission is also proposing to remove the Commission's ability 
under current Sec.  45.14(c) to approve the use of different data 
formats for corrections because the Commission does not believe that 
the use of different data formats for corrections is necessary and 
believes that the possibility adds uncertainty and potential delays to 
the correction process. SEFs, DCMs, reporting counterparties, and SDRs 
are all capable of reporting corrections using the same format as 
initial swap data reporting and would all know the correct format in 
advance of reporting under the requirements of proposed Sec. Sec.  
49.17 \190\ and 49.26(j).\191\ Additionally, proposed Sec.  
45.14(b)(1)(iii) would require SEFs, DCMs, and reporting counterparties 
to report corrections of errors or omissions in conformity with the 
SDR's policies and procedures for correcting errors and omissions 
created pursuant to proposed Sec.  49.10, which would include how to 
properly format swap data in order for the SDR to successfully complete 
the correction process. The Commission believes that this approach 
would be more flexible than the current requirements, as the SDRs would 
be able to require a different format for reporting errors and 
omissions without requiring approval from the Commission.
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    \190\ See section II.L above.
    \191\ See section II.R above.
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    Finally, the current Sec.  45.14(c) requirement for an SDR to 
transmit corrections to errors or omissions in swap data in the same 
format as the SDR typically transmits swap data to the Commission would 
be redundant, because the requirement does still effectively apply to 
all SDRs under proposed Sec.  49.17, which requires SDRs to transmit 
all SDR data requested by the Commission to the Commission as 
instructed by the Commission.\192\
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    \192\ See section II.L above (describing the proposed 
requirements for SDRs to transmit data to the Commission).

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[[Page 21071]]

    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  45.14. The Commission also invites specific comment 
on the following:
    (27) Should the Commission be more prescriptive in how reporting 
counterparties must complete the verification process? If so, please 
describe in detail.

IV. Proposed Amendments to Part 43

A. Sec.  43.3--Method and Timing for Real-Time Public Reporting

1. Correction of Errors and Omissions in Swap Transaction and Pricing 
Data--Sec.  43.3(e)
    The Commission is proposing to amend the error and omission 
correction requirements for swap transaction and pricing data under 
Sec.  43.3(e) to conform with the proposed amendments to Sec.  45.14(b) 
for swap data discussed above in section III.B.
    Proposed Sec.  43.3(e)(1) would require any SEF, DCM, or reporting 
counterparty that by any means becomes aware of any errors or omissions 
in swap transaction and pricing data previously reported to an SDR by 
the SEF, DCM, or reporting counterparty to submit corrected swap 
transaction and pricing data to the SDR. Proposed Sec.  43.3(e)(1) 
would also require any SEF, DCM, or reporting counterparty that by any 
means becomes aware of the omission \193\ of swap transaction and 
pricing data previously not reported to an SDR by the SEF, DCM, or 
reporting counterparty as required, to submit corrected swap 
transaction and pricing data to the SDR.\194\ As with proposed Sec.  
45.14(b), the error and omission correction requirements would apply 
regardless of the state of the swap, and include the correction of 
swaps that are no longer open or ``alive.'' \195\
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    \193\ The Commission notes that the failure to perform the 
initial reporting of swap transaction and pricing data as required 
under current and proposed Sec.  43.3 is an ``omission'' for the 
purposes of both current and proposed Sec.  43.3(e). The omission 
must be corrected pursuant to the same requirements as any other 
error or omission, regardless of the state of the swap, by reporting 
the swap transaction and pricing data as soon as technologically 
practicable after discovery of the failure to report. This includes 
reporting the omitted swap transaction and pricing data to the SDR 
as required by the SDR for an initial report of swap transaction and 
pricing data.
    \194\ The Commission notes that successful reporting of swap 
transaction and pricing data that was erroneously not previously 
reported as required would entail the relevant SEF, DCM, or 
reporting counterparty completing the reporting process for the 
omitted swap data as instructed in the relevant SDR's policies and 
procedures created pursuant to proposed Sec.  49.10(e).
    \195\ This requirement is effectively the same as current Sec.  
43.3(e)(1).
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    Proposed Sec.  43.3(e)(1)(i) would adopt the same timing 
requirements as proposed Sec.  45.14(b)(1)(i) for SEFs, DCMs, and 
reporting counterparties to correct swap transaction and pricing data 
``as soon as technologically practicable following discovery of the 
errors or omissions,'' with a three business day backstop following the 
discovery of the errors or omissions.
    Similar to proposed Sec.  45.14(b)(1)(ii), proposed Sec.  
43.3(e)(1)(ii) would provide that if a SEF, DCM, or reporting 
counterparty is unable to correct the errors or omissions within three 
business days following discovery of the errors or omissions, the SEF, 
DCM, or reporting counterparty must immediately inform the Director of 
DMO, or such other employees of the Commission that the Director of DMO 
may designate, in writing, of such errors or omissions and provide an 
initial assessment of the scope of the errors or omissions \196\ and an 
initial remediation plan for correcting the errors or omissions.\197\
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    \196\ The Commission anticipates that this would include the 
causes of the errors or omissions, the number of swaps affected, the 
USIs for the affected swaps, the date range for the affected swaps, 
among other information.
    \197\ The Commission needs to know as soon as possible if swap 
transaction and pricing data is unreliable, particularly if for an 
extended period of time, so that the Commission may alert the public 
as needed.
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    Proposed Sec.  43.3(e)(1)(iii) would require that a SEF, DCM, or 
reporting counterparty conform to an SDR's policies and procedures for 
corrections of errors and omissions in previously reported swap 
transaction and pricing data and reporting of omitted swap transaction 
and pricing data that the SDRs would be required to create under 
proposed Sec.  49.10.\198\ By following the relevant SDR's policies and 
procedures for swap data correction, which would be provided to users 
by the SDRs pursuant to proposed Sec.  49.26(j), the Commission expects 
that SEFs, DCMs, or reporting counterparties would know how to correct 
swap data before correction is required and would be able to properly 
correct swap data with as little effort as necessary.\199\
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    \198\ See section II.F above.
    \199\ The Commission expects that SEFs, DCMs, reporting 
counterparties, and SDRs would work together to devise effective 
correction policies, with particular attention paid to minimizing 
the effort needed to correct swap data for non-SD/MSP/DCO reporting 
counterparties.
---------------------------------------------------------------------------

    Proposed Sec.  43.3(e)(2) would require a non-reporting 
counterparty that by any means becomes aware of any error or omission 
in swap transaction and pricing data previously reported to an SDR, or 
the omission of swap transaction and pricing data for a swap that was 
not previously reported to an SDR as required, to notify the reporting 
counterparty for the swap of the errors and omissions as soon as 
technologically practicable following discovery of the errors or 
omissions, but no later than three business days following the 
discovery of the errors or omissions.
    Proposed Sec.  43.3(e)(2) would also specify that a non-reporting 
counterparty that does not know the identity of the reporting 
counterparty for a swap must notify the SEF or DCM where the swap was 
executed of the errors and omissions as soon as technologically 
practicable after discovery of the errors or omissions, but no later 
than three business days after the discovery. Proposed Sec.  43.3(e)(2) 
would also require that, if the reporting counterparty, SEF, or DCM, as 
applicable, and the non-reporting counterparty agree that the swap 
transaction and pricing data for a swap is incorrect or incomplete, the 
reporting counterparty, SEF, or DCM, as applicable, must correct the 
swap transaction and pricing data in accordance with proposed Sec.  
43.3(e)(1).
    The Commission believes that the amendments to Sec.  43.3(e) would 
help ensure that errors or omissions in swap transaction and pricing 
data are corrected as soon as possible. The proposed rule would also 
clarify that swap transaction and pricing data must be corrected 
regardless of the state of the swap that is the subject of the swap 
transaction and pricing data to ensure that all incorrect or omitted 
swap transaction and pricing data is corrected, even if the swap that 
the swap transaction and pricing data relates to has been terminated, 
matured, or otherwise ceased to be an open swap. This is not a new 
requirement, as the current correction requirements in Sec.  43.3(e) do 
not have time restrictions. The Commission also believes that proposed 
Sec.  43.3(e) would help ensure that the public has access to the most 
accurate and complete swap transaction and pricing data possible. 
Incorrect swap transaction and pricing data harms market integrity and 
price discovery, long after the swap has been executed.
    The requirement to correct all swap transaction and pricing data, 
regardless of status, also helps ensure that SEFs, DCMs, and reporting 
counterparties would maintain properly functioning reporting systems to 
prevent reporting errors or omissions, as correcting swap transaction 
and pricing data for swaps, including terminated swaps, would require 
effort that can be avoided by initially reporting correct swap 
transaction and pricing data. Proper and

[[Page 21072]]

thorough system design and testing during the implementation process 
for these proposed regulations would benefit market participants in the 
form of less time and resources spent on error corrections in the 
future. The Commission expects that, as data reporting improves over 
time, the resources needed to correct swaps, including swaps that are 
no longer open, would diminish.
    The Commission also notes that the discovery of errors under 
proposed Sec.  43.3(e)(1) includes any errors or omissions revealed 
when reporting counterparties are reconciling swap data during the 
verification process required under proposed Sec.  45.14(a) that would 
also be errors or omissions in swap transaction and pricing data. The 
means of discovery are unlimited, however, and would also include, for 
example, a SEF, DCM, or reporting counterparty being informed of errors 
or omissions by an outside source, such as a non-reporting 
counterparty, an exchange, or the Commission; errors or omissions 
discovered by a SEF, DCM, or reporting counterparty during a review of 
its own records or voluntary review of swap transaction and pricing 
data maintained by the SDR, including the discovery of any over- or 
under-reporting of swap transaction and pricing data; and the of 
discovery of errors or omissions during the investigation of a separate 
issue.
    The Commission expects that a SEF, DCM, or reporting counterparty 
that repeatedly discovers errors or omissions, especially repeated 
errors or omissions that follow a pattern, such as the reporting for a 
certain type of swap regularly resulting in errors, would evaluate its 
reporting systems to attempt to find and promptly correct any issues 
discovered. This would include working with the relevant SDR to address 
any reporting issues. A SEF, DCM, or reporting counterparty that fails 
to perform such an evaluation and improvement in light of repeated 
errors may not be in compliance with the Commission's regulations.
    The Commission is aware that some errors and omissions may not be 
able to be corrected within three business days of discovery. The 
Commission believes having the SEF, DCM, or reporting counterparty 
notify the Commission of such errors and omissions pursuant to proposed 
Sec.  43.3(e)(1)(ii), formulate a plan to correct the errors and 
omissions, and to perform the corrections as soon as possible would 
help alert the Commission to swap transaction and pricing data that is 
unreliable, particularly if it may be unreliable for an extended period 
of time, and facilitates the fastest correction of swap transaction and 
pricing data. The Commission also believes that proposed Sec.  
43.3(e)(1)(ii) would incentivize SEFs, DCMs, and reporting 
counterparties to fix reporting errors and omissions as quickly as 
possible. The Commission notes that these proposed requirements are 
consistent with industry practice, as SEFs, DCMs, and reporting 
counterparties regularly inform Commission staff of reporting errors or 
omissions and work with Commission staff as they correct the errors and 
omissions, which typically includes remediation plans and timelines for 
completion.
    The Commission is proposing to require, as with proposed Sec.  
45.14(b)(2), that the non-reporting counterparty inform the reporting 
counterparty of the errors or omissions. The Commission believes that 
it is not necessary for a non-reporting counterparty to undertake the 
burden of reporting corrections to an SDR because the non-reporting 
counterparty is often not a user of the SDR, and may never serve as a 
reporting counterparty for any swaps. In contrast, reporting 
counterparties would already by definition be users of the relevant 
SDR, and would have continuation data reporting responsibilities for 
the swap. The reporting counterparty is therefore the logical 
counterparty to perform the error and omission corrections without the 
need for the non-reporting counterparty to use additional resources on 
error and omission reporting.
    The Commission notes that the proposed requirement for the 
reporting counterparty and non-reporting counterparty to agree that the 
swap transaction and pricing data is incorrect or incomplete before the 
reporting counterparty must correct errors discovered by the non-
reporting counterparty is included to avoid the reporting of 
corrections when there is a legitimate dispute over whether the swap 
transaction and pricing data contains an error or omission. Neither 
party may arbitrarily or falsely withhold agreement that an error or 
omission exists, particularly if a reporting counterparty is 
withholding agreement in order to avoid its responsibility to correct 
errors or omissions. The parties would be expected to resolve any 
dispute with each other before the error or omission is corrected.
    Similarly, in the instance where the non-reporting counterparty 
does not know the identity of the reporting counterparty and instead 
reports the errors or omissions to the SEF or DCM, if the SEF or DCM 
and the non-reporting counterparty agree that the relevant swap 
transaction and pricing data is incorrect or incomplete, then the SEF 
or DCM must correct the errors or omissions in accordance with proposed 
Sec.  43.3(e)(1). No SEF, DCM, or non-reporting counterparty may 
arbitrarily or falsely withhold agreement that an error or omission 
exists, particularly if the SEF or DCM is withholding agreement to 
avoid its responsibility to correct errors or omissions. The entities 
would be expected to resolve any dispute with each other before the 
error or omissions is corrected. The Commission expects that a SEF or 
DCM, when necessary, would be capable of contacting a reporting 
counterparty to confirm whether the error or omission reported by the 
non-reporting counterparty exists without revealing the identity of the 
non-reporting counterparty to the reporting counterparty.
2. Proposed Deletions--Sec.  43.3(f) and (g)
    The Commission is proposing to delete current Sec.  43.3(f) and 
(g). The Commission is proposing to include the operating hours 
requirements for SDRs in new Sec.  49.28,\200\ which includes 
incorporating the requirements of current Sec.  43.3(f) and (g). 
Current Sec.  43.3(f) contains the hours of operations requirements 
\201\ and current Sec.  43.3(g) contains the requirements for SDRs to 
accept swap transaction and pricing data during closing hours.\202\
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    \200\ See section II.S above.
    \201\ See 17 CFR 43.3(f).
    \202\ See 17 CFR 43.3(g).
---------------------------------------------------------------------------

    Keeping the paragraphs in part 43 could also cause confusion as to 
the requirements that apply to SDRs, because proposed Sec.  49.28 would 
apply to all SDR data and also incorporates provisions from SBSDR 
operating hours requirements. The Commission notes that most of the 
requirements contained in current Sec.  43.3(f) and (g) would continue 
to apply to SDRs, because the requirements are included in proposed 
Sec.  49.28.
    Request for Comment. The Commission requests comment on all aspects 
of proposed Sec.  43.3.

V. Proposed Amendments to Part 23

A. Sec.  23.204--Reports to Swap Data Repositories

    Proposed Sec.  23.204(c) would require each SD and MSP to 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to ensure that the SD or MSP complies with all 
obligations to report swap data to an SDR consistent with part 45. 
Proposed Sec.  23.204(c) also would require an SD or MSP to review its 
policies and procedures on an annual basis and to update its policies 
and procedures as

[[Page 21073]]

needed to reflect the requirements in part 45.
    As part of the SD/MSP requirements set forth in part 23 of the 
Commission's regulations, the Commission currently requires SDs/MSPs to 
report all information and swap data required for swap transactions as 
set forth in part 45.\203\ The Commission also currently requires that 
SDs/MSPs have in place the electronic systems and procedures necessary 
to transmit electronically all information and swap data required to be 
reported in accordance with part 45.\204\
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    \203\ See 17 CFR 23.204(a).
    \204\ See 17 CFR 23.204(b).
---------------------------------------------------------------------------

    The Commission notes that, pursuant to other Commission 
regulations, SDs and MSPs are already expected to establish policies 
and procedures related to their swap market activities, including but 
not limited to, swaps reporting obligations.\205\ The proposed 
amendments would make that expectation explicit with respect to swap 
data reporting obligations.
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    \205\ See, e.g., 17 CFR 3.3(d)(1)(requiring a chief compliance 
officer to administer each of the registrant's policies and 
procedures relating to its business as an SD/MSP that are required 
to be establish pursuant to the Act and the Commission's 
regulations); 17 CFR 3.2(c)(3)(ii) (requiring the National Futures 
Association to assess whether an entity's SD/MSP documentation 
demonstrates compliance with the Section 4s Implementing Regulation 
to which it pertains which includes Sec.  23.204 and Sec.  23.205).
---------------------------------------------------------------------------

    The Commission believes that the annual review requirement in 
proposed Sec.  23.204(c) would help ensure that SD/MSP policies and 
procedures remain current and effective over time. The proposal is also 
substantially similar to the requirements that the SEC has enacted for 
SBSDs and SBS MSPs.\206\
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    \206\ See SBSDR Adopting Release at 14647-14648; see also 17 CFR 
242.906(c).
---------------------------------------------------------------------------

    As part of the goal to increase the reliability, accuracy, and 
completeness of SDR data reported to and maintained by SDRs, the 
Commission believes that it is important to make clear the 
responsibilities of SDs and MSPs to ensure proper reporting of swaps 
for which they act as reporting counterparties. Accordingly, the 
Commission proposes that SDs/MSPs that report to an SDR should be 
explicitly required to adopt policies and procedures reasonably 
designed to ensure compliance with their reporting obligations under 
parts 43 and 45.\207\
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    \207\ The amendments for part 43 reporting are discussed below 
in section IV.A.
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    The policies and procedures required by proposed Sec.  23.204(c) 
should address how the SD or MSP would comply with the requirements of 
part 45, including, but not necessarily limited to: (i) The reporting 
process and designation of responsibility for reporting swap data; (ii) 
reporting system outages or malfunctions, and when and how back-up 
systems are to be used in connection with required reporting; (iii) 
verification of all swap data reported to an SDR pursuant to proposed 
Sec.  45.14(a) and in accordance with the policies and procedures of 
such SDR established under proposed Sec.  49.11; (iv) a training 
program for employees responsible for swap data reporting; (v) control 
procedures relating to swap data reporting and designation of personnel 
responsible for testing and verifying such policies and procedures; and 
(vi) reviewing and assessing the performance and operational capability 
of any third party that carries out any duty required by part 45 on 
behalf of the SD or MSP.
    These issues are also generally the issues that the SEC 
contemplated being addressed by SBSDs and SBS MSPs in their policies 
and procedures adopted pursuant to the SBSR Adopting Release.\208\ In 
conjunction with ``know your counterparty'' obligations under current 
Sec.  23.402(b), such policies should also ensure that the SD/MSP would 
have all necessary counterparty information, including, but not limited 
to, legal entity identifier (``LEI'') or acceptable counterparty 
identifier, U.S. Person status, and SD/MSP status, to accurately report 
all swap data required by part 45 for swaps for which the SD/MSP has 
reporting obligations.
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    \208\ See SBSDR Adopting Release at 14648; see also 17 CFR 
242.906(c).
---------------------------------------------------------------------------

B. Sec.  23.205--Real-Time Public Reporting

    Similar to the requirements of proposed Sec.  23.204(c) discussed 
above in section V.A, the Commission is proposing Sec.  23.205(c), 
which would require SDs and MSPs to establish, maintain, and enforce 
written policies and procedures that are reasonably designed to ensure 
that the SD or MSP complies with any obligations to report swap 
transaction and pricing data to an SDR consistent with part 43 of the 
Commission's regulations. As with swap data under Sec.  23.204(c), 
proposed Sec.  23.205(c) is intended to promote complete and accurate 
reporting of swap transaction and pricing data by SDs and MSPs, 
consistent with their obligations under part 43 and the CEA.\209\ The 
Commission believes that the addition of this proposed requirement 
would help to improve the extent and quality of overall compliance with 
the reporting requirements of part 43. Similar to proposed Sec.  
23.204(c), proposed Sec.  23.205(c) would require an SD or MSP to 
review its policies and procedures on an annual basis and to update its 
policies and procedures as needed to reflect the requirements of part 
43. The periodic review requirement would help ensure that these 
policies and procedures remain current and effective over time. The 
proposal is also substantially similar to the requirements that the SEC 
has enacted for SBSDs and SBS MSPs.\210\
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    \209\ Section 2(a)(13) of the CEA directs the Commission to 
adopt regulations for the public availability of swap transaction 
and pricing data. See 7 U.S.C. 2(a)(13).
    \210\ See SBSDR Adopting Release at 14647-14648.
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    The SD/MSP recordkeeping and reporting requirements in part 23 also 
currently require SDs/MSPs to report all information and swap 
transaction and pricing data required in accordance with the real-time 
public reporting requirements as set forth in part 43.\211\ The 
Commission also requires that SDs/MSPs have in place the electronic 
systems and procedures necessary to transmit electronically all 
information and swap transaction and pricing data required to be 
reported in accordance with part 43.\212\
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    \211\ See 17 CFR 23.205(a).
    \212\ See 17 CFR 23.205(b).
---------------------------------------------------------------------------

    The policies and procedures required by proposed Sec.  23.205(c) 
should address how the SD or MSP will comply with the requirements of 
part 43, including, but not necessarily limited to: (i) The reporting 
process and designation of responsibility for reporting swap 
transaction and pricing data; (ii) reporting system outages or 
malfunctions, and when and how back-up systems are to be used in 
connection with required reporting; (iii) a training program for 
employees responsible for real-time reporting; (iv) control procedures 
relating to real-time reporting and designation of personnel 
responsible for testing and verifying such policies and procedures; (v) 
reviewing and assessing the performance and operational capability of 
any third party that carries out any duty required by part 43 of the 
Commission's regulations on behalf of the SD or MSP; and (vi) the 
determination of whether a new swap transaction or amendment, 
cancelation, novation, termination, or other lifecycle event of an 
existing swap, is subject to the real time reporting requirements of 
part 43. These issues are a subset of the general issues that the SEC 
contemplated being addressed by SBSDs and SBS MSPs in their policies 
and procedures adopted pursuant to the SBSR Adopting Release.\213\
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    \213\ See SBSDR Adopting Release at 14648.
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    Request for Comment. The Commission requests comment on all

[[Page 21074]]

aspects of proposed Sec. Sec.  23.204(c) and 23.205(c). The Commission 
also invites specific comment on the following:
    (28) Should proposed Sec.  23.204(c) and Sec.  23.205(c) specify 
the elements to be included in the required policies and procedures? If 
so, what specific elements should be included in the proposed 
regulation, and why? Please be specific.

VI. Request for Comments

    The Commission requests comments concerning all aspects of the 
proposed regulations, including, without limitation, all of the aspects 
of the proposed regulations on which comments have been requested 
specifically herein. The Commission also invites comments on the 
following:
    (29) Please describe the nature of any changes necessary, i.e., 
operational, technological, administrative, etc., for SDRs, other 
registered entities, and swap counterparties to comply with the 
regulations proposed in this release, including the length of time 
needed to implement each type of change, whether a phase-in period is 
needed, and how any phase in of any final rules should be structured. 
Please describe how any changes to systems made by one type of entity, 
such as the SDRs, would require changes to systems by other entities 
within the swaps reporting environment, and what sequencing of changes 
would need to occur.
    (30) Would the proposed amendments and additions to parts 23, 43, 
45, and 49 adequately improve the data quality and accuracy of reported 
SDR data maintained by SDRs? If not, please explain.
    (31) Are additional changes necessary to parts 23, 43, 45, and 49 
(or other parts of the regulations) to ensure the quality of reported 
SDR data held and maintained by SDRs? If so, please explain.

VII. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires federal agencies, 
in promulgating rules, to consider the impact of those rules on small 
entities.\214\ The Commission has previously established certain 
definitions of ``small entities'' to be used by the Commission in 
evaluating the impact of its rules on small entities in accordance with 
the RFA.\215\ The amendments to part 49 proposed herein would have a 
direct effect on the operations of SDRs. The Commission has previously 
certified that SDRs are not small entities for purpose of the RFA.\216\ 
Proposed Sec. Sec.  23.204(c) and 23.205(c), which require SDs and MSPs 
to have policies and procedures to ensure compliance with requirements 
of parts 45 and 43, respectively, would have a direct impact on the 
operation of SDs and MSPs. The Commission has previously certified that 
SDs and MSPs are also not small entities for purpose of the RFA.\217\
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    \214\ See 5 U.S.C. 601 et seq.
    \215\ See Policy Statement and Establishment of ``Small 
Entities'' for purposes of the Regulatory Flexibility Act, 47 FR 
18618, 18618-21 (Apr. 30, 1982).
    \216\ See Swap Data Repositories, Proposed Rule, 75 FR 80898, 
80926 (Dec. 23, 2010) (basing determination in part on the central 
role of SDRs in swaps reporting regime, and on the financial 
resource obligations imposed on SDRs).
    \217\ See Swap Dealer and Major Swap Participant Recordkeeping, 
Reporting, and Duties Rules, Final Rule, 77 FR 20128, 20194 (Apr. 3, 
2012) (basing determination in part on minimum capital 
requirements).
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    Proposed Sec.  45.14(a), which requires all reporting 
counterparties to verify the accuracy of swap data with the SDR, would 
have a direct impact on all reporting counterparties. These reporting 
counterparties may include SDs, MSPs, DCOs,\218\ and non-SD/MSP/DCO 
counterparties. Regarding whether non-SD/MSP/DCO reporting 
counterparties are small entities for RFA purposes, the Commission 
notes that section 2(e) of the Act prohibits entities from entering 
into swaps unless the entity qualifies as an eligible contract 
participant (``ECP''), except for swaps executed on or pursuant to the 
rules of a DCM.\219\ The Commission has previously certified that ECPs 
are not small entities for purposes of the RFA.\220\ The vast majority 
of swap are not conducted on DCMs, and therefore must involve ECPs. A 
recent Commission staff review of swap data, including swaps executed 
on or pursuant to the rules of a DCM, identified nearly 1,600 non-SD/
MSP/DCO reporting counterparties. Based on its review of publicly 
available data, the Commission believes that the overwhelming majority 
of these non-SD/MSP/DCO reporting counterparties are either ECPs or do 
not meet the definition of ``small entity'' established in the RFA. 
Accordingly, the Commission does not believe the proposed rule would 
affect a substantial number of small entities.
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    \218\ The Commission has previously certified that DCOs are not 
small entities for purposes of the RFA. See Derivatives Clearing 
Organization General Provisions and Core Principles, Final Rule, 76 
FR 69334, 69428 (Nov. 8, 2011).
    \219\ See 7 U.S.C. 2(e).
    \220\ See Opting Out of Segregation, Final Rule, 66 FR 20740, 
20743 (Apr. 25, 2001). The Commission also notes that this 
determination was based on the definition of ECP as provided in the 
Commodity Futures Modernization Act of 2000. The Dodd-Frank Act 
amended the definition of ECP as to the threshold for individuals to 
qualify as ECPs, changing an individual who has total assets in an 
amount in excess of to an individual who has amounts invested on a 
discretionary basis, the aggregate of which is in excess of. 
Therefore, the threshold for ECP status is currently higher than was 
in place when the Commission certified that ECPs are not small 
entities for RFA purposes, meaning that there are likely fewer 
entities that could qualify as ECPs than when the Commission first 
made the determination.
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    Therefore, the Chairman, on behalf of the Commission, pursuant to 5 
U.S.C. 605(b), hereby certifies that the proposed rules will not have a 
significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') \221\ imposes certain 
requirements on federal agencies, including the Commission, in 
connection with their conducting or sponsoring any collection of 
information, as defined by the PRA. This proposed rulemaking would 
result in the collection of information within the meaning of the PRA, 
as discussed below. The proposed rulemaking contains collections of 
information for which the Commission has previously received three 
control numbers from OMB: (1) OMB Control Number 3038-0096 (relating to 
swap data recordkeeping and reporting by market participants); (2) OMB 
Control Number 3038-0070 (relating to real-time swap transaction and 
pricing data); and (3) OMB Control Number 3038-0086 (relating to 
obligations of SDRs).
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    \221\ See 44 U.S.C. 3501.
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    The Commission is proposing to amend information collections 3038-
0096, 3038-0070, and 3038-0086 to accommodate new information 
collection requirements for swap market participants and SDRs that 
require approval from OMB under the PRA. The following amendments to 
the obligations of market participants and SDRs are expected to modify 
the existing annual burden for complying with the requirements of parts 
43, 45, and 49.
    The proposed amendments to Sec.  45.2 would move the requirements 
of paragraphs (f) and (g) to proposed Sec.  49.12, in order to better 
organize regulations related to SDRs. The proposed amendments to Sec.  
45.14 would require reporting counterparties to verify swap data 
reported to an SDR pursuant to the policies and procedures established 
by that SDR and would require SEFs, DCMs, and reporting counterparties 
to provide additional information to the Commission regarding 
correction of errors and

[[Page 21075]]

omissions in swap data in certain circumstances. The proposed 
amendments to Sec.  43.3 would require SEFs, DCMs, and reporting 
counterparties to provide additional information to the Commission 
regarding correction of errors and omissions in swap transaction and 
pricing data in certain circumstances and would move the requirements 
of paragraphs (f) and (g) to proposed Sec.  49.28. The proposed 
amendments to part 49 would require SDRs to: (i) Continue to amend Form 
SDR as required, but remove the annual amendment requirement and limit 
the amendment requirement to before an application for registration is 
granted, as set forth in proposed Sec.  49.3(a)(5); (ii) provide 
notifications and certifications to the Commission related to equity 
interest transfers, as set forth in proposed Sec.  49.5; (iii) request 
transfer of registration, as set forth in proposed Sec.  49.6; (iv) 
provide open swaps reports to the Commission, as set forth in proposed 
Sec.  49.9; (v) correct errors and omissions in SDR data and create 
policies and procedures to accomplish the corrections, as set forth in 
proposed Sec.  49.10(e); (vi) compile and distribute to each applicable 
reporting counterparty an open swaps report and to receive a response 
to each open swaps report, as set forth in proposed Sec.  49.11; (vii) 
establish automated systems for monitoring, screening, and analyzing 
all SDR data in their possession in the form and manner as may be 
directed by the Commission under proposed Sec.  49.13(a); (viii) 
provide SDR users and potential users with SDR policies and procedures 
related to reporting SDR data, as provided in proposed Sec.  49.26(j); 
(ix) operate continuously, except for normal closing hours and special 
closing hours, as provided in proposed Sec.  49.28; and (x) provide the 
Commission with information related to their business as an SDR and 
such information as the Commission determines to be necessary to 
perform its duties under the CEA and Commission regulations and provide 
the Commission with information and/or SDR data as requested to 
demonstrate SDR compliance with the CEA and Commission regulations, as 
set forth in proposed Sec.  49.29.
    The Commission therefore is submitting this proposal to the Office 
of Management and Budget (``OMB'') for its review in accordance with 44 
U.S.C. 3507(d) and 5 CFR 1320.11. Responses to this collection of 
information would be mandatory. The Commission will protect proprietary 
information according to the Freedom of Information Act (``FOIA'') and 
17 CFR 145, ``Commission Records and Information.'' In addition, 
section 8(a)(1) of the CEA strictly prohibits the Commission, unless 
specifically authorized by the Act, from making public data and 
information that would separately disclose the business transactions or 
market positions of any person and trade secrets or names of 
customers.\222\ The Commission is also required to protect certain 
information contained in a government system of records according to 
the Privacy Act of 1974.\223\
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    \222\ 7 U.S.C. 12.
    \223\ 5 U.S.C. 552a.
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1. Revisions to Collection 3038-0096 (Swap Data Reporting)
i. Amended Sec.  45.2
    The Commission is proposing to remove paragraphs (f) and (g) from 
Sec.  45.2 in order to move the requirements of these paragraphs to 
proposed Sec.  49.12. Paragraphs (f) and (g) contain recordkeeping 
requirements specific to SDRs. Current Sec.  49.12 already incorporates 
the requirements of current Sec.  45.2(f) and (g), and proposed Sec.  
49.12 would include the same requirements, but this proposed deletion 
and move is intended to better organize regulations for SDRs by 
locating as many SDR requirements as possible in part 49 of the 
Commission's regulations. Moving the requirements would however modify 
collection 3038-0096 because it would remove these recordkeeping 
requirements from part 45 of the Commission's regulations. As a result, 
the Commission estimates that moving these requirements would result in 
a reduction of 50 annual burden hours for each SDR in collection 3038-
0096, for a total reduction of 150 annual burden hours across all three 
SDRs.
ii. Amended Sec.  45.14
    Proposed Sec.  45.14(a) would require all reporting counterparties 
to verify the accuracy and completeness of all swap data for all open 
swaps to which they are the reporting counterparty. Reporting 
counterparties would comply with this provision by conforming to the 
verification policies and procedures of the relevant SDR(s) established 
pursuant to proposed Sec.  49.11(a), including receiving and responding 
to the open swaps reports provided by the SDR(s). Section 21(c)(2) 
\224\ of the Act requires SDRs to confirm the accuracy of reported swap 
data with the counterparties to the swap. Compliance with proposed 
Sec.  45.14(a) would constitute a collection of information not 
currently included in collection 3038-0096, and therefore would require 
a revision of that collection.
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    \224\ 7 U.S.C. 24a(c)(2).
---------------------------------------------------------------------------

    Compliance with proposed Sec.  45.14(a) would be based on 
compliance with SDR verification policies and procedures, but would 
require reporting counterparties to receive and respond to open swaps 
reports on a weekly or monthly basis, depending on the registration 
status of the reporting counterparty. The Commission expects that 
compliance with this section would include: (1) A one-time hours burden 
to establish internal systems needed to perform their verification 
responsibilities, and (2) an ongoing hours burden to complete the 
verification process for each report provided by an SDR.
    In order to comply with the relevant SDR verification policies and 
procedures as required to complete the verification process, the 
Commission believes that reporting counterparties would be required to 
create their own verification systems or modify their existing 
connections to the SDRs. The Commission estimates that each reporting 
counterparty would incur an initial, one-time burden of 100 hours to 
build, test, and implement their verification systems based on SDR 
instructions. This burden may be reduced, if complying with SDR 
verification requirements only requires reporting counterparties to 
make small modifications to their existing SDR reporting systems, but 
the Commission is estimating the burden based on the creation of a new 
system. The Commission also estimates an ongoing annual burden of 10 
hours per reporting counterparty to maintain their verification systems 
and to make any needed updates to verification systems to conform to 
any changes to SDR verification policies and procedures. As there are 
approximately 1,702 reporting counterparties based on data available to 
the Commission, the Commission estimates a one-time overall hours 
burden of 170,200 hours to build reporting counterparty verification 
systems and an ongoing annual overall hours burden of 17,020 hours to 
maintain the reporting counterparty verification systems.
    Proposed Sec.  45.14(a) would also require reporting counterparties 
to reconcile the swap data in their internal books and records with the 
swap data in each open swaps report provided by an SDR and to respond 
to each open swaps report with a verification of data accuracy or a 
notice of discrepancy, as instructed by the relevant SDR verification 
policies and procedures. For SD, MSP, or DCO reporting counterparties, 
data verification would

