Reporting and Information Requirements for Derivatives Clearing Organizations, 53664-53702 [2023-16591]
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Parts 39 and 140
RIN 3038–AF12
Reporting and Information
Requirements for Derivatives Clearing
Organizations
Commodity Futures Trading
Commission.
ACTION: Final rule.
AGENCY:
The Commodity Futures
Trading Commission (Commission) is
amending certain reporting and
information regulations applicable to
derivatives clearing organizations
(DCOs). These amendments, among
other things, update information
requirements associated with
commingling customer funds and
positions in futures and swaps in the
same account, revise certain daily and
event-specific reporting requirements in
the regulations, and codify in an
appendix the fields that a DCO is
required to provide on a daily basis
under the regulations. In addition, the
Commission is adopting amendments to
certain delegation provisions in its
regulations.
SUMMARY:
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DATES:
Effective date: The effective date for
this final rule is September 7, 2023.
Compliance date: DCOs must comply
with the amendments to § 39.19 and
appendix C by February 10, 2025; DCOs
must comply with the amendments to
all other rules by September 7, 2023.
FOR FURTHER INFORMATION CONTACT:
Eileen A. Donovan, Deputy Director,
(202) 418–5096, edonovan@cftc.gov;
Parisa Nouri, Associate Director, (202)
418–6620, pnouri@cftc.gov; August A.
Imholtz III, Special Counsel, (202) 418–
5140, aimholtz@cftc.gov; or Gavin
Young, Special Counsel, (202) 418–
5976, gyoung@cftc.gov; Division of
Clearing and Risk, Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street NW,
Washington, DC 20581; Theodore Z.
Polley III, Associate Director, (312) 596–
0551, tpolley@cftc.gov; or Elizabeth
Arumilli, Special Counsel, (312) 596–
0632, earumilli@cftc.gov; Division of
Clearing and Risk, Commodity Futures
Trading Commission, 77 West Jackson
Boulevard, Suite 800, Chicago, Illinois
60604.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Amendments to § 39.13(h)(5)
III. Amendments to § 39.15(b)(2)
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IV. Amendments to § 39.18
V. Amendments to § 39.19(c)
A. Daily Reporting of Variation Margin and
Cash Flows—§ 39.19(c)(1)(i)(B) and (C)
B. Codifying the Existing Reporting Fields
for the Daily Reporting Requirements in
New Appendix C to Part 39
C. Additional Reporting Fields for the
Daily Reporting Requirements—
§ 39.19(c)(1)
D. Non-Substantive and Technical Edits to
Appendix C to Part 39
E. Individual Customer Account
Identification Requirements—
§ 39.19(c)(1)(i)(A) and (D)
F. Daily Reporting of Margin Model
Backtesting—§ 39.19(c)(1)(i)
G. Fully Collateralized Positions—
§ 39.19(c)(1)(ii)
H. Voluntary Reporting—§ 39.19(c)(1)(iii)
I. Reporting Change of Control of the
DCO—§ 39.19(c)(4)(ix)(A)(1)
J. Reporting Changes to Credit Facility
Funding and Liquidity Funding
Arrangements—§ 39.19(c)(4)(xii) and
(xiii)
K. Reporting Issues With Credit Facility
Funding Arrangements, Liquidity
Funding Arrangements, and Custodian
Banks—§ 39.19(c)(4)(xv)
L. Reporting of Updated Responses to the
Disclosure Framework for Financial
Market Infrastructures—
§ 39.19(c)(4)(xxv)
VI. Amendments to § 39.21(c)
VII. Amendments to § 39.37(c) and (d)
VIII. Amendments to § 140.94(c)(10)
IX. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Considerations
D. Antitrust Considerations
I. Background
In January 2020, the Commission
adopted amendments to its part 39
regulations in order to, among other
things, update DCO reporting
requirements.1 The Commission
subsequently became aware of issues
with the amended regulations that
would benefit from further change or
clarification. Thus, in November 2022,
the Commission proposed to amend
certain reporting and information
regulations applicable to DCOs to
address those issues.2
The Commission received a total of 11
substantive comment letters in response
to the proposal.3 After considering the
1 Derivatives Clearing Organization General
Provisions and Core Principles, 85 FR 4800 (Jan. 27,
2020), available at https://www.federalregister.gov/
documents/2020/01/27/2020-01065/derivativesclearing-organization-general-provisions-and-coreprinciples.
2 Reporting and Information Requirements for
Derivatives Clearing Organizations, 87 FR 76698
(Dec. 15, 2022), available at https://
www.federalregister.gov/documents/2022/12/15/
2022-26849/reporting-and-informationrequirements-for-derivatives-clearing-organizations.
3 The Commission received comment letters
submitted by the following: Better Markets; Chris
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comments, the Commission is largely
adopting the rules as proposed,
although there are some proposed
changes that the Commission has
determined to either revise or decline to
adopt.
In the discussion below, the
Commission highlights topics of
particular interest to commenters and
discusses comment letters that are
representative of the views expressed on
those topics. The discussion does not
explicitly respond to every comment
submitted; rather, it addresses the most
significant issues raised by the proposed
rulemaking and analyzes those issues in
the context of specific comments.
II. Amendments to § 39.13(h)(5)
Regulation § 39.13(h)(5) requires a
DCO to have rules that require its
clearing members to maintain current
written risk management policies and
procedures; ensure that it has the
authority to request and obtain
information and documents from its
clearing members regarding their risk
management policies, procedures, and
practices; and require its clearing
members to make information and
documents regarding their risk
management policies, procedures, and
practices available to the Commission
upon the Commission’s request. It also
requires the DCO to review the risk
management policies, procedures, and
practices of each of its clearing members
on a periodic basis.
It is the Commission’s view that these
requirements are unnecessary for
clearing members that clear only fully
collateralized positions, as fully
collateralized positions do not expose
the DCO to any credit or default risk
stemming from the inability of a
clearing member to meet a margin call
or a call for additional capital.
Therefore, and consistent with other
amendments to part 39 to address fully
collateralized positions,4 the
Commission proposed new
§ 39.13(h)(5)(iii), which would provide
that a DCO that clears fully
collateralized positions may exclude
from the requirements of paragraphs
(h)(5)(i) and (ii) those clearing members
that clear only fully collateralized
Barnard; CME Group, Inc. (CME); Eurex Clearing
AG (Eurex); Futures Industry Association (FIA); The
Global Association of Central Counterparties
(CCP12); Google Cloud (Google); Intercontinental
Exchange, Inc. (ICE); Nodal Clear, LLC (Nodal); The
Options Clearing Corporation (OCC); and World
Federation of Exchanges (WFE). All comments
referred to herein are available on the Commission’s
website, at https://comments.cftc.gov/
PublicComments/CommentList.aspx?id=7343.
4 See 85 FR 4800, 4803–4805.
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positions.5 The requirements would still
apply to clearing members that clear
fully collateralized positions but also
clear margined products.6 The
Commission did not receive any
comments on the proposed changes to
§ 39.13(h)(5), and is therefore adopting
the changes as proposed.
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III. Amendments to § 39.15(b)(2)
Regulation § 39.15(b)(2) sets forth
procedures a DCO must follow to obtain
Commission approval to commingle
customer positions and associated funds
from two or more of three separate
account classes—futures and options,
foreign futures and options, and
swaps—in either a futures or cleared
swaps customer account. The
Commission proposed several
amendments to § 39.15(b)(2) to better
reflect the information that the
Commission needs to evaluate such a
request.
OCC, Eurex, ICE, and Better Markets
supported the proposal. OCC stated that
the changes appear reasonably
calibrated to achieve the Commission’s
policy objectives while providing useful
guidance to DCOs on the required
contents of a request. Eurex added that
the proposed changes appropriately
streamline the procedures and will help
focus both DCOs seeking such relief,
and the Commission in its review of
such request for relief, on the
information most relevant to a DCO’s
request.
Furthermore, recognizing that futures
and swaps are typically commingled to
allow for portfolio margining, the
Commission proposed to add new
§ 39.15(b)(2)(vii) to require that a DCO
provide an express confirmation that
any portfolio margining will be allowed
only as permitted under § 39.13(g)(4),
which allows portfolio margining of
positions only if the price risks with
respect to such positions are
‘‘significantly and reliably correlated.’’
Although ICE generally supported the
proposed changes to § 39.15(b)(2), ICE
stated that the express confirmation
under proposed new § 39.15(b)(2)(vii) is
unnecessary, as § 40.5 already requires
5 By adopting this regulation, this requirement
would be consistent with and would supersede a
related interpretation issued by the Division of
Clearing and Risk. See CFTC Letter No. 14–05 (Jan.
16, 2014).
6 The Commission also proposed to combine
paragraphs (h)(5)(i)(B) and (C) of § 39.13, which
require, respectively, that a DCO have rules that:
ensure that it has the authority to request and
obtain information and documents from its clearing
members regarding their risk management policies,
and require its clearing members to make such
information and documents available to the
Commission upon request. These revisions are
purely technical and are not meant to alter the
requirements in any way.
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that a DCO analyze its proposal for
compliance with the Commodity
Exchange Act (CEA) and Commission
regulations. The Commission notes,
however, that because the DCO’s
submission would address commingling
but not necessarily portfolio margining,
the DCO’s analysis may not take
§ 39.13(g)(4) into account. Thus, the
Commission does not want approval of
the submission to be misinterpreted as
approval of the DCO’s portfolio
margining as well. Because a
submission under § 40.5 is deemed
approved by the Commission without
any written form of approval, requiring
the DCO to provide the express
confirmation in § 39.15(b)(2)(vii) is
meant to address that.
In response to the Commission’s
request for comment as to whether there
is additional information that would be
helpful to market participants and the
public in evaluating a DCO’s
commingling rule submission, ICE does
not believe that the Commission should
require disclosure of additional
information. ICE stated that the
information already required, as
proposed to be modified, will provide
market participants with sufficient
information to evaluate a commingling
proposal.
In general, Better Markets believes the
proposal would strengthen the existing
requirements by requiring a DCO to
provide not only an analysis of the risk
characteristics of the products but also
an analysis of any risk characteristics of
products to be commingled that are
unusual in relation to the other
products the DCO clears, as well as how
it plans to manage any identified risks.
Better Markets stated that it supports
this aspect of the proposal because
adding the phrase ‘‘unusual in relation
to’’ in § 39.15(b)(2)(ii) will allow the
Commission and the public to better
understand any increased risk posed to
the DCO or its customers by the
commingling of products that otherwise
would be held in separate accounts.
Better Markets further stated that this
additional requirement will better
enable the Commission to understand
the DCO’s ability to manage those risks.
In response to a request for comment as
to whether there is a better way to
articulate this concept, Better Markets
argued that the Commission should go
a step further and specify that the
analysis should cover products with
margining, liquidity, default
management, pricing, and volatility
characteristics that differ from those
currently cleared by the DCO. Better
Markets believes this discussion is
critical in the ever-changing derivatives
markets, where new derivatives
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products are constantly being
introduced. Better Markets urged the
Commission to be forward-looking in its
approach to receiving as much
information as possible from a DCO’s
‘‘unusual in relation to’’ analysis to
determine whether to allow a DCO to
commingle products in a single
customer account. The Commission is
persuaded that this provision should be
more specific, and is therefore adding to
§ 39.15(b)(2)(ii) the requirement that a
DCO’s analysis address any
characteristics that are unusual in
relation to the other products cleared by
the DCO, ‘‘such as margining, liquidity,
default management, pricing, or other
risk characteristics.’’ The Commission
believes that this information would
better assist the Commission in
evaluating a DCO’s request to
commingle customer positions and its
ability to manage any identified risks.
The Commission is otherwise adopting
the amendments to § 39.15(b)(2) as
proposed, without any changes.7
IV. Amendments to § 39.18
Regulation § 39.18(g)(1) requires that a
DCO promptly notify staff of the
Division of Clearing and Risk (Division)
of any hardware or software
malfunction, security incident, or
targeted threat that materially impairs,
or creates a significant likelihood of
material impairment of, automated
system operation, reliability, security, or
capacity. The Commission proposed to
amend § 39.18(g)(1) to eliminate the
materiality threshold, requiring DCOs to
report all such events regardless of their
magnitude. Better Markets supported
the proposal to remove the materiality
threshold, stating that both the
Commission and DCOs would benefit
from expanded reporting of such
incidents. CME, OCC, ICE, Eurex,
Nodal, CCP12, Google, and WFE
opposed the proposal.
CCP12, CME, Eurex, ICE, Nodal, OCC,
and WFE stated that the removal of the
materiality threshold would lead to a
significant increase in the number of
reportable events, including events
which have little or no impact on a
DCO’s operations or on market
participants, or which are mitigated
well before any impact, and thus of little
or no value as the subject of a required
notification. CCP12, CME, Eurex,
Google, ICE, Nodal, OCC, and WFE
commented that such an increase in
reportable incidents would burden both
DCOs and the Commission, and would
7 For a description of the proposed amendments
to § 39.15(b)(2), see Reporting and Information
Requirements for Derivatives Clearing
Organizations (Dec. 15, 2022), supra note 2, at
76699–76700.
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divert attention and resources away
from incidents that deserve greater focus
and planning, with little corresponding
benefit to the Commission, the
protection of market participants, or the
risk management practices of DCOs.
CCP12, CME, Google, and OCC further
asserted that the proposal is
inconsistent with notification regimes in
analogous contexts, including similar
Commission rules and reporting
obligations to other agencies and
authorities.
CCP12, CME, Eurex, ICE, Nodal, and
OCC further stated that the Commission
underestimated the increase in reporting
obligations as a result of the proposal to
eliminate the materiality threshold;
CCP12, CME, and OCC similarly stated
that the Commission underestimated the
costs of such notifications. Such
underestimates would, according to
commenters, distort the Commission’s
cost-benefit considerations. The
Commission received additional
comments in opposition to the proposed
removal of the materiality threshold,
including statements regarding the costs
and impacts on third-party contracts,
the value of allowing DCOs to use their
expertise to determine which events are
material, and a request to alternatively
allow for quarterly submission of
reports for incidents deemed not
material.
After considering the comments
received, the Commission recognizes
the concerns raised therein and declines
at this time to adopt the proposal to
remove the materiality threshold for the
reporting of exceptional events under
§ 39.18(g). Better Markets supported the
removal of the materiality threshold,
stating that events might be material
even when they do not have any effect
on measurements often used to
determine materiality, and that both the
Commission and DCOs would benefit
from clear reporting standards which
would promote consistency in reporting
across DCOs. However, given the
rationale of comments opposed to the
removal of the materiality threshold as
described above, including arguments
regarding increased cost, lack of
informational benefit, and the volume of
reports which would be required if the
threshold were removed, and the lack of
opportunity to solicit comment on
potentially less costly or voluminous
alternatives suggested by commenters,
the Commission declines to move
forward with the proposal at this time.
The Commission understands that
removing the materiality threshold
altogether could result in a significant
increase in the number of reportable
events, including events which have
little or no impact on a DCO’s
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operations, or which are mitigated well
before any impact, and thus could be of
little or no value as the subject of a
required notification. The Commission
will continue to evaluate the
effectiveness of the existing reporting
standard in generating uniform and
timely notification regarding events
where notification would be of value to
the Commission and will provide
additional guidance, or further modify
the standard, as appropriate. Better
Markets also commented that the
requirement in § 39.18(g) that notice of
exceptional events be given ‘‘promptly’’
is vague and should be amended to a
more specific timeframe in order to
avoid undue delay in reporting. The
Commission notes, however, that it did
not propose to amend this requirement,
as Commission staff has not had any
issues with the timing of the notices that
are made.
The Commission also proposed to
amend § 39.18(g)(1) by adding ‘‘operator
error’’ to the list of events that would
require prompt notification to the
Division. Better Markets expressed
support for the addition of ‘‘operator
error’’ to the list of potentially
reportable events, and WFE, CME, OCC,
and Nodal expressed opposition. Better
Markets stated that ‘‘operator error’’ is
appropriately included as an additional
subject of reporting because such errors
may impact or potentially impact the
operation, reliability, security, or
capacity of a DCO’s automated systems.
WFE, CME, OCC, CCP12, and Nodal
expressed concern about the potential
breadth of the term ‘‘operator error,’’
which is not defined in the regulation
and which might be read to include de
minimis, routine errors which would
require reporting of events that have
little or no impact on clearing and
settlement functions and for which
effective procedures are already in place
to mitigate any potential impacts. OCC
further stated that ‘‘operator error’’
might be read to include actions of
clearing members or their agents and
employees because they are responsible
for providing information via
applications, and OCC suggested adding
certainty to the term ‘‘operator error’’ by
providing examples.
After considering the comments
received, the Commission recognizes
the concerns raised therein and declines
to adopt the proposal to include
‘‘operator error’’ to the list of events that
would require prompt notification to the
Division under § 39.18(g)(1). The
Commission acknowledges that, as
described by Better Markets, operator
errors may impact a DCO’s operations in
the same way as other events described
in § 39.18(g)(1). However, the
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Commission believes that such operator
errors are already required to be
reported under § 39.18(g)(1) as a
‘‘security incident,’’ which, as defined
by § 39.18(a), is a cybersecurity or
physical security event that actually
jeopardizes or has a significant
likelihood of jeopardizing automated
system operation, reliability, security, or
capacity, or the availability,
confidentiality or integrity of data. The
proposed addition of ‘‘operator error’’
was intended to specify this obligation
more clearly. In light of comments
which indicate that the proposal would
result in confusion, particularly as to
scope, the Commission will not adopt
the proposal but will consider providing
guidance, or further modifying
§ 39.18(g)(1), as appropriate.
The Commission further proposed to
redesignate existing paragraph (g)(2) of
§ 39.18 as new paragraph (g)(3) (without
any further revisions), and to move from
existing paragraph (g)(1) to paragraph
(g)(2) the requirement to report security
incidents or threats (and not just
‘‘targeted’’ threats). Thus, as proposed,
new § 39.18(g)(2) would require that a
DCO promptly notify the Division of
any security incident or threat that
compromises or could compromise the
confidentiality, availability, or integrity
of any automated system or any
information, services, or data, including,
but not limited to, third-party
information, services, or data, relied
upon by the DCO in discharging its
responsibilities.
Among comments received regarding
this proposed amendment, OCC, Google,
and ICE expressed opposition, and
Better Markets commented in favor.
Better Markets stated that non-targeted
cyber attacks can be just as destructive
as targeted attacks, and thus the
reporting of non-targeted attacks may
enhance the ability of the CFTC to
assess emerging threats and alert DCOs.
OCC, Google, and ICE stated that the
inclusion of the language ‘‘could
compromise’’ is overly broad and
ambiguous and would dramatically
increase the reach and burdens of the
rule without providing regulatory
benefit. OCC recommended removing
‘‘could compromise’’ from the proposal
and stated that, as proposed,
§ 39.18(g)(2) would increase a DCO’s
costs of obtaining third-party services
and may lead to termination of existing
third-party relationships because of the
additional costs and potential liability
facing third parties as a result of the
proposal. Google also expressed
opposition to the removal of the
‘‘targeted’’ qualifier for threats, stating
that it would result in overbroad and
inefficient reporting. Google
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additionally recommended that
paragraph (g)(2) also incorporate a
probabilistic reporting trigger by, for
example, replacing ‘‘could’’ with
‘‘reasonably likely to’’ in order to
exclude speculative incidents. After
considering the comments received, and
in light of the broad scope of attacks
which comments indicate would be
required to be reported under the
proposal, the Commission recognizes
the concerns raised therein and declines
to adopt new § 39.18(g)(2) as proposed
but will consider providing guidance, or
further modifying § 39.18(g), as
appropriate.
Finally, in connection with the
proposed amendments to § 39.18(g), the
Commission proposed to amend
§ 39.18(a) to define ‘‘hardware or
software malfunction’’ and ‘‘automated
system.’’ WFE, CME, OCC, and CCP12
expressed opposition to the proposed
definition of ‘‘automated system,’’ and
OCC, CCP12, Eurex and Nodal
expressed opposition to the proposed
definition of ‘‘hardware or software
malfunction.’’ WFE, CME, OCC, and
CCP12 stated that the definition of
‘‘automated system’’ is broad and
overinclusive, and that most of a DCO’s
ancillary support systems would fall
within the definition, resulting in a
significant increase in reporting
obligations under § 39.18(g) that are not
related to a DCO’s core clearing and
settlement functions. OCC, CCP12,
Eurex, and Nodal expressed opposition
to the definition of ‘‘hardware or
software malfunction,’’ stating that it is
overly broad and would result in a
significant increase in reach and burden
of reporting requirements with little
corresponding regulatory value to the
Commission. OCC recommended that
both definitions be refined to avoid
reporting of incidents that pose no
significant risk to a DCO’s core
functions and which do not impact or
narrowly impact market participants.
OCC further recommended limiting the
definitions to systems or events that
impact a DCO’s market activities that
are subject to the Commission’s
jurisdiction. After considering the
comments received, the Commission
recognizes the concerns raised therein
and declines to adopt the proposed
definitions for ‘‘hardware or software
malfunction’’ and ‘‘automated system’’
but will consider providing guidance
defining these terms, or further
modifying § 39.18(g), as appropriate.
Based on the concerns raised in the
comments received, the Commission is
not adopting any of the proposed
changes to § 39.18(g). Although the
Commission continues to believe that
the considerations that motivated the
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initial proposal are valid, it also
recognizes the concerns and alternatives
raised by commenters as requiring
additional analysis that precludes
adopting the proposal at this time. To
that end, the Commission may choose to
instead provide guidance to address
these considerations, or to propose new
modifications to § 39.18(g) reflecting
both the motivations for the proposed
rule and the concerns raised by
commenters.
V. Amendments to § 39.19(c)
A. Daily Reporting of Variation Margin
and Cash Flows—§ 39.19(c)(1)(i)(B) and
(C)
Regulation § 39.19(c)(1) requires a
DCO to report to the Commission on a
daily basis initial margin, variation
margin (VM), cash flow, and position
information for each clearing member,
by house origin, by each customer
origin, and by individual customer
account. The Commission proposed to
amend § 39.19(c)(1)(i)(B) and (C) to
remove the requirement that a DCO
report daily VM and cash flows by
individual customer account.8
FIA, CCP12, Eurex, OCC, and ICE
supported the proposal; no commenters
opposed it. CCP12 and ICE stated that
many DCOs do not possess VM and cash
flow information at the customer level.
OCC confirmed that it does not collect
VM and cash flow information at the
individual customer account level in the
ordinary course of business. FIA stated
that DCOs would need to develop and
implement new systems, processes, and
controls, at significant cost, to
accurately report customer level VM
and cash flow information. FIA stated
that because clearing members that are
futures commission merchants (FCMs)
currently do not provide DCOs with
daily customer level VM and cash flow
information, FCM clearing members
would incur substantial upfront and
ongoing costs to provide this
information to DCOs. OCC stated that
collecting this information would
impose significant costs on OCC and its
clearing members. FIA stated that daily
reporting of customer VM and cash flow
information would not be of meaningful
benefit to the Commission, DCOs,
clearing members or market
participants, particularly when weighed
8 DCOs currently are not reporting VM and cash
flow information by each individual customer
account because the Division issued a no-action
letter addressing compliance with the amended
requirements in § 39.19(c)(1). See CFTC Letter No.
21–01 (Dec. 31, 2020); see also CFTC Letter No. 21–
31 (Dec. 22, 2021); CFTC Letter No. 22–20 (Dec. 19,
2022). The amendments to § 39.19(c)(1)(i)(B) and
(C) eliminate the requirement for which additional
time was provided in the staff letter.
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against the associated costs. OCC
believes that because it engages in VM
netting at the customer origin level, VM
and cash flow information at the
individual customer account level
would not necessarily reflect OCC’s
actual exposure to its clearing members.
In response to the Commission’s
request for comment on whether there
are certain products or market segments
where it may be appropriate to retain
customer-level reporting requirements,
FIA and ICE stated that there is no basis
to differentiate between product
categories, with FIA emphasizing the
cost to DCOs and FCMs of developing
new reporting processes to report VM
and cash flow information by individual
customer account, and the limited
marginal benefit of reporting such
information. Because many DCOs
currently do not receive VM and cash
flow information at the customer level,
and a requirement to collect this
information would impose significant
costs on DCOs, the Commission is
removing this requirement by adopting
the amendments to § 39.19(c)(1)(i)(B)
and (C) as proposed.
B. Codifying the Existing Reporting
Fields for the Daily Reporting
Requirements in New Appendix C to
Part 39
The Commission proposed to add a
new appendix to part 39 of the
Commission’s regulations that would
codify the existing reporting fields for
the daily reporting requirements in
§ 39.19(c)(1). Until now, the
instructions, reporting fields, and
technical specifications for daily
reporting have been contained in the
Reporting Guidebook, which the
Division provides to DCOs to facilitate
reporting pursuant to § 39.19(c)(1).9 The
Commission proposed to add a new
appendix C to part 39 that would set out
the relevant contents of the Reporting
Guidebook, specifically the reporting
fields for which a DCO is required to
provide data on a daily basis, as well as
additional optional data that DCOs may
provide.10 The Commission did not
propose to codify the non-substantive
technical and procedural aspects of the
Reporting Guidebook that address the
9 Commodity Futures Trading Commission
Guidebook for Part 39 Daily Reports, Version 1.0.1,
Dec. 10, 2021 (Reporting Guidebook).
10 Appendix C specifies whether a field is
mandatory, optional, or conditional. In this context,
fields that are ‘‘conditional’’ would be reported by
the DCO if it collects or calculates the particular
data element and uses the data element in the
normal course of its risk management and
operations, or if the field is subject to any row-level
validation rule described in the Reporting
Guidebook.
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format and manner in which DCOs
provide this information.11
Eurex, ICE, CCP12, and OCC
supported the proposal to codify the
existing daily reporting fields in new
appendix C to part 39. Better Markets
opposed the proposal, arguing that
codifying the Reporting Guidebook will
make it more difficult for the
Commission to quickly update the
reporting fields in response to new
products or other financial innovations.
In response to Better Markets, the
Commission notes that it has drawn on
its experience of more than a decade
since § 39.19(c)(1) was first adopted to
make certain it will receive the data it
intended to be provided under this
provision. However, in the unlikely
event that the Commission identifies
additional data it needs, the
Commission could, if necessary, request
from a DCO ‘‘information related to its
business as a clearing organization,
including information relating to trade
and clearing details’’ pursuant to
§ 39.19(c)(5)(i). The Commission is
therefore adopting the proposal to add
new appendix C to part 39 of the
Commission’s regulations, to codify the
existing reporting fields in the Reporting
Guidebook, which includes both
required and optional fields.12
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C. Additional Reporting Fields for the
Daily Reporting Requirements—
§ 39.19(c)(1)
The Commission proposed to include
in appendix C several new fields that do
not appear in the Reporting Guidebook
but would further implement the
existing daily reporting requirements
under § 39.19(c)(1). Eurex generally
supported the proposal, while CME
opposed it, stating that the Commission
severely underestimated the time and
costs associated with adding the
proposed new fields, and that the costs
to DCOs substantially outweigh the
benefits that additional reporting
provides to the Commission. The new
fields and comments received are
discussed in greater detail below.
1. Risk Metrics
The Commission proposed to include
in appendix C a series of new fields
applicable only to interest rate swaps,
including the delta ladder, gamma
ladder, vega ladder, zero rate curves,
and yield curves that a DCO uses in
11 The Division will issue a new version of the
Reporting Guidebook that will contain only the
non-substantive technical and procedural aspects to
facilitate daily reporting by DCOs.
12 The Commission is adding to § 39.19(c)(1)(i) a
reference to appendix C to specify that daily reports
are required to be submitted in accordance with the
data fields set forth in the appendix.
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connection with managing risks
associated with interest rate swap
positions. The Commission did not
receive any comments on this proposal
and therefore is adopting these fields as
proposed. However, the Commission is
amending the title of this section of
appendix C to change it from ‘‘Greek
Ladder Reporting’’ to ‘‘Risk Metric
Ladder Reporting’’, which better reflects
the contents of the section, since rate
and yield curves technically are not
‘‘Greeks,’’ and to account for the
possible addition of other non-Greek
risk metrics in the future.
2. Timing of Variation Margin Calls and
Payments
The Commission proposed to require
a DCO to report timing information
about VM calls and payments, including
the time and amount of each VM call to
each clearing member, the time and
amount that VM is received from each
clearing member, and the time and
amount that VM is paid to each clearing
member. There were no comments in
support of the proposal.
CME, ICE, and OCC opposed the
proposal, arguing that it would impose
costs on DCOs and settlement banks
because they would need to build
systems for daily automated reporting of
payment flow timestamps. ICE and OCC
stated that the manner in which DCOs
make and collect a margin call is unique
to each DCO based on its own processes
and, as a result, the information that
would be reported under these proposed
fields only would reflect individual
DCOs’ practices, with the information
being too bespoke to be useful for
surveillance. OCC further stated that
clearing member payments to or from
OCC at settlement times are made on a
net basis, taking into account multiple
categories of pay or collect obligations,
in addition to the mark-to-market
amounts. CME stated that not all
settlement banks communicate with
DCOs in automated and digestible file
formats that can be used for daily
reporting. Echoing comments by CME,
CCP12 recommended that the
Commission consider whether this
proposal would require settlement
banks to develop and deploy automated
systems to communicate timestamps to
DCOs, which could make compliance
with this requirement unnecessarily
complex. CME also stated that the
information would not be useful for the
Commission in real-time monitoring of
DCO liquidity issues because it would
be reported one day later, and because
the timing of payments can vary from
day to day for reasons unrelated to
liquidity issues or other risks to DCOs
or their clearing members. ICE stated
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that specific timing information is
generally irrelevant, so long as the
amounts are paid before the applicable
DCO’s deadline, and that the exact
timing of payments is not indicative of
the DCO’s liquidity position or its
ability to manage liquidity risks.
As an alternative to the proposal,
CME recommended that the
Commission require DCOs to report
when clearing members are sufficiently
late making VM payments that it results
in an impactful delay to the completion
of the settlement cycle. ICE stated that
because the proposal does not account
for different approaches to the payment
and netting of VM, the proposed fields
would need to be revised to reflect the
variety of ways that DCOs deal with VM
payments. CCP12 commented that
reporting VM calls and payment as of
the beginning, middle, and end of the
day would avoid confusion that may
accompany reporting of individual cash
flows, and would simplify DCOs’
reporting obligations.
The Commission understands that
compliance with this requirement
would be unnecessarily complex, given
that the manner in which DCOs make
and collect a margin call is unique to
each DCO based on its own processes.
The Commission is therefore persuaded
by the comments that the timing
information would not be particularly
useful to it and therefore has
determined not to require DCOs to
report this information at this time.
3. Trade Date
The Commission proposed to require
a DCO that clears interest rate swaps,
forward rate agreements, or inflation
index swaps to include in its daily
reports the actual trade date for each
position along with an event
description. CCP12 supported the
proposal, but requested that the
Commission clarify whether the term
‘‘actual trade date’’ refers to the
economically agreed date or the
execution date. CME opposed the
proposal, stating that the proposed
requirement is duplicative of the recent
amendments to part 45 of the
Commission’s regulations, under which
DCOs already provide this information
to the Commission. CME also stated that
numerous dates for these products exist
in the over-the-counter registers, and
requested clarification as to which date
should be reported. The Commission is
adopting the proposal, albeit with one
change. In response to commenters’
requests for clarification, the
Commission is modifying the
description of ‘‘trade date’’ to read, the
‘‘[d]ate a transaction was originally
executed, resulting in the generation of
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a new USI [unique swap identifier]. For
clearing swaps, the date when the DCO
accepts the original swap.’’ In response
to CME’s comment regarding part 45
reporting, the Commission
acknowledges some overlap between the
information DCOs report pursuant to
part 45 and the information reported
pursuant to § 39.19(c)(1), but notes that
the two data streams have different
albeit complimentary regulatory and
supervisory uses within the
Commission,13 and are reported using
different underlying technical
specifications, sometimes with nuanced
differences between substantive or
technical definitions of individual data
points, which then can affect whether
and how the data changes in response
to events, such as a compression
exercise for swaps.
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4. File Completeness
The Commission proposed to require
a DCO to include in its daily reports
information that reflects that the daily
report is complete, with completeness
information submitted either as a
manifest file that contains a list of files
sent by the DCO, or by including the file
number and count information
embedded within each report, where
each Financial Information eXchange
Markup Language (FIXML) file would
indicate its position in the sequence of
files submitted that day, e.g., file 1 of 10.
No commenters opposed the proposal.
Eurex and Nodal supported the proposal
that file completeness be reflected in a
manifest file and opposed the proposal
that files be sequentially numbered to
indicate completeness. Eurex and Nodal
both explained that submitting a
manifest file is more efficient
operationally. Specifically, Eurex noted
that when files are sequentially
numbered to reflect completeness, all of
the files would need to be renumbered
and resubmitted any time a file is added
or removed. Nodal made a similar
observation, and also noted that a
manifest file can be submitted after the
DCO ensures that its reporting for the
day is complete and the DCO confirms
internally that there will be no changes.
