Security-Based Swap Data Repositories; DTCC Data Repository (U.S.), LLC; Notice of Filing of Application for Registration as a Security-Based Swap Data Repository, 8977-8982 [2021-02755]
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Federal Register / Vol. 86, No. 26 / Wednesday, February 10, 2021 / Notices
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2021–005 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2021–005. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
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submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2021–005, and
should be submitted on or before March
3, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02711 Filed 2–9–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91071; File No. SBSDR–
2020–01]
Security-Based Swap Data
Repositories; DTCC Data Repository
(U.S.), LLC; Notice of Filing of
Application for Registration as a
Security-Based Swap Data Repository
February 5, 2021.
I. Introduction
On December 22, 2020, DTCC Data
Repository (U.S.), LLC (‘‘DDR’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) an
application on Form SDR to register as
a security-based swap data repository
(‘‘SDR’’) pursuant to Section 13(n)(1) of
the Securities Exchange Act of 1934
(‘‘Exchange Act’’) and 17 CFR 240.13n–
1 (‘‘Rule 13n–1’’) thereunder,1 and as a
securities information processor (‘‘SIP’’)
under Section 11A(b) of the Exchange
Act.2 DDR intends to operate as a
registered SDR for security-based swap
(‘‘SBS’’) transactions in the equity,
credit, and interest rate derivatives asset
classes.3 The Commission is publishing
this notice to solicit comments from
interested persons regarding DDR’s
22 17
CFR 200.30–3(a)(12).
U.S.C. 78m(n)(1); 17 CFR 240.13n–1. A copy
of DDR’s application on Form SDR and nonconfidential exhibits thereto are available for public
viewing on the Commission’s website. In 2016, DDR
submitted a prior application for registration as an
SDR. See Release No. 34–78216 (June 30, 2016), 81
FR 44379 (July 7, 2016); Release No. 34–81302
(Aug. 3, 2017), 82 FR 37276 (Aug. 9, 2017). DDR
withdrew this prior application in 2018. See Letter
from Chris Childs, Managing Director, DDR, Mar.
27, 2018, https://www.sec.gov/divisions/marketreg/
sdr/dtcc-sdr-application-withdrawal-letter032718.pdf.
2 15 U.S.C. 78k–1(b).
3 DDR has included the interest rate asset class in
its application based on feedback from potential
users of its SDR services. The potential users have
identified certain types of transactions that will be
reported through DDR’s infrastructure for interest
rate derivatives as falling within the Exchange Act
definition of an SBS transaction.
1 15
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8977
application,4 and the Commission will
consider any comments it receives in
making its determination whether to
approve DDR’s application for
registration as an SDR and as a SIP.
II. Background
A. SDR Registration, Duties, and Core
Principles
Section 13(n) of the Exchange Act
makes it unlawful for any person, unless
registered with the Commission,
directly or indirectly, to make use of the
mails or any means or instrumentality of
interstate commerce to perform the
functions of an SDR.5 To be registered
and maintain registration, an SDR must
comply with certain requirements and
core principles described in Section
13(n), as well as any requirements that
the Commission may impose by rule or
regulation.6 In 2015, the Commission
adopted 17 CFR 240.13n–1 to 13n–12
under the Exchange Act to establish
Form SDR, the procedures for
registration as an SDR, and the duties
and core principles applicable to an
SDR (‘‘SDR Rules’’).7 The Commission
provided a temporary exemption from
compliance with the SDR Rules and also
extended exemptions from the
provisions of the Dodd-Frank Act set
forth in a Commission order providing
temporary exemptions and other
temporary relief from compliance with
certain provisions of the Exchange Act
concerning security-based swaps, and
these temporary exemptions expired in
2017.8
The Commission also has adopted 17
CFR 242.900 to 909 under the Exchange
Act (collectively, ‘‘Regulation SBSR’’),
which governs regulatory reporting and
public dissemination of security-based
swap transactions.9 Among other things,
Regulation SBSR requires each
registered SDR to register with the
Commission as a SIP,10 and the Form
SDR constitutes an application for
4 The descriptions set forth in this notice
regarding the structure and operations of DDR have
been derived, excerpted, or summarized from DDR’s
application on Form SDR.
5 15 U.S.C. 78m(n).
6 Id.
7 See Release No. 34–74246 (Feb. 11, 2015), 80 FR
14438, 14438 (Mar. 19, 2015) (‘‘SDR Adopting
Release’’). In 2016, the Commission subsequently
amended 17 CFR 240. 13n–4 to address third-party
regulatory access to SBS data obtained by an SDR.
See Release No. 34–78716 (Aug. 29, 2016), 81 FR
60585 (Sep. 2, 2016).
8 See Release No. 34–80359 (Mar. 31, 2017), 82 FR
16867 (Apr. 6, 2017).
9 Release No. 34–74244 (Feb. 11, 2015), 80 FR
14563 (Mar. 19, 2015); Release No. 34–78321 (July
14, 2016), 81 FR 53546 (Aug. 12, 2016). Regulation
SBSR and the SDR Rules are referred to collectively
as the ‘‘SBS Reporting Rules.’’
10 See 17 CFR 242.909.
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registration as a SIP, as well as an
SDR.11
In 2019, the Commission stated that
implementation of the SBS Reporting
Rules can and should be done in a
manner that carries out the fundamental
policy goals of the SBS Reporting Rules
while minimizing burdens as much as
practicable.12 Noting ongoing concerns
among market participants about
incurring unnecessary burdens and the
Commission’s efforts to promote
harmonization between the SBS
Reporting Rules and swap reporting
rules, the Commission took the position
that, for four years following Regulation
SBSR’s Compliance Date 1 in each asset
class,13 certain actions with respect to
the SBS Reporting Rules would not
provide a basis for a Commission
enforcement action.14 The no-action
statement’s relevance to DDR’s
application for registration as an SDR
and SIP is discussed further below.
B. Standard for Registration
As noted above, to be registered with
the Commission as an SDR and
maintain such registration, an SDR is
required to comply with the
requirements and core principles
described in Section 13(n) of the
Exchange Act, as well as with any
requirement that the Commission may
impose by rule or regulation.15 In
addition, Rule 13n–1(c)(3) under the
Exchange Act provides that the
Commission shall grant the registration
of an SDR if it finds that the SDR is so
organized, and has the capacity, to be
able to: (i) Assure the prompt, accurate,
and reliable performance of its functions
as an SDR; (ii) comply with any
applicable provisions of the securities
laws and the rules and regulations
thereunder; and (iii) carry out its
functions in a manner consistent with
the purposes of Section 13(n) of the
Exchange Act and the rules and
regulations thereunder.16 The
Commission shall deny the registration
11 See
Form SDR, Instruction 2.
No. 34–87780 (Dec. 18, 2019), 85 FR
6270, 6347 (Feb. 4, 2020) (‘‘ANE Adopting
Release’’).
13 See id. Under Regulation SBSR, the first
compliance date (‘‘Compliance Date 1’’) for affected
persons with respect to an SBS asset class is the
first Monday that is the later of: (i) Six months after
the date on which the first SDR that can accept
transaction reports in that asset class registers with
the Commission; or (ii) one month after the
compliance date for registration of SBS dealers and
major SBS participants (‘‘SBS entities’’). Id. at 6346.
The compliance date for registration of SBS entities
is October 6, 2021. See id. at 6270, 6345.
14 See id. The specific rule provisions of the SBS
Reporting Rules affected by the no-action statement
are discussed in Part II.B.
15 See 15 U.S.C. 78m(n)(3).
16 17 CFR 240.13n–1(c)(3).
12 Release
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of an SDR if it does not make any such
finding.17 Similarly, to be registered
with the Commission as a SIP, the
Commission must find that such
applicant is so organized, and has the
capacity, to be able to assure the
prompt, accurate, and reliable
performance of its functions as a SIP,
comply with the provisions of the
Exchange Act and the rules and
regulations thereunder, carry out its
functions in a manner consistent with
the purposes of the Exchange Act, and,
insofar as it is acting as an exclusive
processor, operate fairly and
efficiently.18
In determining whether an applicant
meets the criteria set forth in Rule 13n–
1(c), the Commission will consider the
information reflected by the applicant
on its Form SDR, as well as any
additional information obtained from
the applicant. For example, Form SDR
requires an applicant to provide a list of
the asset classes for which the applicant
is collecting and maintaining data or for
which it proposes to collect and
maintain data, a description of the
functions that it performs or proposes to
perform, general information regarding
its business organization, and contact
information.19 Obtaining this
information and other information
reflected on Form SDR and the exhibits
thereto—including the applicant’s
overall business structure, financial
condition, track record in providing
access to its services and data,
technological reliability, and policies
and procedures to comply with its
statutory and regulatory obligations—
will enable the Commission to
determine whether to grant or deny an
application for registration.20
Furthermore, the information requested
in Form SDR will enable the
Commission to assess whether the
applicant is so organized and has the
capacity to comply and carry out its
functions in a manner consistent with
the federal securities laws and the rules
and regulations thereunder, including
the SBS Reporting Rules.21
Consistent with the Commission’s noaction statement in the ANE Adopting
Release,22 an entity wishing to register
with the Commission as an SDR must
still submit an application on Form SDR
but can address the rule provisions
included in the no-action statement by
discussing how the SDR complies with
17 Id.
18 See
19 See
15 U.S.C. 78k–1(b)(3).
SDR Adopting Release, supra note 7, at
14459.