[[Page 21076]]

be at most a weekly occurrence for each SDR where the reporting 
counterparty maintains any open swaps. For non-SD/MSP/DCO reporting 
counterparties, data verification would be at most a monthly occurrence 
for each SDR where the reporting counterparty maintains any opens 
swaps. The Commission also expects, based on discussions with SDRs and 
reporting counterparties, that the verification process will be largely 
automated for all parties involved. The Commission is therefore 
estimating an ongoing average burden of two hours per open swaps report 
per reporting counterparty.
    As there are 117 SDs, MSPs, or DCOs that clear swaps registered 
with the Commission, the Commission estimates\225\ that these 117 
reporting counterparties would, at maximum, be required to verify data 
52 times per year, for an overall additional annual hours burden of 
12,168 ongoing burden hours related to the verification process for 
these reporting counterparties. The Commission also estimates, based on 
data available to the Commission, that there are 1,585 non-SD/MSP/DCO 
reporting counterparties.\226\ The Commission estimates that these 
1,585 reporting counterparties would be required to, at maximum, verify 
data 12 times per year, for an overall additional annual hours burden 
of 38,040 burden hours related to verification process for these 
reporting counterparties.
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    \225\ Though there are 117 SDs, MSPs, or DCOs that clear swaps 
registered with the Commission that could be a reporting 
counterparty, not all potential reporting counterparties would be 
performing data verification for any given verification cycle. Only 
those reporting counterparties with open swaps as of the moment the 
SDRs create the open swaps reports would perform data verification 
for that verification cycle.
    \226\ Though there are 1,585 non-SD/MSP/DCOs that could be a 
reporting counterparty, not all potential reporting counterparties 
would be performing data verification for any given verification 
cycle. Only those reporting counterparties with open swaps as of the 
moment the SDRs create the open swaps reports would perform data 
verification for that verification cycle.
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    Proposed Sec.  45.14(b) would, similar to current Sec.  45.14, 
require SEFs, DCMs, and reporting counterparties to correct errors and 
omissions in swap data previously reported to an SDR, or erroneously 
not reported to an SDR as required, as soon as technologically 
practicable after discovery of the errors or omissions. Proposed Sec.  
45.14(b) would also require a non-reporting counterparty to report a 
discovered error or omission to the relevant SEF, DCM, or reporting 
counterparty as soon as technologically practicable after discovery of 
the error or omission.\227\ These proposed requirements, being 
effectively the same as the requirements in current Sec.  45.14, do not 
require amendments to the collection.
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    \227\ The Commission notes that proposed Sec.  45.14(b)(2) does 
add provisions that are not present in current Sec.  45.14(b) to 
address the situation where a non-reporting counterparty does not 
know the identity of the reporting counterparty. The Commission does 
not believe that these additions have PRA implications, as the 
amount of information the non-reporting counterparty must provide 
and the frequency with which it must be provided remain the same and 
are de minimis. The only change is the requirement that non-
reporting counterparties inform the SEF or DCM of errors, instead of 
the reporting counterparty. SEFs and DCMs have correction 
responsibilities under current Sec.  45.14(b) and proposed Sec.  
45.14(b)(2) does not change these responsibilities.
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    Proposed Sec.  45.14(b)(1)(ii) does, however, include the new 
requirement for SEFs, DCMs, and reporting counterparties to notify the 
Director of DMO when errors or omissions cannot be corrected within 
three business days and, in such case, to provide the Director of DMO 
with an initial assessment of the errors and omissions and an initial 
remediation plan. This requirement would constitute a new collection of 
information. The Commission estimates that each SEF, DCM, and reporting 
counterparty would, on average need to provide notice and initial 
assessments to the Commission under proposed Sec.  45.14(b)(1)(ii) once 
per year and that each instance would require 30 burden hours.\228\ As 
there are approximately 1,729 SEFs, DCMs, and reporting counterparties 
that handle swaps, the Commission estimates an overall additional 
annual hours burden of 51,870 hours related to this requirement. This 
estimate is based on the Commission's experience with the current 
practices of SEFs, DCMs, and reporting counterparties regarding the 
reporting of errors and omissions, including the initial assessments 
and remediation plans that SEFs, DCMs, and reporting counterparties 
provide to the Commission under current practice. The Commission does 
not anticipate any one-time, initial burdens related to proposed Sec.  
45.14(b)(1)(ii).
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    \228\ The Commission notes that, currently, it receives 
significantly less than one notice and initial assessment of 
reporting errors and omissions per SEF, DCM, or reporting 
counterparty per year, but is estimating one notice and initial 
assessment here, as the proposed requirements of Sec.  45.14(a) may 
reveal more reporting errors to reporting counterparties that would 
then prompt corrections pursuant to proposed Sec.  45.14(b).
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    The Commission therefore estimates that the overall burden for 
updated Information Collection 3038-0096 will be as follows:
    Estimated number of respondents affected: 1,732 SEFs, DCMs, DCOs, 
SDRs, and reporting counterparties.
    Estimated annual number of responses per respondent: 257,595.
    Estimated total annual responses: 446,154,518.
    Estimated burden hours per response: 0.005.
    Estimated total annual burden hours per respondent: 1,316.
    Estimated aggregate total burden hours for all respondents: 
2,279,202.
2. Revisions to Collection 3038-0070 (Real-Time Transaction 
Reporting)--Amended Sec.  43.3
    Proposed Sec.  43.3(e) would, as with swap data under proposed 
Sec.  45.14(b), require SEFs, DCMs, and reporting counterparties to 
correct errors and omissions in swap transaction and pricing data 
previous reported to an SDR or erroneously not reported to an SDR as 
soon as technologically practicable after discovery of the errors or 
omissions. Proposed Sec.  43.3(e) would also require a non-reporting 
counterparty to report a discovered error or omission to the relevant 
SEF, DCM, or reporting counterparty as soon as technologically 
practicable after discovery of the error or omission. These proposed 
requirements are intend to match the requirements in proposed Sec.  
45.14(b), but are also effectively the same as the requirements of 
current Sec.  43.3(e).\229\ These proposed requirements therefore do 
not require amendments to the collection.
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    \229\ The Commission notes that proposed Sec.  43.3(e)(2) does 
add provisions that are not present in current Sec.  43.3(e)(1) to 
address the situation where a non-reporting counterparty does not 
know the identity of the reporting counterparty. The Commission does 
not believe that these additions have PRA implications, as the 
amount of information the non-reporting counterparty must provide 
and the frequency with which it must be provided remain the same as 
the current requirement and are de minimis. The only change is the 
requirement that non-reporting counterparties inform the SEF or DCM 
of errors, instead of the reporting counterparty. SEFs and DCMs have 
correction responsibilities under current Sec.  43.3(e)(1) and 
proposed Sec.  43.3(e)(2) does not change these responsibilities.
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    Proposed Sec.  43.3(e)(1)(ii) does, however, include the new 
requirement for SEFs, DCMs, and reporting counterparties to notify the 
Director of DMO when errors or omissions cannot be corrected within 
three business days and, in such case, to provide the Director of DMO 
with an initial assessment of the errors and omissions and an initial 
remediation plan. This requirement would constitute a new collection of 
information. The Commission estimates that each SEF, DCM, and reporting 
counterparty would, on average need to provide notice and initial 
assessments to the Commission under proposed

[[Page 21077]]

Sec.  43.3(e)(1)(ii) once per year and that each instance would require 
30 burden hours.\230\ As there are approximately 1,729 SEFs, DCMs, and 
reporting counterparties that handle swaps, the Commission estimates an 
overall additional annual hours burden of 51,870 hours related to this 
requirement. This estimate is based on the Commission's experience with 
SEFs, DCMs, and reporting counterparties current practices regarding 
the reporting of errors and omissions, including the initial 
assessments and remediation plans that SEFs, DCMs, and reporting 
counterparties provide to the Commission under current practice. The 
Commission does not anticipate any one-time, initial burdens related to 
proposed Sec.  43.3(e)(1)(ii).
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    \230\ The Commission notes that, currently, it receives 
significantly less than one notice and initial assessment of 
reporting errors and omissions per SEF, DCM, or reporting 
counterparty per year, but is conservatively estimating one notice 
and initial assessment annually here, as the proposed requirements 
of Sec.  45.14(a) may reveal more reporting errors to reporting 
counterparties that would then prompt corrections pursuant to 
proposed Sec.  43.3(e).
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    The Commission is also proposing to remove paragraphs (f) and (g) 
from Sec.  43.3 in order to move the requirements of these paragraphs 
to proposed Sec.  49.28. Paragraphs (f) and (g) contain requirements 
for SDRs related to their operating hours. Proposed Sec.  49.28 would 
include all of the current Sec.  43.3(f) and (g) requirements, because 
this proposed deletion and move is intended to better organize 
regulations for SDRs by locating as many SDR requirements as possible 
in part 49 of the Commission's regulations. Moving the requirements 
would modify collections 3038-0070 and 3038-0086 because it will remove 
these recordkeeping requirements from part 43 of the Commission's 
regulations and add them to part 49 of the Commission's regulations. 
The Commission estimates that the public notice requirements of Sec.  
43.3(f) and (g) require SDRs to issue three notices per year and spend 
five hours creating and disseminating each notice, for a total of 15 
hours annually for each SDR, for a total of 45 annual burden hours 
being moved across all three SDRs. As a result, the Commission 
estimates that moving these requirements would result in a total 
reduction of 45 annual burden hours for SDRs in collection 3038-0070.
    The Commission therefore estimates that the total overall burdens 
for updated Information Collection 3038-0070 will be as follows:
    Estimated number of respondents affected: 1,732 SEFs, DCMs, DCOs, 
SDRs, and reporting counterparties.
    Estimated annual number of responses per respondent: 21,247.
    Estimated total annual responses: 36,799,804.
    Estimated burden hours per response: 0.033.
    Estimated total annual burden hours per respondent: 701.
    Estimated aggregate total burden hours for all respondents: 
1,214,392.
3. Revisions to Collection 3038-0086 (SDR Registration and Regulatory 
Requirements) \231\
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    \231\ The Commission is also proposing to reduce the number of 
SDRs used in collection 3038-0086 to calculate burdens and costs 
from 4 to 3. There are currently three SDRs provisionally registered 
with the Commission. The Commission has not received any 
applications for SDR registration since 2012.
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    The Commission proposes to revise collection 3038-0086 to account 
for changes in certain SDR responsibilities under proposed amendments 
to Sec. Sec.  49.3, 49.5, 49.6, 49.9, 49.10, 49.11, 49.13, and 49.26, 
and to the proposed addition of Sec. Sec.  49.28, 49.29, and 49.30. The 
estimated hours burdens and costs provided below would be in addition 
to or subtracted from the existing hours burdens and costs in 
collection 3038-0086. The Commission also describes a number of 
proposed changes to sections that do not have PRA implications below, 
for clarity purposes.
    The Commission will also reduce the estimated number of SDRs from 
four to three, as there are currently three SDRs provisionally 
registered with the Commission that would be subject to the proposed 
collection requirements.
i. Amended Sec.  49.3
    The proposed amendments to Sec.  49.3(a)(5) would remove the 
requirement for each SDR to file an annual amendment to its Form SDR 
and, once an SDR's application for registration is granted, the 
requirement for SDRs to amend the Form SDR whenever any of the 
information in the Form SDR becomes inaccurate. The proposed amendments 
would reduce the PRA burden for SDRs by lowering the number of filings 
required for each SDR. The Commission estimates that the PRA burden for 
each SDR would remain at 15 hours per filing, but that the number of 
filings per year would be reduced from three to two, meaning that the 
proposed amendments to Sec.  49.3(a)(5) would reduce the burden on SDRs 
by 15 hours per year, for a total reduction of 45 annual burden hours 
across all three SDRs. This estimate is based on the Commission's 
experience with current SDR practices and the original supporting 
statement for collection 3038-0086.\232\ The Commission does not 
anticipate any one-time, initial burden changes related to proposed 
Sec.  49.3(a)(5).
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    \232\ The original supporting statement for collection 3038-0086 
estimated that the requirements of current Sec.  49.3(a)(5) would 
necessitate three filings per year and 15 hours per filing.
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ii. Amended Sec.  49.5
    The proposed amendments to Sec.  49.5 would require SDRs to file a 
notification with the Commission for each transaction involving the 
direct or indirect transfer of ten percent or more of the equity 
interest in the SDR within ten business days of the firm obligation to 
transfer the equity interest, to provide the Commission with supporting 
documentation for the transaction on request, and to file a 
certification with the Commission that the SDR will meet all of its 
obligations under the Act and the Commission's regulations within two 
business days of the completion of the equity interest transfer. The 
Commission estimates that the requirements of proposed Sec.  49.5 would 
create a burden of 15 hours per SDR for each qualifying equity interest 
transfer. Equity interest transfers for SDR are rare, so the Commission 
conservatively estimates that each SDR would provide information 
pursuant to proposed Sec.  49.5 no more often than once every three 
years. As a result, the estimated average annual PRA burden related to 
proposed Sec.  49.5 would be 5 hours per SDR, or 15 hours total for all 
three SDRs. The Commission does not anticipate any one-time, initial 
burdens related to proposed Sec.  49.5.
iii. Amended Sec.  49.6
    The proposed amendments to Sec.  49.6 would require an SDR seeking 
to transfer its registration to another legal entity due to a corporate 
change to file a request for approval with the Commission before the 
anticipated corporate change, including the specific documents and 
information listed in proposed Sec.  49.6(c). The Commission estimates 
that the requirements of proposed Sec.  49.6 would create a burden of 
15 hours per SDR for each transfer of registration. Transfers of 
registration for SDR are rare, so the Commission conservatively 
estimates that each SDR would provide information pursuant to proposed 
Sec.  49.6 no more often than once every three years. As a result, the 
estimated average annual PRA burden related to proposed Sec.  49.6 
would be 5 hours per SDR, or 15 hours total for all three SDRs. The 
Commission does not anticipate any one-time, initial burdens related to 
proposed Sec.  49.6.

[[Page 21078]]

iv. Amended Sec.  49.9
    The proposed amendments to Sec.  49.9 would remove the current text 
of the section and replace it with requirements related to SDRs 
providing open swaps reports to the Commission. The new Sec.  49.9 
would require SDRs to provide reports to the Commission with swap data 
for every open swap an SDR maintains, as instructed by the Commission. 
The instructions may include the method, timing, frequency, and format 
of the open swaps reports.
    The Commission estimates that SDRs would incur a one-time initial 
burden of 250 hours per SDR for SDRs to create or modify their systems 
to provide the open swaps reports to the Commission as instructed, for 
a total estimated hours burden of 750 hours. This burden may be 
mitigated by the fact that SDRs currently have systems in place to 
provide similar information to the Commission, which would reduce the 
effort needed to create or modify SDR systems. The Commission 
additionally estimates 30 hours per SDR annually to perform any needed 
maintenance or adjustments to SDR reporting systems.
    The Commission expects that the process for providing the open 
swaps reports to the Commission would be largely automated and 
therefore estimates a burden on the SDRs of 2 hours per report. Though 
the Commission is not prescribing the frequency of the open swaps 
reports at this time, the Commission estimates, only for the purposes 
of this burden calculation, that the SDRs would provide the Commission 
with 365 open swaps reports per year, meaning that the estimated 
ongoing annual additional hours burden for generating the open swaps 
reports and providing the reports to the Commission is 730 hours per 
SDR.
    The Commission therefore estimates a total ongoing additional 
annual hours burden related to proposed Sec.  49.9 of 760 hours per 
SDR, for a total estimated ongoing annual burden of 2,280 hours.
v. Amended Sec.  49.10
    Proposed Sec.  49.10(e) would require SDRs to accept, process, and 
disseminate corrections to SDR data errors and omissions. Proposed 
Sec.  49.10(e) would also require SDRs to have policies and procedures 
in place to accomplish the corrections.
    The Commission estimates that SDRs would incur a one-time initial 
burden of 100 hours per SDR to update and implement the systems, 
policies, and procedures necessary to complete the corrections process, 
for a total increased initial hours burden of 300 hours across all 
three SDRs. This burden may be mitigated by the fact that SDRs already 
have systems, policies, and procedures in place to accomplish 
corrections to SDR data and that the SDRs currently make such 
corrections on a regular basis. The Commission additionally estimates 
30 hours per SDR annually to perform any needed maintenance on 
correction systems and to update corrections policies and procedures as 
needed.
    The Commission anticipates that the process for SDRs to perform 
corrections would be largely automated, as this is the case with 
current SDR corrections. Based on swap data available to the Commission 
and discussions with the SDRs, the Commission estimates that an SDR 
would perform an average of approximately 2,652,000 data corrections 
per year. Based on the same information, the Commission estimates that 
performing each correction would require 2 seconds from an SDR. As a 
result, the Commission estimates that the ongoing burden of performing 
the actual corrections to SDR data would be approximately 1,473 hours 
per SDR annually, on average.
    The Commission therefore estimates a total additional ongoing hours 
burden related to proposed Sec.  49.10(e) of 1,503 hours per SDR 
annually, for a total estimated ongoing burden of 4,509 hours.
vi. Amended Sec.  49.11
    The proposed amendments to Sec.  49.11 modify the existing 
obligations on SDRs to confirm the accuracy and completeness of swap 
data. Proposed Sec.  49.11(b) would require SDRs to distribute open 
swaps reports to reporting counterparties on a weekly or monthly basis, 
depending on the registration status of a reporting counterparty. 
Proposed Sec.  49.11(c) would require SDRs to receive a verification of 
data accuracy or a notice of discrepancy from the reporting 
counterparties in order to complete the verification process. Proposed 
Sec.  49.11(a) and Sec.  49.11(d) \233\ do not have PRA implications 
beyond the burdens discussed for paragraphs (b) and (c) below.
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    \233\ The Commission notes that requirements of part 40 of the 
Commission's regulations would apply to SDRs amending their 
verification policies and procedures regardless of proposed Sec.  
49.11(d), because verification policies and procedures would fall 
under the part 40 definition of a ``rule.'' See 17 CFR 40.1(i) 
(definition of rule for the purposes of part 40). PRA implications 
for proposed Sec.  49.11(d) would be included under the existing 
approved PRA collection for part 40 of the Commission's regulations.
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    While SDRs are already required to confirm the accuracy and 
completeness of swap data under current Sec.  49.11, the Commission 
anticipates that the requirements in proposed Sec.  49.11 would impose 
different burdens on the SDRs than the current regulation. The 
Commission estimates that each SDR would incur an initial, one-time 
burden of 500 hours to build, test, and implement updated verification 
systems that would generate and disseminate the open swaps reports and 
receive the verifications of data accuracy or notices of discrepancy, 
for a total of 1,500 initial burden hours across all SDRs. The 
Commission also estimates 50 hours per SDR annually for SDRs to 
maintain their verification systems and make any needed updates to 
verification policies and procedures required under proposed Sec.  
49.11(a) and (c).
    Currently, SDRs are required to confirm swap data by contacting 
both counterparties for swaps that are not submitted by a SEF, DCM, 
DCO, or third-party service provider every time the SDR receives swap 
data related to the swap. For swaps reported by a SEF, DCM, DCO, or 
third-party service provider, the SDRs must currently assess the swap 
data to form a reasonable belief that the swap data is accurate every 
time swap data is submitted for a swap. Under proposed Sec.  49.11(b) 
and (c), SDRs would only generate the open swaps reports at most once a 
week for any reporting counterparty, regardless of how often swap data 
is submitted for an open swap, and would only be required to provide 
the open swaps reports to the reporting counterparties, without needing 
to contact the non-reporting counterparty or evaluate the swap data. 
The Commission also anticipates, based on discussions with SDRs and 
other market participants, that the verification process would be 
largely automated once the processes are in place.
    At maximum, the SDRs would be required to create open swaps reports 
for the 117 SD/MSP/DCO reporting counterparties every week (6,084 
reports per year) and open swaps reports for the 1,585 non-SD/MSP/DCO 
reporting counterparties every month (19,020 reports per year) for a 
total of 25,104 reports per year overall. The Commission estimates that 
creating each report would require 2 hours, for a total of 50,208 hours 
per SDR per year or 150,624 hours overall across all SDRs.
vii. Amended Sec.  49.12
    Proposed amendments to Sec.  49.12(a) and (b) would incorporate 
existing SDR recordkeeping obligations from Sec.  45.2(f) and (g) 
respectively, which are already applicable to SDRs under current Sec.  
49.12(a). As the recordkeeping

[[Page 21079]]

requirements being moved from Sec.  45.2 already apply to SDRs under 
current Sec.  49.12, the Commission does not believe that amended Sec.  
49.12(a) or (b) would require any revision to hours burden related to 
Sec.  49.12 already included in collection 3038-0086. Proposed 
amendments to Sec.  49.12(c) would require SDRs to maintain records of 
data validation errors and of data reporting errors, which would 
include records of data subsequently corrected by a SEF, DCM, or 
reporting counterparty pursuant to parts 43, 45, and 46. Proposed Sec.  
49.12(c) does not however add any new requirement to part 49, as all of 
the records to be kept would already be required to be kept by existing 
recordkeeping obligations as data submitted under parts 43, 45, or 46. 
As a result, the Commission does not believe that amended Sec.  
49.12(c) would require an additional PRA burden beyond that already 
included in collection 3038-0086.
viii. Amended Sec.  49.13
    Proposed Sec.  49.13(a) would require SDRs to monitor, screen, and 
analyze SDR data in the form and manner determined by the Commission. 
This would involve generating reports and other information at the 
request of the Commission by calculating or compiling information and 
SDR data maintained by the SDR. Proposed Sec.  49.13(b) would require 
SDRs to have sufficient resources to perform such obligations. The 
Commission proposes to amend existing collection 3038-0086 to account 
for any burdens associated with responding to Commission requests to 
monitor, screen, and analyze SDR data. While SDRs are currently 
required to perform monitoring, screening, and analyzing tasks as 
required by the Commission, the proposed amendments would facilitate 
more frequent requests from the Commission, which may increase the 
burden on SDRs. The Commission anticipates that requests would be both 
one-time requests and requests to establish periodic reports. The 
Commission estimates that it would make 10 new requests per SDR per 
year, and that each request would require an average of 40 hours to 
respond, for a total burden of 400 hours per SDR per year, or 1,200 
hours per year overall. The Commission anticipates that the number of 
new requests would decrease over time as the Commission's resources for 
utilizing SDR data improve. The Commission does not anticipate any one-
time, initial burdens related to proposed Sec.  49.13(a).
    Proposed Sec.  49.13(c) would require SDRs to notify the Commission 
of any SDR data that the SDR receives that is not reported in 
accordance with parts 43, 45, or 46, as applicable. Currently, under 
Sec.  49.15(c), SDRs are only required to notify the Commission when 
swap transaction and pricing data is not reported in compliance with 
the obligations under part 43. Proposed Sec.  49.13(c) would expand 
this obligation to also include SDRs notifying the Commission when a 
transaction is reported that is not in accordance with part 45 or part 
46. The Commission anticipates that the notification provisions in 
proposed Sec.  49.13(c) would create little or no PRA burden on SDRs 
beyond those existing under current Sec.  49.15(c), as the SDRs would 
already have the necessary systems and procedures in place due to the 
existing requirements in current Sec.  49.15(c).
ix. Amended Sec.  49.26
    Proposed new Sec.  49.26(j) would require SDRs to provide their 
users and potential users with the SDR's policies and procedures on 
reporting SDR data, including SDR data validation procedures, swap data 
verification procedures, and SDR data correction procedures. The 
Commission anticipates that SDRs would incur a one-time burden of 20 
burden hours to draft written documents that they would provide to 
their users and potential users, for a total increase of 60 one-time 
burden hours across SDRs. The Commission also anticipates that SDRs 
would update their policies once per year and incur a recurring burden 
of 10 hours annually from providing any updated reporting policies and 
procedures to their users and potential users, as needed, for a total 
increase of 30 ongoing burden hours across SDRs.
x. New Sec.  49.28
    Proposed new Sec.  49.28 incorporates existing provisions of Sec.  
43.3(f) and (g) with respect to hours of operation with minor changes 
and clarifications. Proposed Sec.  49.28 extends the provisions of 
current Sec.  43.3(f) and (g) to include all SDR data and clarifies the 
different treatment of regular closing hours and special closing hours. 
SDRs currently have closing hours systems, policies, and procedures 
that apply to all SDR functions and all SDR data under the current 
requirements. The proposed requirements related to declaring regular 
closing hours and special closing hours would also effectively follow 
current requirements, without necessitating changes to current SDR 
systems or practices. The Commission does however anticipate that the 
SDRs would need to issue notices to the public related to closing hours 
under proposed Sec.  49.28(a) and (c). The Commission estimates that 
each SDR would issue three notices per year and spend five hours 
creating and disseminating each notice, for a total of 15 hours per 
year preparing and providing public notices per SDR, and a total of 45 
hours per year across all SDRs.
xi. New Sec.  49.29
    Proposed new Sec.  49.29 would require each SDR to provide, upon 
request by the Commission, information relating to its business as an 
SDR, and such other information that the Commission needs to perform 
its regulatory duties. This provision also requires each SDR, upon 
request by the Commission, to provide a written demonstration of 
compliance with the SDR core principles and other regulatory 
obligations. The PRA burden associated with such responses is dependent 
on the number of requests made and the complexity of such requests. 
Based on its experience with requests to DCMs, the Commission would 
estimate that each SDR would likely receive on average between three 
and five requests per year, considering that an SDR is a newer type of 
registered entity than a DCM. The Commission anticipates that the 
number of requests would decrease over time. The Commission also 
anticipates that each such request would require the SDR to spend 20 
hours to gather information and formulate a response, and bases its 
estimate of burden hours assuming five such requests per year, for a 
total additional hours burden of 100 hours per SDR per year, or 300 
hours per year across all SDRs. The Commission does not anticipate that 
SDRs would incur any one-time hours burden or costs in complying with 
this regulation.
    The Commission therefore estimates that the total overall burdens 
for updated Information Collection 3038-0086 will be as follows:
    Estimated number of respondents affected: 3 SDRs.
    Estimated annual number of responses per respondent: 154,327,169.
    Estimated total annual responses: 462,981,508.
    Estimated burden hours per response: 0.0006.
    Estimated total annual burden hours per respondent: 99,197.
    Estimated aggregate total burden hours for all respondents: 
297,526.
4. Request for Comment
    The Commission invites the public and other Federal agencies to 
comment on any aspect of the proposed information collection 
requirements discussed above. The Commission will

[[Page 21080]]

consider public comments on this proposed collection of information in:
    (1) Evaluating whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have a practical 
use;
    (2) evaluating the accuracy of the estimated burden of the proposed 
collection of information, including the degree to which the 
methodology and the assumptions that the Commission employed were 
valid;
    (3) enhancing the quality, utility, and clarity of the information 
proposed to be collected; and
    (4) minimizing the burden of the proposed information collection 
requirements on registered entities, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
information collection techniques, e.g., permitting electronic 
submission of responses.
    Copies of the submission from the Commission to OMB are available 
from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC 
20581, (202) 418-5160 or from https://RegInfo.gov. Organizations and 
individuals desiring to submit comments on the proposed information 
collection requirements should send those comments to:
     The Office of Information and Regulatory Affairs, Office 
of Management and Budget, Room 10235, New Executive Office Building, 
Washington, DC 20503, Attn: Desk Officer of the Commodity Futures 
Trading Commission;
     (202) 395-6566 (fax); or
     [email protected] (email).
    Please provide the Commission with a copy of submitted comments so 
that all comments can be summarized and addressed in the final 
rulemaking, and please refer to the ADDRESSES section of this 
rulemaking for instructions on submitting comments to the Commission. 
OMB is required to make a decision concerning the proposed information 
collection requirements between 30 and 60 days after publication of 
this Release in the Federal Register. Therefore, a comment to OMB is 
best assured of receiving full consideration if OMB receives it within 
30 calendar days of publication of this Release. Nothing in the 
foregoing affects the deadline enumerated above for public comment to 
the Commission on the proposed rules.

C. Cost-Benefit Considerations

1. Introduction
    Section 15(a) \234\ of the CEA requires the Commission to consider 
the costs and benefits of its actions before promulgating a regulation 
under the CEA or issuing certain orders. Section 15(a) further 
specifies that the costs and benefits shall be evaluated in light of 
five broad areas of market and public concern: (1) Protection of market 
participants and the public; (2) efficiency, competitiveness, and 
financial integrity of markets; (3) price discovery; (4) sound risk 
management practices; and (5) other public interest considerations. The 
Commission considers the costs and benefits resulting from its 
discretionary determinations with respect to the section 15(a) factors.
---------------------------------------------------------------------------

    \234\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    In this release, the Commission is proposing revisions to existing 
regulations in parts 23, 43, 45, and 49. The Commission also is 
proposing new regulations in part 49. Together, these proposed 
revisions and additions are intended to address swap data verification 
and to improve the quality of data reporting generally. Some of the 
proposed amendments are substantive. A number of amendments, however, 
are non-substantive or technical, and therefore would not have 
associated cost-benefits implications.\235\
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    \235\ The Commission believes there are no cost-benefit 
implications for proposed Sec. Sec.  49.2, 49.15, 49.16, 49.18, 
49.20, 49.24, and 49.31.
---------------------------------------------------------------------------

    To the extent costs are quantifiable, they have been discussed in 
two places: The PRA section in this release and in the PRA-related 
information collection requests filed with OMB. In general, however, 
given the small number of existing SDRs and their differences in size 
and operations, many of the costs associated with this proposed 
rulemaking were not readily quantifiable without relying on and 
potentially divulging confidential information. The Commission 
therefore specifically requests comments to help quantify the costs of 
this rulemaking.
2. Background
    In 2011, the Commission issued the Part 49 Adopting Release. The 
duties and requirements included in the Part 49 Adopting Release 
require SDRs to, among other requirements, accept and confirm data 
reported to the SDRs. The Commission also believed that the Commission 
would be better able to monitor the overall swaps market and individual 
market participants through SDR collection and maintenance of swap data 
as required in parts 45 and 49. Before the adoption of the Dodd-Frank 
Act and its implementing regulations, the swaps market generally, and 
transactions and positions of individual market participants in 
particular, were not transparent to regulators or to the public.
    Due to these requirements for SDRs to collect and maintain SDR 
data, the Commission has now had the opportunity to work directly with 
SDR data reported to, and held by, SDRs. Based on its experience 
working with SDR data, along with extensive feedback received from 
market participants, the Commission believes that improving data 
quality would help enhance the data's usefulness. In this release, the 
Commission has focused on the operation and implementation of CEA 
section 21,\236\ which contains requirements related to SDRs, including 
the requirement to confirm data.\237\ The Commission is also proposing 
to modify a number of other regulations for clarity and consistency and 
to enhance the Commission's ability to monitor and supervise the swaps 
market.
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    \236\ See 7 U.S.C. 24a.
    \237\ See 7 U.S.C. 24a(c)(2).
---------------------------------------------------------------------------

    Prior to discussing the proposed rule changes, the Commission 
describes below the current environment that would be impacted by these 
changes. Three SDRs are currently provisionally registered with the 
Commission: CME, DDR, and ICE.
    Each SDR has unique characteristics and structures that determine 
how the proposed rule changes would impact its operations. For example, 
SDRs affiliated with DCOs tend to receive a large proportion of their 
SDR data from swaps cleared through those affiliated DCOs, while 
independent SDRs tend to receive SDR data from a wider range of market 
participants.
    The current reporting environment also involves third-party service 
providers. These entities assist market participants with fulfilling 
the applicable data reporting requirements, though the reporting 
requirements do not apply to third-party service providers directly.
    Given that data quality depends on the underlying data reporting 
requirements, the proposed changes should be considered in context with 
other planned improvements to parts 43 and 45. As discussed in the 
Roadmap, the Commission is in the process of improving data reporting 
requirements, including modifying the requirements to be more clear and 
consistent with other regulators' requirements. The amendments proposed 
in this

[[Page 21081]]

rulemaking are one part of this larger effort to ensure that better-
quality data is available to market participants and the Commission.
    Current regulations have not created results that meet the 
Commission's expectations for data quality. For example, current 
regulations do not include a specific affirmative obligation for swap 
counterparties to review reported swap data for errors, but instead 
require swap counterparties to correct errors and omissions only after 
the discovery of inaccurate data.\238\ The result has been that market 
participants too often have not acted to review and correct reported 
swap data. It is not uncommon for Commission staff to find 
discrepancies between open swaps information available to the 
Commission and reported data for the same swaps. In the processing of 
swap data to generate the CFTC's Weekly Swaps Report,\239\ for example, 
there are instances when the notional amount differs between the 
Commission's open swaps information and the swap data reported for the 
same swap. Other common examples of discrepancies include incorrect 
references to an underlying currency, such as a notional value 
incorrectly linked to U.S. dollars instead of Japanese Yen. These 
examples, among others, strongly suggest a need for better verification 
of reported swap data. Improved verification could lead to these errors 
being discovered and corrected in a timely manner.
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    \238\ See 17 CFR 43.3(e); 17 CFR 45.14.
    \239\ See CFTC's Weekly Swaps Report, https://www.cftc.gov/MarketReports/SwapsReports/index.htm.
---------------------------------------------------------------------------

    SDR policies and procedures have also created additional challenges 
for swap data accuracy. As discussed above, certain SDR policies and 
procedures for swap data have been based on negative affirmation, i.e., 
predicated on the concept that reported swap data is accurate and 
confirmed if a reporting counterparty does not inform the SDR of errors 
or omissions, or otherwise make subsequent modifications to data 
reported for a swap within a certain period of time.\240\ As reporting 
counterparties are typically not reviewing their reported swap data 
maintained by the SDRs, the data is effectively assumed to be accurate 
and errors and omissions are not sufficiently discovered and corrected. 
As described in more detail in the section VII.C.8.iii discussion of 
price discovery below, the volume of inaccurate swap data that is 
discovered by market participants or the Commission shows that current 
regulations are insufficient to produce the quality of swap data the 
Commission expects and needs to fulfill its regulatory 
responsibilities.
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    \240\ See 17 CFR 49.11(b)(1)(ii) and (b)(2)(ii).
---------------------------------------------------------------------------

    Based on its experience with data reporting, the Commission 
believes that certain regulations, particularly in parts 43, 45, and 
49, should be amended to improve swap data accuracy and completeness. 
The regulatory changes being proposed to meet this objective include 
requiring SDRs and reporting counterparties to verify the accuracy and 
completeness of reported swap data. Many of the proposed regulations 
have costs and benefits that must be considered. These will be 
discussed individually below.
    This release also includes amendments to part 49 to improve and 
streamline the Commission's oversight of SDRs. These proposed 
regulations include allowing the Commission to request demonstrations 
of compliance and other reports from SDRs.
    For each proposed amendment discussed below, the Commission 
summarizes the changes,\241\ and identifies and discusses the costs and 
benefits attributable to the proposed changes. The Commission then 
considers alternatives to the rules proposed in this release. Finally, 
the Commission considers the costs and benefits of all of the proposed 
rules jointly in light of the five public interest considerations in 
CEA section 15(a).
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    \241\ As described throughout this release, the Commission is 
also proposing a number of non-substantive, conforming rule 
amendments in this release, such as renumbering certain provisions 
and modifying the wording of existing provisions. Non-substantive 
amendments of this nature may be described in the cost-benefit 
portion of this release, but the Commission will note that there are 
no costs or benefits to consider.
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    The Commission notes that this consideration of costs and benefits 
is based on the understanding that the swaps market functions 
internationally. Many swaps transactions involving U.S. firms occur 
across international borders and some Commission registrants are 
organized outside of the United States, with leading industry members 
often conducting operations both within and outside the United States, 
and with market participants commonly following substantially similar 
business practices wherever located. Where the Commission does not 
specifically refer to matters of location, the discussion of costs and 
benefits refers to the proposed rules' effects on all swaps activity, 
whether by virtue of the activity's physical location in the United 
States or by virtue of the activity's connection with or effect on U.S. 
commerce under CEA section 2(i).\242\ The Commission contemplated this 
cross-border perspective in 2011 when it adopted Sec.  49.7, which 
applies to trade repositories located in foreign jurisdictions.\243\
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    \242\ See 7 U.S.C. 2(i). CEA section 2(i) limits the 
applicability of the CEA provisions enacted by the Dodd-Frank Act, 
and Commission regulations promulgated under those provisions, to 
activities within the U.S., unless the activities have a direct and 
significant connection with activities in, or effect on, commerce of 
the U.S.; or contravene such rules or regulations as the Commission 
may prescribe or promulgate as are necessary or appropriate to 
prevent the evasion of any provision of the CEA enacted by Dodd-
Frank Act. Application of section 2(i)(1) to the existing 
regulations under part 45 with respect to SDs/MSPs and non-SD/MSP 
counterparties is discussed in the Commission's Interpretive 
Guidance and Policy Statement Regarding Compliance With Certain Swap 
Regulations, 78 FR 45292 (July 26, 2013).
    \243\ See 17 CFR 49.7.
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3. Baseline
    There are separate baselines for the costs and benefits that might 
arise from the proposed regulations in this release. The Commission 
believes that for proposed paragraphs (c) added to Sec. Sec.  23.204 
and 23.205, the baseline is the current practice. The baseline for 
proposed Sec.  45.14 is current Sec.  45.14. The baseline for proposed 
amendments to current part 49 regulations is the existing part 49 and 
current practices. For proposed Sec.  49.12, the baseline is current 
Sec.  49.12, as well as Sec.  45.2(f) and (g), which would be replaced 
by proposed Sec.  49.12. For proposed Sec.  49.17, the baseline is 
current Sec. Sec.  49.17 and 45.13.
    In this release, the Commission is proposing to adopt four new 
regulations: Sec. Sec.  49.28, 49.29, 49.30, and 49.31. For proposed 
new Sec.  49.28 the baseline is current Sec.  43.3(f) and (g), because 
the requirements in Sec.  43.3(f) and (g) are being moved to proposed 
Sec.  49.28. For proposed new Sec. Sec.  49.29 and 49.30, the baselines 
are current practices. Proposed new Sec.  49.31 concerns internal 
Commission practices and is not subject to consideration of costs and 
benefits.
4. Costs and Benefits of Proposed Amendments to Part 49
i. Sec.  49.3--Procedures for Registration
    The Commission is proposing to amend Sec.  49.3 to remove the 
requirements for SDRs to: (i) file an annual amendment to Form SDR; and 
(ii) amend Form SDR after the Commission grants the application for 
registration under Sec.  49.3(a), as required in current Sec.  
49.3(a)(5). The Commission believes the annual filing requirement and 
the requirement to continuously update Form SDR once the application