OCC stated that sequential file
numbering to indicate completeness is
preferable to requiring a manifest file,
because the former is more efficient
given the manner in which OCC submits
13 The information reported under § 39.19(c)(1) is
intended to ensure that the Division is informed
regarding both the risks that are present at each
DCO as well as the DCO’s management of those
risks, which pursuant to § 39.19(c)(1)(ii) includes
information about the risks associated the futures,
options, swaps, and securities positions cleared at
the DCO, in contrast with the part 45 data, which
includes highly granular trade data related to both
cleared and uncleared swaps.
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its daily reports. OCC requested that the
Commission provide DCOs with the
flexibility to use either a manifest file or
sequential file numbering to indicate
completeness, so that DCOs could use
the method that works best with their
processes.
Although the Commission
acknowledges that for some DCOs, such
as OCC, sequential file numbering to
indicate completeness may be
preferable, the Commission agrees with
Eurex and Nodal that submitting a
manifest file is operationally more
efficient, especially for those DCOs that
submit more complex or voluminous
reports. Similarly, to ensure consistency
and uniformity across all reports
received, the Commission declines to
provide DCOs with the option to choose
between sequential file numbering and
a manifest file to indicate completeness.
Therefore, the Commission is adopting
the proposal to require a DCO to include
in its daily reports a manifest file that
reflects that the daily report is complete.
5. Settlement Information for Contracts
With No Open Interest
The Commission requested comment
on whether it should require that a DCO
provide the current settlement prices
and related information published by
DCMs for futures and options contracts
with no open interest. No commenters
supported this proposal.
CCP12, Nodal, OCC, ICE, and CME
opposed the proposal. CCP12 stated that
DCOs already calculate and report
settlement prices for contracts with no
open interest where they believe those
prices provide a benefit to DCOs
themselves or the marketplace, and
requiring DCOs to report such data for
all contracts with no open interest
would be of questionable value for
analytical or regulatory purposes.
CCP12 recommended that DCOs
continue to be afforded the discretion to
choose to report such information on a
voluntary basis. Nodal stated that, in
addition to being impractical, the
proposal would duplicate information
that DCMs are required to report
pursuant to part 16 of the Commission’s
regulations. CME argued that reporting
data that is unused and not based on
observed open interest would not help
the risk surveillance process because it
does not represent an actual transaction,
and ICE argued that the information
would not be reliable because it is not
based on actual trading activity. OCC
and ICE stated that this information
would be of limited utility, with OCC
adding that this information relates to
contracts that do not impact the DCO’s
risk profile. CME stated that exchanges
and DCOs list new products daily and
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53669
that this reporting requirement would
add complexity to the listing process.
CME also questioned whether the
Commission has the authority to require
this information if it is not clear that
this information is necessary to conduct
oversight of the DCO since it does not
reflect actual trades that are settled or
cleared. Similarly, OCC argued that a
requirement to report such information
could be inconsistent with the scope of
reporting required by DCO Core
Principle L, which requires a DCO to
disclose publicly and to the
Commission daily settlement prices,
volume, and open interest for each
contract settled or cleared by the DCO.
CME noted that an alternative would be
to require reporting of contracts with no
open interest, but without requiring
pricing information.
The Commission is persuaded by the
comments that settlement information
for contracts with no open interest
would not be particularly useful to it,
given that it does not impact a DCO’s
risk profile, among other things.
Therefore, the Commission has
determined not to adopt the proposed
requirement at this time.
D. Non-Substantive and Technical Edits
to Appendix C to Part 39
The Commission has made a variety
of non-substantive and technical edits to
appendix C to part 39. Some of the edits
are intended to ensure that, to the extent
that a requirement appears in multiples
places in appendix C, its title and
description are uniform throughout.
Other edits include the deletion of
duplicate fields, the deletion of surplus
language, formatting instructions, or
technical instructions, or the
replacement of abbreviations with
complete words. Other edits rename
fields or clarify, simplify, or rephrase
descriptions. For example, the
‘‘Universal Product Identifier’’ field is
being renamed ‘‘Unique Product
Identifier’’ (UPI), and its description is
being changed from ‘‘Uniquely
identifies the product of a security using
ISO 4914 standard, Unique Product
Identifier’’ to ‘‘[a] unique set of
characters that represents a particular
swap. The Commission will designate a
UPI pursuant to 17 CFR 45.7.’’ Another
example is that the description for the
Implied Volatility field is being changed
from ‘‘implied volatility’’ to ‘‘[t]he
implied volatility and quotation style
for the contract, typically in natural log
percent or index points.’’
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E. Individual Customer Account
Identification Requirements—
§ 39.19(c)(1)(i)(A) and (D)
Regulation § 39.19(c)(1)(i)(D) requires
the daily reporting of end-of-day
positions for each clearing member, by
house origin and by each customer
origin, and by each individual customer
account. In January 2020, the
Commission amended this provision to
require, among other things, that a DCO
identify each individual customer
account using both a legal entity
identifier (LEI) and any internallygenerated identifier, where available,
within each customer origin for each
clearing member.14 The Commission
intended that this requirement apply to
all instances within § 39.19(c)(1) where
a DCO is required to report information
at the individual customer account
level. However, this may not have been
clear because paragraph (c)(1)(i)(D)
addresses only the reporting of end-ofday positions. Therefore, the
Commission proposed to amend
§ 39.19(c)(1)(i)(A) to clarify that the
requirement that a DCO identify each
individual customer account by LEI and
internally-generated identifier was not
intended to be limited to end-of-day
position reporting under paragraph
(c)(1)(i)(D), but rather to apply to all
instances in § 39.19(c)(1) where a DCO
is required to report information at the
individual customer account level.
Furthermore, the Commission also
proposed a technical change to clarify
that the requirement that a DCO identify
each individual customer account using
both an LEI and any internallygenerated identifier, ‘‘where available,’’
is intended to mean this information is
required, in either case, only if the DCO
has the information associated with an
account.
CCP12, OCC, CME, and Eurex
supported this proposal. Eurex noted
that in Europe there is no requirement
that LEIs be provided to DCOs and that,
consequently, not all Multilateral
Trading Facilities or Approved Trade
Sources transmit LEIs to DCOs. On the
other hand, CME observed that LEI
reporting to DCOs has become more
routine. ICE opposed the requirement
that a DCO identify each individual
customer account by LEI because
extensive systems changes would be
required to add identifiers to the
reportable data, and since DCOs are
unlikely to have customer-level LEI
information, the costs associated with
implementing this requirement
outweigh the benefits. In response to
ICE’s comment, the Commission further
14 85
FR 4800, 4817.
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emphasizes that the requirement that a
DCO identify each individual customer
account using both an LEI and any
internally-generated identifier, ‘‘where
available,’’ is intended to mean this
information is required, in either case,
only when the DCO has the information
associated with an account, and the
information is both maintained and
associated with the account in a
reportable format, such that reporting
will not impose a significant additional
burden on the DCO.
F. Daily Reporting of Margin Model
Backtesting—§ 39.19(c)(1)(i)
The Commission proposed to add to
§ 39.19(c)(1)(i) a requirement that a DCO
include in its daily reports the results of
the margin model backtesting that a
DCO is required to perform daily
pursuant to § 39.13(g)(7)(i). The
Commission also proposed to add to
new appendix C to part 39 the data
fields it believes would be relevant and
necessary to capture the backtesting
results that would have to be reported
under this provision. The Commission
is adopting as proposed the amendment
to § 39.19(c)(1)(i) to require that a DCO
include in its daily reports its margin
model backtesting results. As explained
below, in response to concerns
expressed by commenters, the
Commission is modifying certain of the
proposed data fields in new appendix C
for reporting margin model backtesting
results.15
Chris Barnard supported the proposal,
stating that daily reporting of
backtesting results will improve the
Commission’s oversight of DCOs and
should work to increase the accuracy,
relevance, and effectiveness of DCOs’
margin calculations. Nodal generally
supported requiring DCOs to provide
the Commission with daily backtesting
results, noting that it already provides
such information to the Commission on
a voluntary basis. CME requested that
the Commission provide DCOs with
ample time, preferably 18 months, to
test and implement daily reporting of
backtesting results. OCC stated that it
has no objection to reporting its margin
model backtesting results.
ICE opposed the proposal. ICE argued
that the manner in which the
Commission currently supervises DCO
margin models, including the
requirement in § 39.13(g)(3) that margin
models be independently validated, and
the requirement in § 39.19(c)(4)(xxiii)
that a DCO report to the Commission
15 The Commission is also changing the term
‘‘back testing’’ to ‘‘backtesting’’ in all places that
this term, or a variation thereof, appears in part 39
of the Commission’s regulations.
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regarding material issues with its
margin model, is sufficient for the
Commission to supervise margin model
performance over time.
Nodal and Eurex argued that the
Commission should collaborate with
DCOs to determine the specific
information needed and the data fields
via which it should be reported to
ensure that the Commission is receiving
the data and information it needs, in a
manner that is consistent across all
DCOs, to provide effective oversight of
the performance of DCOs’ margin
models.
Commenters expressed concern
regarding the new fields that the
Commission proposed to add to new
appendix C for the purpose of reporting
backtesting results, with commenters
focusing on the fields for reporting
detailed information related to margin
model breaches. The Commission had
proposed that breach details be reported
using three fields: initial margin; VM;
and breach amount, which was defined
as the difference between the initial
margin and VM. ICE, OCC, and Eurex
argued that the proposed fields would
not provide the Commission with
meaningful information regarding
margin model breaches. ICE stated that
because initial margin requirements and
VM payments may not be associated
with the same set of positions, ‘‘from a
formal statistical (hypothesis testing)
point of view, the backtesting of the
initial margin model should consider
fixed positions over the implemented
margin period of risk.’’ Similarly, OCC
argued that the VM field should be
replaced with a field titled ‘‘Static
Portfolio Profit/Loss,’’ which would
reflect ‘‘profit or loss on the same
portfolio against which the initial
margin was assessed.’’ OCC also argued
that the Breach Amount field
description be revised to delete the
reference to VM and instead reflect the
‘‘difference between the initial margin
and static portfolio profit/loss.’’ Along
the same lines, Eurex argued that VM
should be replaced as a measure for
backtesting by a more general
backtesting profit/loss, which would
include further mandatory fields
detailing how backtesting profit/loss is
calculated (including profit/loss
horizon, ‘‘clean’’ vs. ‘‘dirty’’ profit/loss,
mark-to-market vs. mark-to-model
profit/loss). Lastly, both Eurex and ICE
emphasized the importance of the
margin period of risk as a component of
evaluating backtesting results.
In response to these comments, the
Commission is amending the fields for
reporting margin model backtesting
results. The Commission is replacing
the VM field with a new field titled
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‘‘Backtesting Metric,’’ which provides
DCOs with the flexibility to designate
the type of profit and loss calculation
used for backtesting: VM; static portfolio
profit and loss (also known as clean
profit and loss); dirty profit and loss;
mark to market profit and loss; or mark
to model profit and loss. In connection
with that change, the Commission is
amending the Breach Amount field
description to be the ‘‘difference
between the Initial Margin and
Backtesting Metric Amount.’’ Lastly, the
Commission is adding a field titled
‘‘Margin Period of Risk’’, which is
defined as the ‘‘holding period for
which the Backtesting Metric is
calculated in days.’’
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G. Fully Collateralized Positions—
§ 39.19(c)(1)(ii)
The Commission proposed to amend
§ 39.19(c)(1)(ii) to clarify that the daily
reporting requirements of § 39.19(c)(1)(i)
do not apply to fully collateralized
positions. The Commission did not
receive any comments on the proposal.
The Commission is adopting the
amendments to § 39.19(c)(1)(ii) as
proposed.
H. Voluntary Reporting—
§ 39.19(c)(1)(iii)
The Commission proposed to add, as
new § 39.19(c)(1)(iii), the ability for a
DCO to, after consultation with the
Division, voluntarily submit any
additional daily reporting data fields it
believes would be necessary or
appropriate. OCC supported the
proposal. OCC recommended that the
Commission remove the phrase
‘‘consultation with’’ and replace it with
‘‘notification to,’’ given the potential
timing issues attendant to daily
reporting generally, potential ambiguity
regarding the extent and nature of the
‘‘consultation’’ required in the proposal,
and to provide DCOs with greater
flexibility. OCC also recommended that
the Commission clarify that voluntarily
reporting of additional information does
not create an obligation to continue
reporting the information, unless agreed
to in writing by the DCO and
Commission staff. No commenters
opposed the proposal.
The Commission agrees with OCC
that, absent any agreement to the
contrary, voluntary reporting by a DCO
of additional information does not
create an obligation to continue
reporting that information. As for the
mechanics of how a DCO should
proceed with voluntarily reporting
additional information, the Commission
believes that the best approach is for the
DCO to coordinate with Division staff to
ensure that any necessary
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accommodations are in place so that the
Division has the ability to receive the
additional information and to
incorporate it into its analytics. The
Commission therefore disagrees with
OCC because it believes that the
collaborative approach encompassed
within the phrase ‘‘consultation with’’ is
preferable to the unilateral approach
described in the phrase ‘‘notification
to.’’ The Commission is adopting new
§ 39.19(c)(1)(iii) as proposed.
I. Reporting Change of Control of the
DCO—§ 39.19(c)(4)(ix)(A)(1)
The Commission proposed to amend
§ 39.19(c)(4)(ix)(A)(1) to require a DCO
to report any change to the entity or
person that holds a controlling interest,
either directly or indirectly, in the DCO.
Eurex supported the proposal. OCC also
supported the proposal, but requested
that the Commission clarify whether the
phrase the ‘‘entity . . . holding a
controlling interest’’ refers to the
specific corporate entity holding an
ownership interest in the DCO, or
whether it refers to any parent entity of
one or more owners that collectively
own more than 50 percent of the DCO.
Better Markets opposed the proposal,
asserting that the Commission instead
should reinstate the 2011 versions of
this regulation and § 39.3(f) because,
unlike the current requirements, the
2011 version referenced § 39.3(f), which
required Commission approval of the
transfer of a DCO registration in
connection with any corporate change
involving the transfer of all or
substantially all of a DCO’s assets to
another legal entity.
In response to OCC’s request for
clarification, the Commission notes that
the phrase the ‘‘entity . . . holding a
controlling interest’’ is intended to refer
to both the specific corporate entity
holding an ownership interest in the
DCO, as well as to any parent entity of
one or more owners that collectively
own more than 50 percent of the DCO.
With respect to the comments from
Better Markets, the Commission initially
notes that the comments do not address
the merits of the proposal, but instead
focus on changes the Commission made
to a different regulation in a different
rulemaking.16 In any event, the
Commission does not believe that it is
necessary to reconsider its 2020
amendment of § 39.3(f).17 The
16 85
FR 4800, 4802–4803.
the 2020 amendment of this regulation,
§ 39.3(f) was renumbered as § 39.3(g), and was
revised to provide that a DCO seeking to transfer its
open interest would be required to submit rules for
Commission approval pursuant to § 40.5, rather
than submitting a request for a Commission order.
The 2020 amendments were intended to, among
17 In
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Commission is adopting the
amendments to § 39.19(c)(4)(ix)(A)(1) as
proposed.
J. Reporting Changes to Credit Facility
Funding and Liquidity Funding
Arrangements—§ 39.19(c)(4)(xii) and
(xiii)
The Commission proposed to amend
§ 39.19(c)(4)(xii) and (xiii), which
require a DCO to report changes to
credit facility funding arrangements and
liquidity funding arrangements,
respectively, to clarify that the reporting
requirements include reporting new
arrangements as well as changes to
existing ones. Eurex and OCC supported
both proposals, with OCC noting that
they are consistent with its
interpretation of the existing
regulations. No commenters opposed
the proposals. The Commission is
adopting the amendments to
§ 39.19(c)(4)(xii) and (xiii) as proposed.
K. Reporting Issues With Credit Facility
Funding Arrangements, Liquidity
Funding Arrangements, and Custodian
Banks—§ 39.19(c)(4)(xv)
The Commission proposed to amend
§ 39.19(c)(4)(xv) to require that a DCO
report to the Commission within one
business day after it becomes aware of
any material issues or concerns
regarding the performance, stability,
liquidity, or financial resources of any
credit facility funding arrangement,
liquidity funding arrangement,
custodian bank, or settlement bank used
by the DCO or approved for use by the
DCO’s clearing members. The
Commission proposed to extend the
reporting requirement, which
previously applied only to any
settlement bank used by the DCO or
approved for use by the DCO’s clearing
members, to apply as well to any credit
facility funding arrangement, liquidity
funding arrangement, or custodian bank
used by the DCO or approved for use by
the DCO’s clearing members. The
Commission also proposed to change
the threshold that triggers a DCO’s
reporting obligations by replacing the
requirement that a DCO report to the
Commission within one business day
after any material issues or concerns
arise, with the requirement that a DCO
report to the Commission within one
business day after it becomes aware of
any material issues or concerns.
Eurex, OCC, and ICE supported the
proposal. OCC observed that the
proposal properly addresses the variety
other things, simplify the requirements for a DCO
to request a transfer of open interest and to separate
the process from the procedures used to report a
change to a DCO’s corporate structure or ownership.
85 FR 4800, 4802–4803.
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of arrangements that DCOs use to meet
their ongoing and situational funding
requirements, and OCC also stated that
DCOs should not be subject to potential
enforcement action for not reporting an
issue of which they are not even aware.
With regard to the requirement to report
material issues or concerns related to
credit facility funding arrangements, ICE
supported the proposal, but believes, as
a technical matter, that it would be more
accurate to refer to the provider of the
arrangement, as opposed to the
arrangement itself. No commenters
opposed the proposal. Better Markets
recommended that the Commission
remove the materiality standard from
the proposed requirement that DCOs
report to the Commission regarding
material issues with credit facility
funding arrangements, liquidity funding
arrangements, and custodian banks.
Better Markets argued that because the
subjective nature of materiality would
result in inconsistent and inadequate
reporting, the Commission instead
should require DCOs to report whenever
there are any issues or concerns.
With respect to ICE’s comment that
§ 39.19(c)(4)(xv) should specify that a
DCO must report material issues or
concerns related to the provider of a
credit facility funding arrangement, as
opposed to reporting issues or concerns
related to the arrangement itself, the
Commission intends that the amended
regulation apply to issues or concerns
related to the provider as well as to the
arrangement itself. The amended
regulation is intended to ensure that the
Division receives notice when a DCO
learns that it may not be able to obtain
the resources from the provider
pursuant to the arrangement. The
Commission disagrees with the
suggestion from Better Markets that
DCOs be required to report all issues or
concerns regarding the performance,
stability, liquidity, or financial
resources of any credit facility funding
arrangement, liquidity funding
arrangement, custodian bank, or
settlement bank used by the DCO or
approved for use by the DCO’s clearing
members. Although Better Markets
correctly noted the subjectivity inherent
in a materiality standard, the
Commission does not believe that it
would be useful for it to be notified of
all issues or concerns, especially since,
in connection with its supervision of
DCOs and engagement with DCO staff
regarding reporting of issues or concerns
related to settlement banks, Division
staff has not found that the materiality
standard impedes necessary reporting.
Because the Commission believes that
the threshold for reporting is properly
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calibrated, the Commission is adopting
§ 39.19(c)(4)(xv) as proposed.
L. Reporting of Updated Responses to
the Disclosure Framework for Financial
Market Infrastructures—
§ 39.19(c)(4)(xxv)
The Commission proposed new
§ 39.19(c)(4)(xxv), which would set forth
the requirement currently in
§ 39.37(b)(2) that, when a DCO updates
its responses to the Disclosure
Framework for Financial Market
Infrastructures published by the
Committee on Payment and Settlement
Systems and the Board of the
International Organization of Securities
Commissions in accordance with
§ 39.37(b)(1), the DCO shall provide
notice of those updates to the
Commission. Eurex and OCC supported
the proposal, with OCC noting that it is
a non-substantive change to existing
DCO reporting obligations. No
commenters opposed the proposal. ICE
recommended that, to be consistent
with § 39.37(b)(2), the Commission
should state explicitly that the proposed
reporting requirement only applies to
material changes that a DCO makes to
its disclosures under the PFMI
Disclosure Framework. The Commission
does not believe that such clarification
is necessary, given that new
§ 39.19(c)(4)(xxv) simply references the
reporting requirements in § 39.37(b)(2)
without altering the substance of those
requirements. The Commission is
adopting new § 39.19(c)(4)(xxv) as
proposed.
VI. Amendments to § 39.21(c)
Regulation § 39.21 requires a DCO to
publish on its website a variety of
information designed to enable market
participants to make informed decisions
about using the clearing services
provided by the DCO. The Commission
proposed several amendments to these
requirements to better align a DCO’s
disclosure obligations with the type of
clearing services that the DCO provides.
Specifically, the Commission proposed
to amend § 39.21(c)(3) and (4) to provide
that a DCO that clears only fully
collateralized positions is not required
to disclose its margin-setting
methodology, or information regarding
the size and composition of its financial
resource package for use in a default, if
instead the DCO discloses that it does
not employ a margin-setting
methodology or maintain a financial
resource package because it clears only
fully collateralized positions.
Additionally, the Commission proposed
to amend § 39.21(c)(7) to provide that a
DCO may omit any non-FCM clearing
member that clears only fully
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collateralized positions, and therefore
does not share in the mutualized risk
associated with clearing activity, from
its published list of clearing members.
The Commission did not receive any
comments on these proposed changes,
and is therefore adopting them as
proposed.
VII. Amendments to § 39.37(c) and (d)
Regulation § 39.37 requires each
systemically important DCO (SIDCO)
and each DCO that elects to comply
with subpart C of part 39 of the
Commission’s regulations (subpart C
DCO) to disclose certain information to
the public and to the Commission.
Regulation § 39.37(c) and (d) require,
respectively, a SIDCO or subpart C DCO
to ‘‘disclose, publicly, and to the
Commission’’ transaction data, and
information regarding the segregation
and portability of customers’ positions
and funds. The Commission proposed to
amend these provisions to clarify that
public disclosure of the information is
sufficient and a separate report directly
to the Commission is not required. OCC
supports and appreciates the proposal,
stating that it would relieve DCOs of
duplicative requirements to report this
information both publicly and to the
Commission. The Commission is
adopting this amendment as proposed.
VIII. Amendments to § 140.94(c)(10)
Regulation § 140.94(c) is a delegation
of authority from the Commission to the
Director of the Division of Clearing and
Risk to perform certain specific
functions. The Commission proposed to
amend § 140.94(c)(10) to delegate to the
Director the authority in existing
§ 39.19(a) to require a DCO to provide to
the Commission the information
specified in § 39.19 and any other
information that the Commission
determines to be necessary to conduct
oversight of the DCO, and in existing
§ 39.19(b)(1) to specify the format and
manner in which the information
required by § 39.19 must be submitted
to the Commission.
OCC generally supported the
proposed changes to § 140.94(c)(10), as
OCC agreed that the proposed
delegations would appropriately
empower Commission staff to facilitate
efficient administration of part 39, and
ensure that the Commission and its staff
can obtain relevant information in a
timely manner. OCC stated that changes
to a DCO’s reporting obligations can
pose significant technical or logistical
challenges, and necessitate substantial
investment of time and resources to
effect compliance. Therefore, while OCC
supported the proposed changes, it
urged the Division to continue to engage
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in open dialogue with DCOs prior to
exercising the delegated authority to
seek additional information pursuant to
§ 39.19 or to change the format or
manner of any required reporting. The
Commission takes notes of this
comment, and expects that information
collection or any changes to the format
and manner of required reporting would
continue to involve engagement with
DCOs. The Commission is adopting
these changes as proposed.
IX. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
requires that agencies consider whether
the regulations they propose will have
a significant economic impact on a
substantial number of small entities
and, if so, provide a regulatory
flexibility analysis on the impact.18 The
final rule adopted by the Commission
will affect only DCOs. The Commission
has previously established certain
definitions of ‘‘small entities’’ to be used
by the Commission in evaluating the
impact of its regulations on small
entities in accordance with the RFA.19
The Commission has previously
determined that DCOs are not small
entities for the purpose of the RFA.20
Accordingly, the Chairman, on behalf of
the Commission, hereby certifies
pursuant to 5 U.S.C. 605(b) that the rule
adopted herein will not have a
significant economic impact on a
substantial number of small entities.
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B. Paperwork Reduction Act
The Paperwork Reduction Act
(PRA) 21 provides that Federal agencies,
including the Commission, may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a valid
control number from the Office of
Management and Budget (OMB). This
final rulemaking contains reporting and
recordkeeping requirements that are
collections of information within the
meaning of the PRA. Responses to the
collections of information are required
to obtain a benefit.
This final rulemaking modifies the
existing information collection
associated with part 39, ‘‘Requirements
for Derivatives Clearing Organizations,
OMB control number 3038–0076.’’ In
accordance with the PRA, 44 U.S.C.
3507(d), the Commission has submitted
these information collection
requirements to OMB for its review.
18 5
U.S.C. 601 et seq.
FR 18618 (Apr. 30, 1982).
20 See 66 FR 45604, 45609 (Aug. 29, 2001).
21 44 U.S.C. 3501 et seq.
19 47
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1. Subpart B—Requirements for
Compliance with Core Principles
a. Risk Management
The Commission is adopting as
proposed new § 39.13(h)(5)(iii) to
provide that a DCO that clears fully
collateralized positions may exclude
from the requirements of paragraphs
(h)(5)(i) and (ii) those clearing members
that clear only fully collateralized
positions. The requirements would still
apply to clearing members that clear
fully collateralized positions but also
clear margined products. This change
will reduce the burden for DCOs that
clear fully collateralized products, but
does not affect the burden for the
majority of DCOs that are subject to
daily reporting requirements, as only
four of the fifteen currently registered
DCOs clear fully collateralized
positions. As a result, the Commission
believes that this reduction will have a
negligible impact on the overall
reporting burden for DCOs, and
therefore the Commission is leaving the
reporting burden for these reporting
requirements unchanged.
b. Treatment of Funds
The Commission is amending
§ 39.15(b)(2), which applies when a
DCO and its clearing members seek to
commingle customer positions in
futures, options, foreign futures, foreign
options, and swaps, or any combination
thereof, and any money, securities, or
property received to margin, guarantee
or secure such positions, in an account
subject to the requirements of sections
4d(a) or 4d(f) of the CEA. The
Commission is consolidating paragraphs
(b)(2)(i) and (ii) and renumbering
paragraphs accordingly. These changes
pertain only to the structure and
organization of the regulation and
therefore do not impact the reporting
requirement. The Commission is
amending § 39.15(b)(2) to clarify that the
requirement in paragraph (b)(2)(i)(G)
that a DCO discuss the systems or
procedures that the DCO has
implemented to oversee its clearing
members’ risk management of eligible
products may be addressed by
describing why existing risk
management systems and procedures
are adequate, and to add language
clarifying that the requirements and
standard of review of § 40.5 apply to
commingling rule submissions. Because
these changes are mere clarifications of
existing requirements, they also have no
impact on the reporting burden.
Similarly, the Commission is
removing existing paragraph (b)(2)(iii),
which provides that the Commission
may request additional information in
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support of a rule submission filed under
existing paragraph (b)(2)(i) or (ii), and
adding new paragraph (b)(2)(viii), which
provides that the Commission may
request supplemental information to
evaluate the DCO’s submission and
requires a DCO to submit any other
information necessary for the
Commission to evaluate the DCO’s
rule’s compliance with the CEA and the
Commission’s regulations. This does not
impact the reporting burden because
new paragraph (b)(2)(viii), like existing
paragraph (b)(2)(iii), would ensure that
the Commission can consider all
information relevant to the rule
submission. Although existing
paragraph (b)(2)(iii) does not contain
explicit language similar to new
paragraph (b)(2)(viii)’s requirement that
the DCO submit any other information
necessary for the Commission to
evaluate the rule’s compliance with the
CEA and the Commission’s regulations,
the fact that existing paragraph (b)(2)(iii)
permits the Commission to request such
information implies a DCO’s obligation
to supply it. Simply making this
implication explicit does not impact the
reporting burden.
The Commission is deleting
paragraphs (b)(2)(i)(C), (E), (H), and (L)
because they require a DCO to submit
information the Commission can
already access or has not needed in its
review of commingling rule
submissions. This change will decrease
the reporting burden. In addition, the
Commission is removing existing
paragraph (b)(2)(i)(I), which requires the
DCO to provide information related to
its margin methodology, while adding
related paragraph (b)(2)(vii), which will
require that a DCO discuss whether it
anticipates allowing portfolio margining
of commingled positions, describe and
analyze any margin reductions it would
apply to correlated positions, and make
an express confirmation that any
portfolio margining will be allowed only
as permitted under § 39.13(g)(4). These
changes will collectively decrease the
reporting burden because the
requirements being removed through
the deletion of paragraph (b)(2)(i)(I) are,
as a whole, more burdensome than the
requirements being added in paragraph
(b)(2)(vii). Similarly, the Commission is
removing the requirement in existing
paragraph (b)(2)(i)(K) to discuss a DCO’s
default management procedures
generally and maintaining only the
requirement to address default
management procedures unique to the
products eligible for commingling and
moving that requirement to paragraph
(b)(2)(vi). This narrowing of the scope of
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the requirement reduces the reporting
burden on the relevant DCOs.
The Commission is amending
paragraph (b)(2)(i)(B) (renumbered as
paragraph (b)(2)(ii)), which requires the
DCO to provide an analysis of the risk
characteristics of the products that
would be eligible for commingling, to
specify that the DCO should address any
risk characteristics of products to be
commingled that are unusual in relation
to the other products the DCO clears,
such as margining, liquidity, default
management, pricing, or other risk
characteristics, and how the DCO plans
to manage any risks identified. Because
such analysis was not previously
explicitly required, and because DCOs
that would not otherwise have
addressed such issues in their analysis
of the risk characteristics of the eligible
products will now be required to do so,
this will increase the reporting burden.
However, the Commission expects this
increase to be negligible, as this
provision would only apply when a
DCO is considering a new commingling
of customer positions in various
products, and only when the risk
characteristics of products to be
commingled are unusual in relation to
other products the DCO clears.
The Commission is amending
paragraph (b)(2)(i)(F) (and renumbering
it as paragraph (b)(2)(iv)), which
currently requires the DCO to describe
the financial, operational, and
managerial standards or requirements
for clearing members that would be
permitted to commingle eligible
products, to require only that the DCO
describe any additional requirements
that would apply to clearing members
permitted to commingle eligible
products. The Commission believes that
this amendment will have no impact on
the reporting burden. Although the new
requirement that the DCO describe any
additional requirements is broader than
the current requirement to describe
financial, operational, and managerial
standards or requirements, the existing
paragraph requires the DCO to report
even if no additional requirements
would apply. The amendment only
requires reporting when additional
requirements are, in fact, applicable.
The Commission believes that the
reductions in the reporting burden
resulting from the deletion of
paragraphs (b)(2)(i)(C), (E), (H), and (L)
and the narrowing of the reporting
burden resulting from the deletions of
paragraphs (b)(2)(i)(I) and (K) (even after
giving effect to the addition of new
paragraphs (b)(2)(vi) and (vii)) are at
least as great as the increase in the
reporting burden resulting from the
amendments to paragraph (b)(2)(i)(B)
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(renumbered as paragraph (b)(2)(ii)).
Because the Commission lacks the data
to fully quantify each of these changes,
it is conservatively estimating that these
changes collectively do not alter the
reporting burden. The Commission is of
the view that to the extent that the
cross-margining program would be
submitted as part of a new rule or rule
amendment filing pursuant to § 40.5, the
changes are already covered by OMB
control number 3038–0093 and there is
no change in the burden estimates.
c. Daily Reporting
The Commission is adopting the
proposed amendments to
§ 39.19(c)(1)(i)(A) that clarify that the
existing requirement to identify
individual customer accounts by LEI
and internally-generated identifier was
intended to apply to all instances in
§ 39.19(c)(1) where reporting is required
at the individual customer account
level, and not only to end-of-day
positions. The Commission therefore is
amending § 39.19(c)(1)(i)(A) to specify
that when a DCO reports initial margin
requirements and initial margin on
deposit by each individual customer
account as required, the DCO also must
identify each individual customer
account by LEI and internally-generated
identifier, where available. The
clarification will not affect the burden
on DCOs because DCOs already provide
this information and the impact of this
amendment on the existing burden is
negligible.
The Commission also is amending
§ 39.19(c)(1)(i)(B) and (C), which require
a DCO to report daily variation margin
and cash flow information by house
origin and separately by customer origin
and by each individual customer
account, to remove the requirement that
a DCO report daily variation margin and
cash flows by individual customer
account. This change is anticipated to
result in a negligible decrease from the
current burden of 0.5 burden hours per
report.22
The Commission also is adopting new
§ 39.19(c)(1)(iii), as proposed, which
will give a DCO the ability, after
consultation with the Division, to
voluntarily submit any additional data
field in its daily reports that is necessary
or appropriate to better capture the
information that is being reported. The
22 DCOs currently are not reporting variation
margin and cash flow information by each
individual customer account because the Division
issued a no-action letter addressing compliance
with the amended requirements in § 39.19(c)(1). See
CFTC Letter No. 21–01 (Dec. 31, 2020); see also
CFTC Letter No. 21–31 (Dec. 22, 2021). As noted,
the proposed amendments to § 39.19(c)(1)(i)(B) and
(C) would eliminate the requirement for which
additional time was provided in the staff letter.