20 See id. at 14458.
21 See id. at 14458–59.
22 See supra notes 12–14 and accompanying text.
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comparable Commodity Futures Trading
Commission (‘‘CFTC’’) requirements.23
Accordingly, in such instances the
Commission will not assess an SDR
application for consistency or
compliance with the rule provisions
included in the Commission’s no-action
statement. Specifically, the Commission
identified the following provisions as
not providing a basis for an enforcement
action against a registered SDR for the
duration of the relief provided in the
Commission statement: Under
Regulation SBSR, aspects of 17 CFR
242.901(a), 901(c)(2) through (7), 901(d),
901(e), 902, 903(b), 906(a) and (b), and
907(a)(1), (a)(3), and (a)(4) through (6);
under the SDR Rules, aspects of Section
13(n)(5)(B) of the Exchange Act and 17
CFR 240.13n–4(b)(3) thereunder, and
aspects of 17 CFR 240.13n–5(b)(1)(iii);
and under Section 11A(b) of the
Exchange Act, any provision pertaining
to SIPs.24 Thus, an SDR applicant will
not need to include materials in its
application explaining how it would
comply with the provisions noted
above, and could instead rely on its
discussion about how it complies with
comparable CFTC requirements.25 The
applicant may instead represent in its
application that it: (i) Is registered with
the CFTC as a swap data repository; (ii)
is in compliance with applicable
requirements under the swap reporting
rules; (iii) satisfies the standard for
Commission registration of an SDR
under Rule 13n–1(c); and (iv) intends to
rely on the no-action statement included
in the ANE Adopting Release for the
period set forth in the ANE Adopting
Release with respect to any SBS asset
class or classes for which it intends to
accept transaction reports.26
III. Summary of DDR’s Application on
Form SDR
As noted above, DDR intends to
operate as a registered SDR for the
equity, credit, and interest rate
derivatives asset classes.27 In its
application, DDR represents that it is
provisionally registered with the CFTC
as a swap data repository, is in
compliance with applicable
requirements under the CFTC reporting
rules applicable to a registered swap
data repository, and intends to rely on
23 See
supra note 14.
ANE Adopting Release provides additional
discussion of the particular aspects of the affected
rules that would not provide a basis for an
enforcement action. See ANE Adopting Release,
supra note 12, at 6347–48.
25 Id. at 6348.
26 Id. For example, an applicant need not describe
in Exhibit S its functions as a SIP.
27 See Rulebook, Ex. HH, sec. 3.1; see also
Disclosure Document, Ex. D6, sec. 1.
24 The
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the Commission’s position outlined in
the ANE Adopting Release for
applicable reporting rules and SBSDR
duties for the period set forth therein.28
Below is an overview of the
representations made in the application
materials.
A. Organization and Governance
DDR is a New York limited liability
company and a wholly owned
subsidiary of DTCC Deriv/SERV LLC
(‘‘Deriv/SERV’’), which in turn is a
wholly owned subsidiary of The
Depository Trust & Clearing Corporation
(‘‘DTCC’’).29 DDR is governed by a board
of directors (‘‘DDR Board’’).30 The
number of directors on the DDR Board
is determined by Deriv/SERV as the sole
LLC member of DDR.31 The DDR Board
is composed of individuals selected
from the following groups: Employees of
DDR’s users (either fees paying users or
end users) with derivatives industry
experience, buy-side representatives,
independents, and members of senior
management or the Board of DTCC.32
The Deriv/SERV Nominations
Committee shall periodically review the
composition of the DDR Board to assure
that the level of representation of
directors from users, management and
non-users is appropriate for the interests
of these constituencies in DDR.33
In addition, the DDR Board is
responsible for the appointment and
removal of the chief compliance officer
(‘‘CCO’’) and approval of CCO
compensation, which is at the discretion
of the Board and effected by a majority
vote.34 The CCO is responsible for
establishing and administering the
compliance program that is designed to
prevent violations of the obligations of
a swap data repository under the DoddFrank Act and other applicable
regulations and is ultimately
responsible for ensuring that DDR
complies with the requirements of the
Commodity Exchange Act, the
Securities Exchange Act and other
applicable laws and regulations.35 The
Chief Compliance Officer has oversight
over all compliance functions and staff
related to DDR’s compliance program.36
The duties of the CCO include, but are
not limited to, the following: (a) Oversee
and review DDR’s compliance with
28 See Form SDR, cover letter from Katherine
Delp, General Manager, DTCC Data Repository
(U.S.) LLC.
29 Rulebook, Ex. HH, sec. 2.1.
30 Id. at sec. 2.2.
31 Id.
32 Id.
33 Id.
34 Rulebook, Ex. HH, sec. 2.3.
35 Ex. P.
36 Id.
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applicable law in jurisdictions where
DDR is registered, designated,
recognized or otherwise licensed; (b) in
consultation with the DDR Board or the
Senior Officer, resolve any conflicts of
interests that may arise, including, but
not limited to, conflicts between
business considerations and compliance
requirements, conflicts between
business considerations and compliance
requirements for fair and open access,
and conflicts between the management
and members of the DDR Board; (c)
establish and administer written
policies and procedures reasonably
designed to prevent violation of law; (d)
take reasonable steps to ensure
compliance with applicable law relating
to agreements, contracts or transactions
and confidentiality agreements entered
into with foreign or domestic regulators;
(e) establish procedures for the
remediation of non-compliance issues
identified by the CCO through a
compliance office review, look-back,
internal or external audit finding, selfreported error, or validated complaint;
(f) notify the DDR Board as soon as
practicable upon becoming aware of a
circumstance indicating that DDR, or an
individual acting on its behalf, is in
non-compliance with the applicable
laws of a jurisdiction in which it
operates and either: (1) The noncompliance creates a risk to a user; (2)
the non-compliance creates a risk of
harm to the capital markets in which it
operates; (3) the non-compliance is part
of a pattern of non-compliance; or (4)
the non-compliance may have an impact
on DDR’s ability to carry on business as
a trade repository in compliance with
applicable law; (g) establish and follow
appropriate procedures for the handling,
management response, remediation,
retesting and closing of noncompliance
issues; (h) establish and administer a
written code of ethics; and (i) prepare
and sign an annual compliance report in
accordance with applicable regulations
and associated recordkeeping.37 In
addition, the application provides that
the CCO or a delegate thereof has the
authority to investigate any potential
rule violation and is responsible for
enforcing sanctions related to violations
and for following the procedures
outlined for DDR system restrictions.38
The CCO, in consultation with the
DDR Audit Committee, will resolve all
conflicts of interest.39 Any conflict of
interest not resolved by the DDR Audit
Committee shall be escalated to the DDR
Board for resolution.40 When resolving
conflicts of interest involving DDR staff,
the DDR CCO, DDR’s senior officer, the
audit committee, and the DDR Board
consider all relevant facts and
circumstances.41 With regard to director
conflicts of interest, the application
provides that a director conflict is
present whenever the interests of DDR
compete with the interests of a director
or any party associated with a
director.42 The application also
provides that a director conflict is
present whenever a director’s corporate
or personal interests could be
reasonably viewed as affecting his or her
objectivity or independence in fulfilling
his or her duties.43 According to the
application materials, DDR expects its
directors to act on the side of caution
and immediately bring to the attention
of the DDR CCO and either the Board
Chairman or DDR’s legal counsel any
matters involving conflicts of interest.44
B. Access and Information Security
According to DDR, access to and
usage of its SDR service will be
available to all market participants that
engage in SBS transactions, and DDR
does not and will not bundle or tie its
SDR services with any other services.45
The application provides that DDR’s
services would be available to all market
participants on a fair, open, and equal
basis.46 Further, DDR does not impose
membership qualifications on users of
its services beyond (i) requiring
execution of membership documents,
such as a user agreement, (ii) the ability
to comply with the technical
specifications published by DDR, and
(iii) compliance with applicable law,
specifically those related to sanctions
administered and enforced by the Office
of Foreign Assets Control of the U.S.
Department of the Treasury (‘‘OFAC’’).47
To be granted access to the DDR
system, receive trade information,
confirm or verify transactions, submit
messages, or receive reports, a market
participant must be an onboarded
user.48 For those market participants
that onboard, DDR will provide a
mechanism for users to access the DDR
system to confirm and verify
transactions. Users are required to
maintain at least two Super Access
Coordinators (‘‘SuperACs’’) on the DDR
System; SuperACs are responsible for:
(1) Providing access to other individuals
(referred to as ‘‘ACs’’) who are eligible
41 Id.
42 Rulebook,
Ex. HH, sec. 11.2.