[[Page 21082]]

for registration has been granted currently in Sec.  49.3(a)(5) are 
unnecessary for the Commission to successfully perform its regulatory 
functions.
(A) Costs and Benefits
    The proposed amendments to Sec.  49.3(a)(5) would benefit SDRs by 
reducing the amount of information that SDRs must provide to the 
Commission and the frequency with which the SDRs must provide the 
information. By removing the annual Form SDR amendment requirement and 
the requirement to update Form SDR after registration is granted, SDRs 
would be required to expend fewer resources to provide this information 
to the Commission. The Commission believes that current Sec.  
49.3(a)(5) is unnecessary as SDRs already submit much of the 
information in Form SDR in rule filings under part 40 or as required 
per other SDR regulations. The Commission also believes that this 
requirement would be unnecessary with new proposed Sec.  49.29, which 
would provide the Commission with the ability to request the same 
information on an as-needed basis.
    The costs of proposed Sec.  49.3(a)(5) would not be significant and 
would largely be associated with any needed adjustments to SDRs 
policies and procedures related to reducing the number of updates to 
Form SDR.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.3(a)(5). Are there 
additional costs or benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.3(a)(5). Are there any other 
alternatives that may provide preferable costs or benefits than the 
costs and benefits related to the proposed amendments?
ii. Sec.  49.5--Equity Interest Transfers
    Proposed Sec.  49.5(a) would require that SDRs: (i) Notify the 
Commission of each transaction involving the direct or indirect 
transfer of ten percent or more of the equity interest in the SDR; and 
(ii) provide the Commission with supporting documentation upon request.
    Proposed Sec.  49.5(b) would require that the notice in Sec.  
49.5(a) be filed electronically with the Secretary of the Commission 
and DMO at the earliest possible time but in no event later than the 
open of business ten business days following the date upon which a firm 
obligation is made for the equity interest transfer.
    Proposed Sec.  49.5(c) would require that upon the transfer, 
whether directly or indirectly, the SDR shall file electronically with 
the Secretary of the Commission and DMO a certification that the SDR 
meets all of the requirements of section 21 of the CEA and the 
Commission regulations, no later than two business days following the 
date on which the equity interest was acquired.
(A) Costs and Benefits
    The Commission believes that the proposed amendments would benefit 
SDRs by lowering the burdens related to notifying the Commission of 
equity interest transfers and by extending the time SDRs have to file 
transfer-related materials with the Commission. The proposed changes 
lower the burdens by removing the obligations in current Sec.  49.5(a) 
to update Form SDR for an SDR that has been granted registration under 
Sec.  49.3(a) and in current Sec.  49.5(b) to provide specific 
information to the Commission with the equity interest transfer 
notification and replacing them with the ability for the Commission to 
request supporting documentation for the transfer as needed under 
proposed Sec.  49.5(a). This would likely result in SDRs only providing 
the information the Commission deems necessary for any particular 
equity interest transfer, which may not include all of the documents or 
information required by current Sec.  49.5. The proposed amendments 
also lower the burdens on SDRs by extending the notification timing 
requirement under current Sec.  49.5(a) from one business day to ten 
business days. More time would allow SDRs more flexibility in time and 
resources needed to file the required notice.
    The costs of proposed Sec.  49.5 would be lower than the current 
requirements and would largely be associated with any needed 
adjustments to SDRs policies and procedures related to notification of 
equity interest transfer and the resources needed to provide the 
Commission with requested documentation. The costs would also include 
any additional costs stemming from the inclusion of ``indirect 
transfers'' of equity ownership in proposed Sec.  49.5. This could 
increase the costs to SDRs, if the inclusion of indirect transfers 
results in more frequent equity interest transfers and the associated 
need to provide information to the Commission, but the inclusion of 
indirect transfers would benefit the Commission by providing more 
insight into equity interest transfers that could affect the business 
of an SDR, even though the equity interest transfer does not involve 
the SDR directly. As equity interest transfers are rare occurrences and 
the Commission does not anticipate that including indirect transfers 
would result in substantially more equity interest transfers, the 
Commission expects these potential additional costs to be small.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.5. Are there 
additional costs or benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these benefits.
    The Commission requests comment on its consideration of 
alternatives to proposed Sec.  49.5. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
iii. Sec.  49.6--Request for Transfer of Registration
    Proposed Sec.  49.6(a) would require an SDR seeking to transfer its 
SDR registration following a corporate change to file a request for 
approval to transfer the registration with the Secretary of the 
Commission in the form and manner specified by the Commission.
    Proposed Sec.  49.6(b) would specify that an SDR file a request for 
transfer of registration as soon as practicable before the anticipated 
corporate change. Proposed Sec.  49.6(c) would set forth the 
information that must be included in the request for transfer of 
registration, including the documentation underlying the corporate 
change, the impact of the change on the SDR, governance documents, 
updated rulebooks, and representations by the transferee entity, among 
other things.
    Proposed Sec.  49.6(d) would specify that upon review of a request 
for transfer of registration, the Commission, as soon as practicable, 
shall issue an order either approving or denying the request for 
transfer of registration.
(A) Costs and Benefits
    The Commission believes that proposed Sec.  49.6 would benefit SDRs 
by reducing the burdens on SDRs for successfully transferring an SDR 
registration to a successor entity. Proposed Sec.  49.6 would require a 
more limited scope of information and representations from the 
transferor and

[[Page 21083]]

transferee entities than current Sec.  49.6, which requires a full 
application for registration on Form SDR, including all Form SDR 
exhibits. This limited scope of information and representations would 
require less time and resources to prepare and submit than the current 
requirements.
    The Commission does not believe that proposed Sec.  49.6 would 
impose any additional costs on SDRs compared to the current 
requirement.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.6. Are there 
additional costs or benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.6. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
iv. Sec.  49.9--Open Swaps Reports Provided to the Commission
    Proposed Sec.  49.9(a) would require SDRs to provide the Commission 
with open swaps reports that contain an accurate reflection of the swap 
data for every swap data field required to be reported under part 45 
for every open swap maintained by the SDR. Proposed Sec.  49.9(b) would 
require SDRs to transmit all open swaps reports to the Commission as 
instructed by the Commission.
(A) Costs and Benefits
    The costs imposed by this proposed requirement would include the 
resources SDRs must use to develop the infrastructure to create and 
deliver the open swaps reports as instructed by the Commission. In 
practice, the costs are expected to be mitigated by the fact that SDRs 
currently send open swaps reports to the Commission on a regular basis, 
which would help limit the costs. The SDRs may incur some costs from 
needing to provide open swaps reports in the standardized format 
required by the Commission, but the Commission does not expect the 
format of these reports to change frequently.
    The Commission believes the proposed amendments would standardize 
the reports SDRs already provide, which would ensure that the reports 
will be delivered in a usable format, which will assist the 
Commission's regulatory oversight efforts. The Commission believes the 
largest cost imposed by these amendments would be the upfront costs to 
implement open swaps reporting systems, with incremental costs to 
maintain or modify SDR systems on an ongoing basis. The underlying 
information contained in the reports would also be similar to 
information SDRs would be required to send to reporting counterparties 
for verification purposes under proposed Sec.  49.11(b).
    The Commission currently uses open swaps reports to create and 
publish Commission papers and reports, including the weekly swaps 
report. These reports benefit market participants by analyzing SDR data 
sourced directly from the SDRs. This information on open swaps is 
unique because it is not available to the public until the Commission 
publishes its reports. The Commission also believes that market 
participants would indirectly benefit from the improved data quality of 
open swaps that would result from proposed Sec.  49.9, as the 
information in the reports would help the Commission to better perform 
its regulatory functions.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.9. Are there 
additional costs or benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.9. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
v. Sec.  49.10--Acceptance of Data
    New Sec.  49.10(e) would require SDRs to correct errors and 
omissions in SDR data that was previously reported, or erroneously not 
reported, to SDRs. Proposed Sec.  49.10(e)(1)-(4) would set forth the 
specific requirements SDRs would need to meet to fulfill the general 
requirement in Sec.  49.10(e): (i) Accept corrections for errors and 
omissions reported to, or erroneously not reported to, the SDR; (ii) 
correct errors and omissions as soon as technologically practicable 
after receiving a report of the errors or omissions; (iii) disseminate 
corrected SDR data to the public and the Commission, as applicable, as 
soon as technologically practicable after correcting the SDR data; and 
(iv) establish, maintain, and enforce policies and procedures designed 
to fulfill its correction responsibilities under Sec.  49.10(e)(1)-(3).
(A) Costs and Benefits
    Proposed Sec.  49.10(e) could impose some costs on SDRs, but the 
Commission believes that the costs would not be significant and largely 
related to any needed updates to their error and omission correction 
systems. SDRs are currently required to identify cancellations, 
corrections, and omissions under parts 43 and 45.\244\ Proposed Sec.  
49.10(e) is largely clarifying the SDRs' existing duties, and, for 
organizational purposes, placing the obligations in part 49, which is 
the Commission's main regulations governing SDRs. The costs of the 
proposed paragraph would be mitigated by the fact that SDRs currently 
routinely correct data errors and omissions and disseminate the 
corrections as required.
---------------------------------------------------------------------------

    \244\ See 17 CFR 43.3(e)(1), (3), (4); 17 CFR 45.14(c).
---------------------------------------------------------------------------

    The Commission also expects there would be costs associated with 
establishing, maintaining, and enforcing the policies and procedures 
required by the proposed paragraph, but believes that these costs would 
not be significant and would be limited to initial creation costs and 
update costs for the policies and procedures as needed.
    The Commission believes that one of the benefits from proposed 
Sec.  49.10(e) is improved data quality resulting from collecting and 
disseminating accurate swap data. Proposed Sec.  49.10(e) is intended 
to work in concert with proposed Sec.  45.14 and proposed Sec.  49.11, 
along with the data correction requirements of Sec.  43.3(e). The 
Commission believes that market participants and the public would 
benefit from more complete and accurate swap transaction and pricing 
data that enhances price discovery. In addition, the Commission uses 
swap transaction and pricing data to produce public information on the 
swaps markets, such as the weekly swaps reports. The Commission also 
believes that market participants would benefit from the Commission 
using more accurate data to inform swaps markets policy and perform its 
other regulatory functions. SDRs would also benefit from greater 
clarity in their requirements to correct errors and omissions in SDR 
data.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.10. Are there 
additional costs and benefits that the Commission should

[[Page 21084]]

consider? Commenters are encouraged to include both qualitative and 
quantitative assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.10. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
vi. Sec.  49.11--Verification of Swap Data Accuracy
    Proposed Sec.  49.11(a) would generally require that SDRs: (i) 
Verify the accuracy and completeness of swap data that the SDRs receive 
from SEFs, DCMs, and reporting counterparties, or third-party service 
providers acting on their behalf; and (ii) establish, maintain, and 
enforce policies and procedures reasonably designed to verify the 
accuracy and completeness of that swap data.
    Proposed Sec.  49.11(b) would require SDRs to regularly distribute 
to each reporting counterparty an open swaps report detailing the swap 
data maintained by the SDR that contains the same information provided 
to the Commission in an open swaps report under proposed Sec.  49.9. 
Proposed Sec.  49.11(b)(1) would require SDRs to distribute open swaps 
reports that accurately reflect the swap data the SDR maintains for 
each of a particular reporting counterparty's open swaps, unless other 
Commission regulations prohibit the disclosure of certain swap data.
    Proposed Sec.  49.11(b)(2) would require SDRs to distribute the 
open swaps reports to SD/MSP/DCO reporting counterparties on a weekly 
basis, no later than 11:59 p.m. Eastern Time on the day of the week 
that the SDR chooses to regularly distribute the open swaps reports. 
Proposed Sec.  49.11(b)(3) would require SDRs to distribute the open 
swaps reports to non-SD/MSP/DCO reporting counterparties on a monthly 
basis, no later than 11:59 p.m. Eastern Time on the day of the month 
that the SDR chooses to regularly distribute the open swaps reports.
    Proposed Sec.  49.11(c) would require SDRs to receive from each 
reporting counterparty to which it sends an open swaps report, in 
response to the open swaps report, either a verification of data 
accuracy signifying that the swap data contained in the distributed 
open swaps report is accurate and complete or a notice of discrepancy 
signifying that the swap data in the open swaps report contains one or 
more errors or omissions. Proposed Sec.  49.11(c) would also require 
SDRs to establish, maintain, and enforce policies and procedures 
reasonably designed for the SDR to receive the notices.
    Proposed Sec.  49.11(d) would require SDRs to comply with the 
requirements under part 40 of the Commission's regulations when 
creating and amending their verification policies and procedures.
(A) Costs and Benefits
    The costs associated with the proposed amendments to Sec.  49.11 
would largely be borne by the three existing SDRs. The Commission 
expects that SDRs would incur initial costs from establishing systems 
to generate open swaps reports and to successfully distribute these 
reports to all reporting counterparties. The Commission also expects 
SDR to incur recurring costs related to any needed adjustments to their 
systems over time and to accommodate the arrival or departure of 
reporting counterparties. SDRs would also incur the cost of generating 
and distributing the particular open swaps reports, and receiving the 
responses from the reporting counterparties, but does not believe these 
changes would be significant because, based on discussions with the 
SDRs and other market participants, the Commission believes SDRs would 
largely automate the verification process.
    The Commission believes that the benefits of the proposed 
amendments to Sec.  49.11 would result from verification improving data 
accuracy and completeness. When paired with the proposed requirements 
of Sec.  45.14 and the correction requirements of Sec.  43.3(e), 
verification would alert reporting counterparties to errors and 
omission in SDR data for their open swaps. Reporting counterparties 
would be required to correct any errors or omissions discoverable in 
the open swaps reports the SDRs provide, including errors in trade-
specific details, such as notional amounts and price. The Commission 
believes that SDRs and reporting counterparties would benefit from 
having clearer regulations.
    The Commission also believes that the proposed verification 
requirements would improve the Commission's ability to monitor, 
measure, and regulate the swaps market, such as using more accurate 
data to improve monitoring for potential systemic risks and 
surveillance for potential threats to market integrity.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.11. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.11. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
vii. Sec.  49.12--Swap Data Repository Recordkeeping Requirements
    Proposed Sec.  49.12(a) would require that SDRs keep full, 
complete, and systematic records, together with all pertinent data and 
memoranda, of all activities relating to the business of the SDR, 
including, but not limited to, all SDR information and all SDR data 
reported to the SDR.
    Proposed Sec.  49.12(b)(1) would require that an SDR maintain all 
SDR information received by the SDR in the course of its business. 
Proposed Sec.  49.12(b)(2) would require an SDR to maintain all SDR 
data and timestamps, and all messages to and from an SDR related to SDR 
data reported to the SDR throughout the existence of the swap to which 
the SDR data relates and for five years following final termination of 
the swap, during which time the records must be readily accessible by 
the SDR and available to the Commission via real-time electronic 
access, and then for an additional period of at least ten years in 
archival storage from which such records are retrievable by the SDR 
within three business days.
    Proposed Sec.  49.12(c) would require SDRs to create and maintain 
records of errors related to SDR data validations and errors related to 
SDR data reporting. Proposed Sec.  49.12(c)(1) would require an SDR to 
create and maintain an accurate record of all SDR data that fails to 
satisfy the SDR's data validation procedures. Proposed Sec.  
49.12(c)(2) would require an SDR to create and maintain an accurate 
record of all SDR data errors and omissions reported to the SDR and all 
corrections disseminated by the SDR pursuant to parts 43, 45, and 46. 
SDRs must make the records available to the Commission on request.
    Proposed Sec.  49.12(d) would contain the requirements of current 
Sec.  49.12(c) and would require that: (i) All records required to be 
kept pursuant to part 49 must be open to inspection upon request by any 
representative of the Commission or any representative of the U.S. 
Department of Justice; and (ii) an SDR must produce any record required

[[Page 21085]]

to be kept, created, or maintained by the SDR in accordance with Sec.  
1.31.
    Finally, the Commission is proposing a non-substantive change to 
incorporate the current requirements of Sec.  49.12(e) into the revised 
requirements of SDRs to monitor, screen, and analyze SDR data under 
Sec.  49.13. This non-substantive change does not have any cost or 
benefit implications.
(A) Costs and Benefits
    The costs of proposed amendments to Sec.  49.12 would primarily be 
incurred by the three existing SDRs as they make any needed adjustments 
to create and maintain all required records. The Commission does not 
believe these costs would be significant, as the recordkeeping 
requirements in proposed Sec.  49.12 are largely similar to the 
requirements in current Sec.  49.12 and current Sec.  45.2(f) and (g). 
The proposed Sec.  49.12(c) requirements are intended to serve as 
specific examples of records required to be created and maintained 
pursuant to current requirements and proposed Sec.  49.12, in order to 
emphasize the importance of retaining records related to reporting 
errors, and would include such information as all reported SDR data and 
reports of errors and omissions. Proposed Sec.  49.12(d) further 
specifies that SDRs must make all records included in proposed Sec.  
49.12 available to the Commission on request, which is the current 
requirement applicable to SDR in current Sec.  45.2(h) and current 
Sec.  49.12(c).
    Finally, the proposed amendments to Sec.  49.12 related to SDR 
information would be substantially similar to the SEC's requirements 
for its SBSDRs.\245\ The Commission expects that there would be 
substantial overlap in these requirements for SDRs that are also SBSDRs 
and these entities would be able to leverage resources to reduce any 
duplicative costs.
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    \245\ See 17 CFR 240.13n-7 (detailing the SBSDR recordkeeping 
requirements).
---------------------------------------------------------------------------

    The Commission believes that the proposed amendments to Sec.  49.12 
would provide greater clarity to SDRs in regards to their recordkeeping 
responsibilities and would allow for improvements in tracking errors in 
data reporting and the collecting of records related to SDR 
information. Better recordkeeping related to SDR data should lead to 
increased awareness for the SDRs and the Commission of any reporting 
issues experienced by reporting counterparties. Data recordkeeping 
should lead to better quality data by allowing the SDRs and the 
Commission to look for patterns in records that may lead to adjustments 
to SDR systems or future data reporting requirements. The availability 
of quality records is also crucial for the Commission to effectively 
perform its market surveillance and enforcement functions, which 
benefit the public by protecting market integrity and identifying risks 
within the swaps markets.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.12. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.12. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
viii. Sec.  49.13--Monitoring, Screening, and Analyzing Data
    Proposed Sec.  49.13(a) would generally require: (i) SDRs to 
establish automated systems for monitoring, screening, and analyzing 
all relevant SDR data in their possession in the form and manner as 
directed by the Commission; and (ii) SDRs to routinely monitor, screen, 
and analyze relevant SDR data at the request of the Commission.
    Proposed Sec.  49.13(a)(1) would: (i) Specify that the requirements 
for monitoring, screening, and analyzing SDR data require SDRs to 
utilize relevant SDR data maintained by the SDR to provide information 
to the Commission concerning the SDR data; and (ii) state that 
monitoring, screening, and analyzing requests may require the SDRs to 
compile or calculate information within certain categories, or to 
compare information among categories, and lists the potential topic 
areas for requests. Proposed Sec.  49.13(a)(1) also provides a list of 
topic areas for monitoring, screening, and analyzing tasks that the 
Commission may require.
    Proposed Sec.  49.13(a)(2) would specify that all monitoring, 
screening, and analyzing requests are at the discretion of the 
Commission and require that all information provided pursuant to a 
request conform to the form and manner requirements established for the 
request pursuant to proposed Sec.  49.30. Proposed Sec.  49.13(a)(3) 
would require that all monitoring, screening, and analyzing requests be 
fulfilled within a time specified by the Commission for the particular 
request.
    Proposed Sec.  49.13(b) would require SDRs to establish and at all 
times maintain sufficient technology, staff, and resources to fulfill 
the requirements in Sec.  49.13 in the manner prescribed by the 
Commission.
    Proposed Sec.  49.13(c) would incorporate current Sec.  49.15(c) 
but also expand it to require SDRs to promptly notify the Commission of 
any swap transaction for which the SDR is aware that it did not receive 
SDR data in accordance with the requirements of parts 43, 45, and 46.
(A) Costs and Benefits
    The costs imposed by the proposed amendments to Sec.  49.13 would 
largely be borne by the three SDRs. The Commission expects these SDRs 
to incur costs as they may need to develop or modify and maintain the 
requisite automated systems to monitor, screen, and analyze the 
reported SDR data to respond to requests from the Commission. Each 
requested task would need to be evaluated independently to determine 
the SDRs' ability to perform the task and then to determine the exact 
content of the report and the delivery requirements. The Commission is 
not prescribing any specific tasks with this proposal.
    Section 21(c)(5) of the CEA currently requires SDRs to ``at the 
direction of the Commission, establish automated systems for 
monitoring, screening, and analyzing'' the data maintained by the 
SDRs,\246\ and current Sec.  49.13(a) codifies this requirement by 
requiring the SDRs to monitor, screen, and analyze all data in their 
possession as the Commission may require for ongoing data surveillance 
activities or ad hoc requests.\247\ Proposed Sec.  49.13(a) retains 
this general requirement, but also provides broad topic areas for tasks 
that the Commission may request in order to provide SDRs with more 
information for the monitoring, screening, and analyzing requirement. 
The Commission expects that the costs for SDRs would vary depending on 
the scope and frequency of the data requested. The Commission also 
expects that the costs would be mitigated by the fact that SDRs 
currently perform monitoring, screening, and analyzing tasks at the 
request of Commission staff and therefore have systems and resources in 
place that may be leveraged for any new requests.
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    \246\ 7 U.S.C. 24a(c)(5).
    \247\ See 17 CFR 49.13(a).
---------------------------------------------------------------------------

    Current Sec.  49.13(b) also requires SDRs to maintain sufficient 
information technology to carry out their duties to monitor, screen, 
and analyze the data

[[Page 21086]]

they collect. SDRs also currently routinely perform monitoring, 
screening, and analyzing tasks at the request of Commission staff. 
While the Commission expects that the SDRs may incur costs to modify 
and maintain their systems to comply with the requirements of proposed 
Sec.  49.13 and to respond to requests from the Commission, the 
Commission believes that the incremental costs would not be significant 
compared to the applicable baseline of the current requirements to 
perform monitoring, screening, and analyzing tasks. These costs would 
also be mitigated by the fact that SDRs are currently performing a 
variety of monitoring, screening, and analyzing tasks at the request of 
Commission staff, and therefore already have resources devoted to 
monitoring, screening, and analyzing SDR data that could be leveraged 
for any additional requests.
    The Commission acknowledges that the cost burdens of the proposed 
changes for any specific SDR would depend on the current systems 
established and maintained by the SDR. While current Sec.  49.13 
includes requirements to monitor, screen, and analyze data and 
establish and maintain sufficient information technology, staff, and 
other resources, the resources expended by an SDR necessarily depends 
on the parameters of the specific requests. The Commission does not 
expect SDRs to expend resources without a pending request from the 
Commission. SDRs currently perform tasks, such as tracking the 
timeliness of swaps reporting, but costs from other tasks facilitated 
by the proposed rule may require new or modified systems to perform 
requested tasks.
    The Commission further acknowledges that costs related to each task 
would likely vary with the complexity of the requested task. The costs 
associated with responding to each task would depend on the information 
requested and the frequency of the reports. The Commission expects the 
requests would be reasonable based on available SDR resources and would 
take into account an understanding of what is possible given the data 
maintained by the SDRs. The Commission understands that SDRs can only 
be expected to perform monitoring, screening, and analyzing tasks based 
on the SDR data available to each SDR and that the results of any task 
would be limited to the SDR data for swaps reported to each SDR. The 
Commission also expects that SDRs and Commission staff would work 
together to design each task before a task is prescribed, as is current 
practice.
    This may also be a source of costs for SDRs, as each pending 
request may require multiple conversations between SDRs and the 
Commission to design each task based on the Commission's needs and what 
is feasible given the SDRs' abilities and the available SDR data.
    After the costs have been incurred for any initial development or 
updates to SDR automated systems related to any specific task, the 
Commission expects recurring costs as SDRs' systems would need to be 
monitored and adjusted as needed. Given that the Commission expects 
most requested tasks would be largely automated, the per-report 
production costs would not be substantial.
    In addition, because the information submitted to the Commission 
must reflect and adhere to established form and manner specifications 
pursuant to proposed Sec.  49.30, the Commission anticipates many of 
the reports resulting from the tasks would share a common form and 
manner, which would result in reduced incremental costs for additional 
reports.
    Proposed Sec.  49.13(c) would not create any costs other than those 
associated with the requirement to promptly notify the Commission. The 
Commission believes those costs would not be significant, because SDRs 
have already established systems to send electronic information to the 
Commission and the Commission is not requiring SDRs to actively search 
for reporting noncompliance as part of this proposed section.
    The Commission expects amended Sec.  49.13 would improve data 
quality and enhance the Commission's surveillance and other regulatory 
capabilities. Market participants and the public would benefit from 
these improvements. As SDRs analyze the SDR data to complete requested 
tasks, for example, inconsistencies and anomalies within the data would 
become more apparent, which may lead to improvements in market 
practices, data quality, and Commission regulations. The reports may 
also assist the Commission with timely analyses that would help the 
Commission perform its regulatory functions. To the extent that the 
tasks enable the Commission to act more quickly, or with greater 
accuracy, to identify abusive market practices, compliance issues, or 
systemic risks, and address these concerns more quickly and with 
greater precision, market participants and the public would benefit. 
These monitoring, screening, and analyzing tasks should lead to more 
robust, improved analyses performed by or available to the Commission 
staff, and the findings from such analyses should help the Commission 
better perform its regulatory functions, improve its policy decisions, 
and allow the Commission to better inform the public about the swaps 
markets.
    The Commission recognizes that not detailing specific tasks in the 
rule text may create certain costs for SDRs, as the tasks the 
Commission requests them to perform may change over time and therefore 
may not be perfectly predictable. At the same time, the Commission 
believes that not assigning tasks in the rule text itself would 
encourage the SDRs and the Commission to work together to devise the 
best approaches for any needed tasks. Adding specific tasks to the rule 
text would also curtail the Commission's ability to remove or modify 
the task in the future, as the Commission's needs and the SDRs' 
capabilities change. Allowing more flexibility by not including tasks 
in the proposed rulemaking would benefit both the SDRs and the 
Commission, and is the Commission's preferred approach. Additionally, 
the examples of the types of tasks the Commission envisions asking of 
SDRs provide above should help reduce any costs associated with 
uncertainty.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.13. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.13. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
    Please describe the qualitative and quantitative costs (including, 
but not limited to, personnel costs, technological costs, and costs 
related to on-going discussions with Commission staff) that SDRs may 
incur in needing to make any updates to current systems related to the 
proposed changes to Sec.  49.13.
    Please describe (both qualitatively and quantitatively) how costs 
or benefits (including, but not limited to, personnel costs, 
technological costs, and costs related to on-going discussions with 
Commission staff) may change depending on whether more or fewer 
categories are included in Sec.  49.13(a)(1). Are there additional 
categories that the Commission should include or are there

[[Page 21087]]

categories that the Commission should remove? If so, please explain in 
detail.
    Please describe (both qualitatively and quantitatively) how costs 
and benefits (including, but not limited to, personnel costs, 
technological costs, and costs related to on-going discussions with 
Commission staff) may change depending on the length of time period to 
be analyzed for a task or the frequency of repetition for a task.
ix. Sec.  49.17--Access to SDR Data
    The Commission proposes to amend the Sec.  49.17(b)(3) definition 
of ``direct electronic access'' to mean an electronic system, platform, 
framework, or other technology that provides internet-based or other 
form of access to real-time SDR data that is acceptable to the 
Commission and also provides scheduled data transfers to Commission 
electronic systems.
    Proposed Sec.  49.17(c) would require SDRs to provide access to the 
Commission for all SDR data maintained by the SDR pursuant to the 
Commission's regulations. Proposed Sec.  49.17(c)(1) would require that 
SDRs provide direct electronic access to the Commission or its designee 
in order for the Commission to carry out its legal and statutory 
responsibilities under the CEA and Commission regulations. Proposed 
Sec.  49.17(c)(1) would also require that SDRs maintain all SDR data 
reported to the SDR in a format acceptable to the Commission, and 
transmit all SDR data requested by the Commission to the Commission as 
instructed by the Commission.
    Proposed Sec.  49.17(c)(1) would amend the requirements of current 
Sec.  45.13(a) from maintaining and transmitting ``swap data'' to 
maintaining and transmitting ``SDR data,'' to make clear that the SDRs 
must maintain all SDR data reported to the SDRs in a format acceptable 
to the Commission and transmit all SDR data requested by the 
Commission, not just swap data.
    Proposed Sec.  49.17(c)(1) would also broaden the requirements of 
current Sec.  45.13(a) from ``transmit all swap data requested by the 
Commission to the Commission in an electronic file in a format 
acceptable to the Commission'' to ``transmit all SDR data requested by 
the Commission to the Commission as instructed by the Commission,'' and 
explains what these instructions may include.
    The Commission proposes to amend Sec.  49.17(f) to correct the 
incorrect reference to ``37.12(b)(7)'' at the end of paragraph (f)(2) 
with a correct reference to ``39.12(b)(7)'' of the Commission's 
regulations, as there is no Sec.  37.12(b)(7) in the Commission's 
regulations.
    The Commission proposes to move the delegation of authority in 
current Sec.  49.17(i) to proposed Sec.  49.31(a)(7).
(A) Costs and Benefits
    The costs imposed by the proposed changes to Sec.  49.17(c) would 
fall mainly on SDRs, because the SDRs would incur costs to provide the 
Commission with direct electronic access to all SDR data and to provide 
access to SDR data as instructed. The costs associated with the use of 
the term ``direct electronic access'' in proposed Sec.  49.17(c) are 
negligible, as the definition is being modified to allow the SDR's more 
flexibility in providing the Commission with direct electronic access 
to SDR data, subject to the Commission's approval. The other proposed 
amendments to Sec.  49.17(c) grant the Commission greater flexibility 
to instruct SDRs on how to transfer SDR data to the Commission at the 
Commission's request. The SDRs may experience some costs based on the 
need to update systems to be able to transfer SDR data to the 
Commission as instructed. These incremental costs would not be 
significant because SDRs are already required to provide scheduled data 
transfers to the Commission under current Sec.  49.17(b)(3) and (c)(1) 
and are required to transmit all swap data requested by the Commission 
to the Commission in an electronic file in a format acceptable to the 
Commission under current Sec.  45.13(a). It is also current market 
practice for SDRs to regularly provide SDR data to the Commission as 
instructed by Commission staff. The Commission expects that the SDRs 
would continue to work with Commission staff to devise the most 
efficient and effective ways to meet the Commission's data needs.\248\
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    \248\ The proposed changes to Sec.  49.17(f)(2) and (i) are non-
substantive and do not have cost-benefit implications.
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    The Commission believes that the proposed amendments to Sec.  49.17 
would provide clarity and certainty to SDRs regarding their 
responsibilities to the Commission, by including the data access 
requirements in one section and by more clearly stating the 
Commission's ability to instruct SDRs on all aspects of providing SDR 
data to the Commission. This clarity would help the SDRs work with 
Commission staff to devise the most efficient and effective ways for 
the SDRs to transfer data to the Commission, ensuring that the 
Commission would have the SDR data that it needs to perform its 
regulatory functions without undue burden on SDRs.
    The proposed changes to Sec.  49.17(b)(3) that modify the 
definition of ``direct electronic access'' to allow for more 
technological flexibility would reduce future costs for SDRs because 
the amendment allows the Commission to consider any technology that may 
provide direct electronic access more efficiently than the current 
requirement. This would allow the Commission to adapt to changing 
technology more quickly and may allow the SDRs to save costs by having 
more efficient technology and processes approved in the future.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.17. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of the costs and benefits, as well as other information to 
support such assessments.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.17. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
x. Sec.  49.22--Chief Compliance Officer
    The Commission proposes to amend Sec.  49.22 to reduce regulatory 
compliance burdens on SDRs and to make a number of non-substantive 
organizational and conforming changes.
    The Commission is proposing a non-substantive change to define 
``senior officer'' in proposed Sec.  49.22(a). Both current Sec.  49.22 
and the CEA \249\ use the term ``senior officer'' in the context of CCO 
requirements. Proposed Sec.  49.22(a) also makes non-substantive 
organizational changes to the paragraph.
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    \249\ See 7 U.S.C. 24a(e).
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    Proposed Sec.  49.22(b) removes an unnecessary reference 
establishing the position of CCO from Sec.  49.22(b)(1) and adds in 
consultation with the board of directors or senior officer to Sec.  
49.22(b)(1)(i), along with other conforming changes to terminology.
    Proposed Sec.  49.22(c) rearranges some parts of the section and 
simplifies the wording of current Sec.  49.22(c) in order to clarify 
the requirements related to the appointment, supervision, and removal 
of the CCO, but makes few substantive changes to the current 
requirements. Proposed Sec.  49.22(c)(3)(i) clarifies that the senior 
officer can also remove a CCO, in addition to the board of