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Commission believes that adding this
provision to § 39.19(c)(1) does not affect
the existing burden estimates for daily
reporting. Although it is unclear at this
time whether any DCOs will decide to
voluntarily submit additional data fields
in their daily reports and how
frequently they will do so, the
Commission believes that the impact of
this new provision on the existing daily
reporting burden is negligible. The
Commission does not anticipate that
DCOs will add information to their daily
reports if doing so is a burden. The
Commission instead anticipates that
voluntary reporting by DCOs likely will
consist only of data that already is
maintained in reportable format and
that can be included in the daily reports
with minimal effort.
The Commission is also adding to part
39 an appendix that will codify the
existing reporting fields for the daily
reporting requirements in § 39.19(c)(1).
The codification of existing reporting
fields in new appendix C will not
change the reporting burden.23
The Commission is adding new fields
within new appendix C that would
further implement the existing daily
reporting requirements under
§ 39.19(c)(1). Specifically, the
Commission is adopting a requirement
that a DCO include in its daily reports,
with regard to interest rate swaps only,
the delta ladder, gamma ladder, vega
ladder, zero rate curves, and yield
curves that the DCO uses in connection
with managing risks associated with
interest rate swaps positions. The
Commission also is adopting a
requirement that a DCO that clears
interest rate swaps, forward rate
agreements, or inflation index swaps to
include in its daily reports the actual
trade date for each position, along with
an event description. The Commission
is not adopting a proposed requirement
that each DCO include in its daily
reports timing information about
variation margin calls and payments,
but is adopting a proposed requirement
to include in its daily reports
information that reflects that the daily
report is complete. Lastly, in connection
with adopting a new requirement in
§ 39.19(c)(1)(i) that a DCO include in its
daily reports the results of its required
daily margin model backtesting, the
Commission also is adding to new
appendix C amended versions of the
additional data fields necessary to
implement this requirement.
23 The current burden estimates for complying
with the daily reporting requirements in
§ 39.19(c)(1) included in OMB Control No. 3038–
0076 take into account the burden associated with
reporting in accordance with the Reporting
Guidebook.
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With respect to adding new fields to
new appendix C, and adding to
§ 39.19(c)(1)(i) a requirement that a DCO
include in its daily reports the results of
its required margin model backtesting,
the Commission believes that the
incremental capital investment costs
associated with implementing these
requirements would be negligible. In
many cases, the new fields are data that
are already being used for DCO risk
management and operations, and in
some cases are already being reported to
the Commission on a voluntary basis.
Further, the Commission believes that
any capital investment implementation
for the reporting of these fields would
leverage the DCO’s existing server
architecture that could be scaled up to
meet these requirements with negligible
costs. However, to the extent that a DCO
does not currently use any of the
information that would be required
under the new fields, or if that
information is not accessible on an
automated basis, then a DCO may incur
start-up costs associated with reporting
information pursuant to the new fields,
specifically including costs for coding,
as well as testing, quality assurance, and
compliance review. As explained below
in connection with its discussion of
cost-benefit considerations, the
Commission has estimated 24 that DCOs
may incur other start-up costs of
approximately $69,667.21 per DCO.25
24 To estimate the start-up costs, the Commission
relied upon internal subject matter experts in its
Divisions of Data and Clearing and Risk to estimate
the amount of time and type of DCO personnel
necessary to complete the coding, testing, quality
assurance, and compliance review. The
Commission then used data from the Department of
Labor’s Bureau of Labor Statistics from May 2021
to estimate the total costs of this work. According
to the May 2021 National Occupational
Employment and Wage Estimates Report produced
by the U.S. Bureau of Labor Statistics, available at
https://www.bls.gov/oes/current/oes_nat.htm, the
mean salary for a computer systems analyst in
management companies and enterprises is
$103,860. This number is divided by 1800 work
hours in a year to account for sick leave and
vacations and multiplied by 2.5 to account for
retirement, health, and other benefits, as well as for
office space, computer equipment support, and
human resources support, all of which yields an
hourly rate of $144.25. Similarly, a computer
programmer has a mean annual salary of $102,430,
yielding an hourly rate of $142.26; a software
quality assurance analyst and tester has a mean
annual salary of $99,460, yielding an hourly rate of
$138.14; and a compliance attorney has a mean
annual salary of $198,900, yielding an hourly rate
of $276.25.
25 The estimate of total start-up costs consists of
the following: $14,101.10 for the delta ladder,
gamma ladder, vega ladder, and the zero rate
curves, based on 20 hours of systems analyst time,
40 hours of programmer time, and 40 hours of tester
time; $7,248.61 for adding interest rate, forward
rates, and end of day position fields, based on 8
hours of systems analyst time, 4 hours of
programmer time, and 40 hours of tester time;
$14,140.83 for the manifest file, based on 40 hours
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CME commented that it believes the
time required to implement the
proposed changes would be ‘‘an order of
magnitude greater than predicted,’’
which would add to the costs. However,
CME did not quantify the amount by
which it believes that costs would be
increased, and as a result, the
Commission is reluctant to adjust its
estimates based on this comment.
Furthermore, the Commission is not
adopting all of the new fields that were
proposed, which would reduce the costs
that may be incurred by DCOs to
implement the required changes relative
to the initial proposal. Accordingly, the
Commission believes that retaining its
initial estimates of these costs in the
proposal (excluding estimates of any
proposals not being adopted in the final
rule) addresses CME’s concern that the
Commission’s initial estimates of the
costs of implementation were not
adequate, while accounting for the fact
that costs were reduced by the
Commission’s decision not to adopt all
of the relevant proposals.
Lastly, because the Commission
understands that the preparation and
submission of the daily reports required
under § 39.19(c)(1)(i) is largely
automated, the Commission estimates
that adding the new fields to new
appendix C, and adding to
§ 39.19(c)(1)(i) a requirement that a DCO
include in its daily reports the results of
the margin model backtesting, will
result in a negligible increase to the
current estimate of 0.5 burden hours per
report. Accordingly, the Commission
retains its existing estimate for the
burden associated with daily reporting
under § 39.19(c)(1).
The aggregate burden estimate for
daily reporting remains as follows:
Estimated number of respondents: 13.
Estimated number of reports per
respondent: 250.
Average number of hours per report:
0.5.
Estimated gross annual reporting
burden: 1,625.
d. Event-Specific Reporting
Regulation § 39.19(c)(4) requires a
DCO to notify the Commission of the
occurrence of certain events;
§ 39.19(c)(4)(ix)(A)(1) requires a DCO to
report any change in the ownership or
of systems analyst time, 40 hours of programmer
time, and 20 hours of tester time; and $22,676.67
for adding the backtesting fields, based on 40 hours
of systems analyst time, 80 hours of programmer
time, and 40 hours of tester time. The estimate of
total start-up costs also includes $11,500.00 for
compliance attorney review. The amount that was
estimated for the payment file in the proposal,
$39,907.22, is not being included here, because the
Commission did not adopt the proposal for the
payment file.
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corporate or organizational structure of
the DCO or its parent(s) that would
result in at least a 10 percent change of
ownership of the DCO. The Commission
is amending § 39.19(c)(4)(ix)(A)(1) to
require the reporting of any change in
the ownership or corporate or
organizational structure of the DCO or
its parent(s) that would result in a
change to the entity or person holding
a controlling interest in the DCO,
whether through an increase in direct
ownership or voting interest in the DCO
or in a direct or indirect corporate
parent entity of the DCO. This increases
the reporting requirement. However, the
changes of control contemplated by the
amendment occur infrequently. In
addition, DCOs have typically notified
the Commission of such changes of
control even if not technically required
by the current regulations. Finally,
although changes of control usually
require the preparation of documents
such as a purchase agreement and the
amendment of corporate governance
documents and organizational charts,
those burdens are a result of the change
in control itself and not of the reporting
requirement. The administrative burden
of notifying the Commission—preparing
a notification, attaching relevant but
pre-existing supporting documents such
as the revised organizational chart, and
submitting to the Commission—is
negligible. Therefore, the increase in the
reporting requirement resulting from
this amendment is negligible.
Regulation § 39.19(c)(4)(xii) and (xiii)
require notification of changes in a
liquidity funding arrangement or
settlement bank arrangement. The
Commission is amending these
regulations to clarify that the reporting
requirements include reporting new
arrangements as well as changes to
existing ones. The clarification will not
affect the burden on DCOs because such
reporting is already implied in the
regulation.
Separately, the Commission is
amending § 39.19(c)(4)(xv) to add credit
facility funding arrangements, liquidity
funding arrangements, and custodian
banks to the list of arrangements or
banks for which the DCO must report to
the Commission any issues or concerns
of which the DCO becomes aware.
Although this increases the number of
entities or arrangements for which
reporting may be required, given that a
DCO is only required to report these
issues when it becomes aware of them,
and given that these events are not very
common, any increase should be
negligible.
The Commission proposed to revise
§ 39.18(g) to delete the materiality
threshold. Proposed changes would also
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have required notification of each
security incident or threat that
compromises or could compromise the
confidentiality, availability, or integrity
of any automated system, or any
information, services, or data, including,
but not limited to, third-party
information, services, or data, relied
upon by the DCO in discharging its
responsibilities; as well as operator
errors that may impair the operation,
reliability, security, or capacity of an
automated system. The Commission
estimated that these changes would
require DCOs to file an additional four
reports per year, on average. The
Commission received several comments
stating that this estimate is too low. The
Commission is not adopting these
changes, however, and is therefore
removing the proposed additional four
reports per year from the reporting
burden.
The Commission proposed modifying
the reporting obligations under
§ 39.18(g)(1) and new § 39.18(g)(2) to
specify that only events that impact, or
potentially impact, a DCO’s clearing
operations must be reported under each
subsection. The Commission is not
adopting these changes.
Finally, the Commission is adding
§ 39.19(c)(4)(xxv) to centralize an
existing reporting obligation under
§ 39.37(b)(2) in § 39.19. This does not
create a new reporting obligation. The
Commission is also revising § 39.37(c)
and (d) to remove the requirement to
make certain disclosures to the
Commission while retaining a
requirement to make such disclosures
publicly. This will cause a negligible
decrease in costs that will not affect the
reporting burden. The reporting burden
under existing § 39.37 is covered in the
PRA estimate for that regulation.
The aggregate burden estimate of
§ 39.19(c)(4) adjusted for the changes
described above is as follows:
Estimated number of respondents: 13.
Estimated number of reports per
respondent: 14.
Average number of hours per report:
0.5.
Estimated gross annual reporting
burden: 91.
e. Public Information
The Commission is revising
§ 39.21(c)(3) and (4) to exclude DCOs
that clear only fully collateralized
positions from the specific disclosure
requirements of these paragraphs.
Similarly, the Commission is amending
§ 39.21(c)(7), which requires a DCO to
publish on its website a current list of
its clearing members, to provide that a
DCO may omit any clearing member
that clears only fully collateralized
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positions and is not an FCM from the
list of clearing members that it must
publish on its website. Because such
DCOs are still required to report per
other parts of § 39.21, such as to
disclose the terms and conditions of
each contract cleared, the fees it charges
its members, and daily settlement
prices, volumes, and open interest for
each contract, the number of
respondents will remain unchanged.
The changes do not affect the burden for
the majority of DCOs that are subject to
the public disclosure requirements. For
fully collateralized DCOs, the changes
would result in a negligible decrease in
the amount of time required per report.
The aggregate estimated burden for
§ 39.21 remains as follows:
Estimated number of respondents: 13.
Estimated number of reports per
respondent: 4.
Average number of hours per report:
2.
Estimated gross annual reporting
burden: 104.
particular DCO will depend on the size,
existing infrastructure, practices, and
cost structure of the DCO.
To further the Commission’s
consideration of the costs and benefits
imposed by the proposal, the
Commission invited comments from the
public on all aspects of its cost-benefit
considerations, including the
identification and assessment of any
costs and benefits not discussed by the
Commission; data and any other
information to assist or otherwise
inform the Commission’s ability to
quantify or qualitatively describe the
costs and benefits of the proposed
amendments; and substantiating data,
statistics, and any other information to
support positions posited by
commenters with respect to the
Commission’s discussion. To the extent
that the Commission received comments
specific to the costs and benefits of the
proposed changes, those comments are
discussed in the relevant sections
below.
C. Cost-Benefit Considerations
2. Baseline
1. Introduction
The baseline for the Commission’s
consideration of the costs and benefits
of this final rule is: (1) the DCO Core
Principles set forth in section 5b(c)(2) of
the CEA; (2) the information
requirements associated with
commingling customer funds and
positions in futures and swaps in the
same account under § 39.15(b)(2); (3) the
reporting obligations under § 39.18(g)
related to a DCO’s system safeguards; (4)
daily reporting requirements under
§ 39.19(c)(1); (5) event-specific reporting
requirements under § 39.19(c)(4); (6)
public information requirements under
§ 39.21(c); (7) disclosure obligations for
SIDCOs and subpart C DCOs under
§ 39.37; and (8) delegation of authority
provisions under § 140.94.
The Commission notes that this
consideration of costs and benefits is
based on its understanding that the
derivatives market regulated by the
Commission functions internationally
with: (1) transactions that involve U.S.
entities occurring across different
international jurisdictions; (2) some
entities organized outside of the United
States that are registered with the
Commission; and (3) some entities that
typically operate both within and
outside the United States and that
follow substantially similar business
practices wherever located. Where the
Commission does not specifically refer
to matters of location, the discussion of
costs and benefits below refers to the
effects of the final rule on all relevant
derivatives activity, whether based on
their actual occurrence in the United
Section 15(a) of the CEA requires the
Commission to consider the costs and
benefits of its actions before
promulgating a regulation under the
CEA or issuing certain orders.26 Section
15(a) further specifies that the costs and
benefits shall be evaluated in light of the
following five broad areas of market and
public concern: (1) protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of futures markets; (3)
price discovery; (4) sound risk
management practices; and (5) other
public interest considerations. The
Commission considers the costs and
benefits resulting from its discretionary
determinations with respect to the
section 15(a) factors (collectively
referred to herein as section 15(a)
factors).
The Commission recognizes that the
final rule may impose costs. The
Commission has endeavored to assess
the expected costs and benefits of the
final rule in quantitative terms,
including PRA-related costs, where
possible. In situations where the
Commission is unable to quantify the
costs and benefits, the Commission
identifies and considers the costs and
benefits of the applicable rules in
qualitative terms. The lack of data and
information to estimate those costs is
attributable in part to the nature of the
final rule. Additionally, any initial and
recurring compliance costs for any
26 7
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States or on their connection with, or
effect on U.S. commerce.27
3. Amendments to § 39.13(h)(5)
a. Benefits
The Commission is adopting new
§ 39.13(h)(5)(iii), which provides that a
DCO that clears fully collateralized
positions may exclude from the
requirements of paragraphs (h)(5)(i) and
(ii), which concern clearing members’
risk management policies and
procedures, those clearing members that
clear only fully collateralized positions.
The requirements would still apply to
clearing members that clear fully
collateralized positions but also clear
margined products.
Fully collateralized positions do not
expose DCOs to many of the risks that
traditionally margined products do. Full
collateralization prevents a DCO from
being exposed to credit or default risk
stemming from the inability of a
clearing member or customer of a
clearing member to meet a margin call
or a call for additional capital. This
limited exposure and full
collateralization of that exposure
renders certain provisions of part 39
inapplicable or unnecessary, including
§ 39.13(h)(5). The Commission is
adopting this provision in order to
provide greater clarity to DCOs and
future applicants for DCO registration
regarding how § 39.13(h)(5) applies to
DCOs that clear fully collateralized
positions. Furthermore, the Commission
believes that this amendment will
provide a benefit to DCOs that clear
fully collateralized positions, as they
will no longer need to meet a
requirement that does not apply to their
clearing model.
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b. Costs
The Commission does not anticipate
any costs associated with this change, as
it would codify the removal of
requirements that need not apply to
fully collateralized positions.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits in light of the specific
considerations identified in section
15(a) of the CEA. In consideration of
section 15(a)(2)(B) of the CEA, the
Commission believes that
§ 39.13(h)(5)(iii) may increase
operational efficiency for DCOs that
clear fully collateralized positions. The
provision should not impact the
protection of market participants and
the public, the financial integrity of
markets, or sound risk management
27 See,
e.g., 7 U.S.C. 2(i).
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practices, as the requirements that the
Commission is proposing to exclude for
fully collateralized positions do not
further these factors when applied to
such positions. The Commission has
considered the other section 15(a)
factors and believes that they are not
implicated by this provision.
4. Amendments to § 39.15(b)(2)
a. Benefits
The Commission is amending
§ 39.15(b)(2) to clarify its requirements
and revise the information a DCO must
provide to the Commission when it
seeks to commingle customer positions
and associated funds from different
account classes. The Commission
anticipates that the amendments will
help DCOs, the Commission, and the
public to focus on those issues that are
most important in considering the
submission, and will generally reduce
compliance burdens on DCOs.
Based on its experience in reviewing
commingling rule submissions, the
Commission believes the changes to the
information requirements would
improve the quality of future
submissions and enhance protection of
market participants. The existing
requirements often result in rule
submissions that provide information
the Commission already has and lack
sufficient focus on the commingling
itself, making it difficult for both the
Commission and the public to properly
assess the risks that commingling of
customer funds may pose. The
amendments would improve the quality
of the submissions by providing the
information needed to evaluate the risks
posed to customers by commingling
products that otherwise would be held
in separate accounts.
The amendments would reduce
compliance burdens for DCOs by
removing existing paragraphs
(b)(2)(i)(C), (E), (H), and (L), provisions
that call for submission of information
the Commission can otherwise access or
has not needed in its review of
commingling rule submissions.
Replacing existing paragraph (b)(2)(i)(I)
and adding the related § 39.15(b)(2)(vii)
would focus DCO efforts on providing
the most useful information on the topic
of margin methodology, and eliminates
a requirement to provide margin
methodology information with which
the Commission is already familiar.
Similarly, by maintaining only that part
of paragraph (b)(2)(i)(K) concerning
default management procedures unique
to the products eligible for commingling
and moving that requirement to
paragraph (b)(2)(vi), the amended
regulation would focus the discussion of
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the DCO’s default management
procedures on changes necessitated by
the commingling of eligible products
rather than general information on
default management procedures already
available to the Commission.
b. Costs
As discussed above, the Commission
expects that the amendments to
§ 39.15(b)(2) will decrease DCOs’ costs
associated with seeking commingling
approval. These changes most
meaningfully reduce costs by no longer
requiring a DCO to produce certain
information it was previously required
to provide to the Commission. This is
partly offset by the addition of new
information requirements. Paragraph
(b)(2)(vii), as amended, would require
information concerning portfolio
margining that is largely a subset of the
margin methodology information
required by existing paragraph
(b)(2)(i)(I). The new requirement in this
paragraph amounts to a one sentence
confirmation of compliance with
§ 39.13(g)(4). Paragraph (b)(2)(viii),
intended to ensure a DCO provides all
information the Commission needs to
evaluate a commingling rule
submission, incorporates the
requirements of existing paragraph
(b)(2)(iii). Further, the amendment to
existing paragraph (b)(2)(i)(B) on risk
characteristics (renumbered as
§ 39.15(b)(2)(ii)), in addition to focusing
the discussion on unusual
characteristics, extends the analysis to
include a discussion of the DCO’s
management of identified risk
characteristics, which is information
that should likely be readily available to
DCOs. The Commission is adding to
§ 39.15(b)(2)(ii) the requirement that a
DCO’s analysis address any
characteristics that are unusual in
relation to the other products cleared by
the DCO, such as margining, liquidity,
default management, pricing, or other
risk characteristics. The Commission
believes that a DCO may incur
additional minor costs, but only to the
extent that the products do in fact have
margining, liquidity, default
management, pricing, or other risk
characteristics that are unusual in
relation to those currently cleared by the
DCO. Lastly, to the extent paragraph
(b)(2)(vi) on default management
procedures extends beyond the scope of
existing paragraph (b)(2)(i)(J) or (K),
DCOs should already have this
information.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendments to
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§ 39.15(b)(2) in light of the specific
considerations identified in section
15(a) of the CEA. The Commission
believes that the amendments will have
a beneficial effect on the protection of
market participants and on sound risk
management practices. The
amendments better focus the DCO
submissions on risk management
considerations that are relevant to
address the commingling of customer
positions and associated funds, and
assure that DCOs provide the
Commission with the information it
needs to consider the regulatory
adequacy of their efforts. These
activities are ultimately directed
towards protecting market participants
whose accounts are exposed to risks the
commingled positions introduce. The
Commission has considered the other
section 15(a) factors and believes that
they are not implicated by the
amendments to § 39.15(b)(2).
5. Notification of Exceptional Events—
§ 39.18(g)
a. Benefits
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For reasons discussed in greater detail
above, the Commission is declining to
adopt the proposal to amend
§ 39.18(g)(1) to expand the scope of
hardware or software malfunctions for
which a DCO must provide notice to the
Division by deleting the materiality
element from the requirement to report
malfunctions that materially impair, or
create a significant likelihood of
material impairment of, the DCO’s
automated systems. Similarly, the
Commission is also declining to adopt
the remaining proposed changes to
§ 39.18(g), including the elimination of
the materiality threshold for reporting of
other exceptional events, the addition of
new language regarding reporting for
operator error, the addition of
untargeted threats as a reporting event,
and definitions for ‘‘hardware or
software malfunction’’ and ‘‘automated
system.’’ The retention of the current
regulatory framework, including the
reporting threshold which affords
discretion to DCOs to report only
material events, will benefit DCOs by
allowing the expenditure of less time
and fewer resources to report events of
no significance, the knowledge of which
would provide little or no informational
value to the Division.
b. Costs
Commenters stated that the
Commission underestimated the
increase in reporting obligations as a
result of the proposal to eliminate the
materiality threshold for the reporting of
exceptional events under § 39.18(g)
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(estimated at four reports per DCO per
year) as well as the costs of such
notifications (estimated at $152 per
year). The Commission is not adopting
the proposal to remove the materiality
threshold or any of the other proposed
changes to § 39.18(g).
c. Section 15(a) Factors
As the Commission is not adopting
the proposed amendments to § 39.18(g),
a consideration of costs and benefits
under section 15(a) is not applicable for
this subsection.
6. Removing the Requirement To Report
Variation Margin and Cash Flow
Information by Individual Customer
Account in § 39.19(c)(1)(i)(B) and (C)
a. Benefits
The Commission is amending
§ 39.19(c)(1)(i)(B) and (C) to remove the
requirement that DCOs report to the
Commission on a daily basis variation
margin and cash flows by individual
customer account. In removing these
requirements from § 39.19(c)(1)(i)(B)
and (C), the Commission anticipates
benefits to DCOs and their clearing
members in that their operational,
technological, and compliance burdens
would be reduced. The Commission did
not receive any comments on the costs
or benefits associated with these
changes.
b. Costs
The Commission expects that DCOs
and their clearing members will not
incur any costs related to the
amendments to § 39.19(c)(1)(i)(B) and
(C), as the Commission is eliminating
the existing requirement that DCOs
report to the Commission on a daily
basis variation margin and cash flows by
individual customer account.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendments to
§ 39.19(c)(1)(i)(B) and (C) in light of the
specific considerations identified in
section 15(a) of the CEA. The
Commission believes that the
amendments to § 39.19(c)(1)(i)(B) and
(C) will have a moderately beneficial
effect by reducing technological,
operational, and compliance burdens of
DCOs, and of their clearing members.
The Commission also believes that the
amendments will not have any effect on
protection of market participants and
the public or on sound risk management
practices because, although the
Commission is slightly reducing the
amount of information that DCOs must
report to the Commission, the
Commission is confident that it will
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continue to receive from DCOs
sufficient information to effectively and
efficiently supervise and oversee DCOs
and the derivatives markets. The
Commission has considered the other
section 15(a) factors and believes that
they are not implicated by the
amendments to § 39.19(c)(1)(i)(B) and
(C).
7. Codifying the Existing Reporting
Fields for the Daily Reporting
Requirements in New Appendix C to
Part 39
a. Benefits
The Commission is adding a new
appendix C to part 39 that codifies the
existing reporting fields for the daily
reporting requirements in § 39.19(c)(1).
Until now, the instructions, reporting
fields, and technical specifications for
daily reporting have been contained in
the Reporting Guidebook, which the
Division provides to DCOs to facilitate
reporting pursuant to § 39.19(c)(1).
Although codifying the Reporting
Guidebook will not result in material
benefit to currently registered DCOs, the
Commission believes that it likely will
benefit prospective DCO applicants, as
well as members of the industry and
general public, by providing a detailed
list of DCO daily reporting obligations,
in contrast to the more general
requirements in § 39.19(c)(1). The
Commission did not receive any
comments on the costs or benefits
associated with these changes.
b. Costs
The Commission does not expect that
DCOs will incur increased costs related
to codifying the reporting fields from
the Reporting Guidebook in new
appendix C to part 39. DCOs have been
relying on the Reporting Guidebook for
nearly a decade to satisfy their daily
reporting obligations under
§ 39.19(c)(1). Codifying these
requirements into a regulatory appendix
does not alter the existing burden that
DCOs have in complying with
§ 39.19(c)(1).
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of codifying the Reporting
Guidebook as appendix C to part 39 in
light of the specific considerations
identified in section 15(a) of the CEA.
The Commission has considered the
section 15(a) factors and believes that
adding new appendix C to part 39 to
codify the reporting fields set forth in
the existing Reporting Guidebook does
not implicate the section 15(a) factors.
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8. Additional Reporting Fields for the
Daily Reporting Requirements—
§ 39.19(c)(1)
a. Benefits
The Commission is adding several
new reporting fields that will be
incorporated into new appendix C to
part 39.28 The Commission is requiring
that DCOs that clear interest rate swaps
include in their daily reports the delta
ladder, gamma ladder, vega ladder, zero
rate curves, and yield curves that those
DCOs use in connection with managing
risks associated with interest rate swaps
positions. Additionally, the Commission
is requiring DCOs that clear interest rate
swaps, forward rate agreements, or
inflation index swaps to include in their
daily reports the actual trade date for
each position along with an event
description. Additionally, the
Commission is requiring DCOs to
include in their daily reports
information that reflects that the daily
report is complete. Lastly, in connection
the new requirement in § 39.19(c)(1)(i)
that a DCO include in its daily reports
the results of its required daily margin
model backtesting, the Commission also
is adding to new appendix C amended
versions of the additional data fields
necessary to implement this
requirement.29 This information,
separately and in the aggregate, is
expected to assist the Commission in
conducting more effective oversight of
DCOs, thereby enhancing the
protections afforded to the markets
generally. The Commission did not
receive any comments on the benefits
associated with these changes.
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b. Costs
The Commission believes that the
costs associated with adding these new
daily reporting fields to appendix C are
negligible. The Commission believes
that DCOs already possess this
information in read-ready format and
use it in the ordinary course of business,
and the regulation only requires that
they transmit it to the Commission in a
standardized format. Despite these
beliefs and out of an abundance of
caution, the Commission is estimating
the cost of developing and producing
the new daily reporting fields that
28 As noted previously, the Commission is not
adopting the proposal that each DCO include in its
daily reports timing information about VM calls and
payments.
29 Although the costs, benefits, and section 15(a)
factors associated with the requirement in
§ 39.19(c)(1)(i) that a DCO include backtesting
results in its daily report are addressed separately
below, the costs associated with the
implementation of this requirement via the
amended new daily reporting fields in appendix C
are addressed in this section.
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would be incorporated into new
appendix C.
The Commission estimates that the
capital costs associated with the
addition of new daily reporting fields in
new appendix C, and the requirement
that DCOs include information on their
backtesting results in their daily reports
are negligible. The Commission also
estimates that any ongoing costs are
negligible because the Commission
understands that the preparation and
submission of the daily reports required
pursuant to § 39.19(c)(1)(i) is largely
automated. However, to the extent that
a DCO does not currently use any of the
information that would be required
under the new fields, or if that
information is not accessible on an
automated basis, then a DCO may incur
start-up costs associated with reporting
information pursuant to the new fields,
specifically including costs for coding,
as well as testing, quality assurance, and
compliance review. To estimate these
start-up costs, the Commission relied
upon internal subject matter experts in
its Divisions of Data and Clearing and
Risk to estimate the amount of time and
type of DCO personnel necessary to
complete the coding, testing, quality
assurance, and compliance review. The
Commission then used data from the
Department of Labor’s Bureau of Labor
Statistics from May 2021 to estimate the
total costs of this work.30 Using this
method, the Commission estimates the
total start-up costs to be approximately
$69,667.21 per DCO.31
30 To estimate the start-up costs, the Commission
relied upon internal subject matter experts in its
Divisions of Data and Clearing and Risk to estimate
the amount of time and type of DCO personnel
necessary to complete the coding, testing, quality
assurance, and compliance review. The
Commission then used data from the Department of
Labor’s Bureau of Labor Statistics from May 2021
to estimate the total costs of this work. According
to the May 2021 National Occupational
Employment and Wage Estimates Report produced
by the U.S. Bureau of Labor Statistics, available at
https://www.bls.gov/oes/current/oes_nat.htm, the
mean salary for a computer systems analyst in
management companies and enterprises is
$103,860. This number is divided by 1800 work
hours in a year to account for sick leave and
vacations and multiplied by 2.5 to account for
retirement, health, and other benefits, as well as for
office space, computer equipment support, and
human resources support, all of which yields an
hourly rate of $144.25. Similarly, a computer
programmer has a mean annual salary of $102,430,
yielding an hourly rate of $142.26; a software
quality assurance analyst and tester has a mean
annual salary of $99,460, yielding an hourly rate of
$138.14; and a compliance attorney has a mean
annual salary of $198,900, yielding an hourly rate
of $276.25.
31 The estimate of total start-up costs consists of
the following: $14,101.10 for the delta ladder,
gamma ladder, vega ladder, and the zero rate
curves, based on 20 hours of systems analyst time,
40 hours of programmer time, and 40 hours of tester
time; $7,248.61 for adding interest rate, forward
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CME commented on the cost-benefit
considerations related to the addition of
these new daily reporting fields, arguing
that the Commission severely
underestimated the amount of time that
would be required to comply with the
requirement. Specifically, CME
commented that it believes the time
required to implement the proposed
changes would be ‘‘an order of
magnitude greater than predicted,’’
which would add to the costs. However,
CME did not quantify the amount by
which it believes that costs would be
increased, and as a result, the
Commission is reluctant to adjust its
estimates based on this comment.
Furthermore, the Commission is not
adopting all of the new fields that were
proposed, which would reduce the costs
that may be incurred by DCOs to
implement the required changes.
Accordingly, the Commission believes
that retaining its initial estimates of
these costs in the proposal (excluding
estimates of any proposals not being
adopted in the final rule) addresses
CME’s concern that the Commission’s
initial estimates of the costs of
implementation were not adequate,
while accounting for the fact that costs
were reduced by the Commission’s
decision not to adopt all of the relevant
proposals.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of adding these daily
reporting fields to new appendix C to
part 39 in light of the specific
considerations identified in section
15(a) of the CEA. Requiring DCOs to
include in their daily reports delta
ladder, gamma ladder, vega ladder, zero
rate curve, and yield curve information
for interest rates swaps, as well as trade
dates for interest rate swaps, forward
rate agreements, and inflation index
swaps, are expected to provide
information necessary for the
Commission to improve its supervision
and oversight of DCOs and the
derivatives markets, which in turn is
expected to result in improved
protection of market participants and
rates, and end of day position fields, based on 8
hours of systems analyst time, 4 hours of
programmer time, and 40 hours of tester time;
$14,140.83 for the manifest file, based on 40 hours
of systems analyst time, 40 hours of programmer
time, and 20 hours of tester time; and $22,676.67
for adding the backtesting fields, based on 40 hours
of systems analyst time, 80 hours of programmer
time, and 40 hours of tester time. The estimate of
total start-up costs also includes $11,500.00 for
compliance attorney review. The amount that was
estimated for the payment file in the proposal,
$39,907.22, is not being included here, because the
Commission did not adopt the proposal for the
payment file.
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the public, improved financial integrity
of the futures markets, and potentially
improved DCO risk management
practices. The Commission has
considered the other section 15(a)
factors and believes that they are not
implicated by this change.