43 Id.
44 Id.
37 Rulebook,
Ex. HH, sec. 2.3.
38 Rulebook, Ex. HH, sec. 10.5.
39 Rulebook, Ex. HH, sec. 11.1.
40 Id.
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8979
at sec. 11.3.
id. at sec. 1.1.
46 See id.
47 See id.
48 See id.
45 See
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to access the System and use the SDR
Services on behalf of the user; and (2)
removing access for any individuals
who should no longer access the System
on behalf of the user.49
To participate in the SDR services
offered by DDR, each user will be
required to enter into a user agreement;
by entering into a user agreement each
user agrees to be bound by the terms of
the user agreement and DDR Operating
Procedures, which incorporate terms of
DDR’s Rulebook.50 In addition, the DDR
Rulebook provides that each user must
comply with all reasonable requests by
DDR for information, documentation, or
data concerning such user and related to
such user’s use of the DDR system as
DDR may deem necessary.51 The DDR
Rulebook also states that DDR has the
right to audit or inspect a user (and its
facilities) with respect to its use of the
DDR system, upon reasonable notice.52
Furthermore, the DDR Rulebook
provides that users must cooperate with
such audits or inspections and with
other inquiries by DDR concerning their
use of the DDR system.53
The DDR Operating Procedures
provide that each user agrees to defend
and indemnify DDR from and against all
reasonable losses, liabilities, damages,
judgments, settlements, fines, costs, and
expenses DDR may incur directly
arising out of or directly relating to the
acts or omissions of a user’s
participation or failure to participate
(for itself or on behalf of others) in
DDR’s services or DDR’s system, any
unauthorized access to DDR’s system
through such user’s interface with
DDR’s system, or any other matter
directly relating to such user that is not
the responsibility of DDR under the
DDR Operating Procedures, except to
the extent that such losses arise out of
or relate to the DDR’s negligence or
willful misconduct.54
With respect to prohibiting or limiting
a person’s access to SDR services, the
DDR Rulebook outlines the process
required for DDR to decline an
application to become a user of SDR
services.55 For example, DDR may deny
an applicant’s access to the DDR system
if required pursuant to applicable law
(e.g., due to sanctions against the
application administered and enforced
by OFAC or the Canadian Government’s
Office of the Superintendent of
Financial Institutions).56 The DDR
49 Id.
at sec. 1.2.
at sec. 1.3.
51 Id. at sec. 10.5.
52 Id.
53 Id.
54 Id., app. A, at sec. 9.
55 See id. at sec. 10.2.
56 See id.
50 Id.
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Rulebook provides that any such
applicants would receive notice and an
opportunity for a hearing in the event
that DDR declines an application.57 The
DDR Rulebook also provides that, if the
denial of an application is reversed by
the DDR Board or by the Commission
pursuant to Section 11A of the
Exchange Act, such application will be
accepted and the applicant granted
access following completion of
onboarding requirements.58
With respect to DDR temporarily
denying a user access to or imposing
restrictions on its use of the DDR
system, the DDR Rulebook provides that
DDR may take such action where a user:
(i) Violates DDR rules; (ii) refuses to or
neglects to comply with any direction
DDR deems reasonably necessary to
protect its systems and other users; (iii)
or any error, delay, or other conduct that
materially and adversely affects the
operations of DDR (each a ‘‘Subject
Event’’).59 Limits to the activities,
functions, or operation of users may
include, but are not limited to,
restricting access to the DDR system or
a user’s ability to submit data via a nonapproved source and assessing users
with all costs incurred by DDR in
connection with a ‘‘Subject Event’’ and
apply any deterrent financial penalties
that DDR may deem necessary.60 The
DDR Rulebook provides that DDR is
required to provide prompt notice to the
designated regulators of any such
action,61 as well as furnish the user with
a concise written statement describing
the Subject Event applicable to the
user.62
In addition, the DDR Rulebook
provides that DTCC has established a
Technology Risk Management Team,
whose role is to manage information
security risk and ensure the availability,
integrity, and confidentiality of the
organization’s information assets.63 DDR
will be responsible for monitoring the
performance of DTCC regarding
implementation and maintenance of
information security within its
infrastructure.64 The DDR Rulebook
specifies that various policies have been
developed to provide the framework for
both physical security and information
57 See
id.
id.
59 See id. at sec. 10.4.1.
60 See id.
61 See id.
62 See id. at sec. 10.4.2 (setting out DDR’s
procedures for restrictive proceedings, including
the user’s response to the Subject Event written
statement, the user’s opportunity for a hearing, and
the user’s right to apply for review to the DDR
Board).
63 Id. at sec. 9.2.
64 Id. at sec. 9.1.
58 See
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security are routinely refreshed.65
According to DDR, the Technology Risk
Management Team carries out a series of
processes to endeavor to ensure DDR is
protected in a cost-effective and
comprehensive manner, while still
meeting the requirements of applicable
regulations.66 This includes preventive
controls such as firewalls, appropriate
encryption technology, and
authentication methods.67 Vulnerability
scanning is used to identify high risks
to be mitigated and managed and to
measure conformance against the
policies and standards.68
The DDR system is supported by
DTCC and relies on the disaster
recovery program maintained by
DTCC.69 To enable DDR to provide
timely resumption of critical services
should there be any disruption to its
business, DDR follows these key
principles for business continuity and
disaster recovery: (i) Achieve recovery
of critical services within a four-hour
window with faster recovery time in
less extreme situations; (ii) disperse staff
across geographically diverse operating
facilities; (iii) operate multiple back-up
data centers linked by a highly resilient
network technology; (iv) maintain
emergency command and out-of-region
operating control; (v) utilize new
technology which provides highvolume, high-speed, asynchronous data
transfer over distances of 1,000 miles or
more; (vi) maintain processes that
mitigate marketplace, operational and
cyber-attack risks; (vii) test continuity
plan readiness and connectivity on a
regular basis ensuring that users and
third-party vendors/service providers
can connect to DDR’s primary and backup sites; (viii) communicate on an
emergency basis with the market, users
and government agency decisionmakers; and (ix) evaluate, test, and
utilize best business continuity and
resiliency practices.70
C. Acceptance and Use of SBS Data
The application provides that DDR
will provide Market Participants with
the ability to submit data for over-thecounter (‘‘OTC’’) derivatives for credits,
equities, rates, foreign exchange (‘‘FX’’)
and other commodity asset classes.71
DDR may reject a transaction record
submitted due the submission failing to
meet DDR validations, including but not
limited to the submission failing to be
65 Id.
at sec. 9.2.
66 Id.
67 Id.
68 Id.
69 See
id. at sec. 8.1.
id.
71 Id. at sec. 3.1; see also Disclosure Document,
Ex. D6, sec. 1.
70 See
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Federal Register / Vol. 86, No. 26 / Wednesday, February 10, 2021 / Notices
in a format that can be ingested by DDR,
failing to meet jurisdictional
requirements or failing to provide
required data elements.72 A rejected
submission is deemed not to have been
submitted at all with respect to
reporting to the jurisdiction for which it
was rejected (it is possible that one
transaction record is submitted to
comply with reporting in more than one
jurisdiction and may be acceptable for
one jurisdiction, but rejected for the
other).73 Upon submission, the DDR
System will perform validation checks
to ensure that each submitted record is
complete and accurate, in accordance
DDR’s message ingestion
requirements.74 This process is
completed through validation and
consistency checks.75 If the record fails
these validation or consistency checks,
the record will be rejected, and such
rejection status will be communicated to
the user(s) to correct and re-submit.76
According to DDR, the SDR process is
an end-to-end straight through process;
from the receipt of data, processing and
maintenance of data, and dissemination
of data, processes are automated and do
not require manual intervention; this
straight through processing model is a
key mitigant to modification or
invalidation of any data.77
DDR’s Operating Procedures provides
that DDR and each user agrees that each
will treat as confidential (both during
and after the termination of a user’s
access to DDR’s system) all confidential
information (defined as: (i) With respect
to DDR, transaction data specified in
records received by DDR and any data,
reports, summaries or payment amounts
which may be produced as a result of
processing such transaction data, and
(ii) with respect to any user, the
technical specifications of DDR’s system
(to the extent not publicly disclosed by
DDR; but confidential information does
not include data distributed to the
public in accordance will applicable
law).78
D. Fees
The application includes DDR’s fee
schedules.79 There are two types of fees,
Position Maintenance Fees and Account
72 Rulebook,
Ex. HH, sec. 1.3.
73 Id.
74 Id.
at sec. 10.1.1.
75 Id.
76 Id.
77 Ex.
EE.
78 Rulebook,
Ex. HH, app. A, sec. 8; see also
Disclosure Document, Ex. D6, sec. 5 (DDR’s privacy
and confidentiality policies and procedures).
79 See Ex. M. Additionally, DDR provides a fee
schedule for DDR Users on its website at https://
www.dtcc.com/derivatives-services/global-traderepository/gtr-us.