[[Page 21088]]

directors, in order to provide more flexibility to the SDRs.
    Proposed Sec.  49.22(d) rearranges some parts of the section and 
simplifies the wording of current Sec.  49.22(d), while also making a 
few substantive changes related to CCO duties. Proposed Sec.  
49.22(d)(2) changes ``any conflicts of interest that may arise'' to 
``any material conflicts of interest'' to contain a more practical 
requirement on SDRs than having CCOs resolve every potential conflict 
of interest, which would also reduce burdens. The proposed changes also 
remove the three examples of conflicts of interest from current Sec.  
49.22(d)(2) \250\ in order to not imply a limit as to the types of 
material conflicts of interest that may arise. The Commission notes 
that material conflict of interest may still arise in the three areas 
listed in current Sec.  49.22(d)(2), and the CCO would have to address 
such material conflicts, even with the examples removed from proposed 
Sec.  49.22(d).
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    \250\ See 17 CFR 49.22(d)(2)(i)-(iii).
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    Proposed Sec.  49.22(e) rearranges some parts of the section and 
simplifies the wording of current Sec.  49.22(e), while making a few 
substantive changes related to the preparation of the annual compliance 
report. The Commission is proposing to curtail the line-by-line review 
of Commission regulations and the CEA requirements with SDR policies, 
as required by current Sec.  49.22(e)(2), in order to streamline the 
SDRs' preparation of the annual compliance report. The Commission 
notes, however, that proposed Sec.  49.22(e)(1) and (e)(2) would focus 
on the most important and useful information in the annual compliance 
report based on the Commission's experience. The Commission is also 
proposing to remove many of the examples of how material compliance 
issues can be identified from current Sec.  49.22(e)(5) so as not to 
imply any limits on the material compliance matters that must be 
described. The Commission notes that removing the examples from current 
Sec.  49.22(e)(5) in proposed Sec.  49.22(e)(4) does not in any way 
limit the material compliance matters that must be described, 
regardless of how the matter are identified. Finally, the Commission 
proposes to add ``in all material aspects'' to the end of current Sec.  
49.22(e)(6) in proposed Sec.  49.22(e)(5), in order to reduce CCOs' 
concerns with certifying the annual compliance report's accuracy.
    The Commission is proposing to remove the requirement in current 
Sec.  49.22(f)(1) that requires the submission of the annual compliance 
report to the SDR's board of directors or the senior officer and any 
subsequent discussion of the report to be recorded in the board minutes 
or other similar record as evidence of compliance with the submission 
requirement, as this requirement would be incorporated into the general 
recordkeeping requirement in proposed Sec.  49.22(g).
    The Commission is proposing to amend Sec.  49.22(f)(2) by 
increasing the amount of time that SDRs have to submit the annual 
compliance report to the Commission from 60 days to 90 calendar days 
after the end of the SDR's fiscal year. The Commission is also 
proposing to remove the annual Form SDR amendment requirement in Sec.  
49.3(a)(5) and is therefore proposing to remove the reference to Sec.  
49.3(a)(5) from Sec.  49.22(f)(2).
    The Commission proposes to amend Sec.  49.22(f)(3) to include a 
requirement that, in the instance where an amendment to the annual 
compliance report must be submitted to the Commission, the CCO must 
also submit the amended annual compliance report to the SDR's board of 
directors or the senior officer.
    The Commission is proposing to amend Sec.  49.22(f)(4) to allow the 
Commission to more easily grant requests for an extension of time to 
file the annual compliance report by removing the requirement that SDRs 
must show ``substantial, undue'' hardship. The Commission believes this 
current requirement is too strict and is instead proposing to allow the 
Commission to grant extensions based on ``reasonable and valid 
requests.''
    The Commission is proposing to amend Sec.  49.22(g) to simplify the 
recordkeeping requirements for records related to the SDRs' policies 
and records created related to the annual compliance report. The 
Commission is removing the specific examples of records listed in 
current Sec.  49.22(g) from proposed Sec.  49.22(g), but proposed Sec.  
49.22(g) still requires all of the same records to be maintained in 
accordance with proposed Sec.  49.12. As a result, the proposed 
amendments to Sec.  49.22(g) are non-substantive.
(A) Costs and Benefits
    The proposed amendments to Sec.  49.22(a), (b), and (g) are non-
substantive and therefore do not have cost-benefit implications. 
Similarly, the conforming amendments related to the terms proposed in 
Sec.  49.2, the rearranging of paragraphs within proposed Sec.  49.22, 
and other changes to text that do not substantively change the 
requirements of Sec.  49.22 do not have cost-benefit implications.
    The only substantive change in proposed Sec.  49.22(c) is the 
addition of the senior officer's ability to remove the CCO. The 
Commission believes that adding the senior officer to this provision 
would benefit SDRs by allowing more flexibility in how the SDRs manage 
their personnel and their compliance activities. The Commission 
believes that any costs associated with proposed Sec.  49.22(c) would 
not be significant and consist of any resources needed to update SDR 
policies and procedures, if the SDRs choose to enable the senior 
officer to remove the CCO.
    The Commission believes that the proposed change to the conflicts 
of interest provision in proposed Sec.  49.22(d)(2) would benefit SDRs 
by including a more practical requirement while still requiring 
important conflicts of interest to be addressed. By changing the 
requirement from ``resolving any conflicts of interest that may arise'' 
to ``taking reasonable steps . . . to resolve any material conflicts of 
interest that may arise,'' an SDR's CCO would not need to spend 
resources to address every conceivable conflict of interest and can 
instead concentrate resources on resolving conflicts of interest that 
have a material effect on an SDR's operations. The Commission does not 
expect the SDRs to incur any significant costs as a result of these 
proposed changes.
    The Commission believes that the changes to the requirements for 
the information to be included in the annual compliance report in 
proposed Sec.  49.22(e)(1) would benefit SDRs by allowing SDRs to focus 
on the most important and useful information in the annual compliance 
report, which would also reduce their burdens. The Commission believes 
that the proposed removal of the assessment of all applicable 
Commission regulations and CEA requirements with SDR policies and 
replacement with a more general requirement to describe and assess the 
SDR's policies and procedures would save SDRs effort without 
detrimental effects on the Commission's ability to perform its 
oversight functions. The Commission does not believe there are any 
incremental costs associated with this proposed amendment. The 
remaining changes to Sec.  49.22(e) are not substantive and do not have 
cost-benefit implications.
    The Commission believes that the proposed amendments to Sec.  
49.22(f) would benefit SDRs by simplifying requirements or reducing the 
costs on SDRs to submit annual compliance reports to the Commission. By 
providing

[[Page 21089]]

more time to submit the annual compliance report and by reducing the 
burden to request a further extension in time to file an annual 
compliance report, the amendments to Sec.  49.22(f)(2) and (4) would 
reduce the cost of complying and submitting the report for SDRs. 
Requirements are also simplified by removing the board or meeting 
minutes requirement in proposed Sec.  49.22(f)(1), as this requirement 
would be incorporated into the general recordkeeping requirement in 
proposed Sec.  49.22(g). The requirement to submit an amended annual 
compliance report to the board of directors or senior officer may 
slightly increase costs for SDRs, but only in the sense of the time 
burden required to submit the amended report. This cost is further 
mitigated by the fact that CCOs are already capable of submitting the 
annual compliance reports to their board of directors or senior officer 
because of existing requirements.
    The benefits of the proposed amendments for SDRs would result from 
the lower burdens related to annual compliance reports. The SDRs would 
have more time to complete the annual compliance reports and the 
Commission would be more able to grant requests for extensions of 
filing time, which should make complying and submitting annual 
compliance reports easier for SDRs. Removing the requirement to record 
the submission and discussions of the annual compliance reports from 
board of directors meeting minutes and similar documents would 
streamline the requirements as this requirement would be incorporated 
into the general recordkeeping requirement in proposed Sec.  49.22(g). 
Overall, the amendments would make the submission process for annual 
compliance reports under Sec.  49.22(f) easier for SDRs.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.22. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of the costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.22. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
xi. Sec.  49.25--Financial Resources
    The Commission proposes conforming changes to Sec.  49.25 to remove 
the reference to Sec.  49.9 and to core principle obligations 
identified in Sec.  49.19. Proposed Sec.  49.25(a) would instead refer 
to SDR obligations under ``this chapter,'' to be broadly interpreted as 
any regulatory or statutory obligation specified in part 49. The 
Commission considers these to be non-substantive changes that do not 
impact existing obligations on SDRs, and therefore have no cost-benefit 
implications.
    The Commission is also proposing to amend Sec.  49.25(f)(3) to 
extend the time SDRs have to submit their quarterly financial resources 
reports to 40 calendar days after the end of the SDR's first three 
fiscal quarters, and 90 days after the end of the SDR's fourth fiscal 
quarter, or a later time that the Commission permits upon request.
(A) Costs and Benefits
    The Commission believes that giving SDRs more time to file their 
quarterly financial resources reports would benefit SDRs with little 
impact on the Commission's oversight of SDRs. In addition, the 
Commission notes that the 90 calendar day deadline for fourth quarter 
financial reports would align with the amended timeframe for SDRs 
submitting annual compliance reports in proposed Sec.  49.22(f)(2). The 
Commission believes that SDRs would benefit from extended, harmonized 
deadlines.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.25. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of the costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.25. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
xii. Sec.  49.26--Disclosure Requirements of Swap Data Repositories
    The Commission proposes to amend Sec.  49.26 to make updates to the 
introductory paragraph of Sec.  49.26 to reflect updates to the terms 
``SDR data,'' ``registered swap data repository,'' and ``reporting 
entity'' in proposed Sec.  49.2. The Commission also proposes to update 
other defined terms used in the section to conform to the proposed 
amendments to Sec.  49.2. These non-substantive amendments do not 
change the requirements of Sec.  49.26 and do not have cost-benefit 
implications.
    The Commission also proposes to add Sec.  49.26(j) that would 
require that the SDR disclosure document set forth the SDR's policies 
and procedures regarding the reporting of SDR data to the SDR, 
including the SDR data validation and swap data verification procedures 
implemented by the SDR and the SDR's procedures for correcting SDR data 
errors and omissions (including the failure to report SDR data as 
required pursuant to the Commission's regulations).
(A) Costs and Benefits
    The Commission believes that costs of proposed Sec.  49.26 would 
not be significant. The costs would entail the costs of adding the 
information required under proposed Sec.  49.26(j) to the required SDR 
disclosure document and updating the document as needed.
    The Commission expects that the proposed addition of Sec.  49.26(j) 
would benefit market participants by providing clearer information 
regarding data reporting to SDR users, which should improve data 
reporting by providing SDR users with information that would allow them 
to align their data reporting systems with the SDRs' data reporting 
systems before using the SDRs' services, thereby reducing reporting 
errors and potential confusion.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.26. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of the costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.26. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
xiii. Sec.  49.28--Operating Hours of Swap Data Repositories
    The Commission is proposing to add new Sec.  49.28 to provide more 
detail on the SDRs' responsibilities with respect to hours of 
operation. Proposed Sec.  49.28(a) would require an SDR to have systems 
in place to continuously accept, promptly record, and, as applicable 
pursuant to part 43, publicly disseminate all SDR data reported to the 
SDR. Proposed Sec.  49.28(a)(1) would

[[Page 21090]]

allow an SDR to establish normal closing hours to perform system 
maintenance when, in the SDRs' reasonable estimation, the SDR typically 
receives the least amount of SDR data, as long as the SDR provides 
reasonable advance notice of its normal closing hours to market 
participants and the public.
    Proposed Sec.  49.28(a)(2) would allow an SDR to declare, on an ad 
hoc basis, special closing hours to perform system maintenance that 
cannot wait until normal closing hours. Proposed Sec.  49.28(a)(2) 
instructs SDRs to schedule special closing hours during periods when, 
in an SDR's reasonable estimation, the special closing hours would, to 
the extent possible, be least disruptive to the SDR's SDR data 
reporting responsibilities. Proposed Sec.  49.28(a)(2) would also 
require the SDRs to provide reasonable advance notice of the special 
closing hours to market participants and the public whenever possible, 
and, if advance notice is not reasonably possible, to give notice to 
the public as soon as is reasonably possible after declaring special 
closing hours.
    Proposed Sec.  49.28(b) would require SDRs to comply with the 
requirements under part 40 of the Commission's regulations when 
adopting or amending normal closing hours or special closing 
hours.\251\
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    \251\ This requirement already applies to SDRs pursuant to 
current Sec.  43.3(f)(3). See 17 CFR 43.3(f)(3).
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    Proposed Sec.  49.28(c) would require an SDR to have the capability 
to accept and hold in queue any and all SDR data reported to the SDR 
during normal closing hours and special closing hours \252\ Proposed 
Sec.  49.28(c)(1) would require an SDR, on reopening from normal or 
special closing hours, to promptly process all SDR data received during 
the closing hours and, pursuant to part 43, publicly disseminate swap 
transaction and pricing data reported to the SDR that was held in queue 
during the closing hours.\253\ Proposed Sec.  49.28(c)(2) would require 
SDRs to immediately issue notice to all SEFs, DCMs, reporting 
counterparties, and the public in the event that an SDR is unable to 
receive and hold in queue any SDR data reported during normal closing 
hours or special closing hours. Proposed Sec.  49.28(c)(2) would also 
require SDRs to issue notice to all SEFs, DCMs, reporting 
counterparties, and the public that the SDR has resumed normal 
operations immediately on reopening. Proposed Sec.  49.28(c)(2) would 
then require a SEF, DCM, or reporting counterparty that was not able to 
report SDR data to an SDR because of the SDR's inability to receive and 
hold in queue SDR data to immediately report the SDR data to the 
SDR.\254\
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    \252\ Proposed Sec.  49.28(c) would expand the similar existing 
requirements for swap transaction and pricing data in current Sec.  
43.3(g) to all SDR data and would largely follow the SBSDR 
requirements to receive and hold in queue information regarding 
security-based swaps.
    \253\ Proposed Sec.  49.28(c)(1) would expand the similar 
existing requirements for the SDRs to disseminate swap transaction 
and pricing data pursuant to current Sec.  43.3(g)(1) to also 
include the prompt processing of all other SDR data received and 
held in queue during closing hours. The proposed requirements would 
also largely follow the SBSDR requirements for disseminating 
transaction reports after reopening following closing hours.
    \254\ Proposed Sec.  49.28(c)(2) would expand the similar 
existing requirements for swap transaction and pricing data in 
current Sec.  43.3(g)(2) to all SDR data and would largely follow 
the SBSDR requirements to receive and hold in queue information 
regarding security-based swaps.
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(A) Costs and Benefits
    The Commission believes that the above requirements, which are 
largely based on existing rule text found in current Sec.  43.3(f) and 
(g), would not have significant cost implications for SDRs. The costs 
would be those associated with any needed modification to SDR systems 
to accommodate all SDR data during closing hours, as opposed to only 
swap transaction and pricing data. These costs would not be significant 
because all SDRs currently have policies, procedures, and systems in 
place to accommodate all SDR data during closing hours because of the 
current requirements.
    The SDRs, market participants, and the public benefit from proposed 
Sec.  49.28 because the requirements for setting closing hours and 
handling SDR data during closing hours would be clearer. Proposed Sec.  
49.28 also removes discrepancies between current requirements for SDRs 
and SBSDRs related to closing hours, which would allow SDRs that are 
also registered as SBSDRs to comply with one requirement.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.28. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of the costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.28. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
xiv. Sec.  49.29--Information Relating To Swap Data Repository 
Compliance
    The Commission is proposing to add new Sec.  49.29 to provide for 
information requests to SDRs regarding compliance with an SDR's 
regulatory duties and core principles.
    Proposed Sec.  49.29(a) would require SDRs, upon request of the 
Commission, to file certain information related to its business as an 
SDR or other such information as the Commission determines to be 
necessary or appropriate for the Commission to perform its regulatory 
duties. The SDRs would be required to provide the requested information 
in the form and manner and within the time specified by the Commission 
in its request.
    Proposed Sec.  49.29(b) would require SDRs, upon the request of the 
Commission, to demonstrate compliance with their obligations under the 
CEA and Commission regulations, as specified in the request. SDRs would 
be required to provide the requested information in the form and manner 
and within the time specified by the Commission in its request.
    Proposed Sec.  49.29 is based on existing Commission requirements 
applicable to SEFs and DCMs.\255\
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    \255\ See, e.g., 17 CFR 37.5 and 38.5.
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(A) Costs and Benefits
    The costs associated with responding to requests for information 
would include the staff hours required to prepare and submit materials 
related to the requests. These costs would vary among SDRs depending 
upon the nature and frequency of Commission inquiries. The Commission 
expects these requests to be limited in both size and scope, which 
would constrain the cost burden on SDRs. While proposed Sec.  49.29 
allows the Commission to make requests on an ad hoc basis, the 
Commission expects that the need for these requests would decrease over 
time as data quality and SDR compliance with Commission regulations 
improves.\256\ The Commission acknowledges that there would be an 
incremental cost for each response, given the time required by the SDR 
to collect and/or summarize the requested information. The Commission 
believes that these costs would be mitigated by the fact that current 
practice is for SDRs to provide similar information to the Commission 
on

[[Page 21091]]

request and that the SDRs do so regularly.
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    \256\ The Commission currently exercises similar authority fewer 
than ten times per year in total with other registered entities, 
such as SEFs, DCMs, and DCOs.
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    Information submitted to the Commission would be required to 
reflect and adhere to form and manner specifications established 
pursuant to proposed Sec.  49.30. The Commission expects that clearly 
defining the form and manner for each response would mitigate the cost 
burden to the SDRs from any uncertainty as to the information to be 
provided.
    Benefits attributed to proposed Sec.  49.29 would include improving 
the Commission's oversight of SDRs. The Commission expects that this 
oversight would lead to improved data quality and SDR compliance with 
Commission regulations due to Commission inquiries. Better data quality 
should improve the Commission's ability to fulfill its regulatory 
responsibilities and help to increase the Commission's understanding of 
the swaps market. These improvements are expected to benefit the public 
through more accurate and complete SDR data reporting, improved 
Commission analyses and oversight of the swaps markets, and increased 
market integrity due to the Commission's improved ability to detect and 
investigate noncompliance issues and oversee their correction.
    Proposed Sec.  49.29 would also help the Commission to obtain the 
information it needs to perform its regulatory functions as needed, as 
opposed to requiring the information on a set schedule, such as with 
the proposed removal of the requirement for annual Form SDR updates in 
proposed Sec.  49.3(a)(5). Proposed Sec.  49.29 would allow the 
Commission to request the same information that would be contained in 
Form SDR and its exhibits when the Commission needs the information, as 
opposed to requiring the SDRs to update Form SDR and the exhibits 
annually. This would reduce the burden on SDRs from annual filings for 
any information that the Commission requests less frequently than 
annually.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.29. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these costs and benefits, as well as other information 
to support such assessments.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.29. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
xv. Sec.  49.30--Form and Manner of Reporting and Submitting 
Information to the Commission
    The Commission is proposing to add new Sec.  49.30 to address the 
form and manner of information the Commission requests from SDRs.
    Proposed Sec.  49.30 would establish the broad parameters of the 
``form and manner'' requirements found throughout part 49 in different 
regulations. The ``form and manner'' requirement proposed in Sec.  
49.30 would not supplement or expand upon existing substantive 
provisions of part 49, but instead, would only allow the Commission to 
specify how existing information reported to, and maintained by, SDRs 
should be formatted and delivered to the Commission. Proposed Sec.  
49.30 would provide that the Commission would specify, in writing, the 
format, coding structure, and electronic data transmission procedures 
for various reports and submissions that are required to be provided to 
the Commission under part 49.
(A) Costs and Benefits
    The Commission believes that the form and manner requirements would 
have costs associated with conforming reports and information to 
Commission specifications, including labor, time, and potentially 
technology costs for formatting reports. In practice, the incremental 
costs are not likely to be significant, because SDRs have extensive 
experience working with Commission staff to deliver data and reports in 
the form and manner requested by Commission staff. The Commission 
believes that, in practice, this experience would significantly 
mitigate the costs of this amendment.
    The Commission believes that the Commission would benefit through 
increased standardization of information provided by SDRs, thereby 
aiding the Commission in the performance of its regulatory obligations 
by ensuring the provided information is useable by the Commission and 
allowing the Commission to alter the form and manner over time, as 
standards and technologies change. The ability to standardize the form 
and manner of information provided to the Commission would also help 
SDRs to efficiently fulfill their obligations to provide this 
information to the Commission.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  49.30. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of the costs and benefits, as well as other information to 
support such assessments.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  49.30. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
5. Costs and Benefits of Proposed Amendments to Part 45
i. Sec.  45.2--Swap Recordkeeping
    The Commission is proposing to move current Sec.  45.2(f) and (g) 
(SDR recordkeeping and SDR records retention, respectively) to proposed 
new Sec.  49.12. As such, all costs and benefits associated with this 
change are discussed above in section 4.viii regarding proposed new 
Sec.  49.12.
ii. Sec.  45.14--Verification of Swap Data Accuracy and Correcting 
Errors and Omissions in Swap Data
    Proposed Sec.  45.14(a) would generally require that reporting 
counterparties verify the accuracy and completeness of swap data for 
swaps for which they are the reporting counterparty. Proposed Sec.  
45.14(a)(1) would require that a reporting counterparty reconcile its 
internal books and records for each open swap for which it is the 
reporting counterparty with every open swaps report provided to the 
reporting counterparty by an SDR pursuant to proposed Sec.  49.11. 
Proposed Sec.  45.14(a)(1) would further require that reporting 
counterparties conform to the verification policies and procedures 
created by an SDR pursuant to Sec.  49.11 for swap data verification.
    Proposed Sec.  45.14(a)(2) would require that reporting 
counterparties submit either a verification of data accuracy or a 
notice of discrepancy in response to every open swaps report received 
from an SDR within the following timeframes: (i) 48 hours of the SDR 
providing the open swaps report if the reporting counterparty is an SD, 
MSP, or DCO; or (ii) 96 hours of the SDR providing the open swaps 
report for non-SD/MSP/DCO reporting counterparties.
    Proposed Sec.  45.14(a)(3) would require that when a reporting 
counterparty does

[[Page 21092]]

not find any discrepancies between the swap data it reported to an SDR 
according to its internal books and records for the swaps included in 
the open swaps report and the swap data provided by the SDR in the open 
swaps report, the reporting counterparty would submit a verification of 
data accuracy to the SDR indicating that the swap data is complete and 
accurate, within the timeframe applicable to the reporting counterparty 
under proposed Sec.  45.14(a)(2).
    Proposed Sec.  45.14(a)(4) would require that when a reporting 
counterparty finds discrepancies between the swap data it reported to 
an SDR according to its internal books and records for the swap data 
included, or erroneously not included, in an open swaps report and the 
swap data provided by the SDR in the open swaps report, the reporting 
counterparty must submit a notice of discrepancy to the SDR in the form 
and manner required by the SDR's policies and procedures created 
pursuant to Sec.  49.11, within the timeframe applicable to the 
reporting counterparty under proposed Sec.  45.14(a)(2).
    Proposed Sec.  45.14(b)(1) would require any SEF, DCM, or reporting 
counterparty that by any means becomes aware of any errors or omissions 
in swap data previously reported to an SDR by the SEF, DCM, or 
reporting counterparty to submit corrected swap data to the SDR. 
Proposed Sec.  45.14(b)(1) would also require any SEF, DCM, or 
reporting counterparty that by any means becomes aware of any swap data 
not reported to an SDR by the SEF, DCM, or reporting counterparty as 
required to submit the omitted swap data to the SDR. The error and 
omission correction requirements include, but are not limited to, 
errors or omissions present during the verification process specified 
in Sec.  45.14(a). These error and omission correction requirements 
also apply regardless of the state of the swap.
    Proposed Sec.  45.14(b)(1)(i) would require that SEFs, DCMs, and 
reporting counterparties correct swap data as soon as technologically 
practicable following discovery of the errors or omissions, but no 
later than three business days after discovery of the error or 
omission.
    Proposed Sec.  45.14(b)(1)(ii) would require that if a SEF, DCM, or 
reporting counterparty is unable to correct errors or omissions within 
three business days of discovery, the SEF, DCM, or reporting 
counterparty must immediately inform the Director of DMO, or such other 
Commission employees whom the Director of DMO may designate, in 
writing, of the errors or omissions and provide an initial assessment 
of the scope of the errors or omissions and an initial remediation plan 
for correcting the errors or omissions.
    Proposed Sec.  45.14(b)(1)(iii) would require that a SEF, DCM, or 
reporting counterparty conform to the SDR's policies and procedures for 
corrections of errors and omissions.
    Proposed Sec.  45.14(b)(2) would require a non-reporting 
counterparty that by any means becomes aware of any error or omission 
in swap data previously reported to an SDR, or the omission of swap 
data for a swap that was not previously reported to an SDR as required, 
to notify the reporting counterparty for the swap of the errors or 
omissions as soon as technologically practicable following discovery of 
the errors or omissions, but no later than three business days 
following the discovery of the errors or omissions.
    Proposed Sec.  45.14(b)(2) would also specify that a non-reporting 
counterparty that does not know the identity of the reporting 
counterparty for a swap must notify the SEF or DCM where the swap was 
executed of the errors or omissions as soon as technologically 
practicable following discovery of the errors or omissions, but no 
later than three business days after the discovery. Proposed Sec.  
45.14(b)(2) would also require that if the reporting counterparty and 
the non-reporting counterparty agree that the swap data for a swap is 
incorrect or incomplete, the reporting counterparty, SEF, or DCM must 
correct the swap data in accordance with proposed Sec.  45.14(b)(1).
(A) Costs and Benefits
    The proposed changes to Sec.  45.14 would result in administrative 
and compliance costs for reporting counterparties to establish 
technological systems to review and reconcile open swaps reports 
provided by SDRs. To verify open swaps, the reporting counterparties 
would be required to maintain records of all data elements reported 
pursuant to part 45. This is already a requirement under parts 23 (for 
SD and MSP reporting counterparties) and 45 of the Commission's 
regulations and as such, the Commission does not believe maintaining 
such records would produce additional costs.\257\
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    \257\ See 17 CFR 23.201 (listing the recordkeeping requirements 
for SDs and MSPs, including transaction records); 17 CFR 45.2 
(listing recordkeeping requirements for swaps, including requiring 
SDs and MSPs to keep all records required to be kept pursuant to 
part 23).
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    The Commission is not proposing to require particular methods for 
reporting counterparties to complete the verification process, but 
based on discussions with market participants, the Commission 
anticipates that the process would be largely automated. Reporting 
counterparties would incur costs in creating these automated systems to 
receive the open swaps reports and to complete the verification process 
in a timely fashion, but once the verification systems are in place, 
the additional costs stemming from the verification process would not 
be significant and would be confined to maintaining and updating the 
verification system as needed.
    A few commenters to the Commission's Roadmap suggested that 
commercial end-users and other non-SD/MSP/DCO reporting counterparties 
would incur greater costs for reporting and verifying swap data because 
swaps are not their primary business.\258\ The Commission has taken 
these comments into account and has proposed different requirements for 
non-SD/MSP/DCO reporting counterparties that would provide them with 
more time to complete the verification process than is permitted for SD 
or MSP reporting counterparties.
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    \258\ See, e.g., NRECA/APPA Letter at 3, 5; IECA Letter at 3. 
These commenters did not provide details on the additional costs.
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    Reporting counterparties may also incur costs in meeting the 
requirements of proposed Sec.  45.14(b)(1), which is largely similar to 
current Sec.  45.14(a), but with more specific requirements related to 
timing. Additional costs may be incurred by SEFs, DCMs, or reporting 
counterparties from correcting errors and omissions within three 
business days of discovery and from informing the Director of DMO in 
writing with a remediation plan, if necessary. The Commission believes 
that these costs would not be significant, however, because the three 
business day requirement merely adds a timeframe to the current ``as 
soon as technologically practicable after discovery'' requirement,\259\ 
and reporting counterparties already typically provide a remediation 
plan to the Commission for reporting errors and omissions as part of 
current practice, which would mitigate the costs of the proposed 
requirement, as many reporting counterparties will have experience with 
creating and providing remediation plans. SEFs, DCMs, and reporting 
counterparties may also incur costs from updating their error and 
omission reporting systems or practices in order to maintain 
consistency with SDR error and omission policies and procedures created 
pursuant to proposed Sec.  49.10(e).
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    \259\ See 17 CFR 45.14(a).

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[[Page 21093]]

    Non-reporting counterparties may also incur additional costs 
related to the requirements in proposed Sec.  45.14(b)(2), which are 
effectively the same as current Sec.  45.14(b), except for the 
inclusion of the three business day time limit for informing the 
reporting counterparty or SEF or DCM of discovered errors or omissions 
and the additional requirement to inform the SEF or DCM when the non-
reporting counterparty does not know the identity of the reporting 
counterparty. The time limit merely adds a boundary to the current 
``promptly'' requirement for informing the reporting counterparty of 
discovered errors and omissions.\260\ The additional requirement to 
inform a SEF or DCM is intended to accommodate the non-reporting 
counterparties in fulfilling their role in the data correction process 
for swaps executed anonymously and the Commission expects that non-
reporting counterparties would not incur many costs for notifying a SEF 
or DCM of errors and omissions beyond the cost currently incurred when 
notifying reporting counterparties.
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    \260\ See 17 CFR 45.14(b).
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    The Commission believes verification of swap data accuracy helps 
ensure that the Commission has access to the most accurate and complete 
swap data possible to fulfill its various regulatory responsibilities. 
Accurate swap data enables the Commission to monitor and surveil market 
activity and risks within the swaps markets, as well as provide 
assessments of the swaps markets to the public. Additionally, the 
Commission believes that complete and accurate swap data is necessary 
for effective risk management for swap counterparties, and the proposed 
verification and correction requirements would assist swap 
counterparties with ensuring that the data they possess is accurate and 
complete. The Commission believes that complete and accurate swap data 
would benefit market participants and the public by improving the 
Commission's ability to monitor the swaps markets and maintain market 
integrity through market oversight, analysis, and providing information 
to the public.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  45.14. Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  45.14. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the proposed amendments?
6. Costs and Benefits of Proposed Amendments to Part 43
i. Sec.  43.3--Method and Timing for Real-Time Public Reporting
    The Commission is proposing to amend the error and omission 
correction requirements of current Sec.  43.3(e) to make the 
requirements consistent with the error and omissions correction 
requirements in proposed Sec.  45.14(b). The Commission believes these 
amendments would create consistency between the error and omission 
correction requirements for swap data and swap transaction and pricing 
data, which would reduce confusion surrounding the error and omissions 
corrections process.
    Proposed Sec.  43.3(e)(1) would require any SEF, DCM, or reporting 
counterparty that by any means becomes aware of any errors or omissions 
in swap transaction and pricing data previously reported to an SDR by 
the SEF, DCM, or reporting counterparty to submit corrected swap 
transaction and pricing data to the SDR, regardless of the state of the 
swap. Proposed Sec.  43.3(e)(1) would also require any SEF, DCM, or 
reporting counterparty that by any means becomes aware of the omission 
of swap transaction and pricing data previously not reported to an SDR 
by the SEF, DCM, or reporting counterparty as required, to submit 
corrected swap transaction and pricing data to the SDR regardless of 
the state of the swap.
    Proposed Sec.  43.3(e)(1)(i) would require SEFs, DCMs, and 
reporting counterparties to correct swap transaction and pricing data 
as soon as technologically practicable following discovery of the 
errors or omissions, but no later than three business days following 
the discovery of the error or omission.
    Proposed Sec.  43.3(e)(1)(ii) would provide that if a SEF, DCM, or 
reporting counterparty is unable to correct the errors or omissions 
within three business days following discovery of the errors or 
omissions, the SEF, DCM, or reporting counterparty must immediately 
inform the Director of DMO, or his or her designee, in writing, of such 
errors or omissions and provide an initial assessment of the scope of 
the errors or omissions and an initial remediation plan for correcting 
the errors or omissions.
    Proposed Sec.  43.3(e)(1)(iii) would require that a SEF, DCM, or 
reporting counterparty conform to an SDR's policies and procedures for 
corrections of errors and omissions in previously reported swap 
transaction and pricing data and reporting of omitted swap transaction 
and pricing data.
    Proposed Sec.  43.3(e)(2) would require a non-reporting 
counterparty that by any means becomes aware of any error or omission 
in swap transaction and pricing data previously reported to an SDR, or 
the omission of swap transaction and pricing data for a swap that was 
not previously reported to an SDR as required, to notify the reporting 
counterparty as soon as technologically practicable following discovery 
of the errors or omissions, but no later than three business days 
following the discovery of the errors or omissions.
    Proposed Sec.  43.3(e)(2) would also require that a non-reporting 
counterparty that does not know the identity of the reporting 
counterparty for a swap to notify the SEF or DCM where the swap was 
executed of the errors and omissions as soon as technologically 
practicable after discovery of the errors or omissions, but no later 
than three business days after the discovery. Proposed Sec.  43.3(e)(2) 
would also require that, if the non-reporting counterparty and the 
reporting counterparty, SEF, or DCM, as applicable, agree that the swap 
transaction and pricing data for a swap is incorrect or incomplete, the 
reporting counterparty, SEF, or DCM, as applicable, must correct the 
swap transaction and pricing data in accordance with proposed Sec.  
43.3(e)(1).
    The Commission is proposing to move all of the requirements of 
current Sec.  43.3(f) and (g) to proposed new Sec.  49.28. As such, all 
costs and benefits associated with this change are discussed above in 
section VII.C.4.xiii.
(A) Costs and Benefits
    The costs and benefits for the proposed changes to Sec.  43.3(e) 
are similar to the costs and benefits previously discussed for the 
proposed changes to Sec.  45.14(b), as the proposed changes to each 
section are intended to be consistent in all respects, aside from the 
verification requirements. Therefore, the proposed changes to Sec.  
43.3(e) may also result in administrative and compliance costs for 
reporting counterparties. These costs would, however, be mitigated by 
the fact that the requirements of proposed Sec.  43.3(e) are similar to 
the requirements of current Sec.  43.3(e).