9. Daily Reporting of Margin Model
Backtesting—§ 39.19(c)(1)(i)
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a. Benefits
The Commission is adding to
§ 39.19(c)(1)(i) a requirement that DCOs
include in their daily reports the results
of the margin model backtesting that
DCOs are required to perform daily
pursuant to § 39.13(g)(7)(i). Because
margin model backtesting results are a
crucial element of an effective risk
surveillance program, obtaining this
information will allow the Commission
to conduct more effective oversight of
DCOs, thereby enhancing the
protections afforded to the markets
generally. The Commission did not
receive any comments on the costs or
benefits associated with these changes.
b. Costs
The Commission expects that
requiring DCOs to report backtesting
results daily will impose only a
negligible cost on DCOs because DCOs
already possess this information, and
they are being required only to transmit
it to the Commission in a standardized
format. Additionally, the Commission
has revised the fields in new appendix
C to part 39 for reporting backtesting
results to address concerns expressed by
commenters and better align those fields
with the manner in which DCOs
calculate their backtesting results, since
DCOs do not perform backtesting and
calculate the results in a uniform
manner. However, to the extent that a
DCO does not maintain the required
information in the required
standardized format, a DCO may incur
initial costs related to modifying its
systems to convert the information to
the standardized format, specifically
including costs for coding, as well as
testing, quality assurance, and
compliance review. An estimate of these
start-up costs is included in the
discussion of the estimated costs
associated with reporting information
pursuant to the new fields in appendix
C. The Commission notes, however, that
some DCOs are already voluntarily
providing backtesting information to the
Commission on a weekly or monthly
basis.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of requiring DCOs to report
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backtesting results daily in light of the
specific considerations identified in
section 15(a) of the CEA. Requiring
DCOs to report backtesting results daily
is expected to improve the
Commission’s supervision of DCO risk
management and, therefore, is expected
to yield enhanced protection of market
participants and the public, improved
financial integrity of the futures
markets, and also potentially improve
DCO risk management practices. The
Commission has considered the other
section 15(a) factors and believes that
they are not implicated by adding to
§ 39.19(c)(1)(i) a requirement that DCOs
include in their daily reports the results
of their daily margin model backtesting.
10. Fully Collateralized Positions—
§ 39.19(c)(1)(ii)
a. Benefits
The Commission is amending
§ 39.19(c)(1)(ii) to clarify that this
regulation does not apply to fully
collateralized positions. Because
§ 39.19(c)(1)(ii) merely expands on
§ 39.19(c)(1)(i), which already does not
apply to fully collateralized positions,
and therefore has no independent force
or effect, this amendment does not
represent a substantive change. Making
this change to § 39.19(c)(1)(ii) provides
greater certainty to DCOs, their clearing
members, and their customers, and may
prevent them from having to request
guidance on this matter from the
Commission or the Division in the
future. Further, the Commission
believes that this amendment may
increase operational efficiency for DCOs
that clear fully collateralized positions.
The Commission did not receive any
comments on the costs or benefits
associated with these changes.
b. Costs
The Commission does not anticipate
any non-negligible change in costs
resulting from amending § 39.19(c)(1)(ii)
to clarify that it does not apply to fully
collateralized positions.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of amending
§ 39.19(c)(1)(ii) to clarify that this
regulation does not apply to fully
collateralized positions in light of the
specific considerations identified in
section 15(a) of the CEA. The
Commission believes that this
amendment may increase operational
efficiency for DCOs that clear fully
collateralized positions, which is in the
public interest. The Commission has
considered the other section 15(a)
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factors and believes that they are not
implicated by the amendment.
11. Reporting Change of Control of the
DCO—§ 39.19(c)(4)(ix)(A)(1)
a. Benefits
Regulation § 39.19(c)(4)(ix)(A)(1)
requires a DCO to report any change in
the ownership or corporate or
organizational structure of the DCO or
its parent(s) that would result in at least
a 10 percent change of ownership of the
DCO. The Commission is amending
§ 39.19(c)(4)(ix)(A)(1) to require a DCO
to report any change in the ownership
or corporate or organizational structure
of the DCO or its parent(s) that would
result in a change to the entity or person
holding a controlling interest in the
DCO, whether through an increase in
direct ownership or voting interest in
the DCO or in a direct or indirect
corporate parent entity of the DCO. This
amendment will ensure that the
Commission has accurate knowledge of
the individuals or entities that directly
or indirectly control a DCO regardless of
the corporate structures of the equity
holders of the DCO. The Commission
did not receive any comments on the
costs or benefits associated with these
changes.
b. Costs
The Commission expects the costs
related to the amendment to
§ 39.19(c)(4)(ix)(A)(1) to be negligible.
Specifically, the Commission expects a
negligible cost burden with respect to
the changes, in part because the changes
of control contemplated by the
amendment occur infrequently. In
addition, DCOs have typically notified
the Commission of such changes of
control even if not technically required
by the current regulations. The
administrative burden of notifying the
Commission—preparing a notification,
attaching relevant but pre-existing
supporting documents such as the
revised organizational chart, and
submitting to the Commission—is
negligible.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendments to
§ 39.19(c)(4)(ix)(A)(1) in light of the
specific considerations identified in
section 15(a) of the CEA. The
Commission believes that the
amendments may have a moderately
beneficial effect on protection of market
participants and the public, as well as
on the financial integrity of the futures
markets, because the amendments are
anticipated to provide the Commission
with a better understanding of the
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organizational structure of the
ownership of the DCO, potentially
illuminating whether any individuals or
entities that directly or indirectly
control a DCO also have ownership
stakes in other registrants or registered
entities. The Commission has
considered the other section 15(a)
factors and believes that they are not
implicated by the amendments to
§ 39.19(c)(4)(ix)(A)(1).
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12. Reporting Issues With Credit Facility
Funding Arrangements, Liquidity
Funding Arrangements, Custodian
Banks, and Settlement Banks—
§ 39.19(c)(4)(xv)
a. Benefits
The Commission is amending
§ 39.19(c)(4)(xv) to require that a DCO
report to the Commission within one
business day after it becomes aware of
any material issues or concerns
regarding the performance, stability,
liquidity, or financial resources of any
credit facility funding arrangement,
liquidity funding arrangement,
custodian bank, or settlement bank used
by the DCO or approved for use by the
DCO’s clearing members. This
amendment expands the reporting
requirement, which previously applied
only to any settlement bank used by the
DCO or approved for use by the DCO’s
clearing members, to apply as well to
any credit facility funding arrangement,
liquidity funding arrangement, or
custodian bank used by the DCO or
approved for use by the DCO’s clearing
members. This amendment also changes
the threshold that triggers a DCO’s
reporting obligations by replacing the
requirement that a DCO report to the
Commission within one business day
after any material issues or concerns
arise, with the requirement that a DCO
report to the Commission within one
business day after it becomes aware of
any material issues or concerns. Given
the importance of credit facility funding
arrangements, liquidity funding
arrangements, custodian banks, and
settlement banks to both DCOs and
clearing members, it is imperative that
the Commission be informed of any
known issues or concerns regarding
these entities or arrangements,
especially considering the broader
impact that problems with these entities
or arrangements could have on DCOs
and clearing members, as well as the
derivatives markets as a whole. As such,
the reporting of this information is
expected to improve the Commission’s
oversight and supervision of DCOs,
clearing members, and the derivatives
markets generally. The Commission did
not receive any comments on the costs
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or benefits associated with these
changes.
b. Costs
The Commission expects that the
costs related to the amendments to
§ 39.19(c)(4)(xv) will be negligible.
Specifically, because a DCO is only
required to report these issues when it
becomes aware of them, and given that
these events are not very common, any
cost increase is estimated to be
negligible.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendments to
§ 39.19(c)(4)(xv) in light of the specific
considerations identified in section
15(a) of the CEA. The Commission
believes that the amendments to
§ 39.19(c)(4)(xv) may potentially have a
beneficial effect on protection of market
participants and the public, as well as
on the financial integrity of the futures
markets, because the amendments
would provide the Commission with
new, additional information that is
anticipated to assist the Commission in
its supervision of DCOs and oversight of
the derivatives markets. Additionally,
this information could be time-sensitive
and critically important in times of
market stress or broader economic
upheaval. The Commission has
considered the other section 15(a)
factors and believes that they are not
implicated by the amendments to
§ 39.19(c)(4)(xv).
13. Reporting of Updated Responses to
the Disclosure Framework for Financial
Market Infrastructures—
§ 39.19(c)(4)(xxv)
a. Benefits
The Commission is adopting new
§ 39.19(c)(4)(xxv) to codify in § 39.19
the requirement in § 39.37(b)(2) that,
when a DCO updates its responses to
the Disclosure Framework for Financial
Market Infrastructures published by the
Committee on Payment and Settlement
Systems and the Board of the
International Organization of Securities
Commissions in accordance with
§ 39.37(b)(1), the DCO shall provide
notice of those updates to the
Commission. This amendment further
centralizes within § 39.19 the
obligations of DCOs to report
information to the Commission, which
benefits affected DCOs by consolidating
their reporting obligations within one
location. The Commission did not
receive any comments on the costs or
benefits associated with these changes.
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53681
b. Costs
The Commission does not anticipate
any costs associated with the adoption
of § 39.19(c)(4)(xxv) because it does not
alter the existing reporting obligations of
DCOs.
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the adoption of
§ 39.19(c)(4)(xxv) in light of the specific
considerations identified in section
15(a) of the CEA. The Commission has
considered the section 15(a) factors and
believes that they are not implicated by
the adoption of § 39.19(c)(4)(xxv).
14. Publication of Margin-Setting
Methodology and Financial Resource
Package Information—§ 39.21(c)(3) and
(4)
a. Benefits
The Commission is amending
§ 39.21(c)(3) and (4) to provide that a
DCO that clears only fully collateralized
positions is not required to disclose its
margin-setting methodology, or
information regarding the size and
composition of its financial resource
package for use in a default, if instead
the DCO discloses that it does not
employ a margin-setting methodology or
maintain a financial resource package
because it clears only fully
collateralized positions. The
Commission anticipates the public may
benefit from increased clarity regarding
the risks that market participants may
face at such a DCO because the full
collateralization requirement is
intended to mitigate such risk.
b. Costs
The Commission does not anticipate
any costs associated with the
amendment to § 39.21(c)(3) and (4).
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendments to
§ 39.21(c)(3) and (4) in light of the
specific considerations identified in
section 15(a) of the CEA. The
Commission believes that the
amendments to § 39.21(c)(3) and (4)
serve the broader public interest due to
the increased clarity regarding the risks
that market participants may face at
such a DCO, as the full collateralization
requirement is intended to mitigate such
risk. The Commission has considered
the other section 15(a) factors and
believes that they are not implicated by
the amendments to § 39.21(c)(3) and (4).
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15. Excluding Eligible DCOs From the
Requirement in § 39.21(c)(7) To Publish
a List of Clearing Members
a. Benefits
The Commission is amending
§ 39.21(c)(7) to provide that a DCO may
omit any non-FCM clearing member that
clears only fully collateralized
positions, and therefore does not share
in the mutualized risk associated with
clearing activity, from its published list
of clearing members. The Commission
anticipates that the amendment will
reduce operational and compliance
burdens on eligible DCOs. This is a
significant benefit because, given the
manner in which they engage directly
with market participants, DCOs that
provide for fully collateralized clearing
may have a large number of non-FCM
clearing participants and a high volume
of turnover among such participants.
b. Costs
The Commission does not anticipate
any costs associated with the
amendments to § 39.21(c)(7), as the rule
reduces the public disclosure
requirements that apply to DCOs that
provide for fully collateralized clearing.
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c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendments to
§ 39.21(c)(7) in light of the specific
considerations identified in section
15(a) of the CEA. The Commission
believes that the amendments to
§ 39.21(c)(7) will have a limited and
rather moderately beneficial effect on
the operations of the eligible DCOs
themselves, because eligible DCOs
would enjoy the reduced burden of
being excused from including non-FCM
clearing members that clear only fully
collateralized positions in their
published lists of clearing participants.
Additionally, with respect to public
interest considerations, the Commission
believes that the amendments to
§ 39.21(c)(7) will have a moderately
beneficial effect on non-FCM market
participants that clear through eligible
DCOs, because those market
participants would benefit from the
additional privacy afforded to them
when they are not publicly listed as
clearing members on the DCO’s website.
The Commission has considered the
other section 15(a) factors and believes
that they are not implicated by the
amendments to § 39.21(c)(7).
16. Clarifying the Disclosure Obligations
in § 39.37
a. Benefits
The Commission is amending
§ 39.37(c) and (d) to clarify that public
disclosure of the information described
in those paragraphs is all that is
required. The changes to § 39.37(c) and
(d) will provide a modest benefit to
SIDCOs and subpart C DCOs by
clarifying that a separate report directly
to the Commission of information that
the DCO discloses publicly pursuant to
§ 39.37(c) and (d) is not required.
b. Costs
The Commission has not identified
any costs associated with the changes to
§ 39.37(c) and (d).
c. Section 15(a) Factors
In addition to the discussion above,
the Commission has evaluated the costs
and benefits of the amendment of
§ 39.37(c) and (d) in light of the specific
considerations identified in section
15(a) of the CEA. The Commission has
considered the section 15(a) factors and
believes that they are not implicated by
the changes.
17. Amendments to § 140.94(c)(10)
a. Benefits
The Commission is amending
§ 140.94(c)(10) to provide the Director of
the Division with delegated authority to
request additional information that the
Commission determines to be necessary
to conduct oversight of the DCO, and to
specify the format and manner of the
DCO reporting requirements. The
Commission believes the delegation of
authority will promote a more expedient
process to address these aspects of the
reporting requirements under § 39.19.
b. Costs
The Commission has not identified
any costs associated with the
amendments to § 140.94(c)(10).
c. Section 15(a) Factors
The Commission has considered the
section 15(a) factors and believes that
they are not implicated by this
amendment.
D. Antitrust Considerations
Section 15(b) of the CEA requires the
Commission to take into consideration
the public interest to be protected by the
antitrust laws and endeavor to take the
least anticompetitive means of
achieving the purposes of the CEA, in
issuing any order or adopting any
Commission rule or regulation.32
32 7
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The Commission believes that the
public interest to be protected by the
antitrust laws is the promotion of
competition. In the proposal, the
Commission requested comment on
whether: (1) the proposed rulemaking
implicates any other specific public
interest to be protected by the antitrust
laws; (2) the proposed rulemaking is
anticompetitive and, if it is, what the
anticompetitive effects are; and (3)
whether there are less anticompetitive
means of achieving the relevant
purposes of the CEA that would
otherwise be served by adopting the
proposed rule amendments. The
Commission did not receive any
comments in response.
The Commission has considered the
final rule to determine whether it is
anticompetitive and has identified no
anticompetitive effects. Because the
Commission has determined that the
rules are not anticompetitive and have
no anticompetitive effects, the
Commission has not identified any less
anticompetitive means of achieving the
purposes of the CEA.
List of Subjects
17 CFR Part 39
Reporting and recordkeeping
requirements.
17 CFR Part 140
Authority delegations (Government
agencies).
For the reasons stated in the
preamble, the Commodity Futures
Trading Commission amends 17 CFR
chapter I as follows:
PART 39—DERIVATIVES CLEARING
ORGANIZATIONS
1. The authority citation for part 39
continues to read as follows:
■
Authority: 7 U.S.C. 2, 6(c), 7a–1, and
12a(5); 12 U.S.C. 5464; 15 U.S.C. 8325;
Section 752 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, Pub. L.
111–203, title VII, sec. 752, July 21, 2010, 124
Stat. 1749.
§ 39.2
[Amended]
2. Amend § 39.2 by removing ‘‘Back
test’’ and adding in its place ‘‘Backtest’’.
■
§ 39.5
[Amended]
3. Amend § 39.5 in paragraph
(b)(3)(vi) by removing ‘‘back testing’’
and adding in its place ‘‘backtesting’’.
■ 4. Amend § 39.13 as follows:
■ a. In paragraph (g)(7), remove ‘‘Back
tests’’ and ‘‘back tests’’ wherever they
appear and add in their places
‘‘Backtests’’ and ‘‘backtests’’,
respectively.
■
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b. In paragraph (h)(5)(i)(A), add the
word ‘‘and’’ at the end of the paragraph;
■ c. Revise paragraph (h)(5)(i)(B);
■ d. Remove paragraph (h)(5)(i)(C); and
■ e. Add paragraph (h)(5)(iii).
The revision and addition read as
follows:
■
§ 39.13
Risk management.
*
*
*
*
*
(h) * * *
(5) * * *
(i) * * *
(B) Require its clearing members to
provide to the derivatives clearing
organization or the Commission, upon
request, information and documents
regarding their risk management
policies, procedures, and practices,
including, but not limited to,
information and documents relating to
the liquidity of their financial resources
and their settlement procedures.
*
*
*
*
*
(iii) A derivatives clearing
organization that clears fully
collateralized positions may exclude
from the requirements of paragraphs
(h)(5)(i) and (ii) of this section those
clearing members that clear only fully
collateralized positions.
*
*
*
*
*
■ 5. Amend 39.15 by revising paragraph
(b)(2) to read as follows:
§ 39.15
Treatment of funds.
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*
*
*
*
*
(b) * * *
(2) Commingling. In order for a
derivatives clearing organization and its
clearing members to commingle
customer positions in futures, options,
foreign futures, foreign options, and
swaps, or any combination thereof, and
any money, securities, or property
received to margin, guarantee or secure
such positions, in an account subject to
the requirements of sections 4d(a) or
4d(f) of the Act, the derivatives clearing
organization shall file rules for
Commission approval pursuant to the
requirements and standard of review of
§ 40.5 of this chapter. Such rule
submission shall include, at a
minimum, the following:
(i) Identification of the products that
would be commingled, including
product specifications or the criteria
that would be used to define eligible
products;
(ii) Analysis of the risk characteristics
of the eligible products and of the
derivatives clearing organization’s
ability to manage those risks, addressing
any characteristics that are unusual in
relation to the other products cleared by
the derivatives clearing organization,
such as margining, liquidity, default
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management, pricing, or other risk
characteristics;
(iii) Analysis of the liquidity of the
respective markets for the eligible
products, the ability of clearing
members and the derivatives clearing
organization to offset or mitigate the risk
of such eligible products in a timely
manner, without compromising the
financial integrity of the account, and,
as appropriate, proposed means for
addressing insufficient liquidity;
(iv) A description of any additional
requirements that would apply to
clearing members permitted to
commingle eligible products;
(v) A description of any risk
management changes that the
derivatives clearing organization will
implement to oversee its clearing
members’ risk management of eligible
products, or an analysis of why existing
risk management systems and
procedures are adequate in connection
with the proposed commingling;
(vi) An analysis of the ability of the
derivatives clearing organization to
manage a potential default with respect
to any of the eligible products that
would be commingled, including a
discussion of any default management
procedures that are unique to the
products eligible for commingling;
(vii) A discussion of the extent to
which the derivatives clearing
organization anticipates allowing
portfolio margining of commingled
positions, including a description and
analysis of any margin reduction
applied to correlated positions and the
language of any applicable clearing
rules or procedures, and an express
confirmation that any portfolio
margining will be allowed only as
permitted under § 39.13(g)(4); and
(viii) Any other information necessary
for the Commission to determine the
rule submission’s compliance with the
Act and the Commission’s regulations in
this chapter, which the Commission
may request as supplemental
information if not provided in the initial
submission. The Commission may
extend the review period for the rule
submission in accordance with § 40.5(d)
of this chapter in order to request and
obtain supplemental information as
necessary.
*
*
*
*
*
■ 6. Amend § 39.19 as follows:
■ a. Revise paragraph (c)(1)(i) and the
introductory text of paragraph (c)(1)(ii);
■ b. Add paragraph (c)(1)(iii);
■ c. Revise paragraphs (c)(4)(ix)(A)(1)
and (c)(4)(xii), (xiii), and (xv); and
■ d. Add paragraph (c)(4)(xxv).
The revisions and additions read as
follows:
PO 00000
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§ 39.19
53683
Reporting.
*
*
*
*
*
(c) * * *
(1) * * *
(i) A derivatives clearing organization
shall compile as of the end of each
trading day, and submit to the
Commission by 10 a.m. on the next
business day, a report containing the
results of the backtesting required under
§ 39.13(g)(7)(i), and the following
information related to all positions,
other than fully collateralized positions,
in accordance with the data fields set
forth in appendix C to this part:
(A) Initial margin requirements and
initial margin on deposit for each
clearing member, by house origin and
by each customer origin, and by each
individual customer account. The
derivatives clearing organization shall
identify each individual customer
account, using both a legal entity
identifier, where available, and any
internally-generated identifier, within
each customer origin for each clearing
member;
(B) Daily variation margin, separately
listing the mark-to-market amount
collected from or paid to each clearing
member, by house origin and by each
customer origin;
(C) All other daily cash flows relating
to clearing and settlement including, but
not limited to, option premiums and
payments related to swaps such as
coupon amounts, collected from or paid
to each clearing member, by house
origin and by each customer origin; and
(D) End-of-day positions, including as
appropriate the risk sensitivities and
valuation data that the derivatives
clearing organization generates, creates,
or calculates in connection with
managing the risks associated with such
positions, for each clearing member, by
house origin and by each customer
origin, and by each individual customer
account. The derivatives clearing
organization shall identify each
individual customer account, using both
a legal entity identifier, where available,
and any internally-generated identifier,
within each customer origin for each
clearing member.
(ii) The report shall contain the
information required by paragraphs
(c)(1)(i)(A) through (D) of this section for
each of the following, other than fully
collateralized positions:
*
*
*
*
*
(iii) Notwithstanding the specific
fields set forth in appendix C to this
part, a derivatives clearing organization
may choose to submit, after consultation
with staff of the Division of Clearing and
Risk, any additional data field that is
necessary or appropriate to better
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capture the information that is being
reported.
*
*
*
*
*
(4) * * *
(ix) * * *
(A) * * *
(1) Result in at least a 10 percent
change of ownership of the derivatives
clearing organization or a change to the
entity or person holding a controlling
interest in the derivatives clearing
organization, whether through an
increase in direct ownership or voting
interest in the derivatives clearing
organization or in a direct or indirect
corporate parent entity of the
derivatives clearing organization;
*
*
*
*
*
(xii) Change in credit facility funding
arrangement. A derivatives clearing
organization shall report to the
Commission no later than one business
day after the derivatives clearing
organization enters into, terminates, or
changes a credit facility funding
arrangement, or is notified that such
arrangement has changed, including but
not limited to a change in lender,
change in the size of the facility, change
in expiration date, or any other material
changes or conditions.
(xiii) Change in liquidity funding
arrangement. A derivatives clearing
organization shall report to the
Commission no later than one business
day after the derivatives clearing
organization enters into, terminates, or
changes a liquidity funding
arrangement, or is notified that such
arrangement has changed, including but
not limited to a change in provider,
change in the size of the arrangement,
change in expiration date, or any other
material changes or conditions.
*
*
*
*
*
(xv) Issues with credit facility funding
arrangements, liquidity funding
arrangements, custodian banks, or
settlement banks. A derivatives clearing
organization shall report to the
Commission no later than one business
day after it becomes aware of any
material issues or concerns regarding
the performance, stability, liquidity, or
financial resources of any credit facility
funding arrangement, liquidity funding
arrangement, custodian bank, or
settlement bank used by the derivatives
clearing organization or approved for
use by the derivatives clearing
organization’s clearing members.
*
*
*
*
*
(xxv) Updates to responses to the
Disclosure Framework for Financial
Market Infrastructures. A systemically
important derivatives clearing
organization or a subpart C derivatives
clearing organization that updates its
responses to the Disclosure Framework
for Financial Market Infrastructures
published by the Committee on
Payment and Settlement Systems and
the Board of the International
Organization of Securities Commissions
pursuant to § 39.37(b)(1) must provide
to the Commission, within ten business
days after such update, a copy of the
text of the responses that shows all
deletions and additions made to the
immediately preceding version of the
responses, as required by § 39.37(b)(2).
*
*
*
*
*
■ 7. Amend § 39.21 by revising
paragraphs (c)(3), (4), and (7) to read as
follows:
§ 39.21
Public information.
*
*
*
*
*
(c) * * *
(3) Information concerning its marginsetting methodology, except that a
derivatives clearing organization that
clears only fully collateralized positions
instead may disclose that it does not
employ a margin-setting methodology
because it clears only fully
collateralized positions;
(4) The size and composition of the
financial resource package available in
the event of a clearing member default,
updated as of the end of the most recent
fiscal quarter or upon Commission
request and posted as promptly as
practicable after submission of the
report to the Commission under
§ 39.11(f)(1)(i)(A), except that a
Field name
derivatives clearing organization that
clears only fully collateralized positions
instead may disclose that it does not
maintain a financial resource package to
be used in the event of a clearing
member default because it clears only
fully collateralized positions;
*
*
*
*
*
(7) A current list of all clearing
members, except that a derivatives
clearing organization may omit any
clearing member that clears only fully
collateralized positions and is not a
futures commission merchant;
*
*
*
*
*
■ 8. Amend § 39.25 by revising
paragraph (c) to read as follows:
§ 39.25
Conflicts of interest.
*
*
*
*
*
(c) Have procedures for identifying,
addressing, and managing conflicts of
interest involving members of the board
of directors.
■ 9. Amend § 39.37 by revising
paragraph (c) and the introductory text
of paragraph (d) to read as follows:
§ 39.37 Additional disclosure for
systemically important derivatives clearing
organizations and subpart C derivatives
clearing organizations.
*
*
*
*
*
(c) Publicly disclose relevant basic
data on transaction volume and values
consistent with the standards set forth
in the Public Quantitative Disclosure
Standards for Central Counterparties
published by the Committee on
Payments and Market Infrastructures
and the International Organization of
Securities Commissions;
(d) Publicly disclose rules, policies,
and procedures concerning segregation
and portability of customers’ positions
and funds, including whether each of:
*
*
*
*
*
■ 10. Add appendix C to part 39 to read
as follows:
Appendix C to Part 39—Daily
Reporting Data Fields
A.
Daily Cash Flow Reporting
Description
House &
customer
origin
Individual
customer
account
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
ddrumheller on DSK120RN23PROD with RULES3
Common Fields (Daily Cash Flow Reporting)
Total Message Count ...........................
FIXML Message Type ..........................
Sender ID .............................................
To ID ....................................................
Message Transmit Datetime ................
Report ID ..............................................
Report Date ..........................................
Base Currency .....................................
Report Time (Message Create Time) ..
DCO Identifier ......................................
Clearing Participant Identifier ...............
VerDate Sep<11>2014
21:11 Aug 07, 2023
The total number of reports included in the file .............................................................................
Financial Information eXchange Markup Language (FIXML) account summary report type ........
The CFTC-issued derivatives clearing organization (DCO) identifier ............................................
Indicate ‘‘CFTC’’ .............................................................................................................................
The date and time the file is transmitted .......................................................................................
A unique identifier assigned by the Commodity Futures Trading Commission (CFTC) to each
clearing member report.
The business date of the information being reported ....................................................................
Base currency referenced throughout report; provide exchange rate against this currency ........
The report ‘‘as of’’ or information cut-off time ................................................................................
CFTC-assigned identifier for a DCO ..............................................................................................
DCO-assigned identifier for a particular clearing member .............................................................
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Field name
Description
Clearing Participant Name ...................
Fund Segregation Type .......................
Clearing Participant LEI .......................
The name of the clearing member .................................................................................................
Clearing fund segregation type ......................................................................................................
Legal entity identifier (LEI) for a particular clearing member per International Organization for
Standardization (ISO) 17442.
The LEI name associated with the clearing member LEI ..............................................................
Proprietary identifier for a particular customer position account ...................................................
The name associated with the customer position identifier ...........................................................
Type of account used for reporting ................................................................................................
LEI for a particular customer; provide if available .........................................................................
The LEI name associated with the customer position LEI ............................................................
Margin account identifier ................................................................................................................
The name associated with the customer margin identifier ............................................................
A single field that uniquely identifies the margin account. This field is used to identify associated positions.
Proprietary identifier for a particular customer ...............................................................................
Account type indicator ....................................................................................................................
Clearing Participant LEI Name ............
Customer Position Identifier .................
Customer Position Name .....................
Customer Position Account Type ........
Customer LEI .......................................
Customer LEI Name ............................
Margin Account ....................................
Customer Margin Name .......................
Unique Margin Identifier .......................
Customer Margin Identifier ..................
Customer Margin Account Type ..........
53685
House &
customer
origin
Individual
customer
account
M
M
C
M
M
C
C
C
M
C
N/A
N/A
M
N/A
M
C
N/A
N/A
N/A
C
C
N/A
C
M
N/A
N/A
M
M
M
N/A
C
C
M
C
N/A
M
C
M
C
N/A
M
N/A
M
N/A
C
C
C
N/A
M
N/A
C
C
C
O
C
C
M
C
N/A
N/A
N/A
N/A
N/A
C
M
N/A
M
M
M
N/A
M
M
M
N/A
M
N/A
C
N/A
C
N/A
C
C
C
M
N/A
N/A
N/A
N/A
M
N/A
C
M
C
M
C
C
Futures and Options (Daily Cash Flow Reporting)
Additional Margin .................................
Concentration Risk ...............................
Delivery Margin ....................................
Initial Margin .........................................
Liquidity Risk ........................................
Margin Calls .........................................
Total Margin .........................................
Variation Margin ...................................
Market Move Risk ................................
Margin Savings ....................................
Collateral on Deposit ...........................
Option Premium ...................................
Net Option Value .................................
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
Customer Margin Omnibus Parent ......
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Risk factor component to capture costs associated with the liquidation of a large position .........
Margin collected to cover delivery risk ...........................................................................................
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons.
Risk component to capture bid/offer costs associated with the liquidation of a large portfolio. ...
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The total margin requirement for the origin. This margin requirement should include the initial
margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
Margin amount associated with market move risk .........................................................................
The margin savings amount for the clearing member where there is a cross-margining agreement with another DCO.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
The credit or debit amount based on the long or short options positions .....................................
The profit and loss (P&L) attributed to positions added that were novated on a prior date .........
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark-to-market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L).
The margin identifier for the omnibus account associated with the customer margin identifier.
(Conditional on reported customer position being part of a separately reported omnibus account position.).
Commodity Swaps (Daily Cash Flow Reporting)
Additional Margin .................................
Initial Margin .........................................
Margin Calls .........................................
Total Margin .........................................
Variation Margin ...................................
Collateral on Deposit ...........................
Option Premium ...................................
Net Cash Flow .....................................
ddrumheller on DSK120RN23PROD with RULES3
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons.
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The total margin requirement for the origin. This margin requirement should include the initial
margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
Net cash flow recognized on report date (with actual settlements occurring according to the
currency’s settlement conventions). E.g., profit/loss, price alignment interest, cash payments
(fees, coupons, etc.).
The P&L attributed to positions added that were novated on a prior date ...................................
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark to market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L).
Credit Default Swaps (Daily Cash Flow Reporting)
Additional Margin .................................
Concentration Risk ...............................
Initial Margin .........................................
Liquidity Risk ........................................
VerDate Sep<11>2014
21:11 Aug 07, 2023
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Risk factor component to capture costs associated with the liquidation of a large position .........
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons.
Risk component to capture bid/offer costs associated with the liquidation of a large portfolio. ...
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Field name
Description
Margin Calls .........................................
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The total margin requirement for the origin. This margin requirement should include the initial
margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
Risk factor component associated with credit spread level changes and credit term structure
shape changes.
Risk factor component to capture parallel shift of credit spreads .................................................
Risk factor that captures curve shifts based on portfolio ...............................................................
Risk factor component associated with risks due to widening/tightening spreads of credit default swap (CDS) indices relative to each other.
Risk factor component to capture sector risk ................................................................................
Risk factor component to capture most extreme up/down move of a reference entity .................
Risk factor component to capture basis risk between index and index constituent reference entities.
Risk factor component associated with parallel shift movements in interest rates .......................
Risk factor component to capture extreme narrowing of credit spreads of a reference entity;
also known as ‘‘idiosyncratic risk’’.
Any other risk factors included in the margin model .....................................................................
Risk factor component to capture fluctuations of recovery rate assumptions ...............................
Risk that occurs when exposure to a counterparty is adversely correlated with the credit quality
of that counterparty. It arises when default risk and credit exposure increase together.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
Amount of coupon premium amount accrued from the start of the current coupon period
through the trade date. (Indicate gross pay/collect amounts.).
The difference in market value between the standard coupon and the market spread as well as
the coupon accrued through the trade date. (Indicate gross pay/collect amounts.).
Additional cash amount on trades. (Indicate gross pay/collect amounts.) ....................................
Regular payment of quarterly coupon premium amounts. (Indicate gross pay/collect amounts.)
Cash settlement of credit events. (Indicate gross pay/collect amounts.) ......................................
Coupon obligation from the first day of the coupon period through the current clearing trade
date. The sum of accrued coupon for each position in the clearing member’s portfolio (by origin)..
Determined by marking the end-of-day position from par (100%) to the end-of-day settlement
price.
The P&L attributed to positions added that were novated on a prior date ...................................
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark-to-market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L).
Previous day’s accrued coupon .....................................................................................................
Previous day’s mark to market .......................................................................................................
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the
DCO will charge interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
Total Margin .........................................
Variation Margin ...................................
Spread Response Risk ........................
Systemic Risk ......................................
Curve Risk ...........................................
Index Spread Risk ...............................