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18:53 Feb 09, 2021
Jkt 253001
Management Fees.80 DDR charges a
monthly ‘‘Position Maintenance Fee,’’
based on the number of positions open
at any time during the applicable month
and which decreases as the number of
open positions increases on a tiered
basis.81 Position count includes
positions even if terminated or exited
prior to the month end.82 Platforms, as
that term is defined by Commission
rules,83 are not charged position
maintenance fees.84 For a position
where a clearing agency (‘‘Clearer’’) is a
counterparty, the Clearer shall be
responsible for the Position
Maintenance Fee, less a 75%
reduction.85 For all other positions, the
Reporting Side, as that term is defined
by Commission rules,86 will be
responsible for Position Maintenance
Fees.87 For entities grouped as a single
account with subaccounts (‘‘Grouped
Accounts’’), positions will be aggregated
for purposes of determining position
count threshold and to determine the
applicable tiered Position Maintenance
Fees.88
In addition to the Position
Maintenance Fee, the application
indicates that DDR will charge an
annual ‘‘Account Management Fee,’’
currently set at $1,200.00, that will
apply to all accounts and will be
prorated in the year the account is
opened.89 Accounts may be set up on an
individual entity basis or, in certain
instances, as Grouped Accounts, such as
a corporate family 90 that chooses to
structure its account as a single account
with subaccounts for affiliates or an
asset manager that chooses to structure
its account as a single account with
subaccounts for its managed funds.
Grouped Accounts will be charged one
Account Management Fee.91
80 See
Ex. M.
Position Maintenance Fees only apply for
a position count of five hundred or more open
positions during any month. See id. For examples
of the calculation of the Position Maintenance Fee,
see Annex A to Exhibit M of the application.
82 See Ex. M.
83 See 17 CFR 242.900(v) (defining ‘‘platform’’ as
a national securities exchange or security-based
swap execution facility that is registered or exempt
from registration).
84 See Ex. M.
85 See id.
86 See 17 CFR 242.900(gg) (defining ‘‘reporting
side’’ as the side of a security-based swap identified
by Rule 901(a)(2) as having the duty to report the
transaction).
87 See Ex. M.
88 See id.
89 See id.
90 DDR organizes its users into families (each, a
‘‘Family’’) as directed by the users (through User
Agreements or in such other manner as designated
by DDR from time to time) that desire to be so
organized. See Rulebook, Ex. HH, app. A, sec. 2.
91 See id.
81 The
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Frm 00100
Fmt 4703
Sfmt 4703
8981
DDR’s fee policy further provides that
users will have the option to elect to
enter into a long-term commitment for
a period ending December 31, 2024
(‘‘Long Term Commitment’’), which
would reduce the applicable Position
Maintenance Fee and Account
Management Fee by ten percent,
exclusive of tax, for the duration of the
Long-Term Commitment.92 If the Long
Term Commitment is terminated prior
to the end of the applicable Long Term
Commitment period, DDR explains that
the non-Clearer User will be subject to
an early termination fee equal to: (a) The
difference between the total amount of
fees due after application of the Long
Term Commitment incentive and the
total amount of fees that would have
been due during the applicable portion
of the Long Term Commitment period
had no incentive been provided (‘‘Total
Incentive Provided’’); plus (b) the
greater of five percent of the Total
Incentive Provided or $500.00.93
E. Recordkeeping
The DDR Rulebook provides that DDR
will maintain all information as
required by applicable law as well as
maintain swap and security-based swap
data throughout the existence of the
swap and security-based swap and for
15 years following termination of the
swap or security-based swap or as
otherwise required by applicable
regulations.94 The records will be
readily accessible throughout the life of
a swap or security-based swap and for
5 years following its termination and
shall be in an electronic format that is
non-rewriteable and non-erasable.95 For
the remainder of the retention period,
the swap or security-based swap record
will be retrievable within 3 business
days.96 In the event DDR ceases doing
business or ceases to be a registered or
designated trade repository it shall
continue, for a period of not less than
five (5) years or upon transfer to the
Designated Regulator or its designee or
another registered or designated trade
repository for that jurisdiction, to
preserve, maintain, and make accessible
to each Designated Regulator or its
designee, the records and data required
by Applicable Regulation in accordance
with DDR’s Wind-Down Policies and
Procedures document.97
92 See
id.
id.
94 Rulebook, Ex. HH, sec. 1.4.1.
95 Id.
96 Id.
97 Id.
93 See
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Federal Register / Vol. 86, No. 26 / Wednesday, February 10, 2021 / Notices
F. Disclosure
DDR publishes a disclosure document
to provide a summary of information
regarding its service offerings and the
SBS data it maintains.98 Specifically,
the disclosure document sets forth a
description of the following: (i) A
description of access to services offered
and swap data maintained; (ii) criteria
for those seeking to connect to or link
with its SDR; (iii) criteria for those
seeking to connect to or link with DDR
systems; (iv) policies and procedures
with respect to DDR systems safeguards;
(v) policies and procedures related to
privacy and confidentiality; (vi) policies
and procedures regarding its noncommercial and commercial use of
transaction data; 99 (vii) procedures for
dispute resolution; (viii) fees, rates, dues
and other charges; and (ix) governance
arrangements.100
G. Regulatory Reporting and Public
Dissemination
As a registered SDR, DDR would carry
out an important role in the regulatory
reporting and public dissemination of
SBS transactions. As noted above, DDR
has stated that it intends to rely on the
no-action statement included in the
ANE Adopting Release for the period set
forth in the ANE Adopting Release with
respect to any SBS asset class or classes
for which it intends to accept
transaction reports.101 Therefore, DDR
does not need to include materials in its
application explaining how it would
comply with the provisions of the SBS
Reporting Rules noted in the no-action
statement.102 Instead, DDR may rely on
98 See
Disclosure Document, Ex. D6.
also Rulebook, Ex. HH, sec. 6.3 (‘‘As part
of the SDR Services, DDR receives and collects
swap and security-based swap data in the ordinary
course of its business from various Market
Participants and registered entities for the purpose
of maintaining a centralized recordkeeping facility
for swaps and security-based swaps. The collection
and maintenance of this data is designed to enhance
the transparency, promote standardization and
reduce systemic risk by making this data available
to regulators and the public pursuant to Applicable
Law. Therefore, access to data maintained by DDR
to Market Participants is generally prohibited,
except to either counterparty to that particular swap
or security-based swap, such counterparty’s
authorized third party service providers or other
parties specifically authorized by the User or
counterparty pursuant to Rule 1.3 or 6.4, or to other
regulators or entities in accordance with Rule 6.5
below. DDR shall not, as a condition of the
reporting of swap or security-based swap
transaction data, require a Reporting Party to
consent to the use of reported data for commercial
or business purposes. DDR shall not make
commercial use of real-time swap data prior to its
public dissemination.’’).
100 See id.
101 See supra note 25 and accompanying text.
102 However, the DDR application includes
provisions explaining how DDR would require
users to identify SBS, as required by Rule 901(c)(1)
99 See
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18:53 Feb 09, 2021
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its discussion about how it complies
with comparable CFTC requirements
pertaining to regulatory reporting and
public dissemination of swap
transactions.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning DDR’s Form SDR,
including whether DDR has satisfied the
requirements for registration as an SDR
and as a SIP. Commenters are requested,
to the extent possible, to provide
empirical data and other factual support
for their views. Comments may be
submitted by any of the following
methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/proposed.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number
SBSDR–2020–01 on the subject line.
Paper Comments
• Send paper comments to Secretary,
Securities and Exchange Commission,
100 F Street NE, Washington, DC
20549–1090. All submissions should
refer to File Number SBSDR–2020–01.
To help the Commission process and
review your comments more efficiently,
please use only one method of
submission. The Commission will post
all comments on the Commission’s
internet website (https://www.sec.gov/
rules/other.shtml).
Copies of the Form SDR, all
subsequent amendments, all written
statements with respect to the Form
SDR that are filed with the Commission,
and all written communications relating
to the Form SDR between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Section, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
of Regulation SBSR. See Exhibit HH2, sec. 4.4
(regarding Unique Product Identifiers). The DDR
application also includes a provision explaining
how DDR would comply with a condition to the noaction statement included in the ANE Adopting
Release. See Exhibit GG2, sec. 15.2.3.2 (providing,
in the case of a credit security-based swap, for
dissemination of a capped notional size of $5
million if the true notional size of the transaction
is $5 million or greater).
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
information from comment submissions.
You should submit only information
that you wish to make available
publicly. All submissions should refer
to File Number SBSDR–2020–01 and
should be submitted on or before March
3, 2021.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02755 Filed 2–9–21; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice: 11353]
Notice of Public Meeting in Preparation
for International Maritime Organization
Meeting
The Department of State will conduct
a public meeting by way of
teleconference on Thursday, March 11,
2021 starting at 1:00 p.m. eastern
standard time. Members of the public
may participate up to the capacity of the
teleconference phone line, which will
handle 500 participants. To access the
teleconference line, participants should
call (202) 475–4000 and use Participant
Code: 138 541 34#.