[[Page 21094]]

    Additional costs may be incurred by SEFs, DCMs, or reporting 
counterparties from correcting errors and omissions within three 
business days of discovery and from informing the Director of DMO in 
writing with an initial assessment and initial remediation plan if 
necessary under proposed Sec.  43.3(e)(1)(i) and (ii). The Commission 
believes that these costs would not be significant, however, because 
the three-day requirement merely adds a specific timeframe to the 
current ``promptly'' requirement,\261\ and reporting counterparties 
typically provide a remediation plan to the Commission for reporting 
errors and omissions as part of current practice. SEFs, DCMs, and 
reporting counterparties may also incur costs from updating their error 
and omission reporting systems or practices in order to maintain 
consistency with SDR error and omission policies and procedures created 
pursuant to proposed Sec.  49.10(e), as would be required under 
proposed Sec.  43.3(e)(1)(iii).
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    \261\ See generally 17 CFR 43.3(e).
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    Non-reporting counterparties may also incur additional costs 
related to the requirements in proposed Sec.  43.3(e)(2), which are 
similar to the requirements of current Sec.  43.3(e)(1)(i), except for 
the proposed inclusion of the three business day time limit for 
informing the reporting counterparty, SEF, or DCM of discovered errors 
or omissions and the additional requirement to inform the SEF or DCM 
when the non-reporting counterparty does not know the identity of the 
reporting counterparty. The time limit merely adds a boundary to the 
current ``promptly'' requirement for informing the reporting 
counterparty of discovered errors and omissions.\262\ The additional 
requirement to inform a SEF or DCM is intended to accommodate the non-
reporting counterparties in fulfilling their role in the data 
correction process for swaps executed anonymously and the Commission 
expects that non-reporting counterparties would not incur many costs 
for notifying a SEF or DCM of errors and omissions beyond the cost 
currently incurred when notifying reporting counterparties.
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    \262\ See 17 CFR 43.3(e)(i).
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    As with the benefits described above in section 5.ii, the 
Commission believes consistent error and omission correction 
requirements for swap data and swap transaction and pricing data helps 
ensure that the Commission has access to the most accurate and complete 
swap transaction and pricing data possible to fulfill its various 
regulatory responsibilities. Accurate swap transaction and pricing data 
helps the Commission to monitor and surveil market activity and risks 
within the swaps markets. Accurate and complete swap transaction and 
pricing data is also beneficial to market participants and the public 
who rely on the data in their swaps-related decision-making. 
Additionally, the Commission believes that complete and accurate swap 
transaction and pricing data is necessary for effective risk management 
for swap counterparties, and the proposed correction requirements would 
assist swap counterparties with ensuring that the swap transaction and 
pricing data they possess is accurate and complete.
    SDRs and counterparties also benefit from proposed Sec.  43.3(e) 
creating consistency between the error and omission correction 
requirements for swap data and for swap transaction and pricing data. 
Inconsistent requirements could lead to confusion, improper correction, 
and unnecessary effort for counterparties and SDRs. The consistency 
created by the proposed amendments to Sec.  43.3(e) would help avoid 
those issues.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec.  43.3(e). Are there 
additional costs and benefits that the Commission should consider? 
Commenters are encouraged to include both qualitative and quantitative 
assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec.  43.3(e). Are there any other 
alternatives that may provide preferable costs or benefits than the 
costs and benefits related to the proposed amendments?
7. Costs and Benefits of Proposed Amendments to Part 23
i. Sec. Sec.  23.204 and 23.205--Reports to Swap Data Repositories and 
Real-Time Public Reporting
    Proposed amendments to Sec. Sec.  23.204 and 23.205 add a paragraph 
(c) to each section requiring SDs and MSPs to establish, maintain, and 
enforce written policies and procedures reasonably designed to ensure 
that SDs and MSPs comply with their swap reporting obligations pursuant 
to parts 45 and 43, respectively. The proposed amendments also require 
SDs and MSPs to perform annual reviews of these policies and 
procedures.
    For proposed Sec.  23.204, the policies and procedures related to 
reporting under part 45 of the Commission's regulations would need to 
contain details related to their responsibilities to verify swap data. 
This would include policies and procedures related to regularly 
accepting open swap reports from SDRs, cross-checking with internal 
records to ensure the swap data is accurate and complete, and 
responding to the SDR, as required. SDs and MSPs are already 
responsible for keeping up-to-date records on all swaps to which they 
are a counterparty under parts 23 and 45 of the Commission's 
regulations.\263\
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    \263\ See 17 CFR 23.201-23.203 (detailing the recordkeeping 
requirements for SDs and MSPs); 17 CFR 45.2 (containing swap 
recordkeeping requirements for SDs and MSPs and referencing the part 
23 recordkeeping requirements).
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(A) Costs and Benefits
    The Commission believes that the costs associated with the proposed 
amendment to Sec. Sec.  23.204 and 23.205 for SDs and MSPs \264\ would 
be associated with creating and enforcing the policies and procedures, 
and would consist mostly of administrative efforts to draft, review, 
implement, and update policies and procedures. The Commission expects 
that SDs and MSPs that are participants of more than one SDR may incur 
higher associated costs than those entities that are participants of 
only one SDR, as the SD and MSP policies and procedures would need to 
contemplate the reporting requirements for each SDR.\265\
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    \264\ There are 103 provisionally-registered SDs as of February 
28, 2019, all of which are expected to be a participant on at least 
one of the three existing SDRs. See https://www.nfa.futures.org/NFA-swaps-information/regulatory-info-sd-and-msp/SD-MSP-registry.HTML.
    \265\ For additional discussion of the costs and benefits 
related to part 23, see generally Part 23 Adopting Release.
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    Even though SDs and MSPs may incur upfront costs related to the 
proposed amendments, the Commission believes that these financial 
outlays would be mitigated for two reasons. First, SDs and MSPs have 
experience with establishing and enforcing policies and procedures 
related to other Commission regulations.\266\ Second, the proposed 
amendments to Sec. Sec.  23.204 and 23.205 are substantially similar to 
the SEC's requirements for its security-based SDs/MSPs.\267\ While not 
all SDs and MSPs covered by the proposed amendments would be subject to 
these SEC requirements, the Commission expects that there would be 
significant overlap.

[[Page 21095]]

Consequently, these SDs and MSPs should be able to leverage resources 
and reduce duplicative costs.
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    \266\ See, e.g., 17 CFR 23.501 (confirmations with 
counterparty); 17 CFR 23.504 (counterparty onboarding 
documentation); 17 CFR 23.602 (supervision policies).
    \267\ See 17 CFR 242.906 (requiring security-based SDs and 
security-based MSPs to establish, maintain, and enforce policies and 
procedures reasonably designed to ensure compliance with reporting 
requirements).
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    The Commission believes the proposed amendments would also provide 
important benefits. SD and MSP policies and procedures reasonably 
designed to ensure compliance with the reporting requirements of parts 
43 and 45 would help improve compliance with the reporting rules. For 
example, policies and procedures designating the responsibility for 
reporting swap transactions should reduce confusion as to who within 
the organizations is responsible for reporting the required SDR data, 
according to the reporting procedures of the different SDRs. The 
Commission expects that there would also likely be fewer reporting 
errors (and less subsequent ad hoc work, with its associated costs, by 
SD/MSP staff to correct these errors) because SD/MSP employees would be 
able to follow the policies and procedures to perform their functions 
correctly.
    The Commission also expects that the proposed amendments would help 
lead to enhanced communication between reporting counterparties and 
SDRs. Increased communication that is focused on improving the accuracy 
of SDR data would help to identify areas that require special attention 
that might not be specifically addressed in these proposed regulations. 
Hence, this enhanced working relationship between market participants 
and SDRs may lead to improved data reporting beyond that specifically 
contemplated by the regulations.
    The Commission also believes that, because SDs and MSPs submit the 
large majority of the reported SDR data, the requirements for policies 
and procedures related to reporting would improve the overall quality 
of reported data. SDs and MSPs generate a considerable majority of the 
total number of transactions reported to SDRs and serve as the 
reporting counterparty for the overwhelming majority of swaps.\268\ A 
Commission analysis of SDR data indicates that from January 1, 2017 
through December 31, 2017, almost all swap transactions involved at 
least one registered SD as a counterparty--greater than 99 percent for 
interest rate, credit default, foreign exchange, and equity swaps. For 
non-financial commodity swaps, approximately 86 percent of transactions 
involved at least one registered SD as a counterparty. Overall, 
approximately 98 percent of transactions involved at least one 
registered SD.\269\ The Commission expects that these additional 
requirements for SDs and MSPs, and the attendant benefits to data 
quality, would have a substantial impact on the overall quality of the 
data reported to SDRs because of the important role these reporting 
counterparties perform in the swaps market.
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    \268\ Based on the requirements of Sec.  45.8, any swap with at 
least one SD or MSP counterparty will have an SD or MSP serving as 
the reporting counterparty. See 17 CFR 45.8 (detailing the 
requirements for determining which counterparty must report swap 
data).
    \269\ 83 FR at 56674.
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    The Commission also expects that the requirement for SDs and MSPs 
to have policies and procedures relating to real-time reporting under 
part 43 would improve swap transaction and pricing information that 
SDRs would then provide the public. Hence, the Commission believes the 
proposed amendments would also improve transparency in the swaps 
markets and provide benefits to market participants and the public in 
general.
(B) Request for Comment
    The Commission requests comment on its considerations of the costs 
and benefits of the proposed amendments to Sec. Sec.  23.204(c) and 
23.205(c). Are there additional costs and benefits that the Commission 
should consider? Commenters are encouraged to include both qualitative 
and quantitative assessments of these costs and benefits.
    The Commission requests comments on its consideration of 
alternatives to proposed Sec. Sec.  23.204(c) and 23.205(c). Are there 
any other alternatives that may provide preferable costs or benefits 
than the costs and benefits related to the proposed amendments?
8. Section 15(a) Factors
    The Dodd-Frank Act sought to promote the financial stability of the 
United States, in part, by improving financial system accountability 
and transparency. More specifically, Title VII of the Dodd-Frank Act 
directs the Commission to promulgate regulations to increase swaps 
markets' transparency and thereby reduce the potential for counterparty 
and systemic risk.\270\ Transaction-based reporting is a fundamental 
component of the legislation's objectives to increase transparency, 
reduce risk, and promote market integrity within the financial system 
generally, and the swaps market in particular. The SDRs and the SEFs, 
DCMs, and reporting counterparties that submit data to SDRs are central 
to achieving the legislation's objectives related to swap reporting.
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    \270\ See Congressional Research Service Report for Congress, 
The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title 
VII, Derivatives, by Mark Jickling and Kathleen Ann Ruane (August 
30, 2010); Dep't of the Treasury, Financial Regulatory Reform: A New 
Foundation: Rebuilding Financial Supervision and Regulation 1 (June 
17, 2009) at 47-48.
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    Section 15(a) of the Act requires the Commission to consider the 
costs and benefits of the proposed amendments to parts 23, 43, 45, and 
49 with respect to the following factors:
     Protection of market participants and the public;
     Efficiency, competitiveness, and financial integrity of 
markets;
     Price discovery;
     Sound risk management practices; and
     Other public interest considerations.
    A discussion of these proposed amendments in light of section 15(a) 
factors is set out immediately below.
i. Protection of Market Participants and the Public
    In the Part 49 Adopting Release, the Commission noted that it 
believed that the registration and regulation of SDRs would serve to 
better protect market participants by providing the Commission and 
other regulators with important oversight tools to monitor, measure, 
and comprehend the swaps markets. Inaccurate and incomplete data 
reporting hinders the Commission's ability to oversee the swaps market. 
The Commission believes that the adoption of all the proposed 
amendments to parts 23, 43, 45, and 49 would improve the quality of the 
data reported, increase transparency, and enhance the Commission's 
ability to fulfill its regulatory responsibilities, including its 
market surveillance and enforcement capabilities. In addition, the 
Commission believes that monitoring of potential risks to financial 
stability would be more effective with more accurate data. More 
accurate data would therefore lead to improved protection of market 
participants and the public.
ii. Efficiency, Competitiveness, and Financial Integrity of Markets
    The Commission believes that the adoption of the proposed 
amendments to parts 23, 43, 45, and 49, together with the swap data 
recordkeeping and reporting requirements in parts 43 and 45, would 
provide a robust source of information on the swaps market that is 
expected to promote increased efficiency and competition. The 
Commission believes that more accurate swap transaction and pricing 
data would lead to greater efficiencies for market participants 
executing swap transactions due to a better understanding of their 
overall positions

[[Page 21096]]

within the context of the broader market. This improved understanding 
would be facilitated by two distinct channels. First, amendments that 
result in improved part 43 swap transaction and pricing data being made 
available to the public would improve the ability of market 
participants to monitor real-time activity by other participants and to 
respond appropriately. Second, amendments that result in improved swap 
data would improve the Commission's ability to monitor the swaps 
markets for abusive practices and improve the Commission's ability to 
create policies that ensure the integrity of the swaps markets. This 
improvement would be facilitated by the Commission's oversight and 
enforcement capabilities and the reports and studies published by the 
Commission's research and information programs.
    In particular, the proposed amendments to Sec. Sec.  23.204, 45.14, 
49.2, 49.10, 49.11, 49.12, 49.13, and 49.26 would help improve the 
financial integrity of markets. For example, the verification and 
correction of swap data would improve the accuracy and completeness of 
swap data available to the Commission and would assist the Commission 
with, among other things, improving monitoring of risk exposures of 
individual counterparties, monitoring concentrations of risk exposure, 
and evaluating systemic risk. In addition, the SDRs' requirement to 
perform monitoring, screening, and analyzing tasks, as proposed in the 
amendments to Sec.  49.13, would support the Commission's other 
regulatory functions, including market surveillance. The efficient 
oversight and accurate data reporting enabled by these proposed 
amendments would improve the financial integrity of the swaps markets.
    In the Part 49 Adopting Release, the Commission expected that the 
introduction of SDRs would further automate the reporting of swap data. 
The Commission expected that automation would benefit market 
participants and reduce transactional risks through the SDRs and other 
service providers offering important ancillary services, such as 
confirmation and matching services, valuations, pricing, reconciliation 
functions, position limits management, and dispute resolution. These 
benefits to market participants and related service providers also 
enhance the efficiency, competitiveness, and financial integrity of 
markets.\271\ The proposed amendments would help to further enhance 
these benefits.
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    \271\ See Part 49 Adopting Release at 54573.
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iii. Price Discovery
    The CEA requires that swap transaction and pricing data be made 
publicly available. The CEA and its existing implementing regulations 
in part 43 also require swap transaction and pricing data to be 
available to the public in real-time. Combined, parts 23, 43, and 49 
achieve the statutory objective of providing transparency and enhanced 
price discovery to swap markets in a timely manner. The proposed 
amendments to Sec. Sec.  23.205, 43.3, 49.2, 49.10, 49.11, 49.12, 
49.13, and 49.26 improve the fulfillment of these objectives. The 
proposed amendments would both directly and indirectly upgrade the 
quality of real-time public reporting of swap transaction and pricing 
data by improving the quality of information that is reported to the 
SDRs and disseminated to the public.
    As with the swap data reported for use by regulators, the 
Commission believes that inaccurate and incomplete swap transaction and 
pricing data hinders the public's use of the data, which harms 
transparency and price discovery. The Commission is aware of at least 
three publicly available studies that support this point. The studies 
examined data and remarked on incomplete, inaccurate, and unreliable 
data. The first study analyzed the potential impact of the Dodd-Frank 
Act on OTC transaction costs and liquidity using real-time CDS trade 
data and stated that more than 5,000 reports had missing prices and 
more than 15,000 reports included a price of zero, leaving a usable 
sample of 180,149 reports.\272\ The second study reported a number of 
fields that were routinely null or missing making it difficult to 
analyze swap market volumes.\273\ The third study assessed the size of 
the agricultural swaps market and described problems identifying the 
underlying commodity as well as other errors in the reported data that 
made some data unusable, including, for example, swaps with a reported 
notional quantity roughly equal to the size of the entire U.S. soybean 
crop.\274\ Market participants would be better able to analyze swap 
transaction and pricing data because it is more accurate and complete 
due to the proposed amendments, and as a result, transparency and price 
discovery should improve.
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    \272\ Y.C. Loon, Z. (Ken) Zhong, ``Does Dodd-Frank affect OTC 
transaction costs and liquidity? Evidence from real-time trade 
reports,'' Journal of Financial Economics (2016), available at 
https://dx.doi.org/10.1016/j.jfineco.2016.01.019.
    \273\ See Financial Stability Report, Office of Financial 
Research (Dec. 15, 2015) at 84-85, available at https://financialresearch.gov/financial-stability-reports/files/OFR_2015-Financial-Stability-Report_12-15-2015.pdf.
    \274\ Peterson, P.E. 2014. ``How Large is the Agricultural Swaps 
Market?'' Proceedings of the NCCC-134 Conference on Applied 
Commodity Price Analysis, Forecasting, and Market Risk Management. 
St. Louis, MO, available at https://www.farmdoc.illinois.edu/nccc134.
---------------------------------------------------------------------------

iv. Sound Risk Management Practices
    In the Part 49 Adopting Release, the Commission stated that part 49 
and part 45 would greatly strengthen the risk management practices of 
the swaps market.\275\ Prior to the adoption of the Dodd-Frank Act, 
participants in the swaps markets operated without obligations to 
disclose transactions to regulators or to the public. The Dodd-Frank 
Act specifically changed the transparency of the swaps market with the 
adoption of CEA section 21 and the establishment of SDRs as the 
entities to which swap data and swap transaction and pricing data is 
reported and maintained for use by regulators or disseminated to the 
public. The Commission believes that the improved reporting of SDR data 
to SDRs would serve to improve risk management practices by market 
participants. To the extent that better swap transaction and pricing 
data improves the ability of market participants to gauge their risks 
in the context of the overall market, risk management practices should 
improve. Earlier and more informed discussions between relevant market 
participants and regulators regarding systemic risk facilitated by 
accurate swap data would also lead to improved risk management 
outcomes. Market participants should also see improvements in their 
risk management practices, as improved swap data allows for more 
accurate and timely market analyses that are publicly disseminated by 
the Commission.
---------------------------------------------------------------------------

    \275\ See Part 49 Adopting Release at 54574.
---------------------------------------------------------------------------

    The Commission believes that the proposed amendments to parts 23, 
43, 45, and 49 would improve the quality of SDR data reported to SDRs 
and, hence, improve the Commission's ability to monitor the swaps 
market, react to potential market emergencies, and fulfill its 
regulatory responsibilities generally. The Commission believes that 
regulator access to high-quality SDR data is essential for appropriate 
risk management and is especially important for regulators' ability to 
monitor the swaps market for systemic risk. Moreover, the Commission 
expects that efforts to improve data quality would increase market 
participants' confidence in the SDR data and therefore their

[[Page 21097]]

confidence in any subsequent analyses based on the data.
v. Other Public Interest Considerations
    The Commission believes that the increased transparency resulting 
from improvements to the SDR data collected by SDRs via the proposed 
amendments to parts 23, 43, 45, and 49 has other public interest 
considerations including:
     Creating greater understanding for the public, market 
participants, and the Commission of the interaction between the swaps 
market, other financial markets, and the overall economy;
     Improved regulatory oversight and enforcement 
capabilities; and
     More information for regulators so that they may establish 
more effective public policies to reduce overall systemic risk.
9. Request for Comment
    The Commission requests comment on all aspects of the proposed 
rules. Beyond specific questions interspersed throughout this 
discussion, the Commission generally requests comment on all aspects of 
its consideration of costs and benefits, including: identification and 
assessment of any costs and benefits not discussed herein; the 
potential costs and benefits of the alternatives that the Commission 
discussed in this release; data and any other information to assist or 
otherwise inform the Commission's ability to quantify or qualitatively 
describe the benefits and costs of the proposed rules; and 
substantiating data, statistics, and any other information to support 
statements by commenters with respect to the Commission's consideration 
of costs and benefits. Commenters also may suggest other alternatives 
to the proposed approach where the commenters believe that the 
alternatives would be appropriate under the CEA and provide a superior 
cost-benefit profile.

D. Anti-trust Considerations

    Section 15(b) of the CEA requires the Commission to take into 
consideration the public interest to be protected by the antitrust laws 
and endeavor to take the least anticompetitive means of achieving the 
objectives of the CEA, in issuing any order or adopting any Commission 
rule or regulation.
    The Commission does not anticipate that the proposed amendments to 
parts 23, 43, 45, and 49 would result in anti-competitive behavior. 
However, the Commission encourages comments from the public on any 
aspect of the proposal that may have the potential to be inconsistent 
with the anti-trust laws or anti-competitive in nature.

List of Subjects

17 CFR Part 23

    Swap dealers and major swap participants.

17 CFR Part 43

    Real-time public swap reporting.

17 CFR Part 45

    Swaps; data recordkeeping requirements; data reporting 
requirements.

17 CFR Part 49

    Swap data repositories; registration and regulatory requirements.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission proposes to amend 17 CFR parts 23, 43, 45, and 49 as 
set forth below:

PART 23--SWAP DEALERS AND MAJOR SWAP PARTICIPANTS

0
1. The authority citation for part 23 is revised to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 
9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21, and 24a as amended by 
Pub. L. 111-203, 124 Stat. 1376 (2010)

PART 23 [AMENDED]

0
2. In the table below, for each section indicated in the left column, 
remove the term indicated in the middle column from wherever it appears 
in the section, and add in its place the term indicated in the right 
column:

------------------------------------------------------------------------
           Section                   Remove                  Add
------------------------------------------------------------------------
23.204(a)...................  swap transaction      swap data.
                               data.
23.204(a)...................  information and data  swap data.
23.204(b)...................  swap transaction      swap data.
                               data.
23.204(b)...................  information and data  swap data.
23.205(a)...................  information and swap  swap transaction and
                               transaction and       pricing data.
                               pricing data.
23.205(a)...................  public recording....  public reporting.
23.205(b)...................  swap transaction      swap transaction and
                               data.                 pricing data.
23.205(b)...................  information and data  swap transaction and
                                                     pricing data.
------------------------------------------------------------------------

0
3. In Sec.  23.204, add paragraph (c) to read as follows:


Sec.  23.204   Reports to swap data repositories.

* * * * *
    (c) Each swap dealer and major swap participant shall establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to ensure that it complies with all obligations to 
report swap data to a swap data repository in accordance with part 45 
of this chapter. Each such swap dealer and major swap participant shall 
review its policies and procedures at least annually and update the 
policies and procedures to reflect the requirements of part 45 of this 
chapter as needed.
0
4. In Sec.  23.205, add paragraph (c) to read as follows:


Sec.  23.205   Real-time public reporting.

* * * * *
    (c) Each swap dealer and major swap participant shall establish, 
maintain, and enforce written policies and procedures that are 
reasonably designed to ensure that it complies with all obligations to 
report swap transaction and pricing data to a swap data repository in 
accordance with part 43 of this chapter. Each such swap dealer and 
major swap participant shall review its policies and procedures at 
least annually and update the policies and procedures to reflect the 
requirements of part 43 of this chapter as needed.

PART 43--REAL-TIME PUBLIC REPORTING

0
5. The authority citation for Part 43 continues to read as follows:

    Authority: 7 U.S.C. 2(a), 12a(5), and 24a, as amended by Pub. L. 
111-203, 124 Stat. 1376 (2010).

0
6. In Sec.  43.3 revise paragraph (e) and remove and reserve paragraphs 
(f) and (g) to read as follows:


Sec.  43.3   Method and timing for real-time public reporting.

* * * * *
    (e) Correction of errors and omissions in swap transaction and 
pricing data.

[[Page 21098]]

(1) Any swap execution facility, designated contract market, or 
reporting counterparty that by any means becomes aware of any error or 
omission in swap transaction and pricing data previously reported to a 
swap data repository by the swap execution facility, designated 
contract market, or reporting counterparty, or of the omission of swap 
transaction and pricing data for a swap that was not previously 
reported to a swap data repository as required under this part by the 
swap execution facility, designated contract market, or reporting 
counterparty, shall, as applicable, submit corrected swap transaction 
and pricing data to the swap data repository that maintains the swap 
transaction and pricing data for the relevant swap or correctly report 
swap transaction and pricing data for a swap that was not previously 
reported to a swap data repository as required under this part, 
regardless of the state of the swap that is the subject of the swap 
transaction and pricing data.
    (i) The swap execution facility, designated contract market, or 
reporting counterparty shall submit the corrections for errors or 
submit the omitted swap transaction and pricing data to the swap data 
repository as soon as technologically practicable following discovery 
of the errors or omissions, but no later than three business days 
following the discovery of the errors or omissions.
    (ii) If the swap execution facility, designated contract market, or 
reporting counterparty is unable to correct the errors or omissions 
within three business days following discovery of the errors or 
omissions, the swap execution facility, designated contract market, or 
reporting counterparty shall immediately inform the Director of the 
Division of Market Oversight, or such other employee or employees of 
the Commission as the Director may designate from time to time, in 
writing, of such errors or omissions and provide an initial assessment 
of the scope of the errors or omissions and an initial remediation plan 
for correcting the errors or omissions.
    (iii) In order to satisfy the requirements of this section, a swap 
execution facility, designated contract market, or reporting 
counterparty shall conform to a swap data repository's policies and 
procedures created pursuant to Sec.  49.10 of this chapter for 
correction of errors and omissions in previously-reported swap 
transaction and pricing data and reporting of omitted swap transaction 
and pricing data.
    (2) Any non-reporting counterparty that by any means becomes aware 
of any error or omission in swap transaction and pricing data 
previously reported to a swap data repository, or of the omission of 
swap transaction and pricing data for a swap that was not previously 
reported to a swap data repository as required under this part, for a 
swap to which it is the non-reporting counterparty shall notify the 
reporting counterparty for the swap of the errors or omissions as soon 
as technologically practicable following discovery of the errors or 
omissions, but no later than three business days following the 
discovery of the errors or omissions. If the non-reporting counterparty 
does not know the identity of the reporting counterparty, the non-
reporting counterparty shall notify the swap execution facility or 
designated contract market where the swap was executed of the errors or 
omissions as soon as technologically practicable following discovery of 
the errors or omissions, but no later than three business days 
following the discovery of the errors or omissions. If, as applicable, 
the reporting counterparty and non-reporting counterparty, or the swap 
execution facility or designated contract market and non-reporting 
counterparty, agree that the swap transaction and pricing data for a 
swap is incorrect or incomplete, the reporting counterparty, swap 
execution facility, or designated contract market, as applicable, shall 
correct the swap transaction and pricing data in accordance with 
paragraph (e)(1) of this section.
* * * * *

PART 45--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS

0
7. The authority citation for Part 45 continues to read as follows:

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


Sec.  45.2   [Amended].

0
8. In Sec.  45.2, remove and reserve paragraphs (f) and (g
0
9. Revise Sec.  45.14 to read as follows:


Sec.  45.14   Verification of swap data accuracy and correcting errors 
and omissions in swap data.

    (a) Verification of swap data accuracy to a swap data repository. A 
reporting counterparty shall verify the accuracy and completeness of 
swap data for swaps for which it is the reporting counterparty in 
accordance with this paragraph (a).
    (1) In order to verify the accuracy and completeness of swap data 
for swaps for which it is the reporting counterparty as required by 
this section, a reporting counterparty shall reconcile its internal 
books and records for each open swap for which it is the reporting 
counterparty with every open swaps report provided to the reporting 
counterparty by a swap data repository pursuant to Sec.  49.11 of this 
chapter. In order to satisfy the requirements of this section, a 
reporting counterparty shall conform to a swap data repository's 
policies and procedures created pursuant to Sec.  49.11 of this chapter 
for verification of swap data.
    (2) For every open swaps report provided to a reporting 
counterparty by a swap data repository pursuant to Sec.  49.11 of this 
chapter, the reporting counterparty shall submit to the swap data 
repository either a verification of data accuracy in accordance with 
paragraph (3) of this section or a notice of discrepancy in accordance 
with paragraph (4) of this section within:
    (i) 48 hours of the swap data repository providing the open swaps 
report to the reporting counterparty pursuant to Sec.  49.11 of this 
chapter, if the reporting counterparty is a swap dealer, major swap 
participant, or a derivatives clearing organization; or
    (ii) 96 hours of the swap data repository providing the open swaps 
report to the reporting counterparty pursuant to Sec.  49.11 of this 
chapter, if the reporting counterparty is not a swap dealer, major swap 
participant, or a derivatives clearing organization.
    (3) If a reporting counterparty finds no discrepancies between the 
accurate and current swap data for a swap according to the reporting 
counterparty's internal books and records and the swap data for the 
swap contained in the open swaps report provided by the swap data 
repository, the reporting counterparty shall submit a verification of 
data accuracy indicating that the swap data is complete and accurate to 
the swap data repository in the form and manner required by the swap 
data repository's policies and procedures created pursuant to Sec.  
49.11 of this chapter.
    (4) If the reporting counterparty finds any discrepancy between the 
accurate and current swap data for a swap according to the reporting 
counterparty's internal books and records and the swap data for the 
swap contained in the open swaps report provided by the swap data 
repository, including, but not limited to, any over-reporting or under-
reporting of swap data for any swap, the reporting counterparty shall 
submit a notice of discrepancy to the swap data repository

[[Page 21099]]

in the form and manner required by the swap data repository's policies 
and procedures created pursuant to Sec.  49.11 of this chapter.
    (b) Correction of errors and omissions in swap data. (1) Any swap 
execution facility, designated contract market, or reporting 
counterparty that by any means becomes aware of any error or omission 
in swap data previously reported to a swap data repository by the swap 
execution facility, designated contract market, or reporting 
counterparty, or of the omission of swap data for a swap that was not 
previously reported to a swap data repository as required under this 
part by the swap execution facility, designated contract market, or 
reporting counterparty, including, but not limited to, errors or 
omissions present during the verification process specified in 
paragraph (a) of this section, shall, as applicable, submit corrected 
swap data to the swap data repository that maintains the swap data for 
the relevant swap or correctly report swap data for a swap that was not 
previously reported to a swap data repository as required under this 
part, regardless of the state of the swap that is the subject of the 
swap data.
    (i) The swap execution facility, designated contract market, or 
reporting counterparty shall submit the corrections for errors or 
submit the omitted swap data to the swap data repository as soon as 
technologically practicable following discovery of the errors or 
omissions, but no later than three business days following the 
discovery of the errors or omissions.
    (ii) If the swap execution facility, designated contract market, or 
reporting counterparty is unable to correct the errors or omissions 
within three business days following discovery of the errors or 
omissions, the swap execution facility, designated contract market, or 
reporting counterparty shall immediately inform the Director of the 
Division of Market Oversight, or such other employee or employees of 
the Commission as the Director may designate from time to time, in 
writing, of such errors or omissions and provide an initial assessment 
of the scope of the errors or omissions and an initial remediation plan 
for correcting the errors or omissions.
    (iii) In order to satisfy the requirements of this section, a swap 
execution facility, designated contract market, or reporting 
counterparty shall conform to a swap data repository's policies and 
procedures created pursuant to Sec.  49.10 of this chapter for 
correction of errors or omissions in previously-reported swap data and 
reporting of omitted swap data.
    (2) Any non-reporting counterparty that by any means becomes aware 
of any error or omission in swap data previously reported to a swap 
data repository, or of the omission of swap data for a swap that was 
not previously reported to a swap data repository as required under 
this part, for a swap to which it is the non-reporting counterparty, 
shall notify the reporting counterparty for the swap of the errors or 
omissions as soon as technologically practicable following discovery of 
the errors or omissions, but no later than three business days 
following the discovery of the errors or omissions. If the non-
reporting counterparty does not know the identity of the reporting 
counterparty, the non-reporting counterparty shall notify the swap 
execution facility or designated contract market where the swap was 
executed of the errors or omissions as soon as technologically 
practicable following discovery of the errors or omissions, but no 
later than three business days following the discovery of the errors or 
omissions. If, as applicable, the reporting counterparty and non-
reporting counterparty, or the swap execution facility or designated 
contract market and non-reporting counterparty, agree that the swap 
data for a swap is incorrect or incomplete, the reporting counterparty, 
swap execution facility, or designated contract market, as applicable, 
shall correct the swap data in accordance with paragraph (b)(1) of this 
section.

PART 49--SWAP DATA REPOSITORIES

0
10. The authority citation for Part 49 is revised to read as follows:

    Authority:  7 U.S.C. 1a, 2(a), 6r, 12a, and 24a, as amended by 
Title VII of the Wall Street Reform and Consumer Protection Act of 
2010, Pub. L. 111-203, 124 Stat. 1376 (Jul. 21, 2010), unless 
otherwise noted.

PART 49 [AMENDED]

0
11. In part 49:
0
a. Remove the phrase to ``registered swap data repository'' and add in 
its place ``swap data repository'';
0
b. Remove the phrase ``Registered Swap Data Repository'' and add in its 
place ``Swap Data Repository''; and
0
c. Remove the phrase ``registered swap data repositories'' and add in 
its place ``swap data repositories.''
0
12. In the table below, for each section and paragraph indicated in the 
left column, remove the term indicated in the middle column from 
wherever it appears in the section or paragraph, and add in its place 
the term indicated in the right column:

----------------------------------------------------------------------------------------------------------------
           Section                                  Remove                                      Add
----------------------------------------------------------------------------------------------------------------
49.3(d).....................  swap transaction data                               SDR data
49.3(d).....................  Sec.   40.1(e)                                      Sec.   40.1
49.4(c) (heading)...........  Revocation of Registration for False Application.   Revocation of registration for
                                                                                   false application.
49.16(a)(2)(i)..............  Section 8 Material                                  section 8 material
49.16(a)(2)(ii).............  Other SDR Information                               other SDR information or SDR
                                                                                   data
49.16(a)(2)(iii)............  Intellectual                                        intellectual
49.16(a)(2)(iii)............  person associated with the swap data repository     person associated with a swap
                                                                                   data repository
49.16(a)(2)(iii)(A).........  Section 8 Material                                  section 8 material
49.16(a)(2)(iii)(A).........  other SDR Information                               SDR information or SDR data
49.16(a)(2)(iii)(B).........  persons associated with the swap data repository    persons associated with a swap
                                                                                   data repository
49.17(a)....................  swap data                                           SDR data
49.17(a)....................  Section 8 of the Act                                section 8 of the Act
49.17(b)(1)(heading)........  Appropriate Domestic Regulator.                     Appropriate domestic
                                                                                   regulator.
49.17(b)(1).................  The term ``Appropriate Domestic Regulator'' shall   The term ``appropriate
                               mean:                                               domestic regulator'' shall
                                                                                   mean:
49.17(b)(2)(heading)........  Appropriate Foreign Regulator.                      Appropriate foreign regulator.
49.17(b)(2).................  The term ``Appropriate Foreign Regulator'' shall    The term ``appropriate foreign
                               mean                                                regulator'' shall mean
49.17(b)(2).................  those Foreign Regulators                            those foreign regulators
49.17(c)(2).................  analyzing of swap data                              analyzing of SDR data
49.17(c)(2).................  transfer of data                                    transfer of SDR data
49.17(c)(3).................  swap data provided                                  SDR data provided
49.17(c)(3).................  authorizedusers                                     authorized users

[[Page 21100]]

 
49.17(d)(1)(heading)........  General Procedure for Gaining Access to Registered  General procedure for gaining
                               Swap Data Repository Data.                          access to swap data
                                                                                   repository swap data.
49.17(d)(1)(i)..............  Appropriate Domestic Regulator                      appropriate domestic regulator
49.17(d)(1)(i)..............  Appropriate Foreign Regulator                       appropriate foreign regulator
49.17(d)(1)(ii).............  Appropriate Domestic Regulators and Appropriate     Appropriate domestic
                               Foreign Regulators seeking                          regulators and appropriate
                                                                                   foreign regulators seeking
49.17(d)(1)(ii).............  applicable to Appropriate Domestic Regulators and   applicable to appropriate
                               Appropriate Foreign Regulators                      domestic regulators and
                                                                                   appropriate foreign
                                                                                   regulators
49.17(d)(3)(heading)........  Foreign Regulator                                   Foreign regulator
49.17(d)(3).................  Foreign Regulator                                   foreign regulator
49.17(d)(3).................  Foreign Regulator's                                 foreign regulator's
49.17(d)(4)(heading)........  requests for data access                            requests for swap data access
49.17(d)(4)(i)..............  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.17(d)(4)(i)..............  Appropriate Domestic Regulator's or Appropriate     appropriate domestic
                               Foreign Regulator's                                 regulator's or appropriate
                                                                                   foreign regulator's
49.17(d)(4)(iii)............  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.17(d)(4)(iii)............  Appropriate Domestic Regulator's or Appropriate     appropriate domestic
                               Foreign Regulator's                                 regulator's or appropriate
                                                                                   foreign regulator's
49.17(d)(5)(heading)........  Timing; Limitation, Suspension or Revocation of     Timing, limitation,
                               Swap Data Access.                                   suspension, or revocation of
                                                                                   swap data access.
49.17(d)(5).................  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.17(d)(6)(heading)........  Confidentiality Arrangement.                        Confidentiality arrangement.
49.17(d)(6).................  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.17(e)....................  swap data and SDR Information                       SDR data and SDR information
49.17(e)(1).................  swap data and SDR Information                       SDR data and SDR information
49.17(e)(2).................  swap data or SDR Information                        SDR data or SDR information
49.17(e)(2).................  swap data and SDR Information                       SDR data and SDR information
49.17(f)(1).................  swap data maintained                                SDR data maintained
49.17(g) (heading)..........  Commercial uses of data                             Commercial uses of SDR data
49.17(g)....................  Swap data accepted                                  SDR data accepted
49.17(g)(1).................  swap data required                                  SDR data required
49.17(g)(2)(A)..............  The swap dealer, counterparty, or any other         The swap execution facility,
                               registered entity                                   designated contract market,
                                                                                   or reporting counterparty
49.17(g)(2)(A)..............  swap data maintained                                SDR data maintained
49.17(g)(2)(B)..............  swap transaction data                               SDR data
49.17(g)(2)(B)..............  reporting party                                     swap execution facility,
                                                                                   designated contract market,
                                                                                   or reporting counterparty
49.17(g)(2)(B)..............  any reported data                                   any reported SDR data
49.17(g)(3).................  real-time swap data                                 swap transaction and pricing
                                                                                   data
49.17(h)(3).................  CEA section 21(c)(7)                                section 21(c)(7) of the Act
49.17(h)(4).................  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.18(a)(heading)...........  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator.                                  or appropriate foreign
                                                                                   regulator.
49.18(a)....................  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.18(a)....................  Appropriate Domestic Regulator's or Appropriate     appropriate domestic
                               Foreign Regulator's                                 regulator's or appropriate
                                                                                   foreign regulator's
49.18(d)....................  Appropriate Domestic Regulator or Appropriate       appropriate domestic regulator
                               Foreign Regulator                                   or appropriate foreign
                                                                                   regulator
49.18(d)....................  Appropriate Domestic Regulator's or Appropriate     appropriate domestic
                               Foreign Regulator's                                 regulator's or appropriate
                                                                                   foreign regulator's
49.19(a)....................  paragraph                                           section
49.20(b)(heading)...........  Transparency of Governance Arrangements.            Transparency of governance
                                                                                   arrangements.
49.20(c)(1)(i)..............  Regulation                                          section
49.20(c)(1)(i)(A)(2)........  Independent Perspective                             independent perspective
49.20(c)(1)(i)(B)...........  Independent Perspective                             independent perspective
49.20(c)(5).................  Regulation                                          section
49.23(a)....................  swap transaction data                               SDR data
49.23(e)(heading)...........  commission                                          Commission
49.24(a)....................  all swap data in its custody                        all SDR data in its custody
49.24(e)(3)(i)..............  dissemination of swap data                          dissemination of SDR data
49.24(e)(3)(ii).............  normal swap data reporting,                         normal SDR data reporting,
49.24(f)(2).................  all swap data contained                             all SDR data contained
49.24(j)(1) Definition of     data and information                                SDR data and SDR information
 ``Controls''.
49.24(j)(1) Definition of     data and information                                SDR data and SDR information
 ``Enterprise technology
 risk assessment''.