Sector Risk ...........................................
Jump to Default Risk ...........................
Basis Risk ............................................
Interest Rate Risk ................................
Jump to Health Risk ............................
Other Risk ............................................
Recovery Rate Sensitivity Risk ............
Wrong Way Risk ..................................
Collateral on Deposit ...........................
Option Premium ...................................
Initial Coupon .......................................
Upfront Payment ..................................
Trade Cash Adjustment .......................
Quarterly Coupon .................................
Credit Event Payments ........................
Accrued Coupon ..................................
Final Mark to Market ............................
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
Previous Accrued Coupon ...................
Previous Mark to Market ......................
Price Alignment Interest .......................
House &
customer
origin
Individual
customer
account
M
N/A
M
C
M
N/A
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
M
N/A
C
N/A
O
N/A
O
N/A
C
O
C
M
N/A
N/A
N/A
N/A
M
N/A
C
C
C
M
N/A
N/A
N/A
N/A
M
M
M
N/A
N/A
N/A
M
N/A
M
M
M
N/A
M
M
M
N/A
M
N/A
M
N/A
C
N/A
M
N/A
C
C
C
M
N/A
N/A
N/A
N/A
M
N/A
Foreign Exchange (Daily Cash Flow Reporting)
Additional Margin .................................
Initial Margin .........................................
Margin Calls .........................................
Total Margin .........................................
Variation Margin ...................................
Collateral on Deposit ...........................
Other Payments ...................................
Option Premium ...................................
ddrumheller on DSK120RN23PROD with RULES3
Price Alignment Interest .......................
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons..
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The total margin requirement for the origin. This margin requirement should include the initial
margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Includes any upfront and/or final/settlement payments made/received for the trade date. (Indicate gross pay/collect amounts.).
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the
DCO will charge interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
The P&L attributed to positions added that were novated on a prior date ...................................
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark-to-market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L).
Interest Rate Swaps (Daily Cash Flow Reporting)
Additional Margin .................................
VerDate Sep<11>2014
21:11 Aug 07, 2023
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
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Field name
Description
Initial Margin .........................................
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons.
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The total margin requirement for the origin. This margin requirement should include the initial
margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
P&L resulting from changes in value due to changes in the futures price. This P&L should only
include changes to the cross-margined futures in the account.
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Includes any upfront and/or final/settlement payments made/received for the trade date. (Indicate gross pay/collect amounts.).
Net amount of any coupon cash flows recognized on report date but actually occurring on currency’s settlement convention date. (Indicate gross pay/collect amounts.).
Net present value (NPV) of all positions by currency ....................................................................
Previous day’s NPV by currency ....................................................................................................
Includes the present value of any upfront and/or final/settlement payments that will be settled
after the report date. Only include amounts that are affecting the NPV of current trades.
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the
DCO will charge interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
Coupon obligation from the first day of the coupon period through the current clearing trade
date. The sum of accrued coupon for each position in the clearing member’s portfolio (by origin).
The P&L attributed to positions added that were novated on a prior date ...................................
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark-to-market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L)..
Margin Calls .........................................
Total Margin .........................................
Variation Margin ...................................
Cross-Margined Products Profit/Loss ..
Option Premium ...................................
Collateral on Deposit ...........................
Other Payments ...................................
Net Coupon Payment ..........................
Net Present Value ................................
Net Present Value Previous ................
PV of Other Payments .........................
Price Alignment Interest .......................
Accrued Coupon ..................................
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
53687
House &
customer
origin
Individual
customer
account
M
M
M
N/A
M
M
M
N/A
C
N/A
C
N/A
M
N/A
C
N/A
M
N/A
M
M
M
N/A
N/A
N/A
M
N/A
M
N/A
C
C
C
M
N/A
N/A
N/A
N/A
M
N/A
M
M
C
M
C
N/A
M
N/A
M
N/A
M
N/A
C
N/A
C
C
C
C
M
C
N/A
N/A
N/A
N/A
M
N/A
M
N/A
M
N/A
M
N/A
M
N/A
M
N/A
C
N/A
C
C
C
M
N/A
N/A
N/A
N/A
Equity Cross Margin (Daily Cash Flow Reporting)
Additional Margin .................................
Initial Margin .........................................
Liquidity Risk ........................................
Margin Calls .........................................
Total Margin .........................................
Variation Margin ...................................
Collateral on Deposit ...........................
Option Premium ...................................
Net Option Value .................................
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons resulting from liquidity/concentration charges.
Risk component to capture bid/offer costs associated with the liquidation of a large portfolio ....
Any outstanding margin call that has been issued but not collected as of the end of the trade
date..
The total margin requirement for the origin. This margin requirement should include the initial
margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin..
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
The credit or debit amount based on the long or short options positions .....................................
The P&L attributed to positions added that were novated on a prior date. ..................................
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark to market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L).
Consolidated (Daily Cash Flow Reporting)
Additional Margin .................................
Initial Margin .........................................
Margin Calls .........................................
Total Margin .........................................
ddrumheller on DSK120RN23PROD with RULES3
Variation Margin ...................................
Collateral on Deposit ...........................
Option Premium ...................................
Backdated Profit and Loss ...................
Day Trading Profit and Loss ................
Position Profit and Loss .......................
Total Profit and Loss ............................
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Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons.
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The consolidated non-U.S. margin requirement for the origin. The consolidated non-U.S. margin requirement should include the initial margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Premium registered on the given trading date. The amount of money that the options buyer
must pay the options seller.
The P&L attributed to positions added that were novated on a prior date ...................................
The P&L attributed to the day’s trades ..........................................................................................
The P&L of the previous day’s position with today’s price movement ..........................................
Unrealized P&L or mark-to-market value of position(s) including change in mark to market
(Total P&L = Position P&L + Day Trading P&L + Backdated P&L).
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
Field name
Description
House &
customer
origin
Individual
customer
account
M
N/A
M
N/A
M
N/A
M
N/A
M
N/A
M
N/A
M
N/A
Exempt DCO (Daily Cash Flow Reporting)
Additional Margin .................................
Initial Margin .........................................
Margin Calls .........................................
Total Margin .........................................
Variation Margin ...................................
Collateral on Deposit ...........................
Mark-to-Market .....................................
Any additional margin required in excess of initial margin. For example, this figure should include any liquidity/concentration charge if the charge is not included in the initial margin.
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of
the margin methodology, this figure should not include any additional margin add-ons.
Any outstanding margin call that has been issued but not collected as of the end of the trade
date.
The U.S. person margin requirement for the origin by currency contribution. If the traded currency’s swaps (i.e., JY) offset risk of other currencies, include an amount of zero for that
currency. This margin requirement should include the initial margin requirement plus any additional margin required by the DCO.
Variation margin should include the net sum of all cash flows between the DCO and clearing
members by origin.
The collateral on deposit for an origin. This amount should include all collateral after all haircuts that have been deposited to cover the total margin requirement.
Determined by marking the end of day position(s) from par (100%) to the end of day settlement price.
M = mandatory C = conditional O = optional.
B. Daily Position Reporting
Field name
Description
Use
Total Message Count ...................................
FIXML Message Type ..................................
Sender ID .....................................................
To ID .............................................................
Message Transmit Datetime ........................
Report ID ......................................................
Report Date ..................................................
Base Currency ..............................................
Report Time (Message Create Time) ..........
Message Event .............................................
Market Segment ID ......................................
DCO Identifier ...............................................
Clearing Participant Identifier .......................
Clearing Participant Name ...........................
Fund Segregation Type ................................
Clearing Participant LEI ...............................
Clearing Participant LEI Name .....................
Customer Position Identifier .........................
Customer Position Name .............................
Customer Position Account Type .................
Customer Position LEI .................................
Customer Position LEI Name .......................
Customer Margin Identifier ...........................
Customer Margin Name ...............................
Unique Margin Identifier ...............................
The total number of reports included in the file .....................................................................................................
FIXML account summary report type ....................................................................................................................
The CFTC-issued DCO identifier ...........................................................................................................................
Indicate ‘‘CFTC’’ .....................................................................................................................................................
The date and time the file is transmitted ...............................................................................................................
A unique identifier assigned by the CFTC to each clearing member report .........................................................
The business date of the information being reported ............................................................................................
Base currency referenced throughout report; provide exchange rate against this currency ................................
The report ‘‘as of’’ or information cut-off time ........................................................................................................
The event source being reported ...........................................................................................................................
Market segment associated with the position report .............................................................................................
CFTC-assigned identifier for a DCO ......................................................................................................................
DCO-assigned identifier for a particular clearing member ....................................................................................
The name of the clearing member ........................................................................................................................
Clearing fund segregation type ..............................................................................................................................
LEI for a particular clearing member .....................................................................................................................
The LEI name associated with the clearing member LEI .....................................................................................
Proprietary identifier for a particular customer position account ...........................................................................
The name associated with the customer position identifier ..................................................................................
Type of account used for reporting ........................................................................................................................
LEI for a particular customer; must be provided when available ..........................................................................
The LEI name associated with the Customer Position LEI ...................................................................................
Proprietary identifier for a particular customer ......................................................................................................
The name associated with the customer margin identifier ....................................................................................
A single field that uniquely identifies the margin account. This field is used to identify associated positions .....
Settlement Price/Currency ...........................
Cross-Margin Entity ......................................
Exchange Commodity Code ........................
Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
Name of the entity associated with a cross-margined account .............................................................................
Contract commodity code issued by the exchange; e.g., ticker symbol, the human recognizable trading identifier.
Registered commodity clearing identifier. The code is for the contract as if it was traded in the form it is
cleared. For example, if the contract was traded as a spread but cleared as an outright, the outright symbol
should be used.
Indicates the type of product with which the security is associated .....................................................................
Indicates type of security .......................................................................................................................................
Month and year of the maturity ..............................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Provides a more specific description of the asset type .........................................................................................
A name assigned to a group of related instruments which may be concurrently affected by market events and
actions.
The multiplier needed to convert a change of one point of the quoted index into local currency P&L for a 1unit long position.
Unit of measure ......................................................................................................................................................
Method of settlement .............................................................................................................................................
Exchange where the instrument is traded, per ISO 10383 ...................................................................................
Used to provide a textual description of a financial instrument ............................................................................
A single field that uniquely identifies a given product. All positions with this identifier will have the same price
When a contract represents a differential between two products, the product code that represents the long
position in the spread for long position in the combined contract.
Common Fields (Daily Position Reporting)
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
C
C
C
M
C
C
C
C
C
M
Futures and Options (Daily Position Reporting)
Clearing Commodity Code ...........................
ddrumheller on DSK120RN23PROD with RULES3
Product Type ................................................
Security Type ...............................................
Maturity Month Year .....................................
Maturity Date ................................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Asset Subtype ..............................................
Security Group (Sector) ...............................
Unit Leverage Factor ....................................
Units .............................................................
Settlement Method .......................................
Exchange Identifier (MIC) ............................
Security Description .....................................
Unique Product Identifier ..............................
Alternate Product Identifier—Spread Underlying Long.
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
53689
Field name
Description
Use
Alternate Product Identifier—Spread Underlying Short.
Last Trading Date .........................................
First Notice Date ..........................................
Position (Long) .............................................
When a contract represents a differential between two products, the product code that represents the long
position in the spread for short position in the combined contract.
The last day of trading in a futures contract ..........................................................................................................
The first date on which delivery notices are issued ..............................................................................................
Long position size. If a position is quoted in a unit of measure (UOM) different from the contract, specify the
UOM. If a position is measured in a currency, specify the currency.
Short position size. If a position is quoted in a UOM different from the contract, specify the UOM. If a position
is measured in a currency, specify the currency.
Settlement price foreign exchange conversion rate ..............................................................................................
The quoted price change between the prior trading day’s settlement and today’s settlement ............................
The local currency P&L between the prior trading day’s settlement and today’s settlement for a 1-unit long
position.
Initial margin for the position as if it were a stand-alone outright position ............................................................
Exercise style .........................................................................................................................................................
Option strike price ..................................................................................................................................................
Option type .............................................................................................................................................................
Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
Underlying Contract code issued by the exchange ...............................................................................................
Registered commodity clearing identifier. The code is for the contract as if it was traded in the form it is
cleared. For example, if the contract was traded as a spread but cleared as an outright, the outright symbol
should be used.
Indicates the type of product the security is associated with ................................................................................
Indicator which identifies the underlying derivative type .......................................................................................
A name assigned to a group of related instruments which may be concurrently affected by market events and
actions.
Month and year of the maturity ..............................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The underlying broad asset category for assessing risk exposure .......................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Provides a more specific description of the asset type. ........................................................................................
Exchange where the underlying instrument is traded ...........................................................................................
Textual description of a financial instrument .........................................................................................................
A single field that is the result of concatenating relevant fields that create a unique product ID that is associated with a unique price.
This field identifies the main options chain for the future that provides the implied volatility quote .....................
C
Position (Short) .............................................
Settlement FX Info .......................................
Change in Settlement Price .........................
Unit Currency P&L .......................................
Outright Initial Margin ...................................
Option Exercise Style ...................................
Option Strike Price .......................................
Option Put/Call Indicator ..............................
Underlying Settlement Price/Currency .........
Underlying Exchange Commodity Code ......
Underlying Clearing Commodity Code .........
Underlying Product Type ..............................
Underlying Security Type .............................
Underlying Security Group (Sector) .............
Underlying Maturity Month Year ..................
Underlying Maturity Date ..............................
Underlying Asset Class ................................
Underlying Asset Subclass ..........................
Underlying Asset Type .................................
Underlying Asset Subtype ............................
Underlying Exchange Code (MIC) ...............
Underlying Security Description ...................
Unique Underlying Product Code ................
Primary Options Exchange Code—Implied
Volatility Quote.
DELTA ..........................................................
Implied Volatility ...........................................
Customer Margin Omnibus Parent ..............
Delta is the measure of how the option’s value varies with changes in the underlying price ..............................
The implied volatility and quotation style for the contract, typically in natural log percent or index points ..........
The margin identifier for the omnibus account associated with the customer margin identifier. (Conditional on
reported customer position being part of a separately reported omnibus account position).
M
C
M
M
M
M
M
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
Commodity Swaps (Daily Position Reporting)
Settlement Price/Currency ...........................
Exchange Commodity Code ........................
Clearing Commodity Code ...........................
Product Type ................................................
Security Group (Sector) ...............................
Unique Product Identifier ..............................
Maturity Month Year .....................................
Maturity Date ................................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Unit Leverage Factor ....................................
Minimum Tick ...............................................
Units .............................................................
Settlement Method .......................................
Exchange Identifier (MIC) ............................
Security Description .....................................
Security Type ...............................................
Position (Long) .............................................
ddrumheller on DSK120RN23PROD with RULES3
Position (Short) .............................................
Net Cash Flow ..............................................
Settlement FX Info .......................................
Universal (or Unique) Swap Identifier ..........
Option Exercise Style ...................................
Option Put/Call Indicator ..............................
Option Strike Price .......................................
Underlying Settlement Price/Currency .........
Underlying Exchange Commodity Code ......
VerDate Sep<11>2014
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Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
Contract commodity code issued by the exchange; e.g., ticker symbol, the human recognizable trading identifier.
Registered commodity clearing identifier. The code is for the contract as if it was traded in the form it is
cleared. For example, if the contract was traded as a spread but cleared as an outright, the outright symbol
should be used.
Indicates the type of product with which the security is associated .....................................................................
A name assigned to a group of related instruments which may be concurrently affected by market events and
actions.
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to 17 CFR 45.7.
Month and year of the maturity ..............................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
The multiplier needed to convert a change of one point of the quoted index into local currency P&L for a 1unit long position.
Minimum price tick increment ................................................................................................................................
Unit of measure ......................................................................................................................................................
Swap settlement method .......................................................................................................................................
Exchange where the instrument is traded .............................................................................................................
Used to provide a textual description of a financial instrument ............................................................................
Indicates type of security .......................................................................................................................................
Long position size. If a position is quoted in a UOM different from the contract, specify the UOM. If a position
is measured in a currency, specify the currency.
Short position size. If a position is quoted in a UOM different from the contract, specify the UOM. If a position
is measured in a currency, specify the currency.
Net cash flow recognized on report date (with actual settlements occurring according to the currency’s settlement conventions). E.g., profit/loss, price alignment interest, cash payments (fees, coupons, etc.).
Settlement price foreign exchange conversion rate ..............................................................................................
Universal (or Unique) Swap Identifier (USI) namespace and USI. The USI namespace and the USI should be
separated by a pipe ‘‘|’’ character.
Exercise style .........................................................................................................................................................
Option type .............................................................................................................................................................
Option strike price ..................................................................................................................................................
Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
Underlying Contract code issued by the exchange ...............................................................................................
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M
M
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O
M
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53690
Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
Field name
Description
Use
Underlying Clearing Commodity Code .........
Registered commodity clearing identifier. The code is for the contract as if it was traded in the form it is
cleared. For example, if the contract was traded as a spread but cleared as an outright, the outright symbol
should be used.
Indicates the type of product the security is associated with ................................................................................
A name assigned to a group of related instruments which may be concurrently affected by market events and
actions.
Month and year of the maturity ..............................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The underlying broad asset category for assessing risk exposure .......................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Exchange where the underlying instrument is traded ...........................................................................................
Indicates type of security .......................................................................................................................................
Textual description of a financial instrument .........................................................................................................
Delta is the measure of how the option’s value varies with changes in the underlying price ..............................
M
Underlying Product Type ..............................
Underlying Security Group (Sector) .............
Underlying Maturity Month Year ..................
Underlying Maturity Date ..............................
Underlying Asset Class ................................
Underlying Asset Subclass ..........................
Underlying Asset Type .................................
Underlying Exchange Code (MIC) ...............
Underlying Security Type .............................
Underlying Security Description ...................
DELTA ..........................................................
C
C
M
C
M
C
C
M
M
C
C
Credit Default Swaps (Daily Position Reporting)
Settlement Price/Currency ...........................
Exchange Security Identifier ........................
Redcode .......................................................
Unique Product Identifier ..............................
Security Type ...............................................
Restructuring Type .......................................
Seniority Type ..............................................
Maturity Date ................................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Reference Entity Type (Sector) ....................
Coupon Rate ................................................
Security Description (Reference Entity) .......
Recovery Factor ...........................................
Position (Long) .............................................
Position (Short) .............................................
5 YR Equivalent Notional .............................
Accrued Coupon ...........................................
Profit and Loss .............................................
Credit Exposure (CS01) ...............................
Mark to Market .............................................
Price Value of a Basis Point (PV01) ............
Previous Accrued Coupon ...........................
Previous Mark to Market ..............................
Universal (or Unique) Swap Identifier ..........
ddrumheller on DSK120RN23PROD with RULES3
Option Strike Price .......................................
Settlement Method .......................................
Option Exercise Style ...................................
Option Put/Call Indicator ..............................
Option Type ..................................................
Option Start Date .........................................
Option Expiration Date—Adjusted ...............
Underlying Exchange Security Identifier ......
Underlying Clearing Security Identifier (Red
Code).
Underlying Unique Product Identifier ...........
Underlying Security Type .............................
Underlying Restructuring Type .....................
Underlying Seniority Type ............................
Underlying Maturity Date ..............................
Underlying Asset Class ................................
Underlying Asset Subclass ..........................
Underlying Asset Type .................................
Underlying Reference Entity Type (Sector)
Underlying Coupon Rate ..............................
Underlying Security Description ...................
Underlying Recovery Factor .........................
DELTA ..........................................................
GAMMA ........................................................
RHO ..............................................................
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Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
Contract code issued by the exchange .................................................................................................................
The code assigned to the CDS by Markit that identifies the referenced entity or the index, series and version.
(Underlying instrument is required for Security Type = SWAPTION.).
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to Commission regulation 17 CFR 45.7.
Indicator which identifies the derivative type .........................................................................................................
This field is used if the index has been restructured due to a credit event ..........................................................
The class of debt ...................................................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Specifies the type of reference entity for first-to-default CDS basket contracts. The Markit sector code should
be provided when available.
The coupon rate associated with this CDS transaction stated in Basis Points ....................................................
Name of CDS index or single-name or sovereign debt ........................................................................................
The assumed recovery rate used to determine the CDS price .............................................................................
Long position size. If a position is quoted in a UOM different from the contract, specify the UOM. If a position
is measured in a currency, specify the currency.
Short position size. If a position is quoted in a UOM different from the contract, specify the UOM. If a position
is measured in a currency, specify the currency.
The five-year equivalent notional amount for each risk factor/reference entity CDS contract .............................
Coupon obligation from the first day of the coupon period through the current clearing trade date ....................
Unrealized P&L or mark to market value of position(s) including change in mark to market plus change in accrued coupon plus change in unsettled upfront fees. Does not include cash flows related to quarterly coupon payments, credit event payments, or price alignment interest.
The credit exposure of the swap at a given point in time. CS01 = Spread DV01 = ‘‘dollar’’ value of a basis
point = In currency (not percentage) terms, the change in fair value of the leg, transaction, position, or portfolio (as appropriate) commensurate with a 1 basis point (0.01 percent) instantaneous, hypothetical increase in the related credit spread curves. CS01/Spread DV01 may refer to non-dollar currencies and related curves. From the DCO’s point of view: positive CS01 = gain in value resulting from 1 basis point increase, negative CS01 = loss of value resulting from 1 basis point increase.
Determined by marking the end of day position(s) from par (100%) to the end of day settlement price ............
Change in P&L of a position given a one basis point move in CDS spread value. May also be referred to as
DV01, Sprd DV01.
Previous day’s accrued coupon .............................................................................................................................
Previous day’s mark to market ..............................................................................................................................
Universal (or Unique) Swap Identifier (USI) namespace and USI. The USI namespace and the USI should be
separated by a pipe ‘‘|’’ character.
Option strike price ..................................................................................................................................................
Method of settlement .............................................................................................................................................
Exercise style .........................................................................................................................................................
Option type .............................................................................................................................................................
Specifies the option type ........................................................................................................................................
The option adjusted start date ...............................................................................................................................
The CDS option adjusted expiration date ..............................................................................................................
The underlying contract alias used by outside vendors to uniquely identify the contract ....................................
The underlying code assigned to the CDS by Markit that identifies the referenced entity or the index, series
and version.
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to Commission regulation 17 CFR 45.7.
Indicator which identifies the underlying derivative type .......................................................................................
This field is used if the underlying index has been restructured due to a credit event ........................................
The underlying class of debt ..................................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The underlying broad asset category for assessing risk exposure .......................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Specifies the type of underlying reference entity for first-to-default CDS basket contracts .................................
The underlying coupon rate associated with this CDS transaction stated in basis points ...................................
Textual description of a financial instrument .........................................................................................................
The assumed recovery rate used to determine the underlying CDS price ...........................................................
Delta is the measure of how the option’s value varies with changes in the underlying price ..............................
Gamma is the rate of change for delta with respect to the underlying asset’s price ...........................................
Rho measures the sensitivity of an option’s price to a variation in the risk-free interest rate ..............................
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M
O
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
53691
Field name
Description
Use
THETA ..........................................................
VEGA ............................................................
Option Premium ...........................................
Theta is the rate at which an option loses value as time passes .........................................................................
Vega is the measurement of an option’s sensitivity to changes in the volatility of the underlying asset .............
Premium registered on the given trading date. The amount of money that the options buyer must pay the options seller.
Date swaption premium is paid .............................................................................................................................
M
M
C
Option Premium Date ...................................
C
Foreign Exchange (Daily Position Reporting)
Settle Date ....................................................
Settlement Price/Fixing Currency .................
Discount Factor ............................................
Valuation Date ..............................................
Delivery Date ................................................
Clearing Security Identifier ...........................
Unique Product Identifier ..............................
Security Type ...............................................
Maturity Month Year .....................................
Maturity Date (Expiration) ............................
Maturity Time (Expiration) ............................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Valuation Method .........................................
Security Description .....................................
Foreign Exchange Type ...............................
Currency One ...............................................
Currency Two ...............................................
Quote Basis ..................................................
Fixed Rate ....................................................
Spot Rate .....................................................
Forward Points .............................................
Delivery Type Indicator ................................
Position—Long .............................................
Position—Short .............................................
Final Mark to Market ....................................
Dollar Value of a Basis Point (DV01)—Long
Currency.
Dollar Value of a Basis Point (DV01)—Short
Currency.
Net Cash Flow ..............................................
Undiscounted Mark to Market ......................
Price Alignment Interest ...............................
Universal (or Unique) Swap Identifier ..........
Option Put/Call Indicator ..............................
Strike Rate ....................................................
Option Exercise Style ...................................
Option Cut Name .........................................
Underlying Settlement Price/Fixing Currency.
Underlying Exchange Security Code ...........
Underlying Clearing Security Identifier .........
Underlying Unique Product Identifier ...........
ddrumheller on DSK120RN23PROD with RULES3
Underlying Security Type .............................
Underlying Maturity Month Year ..................
Underlying Maturity Date (Expiration) ..........
Underlying Exchange Identifier (MIC) ..........
Underlying Security Description ...................
Option Long/Short Indicator .........................
Option Expiration ..........................................
Notional Long/Short ......................................
Implied Volatility ...........................................
DELTA ..........................................................
GAMMA ........................................................
RHO ..............................................................
THETA ..........................................................
VEGA ............................................................
Option Premium MTM ..................................
Settle date of the position ......................................................................................................................................
Settlement price of the position .............................................................................................................................
Discount factor for the position. Use the factor for the Mark to Market (MTM) currency .....................................
Valuation date of the position ................................................................................................................................
Delivery date of the position ..................................................................................................................................
Code assigned by the DCO for a particular contract ............................................................................................
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to Commission regulation 17 CFR 45.7.
Registered commodity clearing identifier. (Underlying instrument is required for Security Type = FXOPT |
FXNDO.).
Month and year of the maturity ..............................................................................................................................
Specifies date of maturity (a calendar date). Used for FXFWD/FXNDF. For non-deliverable forwards (NDFs),
this represents the fixing date of the contract.
The contract expiration time. (Used for FXFWD/FXNDF.) ....................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Specifies the type of valuation method applied .....................................................................................................
Used to provide a textual description of a financial instrument ............................................................................
Identifies the type of FX contract. Use Typ = 7 for direct FX (e.g., EUR/USD). Use Typ = 16 for NDFWD contracts (e.g., THB/INR settled in USD).
Specifies the first or only reference currency of the trade ....................................................................................
Specifies the second reference currency of the trade ...........................................................................................
For foreign exchange quanto option feature .........................................................................................................
(FXFWD or FXNDF only). Specifies the forward FX rate alternative ....................................................................
Specifies the FX spot rates the first or only reference currency of the trade .......................................................
(FXFWD or FXNDF only) The interest rate differential in basis points between the base and quote currencies
in a forward rate quote. May be a negative value. (The number of basis points added to or subtracted from
the current spot rate of a currency pair to determine the forward rate for delivery on a specific value date.).
Delivery type indicator ............................................................................................................................................
Gross long position. An affirmative zero value should be reported for the long position. (Both long and short
positions are required.) For FXNDF use Typ = DLV for settlement currency.
Gross short position. An affirmative zero value should be reported for the short position. (Both long and short
positions are required.) For FXNDF use Typ = DLV for settlement currency.
Mark to market which includes the discount factor ...............................................................................................
The dollar value of a one basis point change (DV01) in the yield of the underlying security and that of the
hedging vehicle.
The dollar value of a one basis point change (DV01) in the yield of the underlying security and that of the
hedging vehicle.
Net cash flow recognized on report date (with actual settlements occurring according to the currency’s settlement conventions). E.g., profit/loss, price alignment interest, cash payments (fees, coupons, etc.).
Mark to market, which does not include the discount factor .................................................................................
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the DCO will charge
interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
Universal (or Unique) Swap Identifier (USI) namespace and USI. The USI namespace and the USI should be
separated by a pipe ‘‘|’’ character.
Option type .............................................................................................................................................................
Option strike rate ....................................................................................................................................................
Exercise style .........................................................................................................................................................
The code by which the expiry time is known in the market ..................................................................................
Settlement price for the position. (Underlying settlement is required for FXOPT, FXNDO.) ................................
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Security code issued by the exchange; e.g., ticker symbol, the human recognizable trading identifier ..............
Code assigned by the DCO for the underlying contract .......................................................................................
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to Commission regulation 17 CFR 45.7.
Indicator which identifies the underlying derivative ...............................................................................................
Month and year of the maturity ..............................................................................................................................
For FXFWD/FXNDF, the date on which the principal amount becomes due. For NDFs, this represents the fixing date of the contract.
Exchange where the underlying instrument is traded ...........................................................................................
Textual description of a financial instrument .........................................................................................................
Indicates whether the option is short or long ........................................................................................................
Adjusted option expiration date .............................................................................................................................
FX currency notional long or short ........................................................................................................................
The implied volatility and quotation style for the contract, typically in natural log percent or index points ..........
Delta is the measure of how the option’s value varies with changes in the underlying price ..............................
Gamma is the rate of change for delta with respect to the underlying asset’s price ...........................................
Rho measures the sensitivity of an option’s price to a variation in the risk-free interest rate ..............................
Theta is the rate at which an option loses value as time passes .........................................................................
Vega is the measurement of an option’s sensitivity to changes in the volatility of the underlying asset .............
Premium mark to market, which includes the discount factor ...............................................................................
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Interest Rate Swaps (Daily Position Reporting)
Cleared Date ................................................
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Date on which the trade was cleared at the DCO ................................................................................................
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Field name
Description
Use
Position Status .............................................
DCO Pays Indicator .....................................
DCO Receives Indicator ...............................
Clearing Participant Pays Indicator ..............
Clearing Participant Receives Indicator .......
Clearing Security Identifier ...........................
Unique Product Identifier ..............................
Position status: active, or terminated. Terminated positions should only be reported on the day of termination
Indicate which cash flow the DCO pays ................................................................................................................
Indicate which cash flow the DCO receives ..........................................................................................................
Indicate which cash flow the clearing member pays .............................................................................................
Indicate which cash flow the clearing member receives .......................................................................................
Code assigned by the DCO for a particular contract ............................................................................................
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to Commission regulation 17 CFR 45.7.
Registered commodity clearing identifier ...............................................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
The classification or type of swap .........................................................................................................................
The sub-classification or notional schedule type of the swap ...............................................................................
Used to provide a textual description of a financial instrument ............................................................................
Identifies if the leg is fixed or floating ....................................................................................................................
Notional amount associated with leg .....................................................................................................................
Currency of the leg’s notional amount ...................................................................................................................
If start date falls on a weekend or holiday, value defines how to adjust actual start date ...................................
Leg’s effective date ................................................................................................................................................
If the maturity date falls on a weekend or holiday, value defines how to adjust actual maturity date .................
The date on which the leg’s principal amount becomes due ................................................................................
Regarding the maturity date, this specifies which dates are considered holidays ...............................................
If a date defining the calculation period falls on a holiday, this adjusts the actual dates based on the definition
of the input.
Calculation frequency, also known as the compounding frequency for compounded swaps ..............................
If there is a beginning stub, this indicates the date when the usual payment periods will begin .........................
If there is an ending stub, this indicates the date when the usual payment periods will end ..............................
Indicates the day of the month when the payment is made .................................................................................
Regarding the calculation period, this specifies which dates are considered holidays ........................................
Defines how interest is accrued/calculated ...........................................................................................................
If payments are made on one timeframe but calculations are made on a shorter timeframe, this describes
how to compound interest.
If cash flow pay or receive date falls on a weekend or holiday, value defines actual date payment is made ....
Frequency at which payments are made ..............................................................................................................
Payment relative to the beginning or end of the period ........................................................................................
Number of business days after payment due date on which the payment is actually made ...............................
Regarding dates on which cash flow payments/receipts are scheduled, this specifies which dates are considered holidays.
Specifies whether reset dates are determined with respect to each adjusted calculation period start date or
adjusted calculation period end date.
Business day convention to apply to each reset date if the reset date falls on a holiday ...................................
Frequency at which resets occur. If the Leg Reset Frequency is greater than the calculation per frequency,
more than 1 reset date should be established for each calculation per frequency and some form of rate
averaging is applicable.
Business day convention to apply to each fixing date if the fixing date falls on a holiday ...................................
Specifies the fixing date relative to the reset date in terms of a business days offset ........................................
The type of days to use to find the fixing date (i.e., business days, calendar days, etc.) ...................................
Regarding reset dates, this specifies which dates are considered holidays .........................................................
Regarding the fixing date, this specifies which dates are considered holidays ....................................................
Only populate if Leg1 is Type ‘‘Fixed’’. This should be expressed in decimal form (e.g., 4% should be input
as ‘‘.04’’).
If Stream is floating rate, this gives the index applicable to the floating rate .......................................................
For the floating rate leg, the tenor of the leg. For the fixed rate leg, NULL .........................................................
Describes if there is a spread (typically an add-on) applied to the coupon rate ..................................................
Variable notional swap notional values .................................................................................................................
The interest rate applicable to the Initial Stub Period in decimal form (e.g., 4% should be input as ‘‘.04’’) ........
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the first index.
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the second index.