The primary purpose of the meeting is
to prepare for the eighth session of the
International Maritime Organization’s
(IMO) Sub-Committee on Pollution
Prevention and Response (PPR 8) to be
held remotely on March 22–26, 2021.
The agenda items to be considered
include:
—Adoption of the agenda
—Decisions of other IMO bodies
—Safety and pollution hazards of
chemicals and preparation of
consequential amendments to the IBC
Code
—Review of the 2011 Guidelines for the
control and management of ships’
biofouling to minimize the transfer of
invasive aquatic species
—Reduction of the impact on the Arctic
of emissions of Black Carbon from
international shipping
—Development of measures to reduce
risks of use and carriage of heavy fuel
oil as fuel by ships in Arctic waters
—Revision of MARPOL Annex IV and
associated guidelines to introduce
provisions for record-keeping and
measures to confirm the lifetime
performance of sewage treatment
plants
—Follow-up work emanating from the
Action Plan to address marine plastic
litter from ships
—Biennial agenda and provisional
agenda for PPR 9
E:\FR\FM\10FEN1.SGM
10FEN1
]]>Agencies
[Federal Register Volume 86, Number 26 (Wednesday, February 10, 2021)]
[Notices]
[Pages 8977-8982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02755]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91071; File No. SBSDR-2020-01]
Security-Based Swap Data Repositories; DTCC Data Repository
(U.S.), LLC; Notice of Filing of Application for Registration as a
Security-Based Swap Data Repository
February 5, 2021.
I. Introduction
On December 22, 2020, DTCC Data Repository (U.S.), LLC (``DDR'')
filed with the Securities and Exchange Commission (``Commission'') an
application on Form SDR to register as a security-based swap data
repository (``SDR'') pursuant to Section 13(n)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') and 17 CFR 240.13n-1 (``Rule
13n-1'') thereunder,\1\ and as a securities information processor
(``SIP'') under Section 11A(b) of the Exchange Act.\2\ DDR intends to
operate as a registered SDR for security-based swap (``SBS'')
transactions in the equity, credit, and interest rate derivatives asset
classes.\3\ The Commission is publishing this notice to solicit
comments from interested persons regarding DDR's application,\4\ and
the Commission will consider any comments it receives in making its
determination whether to approve DDR's application for registration as
an SDR and as a SIP.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78m(n)(1); 17 CFR 240.13n-1. A copy of DDR's
application on Form SDR and non-confidential exhibits thereto are
available for public viewing on the Commission's website. In 2016,
DDR submitted a prior application for registration as an SDR. See
Release No. 34-78216 (June 30, 2016), 81 FR 44379 (July 7, 2016);
Release No. 34-81302 (Aug. 3, 2017), 82 FR 37276 (Aug. 9, 2017). DDR
withdrew this prior application in 2018. See Letter from Chris
Childs, Managing Director, DDR, Mar. 27, 2018, https://www.sec.gov/divisions/marketreg/sdr/dtcc-sdr-application-withdrawal-letter-032718.pdf.
\2\ 15 U.S.C. 78k-1(b).
\3\ DDR has included the interest rate asset class in its
application based on feedback from potential users of its SDR
services. The potential users have identified certain types of
transactions that will be reported through DDR's infrastructure for
interest rate derivatives as falling within the Exchange Act
definition of an SBS transaction.
\4\ The descriptions set forth in this notice regarding the
structure and operations of DDR have been derived, excerpted, or
summarized from DDR's application on Form SDR.
---------------------------------------------------------------------------
II. Background
A. SDR Registration, Duties, and Core Principles
Section 13(n) of the Exchange Act makes it unlawful for any person,
unless registered with the Commission, directly or indirectly, to make
use of the mails or any means or instrumentality of interstate commerce
to perform the functions of an SDR.\5\ To be registered and maintain
registration, an SDR must comply with certain requirements and core
principles described in Section 13(n), as well as any requirements that
the Commission may impose by rule or regulation.\6\ In 2015, the
Commission adopted 17 CFR 240.13n-1 to 13n-12 under the Exchange Act to
establish Form SDR, the procedures for registration as an SDR, and the
duties and core principles applicable to an SDR (``SDR Rules'').\7\ The
Commission provided a temporary exemption from compliance with the SDR
Rules and also extended exemptions from the provisions of the Dodd-
Frank Act set forth in a Commission order providing temporary
exemptions and other temporary relief from compliance with certain
provisions of the Exchange Act concerning security-based swaps, and
these temporary exemptions expired in 2017.\8\
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\5\ 15 U.S.C. 78m(n).
\6\ Id.
\7\ See Release No. 34-74246 (Feb. 11, 2015), 80 FR 14438, 14438
(Mar. 19, 2015) (``SDR Adopting Release''). In 2016, the Commission
subsequently amended 17 CFR 240. 13n-4 to address third-party
regulatory access to SBS data obtained by an SDR. See Release No.
34-78716 (Aug. 29, 2016), 81 FR 60585 (Sep. 2, 2016).
\8\ See Release No. 34-80359 (Mar. 31, 2017), 82 FR 16867 (Apr.
6, 2017).
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The Commission also has adopted 17 CFR 242.900 to 909 under the
Exchange Act (collectively, ``Regulation SBSR''), which governs
regulatory reporting and public dissemination of security-based swap
transactions.\9\ Among other things, Regulation SBSR requires each
registered SDR to register with the Commission as a SIP,\10\ and the
Form SDR constitutes an application for
[[Page 8978]]
registration as a SIP, as well as an SDR.\11\
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\9\ Release No. 34-74244 (Feb. 11, 2015), 80 FR 14563 (Mar. 19,
2015); Release No. 34-78321 (July 14, 2016), 81 FR 53546 (Aug. 12,
2016). Regulation SBSR and the SDR Rules are referred to
collectively as the ``SBS Reporting Rules.''
\10\ See 17 CFR 242.909.
\11\ See Form SDR, Instruction 2.
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In 2019, the Commission stated that implementation of the SBS
Reporting Rules can and should be done in a manner that carries out the
fundamental policy goals of the SBS Reporting Rules while minimizing
burdens as much as practicable.\12\ Noting ongoing concerns among
market participants about incurring unnecessary burdens and the
Commission's efforts to promote harmonization between the SBS Reporting
Rules and swap reporting rules, the Commission took the position that,
for four years following Regulation SBSR's Compliance Date 1 in each
asset class,\13\ certain actions with respect to the SBS Reporting
Rules would not provide a basis for a Commission enforcement
action.\14\ The no-action statement's relevance to DDR's application
for registration as an SDR and SIP is discussed further below.
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\12\ Release No. 34-87780 (Dec. 18, 2019), 85 FR 6270, 6347
(Feb. 4, 2020) (``ANE Adopting Release'').
\13\ See id. Under Regulation SBSR, the first compliance date
(``Compliance Date 1'') for affected persons with respect to an SBS
asset class is the first Monday that is the later of: (i) Six months
after the date on which the first SDR that can accept transaction
reports in that asset class registers with the Commission; or (ii)
one month after the compliance date for registration of SBS dealers
and major SBS participants (``SBS entities''). Id. at 6346. The
compliance date for registration of SBS entities is October 6, 2021.
See id. at 6270, 6345.
\14\ See id. The specific rule provisions of the SBS Reporting
Rules affected by the no-action statement are discussed in Part
II.B.
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B. Standard for Registration
As noted above, to be registered with the Commission as an SDR and
maintain such registration, an SDR is required to comply with the
requirements and core principles described in Section 13(n) of the
Exchange Act, as well as with any requirement that the Commission may
impose by rule or regulation.\15\ In addition, Rule 13n-1(c)(3) under
the Exchange Act provides that the Commission shall grant the
registration of an SDR if it finds that the SDR is so organized, and
has the capacity, to be able to: (i) Assure the prompt, accurate, and
reliable performance of its functions as an SDR; (ii) comply with any
applicable provisions of the securities laws and the rules and
regulations thereunder; and (iii) carry out its functions in a manner
consistent with the purposes of Section 13(n) of the Exchange Act and
the rules and regulations thereunder.\16\ The Commission shall deny the
registration of an SDR if it does not make any such finding.\17\
Similarly, to be registered with the Commission as a SIP, the
Commission must find that such applicant is so organized, and has the
capacity, to be able to assure the prompt, accurate, and reliable
performance of its functions as a SIP, comply with the provisions of
the Exchange Act and the rules and regulations thereunder, carry out
its functions in a manner consistent with the purposes of the Exchange
Act, and, insofar as it is acting as an exclusive processor, operate
fairly and efficiently.\18\
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\15\ See 15 U.S.C. 78m(n)(3).
\16\ 17 CFR 240.13n-1(c)(3).
\17\ Id.
\18\ See 15 U.S.C. 78k-1(b)(3).