[[Page 21101]]

 
49.24(j)(1) Definition of     integrity of data                                   integrity of SDR data
 ``Security incident''.
49.24(k)(1).................  report swap data                                    report SDR data
49.24(k)(2).................  report swap data                                    report SDR data
49.24(l)(3).................  any data related to                                 any SDR data related to
49.24(m)....................  Board of Directors                                  board of directors
49.26(a)....................  swap data maintained                                SDR data maintained
49.26(c)....................  safeguarding of swap data                           safeguarding of SDR data
49.26(d)....................  any and all swap data                               any and all SDR data
49.26(d)....................  reporting entity                                    swap execution facility,
                                                                                   designated contract market,
                                                                                   or reporting counterparty
49.26(e)....................  swap data that it receives                          SDR data that it receives
49.26(e)....................  market participant, any registered entity, or any   swap execution facility,
                               other person;                                       designated contract market,
                                                                                   or reporting counterparty;
49.26(h)....................  rebates; and                                        rebates;
49.26(i)....................  arrangements.                                       arrangements; and
49.27(a)(2).................  Regulation                                          section
49.27(b)....................  reporting of swap data                              reporting of SDR data
Part 49, App. B (heading)...  Registered Swap Data Respositories                  Swap Data Repositories
----------------------------------------------------------------------------------------------------------------

0
13. Revise Sec.  49.2 to read as follows:


Sec.  49.2   Definitions.

    (a) As used in this part:
    Affiliate. The term ``affiliate'' means a person that directly, or 
indirectly, controls, is controlled by, or is under common control 
with, the swap data repository.
    As soon as technologically practicable. The term ``as soon as 
technologically practicable'' means as soon as possible, taking into 
consideration the prevalence, implementation, and use of technology by 
comparable market participants.
    Asset class. The term ``asset class'' means a broad category of 
commodities including, without limitation, any ``excluded commodity'' 
as defined in section 1a(19) of the Act, with common characteristics 
underlying a swap. The asset classes include interest rate, foreign 
exchange, credit, equity, other commodity, and such other asset classes 
as may be determined by the Commission.
    Commercial use. The term ``commercial use'' means the use of SDR 
data held and maintained by a swap data repository for a profit or 
business purposes. A swap data repository's use of SDR data for 
regulatory purposes and/or to perform its regulatory responsibilities 
would not be considered a commercial use regardless of whether the swap 
data repository charges a fee for reporting such SDR data.
    Control. The term ``control'' (including the terms ``controlled 
by'' and ``under common control with'') means the possession, direct or 
indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership of 
voting securities, by contract, or otherwise.
    Foreign regulator. The term ``foreign regulator'' means a foreign 
futures authority as defined in section 1a(26) of the Act, foreign 
financial supervisors, foreign central banks, foreign ministries, and 
other foreign authorities.
    Independent perspective. The term ``independent perspective'' means 
a viewpoint that is impartial regarding competitive, commercial, or 
industry concerns and contemplates the effect of a decision on all 
constituencies involved.
    Market participant. The term ``market participant'' means any 
person participating in the swap market, including, but not limited to, 
designated contract markets, derivatives clearing organizations, swap 
execution facilities, swap dealers, major swap participants, and any 
other counterparty to a swap transaction.
    Non-affiliated third party. The term ``non-affiliated third party'' 
means any person except:
    (1) The swap data repository;
    (2) The swap data repository's affiliate; or
    (3) A person jointly employed by a swap data repository and any 
entity that is not the swap data repository's affiliate (the term 
``non-affiliated third party'' includes such entity that jointly 
employs the person).

    Non-swap dealer/major swap participant/derivatives clearing 
organization reporting counterparty. The term ``non-swap dealer/major 
swap participant/derivatives clearing organization reporting 
counterparty'' means a reporting counterparty that is not a swap 
dealer, major swap participant, derivatives clearing organization, or 
exempt derivatives clearing organization.
    Open swap. The term ``open swap'' means an executed swap 
transaction that has not reached maturity or the final contractual 
settlement date, and has not been exercised, closed out, or terminated.
    Person associated with a swap data repository. The term ``person 
associated with a swap data repository'' means:
    (1) Any partner, officer, or director of such swap data repository 
(or any person occupying a similar status or performing similar 
functions);
    (2) Any person directly or indirectly controlling, controlled by, 
or under common control with such swap data repository; or
    (3) Any person employed by such swap data repository, including a 
jointly employed person.
    Position. The term ``position'' means the gross and net notional 
amounts of open swap transactions aggregated by one or more attributes, 
including, but not limited to, the:

    (1) Underlying instrument;
    (2) Index, or reference entity;
    (3) Counterparty;
    (4) Asset class;
    (5) Long risk of the underlying instrument, index, or reference 
entity; and
    (6) Short risk of the underlying instrument, index, or reference 
entity.

    Reporting counterparty. The term ``reporting counterparty'' means 
the counterparty responsible for reporting SDR data to a swap data 
repository pursuant to parts 43, 45, or 46 of this chapter.
    SDR data. The term ``SDR data'' means the specific data elements 
and information required to be reported to a swap data repository or 
disseminated by a swap data repository pursuant to two or more of parts 
43, 45, 46, and/or 49

[[Page 21102]]

of this chapter, as applicable in the context.
    SDR information. The term ``SDR information'' means any information 
that the swap data repository receives or maintains related to the 
business of the swap data repository that is not SDR data.
    Section 8 material. The term ``section 8 material'' means the 
business transactions, SDR data, or market positions of any person and 
trade secrets or names of customers.
    Swap data. The term ``swap data'' means the specific data elements 
and information required to be reported to a swap data repository 
pursuant to part 45 of this chapter or made available to the Commission 
pursuant to this part, as applicable.
    Swap transaction and pricing data. The term ``swap transaction and 
pricing data'' means the specific data elements and information 
required to be reported to a swap data repository or publicly 
disseminated by a swap data repository pursuant to part 43 of this 
chapter, as applicable.
    (b) Other defined terms. Terms not defined in this part have the 
meanings assigned to the terms in Sec.  1.3 of this chapter.
0
14. In Sec.  49.3, revise paragraph (a)(5) to read as follows:


Sec.  49.3   Procedures for registration.

    (a) * * *
    (5) Amendments. If any information reported on Form SDR or in any 
amendment thereto is or becomes inaccurate for any reason before the 
application for registration has been granted under this paragraph (a), 
the swap data repository shall promptly file an amendment on Form SDR 
updating such information.
* * * * *
0
15. Revise Sec.  49.5 to read as follows:


Sec.  49.5   Equity interest transfers.

    (a) Equity interest transfer notification. A swap data repository 
shall file with the Commission a notification of each transaction 
involving the direct or indirect transfer of ten percent or more of the 
equity interest in the swap data repository. The Commission may, upon 
receiving such notification, request that the swap data repository 
provide supporting documentation of the transaction.
    (b) Timing of notification. The equity interest transfer notice 
described in paragraph (a) of this section shall be filed 
electronically with the Secretary of the Commission at its Washington, 
DC headquarters at [email protected] and the Division of Market 
Oversight at [email protected], at the earliest possible time but 
in no event later than the open of business ten business days following 
the date upon which a firm obligation is made to transfer, directly or 
indirectly, ten percent or more of the equity interest in the swap data 
repository.
    (c) Certification. Upon a transfer, whether directly or indirectly, 
of an equity interest of ten percent or more in a swap data repository, 
the swap data repository shall file electronically with the Secretary 
of the Commission at its Washington, DC headquarters at 
[email protected] and the Division of Market Oversight at 
[email protected], a certification that the swap data repository 
meets all of the requirements of section 21 of the Act and the 
Commission regulations adopted thereunder, no later than two business 
days following the date on which the equity interest of ten percent or 
more was acquired.
0
16. Revise Sec.  49.6 to read as follows:


Sec.  49.6   Request for transfer of registration.

    (a) Request for approval. A swap data repository seeking to 
transfer its registration from its current legal entity to a new legal 
entity as a result of a corporate change shall file a request for 
approval to transfer such registration with the Secretary of the 
Commission in the form and manner specified by the Commission.
    (b) Timing for filing a request for transfer of registration. A 
swap data repository shall file a request for transfer of registration 
as soon as practicable prior to the anticipated corporate change.
    (c) Required information. The request for transfer of registration 
shall include the following:
    (1) The underlying documentation that governs the corporate change;
    (2) A description of the corporate change, including the reason for 
the change and its impact on the swap data repository, including the 
swap data repository's governance and operations, and its impact on the 
rights and obligations of market participants;
    (3) A discussion of the transferee's ability to comply with the 
Act, including the core principles applicable to swap data repositories 
and the Commission's regulations;
    (4) The governance documents adopted by the transferee, including a 
copy of any constitution; articles or certificate of incorporation, 
organization, formation, or association with all amendments thereto; 
partnership or limited liability agreements; and any existing bylaws, 
operating agreement, or rules or instruments corresponding thereto;
    (5) The transferee's rules marked to show changes from the current 
rules of the swap data repository; and
    (6) A representation by the transferee that it:
    (i) Will be the surviving entity and successor-in-interest to the 
transferor swap data repository and will retain and assume the assets 
and liabilities of the transferor, except if otherwise indicated in the 
request;
    (ii) Will assume responsibility for complying with all applicable 
provisions of the Act and the Commission's regulations; and
    (iii) Will notify market participants of all changes to the 
transferor's rulebook prior to the transfer, including those changes 
that may affect the rights and obligations of market participants, and 
will further notify market participants of the concurrent transfer of 
the registration to the transferee upon Commission approval and 
issuance of an order permitting the transfer.
    (d) Commission determination. Upon review of a request for transfer 
of registration, the Commission, as soon as practicable, shall issue an 
order either approving or denying the request for transfer of 
registration.
0
17. Revise Sec.  49.9 to read as follows:


Sec.  49.9   Open swaps reports provided to the Commission.

    Each swap data repository shall provide reports of open swaps to 
the Commission in accordance with this section.
    (a) Content of the open swaps report. In order to satisfy the 
requirements of this section, each swap data repository shall provide 
the Commission with open swaps reports that contain an accurate 
reflection of the swap data for every swap data field required to be 
reported for swaps pursuant to part 45 of this chapter for every open 
swap maintained by the swap data repository, organized by the unique 
identifier created pursuant to Sec.  45.5 of this chapter associated 
with each open swap, as of the time the swap data repository compiles 
the open swaps report.
    (b) Transmission of the open swaps report. A swap data repository 
shall transmit all open swaps reports to the Commission as instructed 
by the Commission. Such instructions may include, but are not limited 
to, the method, timing, and frequency of transmission as well as the 
format of the swap data to be transmitted.
0
 18. In Sec.  49.10, add paragraph (e) to read as follows:

[[Page 21103]]

Sec.  49.10   Acceptance of data.

* * * * *
    (e) Errors and omissions. In accordance with this paragraph (e), a 
swap data repository shall correct errors and omissions in SDR data 
previously reported to the swap data repository pursuant to parts 43, 
45, and 46 of this chapter and shall correct omissions in reporting SDR 
data for swaps that were not previously reported to the swap data 
repository as required under parts 43, 45, or 46 of this chapter, 
regardless of the state of the swap that is the subject of the SDR 
data.
    (1) A swap data repository shall accept corrections for errors and 
omissions reported to the swap data repository pursuant to parts 43, 
45, or 46 of this chapter.
    (2) A swap data repository shall correct the reported errors and 
omissions as soon as technologically practicable after the swap data 
repository receives a report of errors or omissions.
    (3) A swap data repository shall disseminate corrected SDR data to 
the public and the Commission, as applicable, in accordance with this 
chapter, as soon as technologically practicable after the swap data 
repository corrects the SDR data.
    (4) A swap data repository shall establish, maintain, and enforce 
policies and procedures designed for the swap data repository to accept 
corrections for errors and omissions, to correct the errors and 
omissions as soon as technologically practicable after the swap data 
repository receives a report of errors or omissions, and to disseminate 
such corrected SDR data to the public and to the Commission, as 
applicable, in accordance with this chapter.
0
19. Revise Sec.  49.11 to read as follows:


Sec.  49.11   Verification of swap data accuracy.

    (a) General requirement. Each swap data repository shall verify the 
accuracy and completeness of swap data that it receives from swap 
execution facilities, designated contract markets, or reporting 
counterparties, or third-party service providers acting on their 
behalf, in accordance with paragraph (b) of this section. A swap data 
repository shall also establish, maintain, and enforce policies and 
procedures reasonably designed to verify the accuracy and completeness 
of swap data that it receives from swap execution facilities, 
designated contract markets, or reporting counterparties, or third-
party service providers acting on their behalf.
    (b) Distribution of open swaps reports. In order to verify the 
accuracy and completeness of swap data as required by this section, a 
swap data repository shall, on a regular basis, distribute to each 
reporting counterparty an open swaps report detailing the swap data 
maintained by the swap data repository for all open swaps as of the 
time the swap data repository compiles the open swaps report for which 
the recipient of the open swaps report is the reporting counterparty.
    (1) Content of open swaps reports. In order to satisfy the 
requirements of this section, the swap data repository shall distribute 
an open swaps report that contains an accurate reflection of the swap 
data for every swap data field required to be reported for swaps 
pursuant to part 45 of this chapter, unless access to a particular data 
field is prohibited by other Commission regulations, for every open 
swap maintained by the swap data repository for which the recipient of 
the report is the reporting counterparty, organized by the unique 
identifier created pursuant to Sec.  45.5 of this chapter associated 
with every open swap, as of the time the swap data repository compiles 
the open swaps report.
    (2) Frequency of open swaps reports for swap dealer, major swap 
participant, and derivatives clearing organization reporting 
counterparties. In order to satisfy the requirements of this section, 
the swap data repository shall distribute an open swaps report to all 
reporting counterparties that are swap dealers, major swap 
participants, or derivatives clearing organizations on a weekly basis, 
no later than 11:59 p.m. Eastern time on the day of the week that the 
swap data repository chooses to regularly distribute the open swaps 
reports. The swap data repository shall distribute all open swaps 
reports on the same day of the week.
    (3) Frequency of open swaps reports for non-swap dealer/major swap 
participant/derivatives clearing organization reporting counterparties. 
In order to satisfy the requirements of this section, the swap data 
repository shall distribute an open swaps report to all non-swap 
dealer/major swap participant/derivatives clearing organization 
reporting counterparties on a monthly basis, no later than 11:59 p.m. 
Eastern time on the day of the month that the swap data repository 
chooses to regularly distribute the open swaps report. The swap data 
repository shall distribute all open swaps reports on the same day of 
the month.
    (c) Receipt of verification of data accuracy or notice of 
discrepancy. In order to satisfy the requirements of this section, the 
swap data repository shall receive from each reporting counterparty for 
each open swaps report (i) a verification of data accuracy indicating 
that the swap data contained in an open swaps report distributed 
pursuant to paragraph (b) of this section is accurate and complete or 
(ii) a notice of discrepancy indicating that the swap data contained in 
an open swaps report contains one or more discrepancies, in accordance 
with Sec.  45.14 of this chapter. The swap data repository shall 
establish, maintain, and enforce policies and procedures reasonably 
designed for the swap data repository to successfully receive the 
verification of data accuracy or notice of discrepancy.
    (d) Amending verification policies and procedures. A swap data 
repository shall comply with the requirements under part 40 of this 
chapter in adopting or amending the policies and procedures required by 
this section.
0
20. Revise Sec.  49.12 to read as follows:


Sec.  49.12   Swap data repository recordkeeping requirements.

    (a) General requirement. A swap data repository shall keep full, 
complete, and systematic records, together with all pertinent data and 
memoranda, of all activities relating to the business of the swap data 
repository, including, but not limited to, all SDR information and all 
SDR data that is reported to the swap data repository pursuant to this 
chapter.
    (b) Maintenance of records. A swap data repository shall maintain 
all records required to be kept by this section in accordance with this 
paragraph (b).
    (1) A swap data repository shall maintain all SDR information, 
including, but not limited to, all documents, policies, and procedures 
required by the Act and the Commission's regulations, correspondence, 
memoranda, papers, books, notices, accounts, and other such records 
made or received by the swap data repository in the course of its 
business. All SDR information shall be maintained in accordance with 
Sec.  1.31 of this chapter.
    (2) A swap data repository shall maintain all SDR data and 
timestamps reported to or created by the swap data repository pursuant 
to this chapter, and all messages related to such reporting, throughout 
the existence of the swap that is the subject of the SDR data and for 
five years following final termination of the swap, during which time 
the records shall be readily accessible by the swap data repository and 
available to the Commission via real-time electronic access, and for a 
period of at least ten additional years in archival storage from which 
such records are retrievable by the swap data repository within three 
business days.

[[Page 21104]]

    (c) Records of data errors and omissions. A swap data repository 
shall create and maintain records of data validation errors and SDR 
data reporting errors and omissions in accordance with this paragraph 
(c).
    (1) A swap data repository shall create and maintain an accurate 
record of all reported SDR data that fails to satisfy the swap data 
repository's data validation procedures including, but not limited to, 
all SDR data reported to the swap data repository that fails to satisfy 
the data validation procedures, all data validation errors, and all 
related messages and timestamps. A swap data repository shall make 
these records available to the Commission on request.
    (2) A swap data repository shall create and maintain an accurate 
record of all SDR data errors and omissions reported to the swap data 
repository and all corrections disseminated by the swap data repository 
pursuant to parts 43, 45, and 46 of this chapter. A swap data 
repository shall make these records available to the Commission on 
request.
    (d) Availability of records. All records required to be kept 
pursuant to this part shall be open to inspection upon request by any 
representative of the Commission or the United States Department of 
Justice in accordance with the provisions of Sec.  1.31 of this 
chapter. A swap data repository required to keep, create, or maintain 
records pursuant to this section shall provide such records in 
accordance with the provisions of Sec.  1.31 of this chapter, unless 
otherwise provided in this part.
0
21. Revise Sec.  49.13 to read as follows:


Sec.  49.13   Monitoring, screening, and analyzing data.

    (a) Duty to monitor, screen, and analyze data. A swap data 
repository shall establish automated systems for monitoring, screening, 
and analyzing all relevant SDR data in its possession in the form and 
manner as may be directed by the Commission. A swap data repository 
shall routinely monitor, screen, and analyze relevant SDR data at the 
request of the Commission.
    (1) Monitoring, screening, and analyzing. Monitoring, screening, 
and analyzing requirements shall include utilizing relevant SDR data 
maintained by the swap data repository to provide information to the 
Commission concerning such relevant SDR data. Monitoring, screening, 
and analyzing requests may require the compiling and/or calculation of 
requested information within discrete categories and/or over periods of 
time, including the comparison of information from different categories 
and/or over multiple periods of time. Requests for monitoring, 
screening, and analyzing may require swap data repositories to provide 
information to the Commission related to:
    (i) The accuracy, timeliness, and quality of SDR data reported 
pursuant to this chapter;
    (ii) Updates and corrections to, and verification of the accuracy 
of, SDR data reported pursuant to this chapter;
    (iii) Currently open swaps and the consistency of SDR data related 
to individual swaps;
    (iv) The calculation of market participant swap positions, 
including for purposes of position limit compliance, risk assessment, 
and compliance with other regulatory requirements;
    (v) Swap counterparty exposure to other counterparties and standard 
market risk metrics;
    (vi) Swap valuations and margining activities;
    (vii) Audit trails for individual swaps, including post-transaction 
events such as allocation, novation, and compression, and all related 
messages;
    (viii) Compliance with Commission regulations;
    (ix) Market surveillance;
    (x) The use of clearing exemptions and exceptions; and/or
    (xi) Statistics on swaps market activity.
    (2) Discretion of the Commission. All monitoring, screening, and 
analyzing requests shall be at the discretion of the Commission. Such 
discretion includes, but is not limited to, the content, scope, and 
frequency of each required response. All information provided by a swap 
data repository pursuant to this section shall conform to the form and 
manner requirements established pursuant to Sec.  49.30 for a 
particular request.
    (3) Timing. All monitoring, screening, and analyzing requests shall 
be fulfilled within the time specified by the Commission for the 
particular request.
    (b) Capacity to monitor, screen, and analyze SDR data. A swap data 
repository shall establish and at all times maintain sufficient 
information technology, staff, and other resources to fulfill the 
requirements in this section in the manner prescribed by the 
Commission.
    (c) Duty to notify the Commission of noncompliance. A swap data 
repository shall promptly notify the Commission of any swap transaction 
for which the swap data repository is aware that:
    (1) The swap transaction and pricing data was not received by the 
swap data repository in accordance with part 43 of this chapter;
    (2) The swap data was not received by the swap data repository in 
accordance with part 45 of this chapter; or
    (3) Data was not received by the swap data repository in accordance 
with part 46 of this chapter.
0
22. Revise Sec.  49.15 to read as follows:


Sec.  49.15   Real-time public reporting by swap data repositories.

    (a) Scope. The provisions of this section apply to the real-time 
public reporting of swap transaction and pricing data submitted to a 
swap data repository pursuant to part 43 of this chapter.
    (b) Systems to accept and disseminate data in connection with real-
time public reporting. A swap data repository shall establish such 
electronic systems as are necessary to accept and publicly disseminate 
swap transaction and pricing data submitted to the swap data repository 
pursuant to part 43 of this chapter in order to meet the real-time 
public reporting obligations of part 43 of this chapter. Any electronic 
system established for this purpose shall be capable of accepting and 
ensuring the public dissemination of all data fields required by part 
43 this chapter.
0
23. Amend Sec.  49.16 by revising paragraphs (a)(1), (b), and (c) to 
read as follows:


Sec.  49.16   Privacy and confidentiality requirements of swap data 
repositories.

    (a) * * *
    (1) Establish, maintain, and enforce written policies and 
procedures reasonably designed to protect the privacy and 
confidentiality of any and all SDR information and all SDR data that is 
not swap transaction and pricing data disseminated under part 43 of 
this chapter. Such policies and procedures shall include, but are not 
limited to, policies and procedures to protect the privacy and 
confidentiality of any and all SDR information and all SDR data (except 
for swap transaction and pricing data disseminated under part 43 of 
this chapter) that the swap data repository shares with affiliates and 
non-affiliated third parties; and
* * * * *
    (b) A swap data repository shall not, as a condition of accepting 
SDR data from any swap execution facility, designated contract market, 
or reporting counterparty, require the waiver of any privacy rights by 
such swap execution facility, designated contract market, or reporting 
counterparty.
    (c) Subject to section 8 of the Act, a swap data repository may 
disclose aggregated SDR data on a voluntary basis or as requested, in 
the form and manner prescribed by the Commission.

[[Page 21105]]

0
24. In Sec.  49.17, revise paragraph (b)(3), the introductory text of 
paragraph (c), paragraphs (c)(1) and (f)(2) to read as follows and 
remove paragraph (i).


Sec.  49.17   Access to SDR data.

* * * * *
    (b) * * *
    (3) Direct electronic access. For the purposes of this section, the 
term ``direct electronic access'' shall mean an electronic system, 
platform, framework, or other technology that provides internet-based 
or other form of access to real-time SDR data that is acceptable to the 
Commission and also provides scheduled data transfers to Commission 
electronic systems.
    (c) Commission access. A swap data repository shall provide access 
to the Commission for all SDR data maintained by the swap data 
repository pursuant to this chapter in accordance with this paragraph 
(c).
    (1) Direct electronic access requirements. A swap data repository 
shall provide direct electronic access to the Commission or the 
Commission's designee, including another registered entity, in order 
for the Commission to carry out its legal and statutory 
responsibilities under the Act and the Commission's regulations 
thereunder. A swap data repository shall maintain all SDR data reported 
to the swap data repository in a format acceptable to the Commission, 
and shall transmit all SDR data requested by the Commission to the 
Commission as instructed by the Commission. Such instructions may 
include, but are not limited to, the method, timing, and frequency of 
transmission, as well as the format and scope of the SDR data to be 
transmitted.
* * * * *
    (f) * * *
    (2) Exception. SDR data and SDR information related to a particular 
swap transaction that is maintained by the swap data repository may be 
accessed by either counterparty to that particular swap. However, the 
SDR data and SDR information maintained by the swap data repository 
that may be accessed by either counterparty to a particular swap shall 
not include the identity or the legal entity identifier (as such term 
is used in part 45 of this chapter) of the other counterparty to the 
swap, or the other counterparty's clearing member for the swap, if the 
swap is executed anonymously on a swap execution facility or designated 
contract market, and cleared in accordance with Sec. Sec.  1.74, 
23.610, and 39.12(b)(7) of this chapter.
* * * * *


Sec.  49.18   [Amended]

0
25. Amend Sec.  49.18 by removing paragraph (e).
0
26. In Sec.  49.20, revise paragraphs (b)(2)(v), (b)(2)(vii), and 
(c)(1)(ii)(B) to read as follows:


Sec.  49.20   Governance arrangements (Core Principle 2).

* * * * *
    (b) * * *
    (2) * * *
    (v) A description of the manner in which the board of directors, as 
well as any committee referenced in paragraph (b)(2)(ii) of this 
section, considers an independent perspective in its decision-making 
process, as Sec.  49.2(a) defines such term;
* * * * *
    (vii) Summaries of significant decisions impacting the public 
interest, the rationale for such decisions, and the process for 
reaching such decisions. Such significant decisions shall include 
decisions relating to pricing of repository services, offering of 
ancillary services, access to SDR data, and use of section 8 material, 
SDR information, and intellectual property (as referenced in Sec.  
49.16). Such summaries of significant decisions shall not require the 
swap data repository to disclose section 8 material or, where 
appropriate, information that the swap data repository received on a 
confidential basis from a swap execution facility, designated contract 
market, or reporting counterparty.
* * * * *
    (c) * * *
    (1) * * *
    (ii) * * *
    (B) A description of the relationship, if any, between such members 
and the swap data repository or any swap execution facility, designated 
contract market, or reporting counterparty user thereof (or, in each 
case, affiliates thereof, as Sec.  49.2(a) defines such term); and
* * * * *
0
27. In Sec.  49.22 revise paragraph (a), (b)(1) introductory text, 
paragraphs (b)(1)(i), (c), (d)(2) through (6), (e), (f), and (g) to 
read as follows and remove paragraph (d)(7).


Sec.  49.22   Chief compliance officer.

    (a) Definitions. For purposes of this section, the term--
    Board of directors means the board of directors of a swap data 
repository, or for those swap data repositories whose organizational 
structure does not include a board of directors, a body performing a 
function similar to a board of directors.
    Senior officer means the chief executive officer or other 
equivalent officer of the swap data repository.
    (b) * * *
    (1) Chief compliance officer required. Each swap data repository 
shall designate an individual to serve as a chief compliance officer.
    (i) The position of chief compliance officer shall carry with it 
the authority and resources to develop, in consultation with the board 
of directors or senior officer, the policies and procedures of the swap 
data repository and enforce such policies and procedures to fulfill the 
duties set forth for chief compliance officers in the Act and 
Commission regulations.
* * * * *
    (c) Appointment, supervision, and removal of chief compliance 
officer. (1) Appointment and compensation of chief compliance officer. 
(i) Only the board of directors or senior officer may appoint the chief 
compliance officer.
    (ii) The board of directors or senior officer shall approve the 
compensation of the chief compliance officer.
    (iii) The swap data repository shall notify the Commission within 
two business days of the appointment, whether interim or permanent, of 
a chief compliance officer.
    (2) Supervision of chief compliance officer. The chief compliance 
officer shall report directly to the board of directors or the senior 
officer of the swap data repository.
    (3) Removal of chief compliance officer. (i) Only the board of 
directors or the senior officer may remove the chief compliance 
officer.
    (ii) The swap data repository shall notify the Commission within 
two business days of the removal, whether interim or permanent, of a 
chief compliance officer.
    (4) Annual meeting with the chief compliance officer. The chief 
compliance officer shall meet with the board of directors or senior 
officer of the swap data repository at least annually.
    (d) * * *
    (2) Taking reasonable steps, in consultation with the board of 
directors or the senior officer of the swap data repository, to resolve 
any material conflicts of interest that may arise;
    (3) Establishing and administering written policies and procedures 
reasonably designed to prevent violations of the Act and the rules of 
the Commission;
    (4) Taking reasonable steps to ensure compliance with the Act and 
Commission regulations relating to agreements, contracts, or 
transactions, and with Commission regulations

[[Page 21106]]

created pursuant to section 21 of the Act;
    (5) Establish procedures reasonably designed to handle, respond, 
remediate, retest, and resolve noncompliance issues identified by the 
chief compliance officer through any means, including any compliance 
office review, look-back, internal or external audit finding, self-
reported error, or validated compliant; and
    (6) Establishing and administering a compliance manual designed to 
promote compliance with the applicable laws, rules, and regulations and 
a written code of ethics for the swap data repository designed to 
prevent ethical violations and to promote honesty and ethical conduct 
by swap data repository personnel.
    (e) Preparation of annual compliance report. The chief compliance 
officer shall, not less than annually, prepare and sign an annual 
compliance report that covers the prior fiscal year. The report shall, 
at a minimum, contain:
    (1) A description and self-assessment of the effectiveness of the 
written policies and procedures of the swap data repository, including 
the code of ethics and conflict of interest policies, designed to 
reasonably ensure compliance with the Act and applicable Commission 
regulations;
    (2) A list of any material changes made to compliance policies and 
procedures during the coverage period for the report and any areas of 
improvement or recommended changes to the compliance program;
    (3) A description of the financial, managerial, and operational 
resources set aside for compliance with the Act and applicable 
Commission regulations;
    (4) A description of any material non-compliance matters identified 
and an explanation of the corresponding action taken to resolve such 
non-compliance matters; and
    (5) A certification by the chief compliance officer that, to the 
best of his or her knowledge and reasonable belief, and under penalty 
of law, the annual compliance report is accurate and complete in all 
material respects.
    (f) Submission of annual compliance report and related matters--(1) 
Furnishing the annual compliance report prior to submission to the 
Commission. Prior to submission to the Commission, the chief compliance 
officer shall provide the annual compliance report for review to the 
board of directors of the swap data repository or, in the absence of a 
board of directors, to the senior officer of the swap data repository. 
Members of the board of directors and the senior officer shall not 
require the chief compliance officer to make any changes to the annual 
compliance report.
    (2) Submission of annual compliance report to the Commission. The 
annual compliance report shall be submitted electronically to the 
Commission not later than 90 calendar days after the end of the swap 
data repository's fiscal year. The swap data repository shall 
concurrently file the annual compliance report with the fourth quarter 
financial report pursuant to Sec.  49.25(f)(3).
    (3) Amendments to annual compliance report. Promptly upon discovery 
of any material error or omission made in a previously filed annual 
compliance report, the chief compliance officer shall file an amendment 
with the Commission to correct the material error or omission. The 
chief compliance officer shall submit the amended annual compliance 
report to the board of directors, or in the absence of a board of 
directors, to the senior officer of the swap data repository, pursuant 
to paragraph (f)(1) of this section. An amendment shall contain the 
certification required under paragraph (e)(5) of this section.
    (4) Requests for extension. A swap data repository may request an 
extension of time to file its annual compliance report from the 
Commission. Reasonable and valid requests for extensions of the filing 
deadline may be granted at the discretion of the Commission.
    (g) Recordkeeping. The swap data repository shall maintain all 
records demonstrating compliance with the duties of the chief 
compliance officer and the preparation and submission of annual 
compliance reports consistent with Sec.  49.12(b)(1).
0
28. In Sec.  49.24, revise paragraphs (d), the introductory text of 
(i), and (i)(5) to read as follows:


Sec.  49.24   System safeguards.

* * * * *
    (d) A swap data repository shall maintain a business continuity-
disaster recovery plan and business continuity-disaster recovery 
resources, emergency procedures, and backup facilities sufficient to 
enable timely recovery and resumption of its operations and resumption 
of its ongoing fulfillment of its duties and obligations as a swap data 
repository following any disruption of its operations. Such duties and 
obligations include, without limitation, the duties set forth in 
Sec. Sec.  49.10 to 49.18, Sec.  49.23, and the core principles set 
forth in Sec. Sec.  49.19 to 49.21 and 49.25 to 49.27, and maintenance 
of a comprehensive audit trail. The swap data repository's business 
continuity-disaster recovery plan and resources generally should enable 
resumption of the swap data repository's operations and resumption of 
ongoing fulfillment of the swap data repository's duties and obligation 
during the next business day following the disruption. A swap data 
repository shall update its business continuity-disaster recovery plan 
and emergency procedures at a frequency determined by an appropriate 
risk analysis, but at a minimum no less frequently than annually.
* * * * *
    (i) As part of a swap data repository's obligation to produce books 
and records in accordance with Sec.  1.31 of this chapter and Sec.  
49.12, a swap data repository shall provide to the Commission the 
following system safeguards-related books and records, promptly upon 
the request of any Commission representative:
    * * *
    (5) Nothing in paragraph (i) of this section shall be interpreted 
as reducing or limiting in any way a swap data repository's obligation 
to comply with Sec.  1.31 of this chapter or with Sec.  49.12.
* * * * *
0
29. In Sec.  49.25, revise paragraphs (a)(1) and (f)(3) to read as 
follows:


Sec.  49.25   Financial resources.