The interest rate applicable to the final stub period in decimal form (e.g., 4% should be input as ‘‘.04’’) ...........
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the first index.
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the second index.
Net accrued coupon amount since the last payment in the leg currency. If reported by leg, indicate the associated stream (leg) description (e.g., ‘‘FIXED/FLOAT,’’ ‘‘FLOAT1/FLOAT2’’).
Profit/loss resulting from changes in value due to changes in underlying curve movements or floating index
rate resets. This should exclude impacts to NPVs from extraneous cash flows (price alignment interest,
fees, and coupons).
If leg is a floating leg, this indicates the current rate used to calculate the next floating Leg coupon in decimal
form (e.g., 4% should be input as ‘‘.04’’).
Coupon amount for T + 1 in the leg currency. This should reflect the net cash flow that will actually occur on
the following business day. Negative number indicates that a payment was made.
Change in value in USD if the relevant pricing curve is shifted up by 1 basis point. DV01 = ‘‘dollar’’ value of a
basis point in currency (not percentage) terms, the change in fair value of the leg, transaction, position, or
portfolio (as appropriate) commensurate with a 1 basis point (0.01 percent) instantaneous, hypothetical increase in the related zero-coupon curves. DV01 may refer to non-dollar currencies and related curves.
From the DCO’s point of view: positive DV01 = profit/gain resulting from 1 basis point increase, negative
DV01 = loss resulting from 1 basis point increase.
Net cash flow recognized on report date (with actual settlements occurring according to the currency’s settlement conventions). E.g., Profit/Loss, price alignment interest, cash payments (fees, coupons, etc.).
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Security Type ...............................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Swap Class ..................................................
Swap Subclass .............................................
Security Description .....................................
Leg Type ......................................................
Leg Notional .................................................
Leg Notional Currency .................................
Leg Start Date Adj Bus Day Conv ...............
Leg Start Date ..............................................
Leg Maturity Date Adj Bus Day Conv ..........
Leg Maturity Date .........................................
Leg Maturity Date Adj Calendar ...................
Leg Calculation Period Adjusted Business
Day Convention.
Leg Calculation Frequency ..........................
Leg First Reg Per Start Date .......................
Leg Last Reg Per End Date .........................
Leg Roll Conv ...............................................
Leg Calc Per Adj Calendar ..........................
Leg Daycount ...............................................
Leg Comp Method ........................................
Leg
Leg
Leg
Leg
Leg
Pay Adj Bus Day Conv .........................
Pay Frequency ......................................
Pay Relative To .....................................
Payment Lag .........................................
Pay Adj Calendar ..................................
Leg Reset Relative To .................................
Leg Reset Date Adj Bus Day Conv .............
Leg Reset Frequency ...................................
Leg
Leg
Leg
Leg
Leg
Leg
Fixing Date Bus Day Conv ...................
Fixing Date Offset .................................
Fixing Day Type ....................................
Reset Date Adj Calendar ......................
Fixing Date Calendar ............................
Fixed Rate or Amount ...........................
Leg
Leg
Leg
Leg
Leg
Leg
Index ......................................................
Index Tenor ...........................................
Spread ...................................................
Pmt Sched Notional ..............................
Initial Stub Rate .....................................
Initial Stub Rate Index 1 .......................
Leg Initial Stub Rate Index 2 Tenor .............
Leg Final Stub Rate .....................................
Leg Final Stub Rate Index 1 ........................
Leg Final Stub Rate Index 2 Tenor .............
Accrued Coupon (Interest) ...........................
Profit/Loss .....................................................
ddrumheller on DSK120RN23PROD with RULES3
Leg Current Period Rate ..............................
Leg Coupon Payment ..................................
Dollar Value of Basis Point (DV01) ..............
Net Cash Flow ..............................................
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
53693
Field name
Description
Use
Net Present Value ........................................
Present Value of Other Payments ...............
Net present value (NPV) of all positions by currency ...........................................................................................
Includes the present value of any upfront and/or final/settlement payments that will be settled after the report
date. Only include amounts that are affecting the NPV of current trades.
Previous day’s NPV by currency ...........................................................................................................................
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the DCO will charge
interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
Includes any upfront and/or final/settlement payments made/received for the trade date. (Indicate gross pay/
collect amounts.).
Universal (or Unique) Swap Identifier (USI) namespace and USI. The USI namespace and the USI should be
separated by a pipe ‘‘|’’ character.
Amount of any exchange of cash flow at initiation of trade being cleared ...........................................................
Date that the initial exchange is set to occur ........................................................................................................
Amount of any exchange of cash flow at maturity of trade ...................................................................................
Date that the final exchange is set to occur ..........................................................................................................
Exercise style .........................................................................................................................................................
Specifies the option type ........................................................................................................................................
The option adjusted start date ...............................................................................................................................
The IRS swaption adjusted expiration date ...........................................................................................................
Indicates the buyer or seller of a swap stream .....................................................................................................
Code assigned by the DCO for the underlying contract .......................................................................................
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to 17 CFR 45.7.
Indicator which identifies the underlying derivative ...............................................................................................
The underlying broad asset category for assessing risk exposure .......................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
The classification or type of swap .........................................................................................................................
The sub-classification or notional schedule type of the swap ...............................................................................
Textual description of a financial instrument .........................................................................................................
Identifies if the leg is fixed or floating ....................................................................................................................
Notional amount associated with leg .....................................................................................................................
Currency of this leg’s notional amount ..................................................................................................................
If stream is floating rate, this gives the index applicable to the floating rate ........................................................
For the floating rate leg, the tenor of the leg. For the fixed rate leg, NULL .........................................................
Only populate if Leg1 is type ‘‘Fixed’’. This should be in decimal form (e.g., 4% should be input as ‘‘.04’’) ......
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Indicates whether there is a spread (typically an add-on) applied to the coupon rate .........................................
Delta is the measure of how the option’s value varies with changes in the underlying price ..............................
Gamma is the rate of change for delta with respect to the underlying asset’s price ...........................................
Rho measures the sensitivity of an option’s price to a variation in the risk-free interest rate ..............................
Theta is the rate at which an option loses value as time passes .........................................................................
Vega is the measurement of an option’s sensitivity to changes in the volatility of the underlying asset .............
Premium registered on the given trading date. The amount of money that the options buyer must pay the options seller.
Date option premium is paid ..................................................................................................................................
Date a transaction was originally executed, resulting in the generation of a new USI. For clearing swaps, the
date when the DCO accepts the original swap.
Description for each position record ......................................................................................................................
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Net Present Value Previous .........................
Price Alignment Interest ...............................
Other Payments ...........................................
Universal (or Unique) Swap Identifier ..........
Leg Initial Exchange .....................................
Leg Initial Exchange Date ............................
Leg Final Exchange .....................................
Leg Final Exchange Date .............................
Option Exercise Style ...................................
Option Type ..................................................
Option Start Date .........................................
Option Adjusted Expiration Date ..................
Option Buy/Sell Indicator ..............................
Underlying Clearing Security Identifier .........
Underlying Unique Product Identifier ...........
Underlying Security Type .............................
Underlying Asset Class ................................
Underlying Asset Subclass ..........................
Underlying Asset Type .................................
Underlying Swap Class ................................
Underlying Swap Subclass ..........................
Underlying Security Description ...................
Underlying Security Leg Type ......................
Underlying Security Leg Notional .................
Underlying Security Leg Currency ...............
Underlying Security Leg Index .....................
Underlying Security Leg Index Tenor ..........
Underlying Security Leg Fixed Rate Or
Amount.
Underlying Security Leg Spread ..................
DELTA ..........................................................
GAMMA ........................................................
RHO ..............................................................
THETA ..........................................................
VEGA ............................................................
Option Premium ...........................................
Option Premium Date ...................................
Trade Date ...................................................
Event Description .........................................
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Forward Rate Agreements (Daily Position Reporting)
ddrumheller on DSK120RN23PROD with RULES3
Previous Business Date ...............................
Position Status .............................................
DCO Pays Indicator .....................................
DCO Receives Indicator ...............................
Clearing Participant Pays Indicator ..............
Clearing Participant Receives Indicator .......
Clearing Security Identifier ...........................
Unique Product Identifier ..............................
Security Type ...............................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
FRA Type .....................................................
Notional Amount ...........................................
Notional Currency .........................................
Start Date .....................................................
Maturity Date ................................................
Payment Day Count Convention ..................
Payment Accrual Days .................................
First Payment Date ......................................
Reset Date Bus Day Convention .................
Reset Date Fixing Date ................................
Fixed Rate ....................................................
Float Index ....................................................
Float First Tenor ...........................................
Float Second Tenor ......................................
Float Spread .................................................
Float Reference Rate ...................................
PV01 .............................................................
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Previous business date ..........................................................................................................................................
Position status: active or terminated. Terminated positions should only be reported on the day of termination
Indicates which cash flow the DCO pays ..............................................................................................................
Indicates which cash flow the DCO receives ........................................................................................................
Indicates which cash flow the clearing member pays ...........................................................................................
Indicates which cash flow the clearing member receives .....................................................................................
Code assigned by the DCO for a particular contract ............................................................................................
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to 17 CFR 45.7.
Registered commodity clearing identifier ...............................................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Type of swap stream .............................................................................................................................................
Stream notional amount .........................................................................................................................................
Currency of leg notional amount ............................................................................................................................
Date the position was established .........................................................................................................................
The date on which the principal amount becomes due ........................................................................................
Defines how interest is accrued/calculated ...........................................................................................................
Number of accrual days between the effective date and maturity date ................................................................
Date on which the payment is made. Always report the adjusted date ................................................................
Business day convention to apply to each fixing date if the fixing date falls on a holiday ...................................
Date on which the payment is fixed. Always report the adjusted date .................................................................
The fixed amount in decimal terms .......................................................................................................................
The index for the floating portion of the Forward Rate Agreement (FRA) ............................................................
First tenor associated with the index .....................................................................................................................
Second tenor associated with the index ................................................................................................................
In basis point terms ................................................................................................................................................
The fixed floating rate in decimal terms ................................................................................................................
Change in value in native currency if the relevant pricing curve is shifted up by 1 basis point ...........................
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
Field name
Description
Use
Dollar Value of Basis Point (DV01) ..............
Change in value in USD if the relevant pricing curve is shifted up by 1 basis point. DV01 = ‘‘dollar’’ value of a
basis point in currency (not percentage) terms, the change in fair value of the leg, transaction, position, or
portfolio (as appropriate) commensurate with a 1 basis point (0.01 percent) instantaneous, hypothetical increase in the related zero-coupon curves. DV01 may refer to non-dollar currencies and related curves.
From the DCO’s point of view: positive DV01 = profit/gain resulting from 1 basis point increase, negative
DV01 = loss resulting from 1 basis point increase.
Net present value (NPV) of all positions by currency ...........................................................................................
Settlement price foreign exchange conversion rate ..............................................................................................
Previous day’s NPV by currency ...........................................................................................................................
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the DCO will charge
interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
Universal (or Unique) Swap Identifier (USI) namespace and USI. The USI namespace and the USI should be
separated by a pipe ‘‘|’’ character.
The amount paid/received on the Payment Date. Always report adjusted date. (The position pays on a negative amount.).
Includes any upfront and/or final/settlement payments made/received for the trade date. (Indicate gross pay/
collect amounts.).
Net cash flow recognized on report date (with actual settlements occurring according to the currency’s settlement conventions). E.g., profit/loss, price alignment interest, cash payments (fees, coupons, etc.).
Profit/Loss resulting from changes in value due to changes in underlying curve movements or floating index
rate resets. Should exclude impacts to NPVs from extraneous cash flows (price alignment interest, fees,
and coupons).
Includes the present value of any upfront and/or final/settlement payments that will be settled after the report
date. Only include amounts that are affecting the NPV of current trades.
Actual trade date for each position record (including specifically, the cleared date and the trade date) .............
Description for each position record ......................................................................................................................
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Net Present Value ........................................
Settlement FX Info .......................................
Net Present Value Previous .........................
Price Alignment Interest ...............................
Universal (or Unique) Swap Identifier ..........
Settlement Amount .......................................
Other Payments ...........................................
Net Cash Flow ..............................................
Profit/Loss .....................................................
Present Value of Other Payments ...............
Trade Date ...................................................
Event Description .........................................
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Inflation Index Swaps (Daily Position Reporting)
Cleared Date ................................................
Position Status .............................................
DCO Pays Indicator .....................................
DCO Receives Indicator ...............................
Clearing Participant Pays Indicator ..............
Clearing Participant Receives Indicator .......
Clearing Security Identifier ...........................
Unique Product Identifier ..............................
Security Type ...............................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Swap Class ..................................................
Swap Subclass .............................................
Security Description .....................................
Leg Type ......................................................
Leg Notional .................................................
Leg Notional Currency .................................
Leg Start Date Adj Bus Day Conv ...............
Leg Start Date ..............................................
Leg Maturity Date Adj Bus Day Conv ..........
Leg Maturity Date .........................................
Leg Maturity Date Adj Calendar ...................
Leg Calc Per Adj Bus Day Conv .................
Leg Calc Frequency .....................................
Leg Roll Conv ...............................................
Leg Calc Per Adj Calendar ..........................
Leg Stream Daycount ..................................
Payment Stream Comp Method ...................
Payment
Payment
Payment
Payment
Payment
Payment
Stream Business Day Conv ..........
Stream Frequency ........................
Stream Relative To .......................
Stream First Date ..........................
Stream Last Regular Date ............
Leg Calendar ................................
ddrumheller on DSK120RN23PROD with RULES3
Leg Reset Date Bus Day Conv ....................
Leg Reset Date Relative To .........................
Leg Reset Frequency ...................................
Leg Reset Fixing Date Offset .......................
Leg Fixing Day Type ....................................
Leg Reset Date Calendar ............................
Leg Fixing Date Bus Day Conv ...................
Leg Fixing Date Calendar ............................
Fixed Leg Rate or Amount ...........................
Floating Leg Inflation Index ..........................
Floating Leg Spread .....................................
Floating Leg Payment Inflation Lag .............
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Date on which the trade was cleared at the DCO ................................................................................................
Position’s status: active or terminated. Terminated positions should only be reported on the day of termination
Indicate which cash flow the DCO pays ................................................................................................................
Indicate which cash flow the DCO receives ..........................................................................................................
Indicate which cash flow the clearing member pays .............................................................................................
Indicate which cash flow the clearing member receives .......................................................................................
Code assigned by the DCO for a particular contract ............................................................................................
A unique set of characters that represents a particular swap. The Commission will designate a UPI pursuant
to 17 CFR 45.7.
Registered commodity clearing identifier ...............................................................................................................
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
The classification or type of swap .........................................................................................................................
The sub-classification or notional schedule type of the swap ...............................................................................
Used to provide a textual description of a financial instrument ............................................................................
Identifies if the leg is fixed or floating ....................................................................................................................
Notional amount associated with leg .....................................................................................................................
Currency of the leg’s notional amount ...................................................................................................................
If start date falls on a weekend or holiday, value defines how to adjust actual start date ...................................
Leg’s effective date ................................................................................................................................................
If the maturity date falls on a weekend or holiday, value defines how to adjust actual maturity date .................
The date on which the leg’s principal amount becomes due ................................................................................
Regarding the maturity date, this specifies which dates are considered holidays ...............................................
If a date defining the calculation period falls on a holiday, this adjusts the actual dates based on the definition
of the input.
Calculation frequency, also known as the compounding frequency for compounded swaps ..............................
Describes the day of the month when the payment is made ................................................................................
Regarding the calculation period, this specifies which dates are considered holidays ........................................
Defines how interest is accrued/calculated ...........................................................................................................
If payments are made on one timeframe but calculations are made on a shorter timeframe, this describes
how to compound interest.
If cash flow pay or receive date falls on a weekend or holiday, value defines actual date payment is made ....
Frequency at which payments are made ..............................................................................................................
Specifies the anchor date when the payment date is relative to that date ...........................................................
The unadjusted first payment date ........................................................................................................................
The unadjusted last regular payment date ............................................................................................................
Regarding dates on which cash flow payments/receipts are scheduled, this specifies which dates are considered holidays.
Business day convention to apply to each reset date if the reset date falls on a holiday ...................................
Specifies the anchor date when reset date is relative to that date .......................................................................
Frequency at which resets occur. If the Leg Reset Frequency is greater than the calculation per frequency,
more than 1 reset date should be established for each calculation per frequency and some form of rate
averaging is applicable.
Specifies the fixing date relative to the reset date in terms of a business days offset ........................................
The type of days to use to find the fixing date (i.e., business days, calendar days, etc.) ...................................
Regarding reset dates, this specifies which dates are considered holidays .........................................................
Business day convention to apply to each fixing date if the fixing date falls on a holiday ...................................
Regarding the fixing date, this specifies which dates are considered holidays ....................................................
Only populate if Leg1 is Type ‘‘Fixed’’. This should be expressed in decimal form (e.g., 4% should be input
as .04).
If leg is floating rate, this gives the index applicable to the floating rate ..............................................................
Describes if there is a spread (typically an add-on) applied to the coupon rate ..................................................
Number of business days after payment due date on which the payment is actually made ...............................
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
53695
Field name
Description
Use
Floating Leg Payment Inflation Interpolation
Method.
Floating Leg Inflation Index Initial Level ......
Floating Leg Inflation Index Fallback Bond
Ind.
The method used when calculating the inflation index level from multiple points. The most common is the linear method.
Initial known index level for the first calculation period .........................................................................................
Indicates whether a fallback bond as defined in the 2006 International Swaps and Derivatives Association
(ISDA) Inflation Derivatives Definitions, sections 1.3 and 1.8, is applicable or not. If not specified, the default value is ‘‘Y’’ (True/Yes).
Variable notional swap notional values .................................................................................................................
Stubs apply to initial or ending periods that are shorter than the usual interval between payments ...................
The interest rate applicable to the Initial Stub Period in decimal form (e.g., 4% should be input as ‘‘.04’’) ........
The interest rate applicable to the final stub period in decimal form (e.g., 4% should be input as ‘‘.04’’) ...........
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the first index.
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the second index.
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the first index.
Stub rate can be a linear interpolation between two floating rate tenors. E.g., if the stub period is 2 months,
rate is linear interpolation of 1-month and 3-month reference rates. Specify the second index.
If there is a beginning stub, this describes the date when the usual payment periods will begin .......................
If there is an ending stub, this describes the date when the usual payment periods will end .............................
The net accrued coupon amount since the last payment in the leg currency. If reported by leg, indicate the
associated stream (leg) description (e.g., ‘‘FIXED/FLOAT,’’ ‘‘FLOAT1/FLOAT2’’).
Profit/Loss resulting from changes in value due to changes in underlying curve movements or floating index
rate resets. This should exclude impacts to NPVs from extraneous cash flows (price alignment interest,
fees, and coupons).
Coupon amount for T + 1 in the leg currency. This should reflect the net cash flow that will actually occur on
the following business day. A negative number indicates payment was made.
If leg is a floating leg, this indicates the current rate used to calculate the next floating leg coupon in decimal
form (e.g., 4% should be input as ‘‘.04’’).
Change in value in native currency if the relevant pricing curve is shifted up by 1 basis point ...........................
Change in value in native currency of the swap/swaption/floor/cap if relevant pricing curve is shifted up by 1
basis point. DV01 = ‘‘dollar’’ value of a basis point in currency (not percentage) terms, the change in fair
value of the leg, transaction, position, or portfolio (as appropriate) commensurate with a 1 basis point (0.01
percent) instantaneous, hypothetical increase in the related zero-coupon curves. DV01 may refer to nondollar currencies and related curves. From the DCO’s point of view: positive DV01 = profit/gain resulting
from 1 basis point increase, negative DV01 = loss resulting from 1 basis point increase.
Net cash flow recognized on report date (with actual settlements occurring according to the currency’s settlement conventions). E.g., profit/loss, price alignment interest, cash payments (fees, coupons, etc.).
Net present value (NPV) of all positions by currency ...........................................................................................
Includes the present value of any upfront and/or final/settlement payments that will be settled after the report
date. Only include amounts that are affecting the NPV of current trades.
Previous day’s NPV by currency ...........................................................................................................................
To minimize the impact of daily cash variation margin payments on the pricing of swaps, the DCO will charge
interest on cumulative variation margin received and pay interest on cumulative variation margin paid.
Universal (or Unique) Swap Identifier (USI) namespace and USI. Enter the USI Namespace and the USI separated by a pipe ‘‘|’’ character..
Amount of any exchange of cash flow at initiation of trade being cleared ...........................................................
Date that the initial exchange is set to occur ........................................................................................................
Amount of any exchange of cash flow at maturity of trade ...................................................................................
Date that the final exchange is set to occur ..........................................................................................................
Includes any upfront and/or final/settlement payments made/received for the trade date. (Indicate gross pay/
collect amounts.).
Actual trade date for each position record (including specifically, the cleared date and the trade date) .............
Description for each position record ......................................................................................................................
C
Leg
Leg
Leg
Leg
Leg
Pmt Sched Notional ..............................
Stub Type ..............................................
Initial Stub Fixed Rate ...........................
Final Stub Fixed Rate ...........................
Initial Stub Floating Rate Index 1 Tenor
Leg Initial Stub Floating Rate Index 2 Tenor
Leg Final Stub Floating Rate Index 1 Tenor
Leg Final Stub Rate Floating Index 2 Tenor
Leg First Reg Per Start Date .......................
Leg Last Reg Per End Date .........................
Leg Accrued Interest (Coupon) ....................
Profit/Loss .....................................................
Leg Coupon Amount ....................................
Leg Current Period Coupon Rate ................
I01 .................................................................
Dollar Value of Basis Point (DV01) ..............
Net Cash Flow ..............................................
Net Present Value ........................................
Present Value Of Other Payments ..............
Net Present Value Previous .........................
Price Alignment Interest ...............................
Universal or Unique) Swap Identifier ...........
Stream Initial Exchange ...............................
Stream Initial Exchange Date ......................
Stream Final Exchange ................................
Stream Final Exchange Date .......................
Other Payments ...........................................
Trade Date ...................................................
Event Description .........................................
C
O
C
C
C
C
C
C
C
C
C
C
M
M
M
M
M
M
M
M
M
C
M
C
C
C
C
C
C
M
C
Equity Cross Margin (Daily Position Reporting)
Exchange Security Identifier ........................
Clearing Security Identifier ...........................
Product Type ................................................
Security Type ...............................................
Maturity Month Year .....................................
Maturity Date ................................................
Asset Class ..................................................
Asset Subclass .............................................
Asset Type ...................................................
Security Description .....................................
Position (Long) .............................................
ddrumheller on DSK120RN23PROD with RULES3
Position (Short) .............................................
Settlement Price/Currency ...........................
Option Strike Price .......................................
Option Put/Call Indicator ..............................
Underlying Exchange Commodity Code ......
Underlying Clearing Commodity Code .........
Underlying
Underlying
Underlying
Underlying
Underlying
Product Type ..............................
Security Type .............................
Maturity Month Year ..................
Maturity Date ..............................
Asset Class ................................
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Contract code issued by the exchange .................................................................................................................
Code assigned by the DCO for a particular contract ............................................................................................
Indicates the type of product the security is associated with ................................................................................
Indicates type of security .......................................................................................................................................
Month and year of the maturity ..............................................................................................................................
The date on which the principal amount becomes due. For NDFs, this represents the fixing date of the contract.
The broad asset category for assessing risk exposure .........................................................................................
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Used to provide a textual description of a financial instrument ............................................................................
Long position size. If a position is quoted in a unit of measure (UOM) different from the contract, specify the
UOM. If a position is measured in a currency, specify the currency.
Short position size. If a position is quoted in a UOM different from the contract, specify the UOM. If a position
is measured in a currency, specify the currency.
Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
Option strike price ..................................................................................................................................................
Option type .............................................................................................................................................................
Underlying Contract code issued by the exchange ...............................................................................................
Registered commodity clearing identifier. The code is for the contract as if it were traded in the form it is
cleared. For example, if the contract was traded as a spread but cleared as an outright, the outright symbol
should be used.
Indicates the type of product the security is associated with ................................................................................
Indicator which identifies the underlying derivative ...............................................................................................
Month and year of the maturity ..............................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The underlying broad asset category for assessing risk exposure .......................................................................
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53696
Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
Field name
Description
Use
Underlying Asset Subclass ..........................
Underlying Asset Type .................................
Underlying Settlement Price/Currency .........
The subcategory description of the asset class ....................................................................................................
Provides a more specific description of the asset subclass ..................................................................................
Settlement price, prior settlement price, settlement currency, and final settlement date .....................................
C
C
C
M = mandatory C = conditional O = optional.
C. Risk Metric Ladder Reporting
Field name
Description
Use
Common Fields (Risk Metric Ladder Reporting)
Total Message Count ...................................
FIXML Message Type ..................................
Sender ID .....................................................
To ID .............................................................
Message Transmit Datetime ........................
Report ID ......................................................
Report Date ..................................................
Base Currency ..............................................
Report Time (Message Create Time) ..........
Message Event .............................................
Ladder Indicator ...........................................
DCO Identifier ...............................................
Clearing Participant Identifier .......................
Clearing Participant Name ...........................
Fund Segregation Type ................................
Clearing Participant LEI ...............................
Clearing Participant LEI Name .....................
Customer Identifier .......................................
Customer Name ...........................................
Customer Account Type ...............................
Customer LEI ...............................................
Customer LEI Name .....................................
Unique Margin Identifier ...............................
The total number of reports included in the file .....................................................................................................
FIXML account summary report type ....................................................................................................................
The CFTC-issued DCO identifier ...........................................................................................................................
Indicate ‘‘CFTC’’ .....................................................................................................................................................
The date and time the file is transmitted ...............................................................................................................
A unique identifier assigned by the CFTC to each clearing member report .........................................................
The business date of the information being reported ............................................................................................
Base currency referenced throughout report; provide exchange rate against this currency ................................
The report ‘‘as of’’ or information cut-off time ........................................................................................................
The event source being reported ...........................................................................................................................
Indicator that identifies the type of risk metric ladder ............................................................................................
CFTC-assigned identifier for a DCO ......................................................................................................................
DCO-assigned identifier for a particular clearing member ....................................................................................
The name of the clearing member ........................................................................................................................
Clearing fund segregation type ..............................................................................................................................
LEI for a particular clearing member .....................................................................................................................
The LEI name associated with the clearing member LEI .....................................................................................
Proprietary identifier for a particular customer position account ...........................................................................
The name associated with the customer position identifier ..................................................................................
Type of account used for reporting ........................................................................................................................
LEI for a particular customer; provide if available .................................................................................................
The LEI name associated with the customer position LEI ....................................................................................
A single field that uniquely identifies the margin account. This field us used to identify associated positions ....
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
C
C
C
C
C
C
Delta Ladder (Daily Reporting)
Currency .......................................................
FX Rate ........................................................
Curve Name .................................................
Tenor ............................................................
Sensitivity .....................................................
ISO 4217 currency code ........................................................................................................................................
Rate used to convert the currency to USD ...........................................................................................................
Name of the reference curve .................................................................................................................................
Number of days from the report date ....................................................................................................................
Theoretical profit and loss with a single upward basis point shift .........................................................................
Currency .......................................................
FX Rate ........................................................
Curve Name .................................................
Tenor ............................................................
Sensitivity .....................................................
ISO 4217 currency code ........................................................................................................................................
Rate used to convert the currency to USD ...........................................................................................................
Name of the reference curve .................................................................................................................................
Number of days from the report date ....................................................................................................................
Theoretical profit and loss with a single upward basis point shift .........................................................................
M
M
M
M
M
Gamma Ladder (Daily Reporting)
M
M
M
M
M
Vega Ladder (Daily Reporting)
Currency .......................................................
FX Rate ........................................................
Curve Name .................................................
Tenor ............................................................
Sensitivity .....................................................
ISO 4217 currency code ........................................................................................................................................
Rate used to convert the currency to USD ...........................................................................................................
Name of the reference curve .................................................................................................................................
Number of days from the report date ....................................................................................................................
Theoretical profit and loss with a single upward basis point shift .........................................................................
M
M
M
M
M
M = mandatory C = conditional O = optional.
D. Curve Reference Reporting
Field name
Description
Use
ddrumheller on DSK120RN23PROD with RULES3
Common Fields (Curve Reference Reporting)
Total Message Count ...................................
FIXML Message Type ..................................
Sender ID .....................................................
To ID .............................................................
Message Transmit Datetime ........................
Report ID ......................................................
Report Date ..................................................
Base Currency ..............................................
Report Time (Message Create Time) ..........
Message Event .............................................
DCO Identifier ...............................................
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The total number of reports included in the file .....................................................................................................
FIXML account summary report type ....................................................................................................................
The CFTC-issued DCO identifier ...........................................................................................................................
Indicate ‘‘CFTC’’ .....................................................................................................................................................
The date and time the file is transmitted ...............................................................................................................
A unique identifier assigned by the CFTC to each clearing member report .........................................................
The business date of the information being reported ............................................................................................
Base currency referenced throughout report; provide exchange rate against this currency ................................
The report ‘‘as of’’ or information cut-off time ........................................................................................................
The event source being reported ...........................................................................................................................
CFTC-assigned identifier for a DCO ......................................................................................................................
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Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
Field name
Description
53697
Use
Currency Curve (Daily Reporting)
Curve ............................................................
Currency .......................................................
Maturity Date ................................................
Par Rate .......................................................
Reference curve name ...........................................................................................................................................
ISO 4217 currency code ........................................................................................................................................
The date on which the principal amount becomes due ........................................................................................
Rate such that the maturity will pay in order to sell at par today .........................................................................
M
M
M
M
Zero Rate Curve (Daily Reporting)
Currency .......................................................
Curve ............................................................
Maturity Date ................................................
Offset ............................................................
Accrual Factor ..............................................
Discount Factor ............................................
Zero Rate .....................................................
ISO 4217 currency code ........................................................................................................................................
Reference curve name ...........................................................................................................................................
The date on which the principal amount becomes due ........................................................................................
The difference in days between the maturity date and reporting date .................................................................
The difference in years between the maturity date and reporting date ................................................................
Value used to compute the present value of future cash flows values ................................................................
Averages of the one-period forward rates up to their maturity .............................................................................
M
M
M
M
M
M
M
M = mandatory C = conditional O = optional.
E. Backtesting Reporting
Field name
Description
Use
Common Fields (Backtesting Reporting)
Total Message Count ...................................
FIXML Message Type ..................................
Sender ID .....................................................
To ID .............................................................
Message Transmit Datetime ........................
Report ID ......................................................
Report Date ..................................................
Base Currency ..............................................
Report Time (Message Create Time) ..........
Message Event .............................................
Breach Indicator ...........................................
DCO Identifier ...............................................
Clearing Participant Identifier .......................
Clearing Participant Name ...........................
Fund Segregation Type ................................
Clearing Participant LEI ...............................
Clearing Participant LEI Name .....................
Customer Identifier .......................................
Customer Name ...........................................
Customer Account Type ...............................
Customer LEI ...............................................
Customer LEI Name .....................................
Unique Margin Identifier ...............................
The total number of reports included in the file .....................................................................................................
FIXML account summary report type ....................................................................................................................
The CFTC-issued DCO identifier ...........................................................................................................................
Indicate ‘‘CFTC’’ .....................................................................................................................................................
The date and time the file is transmitted ...............................................................................................................
A unique identifier assigned by the CFTC to each clearing member report .........................................................
The business date of the information being reported ............................................................................................
Base currency referenced throughout report; provide exchange rate against this currency ................................
The report ‘‘as of’’ or information cut-off time ........................................................................................................
The event source being reported ...........................................................................................................................
Indicates the breach file .........................................................................................................................................
CFTC-assigned identifier for a DCO ......................................................................................................................
DCO-assigned identifier for a particular clearing member ....................................................................................
The name of the clearing member ........................................................................................................................
Clearing fund segregation type ..............................................................................................................................
LEI for a particular clearing member .....................................................................................................................
The LEI name associated with the clearing member LEI .....................................................................................
Proprietary identifier for a particular customer position account ...........................................................................
The name associated with the customer position identifier ..................................................................................
Type of account used for reporting ........................................................................................................................
LEI for a particular customer; provide if available .................................................................................................
The LEI name associated with the customer position LEI ....................................................................................
A single field that uniquely identifies the margin account. This field us used to identify associated positions ....
Initial Margin .................................................
Margin requirement calculated by the DCO’s margin methodology. Unless an integral part of the margin
methodology, this figure should not include any additional margin add-ons.
Indicates the type of profit and loss calculation used for backtesting: ..................................................................
• VM—Variation Margin
• STATIC—Static Portfolio P/L (Clean P/L)
• DIRTY—Dirty P/L
• MTMA—Mark to Market P/L
• MTMO—Mark to Model P/L
• OTHER
Amount on the positions for which Initial Margin is computed ..............................................................................
Difference between the Initial Margin and Backtesting Metric Amount .................................................................
Holding period for which the Backtesting Metric is calculated in days .................................................................
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
C
C
C
C
C
C
Breach Details (Daily Reporting)
Backtesting Metric ........................................