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In determining whether an applicant meets the criteria set forth in
Rule 13n-1(c), the Commission will consider the information reflected
by the applicant on its Form SDR, as well as any additional information
obtained from the applicant. For example, Form SDR requires an
applicant to provide a list of the asset classes for which the
applicant is collecting and maintaining data or for which it proposes
to collect and maintain data, a description of the functions that it
performs or proposes to perform, general information regarding its
business organization, and contact information.\19\ Obtaining this
information and other information reflected on Form SDR and the
exhibits thereto--including the applicant's overall business structure,
financial condition, track record in providing access to its services
and data, technological reliability, and policies and procedures to
comply with its statutory and regulatory obligations--will enable the
Commission to determine whether to grant or deny an application for
registration.\20\ Furthermore, the information requested in Form SDR
will enable the Commission to assess whether the applicant is so
organized and has the capacity to comply and carry out its functions in
a manner consistent with the federal securities laws and the rules and
regulations thereunder, including the SBS Reporting Rules.\21\
---------------------------------------------------------------------------
\19\ See SDR Adopting Release, supra note 7, at 14459.
\20\ See id. at 14458.
\21\ See id. at 14458-59.
---------------------------------------------------------------------------
Consistent with the Commission's no-action statement in the ANE
Adopting Release,\22\ an entity wishing to register with the Commission
as an SDR must still submit an application on Form SDR but can address
the rule provisions included in the no-action statement by discussing
how the SDR complies with comparable Commodity Futures Trading
Commission (``CFTC'') requirements.\23\ Accordingly, in such instances
the Commission will not assess an SDR application for consistency or
compliance with the rule provisions included in the Commission's no-
action statement. Specifically, the Commission identified the following
provisions as not providing a basis for an enforcement action against a
registered SDR for the duration of the relief provided in the
Commission statement: Under Regulation SBSR, aspects of 17 CFR
242.901(a), 901(c)(2) through (7), 901(d), 901(e), 902, 903(b), 906(a)
and (b), and 907(a)(1), (a)(3), and (a)(4) through (6); under the SDR
Rules, aspects of Section 13(n)(5)(B) of the Exchange Act and 17 CFR
240.13n-4(b)(3) thereunder, and aspects of 17 CFR 240.13n-5(b)(1)(iii);
and under Section 11A(b) of the Exchange Act, any provision pertaining
to SIPs.\24\ Thus, an SDR applicant will not need to include materials
in its application explaining how it would comply with the provisions
noted above, and could instead rely on its discussion about how it
complies with comparable CFTC requirements.\25\ The applicant may
instead represent in its application that it: (i) Is registered with
the CFTC as a swap data repository; (ii) is in compliance with
applicable requirements under the swap reporting rules; (iii) satisfies
the standard for Commission registration of an SDR under Rule 13n-1(c);
and (iv) intends to rely on the no-action statement included in the ANE
Adopting Release for the period set forth in the ANE Adopting Release
with respect to any SBS asset class or classes for which it intends to
accept transaction reports.\26\
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\22\ See supra notes 12-14 and accompanying text.
\23\ See supra note 14.
\24\ The ANE Adopting Release provides additional discussion of
the particular aspects of the affected rules that would not provide
a basis for an enforcement action. See ANE Adopting Release, supra
note 12, at 6347-48.
\25\ Id. at 6348.
\26\ Id. For example, an applicant need not describe in Exhibit
S its functions as a SIP.
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III. Summary of DDR's Application on Form SDR
As noted above, DDR intends to operate as a registered SDR for the
equity, credit, and interest rate derivatives asset classes.\27\ In its
application, DDR represents that it is provisionally registered with
the CFTC as a swap data repository, is in compliance with applicable
requirements under the CFTC reporting rules applicable to a registered
swap data repository, and intends to rely on
[[Page 8979]]
the Commission's position outlined in the ANE Adopting Release for
applicable reporting rules and SBSDR duties for the period set forth
therein.\28\ Below is an overview of the representations made in the
application materials.
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\27\ See Rulebook, Ex. HH, sec. 3.1; see also Disclosure
Document, Ex. D6, sec. 1.
\28\ See Form SDR, cover letter from Katherine Delp, General
Manager, DTCC Data Repository (U.S.) LLC.
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A. Organization and Governance
DDR is a New York limited liability company and a wholly owned
subsidiary of DTCC Deriv/SERV LLC (``Deriv/SERV''), which in turn is a
wholly owned subsidiary of The Depository Trust & Clearing Corporation
(``DTCC'').\29\ DDR is governed by a board of directors (``DDR
Board'').\30\ The number of directors on the DDR Board is determined by
Deriv/SERV as the sole LLC member of DDR.\31\ The DDR Board is composed
of individuals selected from the following groups: Employees of DDR's
users (either fees paying users or end users) with derivatives industry
experience, buy-side representatives, independents, and members of
senior management or the Board of DTCC.\32\ The Deriv/SERV Nominations
Committee shall periodically review the composition of the DDR Board to
assure that the level of representation of directors from users,
management and non-users is appropriate for the interests of these
constituencies in DDR.\33\
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\29\ Rulebook, Ex. HH, sec. 2.1.
\30\ Id. at sec. 2.2.
\31\ Id.
\32\ Id.
\33\ Id.
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In addition, the DDR Board is responsible for the appointment and
removal of the chief compliance officer (``CCO'') and approval of CCO
compensation, which is at the discretion of the Board and effected by a
majority vote.\34\ The CCO is responsible for establishing and
administering the compliance program that is designed to prevent
violations of the obligations of a swap data repository under the Dodd-
Frank Act and other applicable regulations and is ultimately
responsible for ensuring that DDR complies with the requirements of the
Commodity Exchange Act, the Securities Exchange Act and other
applicable laws and regulations.\35\ The Chief Compliance Officer has
oversight over all compliance functions and staff related to DDR's
compliance program.\36\ The duties of the CCO include, but are not
limited to, the following: (a) Oversee and review DDR's compliance with
applicable law in jurisdictions where DDR is registered, designated,
recognized or otherwise licensed; (b) in consultation with the DDR
Board or the Senior Officer, resolve any conflicts of interests that
may arise, including, but not limited to, conflicts between business
considerations and compliance requirements, conflicts between business
considerations and compliance requirements for fair and open access,
and conflicts between the management and members of the DDR Board; (c)
establish and administer written policies and procedures reasonably
designed to prevent violation of law; (d) take reasonable steps to
ensure compliance with applicable law relating to agreements, contracts
or transactions and confidentiality agreements entered into with
foreign or domestic regulators; (e) establish procedures for the
remediation of non-compliance issues identified by the CCO through a
compliance office review, look-back, internal or external audit
finding, self-reported error, or validated complaint; (f) notify the
DDR Board as soon as practicable upon becoming aware of a circumstance
indicating that DDR, or an individual acting on its behalf, is in non-
compliance with the applicable laws of a jurisdiction in which it
operates and either: (1) The non-compliance creates a risk to a user;
(2) the non-compliance creates a risk of harm to the capital markets in
which it operates; (3) the non-compliance is part of a pattern of non-
compliance; or (4) the non-compliance may have an impact on DDR's
ability to carry on business as a trade repository in compliance with
applicable law; (g) establish and follow appropriate procedures for the
handling, management response, remediation, retesting and closing of
noncompliance issues; (h) establish and administer a written code of
ethics; and (i) prepare and sign an annual compliance report in
accordance with applicable regulations and associated
recordkeeping.\37\ In addition, the application provides that the CCO
or a delegate thereof has the authority to investigate any potential
rule violation and is responsible for enforcing sanctions related to
violations and for following the procedures outlined for DDR system
restrictions.\38\
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\34\ Rulebook, Ex. HH, sec. 2.3.
\35\ Ex. P.
\36\ Id.
\37\ Rulebook, Ex. HH, sec. 2.3.
\38\ Rulebook, Ex. HH, sec. 10.5.
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The CCO, in consultation with the DDR Audit Committee, will resolve
all conflicts of interest.\39\ Any conflict of interest not resolved by
the DDR Audit Committee shall be escalated to the DDR Board for
resolution.\40\ When resolving conflicts of interest involving DDR
staff, the DDR CCO, DDR's senior officer, the audit committee, and the
DDR Board consider all relevant facts and circumstances.\41\ With
regard to director conflicts of interest, the application provides that
a director conflict is present whenever the interests of DDR compete
with the interests of a director or any party associated with a
director.\42\ The application also provides that a director conflict is
present whenever a director's corporate or personal interests could be
reasonably viewed as affecting his or her objectivity or independence
in fulfilling his or her duties.\43\ According to the application
materials, DDR expects its directors to act on the side of caution and
immediately bring to the attention of the DDR CCO and either the Board
Chairman or DDR's legal counsel any matters involving conflicts of
interest.\44\
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\39\ Rulebook, Ex. HH, sec. 11.1.
\40\ Id.
\41\ Id.
\42\ Rulebook, Ex. HH, sec. 11.2.
\43\ Id.
\44\ Id. at sec. 11.3.