    (a) * * *
    (1) A swap data repository shall maintain sufficient financial 
resources to perform its statutory and regulatory duties set forth in 
this chapter.
* * * * *
    (f) * * *
    (3) The reports and any supporting documentation required by this 
section shall be filed not later than 40 calendar days after the end of 
the swap data repository's first three fiscal quarters, and not later 
than 90 calendar days after the end of the swap data repository's 
fourth fiscal quarter, or at such later time as the Commission may 
permit, in its discretion, upon request by the swap data repository.
0
30. In Sec.  49.26,
0
a. Revise the introductory text; and
0
b. Add paragraph (j).
    The revisions and additions read as follows:


Sec.  49.26   Disclosure requirements of swap data repositories.

    Before accepting any SDR data from a swap execution facility, 
designated contract market, or reporting counterparty; or upon a swap 
execution facility's, designated contract market's, or reporting 
counterparty's request; a swap data repository shall furnish to the 
swap execution facility, designated contract market, or reporting 
counterparty a disclosure document that

[[Page 21107]]

contains the following written information, which shall reasonably 
enable the swap execution facility, designated contract market, or 
reporting counterparty to identify and evaluate accurately the risks 
and costs associated with using the services of the swap data 
repository:
* * * * *
    (j) The swap data repository's policies and procedures regarding 
the reporting of SDR data to the swap data repository, including the 
swap data repository's SDR data validation procedures, swap data 
verification procedures, and procedures for correcting SDR data errors 
and omissions.
0
31. Add Sec.  49.28 to read as follows:


Sec.  49.28   Operating hours of swap data repositories.

    (a) Except as otherwise provided in this paragraph (a), a swap data 
repository shall have systems in place to continuously accept and 
promptly record all SDR data reported to the swap data repository as 
required in this chapter and, as applicable, publicly disseminate all 
swap transaction and pricing data reported to the swap data repository 
as required in part 43 of this chapter.
    (1) A swap data repository may establish normal closing hours to 
perform system maintenance during periods when, in the reasonable 
estimation of the swap data repository, the swap data repository 
typically receives the least amount of SDR data. A swap data repository 
shall provide reasonable advance notice of its normal closing hours to 
market participants and to the public.
    (2) A swap data repository may declare, on an ad hoc basis, special 
closing hours to perform system maintenance that cannot wait until 
normal closing hours. A swap data repository shall schedule special 
closing hours during periods when, in the reasonable estimation of the 
swap data repository in the context of the circumstances prompting the 
special closing hours, the special closing hours will be the least 
disruptive to the swap data repository's SDR data reporting 
responsibilities. A swap data repository shall provide reasonable 
advance notice of its special closing hours to market participants and 
to the public whenever possible, and, if advance notice is not 
reasonably possible, shall provide notice of its special closing hours 
to market participants and to the public as soon as reasonably possible 
after declaring special closing hours.
    (b) A swap data repository shall comply with the requirements under 
part 40 of this chapter in adopting or amending normal closing hours 
and special closing hours.
    (c) During normal closing hours and special closing hours, a swap 
data repository shall have the capability to accept and hold in queue 
any and all SDR data reported to the swap data repository during the 
normal closing hours or special closing hours.
    (1) Upon reopening after normal closing hours or special closing 
hours, a swap data repository shall promptly process all SDR data 
received during normal closing hours or special closing hours, as 
required pursuant to this chapter, and, pursuant to part 43 of this 
chapter, publicly disseminate all swap transaction and pricing data 
reported to the swap data repository that was held in queue during the 
normal closing hours or special closing hours.
    (2) If at any time during normal closing hours or special closing 
hours a swap data repository is unable to receive and hold in queue any 
SDR data reported pursuant to this chapter, then the swap data 
repository shall immediately issue notice to all swap execution 
facilities, designated contract markets, reporting counterparties, and 
the public that it is unable to receive and hold in queue SDR data. 
Immediately upon reopening, the swap data repository shall issue notice 
to all swap execution facilities, designated contract markets, 
reporting counterparties, and the public that it has resumed normal 
operations. Any swap execution facility, designated contract market, or 
reporting counterparty that was obligated to report SDR data pursuant 
to this chapter to the swap data repository, but could not do so 
because of the swap data repository's inability to receive and hold in 
queue SDR data, shall report the SDR data to the swap data repository 
immediately after receiving such notice.
0
32. Add Sec.  49.29 to read as follows:


Sec.  49.29   Information relating to swap data repository compliance.

    (a) Requests for information. Upon the Commission's request, a swap 
data repository shall file with the Commission information related to 
its business as a swap data repository and such information as the 
Commission determines to be necessary or appropriate for the Commission 
to perform the duties of the Commission under the Act and regulations 
thereunder. The swap data repository shall file the information 
requested in the form and manner and within the time period the 
Commission specifies in the request.
    (b) Demonstration of compliance. Upon the Commission's request, a 
swap data repository shall file with the Commission a written 
demonstration, containing supporting data, information, and documents, 
that it is in compliance with its obligations under the Act and the 
Commission's regulations thereunder, as the Commission specifies in the 
request. The swap data repository shall file the written demonstration 
in the form and manner and within the time period the Commission 
specifies in the request.
0
33. Add Sec.  49.30 to read as follows:


Sec.  49.30   Form and manner of reporting and submitting information 
to the Commission.

    Unless otherwise instructed by the Commission, a swap data 
repository shall submit SDR data reports and any other information 
required under this part to the Commission, within the time specified, 
using the format, coding structure, and electronic data transmission 
procedures approved in writing by the Commission.
0
34. Add Sec.  49.31 to read as follows:


Sec.  49.31   Delegation of authority to the Director of the Division 
of Market Oversight relating to certain part 49 matters.

    (a) The Commission hereby delegates, until such time as the 
Commission orders otherwise, the following functions to the Director of 
the Division of Market Oversight and to such members of the Commission 
staff acting under his or her direction as he or she may designate from 
time to time:
    (1) All functions reserved to the Commission in Sec.  49.5.
    (2) All functions reserved to the Commission in Sec.  49.9.
    (3) All functions reserved to the Commission in Sec.  49.10.
    (4) All functions reserved to the Commission in Sec.  49.12.
    (5) All functions reserved to the Commission in Sec.  49.13.
    (6) All functions reserved to the Commission in Sec.  49.16.
    (7) All functions reserved to the Commission in Sec.  49.17.
    (8) All functions reserved to the Commission in Sec.  49.18.
    (9) All functions reserved to the Commission in Sec.  49.22.
    (10) All functions reserved to the Commission in Sec.  49.23.
    (11) All functions reserved to the Commission in Sec.  49.24.
    (12) All functions reserved to the Commission in Sec.  49.25.
    (13) All functions reserved to the Commission in Sec.  49.29.
    (14) All functions reserved to the Commission in Sec.  49.30.
    (b) The Director of the Division of Market Oversight may submit to 
the Commission for its consideration any

[[Page 21108]]

matter that has been delegated under paragraph (a) of this section.
    (c) Nothing in this section may prohibit the Commission, at its 
election, from exercising the authority delegated in this section.
0
35. Revise Appendix A to Part 49 to read as follows:

Appendix A to Part 49--Form SDR

COMMODITY FUTURES TRADING COMMISSION

FORM SDR

SWAP DATA REPOSITORY APPLICATION OR AMENDMENT TO APPLICATION FOR 
REGISTRATION

REGISTRATION INSTRUCTIONS

Intentional misstatements or omissions of material fact may 
constitute federal criminal violations (7 U.S.C. 13 and 18 U.S.C. 
1001) or grounds for disqualification from registration.

DEFINITIONS

Unless the context requires otherwise, all terms used in this Form 
SDR have the same meaning as in the Commodity Exchange Act, as 
amended (``Act''), and in the General Rules and Regulations of the 
Commodity Futures Trading Commission (``Commission'') thereunder (17 
CFR chapter I).

For the purposes of this Form SDR, the term ``Applicant'' shall 
include any applicant for registration as a swap data repository or 
any applicant amending a pending application.

GENERAL INSTRUCTIONS

1. This Form SDR, which includes instructions, a Cover Sheet, and 
required Exhibits (together ``Form SDR''), is to be filed with the 
Commission by all Applicants, pursuant to section 21 of the Act and 
the Commission's regulations thereunder. Upon the filing of an 
application for registration in accordance with the instructions 
provided herein, the Commission will publish notice of the filing 
and afford interested persons an opportunity to submit written 
comments concerning such application. No application for 
registration shall be effective unless the Commission, by order, 
grants such registration.
2. Individuals' names, except the executing signature, shall be 
given in full (Last Name, First Name, Middle Name).
3. Signatures on all copies of the Form SDR filed with the 
Commission can be executed electronically. If this Form SDR is filed 
by a corporation, it shall be signed in the name of the corporation 
by a principal officer duly authorized; if filed by a limited 
liability company, it shall be signed in the name of the limited 
liability company by a manager or member duly authorized to sign on 
the limited liability company's behalf; if filed by a partnership, 
it shall be signed in the name of the partnership by a general 
partner duly authorized; if filed by an unincorporated organization 
or association that is not a partnership, it shall be signed in the 
name of such organization or association by the managing agent, 
i.e., a duly authorized person who directs manages or who 
participates in the directing or managing of its affairs.
4. If this Form SDR is being filed as an application for 
registration, all applicable items must be answered in full. If any 
item is inapplicable, indicate by ``none,'' ``not applicable,'' or 
``N/A,'' as appropriate.
5. Under section 21 of the Act and the Commission's regulations 
thereunder, the Commission is authorized to solicit the information 
required to be supplied by this Form SDR from any Applicant seeking 
registration as a swap data repository. Disclosure by the Applicant 
of the information specified in this Form SDR is mandatory prior to 
the start of the processing of an application for registration as a 
swap data repository. The information provided in this Form SDR will 
be used for the principal purpose of determining whether the 
Commission should grant or deny registration to an Applicant. The 
Commission may determine that additional information is required 
from an Applicant in order to process its application. A Form SDR 
that is not prepared and executed in compliance with applicable 
requirements and instructions may be returned as not acceptable for 
filing. Acceptance of this Form SDR, however, shall not constitute a 
finding that the Form SDR has been filed as required or that the 
information submitted is true, current, or complete.
6. Except in cases where confidential treatment is requested by the 
Applicant and granted by the Commission pursuant to the Freedom of 
Information Act and Commission Regulation Sec.  145.9, information 
supplied on this Form SDR will be included in the public files of 
the Commission and will be available for inspection by any 
interested person. The Applicant must identify with particularity 
the information in these exhibits that will be subject to a request 
for confidential treatment and supporting documentation for such 
request pursuant to Commission Regulations Sec.  40.8 and Sec.  
145.9.

APPLICATION AMENDMENTS

1. An Applicant amending a pending application for registration as a 
swap data repository shall file an amended Form SDR electronically 
with the Secretary of the Commission in the manner specified by the 
Commission.
2. When filing this Form SDR for purposes of amending a pending 
application, an Applicant must re-file the entire Cover Sheet, 
amended if necessary, include an executing signature, and attach 
thereto revised Exhibits or other materials marked to show any 
amendments. The submission of an amendment to a pending application 
represents that all unamended items and Exhibits remain true, 
current, and complete as previously filed.

WHERE TO FILE

This Form SDR shall be filed electronically with the Secretary of 
the Commission in the manner specified by the Commission.
BILLING CODE 6351-01-P

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[[Page 21117]]


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BILLING CODE 6351-01-C

    Issued in Washington, DC, on April 25, 2019, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.


    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendices to Proposed Amendments to the Commission's Regulations 
Relating to Certain Swap Data Repository and Data Reporting 
Requirements

Appendix 1--Commission Voting Summary

    On this matter, Chairman Giancarlo and Commissioners Quintenz 
and Berkovitz voted in the affirmative. Commissioners Behnam and 
Stump voted to concur. No Commissioner voted in the negative.

Appendix 2--Statement of Chairman J. Christopher Giancarlo

    A critical component of the 2008 financial crisis was the 
inability of regulators to assess and quantify the counterparty 
credit risk of large banks and swaps dealers. To address this 
shortcoming, the Dodd-Frank Act gave the CFTC broad responsibility 
to enhance regulatory transparency and price discovery for market 
participants through trade reporting to swap data repositories 
(SDRs).
    In 2011 and 2012, the CFTC adopted rules for swap data 
reporting, recordkeeping and SDRs. Unfortunately, these initial 
rules lacked technological detail and specification. Under my 
direction in 2017, CFTC staff began the process of assessing the 
effectiveness of the swap reporting rules in Parts 43, 45, and 49 of 
the CFTC's regulations. The 2017 Roadmap to Achieve High Quality 
Swaps Data (Roadmap) outlined a series of steps to improve data 
reporting requirements. The CFTC received a wide range of feedback 
on the Roadmap, via written comments and discussions with SDRs and 
market participants.
    I am pleased to see the first part of the Roadmap, the proposed 
changes to Part 49, issued today. These proposed changes update the 
requirements for SDRs and swap counterparties to verify the accuracy 
and completeness of swap data reported to SDRs. Completion of these 
and the other changes proposed by the Roadmap will result in more 
complete, more accurate, and higher-quality data available to the 
CFTC and to the public; streamline data reporting; and help the CFTC 
perform its regulatory responsibilities. The time has come to 
revisit this important post-crisis reform and ensure the CFTC is 
fulfilling its commitments.

Appendix 3--Statement of Concrrence of Commissioner Rostin Behnam

    I respectfully concur with the Commodity Futures Trading 
Commission's (the ``Commission'' or ``CFTC'') approval of its 
proposed rule regarding amendments to the Commission's Regulations 
Relating to Certain Swap Data Repository and Swap Data Reporting 
Requirements (the ``Proposal''). In 2011, the Commission adopted 
part 49 of the Commission's Regulations \1\ to implement the 
requirements of section 21 of the Commodity Exchange Act (the 
``Act'' or ``CEA'').\2\ Section 21 describes the registration regime 
for and operation of swap data repositories (``SDRs'') by setting 
out applicable registration rules, data standards, duties, core 
principles, and requirements regarding confidentiality and chief 
compliance officers as envisioned by Congress in the Dodd-Frank Act 
to implement the key trade reporting provisions laid out at the 2009 
G20 Pittsburgh Summit.\3\ Similarly, part 49 builds out a regulatory 
framework aimed at ensuring the legal and operational stability and 
soundness of SDRs in support of post-trade transparency in the swaps 
market. The Proposal aims to improve upon the quality, accuracy, and 
completeness of swap data reported to the Commission via SDRs and 
generally follows a plan laid out in the Commission's 2017 Roadmap 
to Achieve High Quality Swap Data.\4\ This Proposal purports to be 
the first step in following that Roadmap. While true, I prefer to 
view this as a part of the Commission's ongoing duties to regularly 
review its Regulations to increase efficiencies and avoid unintended 
consequences, and to be certain that our SDR rules further the goals 
of increasing transparency and identifying risk.
---------------------------------------------------------------------------

    \1\ Swap Data Repositories: Registration Standards, Duties and 
Core Principles, 76 FR 54538 (Sept. 1, 2011).
    \2\ 7 U.S.C. 24a.
    \3\ Id.
    \4\ Roadmap to Achieve High Quality Swap Data, available at 
https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.
---------------------------------------------------------------------------

    As I have stated several times during my tenure as a 
Commissioner, as we engage in strategic regulatory decisions, our 
policy goals from 2010 remain unchanged. As we endeavor to provide 
surgical flexibility and a more principles-based approach, I will 
continue to oppose any roll backs of Dodd-Frank initiatives.\5\ 
While I do not believe that today's Proposal would be considered a 
rollback per se, I would like to call attention to a section of the 
Proposal where we deviate from the language of section 21 regarding 
the role of the chief compliance officer (``CCO'') at an SDR.
---------------------------------------------------------------------------

    \5\ Rostin Behnam, Commissioner, U.S. Comm. Fut. Trading Comm'n, 
Remarks of Rostin Behnam before FIA/SIFMA Asset Management Group, 
Asset Management Derivatives Forum 2018, Dana Point, California 
(Feb. 8, 2018), https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam2.
---------------------------------------------------------------------------

    Section 21(e)(2)(C) affirmatively requires an SDR's CCO, in 
consultation with the board of directors or similar body, to 
``resolve any conflicts of interest that may arise.'' The 
Commission's current part 49 rules mirror the language of the CEA 
exactly. Regulation 49.22(d)(2) affirmatively requires an SDR's CCO 
to ``resolve any conflicts of interest that may arise,'' using 
precisely the same language as the Act.
    However, today's Proposal would amend 49.22(d)(2) in a way that 
deviates from the plain language of the statute. While the statute 
requires that CCOs actually resolve any conflicts of interest, 
today's Proposal would simply require a CCO to take ``reasonable 
steps'' to resolve any conflict of interest. In addition, the 
Proposal would only apply to ``material'' conflicts of interest. 
Neither this new reasonableness standard nor this new materiality 
standard appear in the language of the statute. My concern is that 
adding these new standards may deviate from Congressional intent. 
This potentially dilutes the CCO's obligation to address conflicts 
of interest, but perhaps more importantly, it dilutes the CCO's 
ability to do

[[Page 21118]]

so. Under the language of the Act and the current Regulation, a CCO 
can point to their statutory obligation in working to resolve 
conflicts of interest. Imposing a new reasonableness standard may 
have the real world impact of making it more difficult for a CCO to 
actually resolve conflicts of interest.
    I note that the same statutory language appears elsewhere in the 
Act regarding CCO resolution of conflicts of interest at other types 
of Commission registrants, and the Commission has issued a final 
rule implementing the same new reasonableness and materiality 
standards regarding CCOs of futures commission merchants, swap 
dealers and major swap participants.\6\ The Commission also has 
recently proposed adding these new standards for CCOs of swap 
execution facilities.\7\ However, in contrast, this week the 
Commission is issuing amendments to the Part 39 regulations for 
Derivatives Clearing Organizations (``DCO'') (the ``Part 39 
Proposal''). Current regulation 39.10(c)(2)(ii) requires a DCO's CCO 
to resolve conflicts of interest. Regulation 39.10(c)(2)(ii) exactly 
follows the language of Section 5b(i)(2)(C). While the Part 39 
Proposal makes amendments to 39.10, the Commission does not alter 
the CCO's current duty to resolve conflicts of interest. In other 
words, for DCOs the Commission is choosing to maintain the statutory 
language. I believe that this may be the more appropriate approach 
for CCOs generally.
---------------------------------------------------------------------------

    \6\ Chief Compliance Officer Duties and Annual Report 
Requirements for Futures Commission Merchants, Swap Dealers, and 
Major Swap Participants, 83 FR 43510 (Aug. 27, 2018).
    \7\ Swap Execution Facilities and Trade Execution Requirement, 
83 FR 61946 (Nov. 30, 2018).
---------------------------------------------------------------------------

    The Commission has, of late, begun a practice of re-interpreting 
statutory provisions with a somewhat flippant regard for their 
underlying purpose and rationales in order to lessen the burdens 
that are rarely substantiated by anything more than a call for 
change. While it is not out of the ordinary for an independent 
agency to reexamine whether its regulatory approach remains fit for 
purpose, I believe that we should be mindful that our role is not to 
bend too easily to unsupported claims of burden or complexity. This 
is particularly true when the re-interpretation seems to be at odds 
with the express language of the statute itself. I look forward to 
reading the comments on this CCO issue. I am particularly interested 
to learn whether various stakeholders believe that the statute 
itself is diluted by the addition of the reasonableness and 
materiality standards to CCO obligations in this and other 
rulemakings.

Appendix 4--Statement of Concurrence of Commissioner Dawn D. Stump

    The Commission is publishing for public comment ``Proposed 
Amendments to the Commission's Regulations Relating to Certain Swap 
Data Repository and Swap Data Reporting Requirements'' (Proposal). 
Accurate swap data reporting is vital to our ability to make 
appropriate policy choices. I very much look forward to receiving 
feedback from all parties impacted by this Proposal to assure that 
the Commission has robust and accurate data, which is a lynchpin of 
future Commission decision-making.
    However, a Latin proverb reads: Qui tacet consentire videtur, 
ubi loqui debuit ac potuit (he who is silent, when he ought to have 
spoken and was able to, is taken to agree). While I share the 
Commission's desire for accurate swap data, I do not agree with all 
the policy and procedural choices in this Proposal. I question 
certain of the underlying assumptions driving these policy changes, 
and the promulgation of this rulemaking in isolation and without 
corresponding changes to other swap data reporting rules. I am 
uncomfortable with the lack of details and nebulous description of 
certain obligations in many parts of the Proposal, which I believe 
will make it difficult for the public to comment in an informed 
fashion. And I disagree with imposing immense additional burdens on 
swap data repositories (SDRs) and all types of reporting 
counterparties (RCPs), particularly without commensurate 
streamlining of regulatory obligations in the rest of the 
Commission's swap data reporting rule set.
    Because I share the Commission's ultimate goal of accurate swaps 
data, I support the Proposal going out for comment, with the caveat 
that the other aspects of the swaps data ``Roadmap'' \1\ are 
published in quick succession. I look forward to feedback from all 
interested parties as to how that goal can best be achieved in light 
of my concerns about the Proposal discussed below and other options 
that may be at the Commission's disposal to enhance data accuracy 
while appropriately balancing costs and benefits.
---------------------------------------------------------------------------

    \1\ See Roadmap to Achieve High Quality Swaps Data (DMO July 10, 
2017), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf, 
published with CFTC Letter 17-33, Division of Market Oversight 
Announces Review of Swap Reporting Rules in Parts 43, 45, and 49 of 
Commission Regulations (DMO July 10, 2017), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/17-33.pdf.
---------------------------------------------------------------------------

I. Verification: Solution in Search of a Problem?

    This Proposal is predicated upon a view that new verification 
procedures are needed because the swap data currently being reported 
to SDRs is substantially wrong and inaccurate. Yet, the Commission 
has recently proffered positive reviews of the role of SDR data in 
enhancing its understanding of swaps markets, citing the ``more 
complete information now available regarding certain portions of the 
swap market, [and] the data analytical capabilities developed since 
the [swap dealer] regulations were adopted'' \2\ as supporting its 
policy decision making. Specifically, the Commission cited analysis 
based upon a year of SDR data sourced from data reported to the 
registered SDRs in its recent rulemaking concerning the de minimis 
exception to the swap dealer definition relating to insured 
depository institutions (IDIs).\3\ Given that the Commission has not 
voiced concern about widespread discrepancies or inaccuracies in 
swaps data reported to SDRs in relying upon that data in our 
rulemakings, I am not convinced that it is necessary to add new 
layers of complexity to swaps data reporting and create new burdens 
on market participants via the steps outlined in the Proposal.
---------------------------------------------------------------------------

    \2\ De Minimis Exception to the Swap Dealer Definition--Swaps 
Entered Into by Insured Depository Institutions in Connection With 
Loans to Customers, 81 FR 12450, 12452 (April 1, 2019) (IDI De 
Minimis Rulemaking).
    \3\ Id. at 12454 and n.59 (``The Commission believes that end-
users would primarily benefit from the IDI De Minimis Provision by 
entering into [interest rate swaps, or `IRS'], [foreign exchange, or 
`FX'] swaps, and [non-financial commodity, or `NFC'] swaps with IDIs 
to hedge loan-related risks. SDR data indicates that IDIs that have 
between $1 billion and $50 billion in [aggregate gross notional 
amount, or `AGNA'] of swaps activity primarily enter into IRS, FX 
swaps, and NFC swaps, as measured by AGNA and transaction count.
---------------------------------------------------------------------------

    Taken in isolation, asking RCPs to verify the accuracy of data 
reported to SDRs is appealing. But how does the Commission know that 
a substantial portion of that data is actually incorrect? The 
Proposal attempts to depict a data accuracy problem by referencing 
that it is not uncommon for discrepancies to be found in SDR data. 
However, from the universe of reported swap data that contains 
millions of swap transactions and exponentially more messages sent 
to SDRs over the course of the last five years, the Proposal 
mentions only two examples of errors: ``In the processing of swap 
data to generate the CFTC's Weekly Swaps Report, for example, there 
are instances when the notional amount differs between the 
Commission's open swaps information and the swap data reported for 
the same swap. Other common examples of discrepancies include 
incorrect references to an underlying currency, such as a notional 
value incorrectly linked to U.S. dollars instead of Japanese Yen.'' 
\4\ I would expect a much more extensive and egregious list of 
systemic, recurring errors in reported swaps data to warrant the 
expansive new obligations contained in the Proposal.
---------------------------------------------------------------------------

    \4\ Proposal, text accompanying n.239.
---------------------------------------------------------------------------

    The Proposal strains to quantify the number of inaccuracies in 
reported SDR data by opining that, ``[b]ased on swap data available 
to the Commission and discussions with the SDRs, the Commission 
estimates that an SDR would perform an average of approximately 
2,652,000 data corrections per year.'' \5\ The Proposal does not 
explain exactly how this figure was derived, identify the 
interaction between SDRs and RCPs referenced in its corrections 
estimate, indicate whether the ``correction'' refers to incomplete 
or inaccurate data,\6\ or provide critical context as to the 
percentage of messages that this number represents. Indeed, it is 
impossible to know for certain that an RCP was intending to correct 
erroneously reported data based on the data schema utilized by SDRs 
to address changes in swaps data--which include actions such as 
``snapshot,'' ``amendment,'' and

[[Page 21119]]

``modify,'' \7\ but may not actually include a category of 
``correction'' messages.
---------------------------------------------------------------------------

    \5\ Id., at section VII.B.3.v.
    \6\ Incomplete data is not the same things as inaccurate data. 
Thus, ``corrections'' of incomplete data would not be relevant to 
the verification with respect to inaccurate data that is the subject 
of this Proposal.
    \7\ DTCC SDR templates, for instance, include the following 
message and action types. The modify action type allows for the 
valid modification or correction to an existing trade that has 
previously been reported by the submitting party. However, firms 
could reflect a correction using other methods. The snapshot message 
allows participants to report the current state of the swap in their 
portfolio as a ``point-in-time'' view of the position. The reported 
position should reflect all post-trade events and non-position 
forming amendments that the submitter may wish to reflect on their 
trade record. The amendment transaction type could be utilized as an 
indication of a confirmable amendment, via a negotiated agreement, 
to a previously confirmed and reported trade. As a result, it would 
be difficult to conclude with any certainty the actual number of 
corrections without a critical review of contrasting terms related 
to a particular trade on each type of action, message, or 
transaction type submission.
---------------------------------------------------------------------------

    While the Proposal posits the annual number of corrections 
across all SDRs to be about 8 million ``corrections'' (3 
provisionally registered SDRs * 2,652,000 annual data corrections 
per SDR), it lacks the total number of data submissions that are 
received by the SDRs. The Paperwork Reduction Act portion of the 
Proposal does provide one potentially related data point, as it 
includes an estimate of 462,981,508 total annual responses across 
all SDRs for the relevant information collection.\8\ Without the 
benefit of further clarity, the corrections could apply to the 
entire universe of the collections associated with the Proposal. If 
the figures are roughly rounded for the sake of simplicity, and it 
is stipulated for the sake of argument that all the corrections 
cited by the Proposal reveal data inaccuracies, then does this 
suggest that only approximately 2% (400 million responses/8 million 
corrections) of all messages might be inaccurate? In my opinion, the 
burdens that this Proposal would impose on SDRs and RCPs (including 
commercial end users) may be difficult to justify if the problem the 
Commission is attempting to rectify may equate to 2% of all messages 
delivered to SDRs.
---------------------------------------------------------------------------

    \8\ Proposal at section VII.B.3.xi.
---------------------------------------------------------------------------

    I share the view that has been stated by some of my colleagues 
recently that the Commission should strive to make data-driven 
policy determinations and should avoid relying on assumptions or 
anecdotes when engaged in rulemaking activity.\9\ Yet, the same is 
true when it comes to imposing costs and burdens on market 
participants that are already heavily encumbered by a broad swath of 
regulatory obligations that continue to shift and expand. Our recent 
rulemakings have referenced data driven policy making, learning from 
experience with Dodd-Frank implementation, and demonstrating 
supporting evidence for regulatory change, but the verification 
provisions of this Proposal deviate from that approach. The 
Commission should delay this rulemaking until the other aspects of 
the Roadmap critical to improving swaps data reporting and lessening 
unnecessary regulatory burdens were ready to be proposed. But, short 
of that, I welcome public comment and data evaluating the breadth 
and depth of inaccuracies in SDR data.\10\ Such information would 
help to determine how much reported SDR data is actually incorrect 
before the Commission requires SDRs and RCPs to build additional 
systems and undertake significant new compliance burdens and 
obligations to address an accuracy problem that, at this point, has 
not been proved. I look forward to comments and data that 
demonstrate the actual need for the proposed changes.
---------------------------------------------------------------------------

    \9\ See, e.g., IDI De Minimis Rulemaking at 12467 (Statement of 
Chairman J. Christopher Giancarlo) (``As I have said many times 
before, I believe that CFTC policy is best when it is driven by data 
and not assumptions.'').
    \10\ The cost-benefit consideration in the Proposal loosely 
references and mischaracterizes information contained in three 
public studies that allude to challenges in SDR data. Unfortunately, 
these studies are from 2015 or earlier and are based upon data from 
the initial roll-out of SDR reporting. These studies address 
incomplete rather than inaccurate data and do not belong in this 
Proposal that focuses on verification of data. See fn. 6, supra. The 
Roadmap explained that validations should be utilized to reject swap 
data reports with missing data fields, and these issues would be 
better served by a holistic implementation of the Roadmap and do not 
require the onerous verification aspects of the Proposal. 
Furthermore, some of these identified issues also would be resolved 
by the technical specification detailed in the Roadmap and, again, 
if proposed in unison, would provide RCPs with clear definition, 
form and manner, and allowable values. The reference to the third 
study also fails to mention that the two soybean swaps referred to 
were removed from a universe of 39,622 agricultural swaps.
---------------------------------------------------------------------------

II. Insufficient Level of Detail for Appropriate Public Comment and 
Cost-Benefit Consideration

    The Administrative Procedure Act (APA) requires that, in issuing 
its rules, the Commission ``examine the relevant data and articulate 
a satisfactory explanation for its action including a rational 
connection between the facts found and the choices made.'' \11\ 
Section 15(a) of the Commodity Exchange Act (CEA) further requires 
that in doing so, the Commission must consider the costs and 
benefits of its proposed action.\12\ A notice of proposed rulemaking 
affords the Commission the opportunity to gather information and 
build a record that will provide the reasons for the conclusions 
that it ultimately draws when final rules are issued. If the 
Commission fails to properly exercise this responsibility, we risk 
having our rules set aside as arbitrary and capricious agency 
action.\13\
---------------------------------------------------------------------------

    \11\ Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. 
Auto Ins. Co., 463 U.S. 29, 43 (1983).
    \12\ 7 U.S.C. 19(a).
    \13\ See APA, 7 U.S.C. 706(2)(A).
---------------------------------------------------------------------------

    While I support the purposes and intent underlying the Proposal, 
I am concerned that some of the proposed rules are too vague to 
enable the public to provide the Commission with information 
necessary to adopt a sound final rule set. For RCPs, the Proposal 
informs them of their general obligations, but leaves a tremendous 
amount of the details to future action by the Commission (often 
delegated to staff) and the SDRs to dictate the operational work 
flows that RCPs will have to adhere to in order to comply with the 
Commission's rules. RCPs reading the proposed rules still would not 
know what changes are being proposed in what they have to report, 
when they must report by, and how they are to deliver that 
information to SDRs. The proposed rules are often amorphous, lacking 
specificity as to the actual processes and procedures to be imposed, 
with RCPs left to comment without really knowing what much of this 
would actually require of them in the future.
    The same is true for SDRs. For example, proposed Sec.  49.9 
covering open swaps reports to be provided to the Commission is 
quite opaque, and provides no detail as to any potential future 
instructions from the Commission that ``may include, but are not 
limited to, the method, timing, and frequency of transmission as 
well as the format of the swap data to be transmitted.'' Similarly, 
proposed Sec.  49.17(c)(1) would require an SDR to transmit all swap 
data requested by the Commission, but provides that the SDR will 
receive instructions that may include, but are not limited to, the 
method, timing, and frequency of transmission, and the format and 
scope of the SDR data to be transmitted, at a later time.
    How can RCPs and SDRs prepare for, budget, build, test, and 
implement systems to comply with these requirements without ample 
information ahead of time as to what these requirements entail? 
Indeed, it is not clear to me how RCPs and SDRs can even 
meaningfully comment on either the merits or the costs and benefits 
of the proposed rules when these critical elements of the 
requirements are left for future determination.
    But the proposed rule that troubles me most in this regard is 
proposed Sec.  49.13, which addresses an SDR's duty to monitor, 
screen, and analyze data upon the request of the Commission. The 
Proposal explains that in its original consideration of current 
Regulation 49.13,\14\ the Commission received comments that the rule 
does not sufficiently describe the specific tasks that SDRs are 
expected to perform. The Commission decided to later establish 
specific monitoring, screening, and analyzing duties when its 
knowledge was more fully developed, and that is where we find 
ourselves presently. Yet, despite the Commission's experience with 
swaps data over the last five plus years, this Proposal still fails 
to delineate specific duties that would enable an SDR to provide 
appropriate budget, technological development, and staff resources 
to assure an ability to comply with the demands that may be made 
upon it.
---------------------------------------------------------------------------

    \14\ 17 CFR 49.13.
---------------------------------------------------------------------------

    Proposed Sec.  49.13(a)(1) requires SDRs to be prepared to 
comply with Commission requests for monitoring, screening, and 
analyzing of data. Several of the tasks alluded to in the proposal 
rule could impose significant, albeit wholly undefined, obligations 
on SDRs. For example, proposed Sec.  49.13(a)(1)(iv) contemplates 
assessments of risk, which is not particularly an SDR function and 
which can be a very complicated exercise that is defined and 
calculated differently by different market participants. Proposed 
Sec.  49.13(a)(1)(viii) would appear to render SDRs an arm of the 
Commission's enforcement program, as it would require them to 
provide information

[[Page 21120]]

about compliance with Commission regulations without clarifying how 
SDRs could do so, and despite the fact that SDRs are not self-
regulatory organizations.
    Proposed Sec.  49.13(b), in turn, requires SDRs to ``establish 
and at all times maintain sufficient information technology, staff, 
and other resources to fulfill'' these Commission requests. Yet, 
proposed Sec.  49.13(a)(2) provides that the content, scope, and 
frequency of all monitoring, screening, and analyzing requests shall 
be at the discretion of the Commission (to be exercised by staff 
pursuant to delegated authority); further, in addition to the 11 
types of potential Commission requests identified in the proposal, 
SDRs also would have to be prepared to comply with other, 
unspecified, types of requests for monitoring, screening, and 
analyzing as well. How can an SDR be expected to efficiently 
allocate capital and meet the standards of proposed Sec.  49.13(b) 
with respect to information technology, staff, and ``other'' 
(undefined) resources when it does not know what the actual 
requirements will be, when it will be expected to deliver, at what 
frequency, and the exact form and manner of the deliverable?
    Finally, proposed Sec.  49.30 would mandate that ``a swap data 
repository shall submit SDR data reports and any other information 
required under this part to the Commission, within the time 
specified, using the format, coding structure, and electronic data 
transmission procedures approved in writing by the Commission.'' I 
cannot begin to fathom the uncomfortable (and unenviable) position 
of an SDR under rules whereby the Commission can ask for almost 
anything under proposed Sec.  49.13, and then demand its submission 
whenever and however it wishes under proposed Sec.  49.30.
    The Proposal states, somewhat incredibly, that it ``expects 
specifying these topic areas [in proposed Sec.  49.13] would not 
impose substantial new fixed costs on SDRs. . .'' \15\ It is wishful 
thinking to claim that the extensive list of undefined, open-ended 
tasks hypothesized in proposed Sec.  49.13(a)(1) that SDRs must 
prepare to build and deliver will not represent a meaningful burden. 
Although it is not clear how SDRs could quantify the costs of 
compliance with such vague obligations, it is likely that the costs 
incurred by SDRs will be significant--and that their clients, 
including commercial end-users, ultimately will pay the price.
---------------------------------------------------------------------------

    \15\ Proposal at section II.I.
---------------------------------------------------------------------------

    I appreciate that it is not possible to foresee all future 
circumstances when proposing a rulemaking, and I recognize the need 
for flexibility in aspects of the Commission's day-to-day 
administration of the Dodd-Frank swap regulatory regime. 
Nevertheless, I am concerned that the Proposal fails to inform the 
public as to the full nature of the responsibilities that the 
Commission intends to impose upon RCPs and SDRs so that they can 
provide appropriate comment and feedback to drive the best final 
rule outcome possible. I wonder how the Commission can produce a 
complete cost-benefit consideration without specifying the actual 
scope and technical details of the requirements it is proposing to 
impose, particularly with respect to requests to SDRs to be made via 
proposed Sec.  49.13. In sum, I fear that in proposing several rules 
where critical elements are left for future specification (often by 
staff), the Commission will not receive informed and meaningful 
public comments (including comments on costs and benefits) that are 
necessary to provide the foundation on which our rules ultimately 
must rest.