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B. Access and Information Security
According to DDR, access to and usage of its SDR service will be
available to all market participants that engage in SBS transactions,
and DDR does not and will not bundle or tie its SDR services with any
other services.\45\ The application provides that DDR's services would
be available to all market participants on a fair, open, and equal
basis.\46\ Further, DDR does not impose membership qualifications on
users of its services beyond (i) requiring execution of membership
documents, such as a user agreement, (ii) the ability to comply with
the technical specifications published by DDR, and (iii) compliance
with applicable law, specifically those related to sanctions
administered and enforced by the Office of Foreign Assets Control of
the U.S. Department of the Treasury (``OFAC'').\47\
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\45\ See id. at sec. 1.1.
\46\ See id.
\47\ See id.
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To be granted access to the DDR system, receive trade information,
confirm or verify transactions, submit messages, or receive reports, a
market participant must be an onboarded user.\48\ For those market
participants that onboard, DDR will provide a mechanism for users to
access the DDR system to confirm and verify transactions. Users are
required to maintain at least two Super Access Coordinators
(``SuperACs'') on the DDR System; SuperACs are responsible for: (1)
Providing access to other individuals (referred to as ``ACs'') who are
eligible
[[Page 8980]]
to access the System and use the SDR Services on behalf of the user;
and (2) removing access for any individuals who should no longer access
the System on behalf of the user.\49\
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\48\ See id.
\49\ Id. at sec. 1.2.
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To participate in the SDR services offered by DDR, each user will
be required to enter into a user agreement; by entering into a user
agreement each user agrees to be bound by the terms of the user
agreement and DDR Operating Procedures, which incorporate terms of
DDR's Rulebook.\50\ In addition, the DDR Rulebook provides that each
user must comply with all reasonable requests by DDR for information,
documentation, or data concerning such user and related to such user's
use of the DDR system as DDR may deem necessary.\51\ The DDR Rulebook
also states that DDR has the right to audit or inspect a user (and its
facilities) with respect to its use of the DDR system, upon reasonable
notice.\52\ Furthermore, the DDR Rulebook provides that users must
cooperate with such audits or inspections and with other inquiries by
DDR concerning their use of the DDR system.\53\
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\50\ Id. at sec. 1.3.
\51\ Id. at sec. 10.5.
\52\ Id.
\53\ Id.
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The DDR Operating Procedures provide that each user agrees to
defend and indemnify DDR from and against all reasonable losses,
liabilities, damages, judgments, settlements, fines, costs, and
expenses DDR may incur directly arising out of or directly relating to
the acts or omissions of a user's participation or failure to
participate (for itself or on behalf of others) in DDR's services or
DDR's system, any unauthorized access to DDR's system through such
user's interface with DDR's system, or any other matter directly
relating to such user that is not the responsibility of DDR under the
DDR Operating Procedures, except to the extent that such losses arise
out of or relate to the DDR's negligence or willful misconduct.\54\
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\54\ Id., app. A, at sec. 9.
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With respect to prohibiting or limiting a person's access to SDR
services, the DDR Rulebook outlines the process required for DDR to
decline an application to become a user of SDR services.\55\ For
example, DDR may deny an applicant's access to the DDR system if
required pursuant to applicable law (e.g., due to sanctions against the
application administered and enforced by OFAC or the Canadian
Government's Office of the Superintendent of Financial
Institutions).\56\ The DDR Rulebook provides that any such applicants
would receive notice and an opportunity for a hearing in the event that
DDR declines an application.\57\ The DDR Rulebook also provides that,
if the denial of an application is reversed by the DDR Board or by the
Commission pursuant to Section 11A of the Exchange Act, such
application will be accepted and the applicant granted access following
completion of onboarding requirements.\58\
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\55\ See id. at sec. 10.2.
\56\ See id.
\57\ See id.
\58\ See id.
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With respect to DDR temporarily denying a user access to or
imposing restrictions on its use of the DDR system, the DDR Rulebook
provides that DDR may take such action where a user: (i) Violates DDR
rules; (ii) refuses to or neglects to comply with any direction DDR
deems reasonably necessary to protect its systems and other users;
(iii) or any error, delay, or other conduct that materially and
adversely affects the operations of DDR (each a ``Subject Event'').\59\
Limits to the activities, functions, or operation of users may include,
but are not limited to, restricting access to the DDR system or a
user's ability to submit data via a non-approved source and assessing
users with all costs incurred by DDR in connection with a ``Subject
Event'' and apply any deterrent financial penalties that DDR may deem
necessary.\60\ The DDR Rulebook provides that DDR is required to
provide prompt notice to the designated regulators of any such
action,\61\ as well as furnish the user with a concise written
statement describing the Subject Event applicable to the user.\62\
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\59\ See id. at sec. 10.4.1.
\60\ See id.
\61\ See id.
\62\ See id. at sec. 10.4.2 (setting out DDR's procedures for
restrictive proceedings, including the user's response to the
Subject Event written statement, the user's opportunity for a
hearing, and the user's right to apply for review to the DDR Board).
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In addition, the DDR Rulebook provides that DTCC has established a
Technology Risk Management Team, whose role is to manage information
security risk and ensure the availability, integrity, and
confidentiality of the organization's information assets.\63\ DDR will
be responsible for monitoring the performance of DTCC regarding
implementation and maintenance of information security within its
infrastructure.\64\ The DDR Rulebook specifies that various policies
have been developed to provide the framework for both physical security
and information security are routinely refreshed.\65\ According to DDR,
the Technology Risk Management Team carries out a series of processes
to endeavor to ensure DDR is protected in a cost-effective and
comprehensive manner, while still meeting the requirements of
applicable regulations.\66\ This includes preventive controls such as
firewalls, appropriate encryption technology, and authentication
methods.\67\ Vulnerability scanning is used to identify high risks to
be mitigated and managed and to measure conformance against the
policies and standards.\68\
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\63\ Id. at sec. 9.2.
\64\ Id. at sec. 9.1.
\65\ Id. at sec. 9.2.
\66\ Id.
\67\ Id.
\68\ Id.
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The DDR system is supported by DTCC and relies on the disaster
recovery program maintained by DTCC.\69\ To enable DDR to provide
timely resumption of critical services should there be any disruption
to its business, DDR follows these key principles for business
continuity and disaster recovery: (i) Achieve recovery of critical
services within a four-hour window with faster recovery time in less
extreme situations; (ii) disperse staff across geographically diverse
operating facilities; (iii) operate multiple back-up data centers
linked by a highly resilient network technology; (iv) maintain
emergency command and out-of-region operating control; (v) utilize new
technology which provides high-volume, high-speed, asynchronous data
transfer over distances of 1,000 miles or more; (vi) maintain processes
that mitigate marketplace, operational and cyber-attack risks; (vii)
test continuity plan readiness and connectivity on a regular basis
ensuring that users and third-party vendors/service providers can
connect to DDR's primary and back-up sites; (viii) communicate on an
emergency basis with the market, users and government agency decision-
makers; and (ix) evaluate, test, and utilize best business continuity
and resiliency practices.\70\
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\69\ See id. at sec. 8.1.
\70\ See id.
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C. Acceptance and Use of SBS Data
The application provides that DDR will provide Market Participants
with the ability to submit data for over-the-counter (``OTC'')
derivatives for credits, equities, rates, foreign exchange (``FX'') and
other commodity asset classes.\71\ DDR may reject a transaction record
submitted due the submission failing to meet DDR validations, including
but not limited to the submission failing to be
[[Page 8981]]
in a format that can be ingested by DDR, failing to meet jurisdictional
requirements or failing to provide required data elements.\72\ A
rejected submission is deemed not to have been submitted at all with
respect to reporting to the jurisdiction for which it was rejected (it
is possible that one transaction record is submitted to comply with
reporting in more than one jurisdiction and may be acceptable for one
jurisdiction, but rejected for the other).\73\ Upon submission, the DDR
System will perform validation checks to ensure that each submitted
record is complete and accurate, in accordance DDR's message ingestion
requirements.\74\ This process is completed through validation and
consistency checks.\75\ If the record fails these validation or
consistency checks, the record will be rejected, and such rejection
status will be communicated to the user(s) to correct and re-
submit.\76\ According to DDR, the SDR process is an end-to-end straight
through process; from the receipt of data, processing and maintenance
of data, and dissemination of data, processes are automated and do not
require manual intervention; this straight through processing model is
a key mitigant to modification or invalidation of any data.\77\
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\71\ Id. at sec. 3.1; see also Disclosure Document, Ex. D6, sec.
1.
\72\ Rulebook, Ex. HH, sec. 1.3.
\73\ Id.
\74\ Id. at sec. 10.1.1.
\75\ Id.
\76\ Id.
\77\ Ex. EE.
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DDR's Operating Procedures provides that DDR and each user agrees
that each will treat as confidential (both during and after the
termination of a user's access to DDR's system) all confidential
information (defined as: (i) With respect to DDR, transaction data
specified in records received by DDR and any data, reports, summaries
or payment amounts which may be produced as a result of processing such
transaction data, and (ii) with respect to any user, the technical
specifications of DDR's system (to the extent not publicly disclosed by
DDR; but confidential information does not include data distributed to
the public in accordance will applicable law).\78\
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\78\ Rulebook, Ex. HH, app. A, sec. 8; see also Disclosure
Document, Ex. D6, sec. 5 (DDR's privacy and confidentiality policies
and procedures).
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D. Fees
The application includes DDR's fee schedules.\79\ There are two
types of fees, Position Maintenance Fees and Account Management
Fees.\80\ DDR charges a monthly ``Position Maintenance Fee,'' based on
the number of positions open at any time during the applicable month
and which decreases as the number of open positions increases on a
tiered basis.\81\ Position count includes positions even if terminated
or exited prior to the month end.\82\ Platforms, as that term is
defined by Commission rules,\83\ are not charged position maintenance
fees.\84\ For a position where a clearing agency (``Clearer'') is a
counterparty, the Clearer shall be responsible for the Position
Maintenance Fee, less a 75% reduction.\85\ For all other positions, the
Reporting Side, as that term is defined by Commission rules,\86\ will
be responsible for Position Maintenance Fees.\87\ For entities grouped
as a single account with subaccounts (``Grouped Accounts''), positions
will be aggregated for purposes of determining position count threshold
and to determine the applicable tiered Position Maintenance Fees.\88\
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\79\ See Ex. M. Additionally, DDR provides a fee schedule for
DDR Users on its website at https://www.dtcc.com/derivatives-services/global-trade-repository/gtr-us.
\80\ See Ex. M.
\81\ The Position Maintenance Fees only apply for a position
count of five hundred or more open positions during any month. See
id. For examples of the calculation of the Position Maintenance Fee,
see Annex A to Exhibit M of the application.
\82\ See Ex. M.
\83\ See 17 CFR 242.900(v) (defining ``platform'' as a national
securities exchange or security-based swap execution facility that
is registered or exempt from registration).
\84\ See Ex. M.
\85\ See id.
\86\ See 17 CFR 242.900(gg) (defining ``reporting side'' as the
side of a security-based swap identified by Rule 901(a)(2) as having
the duty to report the transaction).
\87\ See Ex. M.
\88\ See id.
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In addition to the Position Maintenance Fee, the application
indicates that DDR will charge an annual ``Account Management Fee,''
currently set at $1,200.00, that will apply to all accounts and will be
prorated in the year the account is opened.\89\ Accounts may be set up
on an individual entity basis or, in certain instances, as Grouped
Accounts, such as a corporate family \90\ that chooses to structure its
account as a single account with subaccounts for affiliates or an asset
manager that chooses to structure its account as a single account with
subaccounts for its managed funds. Grouped Accounts will be charged one
Account Management Fee.\91\
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\89\ See id.
\90\ DDR organizes its users into families (each, a ``Family'')
as directed by the users (through User Agreements or in such other
manner as designated by DDR from time to time) that desire to be so
organized. See Rulebook, Ex. HH, app. A, sec. 2.
\91\ See id.
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DDR's fee policy further provides that users will have the option
to elect to enter into a long-term commitment for a period ending
December 31, 2024 (``Long Term Commitment''), which would reduce the
applicable Position Maintenance Fee and Account Management Fee by ten
percent, exclusive of tax, for the duration of the Long-Term
Commitment.\92\ If the Long Term Commitment is terminated prior to the
end of the applicable Long Term Commitment period, DDR explains that
the non-Clearer User will be subject to an early termination fee equal
to: (a) The difference between the total amount of fees due after
application of the Long Term Commitment incentive and the total amount
of fees that would have been due during the applicable portion of the
Long Term Commitment period had no incentive been provided (``Total
Incentive Provided''); plus (b) the greater of five percent of the
Total Incentive Provided or $500.00.\93\
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\92\ See id.
\93\ See id.
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E. Recordkeeping
The DDR Rulebook provides that DDR will maintain all information as
required by applicable law as well as maintain swap and security-based
swap data throughout the existence of the swap and security-based swap
and for 15 years following termination of the swap or security-based
swap or as otherwise required by applicable regulations.\94\ The
records will be readily accessible throughout the life of a swap or
security-based swap and for 5 years following its termination and shall
be in an electronic format that is non-rewriteable and non-
erasable.\95\ For the remainder of the retention period, the swap or
security-based swap record will be retrievable within 3 business
days.\96\ In the event DDR ceases doing business or ceases to be a
registered or designated trade repository it shall continue, for a
period of not less than five (5) years or upon transfer to the
Designated Regulator or its designee or another registered or
designated trade repository for that jurisdiction, to preserve,
maintain, and make accessible to each Designated Regulator or its
designee, the records and data required by Applicable Regulation in
accordance with DDR's Wind-Down Policies and Procedures document.\97\
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\94\ Rulebook, Ex. HH, sec. 1.4.1.
\95\ Id.
\96\ Id.
\97\ Id.
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[[Page 8982]]
F. Disclosure
DDR publishes a disclosure document to provide a summary of
information regarding its service offerings and the SBS data it
maintains.\98\ Specifically, the disclosure document sets forth a
description of the following: (i) A description of access to services
offered and swap data maintained; (ii) criteria for those seeking to
connect to or link with its SDR; (iii) criteria for those seeking to
connect to or link with DDR systems; (iv) policies and procedures with
respect to DDR systems safeguards; (v) policies and procedures related
to privacy and confidentiality; (vi) policies and procedures regarding
its non-commercial and commercial use of transaction data; \99\ (vii)
procedures for dispute resolution; (viii) fees, rates, dues and other
charges; and (ix) governance arrangements.\100\
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\98\ See Disclosure Document, Ex. D6.
\99\ See also Rulebook, Ex. HH, sec. 6.3 (``As part of the SDR
Services, DDR receives and collects swap and security-based swap
data in the ordinary course of its business from various Market
Participants and registered entities for the purpose of maintaining
a centralized recordkeeping facility for swaps and security-based
swaps. The collection and maintenance of this data is designed to
enhance the transparency, promote standardization and reduce
systemic risk by making this data available to regulators and the
public pursuant to Applicable Law. Therefore, access to data
maintained by DDR to Market Participants is generally prohibited,
except to either counterparty to that particular swap or security-
based swap, such counterparty's authorized third party service
providers or other parties specifically authorized by the User or
counterparty pursuant to Rule 1.3 or 6.4, or to other regulators or
entities in accordance with Rule 6.5 below. DDR shall not, as a
condition of the reporting of swap or security-based swap
transaction data, require a Reporting Party to consent to the use of
reported data for commercial or business purposes. DDR shall not
make commercial use of real-time swap data prior to its public
dissemination.'').
\100\ See id.
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G. Regulatory Reporting and Public Dissemination
As a registered SDR, DDR would carry out an important role in the
regulatory reporting and public dissemination of SBS transactions. As
noted above, DDR has stated that it intends to rely on the no-action
statement included in the ANE Adopting Release for the period set forth
in the ANE Adopting Release with respect to any SBS asset class or
classes for which it intends to accept transaction reports.\101\
Therefore, DDR does not need to include materials in its application
explaining how it would comply with the provisions of the SBS Reporting
Rules noted in the no-action statement.\102\ Instead, DDR may rely on
its discussion about how it complies with comparable CFTC requirements
pertaining to regulatory reporting and public dissemination of swap
transactions.
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\101\ See supra note 25 and accompanying text.
\102\ However, the DDR application includes provisions
explaining how DDR would require users to identify SBS, as required
by Rule 901(c)(1) of Regulation SBSR. See Exhibit HH2, sec. 4.4
(regarding Unique Product Identifiers). The DDR application also
includes a provision explaining how DDR would comply with a
condition to the no-action statement included in the ANE Adopting
Release. See Exhibit GG2, sec. 15.2.3.2 (providing, in the case of a
credit security-based swap, for dissemination of a capped notional
size of $5 million if the true notional size of the transaction is
$5 million or greater).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning DDR's Form SDR, including whether DDR has
satisfied the requirements for registration as an SDR and as a SIP.
Commenters are requested, to the extent possible, to provide empirical
data and other factual support for their views. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/proposed.shtml); or
Send an email to [email protected]. Please include
File Number SBSDR-2020-01 on the subject line.
Paper Comments
Send paper comments to Secretary, Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions
should refer to File Number SBSDR-2020-01.
To help the Commission process and review your comments more
efficiently, please use only one method of submission. The Commission
will post all comments on the Commission's internet website (https://www.sec.gov/rules/other.shtml).
Copies of the Form SDR, all subsequent amendments, all written
statements with respect to the Form SDR that are filed with the
Commission, and all written communications relating to the Form SDR
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for website viewing and printing in the
Commission's Public Reference Section, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SBSDR-2020-01 and should be
submitted on or before March 3, 2021.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02755 Filed 2-9-21; 8:45 am]
BILLING CODE 8011-01-P