III. Suboptimal Policy Choices

    Certain elements of the Proposal rest on questionable policy 
choices that I wish to highlight in order to garner public input as 
part of the comment process.
    First, the Proposal would remove a longstanding market practice 
of trusted sources when it comes to verification of data accuracy 
without demonstrating why such a change is necessary, or 
appropriate. The Proposal states: ``The Commission provided an 
exception to the requirement that SDRs `confirm with both 
counterparties to the swap the accuracy of the data that was 
submitted' in Sec.  49.11(b)(1)(ii) for swap creation data and Sec.  
49.11(b)(2)(ii) for swap continuation data when swap data is 
received from a [swap execution facility, or `SEF'], [designated 
contract market, or `DCM'], derivatives clearing organization 
(`DCO'), or from a third-party service provider acting on behalf of 
the swap counterparty, under certain conditions.'' \16\ The 
Proposal's departure from this policy means that SDRs would no 
longer be able to rely on an exception from the requirement to 
affirmatively confirm with both counterparties where (1) the SDR 
forms a reasonable belief that the data is accurate, (2) the 
reporting identifies that both counterparties agreed to the data 
submitted, and (3) the SDR provides both counterparties with a 48-
hour correction window.
---------------------------------------------------------------------------

    \16\ Id., text accompanying n.70.
---------------------------------------------------------------------------

    The Proposal argues, without citing any evidence, that, ``based 
on the Commission's experience with swap data submitted by SEFs, 
DCMs, DCOs, and third-party service providers since the rule was 
adopted, the Commission believes that such swap data has not been 
consistently complete and accurate in some instances, and the swap 
data accuracy is not sufficient to justify the exception to the 
requirement that SDRs confirm the reported swap data's accuracy with 
swap counterparties. The current requirements have had a negative 
effect on swap data accuracy and consistency, which has hampered the 
Commission's ability to carry out its regulatory responsibilities.'' 
\17\ I do not believe that trading venues, which value execution 
certainty and must deliver accurate trade details to clients, or 
clearing organizations, which must have verified trade details 
available for risk management purposes, would report systematically 
or consistently inaccurate swaps data to SDRs, given their level of 
technological expertise and concern for reputational risk. At a 
minimum, I would not eliminate the existing exception absent 
evidence establishing that this is the case.
---------------------------------------------------------------------------

    \17\ Id., text immediately following n.73.
---------------------------------------------------------------------------

    Second, the Proposal would mandate in proposed Sec. Sec.  
43.3(e) and 45.14(b) that corrections of errors and omissions be 
performed by SEFs, DCMs, and RCPs ``regardless of the state of the 
swap that is the subject of the swap data.'' The Proposal defines an 
``open swap'' as ``an executed swap transaction that has not reached 
maturity or the final contractual settlement date, and has not been 
exercised, closed out, or terminated.'' Thus, the Proposal is 
requiring additional reporting for ``dead'' swaps without 
demonstrating a relevant use-case to warrant such a requirement.
    It is more difficult for RCPs to correct dead/expired swaps that 
are no longer on their books and records. SDRs also face additional 
challenges and complexity in modifying swaps that are no longer what 
the Proposal defines as an ``open swap.'' The Proposal does not 
identify a Commission or public use-case that justifies the 
increased burden and challenge associated with correcting data on 
dead/expired swaps. The financial crisis that precipitated Dodd-
Frank was not caused by, nor could it have been prevented by, 
regulatory oversight of dead swaps, but rather was the result of 
active risk. Again, absent an identified justification with 
evidentiary support, I do not support imposing additional regulatory 
burdens that force market participants to shift resources from the 
management of active risks to the reporting of dead swaps.
    Third, I would prefer a more sensible approach to the duration 
of the recordkeeping requirements for SDRs. Proposed Sec.  
49.12(b)(2) would require SDR records--including SDR data, 
timestamps, and messages--to be readily accessible following final 
termination of the swap for five years, and then for a period of ten 
additional years in archival storage, which, of course, has an 
associated cost. Unless the Commission can clearly articulate the 
use-case and regulatory purpose that would justify requiring 
archival storage up to 15 years after the expiration of the swap, I 
believe the Commission should consider reducing the recordkeeping 
time frame for SDRs.

IV. Process Foul To Address Only One Aspect of the Complex Swap Data 
Reporting Puzzle

    I also am uncomfortable with the sequencing of this Proposal and 
the rush to publication on a stand-alone basis rather than as part 
of the contemplated overhaul of all the swaps data reporting rules.
    I expressed a similar view about the application of a holistic 
approach to interrelated regulations during last November's Open 
Meeting concerning SEFs when I noted that ``I would prefer that the 
Commission be able to opine on a final SEF rule and a final rule on 
name give-up at the same time. Acting on all aspects impacting SEF 
trading contemporaneously would benefit all entities involved.'' 
\18\ The same principles apply to swap data reporting, as both the 
public and the Commission would benefit from holistically addressing 
the

[[Page 21121]]

entirety of the swap data reporting universe. Unfortunately, the 
Commission continues to propose regulations that are interrelated 
and that would govern the same activity in an inefficient, piecemeal 
manner.
---------------------------------------------------------------------------

    \18\ See Opening Statement of Commissioner Dawn D. Stump before 
the CFTC Open Meeting, November 5, 2018, available at https://www.cftc.gov/PressRoom/SpeechesTestimony/stumpstatement110518.
---------------------------------------------------------------------------

    Swap data reporting is a complex web of interrelated processes 
and systems that must all work in sync in order to generate complete 
and accurate data in a timely and cost effective manner. Many tasks 
in reporting are sequential in nature, and it takes all participants 
in the reporting ecosystem to coordinate and cooperate with a 
complete understanding of all the swap data reporting regulations 
from the Commission. For example, SDRs have to scope out and create 
policies and procedures and build systems/templates for any new 
requirement. RCPs cannot adequately prepare for, much less build and 
test, systems on how to comply until they receive final feedback and 
instructions from the SDR. For this reason, implementing reporting 
changes--which invariably is quite costly to both SDRs and RCPs in 
terms of the expenditure of time, energy, and money--must be 
orchestrated and timed very carefully.
    SDRs and RCPs have previously expressed to the Commission the 
importance of being made aware of anticipated future modifications 
to reporting so that they can understand the expected end-game that 
the Commission has in mind.\19\ Market participants also have 
commented on the need to understand the entire policy idea and all 
the associated pieces before committing time and energy to provide 
the Commission with meaningful comments and input.\20\
---------------------------------------------------------------------------

    \19\ In late 2015, CFTC staff issued a request for comment on 
draft technical specifications for certain prioritized swap data 
elements and sought input on 80 enumerated questions addressing 120 
data elements for several swap data reporting topics. See Draft 
Technical Specifications for Certain Swap Data Elements (December 
22, 2015), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@newsroom/documents/file/specificationsswapdata122215.pdf and https://www.cftc.gov/PressRoom/PressReleases/pr7298-15. In responding to staff's request for 
comment, SIFMA stated that it ``view[s] the Draft Technical 
Specifications as one component of a broader initiative to enhance 
swap data reporting'' and that the ``interrelationships among the 
Draft Technical Specifications and these other workstreams, as well 
as their shared dependencies on the same technology and human 
resources, necessitate a well-planned and sequenced approach to 
enhancing swap data reporting requirements. Prioritizing among the 
various enhancements under consideration will help to avoid 
inadvertent inconsistencies and associated potential for erroneous 
data and unnecessary infrastructure costs.'' Letter from Kyle 
Brandon, SIFMA, at 2 (March 7, 2016), available at https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=60702&SearchText=.
    \20\ SIFMA and ISDA jointly commented on the swaps data Roadmap 
and suggested that the Commission align the anticipated timeframes 
for swaps data reporting changes: ``[G]iven the interconnection 
between SDR functions and the counterparties' reporting workflows, 
we believe that any proposed rule amendments and final rules 
associated with Tranche 1 and Tranche 2 should be issued at the same 
time.'' Their letter then went on to comment: ``Alternatively, 
should the Commission decide to publish the proposed rule amendments 
to the SDR rules first in Tranche 1, then we recommend that the 
public comment period for this release remain open for at least 90 
days following publication of the proposed rule amendments to the 
reporting workflow rules in Tranche 2. This extended comment period 
would provide market participants with a comprehensive and holistic 
understanding of whether the two proposals achieve the desired 
policy outcomes and account for operational costs and possible 
additional builds to comply with a modified reporting regime.'' 
Letter from Steven Kennedy, ISDA, and Kyle Brandon, SIFMA, at 3-4 
(August 21, 2017) (footnote omitted), available at https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=61288&SearchText=.
---------------------------------------------------------------------------

    I appreciate that the Proposal states that ``[w]hen the 
Commission proposes the next two rulemakings, the Commission 
anticipates re-opening the comment period for this proposal to 
provide market participants with an opportunity to comment 
collectively on the three rulemakings together, because the 
proposals address interconnected issues.'' \21\ But I do not see the 
benefit of proceeding in such an inefficient manner. Issuing the 
Proposal now does provide notice of the Commission's intentions with 
respect to one piece of the swaps data Roadmap, but no notice of 
what else from the Roadmap might come to pass. Such ``partial 
notice'' does not enable parties to evaluate, and comment upon, the 
full picture of their new compliance obligations, including their 
costs and burdens.\22\ Under these circumstances, I would not be 
surprised if market participants simply waited for all of the 
reporting rules to be proposed before providing feedback to the 
Commission on the whole of what is being proposed.
---------------------------------------------------------------------------

    \21\ Proposal, text immediately following n.23.
    \22\ The Commission's disjointed delivery of proposed changes to 
its swap data reporting rules also raises questions as to its 
consideration of relevant costs and benefits. Cost-benefit 
considerations, by their very nature, must evaluate the proposed 
changes in comparison to the status quo--including the present state 
of other relevant regulations. As a result, the cost-benefit portion 
of the Proposal could be deemed obsolete to the extent it does not 
incorporate any of the modifications to other swap data reporting 
requirements in parts 43 and 45 of the Commission's regulations that 
the Commission intends to propose and act upon. The failure to 
propose all the swaps data reporting rule amendments in unison would 
seem to necessitate a refresh of the accompanying cost-benefit 
portion of this Proposal, and further public comment.
---------------------------------------------------------------------------

    In addition, if, as the Proposal suggests, there actually is a 
significant problem with inaccurate swap data being reported to 
SDRs, the piecemeal issuance of these rulemakings makes it more 
difficult for the Commission to evaluate whether that problem can be 
rectified by allowing other facets of the swaps data Roadmap to gain 
traction. Query whether the Commission generating a technical 
specification removing uncertainty as to what must be reported and 
how, harmonizing with other regulators and implementing unique 
identifiers (Unique Transaction Identifiers and Unique Product 
Identifiers) and critical data elements from CPMI-IOSCO work 
streams, minimizing the number of fields required to be reported, 
and affording RCPs more time to report would organically resolve a 
large proportion of any inaccurate data reporting problem that may 
exist. The manner in which the Commission has elected to proceed 
will make it challenging for SDRs and RCPs to comment appropriately 
on these questions, and I fear will place the Commission in a 
predicament as it attempts to make informed policy decisions on how 
best to proceed.

V. Lack of Harmonization With the SEC

    Market participants of all shapes-and-sizes--even those that are 
often on opposing sides of most regulatory debates--all agree on a 
common theme that has been repeatedly urged upon the Commission via 
every imaginable medium since the enactment of Dodd-Frank: The 
Commission and the Securities and Exchange Commission (SEC) should 
coordinate and harmonize their respective derivatives regulations to 
the maximum extent possible, and especially concerning entities that 
have already incurred systems and compliance costs in connection 
with the corresponding requirements of the related agency. All types 
of market participants have implored both the Commission and the SEC 
to minimize compliance burdens on potential dual registrants in 
connection with the derivatives rules, such as swap data reporting. 
And yet, notwithstanding the current emphasis on CFTC-SEC 
harmonization,\23\ the Commission is proposing a swap data reporting 
rule that appears to take an approach that is the opposite of, and 
in direct contrast to, the SEC's thinking on the same issue.
---------------------------------------------------------------------------

    \23\ See, e.g., Memorandum of Understanding Between the U.S. 
Securities and Exchange Commission and the U.S. Commodity Futures 
Trading Commission Regarding Coordination in Areas of Common 
Regulatory Interest and Information Sharing (July 11, 2018) 
(specifically addressing the regulatory regime for swaps and 
security-based swaps), available at https://www.cftc.gov/sites/default/files/2018-07/CFTC_MOU_InformationSharing062818.pdf and 
https://www.cftc.gov/PressRoom/PressReleases/7745-18.
---------------------------------------------------------------------------

    The SEC published a proposed rulemaking in December 2018 \24\ 
that specifically discusses, among other things, verification of the 
terms of reported security-based swaps--as does the Proposal. Yet, 
while the Proposal would increase regulatory burdens on all entities 
in its amended regulatory reporting scheme, the SEC is considering a 
more pragmatic approach. The SEC, in its proposal, ``believes it to 
be an appropriate time to revisit and request comment on an issue 
previously identified in connection with the rules . . . [that] 
require[] each registered SDR to `confirm with both counterparties 
to the security-based swap the accuracy of the data that was 
submitted.' '' \25\
---------------------------------------------------------------------------

    \24\ Risk Mitigation Techniques for Uncleared Security-Based 
Swaps, 84 FR 4614 (February 15, 2019) (proposed rules).
    \25\ Id. at 4633-4634 (footnote omitted).
---------------------------------------------------------------------------

    Specifically, the SEC in its proposal states that ``SDRs may be 
able to reasonably rely on certain third parties to address the 
accuracy of the transaction data. For example, the Commission 
previously stated that if an SDR develops reasonable policies and 
procedures that rely on confirmations completed by another entity, 
such as a third-party confirmation provider, as long as such 
reliance is reasonable the SDR could use such confirmation to 
fulfill its obligations under certain SDR rules. Because the two

[[Page 21122]]

relevant provisions that we are proposing today generally relate to 
the obligation of [Security-Based Swap, or `SBS'] Entities to take 
certain steps in the reconciliation and documentation processes 
related specifically to the reporting of the relevant security-based 
swap data to an SDR . . . the Commission believes that . . . these 
measures, taken together, could provide an SDR with a set of factors 
to assess the reasonableness of relying on an SBS Entity's ability 
to independently provide the definitive report of a given security-
based swap position, thereby providing a basis for the SDR to 
satisfy its statutory and regulatory obligations to verify the 
accuracy of the reported data when the SBS Entity's counterparty is 
not a member of the SDR.'' \26\
---------------------------------------------------------------------------

    \26\ Id. at 4634 (footnotes omitted).
---------------------------------------------------------------------------

    In other words, the SEC is considering whether the 
reconciliation process undertaken by security-based swap dealers of 
their swaps portfolios could satisfy the statutory obligation to 
confirm the accuracy of data reported to SDRs. This sensible 
approach being considered demonstrates deference to trusted sources 
for swap data accuracy when a third-party service provider is 
employed to address the confirmation of swaps data, similar to the 
exceptions in Regulations 49.11(b)(1)(ii) and 49.11(b)(2)(ii) that 
the Proposal would eliminate.
    As discussed more fully in Section VI below, based on the 
Commission's reporting hierarchy in Regulation 45.8,\27\ swap 
dealers (SDs) are the RCP and transmit required swap data elements 
to an SDR for the vast preponderance of swap transactions. These 
same SDs are already subject to another regulatory obligation 
relating to verification of the terms of their swap transactions, as 
they must conduct a portfolio reconciliation exercise on a regularly 
recurring basis via Regulation 23.502.\28\ Portfolio reconciliation 
forces the ``[e]xchange [of] the material terms of all swaps in the 
swap portfolio between the counterparties'' and requires the parties 
to ``[r]esolve any discrepancy in material terms and valuations.'' 
\29\ Since SDs already must check the accuracy of their portfolios 
through a reconciliation exercise, and since SDs report almost all 
swaps, then the Commission, like the SEC, should consider leveraging 
this existing process and afford SDs that undertake such an exercise 
enough time for it to run its course and then submit that same 
accurate and verified data set for SDR reporting purposes. 
Leveraging this existing regulatory process, rather than creating 
yet another process that compliance officers and operations staff 
must adhere to, may offer a ``good government'' solution, assuming 
the existence of a systemic problem with SDR data accuracy. If SDs 
represent that the same data reconciled with counterparties per Rule 
23.502 is reported to SDRs, then the Commission might not need to 
impose the burdensome new requirements set out in the Proposal.
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    \27\ 17 CFR 45.8.
    \28\ 17 CFR 23.502.
    \29\ 17 CFR 23.500(i)(1), (3).
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    It is unfortunate that the Commission did not propose--or even 
request comment on--the less burdensome approach to verification 
that the SEC is considering in light of our stated commitment to 
harmonizing the agencies' derivatives rules. And it is even more 
mystifying to me why we are proposing these rule amendments in the 
inefficient, piecemeal manner described above when delaying the 
issuance of this Proposal would not only enable us to issue the 
various proposed amendments to our swap data reporting rules as a 
unified package, but also to learn from comments on the SEC's data 
verification discussion (the comment period closed on April 16) 
whether the SEC may have identified a better option for fostering 
accurate reported swaps data.

VI. Outsized Burden Placed Upon SDRs and RCPs, Including End-Users

    Swap market participants have repeatedly emphasized to the 
Commission that the swap data reporting rules are overly 
complicated, difficult to implement, and a significant operational 
burden and compliance challenge for all concerned, including end-
users.\30\ Yet, the Proposal would add more layers of complexity to 
reporting workflows, and require SDRs and RCPs to commit more time 
and money to submit more reports and undertake additional 
obligations.
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    \30\ In responding to staff's request for comment on the Draft 
Technical Specifications, see fn. 19, supra, ISDA stated: 
``End[hyphen]users which either have reporting obligations or which 
would be compelled to provide data to the reporting counterparty 
necessitated by the proposed fields would be particularly burdened 
by the requirements and many will lack the technological capability 
to capture, transform and report or provide data as required. The 
small to mid[hyphen]sized commodity producers, processors, merchants 
and other end[hyphen]users that use swaps to mitigate commodity, 
interest rates, foreign exchange or other price risks will require 
additional technology, compliance and legal support in order to 
accommodate additional reporting requirements. This will impose 
significant, unjustified costs to end-users . . . . ISDA, on behalf 
of commercial end[hyphen]users, requests the CFTC to avoid imposing 
changes and additional reporting requirements on end[hyphen]users by 
maintaining their obligations under the current Reporting 
Regulations to the greatest extent possible.'' Letter from Tara 
Kruse, ISDA, at 7-8 (March 7, 2016), available at https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=60713&SearchText=. ISDA continued to advocate 
against placing additional burdens on end-users through its joint 
comment letter with SIFMA to the Swap Data Roadmap and suggested the 
Commission ``should not require non-reporting counterparties, end-
users, and smaller firms to perform reconciliations because these 
entities generally do not have the resources to effectively validate 
their swap transactions.'' See fn. 20, supra, at 6.
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    In particular, the Commission has heard from many end-users 
about the immense nature of their reporting burdens, how regulatory 
capture on end-users has impacted their business models and their 
ability to hedge via derivatives markets, and the unintended 
consequences of the initial implementation of the Dodd-Frank swap 
reporting regime. In response, the Commission, commendably, has made 
considerable progress in addressing reporting issues and limiting 
burdens on end-users via the various tools at our disposal when 
consistent with our regulatory responsibilities. It is not clear to 
me why this Proposal would break from those efforts and go in the 
opposite direction by placing new and burdensome swap data reporting 
obligations on end-users.
    End-user RCPs would bear several onerous obligations under this 
Proposal. End-user RCPs would have to commit considerable resources 
to create more sophisticated and elaborate reporting systems in 
order to be compliant. The Proposal estimates that 1,585 RCPs are 
neither SDs, major swap participants (MSPs), nor DCOs.\31\ As a 
result of the Proposal, all of these end-user RCPs would have to 
acquire or build additional processes and hire more staff to comply 
with these new reporting regulations, regardless of the number, 
notional amount, asset class, or risk profile of the swaps for which 
they are the RCP. To provide some perspective, staff has indicated 
that of new transactions in January 2019, trades with at least one 
SD counterparty (which would serve as the RCP) per asset class 
represented 99.6183% of the 22,446 CDS trades; 98.2466% of the 
137,499 IRS trades; 97.0540% of the 603,696 FX trades; 99.9998% of 
the 471,657 Equity trades; and 85.3056% of the 60,021 Commodity 
trades. In other words, the 1,585 RCPs that are not SDs, MSPs, or 
DCOs reported, at most, 86 CDS, 2,454 IRS, 18,325 FX, 1 Equity, and 
10,339 Commodity swaps during this time period. Given the limited 
number of swaps for which end-users are RCPs compared to the overall 
swaps market, I question whether imposing on all end-users that may 
serve as an RCP the additional burdens of preparing for compliance 
with the requirements of this Proposal reflects an appropriate 
consideration of costs and benefits.
---------------------------------------------------------------------------

    \31\ Proposal, text accompanying n.226.
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    The Commission has made strides post the initial roll-out of its 
Dodd-Frank rulemakings to fix unintended consequences of its swap 
data reporting rules and minimize the burdens on end-users where 
appropriate. This Proposal, unfortunately, errs in the other 
direction. I welcome suggestions via the public comment process on 
the appropriate role for end-user RCPs to play in assuring the 
accuracy of reported swap data short of imposing the burdens set out 
in the Proposal.

VII. Alternate Approaches for Further Consideration

    To be clear, my concern with the Proposal is not simply that it 
would impose costs on market participants; all necessary regulatory 
requirements do so. Rather, my concern is with the extent of the 
burdens that the Proposal would impose on market participants, 
including end-users, in light of the prospects that the Proposal 
will meaningfully improve the quality of reported swap data. As 
discussed above, the Proposal does not establish that there actually 
is a systemic problem in that regard. But assuming that to be the 
case, consider the following fact pattern and whether any errors 
would be found and rectified under the Proposal:
     RCP submits data to an SDR from its regulatory 
reporting databases;
     SDR creates Open Swaps reports based upon the data 
received;

[[Page 21123]]

     SDR provides a mechanism for the RCP to verify the 
accuracy of the Open Swaps report; and
     RCP checks the Open Swaps report against the data that 
it submitted to the SDR.
    In other words, if the original data set utilized by the RCP 
contains an inaccuracy, the Proposal could simply impose a futile 
exercise based on circular logic. The end result of the new burdens 
placed upon RCPs and SDRs would merely be a false positive in this 
scenario. If the RCP's data is inaccurate in the first place, then 
the Proposal would be successful only in making swap data reporting 
more complicated and expensive, without actually improving the 
accuracy of the data reported to the SDR.\32\
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    \32\ To be sure, the Proposal might identify situations in which 
the SDR inexplicably alters the data that it receives from an RCP. 
But current Regulation 49.10(c), 17 CFR 49.10(c), already prohibits 
such activity since an SDR ``shall establish policies and procedures 
reasonably designed to prevent any provision in a valid swap from 
being invalidated or modified through the confirmation or recording 
process of the swap data repository. The policies and procedures 
must ensure that the swap data repository's user agreements are 
designed to prevent any such invalidation or modification.''
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    Accurately reported swap data is, of course, crucial to the 
Commission's performance of its regulatory responsibilities and the 
effective operation of the Dodd-Frank swap regime. That is why I am 
concurring in the issuance of the Proposal--because I support the 
Commission's efforts to determine whether appropriate improvements 
can be made to its swap data reporting rule set.
    This Proposal provides an opportunity for the public to suggest 
other, perhaps better, solutions to more efficiently produce the 
desired outcome of accurate swap data for purposes of conducting the 
Commission's work, facilitating risk oversight and management, and 
fostering robust swaps markets. I strongly encourage SDRs, SDs, 
DCOs, end-users, and the public in general to take advantage of this 
opportunity and provide not only feedback on the Proposal, but also 
their ideas on how to appropriately balance the need for accurately 
reported swap data with the costs and burdens associated with 
obtaining it. The Commission should consider any alternate 
approaches that can satisfy the policy goal of improving the quality 
of SDR data while limiting the impact on market participants already 
saturated with complex and repetitive reporting obligations.
    I would like to offer, and invite comment on, a few alternatives 
with respect to RCPs. CEA Section 21(c)(2) provides that SDRs shall 
``confirm with both counterparties to the swap the accuracy of the 
data that was submitted.'' \33\ As a result, a clear obligation 
exists as to what SDRs must do. The statute is less clear on what 
RCPs must do, if anything.
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    \33\ 7 U.S.C. 24a(c)(2).
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    Under the Commission's current regulations, all RCPs must submit 
hundreds of fields per transaction to their respective SDRs. Some 
RCPs have thousands of open swaps that would be captured under this 
Proposal and require recurring verification. I hope that commenters 
will address whether a smaller number of swaps and/or a limited 
subset of essential fields that must be verified would enable the 
Commission to conduct its regulatory functions without 
indiscriminately requiring verification of all swap data elements.
    Another option on which public comment would be helpful is 
requiring RCPs to verify only the accuracy of a statistically 
significant portion of their Open Swaps report and then decide, 
based on the level of accuracy, whether the entirety of Open Swaps 
must be analyzed. Still another option might be to require 
verification of only a limited set of the most important fields 
required to understand the basic terms of plain-vanilla swap 
transactions. Finally, commenters could address a possible de 
minimis level that must be exceeded before the new reporting 
obligations in this Proposal would apply. For example, if an RCP has 
less than X swaps per year, or less than Y notional transacted per 
year, then it would not have to perform these verification 
functions.
    With respect to end-user RCPs in particular, where the ability 
to build reporting systems and the cost of doing so on a per swap 
basis is much different than for SDs, MSPs, and DCOs, comment would 
be beneficial on whether end-user RCPs should have more time than 
proposed, both for replying to Open Swaps reports with a 
``verification'' or ``notification of discrepancy'' message and 
correcting errors and omissions. Also, commenters may wish to 
address the frequency of how often end-user RCPs should be required 
to participate in this labor-intensive process. I recognize that the 
Proposal includes less stringent obligations on end-user RCPs in 
comparison to SDs, MSPs, and DCOs that are RCPs, but I welcome 
comment on whether the Commission should strive to do more in this 
regard.
    As written, the Proposal would impose a number of new, often 
undefined, obligations with respect to swap data reporting. The 
potential alternatives noted above, together with others that 
commenters may suggest, could represent a common sense approach to 
addressing concerns regarding swap data accuracy while appropriately 
calibrating the costs and burdens associated with verification of 
SDR data.

Appendix 5--Statement of Commissioner Dan. M. Berkovitz

    I am pleased to support the Commission's notice of proposed 
rulemaking (``NPRM'') to amend its rules for swap data repositories 
(``SDRs'') and data reporting requirements.\1\ The proposed 
amendments reflect the Commission's commitment to accurate, 
detailed, and timely swaps data for regulators, market participants, 
and the public through enhanced data verification and error 
correction procedures, among other amendments. They are an important 
step in achieving the Dodd-Frank Act's mandate of swap data 
reporting as an integral part of OTC derivatives reform and 
financial market stability. \2\
---------------------------------------------------------------------------

    \1\ The NPRM notes that it is the first of three rulemakings 
anticipated pursuant to the Commission's 2017 ``Roadmap to Achieve 
High Quality Swaps Data'' (``Roadmap''). See NPRM section I(C). 
Information regarding the Roadmap is available in CFTC Letter 17-33 
(Division of Market Oversight Announces Review of Swap Reporting 
Rules in Parts 43, 45, and 49 of Commission Regulations) (July 10, 
2017), available at https://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-33.pdf. The Roadmap itself is 
available at https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/dmo_swapdataplan071017.pdf.
    \2\ See also G20, Leaders' Statement: The Pittsburgh Summit 
(Sept. 24-25, 2009), paragraph 13, available at https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf.
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    The Dodd-Frank Act codified important new swap data reporting 
obligations, \3\ and established SDRs as the vehicles for reporting 
and retaining swaps data. \4\ It recognized the role of regulatory 
reporting and real-time public reporting in enhancing transparency 
and reducing systemic risk in the U.S. financial system. Consistent 
with these foundational principles, the Commission has focused on 
swap data reporting since the very inception of its Dodd-Frank 
efforts. In 2011, it began finalizing a series of coordinated 
reporting rules that provide for both regulatory and real-time 
public reporting of swap transaction and pricing data (Parts 45 and 
43); \5\ establish SDRs to receive data and make it available to 
regulators and the public (Part 49); \6\ and define certain swap 
dealer and major swap participant reporting obligations (Part 23). 
\7\
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    \3\ See Dodd-Frank Wall Street Reform and Consumer Protection 
Act, section 727, Public Law 111-203, 124 Stat. 1376 (2010) (the 
``Dodd-Frank Act''), available at https://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf.
    \4\ See Dodd-Frank Act, section 728.
    \5\ Swap Data Recordkeeping and Reporting Requirements, 77 FR 
2136 (Jan. 13, 2012) (``Part 45 Adopting Release'') and Real-Time 
Public Reporting of Swap Transaction Data, 77 FR 1182 (``Part 43 
Adopting Release'').
    \6\ Swap Data Repositories: Registration Standards, Duties and 
Core Principles, 76 FR 54538 (Sept. 1, 2011).
    \7\ Swap Dealer and Major Swap Participant Recordkeeping, 
Reporting, and Duties Rules; Futures Commission Merchant and 
Introducing Broker Conflicts of Interest Rules; and Chief Compliance 
Officer Rules for Swap Dealers, Major Swap Participants, and Futures 
Commission Merchants, 77 FR 20128 (Apr. 3, 2012).
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    The Commission's regulations leverage real-time public reporting 
to help increase transparency, fairness, and efficiency in swaps 
markets, \8\ while regulatory reporting assists the Commission and 
other financial regulators in market oversight and systemic risk 
mitigation. \9\ In this regard, SDRs provide a more consolidated 
view \10\ of market

[[Page 21124]]

participants' exposures across their swaps portfolios, and can help 
to identify concentrations and other potential risks that are 
dispersed across individual portfolios, trading platforms, and 
clearinghouses. Accurate, complete, and timely information is 
therefore vital to any successful swaps data reporting regime. These 
objectives were central to post-crisis reform efforts, and they must 
remain the primary considerations as the Commission moves to enhance 
its reporting rules.
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    \8\ See Part 43 Adopting Release, 77 FR 1182, 1183.
    \9\ See Part 45 Adopting Release, 77 FR 2136, 2138.
    \10\ However, in a jurisdiction with multiple SDRs, such as the 
United States, regulators' view into market participants' swap 
positions is not fully consolidated. The presence of different SDRs 
in jurisdictions across the globe also impinges on full 
consolidation. These limitations give added import to standardizing 
data reporting, data fields, and regulators' access to data. 
Aggregation by regulators in a jurisdiction with multiple SDRs, for 
example, is greatly facilitated by agreed reporting conventions.
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    It is important to note that the existing reporting rules have 
already achieved important successes. Currently, three provisionally 
registered SDRs \11\ facilitate regulatory reporting and real-time 
public reporting, and CFTC staff estimates that SDRs processed 
approximately 13 million unique swaps in 2018. SDRs provide online 
systems where any member of the public can track transaction-by-
transaction information as swaps are executed and publicly reported. 
SDRs have also designed portals and other resources to provide CFTC 
staff with more complete regulatory access.
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    \11\ Chicago Mercantile Exchange Inc. Swap Data Repository; DTCC 
Data Repository (U.S.); and ICE Trade Vault.
---------------------------------------------------------------------------

    While building on this solid foundation, the NPRM and the 
proposed amendments acknowledge areas where the Commission's 
existing swap data reporting rules are not working as effectively as 
they might. Registered swap dealers began reporting swap data on 
December 31, 2012, and the proposed amendments are therefore based 
on over six years of Commission experience with SDRs and swap data 
reporting. In this regard, the NPRM addresses several areas that the 
Commission identified for improvement in its 2017 Roadmap. For 
example, the NPRM addresses swap data verification and the prompt 
correction of errors or omissions in previously reported data. It 
proposes to clarify and strengthen the obligations of SDRs and 
reporting counterparties by requiring SDRs to provide reporting 
counterparties with regular reports on open swaps to ``verify the 
accuracy and completeness of swap data reported to SDRs.'' \12\ In 
turn, reporting counterparties must respond affirmatively by 
indicating that the records in the reports they receive are 
accurate, or otherwise correcting any errors or omissions.\13\ 
Reporting counterparties must respond within timeframes specified in 
the NPRM, and they must do so pursuant to standards established by 
SDRs.
---------------------------------------------------------------------------

    \12\ See NPRM section II(G) (discussing proposed section 49.11).
    \13\ See NPRM section III(B) (discussing proposed section 
45.14).
---------------------------------------------------------------------------

    The NPRM also proposes that SDRs provide open swap reports to 
the Commission. SDRs must provide such reports pursuant to timing, 
method, frequency, content, and other instructions that the 
Commission may issue.\14\ While working with SDRs, open swaps 
reports will help the Commission to perform its regulatory functions 
more effectively and efficiently through reports that SDRs 
standardize in content, format, calculation methods, and other 
variables.
---------------------------------------------------------------------------

    \14\ See NRPM section II(E) (discussing proposed section 49.9).
---------------------------------------------------------------------------

    In addition to these important data-focused amendments, the NPRM 
also proposes amendments to rules in Part 49 of the Commission's 
regulations that govern the internal operations of SDRs, 
particularly as they pertain to an SDR's chief compliance officer 
(``CCO''), conflicts of interest, and annual compliance reports. I 
am interested in receiving comments regarding these proposed 
amendments, including areas where the Commission's existing CCO-
related rules for SDRs are working well and where they could be 
improved. In this regard, the Commission should be vigilant that 
changes to compliance or other requirements made in the name of 
efficiency do not diminish the self-regulatory foundation of the 
Commission's oversight of derivatives markets.
    I thank the staff of the Division of Market Oversight for their 
dedicated work on both this NPRM and potential future proposals 
related to swaps data reporting. I also thank staff for their 
responsiveness to questions and comments from my office, including 
their willingness to consider changes that have improved the NPRM 
before the Commission today. While swap data reporting is not always 
the most glamorous area of the Commission's work, it is vitally 
important that we get it right. I look forward to public comments on 
the NPRM, and to continued efforts by market participants and the 
Commission to achieve the most effective swap data reporting 
possible.

[FR Doc. 2019-08788 Filed 5-10-19; 8:45 am]
 BILLING CODE 6351-01-P

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