Backtesting Metric Amount ..........................
Breach Amount .............................................
Margin Period of Risk ...................................
M
M
M
M
M
Breach Summary (Daily Reporting)
Total Instance ...............................................
Number of Breaches ....................................
Test Range Start ..........................................
Test Range End ...........................................
Total number of testing dates for the account .......................................................................................................
Total number of breaches in the testing period .....................................................................................................
Beginning date of the test ......................................................................................................................................
End date of the test ...............................................................................................................................................
M
M
M
M
ddrumheller on DSK120RN23PROD with RULES3
M = mandatory C = conditional O = optional.
F. Manifest Reporting
Field name
Description
Use
The total number of reports included in the file .....................................................................................................
FIXML account summary report type ....................................................................................................................
M
M
Manifest Reporting
Total Message Count ...................................
FIXML Message Type ..................................
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53698
Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
Field name
Description
Use
Sender ID .....................................................
To ID .............................................................
Message Transmit Datetime ........................
Filenames .....................................................
The CFTC-issued DCO identifier ...........................................................................................................................
Indicate ‘‘CFTC’’ .....................................................................................................................................................
The date and time the file is transmitted ...............................................................................................................
List of files to be sent .............................................................................................................................................
M
M
M
M
M = mandatory C = conditional O = optional.
PART 140—ORGANIZATION,
FUNCTIONS, AND PROCEDURES OF
THE COMMISSION
11. The authority citation for part 140
continues to read as follows:
■
Authority: 7 U.S.C. 2(a)(12), 12a, 13(c),
13(d), 13(e), and 16(b).
12. Amend § 140.94 by revising
paragraph (c)(10) to read as follows:
■
§ 140.94 Delegation of authority to the
Director of the Division of Swap Dealer and
Intermediary Oversight and the Director of
the Division of Clearing and Risk.
*
*
*
*
*
(c) * * *
(10) All functions reserved to the
Commission in § 39.19(a), (b)(1), (c)(2),
(c)(3)(iv), and (c)(5) of this chapter;
*
*
*
*
*
Issued in Washington, DC, on July 31,
2023, by the Commission.
Christopher Kirkpatrick,
Secretary of the Commission.
Note: The following appendices will not
appear in the Code of Federal Regulations.
Appendices to Reporting and
Information Requirements for
Derivatives Clearing Organizations—
Commission Voting Summary and
Chairman’s and Commissioners’
Statements
Appendix 1—Commission Voting
Summary
On this matter, Chairman Behnam and
Commissioners Johnson, Goldsmith Romero,
Mersinger, and Pham voted in the
affirmative. No Commissioner voted in the
negative.
ddrumheller on DSK120RN23PROD with RULES3
Appendix 2—Statement of Support of
Chairman Rostin Behnam
Today the Commission considered a final
rule addressing reporting and information
requirements for derivatives clearing
organizations (DCOs). As with the proposal,
the final rule provides greater transparency,
clarity, and certainty to our DCOs and market
participants. It also streamlines how the
Commission receives information necessary
to carry out its supervisory role. By
periodically updating our regulations, the
agency can incorporate our experiences with
the industry and market participants directly
into our ruleset. We can also use these
opportunities to respond to emerging
technologies, issues, and risks with
responsive and targeted regulation. This both
creates efficiencies and a level playing field,
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and provides a forum to address ongoing
compliance concerns on each of our
respective sides through open dialogue.
I fully support the final rule. Ensuring our
regulations are operating as intended is
paramount. DCOs play a critical role in U.S.
derivatives markets. Any lapse in their duties
or even the perception that compliance is
nothing more than window dressing puts our
markets and the larger financial system at
risk, especially when it comes to entities that
have been designated as systemically
important by the Financial Stability
Oversight Council known as ‘‘SIDCOs.’’
The majority of the proposed Part 39
amendments—with the exception of those
addressing system safeguards—were
considered today. Several amendments in the
final rule, codify existing staff letters and
Commission practices and interpretations
with the goal of ensuring that DCOs
understand their reporting obligations and
the Commission receives the information it
needs to perform its supervisory
responsibilities in the most effective and
least burdensome manner. For example, an
amendment to Rule 39.19 will codify an
existing staff letter 1 providing for no-action
relief by removing the requirement that a
DCO report daily variation margin and cash
flows by individual customer account. The
final rule will also codify existing reporting
fields for the daily reporting requirements in
new appendix C to Part 39.2 Additional
amendments will update information
requirements associated with commingling
customer funds and positions in futures and
swaps in the same account.
Acknowledging that different risk profiles
require more tailored consideration, the final
rule will adopt specific obligations for fully
collateralized positions which specify that
certain requirements for risk management,
daily reporting, and website publication do
not apply to DCOs that clear fully
collateralized positions. In addition, to
ensure that the Commission maintains
unfettered access to data, an amendment to
Part 140 of the Commission rules will
delegate to the Director of the Division of
Clearing and Risk (DCR) existing authority to
require a DCO to provide to the Commission
1 See CFTC Letter No. 21–01, Request for
Temporary No-Action Relief from the Reporting
Requirements in Commission Regulation 39.19(c)(1)
(Dec. 31, 2020), https://www.cftc.gov/csl/21-01/
download; CFTC Letter no. 21–31, Extension of
Temporary No-Action Relief from the Reporting
Requirements in Commission Regulation 39(c)(1)
(Dec. 22, 2021), https://www.cftc.gov/csl/21-31/
download; and CFTC Letter No. 22–20, Extension
of No-Action letter Regarding Reporting
Requirements in Commission Regulation 39.19(c)(1)
(Dec. 19, 2022), https://www.cftc.gov/csl/22-20/
download.
2 Commodity Futures Trading Commission
Guidebook for Part 39 Daily Reports, Version 1.0.1,
Dec. 10, 2021 (Reporting Guidebook).
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the information specified in Rule 39.19 and
any other information that the Commission
determines to be necessary to conduct
oversight of the DCO, and to specify the
format and manner in which the information
required must be submitted to the
Commission.
Given that what we do as regulators is as
important as what we do not do, based on the
concerns raised regarding the system
safeguards proposals, the Commission did
not vote on the adoption of any of the
proposed amendments. This determination
does not alter the current landscape or
diminish Commission concerns regarding
cyber resilience. However, significant and
important concerns and meaningful
alternatives raised by commenters require
additional consideration and analysis. The
Commission will continue to consider how
best to address the issues targeted in the
proposed rule while incorporating additional
information gained through this rulemaking
process and additional examination.
Appendix 3—Statement of Support of
Commissioner Kristin N. Johnson
Today, the Commission considers several
amendments to Part 39 regulations. In
January of 2020, the Commission amended a
number of the provisions in Part 39 to
enhance certain risk management and
reporting obligations and clarify the meaning
of certain provisions including registration
and reporting requirements.1 Last November,
the Commission considered a proposed
rulemaking seeking to further update certain
Part 39 regulations to reflect developments in
risk management. I support the Commission’s
consideration of these amendments designed
to improve derivatives clearing organizations’
(DCO) risk management practices and clarify
reporting requirements set out in Part 39.
The Dodd-Frank Wall Street Reform and
Consumer Protection Act set out to
implement reforms to mitigate systemic risk
and promote transparency and stability.2
DCOs play a significant role in mitigating risk
and facilitating stability in our markets by
providing essential clearing and settlement
market infrastructure. Clearinghouses
enhance visibility, introduce and enforce
uniform contractual obligations, and
establish standards for critical risk
management tools such as initial and
variation margin. They facilitate dispute
resolution among counterparties, ensure the
maintenance of necessary liquidity reserves,
1 Derivatives Clearing Organization General
Provisions and Core Principles, 85 FR 4800 (Jan. 27,
2020), https://www.federalregister.gov/documents/
2020/01/27/2020-01065/derivatives-clearingorganization-general-provisions-and-coreprinciples.
2 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111–203, 124 Stat. 1376
(2010).
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introduce important operating systems and
cyber-risk management measures, and
implement governance measures that
mitigate conflicts of interest and monitor
systems safeguards.3
In light of the role of DCOs in our markets,
we must provide a framework that not only
supports market stability but is functional
and can be practically integrated. The
implementation of the proposed final
amendments to existing regulations will
address gaps in reporting data to the
Commission.
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Cyber Security
We live in a digital age, and our
dependence on technology, digital
operational infrastructure systems, and
software is increasingly undeniable. The
security and integrity of cyber systems is
important for the effective functioning of
individual firms. Interconnectedness in
financial markets creates the possibility that
a cyber-threat that impacts certain actors in
our markets may also impact the safety and
soundness of counterparties or customers. In
some instances, these cyber events will lead
to more significant disruption, impeding
clearing and settlement of transactions or
impacting price discovery. Just a few months
ago, ION, a significant service provider in
global derivatives markets, experienced a
cybersecurity event that triggered concerning
effects across derivatives markets. The ION
cybersecurity event underscores the
importance of cyber security monitoring,
prevention, and reporting.
Under DCO Core Principle I, DCOs must
‘‘establish and maintain a program of risk
analysis and oversight to identify and
minimize sources of operational risk through
the development of appropriate controls and
procedures . . . .’’ 4 In accord with this Core
Principle, the Commission adopted
Regulation 39.18(g) requiring DCOs to
promptly notify the Division of Clearing and
Risk (DCR) of any cyber security event or
targeted threat that materially impairs, or
creates a significant likelihood of material
impairment of automated system operation,
reliability, security, or capacity.5
In November of 2022, DCR proposed
amendments to Regulation 39.18(g),
recommending improvements to certain
cyber-event reporting requirements. The
proposed amendment would have eliminated
the materiality threshold, which would have
required DCOs to report all such events
regardless of magnitude.6 The amendment
would have increased reporting of DCO cyber
events and automated system impairments,
including impairments concerning thirdparty provided services.
While I appreciate the Commission’s
careful response to public comments
3 Statement of Commissioner Kristin N. Johnson
in Support of Notice of Proposed Amendments to
Reporting and Information Requirements for
Derivatives Clearing Organizations, Nov. 10, 2022,
https://www.cftc.gov/PressRoom/
SpeechesTestimony/johnsonstatement060723d.
4 7 U.S.C. 7a–1(c)(2)(I)(i).
5 17 CFR 39.18(g).
6 Reporting and Information Requirements for
Derivatives Clearing Organizations, 87 FR 76698,
76700 (Dec. 15, 2022), https://www.cftc.gov/sites/
default/files/2022/12/2022-26849a.pdf.
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received regarding proposed amendments to
Regulation 39.18(g), it is important to balance
thoughtful consideration of cyber regulation
with the emergent need for action. Our
markets cannot afford to wait for continued
attacks or delayed action over a significant
period of time. The potential disruption that
may be created by cyber-events requires a
timely response.
As market participants integrate, adopt,
and partner with significant technology firms
and adopt software and technology that
facilitates the technical operations for their
businesses, it is imperative that our
regulation focus on monitoring, reporting,
transparency and the development of cyber
recovery and resilience programs.
Four months ago, the Market Risk Advisory
Committee (MRAC) that I sponsor held a
meeting in this room. The director of national
cybersecurity at the White House’s Office of
the National Cyber Director and others joined
a thoughtful dialogue focused on preventing
or mitigating the threat of cyber events and
cyber security threats. In addition to valuable
dialogue during the MRAC meeting, my staff
and I traveled to the White House executive
offices to meet with the Office of the National
Cyber Director. Our discussions and dialogue
continue.
DCR is correctly focused on refining and
updating Regulation 39.18(g). There is a clear
need for immediate and careful study of the
cyber-risk issues that present for DCOs. To
this end, an MRAC subcommittee focused on
technical and operational resilience will
begin to examine several of the issues raised
in the proposed amendment and comment
letters. Hopefully, our collective efforts will
enhance cyber resilience of the registrants in
our markets as well as the critical third- and
fourth-party service providers that registrants
may depend on.
Segregation of Customer Funds
DCO Core Principle F and requires DCOs
to establish standards and procedures for
protecting and ensuring the safety of clearing
member and customer funds. In addition,
Core Principle F requires DCOs to establish
standards and procedures that are designed
to protect and to ensure the safety of funds
and assets held in custody, to hold such
funds and assets in a way designed to
minimize risk, and to limit investment of
such funds and assets to instruments with
minimal credit, market, and liquidity risks.
The DCO risk mitigation function is
imperative for the segregation and
safekeeping of clearing member and customer
funds and assets.
Today, DCR proposes amendments that
seek to close a gap with respect to DCO
regulations that govern segregation of
customer assets.
While there are robust regulations
governing segregation of customer funds by
futures commission merchants (FCMs),7
7 Section 4d(a)(2) of the CEA requires each FCM
to segregate from its own assets all money,
securities, and other property deposited by futures
customers to margin, secure, or guarantee futures
contracts and options on futures contracts traded on
designated contract markets. 7 U.S.C. 6d(a)(2). In
addition, Section 4d(a)(2) requires an FCM to treat
and deal with futures customer funds as belonging
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53699
those same protections may not reach all
DCO customers. In some instances, the
divergence in our rules is based on the
history and structure of the markets for
certain assets and products. As innovative
financial products and market structures
proliferate, we must be mindful of the
consequences of the lack of parallelism in
our customer protection regulations.
I support the Commission’s adoption of the
proposed amendments that enhance
customer protections, namely segregation of
customer funds, treatment of customer funds,
and the introduction of financial resource
requirements for certain DCOs.
Liquidity Reserves
The amendments today also include
updates addressing liquidity-related
transparency. When market participants fail
to manage liquidity risk effectively,
enterprise risk management failures may
occur and, depending on the size and
significance of the market participants
experiencing risk management failures, the
effects may trigger disruption across global
financial markets.
The transparency amendments proposed
today, enhance reporting requirements for
credit and liquidity facilities. Specifically,
Regulation 39.19(c)(4)(xv) will require DCOs
to report within one business day after
becoming aware of any material issues or
concerns regarding the performance,
stability, liquidity, or financial resources of
any credit facility funding arrangement,
liquidity funding arrangement, custodian
bank, or settlement bank used by the DCO or
approved for use by the DCO’s clearing
members. These amendments will improve
the Commission’s risk surveillance of DCOs
and clearing members. Prudent risk
management—the management of liquidity
needs, in particular—is critical to DCO
resilience. I support the amendments to
enhance transparency. Each adds value to the
Core Principles we uphold and our mandate
to the protect customers and preserve the
integrity of the financial markets that we
regulate.
I want to thank the staff of DCR—Eileen
Donovan, August Imholtz, Gavin Young, and
Parisa Nouri—for their diligent and
thoughtful work on these amendments.
Appendix 4—Statement of Support of
Commissioner Christy Goldsmith
Romero
Clearinghouses play an important public
interest role—they are critical market
infrastructure intended to foster financial
stability, trust, and confidence in U.S.
markets. Dodd-Frank Act reforms increased
central clearing, thereby increasing financial
stability. Those reforms also concentrated
risk in clearinghouses. With that
concentrated risk, it is critical that the
Commission maintain vigilance in its
oversight over clearinghouses to identify and
monitor risk and promote financial stability.
This is most important for the CFTC’s
monitoring of systemic risk.
to the futures customer, and prohibits an FCM from
using the funds deposited by a futures customer to
margin or extend credit to any person other than the
futures customer that deposited the funds. Id.
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Clearinghouse reporting is a cornerstone to
the Commission’s oversight, including
monitoring risk and promoting financial
stability. I support this rule because it
strengthens and improves certain
clearinghouse reporting requirements.
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Strengthening Reporting on Risk
Characteristics of Unusual Products To Be
Commingled Facilitates Effective
Commission Oversight in Areas of Emerging
Risk
First, the final rule strengthens
requirements for reporting the risk
characteristics of products to be commingled
that are unusual in relation to other products
that the clearinghouse clears. A
clearinghouse must obtain CFTC approval to
commingle customer positions and
associated funds of products that would
otherwise be held in separate customer
accounts.
This rule facilitates effective Commission
oversight, as clearinghouses will provide
better information for the CFTC to evaluate
a request to commingle customer positions
across asset classes. This practice can be used
to reduce margin requirements for customers
with offsetting positions. Margin
requirements are an important element of
financial stability, so any reduction should
be carefully considered.
In addition to providing the CFTC an
analysis of risk characteristics of the products
to be commingled, this rule adds an analysis
of any risk characteristics that are unusual in
relation to the products that clearinghouse
clears, as well as how it plans to manage any
identified risk. This addition will help the
Commission better understand the risks
posed by the commingling arrangement.
I also appreciate that the final rule
incorporates the suggestion by a public
interest group that the Commission go further
and add that the analysis should specifically
address the commingled products’
margining, liquidity, default management,
pricing, and volatility risks that are unusual
in relation to those currently cleared by the
clearinghouse. This is particularly important
given that the derivatives industry is seeing
a change with emerging products such as
digital assets for example, that can carry
emerging risk in each of these areas.
Expanding Reporting of Change of Control of
the Clearinghouse
I support the expansion of the rule
requiring a clearinghouse to report any
change to the entity or person that holds a
controlling interest, either directly or
indirectly, rather than the existing rule of
reporting a change that would result in at
least a 10 percent change of ownership. The
existing rule could mean that there would be
no reporting when an entity increases its
ownership stake in a clearinghouse from 45
percent to 51 percent. That would leave the
Commission blind to important changes of
control. This proposed rule would provide
the CFTC with better understanding of the
organizational structure of the clearinghouse,
including control and ownership. This is a
critical change.
I read with interest the comment about
changes to Regulation 39.19(c)(4) during the
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last Administration regarding Commission
approval when a clearinghouse seeks to
transfer its registration and open interest in
connection with a corporate change. While
that is not the subject of this rule, I would
be interested in learning more about the
effects of those amendments and what is
needed for the Commission to have greater
control over a transfer of registration. This is
an issue that arose when it became apparent
that LedgerX would be sold in FTX’s
bankruptcy.
Strengthening the Enforceability of Reporting
Fields
Clearinghouses report information daily to
the Commission such as initial margin,
variation margin, cash flow, and position
information for each clearing member, by
house origin, and by each customer origin
and customer account. Over time, the
Commission has provided detailed
instructions and technical specifications in
the Reporting Guidebook. The whole purpose
of the Reporting Guidebook was to ensure
uniformity in clearinghouse reporting, as
well as to ensure that the Commission
received the right information for its
surveillance and oversight of clearinghouses
and the derivatives markets.
I am pleased to support the Commission
now requiring the reporting fields, rather
than just serving as a guide, which will
strengthen the enforceability of reporting
fields and aid in clearinghouse
accountability. First, the Reporting
Guidebook contains some reporting fields
that are only optional, not required, but that
would help the Commission in its oversight.
It is important to require these fields,
removing a clearinghouse’s option not to
report them. Second, the types of
clearinghouses registering with or applying
to register with the Commission are
changing. Recently, for example, we have
seen digital asset companies registering or
applying to register, some with no history of
being regulated. It has become increasingly
important that we have rules and regulations,
rather than guides that can be ignored by new
clearinghouses.
However, I do agree with the comment
from a public interest group that it is
important for the Commission to be nimble,
particularly in light of emerging products and
emerging risk. I urge the staff to consider how
we can both implement this new rule
requiring the reporting fields, while also
staying ahead of the risk curve in gathering
the information needed or releasing
additional guidance or rules.
Continuing Concerns Over Cyber and Other
Incident Reporting
When it comes to expanding the reporting
of cyber incidents and other incidents, the
final rule dropped proposed requirements for
expanded Commission reporting. Let me start
by saying that drafting new regulation is a
process that works best with public input
from the full range of interested parties.
While I supported this requirement at the
proposal stage, I also understand the
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importance of listening to commenters about
the practical effect of our regulations.1
However, the concern that caused us to
propose the rule still exists. The cyber threat
is pervasive and increasing. In fact, since the
Commission issued this proposal last
November, cyber incidents have continued to
threaten the derivatives markets. Notably, in
January 2023, a third-party service provider,
ION Markets, suffered a ransomware attack
that disrupted trade processing at affected
brokers.
Early notification is key for the
Commission’s ability to protect markets,
including working with registrants and all
those affected to coordinate a response. The
original proposal was based on CFTC staff
finding a troubling lack of uniformity in how
clearinghouses were reporting cyber
incidents or incidents of other disruptions.
As discussed in the open meeting on the
proposed rule, there were 120 reports of an
incident made in fiscal year 2022.
Examination staff have learned of about
perhaps as many incidents that they
considered material where the CFTC should
have been notified.2 They found that some
clearinghouses did an excellent job of
reporting, while others lagged way behind.3
The goal of the rule was to improve the
uniformity of reporting incidents to the
CFTC. While I appreciate the commenters’
concerns about the consequences of
removing the limitation that the incident be
material, as well as other proposed changes,
we still need to address the underlying
problem in some way.
Additionally, the proposal also clarified
that incidents requiring notification were not
just those caused by cyber attackers, but also
those triggered by accidents or malfunctions.
At the recent Technology Advisory
Committee meeting, TAC member Professor
Hilary Allen of American University
Washington College of Law described how by
some estimates, losses from accidental tech
glitches exceed those from cyberattacks.4 I
appreciate the discussion in the rule’s
preamble, which reminds clearinghouses that
the existing notification requirements already
cover many instances of operator error.
Ultimately, given the experiences of the
CFTC staff, the Commission needs to find the
right fix that improves notifications. I am
pleased to see a commitment here to
addressing this urgent need as cyber threats
are the threats of our day. The Technology
Advisory Committee’s Cybersecurity
Subcommittee is working on advising the
Commission on how best to promote cyber
resilience.
I am thankful for the Commission’s
continued attention to this topic and I urge
1 Commissioner Christy Goldsmith Romero,
‘‘Statement of Commissioner Christy Goldsmith
Romero on Proposed Rule on Cybersecurity
Incident Reporting’’ (Nov. 10, 2022), https://
www.cftc.gov/PressRoom/SpeechesTestimony/
romerostatement111022.
2 See ‘‘CFTC to Hold an Open Commission
Meeting November 10’’ at 1:15:00 (posted Nov. 15,
2022), https://youtu.be/hZn2Vv5uNRE.
3 See Id.
4 See CFTC Technology Advisory Committee (July
18, 2023) https://www.youtube.com/
watch?v=8ro4Iu0N17I.
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the staff to continue engaging with
commenters, financial regulators, and the
public, and to then propose new
requirements. In the interim, the Commission
should also continue to work closely with
clearinghouses to maintain two-way
communication, and use our supervision and
enforcement tools to ensure that we are
staying on top of cyber and other incidents
so that we can fulfill our responsibility in
protecting markets.
Appendix 5—Statement of Support of
Commissioner Caroline D. Pham
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I support the final rule on reporting and
information requirements for derivatives
clearing organizations (DCOs) (DCO
Reporting Final Rule) because of its careful
attention and response to public comments
received. I would like to thank Clark
Hutchison, Eileen Donovan, Parisa Nouri,
August Imholtz, Gavin Young, Theodore
Polley, and Elizabeth Arumilli of the
Division of Clearing and Risk (DCR) for their
work on the DCO Reporting Final Rule. I
appreciate the staff addressing my concerns.
The Commission has a great deal to be
proud of with respect to its DCO registration
and oversight regimes. Mandatory clearing
for swaps was a pillar of the G20 reforms,
and the U.S. was one of the first jurisdictions
to adopt a clearing requirement pursuant to
the directive.1 Since then, the CFTC has
amended its rules to keep them up to date
and ensure they reflect changes that take
place in the industry.2
I am pleased that the DCO Reporting Final
Rule is appropriately responsive to industry
concerns that the Commission’s existing
rules were unworkable.3 I continue to stress
the need that the Commission evaluate its
rules to ensure they are functioning as
intended, and propose workable solutions to
any operational or implementation
challenges to enable firms to more effectively
achieve compliance, particularly for
technical issues that do not meaningfully
1 G20 Pittsburgh Summit (Sept. 24–25, 2009);
Clearing Requirement Determination Under Section
2(h) of the CEA, 77 FR 74283 (Dec. 13, 2012).
2 Derivatives Clearing Organization General
Provisions and Core Principles, 85 FR 4800 (Jan. 27,
2020).
3 In January 2020, as part of updates to its DCO
regulations, the CFTC amended the daily reporting
requirements for DCOs to require, among other
things, the reporting of margin and position
information by each individual customer account.
The Commission then learned of concerns about
futures commission merchants’ ability to provide
this information to DCOs. As a result, CFTC staff
issued a no-action letter extending the compliance
date for this reporting requirement in order to
resolve this issue. See CFTC Letter No. 21–01,
United States Commodity Futures Trading
Commission (Dec. 31, 2020), https://www.cftc.gov/
csl/21-01/download; see also CFTC Letter No. 21–
31, United States Commodity Futures Trading
Commission (Dec. 22, 2021), https://www.cftc.gov/
csl/21-31/download; CFTC Letter No. 22–20, United
States Commodity Futures Trading Commission
(Dec. 19, 2022) (further extending the compliance
date), https://www.cftc.gov/csl/22-20/download.
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impact our oversight or systemic risk
concerns.
In this instance, Regulation 39.19(c)(1)
required a DCO to report to the Commission
on a daily basis initial margin, variation
margin, cash flow, and position information
for each clearing member, by house origin, by
each customer origin, and by individual
customer account.4 Since providing certain
information by individual customer account
was unworkable, the Commission proposed
amending Regulation 39.19(c)(1)(i)(B) and (C)
to remove the requirement that a DCO report
daily variation margin and cash flows by
individual customer account.5 In response to
commenters, all of whom supported
removing this part of the requirement, the
Commission is removing the unfeasible part
of the requirement.
There are other instances of the
Commission responding to overwhelming
support from commenters on unworkable
proposals. These include significant
amendments the Commission had proposed
to the system safeguards rules for DCOs. To
highlight one, Regulation 39.18(g)(1) requires
that a DCO promptly notify DCR staff of any
hardware or software malfunction, security
incident, or targeted threat that materially
impairs, or creates a significant likelihood of
material impairment of, automated system
operation, reliability, security, or capacity.6
The Commission had proposed amending
Regulation 39.18(g)(1) to eliminate the
materiality threshold, requiring DCOs to
report all such events regardless of their
magnitude.7 Eight out of nine commenters
opposed this proposal, and took the time to
detail the compliance issues the proposal
created. Reasons included that DCOs would
report events that do not impact the DCO; the
requirement would divert attention and
resources away from incidents that deserve
greater focus and planning, with little
corresponding benefit to the Commission;
and the requirement would be inconsistent
with other notification regimes, including
similar Commission rules and reporting
obligations to other agencies and authorities.
In general, the commenters’ position was that
the CFTC underestimated the increase in
reporting the amended rule would create.
Speaking from personal experience, I think
that if we had removed the materiality
requirement, there would be a nonstop flood
of notifications coming in to the staff because
there are operational issues that occur all the
time, many of which are insignificant and are
resolved with de minimis impact. But
nonetheless, without a materiality threshold
then all such incidents would need to be
reported promptly. So, I am pleased that we
are taking the time to consider this aspect of
the proposed rule further, particularly since
there is ongoing work around the world on
4 17
CFR 39.19(c)(1).
and Information Requirements for
Derivatives Clearing Organizations, 87 FR 76698
(Dec. 15, 2022).
6 17 CFR 39.18(g)(1).
7 See footnote 5, supra.
5 Reporting
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international standards, and the Fed and the
Securities and Exchange Commission (SEC)
are also both updating their incident
reporting requirements. There is no doubt
that the maintenance of strong incident
reporting regimes is critical to CFTC
oversight, but I also believe that it is
important for the Commission to harmonize
it’s reporting regime with other similar
regulatory approaches.
The SEC’s Reg SCI is most analogous to our
DCO systems safeguards and systems
incident reporting requirements.8 It was
promulgated in 2014 after our system
safeguard rules, and after a joint CFTC–SEC
advisory committee examined the cause of
the 2010 flash crash, which showed the
interconnectedness between the stock and
futures markets and made recommendations
for market structure reforms. Many firms
operate DCOs that are either dually
registered, or have affiliates that are
registered as SEC clearing agencies, and have
already implemented policies, procedures,
and processes to comply with Reg SCI.
Accordingly, it should be simpler and faster
for them to apply the same SEC reporting
framework to the DCOs if we are considering
an update to our system safeguards
requirements.
In looking at the preamble to the NPRM for
Reg SCI, I note that it dates back to two
policy statements by the SEC on ‘‘Automated
Systems for Self-Regulatory Organizations’’
dated 1989 and 1991.9 And, these policy
statements are based on SEC reports dating
back to 1986. Ultimately these policy
statements established the initial framework
for what would later become Reg SCI.
Both the securities and futures markets
experienced the same shift to electronic
trading and reliance on automated systems in
the wake of rapid technological advance, and
given how these developments dominated
the industry, I believe it is reasonable to infer
that the contemporaneous use of the term
‘‘automated systems’’ in CFTC regulations
would have similar meaning to the SEC’s use
of that term in the context of securities
regulation.10 If the CFTC revisits these rules,
I would be interested in learning more about
the genesis of the DCO systems safeguards
and reporting requirements, and reviewing
the original CFTC rulemakings, to confirm
whether that was the case.
8 See generally Regulation Systems Compliance
and Integrity, 79 FR 72251 (Dec. 5, 2014) (codified
at 17 CFR 240).
9 Automated Systems of Self-Regulatory
Organizations, 54 FR 48703 (Nov. 16, 1989);
Automated Systems of Self-Regulatory
Organizations, 56 FR 22490 (May 15, 1991).
10 Regulation Systems Compliance and Integrity,
79 FR 72251, 72272 (codified at 17 CFR 240) (noting
the definition of SCI systems to include ‘‘all
computer, network, electronic, technical,
automated, or similar systems of, or operated by or
on behalf of, an SCI entity that, with respect to
securities, directly support trading, clearance and
settlement, order routing, market data, market
regulation, or market surveillance’’).
E:\FR\FM\08AUR3.SGM
08AUR3
53702
Federal Register / Vol. 88, No. 151 / Tuesday, August 8, 2023 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES3
Therefore, I think it would make sense to
evaluate whether to adopt essentially the
same definition for ‘‘automated systems’’ as
the SEC definition of ‘‘SCI systems’’ because
I think the intent and scope would be the
same. In fact, the SEC explicitly
acknowledged the similarities in the
VerDate Sep<11>2014
21:11 Aug 07, 2023
Jkt 259001
securities and U.S. commodities markets
with respect to systems issues and incidents
in its preamble to the final rule.11
11 See id. at 72256 (‘‘Systems issues are not
unique to the U.S. securities markets, with similar
incidents occurring in the U.S. commodities
markets as well as foreign markets.’’).
PO 00000
Frm 00040
Fmt 4701
Sfmt 9990
Overall, this rule is an example of how
good government works, and I am pleased to
support it. Thank you.
[FR Doc. 2023–16591 Filed 8–7–23; 8:45 am]
BILLING CODE 6351–01–P
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08AUR3
]]>Agencies
[Federal Register Volume 88, Number 151 (Tuesday, August 8, 2023)]
[Rules and Regulations]
[Pages 53664-53702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16591]
[[Page 53663]]
Vol. 88
Tuesday,
No. 151
August 8, 2023
Part III
Commodity Futures Trading Commission
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17 CFR Parts 39 and 140
Reporting and Information Requirements for Derivatives Clearing
Organizations; Final Rule
Federal Register / Vol. 88 , No. 151 / Tuesday, August 8, 2023 /
Rules and Regulations
[[Page 53664]]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 39 and 140
RIN 3038-AF12
Reporting and Information Requirements for Derivatives Clearing
Organizations
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
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SUMMARY: The Commodity Futures Trading Commission (Commission) is
amending certain reporting and information regulations applicable to
derivatives clearing organizations (DCOs). These amendments, among
other things, update information requirements associated with
commingling customer funds and positions in futures and swaps in the
same account, revise certain daily and event-specific reporting
requirements in the regulations, and codify in an appendix the fields
that a DCO is required to provide on a daily basis under the
regulations. In addition, the Commission is adopting amendments to
certain delegation provisions in its regulations.
DATES:
Effective date: The effective date for this final rule is September
7, 2023.
Compliance date: DCOs must comply with the amendments to Sec.
39.19 and appendix C by February 10, 2025; DCOs must comply with the
amendments to all other rules by September 7, 2023.
FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Deputy Director,
(202) 418-5096, [email protected]; Parisa Nouri, Associate Director,
(202) 418-6620, [email protected]; August A. Imholtz III, Special
Counsel, (202) 418-5140, [email protected]; or Gavin Young, Special
Counsel, (202) 418-5976, [email protected]; Division of Clearing and
Risk, Commodity Futures Trading Commission, Three Lafayette Centre,
1155 21st Street NW, Washington, DC 20581; Theodore Z. Polley III,
Associate Director, (312) 596-0551, [email protected]; or Elizabeth
Arumilli, Special Counsel, (312) 596-0632, [email protected]; Division
of Clearing and Risk, Commodity Futures Trading Commission, 77 West
Jackson Boulevard, Suite 800, Chicago, Illinois 60604.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Amendments to Sec. 39.13(h)(5)
III. Amendments to Sec. 39.15(b)(2)
IV. Amendments to Sec. 39.18
V. Amendments to Sec. 39.19(c)
A. Daily Reporting of Variation Margin and Cash Flows--Sec.
39.19(c)(1)(i)(B) and (C)
B. Codifying the Existing Reporting Fields for the Daily
Reporting Requirements in New Appendix C to Part 39
C. Additional Reporting Fields for the Daily Reporting
Requirements--Sec. 39.19(c)(1)
D. Non-Substantive and Technical Edits to Appendix C to Part 39
E. Individual Customer Account Identification Requirements--
Sec. 39.19(c)(1)(i)(A) and (D)
F. Daily Reporting of Margin Model Backtesting--Sec.
39.19(c)(1)(i)
G. Fully Collateralized Positions--Sec. 39.19(c)(1)(ii)
H. Voluntary Reporting--Sec. 39.19(c)(1)(iii)
I. Reporting Change of Control of the DCO--Sec.
39.19(c)(4)(ix)(A)(1)
J. Reporting Changes to Credit Facility Funding and Liquidity
Funding Arrangements--Sec. 39.19(c)(4)(xii) and (xiii)
K. Reporting Issues With Credit Facility Funding Arrangements,
Liquidity Funding Arrangements, and Custodian Banks--Sec.
39.19(c)(4)(xv)
L. Reporting of Updated Responses to the Disclosure Framework
for Financial Market Infrastructures--Sec. 39.19(c)(4)(xxv)
VI. Amendments to Sec. 39.21(c)
VII. Amendments to Sec. 39.37(c) and (d)
VIII. Amendments to Sec. 140.94(c)(10)
IX. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Considerations
D. Antitrust Considerations
I. Background
In January 2020, the Commission adopted amendments to its part 39
regulations in order to, among other things, update DCO reporting
requirements.\1\ The Commission subsequently became aware of issues
with the amended regulations that would benefit from further change or
clarification. Thus, in November 2022, the Commission proposed to amend
certain reporting and information regulations applicable to DCOs to
address those issues.\2\
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\1\ Derivatives Clearing Organization General Provisions and
Core Principles, 85 FR 4800 (Jan. 27, 2020), available at https://www.federalregister.gov/documents/2020/01/27/2020-01065/derivatives-clearing-organization-general-provisions-and-core-principles.
\2\ Reporting and Information Requirements for Derivatives
Clearing Organizations, 87 FR 76698 (Dec. 15, 2022), available at
https://www.federalregister.gov/documents/2022/12/15/2022-26849/reporting-and-information-requirements-for-derivatives-clearing-organizations.
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The Commission received a total of 11 substantive comment letters
in response to the proposal.\3\ After considering the comments, the
Commission is largely adopting the rules as proposed, although there
are some proposed changes that the Commission has determined to either
revise or decline to adopt.
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\3\ The Commission received comment letters submitted by the
following: Better Markets; Chris Barnard; CME Group, Inc. (CME);
Eurex Clearing AG (Eurex); Futures Industry Association (FIA); The
Global Association of Central Counterparties (CCP12); Google Cloud
(Google); Intercontinental Exchange, Inc. (ICE); Nodal Clear, LLC
(Nodal); The Options Clearing Corporation (OCC); and World
Federation of Exchanges (WFE). All comments referred to herein are
available on the Commission's website, at https://comments.cftc.gov/PublicComments/CommentList.aspx?id=7343.
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In the discussion below, the Commission highlights topics of
particular interest to commenters and discusses comment letters that
are representative of the views expressed on those topics. The
discussion does not explicitly respond to every comment submitted;
rather, it addresses the most significant issues raised by the proposed
rulemaking and analyzes those issues in the context of specific
comments.
II. Amendments to Sec. 39.13(h)(5)
Regulation Sec. 39.13(h)(5) requires a DCO to have rules that
require its clearing members to maintain current written risk
management policies and procedures; ensure that it has the authority to
request and obtain information and documents from its clearing members
regarding their risk management policies, procedures, and practices;
and require its clearing members to make information and documents
regarding their risk management policies, procedures, and practices
available to the Commission upon the Commission's request. It also
requires the DCO to review the risk management policies, procedures,
and practices of each of its clearing members on a periodic basis.
It is the Commission's view that these requirements are unnecessary
for clearing members that clear only fully collateralized positions, as
fully collateralized positions do not expose the DCO to any credit or
default risk stemming from the inability of a clearing member to meet a
margin call or a call for additional capital. Therefore, and consistent
with other amendments to part 39 to address fully collateralized
positions,\4\ the Commission proposed new Sec. 39.13(h)(5)(iii), which
would provide that a DCO that clears fully collateralized positions may
exclude from the requirements of paragraphs (h)(5)(i) and (ii) those
clearing members that clear only fully collateralized
[[Page 53665]]
positions.\5\ The requirements would still apply to clearing members
that clear fully collateralized positions but also clear margined
products.\6\ The Commission did not receive any comments on the
proposed changes to Sec. 39.13(h)(5), and is therefore adopting the
changes as proposed.
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\4\ See 85 FR 4800, 4803-4805.
\5\ By adopting this regulation, this requirement would be
consistent with and would supersede a related interpretation issued
by the Division of Clearing and Risk. See CFTC Letter No. 14-05
(Jan. 16, 2014).
\6\ The Commission also proposed to combine paragraphs
(h)(5)(i)(B) and (C) of Sec. 39.13, which require, respectively,
that a DCO have rules that: ensure that it has the authority to
request and obtain information and documents from its clearing
members regarding their risk management policies, and require its
clearing members to make such information and documents available to
the Commission upon request. These revisions are purely technical
and are not meant to alter the requirements in any way.
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III. Amendments to Sec. 39.15(b)(2)
Regulation Sec. 39.15(b)(2) sets forth procedures a DCO must
follow to obtain Commission approval to commingle customer positions
and associated funds from two or more of three separate account
classes--futures and options, foreign futures and options, and swaps--
in either a futures or cleared swaps customer account. The Commission
proposed several amendments to Sec. 39.15(b)(2) to better reflect the
information that the Commission needs to evaluate such a request.
OCC, Eurex, ICE, and Better Markets supported the proposal. OCC
stated that the changes appear reasonably calibrated to achieve the
Commission's policy objectives while providing useful guidance to DCOs
on the required contents of a request. Eurex added that the proposed
changes appropriately streamline the procedures and will help focus
both DCOs seeking such relief, and the Commission in its review of such
request for relief, on the information most relevant to a DCO's
request.
Furthermore, recognizing that futures and swaps are typically
commingled to allow for portfolio margining, the Commission proposed to
add new Sec. 39.15(b)(2)(vii) to require that a DCO provide an express
confirmation that any portfolio margining will be allowed only as
permitted under Sec. 39.13(g)(4), which allows portfolio margining of
positions only if the price risks with respect to such positions are
``significantly and reliably correlated.'' Although ICE generally
supported the proposed changes to Sec. 39.15(b)(2), ICE stated that
the express confirmation under proposed new Sec. 39.15(b)(2)(vii) is
unnecessary, as Sec. 40.5 already requires that a DCO analyze its
proposal for compliance with the Commodity Exchange Act (CEA) and
Commission regulations. The Commission notes, however, that because the
DCO's submission would address commingling but not necessarily
portfolio margining, the DCO's analysis may not take Sec. 39.13(g)(4)
into account. Thus, the Commission does not want approval of the
submission to be misinterpreted as approval of the DCO's portfolio
margining as well. Because a submission under Sec. 40.5 is deemed
approved by the Commission without any written form of approval,
requiring the DCO to provide the express confirmation in Sec.
39.15(b)(2)(vii) is meant to address that.
In response to the Commission's request for comment as to whether
there is additional information that would be helpful to market
participants and the public in evaluating a DCO's commingling rule
submission, ICE does not believe that the Commission should require
disclosure of additional information. ICE stated that the information
already required, as proposed to be modified, will provide market
participants with sufficient information to evaluate a commingling
proposal.
In general, Better Markets believes the proposal would strengthen
the existing requirements by requiring a DCO to provide not only an
analysis of the risk characteristics of the products but also an
analysis of any risk characteristics of products to be commingled that
are unusual in relation to the other products the DCO clears, as well
as how it plans to manage any identified risks. Better Markets stated
that it supports this aspect of the proposal because adding the phrase
``unusual in relation to'' in Sec. 39.15(b)(2)(ii) will allow the
Commission and the public to better understand any increased risk posed
to the DCO or its customers by the commingling of products that
otherwise would be held in separate accounts. Better Markets further
stated that this additional requirement will better enable the
Commission to understand the DCO's ability to manage those risks. In
response to a request for comment as to whether there is a better way
to articulate this concept, Better Markets argued that the Commission
should go a step further and specify that the analysis should cover
products with margining, liquidity, default management, pricing, and
volatility characteristics that differ from those currently cleared by
the DCO. Better Markets believes this discussion is critical in the
ever-changing derivatives markets, where new derivatives products are
constantly being introduced. Better Markets urged the Commission to be
forward-looking in its approach to receiving as much information as
possible from a DCO's ``unusual in relation to'' analysis to determine
whether to allow a DCO to commingle products in a single customer
account. The Commission is persuaded that this provision should be more
specific, and is therefore adding to Sec. 39.15(b)(2)(ii) the
requirement that a DCO's analysis address any characteristics that are
unusual in relation to the other products cleared by the DCO, ``such as
margining, liquidity, default management, pricing, or other risk
characteristics.'' The Commission believes that this information would
better assist the Commission in evaluating a DCO's request to commingle
customer positions and its ability to manage any identified risks. The
Commission is otherwise adopting the amendments to Sec. 39.15(b)(2) as
proposed, without any changes.\7\
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\7\ For a description of the proposed amendments to Sec.
39.15(b)(2), see Reporting and Information Requirements for
Derivatives Clearing Organizations (Dec. 15, 2022), supra note 2, at
76699-76700.
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IV. Amendments to Sec. 39.18
Regulation Sec. 39.18(g)(1) requires that a DCO promptly notify
staff of the Division of Clearing and Risk (Division) of any hardware
or software malfunction, security incident, or targeted threat that
materially impairs, or creates a significant likelihood of material
impairment of, automated system operation, reliability, security, or
capacity. The Commission proposed to amend Sec. 39.18(g)(1) to
eliminate the materiality threshold, requiring DCOs to report all such
events regardless of their magnitude. Better Markets supported the
proposal to remove the materiality threshold, stating that both the
Commission and DCOs would benefit from expanded reporting of such
incidents. CME, OCC, ICE, Eurex, Nodal, CCP12, Google, and WFE opposed
the proposal.
CCP12, CME, Eurex, ICE, Nodal, OCC, and WFE stated that the removal
of the materiality threshold would lead to a significant increase in
the number of reportable events, including events which have little or
no impact on a DCO's operations or on market participants, or which are
mitigated well before any impact, and thus of little or no value as the
subject of a required notification. CCP12, CME, Eurex, Google, ICE,
Nodal, OCC, and WFE commented that such an increase in reportable
incidents would burden both DCOs and the Commission, and would
[[Page 53666]]
divert attention and resources away from incidents that deserve greater
focus and planning, with little corresponding benefit to the
Commission, the protection of market participants, or the risk
management practices of DCOs. CCP12, CME, Google, and OCC further
asserted that the proposal is inconsistent with notification regimes in
analogous contexts, including similar Commission rules and reporting
obligations to other agencies and authorities.
CCP12, CME, Eurex, ICE, Nodal, and OCC further stated that the
Commission underestimated the increase in reporting obligations as a
result of the proposal to eliminate the materiality threshold; CCP12,
CME, and OCC similarly stated that the Commission underestimated the
costs of such notifications. Such underestimates would, according to
commenters, distort the Commission's cost-benefit considerations. The
Commission received additional comments in opposition to the proposed
removal of the materiality threshold, including statements regarding
the costs and impacts on third-party contracts, the value of allowing
DCOs to use their expertise to determine which events are material, and
a request to alternatively allow for quarterly submission of reports
for incidents deemed not material.
After considering the comments received, the Commission recognizes
the concerns raised therein and declines at this time to adopt the
proposal to remove the materiality threshold for the reporting of
exceptional events under Sec. 39.18(g). Better Markets supported the
removal of the materiality threshold, stating that events might be
material even when they do not have any effect on measurements often
used to determine materiality, and that both the Commission and DCOs
would benefit from clear reporting standards which would promote
consistency in reporting across DCOs. However, given the rationale of
comments opposed to the removal of the materiality threshold as
described above, including arguments regarding increased cost, lack of
informational benefit, and the volume of reports which would be
required if the threshold were removed, and the lack of opportunity to
solicit comment on potentially less costly or voluminous alternatives
suggested by commenters, the Commission declines to move forward with
the proposal at this time. The Commission understands that removing the
materiality threshold altogether could result in a significant increase
in the number of reportable events, including events which have little
or no impact on a DCO's operations, or which are mitigated well before
any impact, and thus could be of little or no value as the subject of a
required notification. The Commission will continue to evaluate the
effectiveness of the existing reporting standard in generating uniform
and timely notification regarding events where notification would be of
value to the Commission and will provide additional guidance, or
further modify the standard, as appropriate. Better Markets also
commented that the requirement in Sec. 39.18(g) that notice of
exceptional events be given ``promptly'' is vague and should be amended
to a more specific timeframe in order to avoid undue delay in
reporting. The Commission notes, however, that it did not propose to
amend this requirement, as Commission staff has not had any issues with
the timing of the notices that are made.
The Commission also proposed to amend Sec. 39.18(g)(1) by adding
``operator error'' to the list of events that would require prompt
notification to the Division. Better Markets expressed support for the
addition of ``operator error'' to the list of potentially reportable
events, and WFE, CME, OCC, and Nodal expressed opposition. Better
Markets stated that ``operator error'' is appropriately included as an
additional subject of reporting because such errors may impact or
potentially impact the operation, reliability, security, or capacity of
a DCO's automated systems. WFE, CME, OCC, CCP12, and Nodal expressed
concern about the potential breadth of the term ``operator error,''
which is not defined in the regulation and which might be read to
include de minimis, routine errors which would require reporting of
events that have little or no impact on clearing and settlement
functions and for which effective procedures are already in place to
mitigate any potential impacts. OCC further stated that ``operator
error'' might be read to include actions of clearing members or their
agents and employees because they are responsible for providing
information via applications, and OCC suggested adding certainty to the
term ``operator error'' by providing examples.
After considering the comments received, the Commission recognizes
the concerns raised therein and declines to adopt the proposal to
include ``operator error'' to the list of events that would require
prompt notification to the Division under Sec. 39.18(g)(1). The
Commission acknowledges that, as described by Better Markets, operator
errors may impact a DCO's operations in the same way as other events
described in Sec. 39.18(g)(1). However, the Commission believes that
such operator errors are already required to be reported under Sec.
39.18(g)(1) as a ``security incident,'' which, as defined by Sec.
39.18(a), is a cybersecurity or physical security event that actually
jeopardizes or has a significant likelihood of jeopardizing automated
system operation, reliability, security, or capacity, or the
availability, confidentiality or integrity of data. The proposed
addition of ``operator error'' was intended to specify this obligation
more clearly. In light of comments which indicate that the proposal
would result in confusion, particularly as to scope, the Commission
will not adopt the proposal but will consider providing guidance, or
further modifying Sec. 39.18(g)(1), as appropriate.
The Commission further proposed to redesignate existing paragraph
(g)(2) of Sec. 39.18 as new paragraph (g)(3) (without any further
revisions), and to move from existing paragraph (g)(1) to paragraph
(g)(2) the requirement to report security incidents or threats (and not
just ``targeted'' threats). Thus, as proposed, new Sec. 39.18(g)(2)
would require that a DCO promptly notify the Division of any security
incident or threat that compromises or could compromise the
confidentiality, availability, or integrity of any automated system or
any information, services, or data, including, but not limited to,
third-party information, services, or data, relied upon by the DCO in
discharging its responsibilities.
Among comments received regarding this proposed amendment, OCC,
Google, and ICE expressed opposition, and Better Markets commented in
favor. Better Markets stated that non-targeted cyber attacks can be
just as destructive as targeted attacks, and thus the reporting of non-
targeted attacks may enhance the ability of the CFTC to assess emerging
threats and alert DCOs. OCC, Google, and ICE stated that the inclusion
of the language ``could compromise'' is overly broad and ambiguous and
would dramatically increase the reach and burdens of the rule without
providing regulatory benefit. OCC recommended removing ``could
compromise'' from the proposal and stated that, as proposed, Sec.
39.18(g)(2) would increase a DCO's costs of obtaining third-party
services and may lead to termination of existing third-party
relationships because of the additional costs and potential liability
facing third parties as a result of the proposal. Google also expressed
opposition to the removal of the ``targeted'' qualifier for threats,
stating that it would result in overbroad and inefficient reporting.
Google
[[Page 53667]]
additionally recommended that paragraph (g)(2) also incorporate a
probabilistic reporting trigger by, for example, replacing ``could''
with ``reasonably likely to'' in order to exclude speculative
incidents. After considering the comments received, and in light of the
broad scope of attacks which comments indicate would be required to be
reported under the proposal, the Commission recognizes the concerns
raised therein and declines to adopt new Sec. 39.18(g)(2) as proposed
but will consider providing guidance, or further modifying Sec.
39.18(g), as appropriate.
Finally, in connection with the proposed amendments to Sec.
39.18(g), the Commission proposed to amend Sec. 39.18(a) to define
``hardware or software malfunction'' and ``automated system.'' WFE,
CME, OCC, and CCP12 expressed opposition to the proposed definition of
``automated system,'' and OCC, CCP12, Eurex and Nodal expressed
opposition to the proposed definition of ``hardware or software
malfunction.'' WFE, CME, OCC, and CCP12 stated that the definition of
``automated system'' is broad and overinclusive, and that most of a
DCO's ancillary support systems would fall within the definition,
resulting in a significant increase in reporting obligations under
Sec. 39.18(g) that are not related to a DCO's core clearing and
settlement functions. OCC, CCP12, Eurex, and Nodal expressed opposition
to the definition of ``hardware or software malfunction,'' stating that
it is overly broad and would result in a significant increase in reach
and burden of reporting requirements with little corresponding
regulatory value to the Commission. OCC recommended that both
definitions be refined to avoid reporting of incidents that pose no
significant risk to a DCO's core functions and which do not impact or
narrowly impact market participants. OCC further recommended limiting
the definitions to systems or events that impact a DCO's market
activities that are subject to the Commission's jurisdiction. After
considering the comments received, the Commission recognizes the
concerns raised therein and declines to adopt the proposed definitions
for ``hardware or software malfunction'' and ``automated system'' but
will consider providing guidance defining these terms, or further
modifying Sec. 39.18(g), as appropriate.
Based on the concerns raised in the comments received, the
Commission is not adopting any of the proposed changes to Sec.
39.18(g). Although the Commission continues to believe that the
considerations that motivated the initial proposal are valid, it also
recognizes the concerns and alternatives raised by commenters as
requiring additional analysis that precludes adopting the proposal at
this time. To that end, the Commission may choose to instead provide
guidance to address these considerations, or to propose new
modifications to Sec. 39.18(g) reflecting both the motivations for the
proposed rule and the concerns raised by commenters.
V. Amendments to Sec. 39.19(c)
A. Daily Reporting of Variation Margin and Cash Flows--Sec.
39.19(c)(1)(i)(B) and (C)
Regulation Sec. 39.19(c)(1) requires a DCO to report to the
Commission on a daily basis initial margin, variation margin (VM), cash
flow, and position information for each clearing member, by house
origin, by each customer origin, and by individual customer account.
The Commission proposed to amend Sec. 39.19(c)(1)(i)(B) and (C) to
remove the requirement that a DCO report daily VM and cash flows by
individual customer account.\8\
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\8\ DCOs currently are not reporting VM and cash flow
information by each individual customer account because the Division
issued a no-action letter addressing compliance with the amended
requirements in Sec. 39.19(c)(1). See CFTC Letter No. 21-01 (Dec.
31, 2020); see also CFTC Letter No. 21-31 (Dec. 22, 2021); CFTC
Letter No. 22-20 (Dec. 19, 2022). The amendments to Sec.
39.19(c)(1)(i)(B) and (C) eliminate the requirement for which
additional time was provided in the staff letter.
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FIA, CCP12, Eurex, OCC, and ICE supported the proposal; no
commenters opposed it. CCP12 and ICE stated that many DCOs do not
possess VM and cash flow information at the customer level. OCC
confirmed that it does not collect VM and cash flow information at the
individual customer account level in the ordinary course of business.
FIA stated that DCOs would need to develop and implement new systems,
processes, and controls, at significant cost, to accurately report
customer level VM and cash flow information. FIA stated that because
clearing members that are futures commission merchants (FCMs) currently
do not provide DCOs with daily customer level VM and cash flow
information, FCM clearing members would incur substantial upfront and
ongoing costs to provide this information to DCOs. OCC stated that
collecting this information would impose significant costs on OCC and
its clearing members. FIA stated that daily reporting of customer VM
and cash flow information would not be of meaningful benefit to the
Commission, DCOs, clearing members or market participants, particularly
when weighed against the associated costs. OCC believes that because it
engages in VM netting at the customer origin level, VM and cash flow
information at the individual customer account level would not
necessarily reflect OCC's actual exposure to its clearing members.
In response to the Commission's request for comment on whether
there are certain products or market segments where it may be
appropriate to retain customer-level reporting requirements, FIA and
ICE stated that there is no basis to differentiate between product
categories, with FIA emphasizing the cost to DCOs and FCMs of
developing new reporting processes to report VM and cash flow
information by individual customer account, and the limited marginal
benefit of reporting such information. Because many DCOs currently do
not receive VM and cash flow information at the customer level, and a
requirement to collect this information would impose significant costs
on DCOs, the Commission is removing this requirement by adopting the
amendments to Sec. 39.19(c)(1)(i)(B) and (C) as proposed.
B. Codifying the Existing Reporting Fields for the Daily Reporting
Requirements in New Appendix C to Part 39
The Commission proposed to add a new appendix to part 39 of the
Commission's regulations that would codify the existing reporting
fields for the daily reporting requirements in Sec. 39.19(c)(1). Until
now, the instructions, reporting fields, and technical specifications
for daily reporting have been contained in the Reporting Guidebook,
which the Division provides to DCOs to facilitate reporting pursuant to
Sec. 39.19(c)(1).\9\ The Commission proposed to add a new appendix C
to part 39 that would set out the relevant contents of the Reporting
Guidebook, specifically the reporting fields for which a DCO is
required to provide data on a daily basis, as well as additional
optional data that DCOs may provide.\10\ The Commission did not propose
to codify the non-substantive technical and procedural aspects of the
Reporting Guidebook that address the
[[Page 53668]]
format and manner in which DCOs provide this information.\11\
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\9\ Commodity Futures Trading Commission Guidebook for Part 39
Daily Reports, Version 1.0.1, Dec. 10, 2021 (Reporting Guidebook).
\10\ Appendix C specifies whether a field is mandatory,
optional, or conditional. In this context, fields that are
``conditional'' would be reported by the DCO if it collects or
calculates the particular data element and uses the data element in
the normal course of its risk management and operations, or if the
field is subject to any row-level validation rule described in the
Reporting Guidebook.
\11\ The Division will issue a new version of the Reporting
Guidebook that will contain only the non-substantive technical and
procedural aspects to facilitate daily reporting by DCOs.
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Eurex, ICE, CCP12, and OCC supported the proposal to codify the
existing daily reporting fields in new appendix C to part 39. Better
Markets opposed the proposal, arguing that codifying the Reporting
Guidebook will make it more difficult for the Commission to quickly
update the reporting fields in response to new products or other
financial innovations. In response to Better Markets, the Commission
notes that it has drawn on its experience of more than a decade since
Sec. 39.19(c)(1) was first adopted to make certain it will receive the
data it intended to be provided under this provision. However, in the
unlikely event that the Commission identifies additional data it needs,
the Commission could, if necessary, request from a DCO ``information
related to its business as a clearing organization, including
information relating to trade and clearing details'' pursuant to Sec.
39.19(c)(5)(i). The Commission is therefore adopting the proposal to
add new appendix C to part 39 of the Commission's regulations, to
codify the existing reporting fields in the Reporting Guidebook, which
includes both required and optional fields.\12\
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\12\ The Commission is adding to Sec. 39.19(c)(1)(i) a
reference to appendix C to specify that daily reports are required
to be submitted in accordance with the data fields set forth in the
appendix.
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C. Additional Reporting Fields for the Daily Reporting Requirements--
Sec. 39.19(c)(1)
The Commission proposed to include in appendix C several new fields
that do not appear in the Reporting Guidebook but would further
implement the existing daily reporting requirements under Sec.
39.19(c)(1). Eurex generally supported the proposal, while CME opposed
it, stating that the Commission severely underestimated the time and
costs associated with adding the proposed new fields, and that the
costs to DCOs substantially outweigh the benefits that additional
reporting provides to the Commission. The new fields and comments
received are discussed in greater detail below.
1. Risk Metrics
The Commission proposed to include in appendix C a series of new
fields applicable only to interest rate swaps, including the delta
ladder, gamma ladder, vega ladder, zero rate curves, and yield curves
that a DCO uses in connection with managing risks associated with
interest rate swap positions. The Commission did not receive any
comments on this proposal and therefore is adopting these fields as
proposed. However, the Commission is amending the title of this section
of appendix C to change it from ``Greek Ladder Reporting'' to ``Risk
Metric Ladder Reporting'', which better reflects the contents of the
section, since rate and yield curves technically are not ``Greeks,''
and to account for the possible addition of other non-Greek risk
metrics in the future.
2. Timing of Variation Margin Calls and Payments
The Commission proposed to require a DCO to report timing
information about VM calls and payments, including the time and amount
of each VM call to each clearing member, the time and amount that VM is
received from each clearing member, and the time and amount that VM is
paid to each clearing member. There were no comments in support of the
proposal.
CME, ICE, and OCC opposed the proposal, arguing that it would
impose costs on DCOs and settlement banks because they would need to
build systems for daily automated reporting of payment flow timestamps.
ICE and OCC stated that the manner in which DCOs make and collect a
margin call is unique to each DCO based on its own processes and, as a
result, the information that would be reported under these proposed
fields only would reflect individual DCOs' practices, with the
information being too bespoke to be useful for surveillance. OCC
further stated that clearing member payments to or from OCC at
settlement times are made on a net basis, taking into account multiple
categories of pay or collect obligations, in addition to the mark-to-
market amounts. CME stated that not all settlement banks communicate
with DCOs in automated and digestible file formats that can be used for
daily reporting. Echoing comments by CME, CCP12 recommended that the
Commission consider whether this proposal would require settlement
banks to develop and deploy automated systems to communicate timestamps
to DCOs, which could make compliance with this requirement
unnecessarily complex. CME also stated that the information would not
be useful for the Commission in real-time monitoring of DCO liquidity
issues because it would be reported one day later, and because the
timing of payments can vary from day to day for reasons unrelated to
liquidity issues or other risks to DCOs or their clearing members. ICE
stated that specific timing information is generally irrelevant, so
long as the amounts are paid before the applicable DCO's deadline, and
that the exact timing of payments is not indicative of the DCO's
liquidity position or its ability to manage liquidity risks.
As an alternative to the proposal, CME recommended that the
Commission require DCOs to report when clearing members are
sufficiently late making VM payments that it results in an impactful
delay to the completion of the settlement cycle. ICE stated that
because the proposal does not account for different approaches to the
payment and netting of VM, the proposed fields would need to be revised
to reflect the variety of ways that DCOs deal with VM payments. CCP12
commented that reporting VM calls and payment as of the beginning,
middle, and end of the day would avoid confusion that may accompany
reporting of individual cash flows, and would simplify DCOs' reporting
obligations.
The Commission understands that compliance with this requirement
would be unnecessarily complex, given that the manner in which DCOs
make and collect a margin call is unique to each DCO based on its own
processes. The Commission is therefore persuaded by the comments that
the timing information would not be particularly useful to it and
therefore has determined not to require DCOs to report this information
at this time.
3. Trade Date
The Commission proposed to require a DCO that clears interest rate
swaps, forward rate agreements, or inflation index swaps to include in
its daily reports the actual trade date for each position along with an
event description. CCP12 supported the proposal, but requested that the
Commission clarify whether the term ``actual trade date'' refers to the
economically agreed date or the execution date. CME opposed the
proposal, stating that the proposed requirement is duplicative of the
recent amendments to part 45 of the Commission's regulations, under
which DCOs already provide this information to the Commission. CME also
stated that numerous dates for these products exist in the over-the-
counter registers, and requested clarification as to which date should
be reported. The Commission is adopting the proposal, albeit with one
change. In response to commenters' requests for clarification, the
Commission is modifying the description of ``trade date'' to read, the
``[d]ate a transaction was originally executed, resulting in the
generation of
[[Page 53669]]
a new USI [unique swap identifier]. For clearing swaps, the date when
the DCO accepts the original swap.'' In response to CME's comment
regarding part 45 reporting, the Commission acknowledges some overlap
between the information DCOs report pursuant to part 45 and the
information reported pursuant to Sec. 39.19(c)(1), but notes that the
two data streams have different albeit complimentary regulatory and
supervisory uses within the Commission,\13\ and are reported using
different underlying technical specifications, sometimes with nuanced
differences between substantive or technical definitions of individual
data points, which then can affect whether and how the data changes in
response to events, such as a compression exercise for swaps.
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\13\ The information reported under Sec. 39.19(c)(1) is
intended to ensure that the Division is informed regarding both the
risks that are present at each DCO as well as the DCO's management
of those risks, which pursuant to Sec. 39.19(c)(1)(ii) includes
information about the risks associated the futures, options, swaps,
and securities positions cleared at the DCO, in contrast with the
part 45 data, which includes highly granular trade data related to
both cleared and uncleared swaps.
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4. File Completeness
The Commission proposed to require a DCO to include in its daily
reports information that reflects that the daily report is complete,
with completeness information submitted either as a manifest file that
contains a list of files sent by the DCO, or by including the file
number and count information embedded within each report, where each
Financial Information eXchange Markup Language (FIXML) file would
indicate its position in the sequence of files submitted that day,
e.g., file 1 of 10. No commenters opposed the proposal. Eurex and Nodal
supported the proposal that file completeness be reflected in a
manifest file and opposed the proposal that files be sequentially
numbered to indicate completeness. Eurex and Nodal both explained that
submitting a manifest file is more efficient operationally.
Specifically, Eurex noted that when files are sequentially numbered to
reflect completeness, all of the files would need to be renumbered and
resubmitted any time a file is added or removed. Nodal made a similar
observation, and also noted that a manifest file can be submitted after
the DCO ensures that its reporting for the day is complete and the DCO
confirms internally that there will be no changes. OCC stated that
sequential file numbering to indicate completeness is preferable to
requiring a manifest file, because the former is more efficient given
the manner in which OCC submits its daily reports. OCC requested that
the Commission provide DCOs with the flexibility to use either a
manifest file or sequential file numbering to indicate completeness, so
that DCOs could use the method that works best with their processes.
Although the Commission acknowledges that for some DCOs, such as
OCC, sequential file numbering to indicate completeness may be
preferable, the Commission agrees with Eurex and Nodal that submitting
a manifest file is operationally more efficient, especially for those
DCOs that submit more complex or voluminous reports. Similarly, to
ensure consistency and uniformity across all reports received, the
Commission declines to provide DCOs with the option to choose between
sequential file numbering and a manifest file to indicate completeness.
Therefore, the Commission is adopting the proposal to require a DCO to
include in its daily reports a manifest file that reflects that the
daily report is complete.
5. Settlement Information for Contracts With No Open Interest
The Commission requested comment on whether it should require that
a DCO provide the current settlement prices and related information
published by DCMs for futures and options contracts with no open
interest. No commenters supported this proposal.
CCP12, Nodal, OCC, ICE, and CME opposed the proposal. CCP12 stated
that DCOs already calculate and report settlement prices for contracts
with no open interest where they believe those prices provide a benefit
to DCOs themselves or the marketplace, and requiring DCOs to report
such data for all contracts with no open interest would be of
questionable value for analytical or regulatory purposes. CCP12
recommended that DCOs continue to be afforded the discretion to choose
to report such information on a voluntary basis. Nodal stated that, in
addition to being impractical, the proposal would duplicate information
that DCMs are required to report pursuant to part 16 of the
Commission's regulations. CME argued that reporting data that is unused
and not based on observed open interest would not help the risk
surveillance process because it does not represent an actual
transaction, and ICE argued that the information would not be reliable
because it is not based on actual trading activity. OCC and ICE stated
that this information would be of limited utility, with OCC adding that
this information relates to contracts that do not impact the DCO's risk
profile. CME stated that exchanges and DCOs list new products daily and
that this reporting requirement would add complexity to the listing
process. CME also questioned whether the Commission has the authority
to require this information if it is not clear that this information is
necessary to conduct oversight of the DCO since it does not reflect
actual trades that are settled or cleared. Similarly, OCC argued that a
requirement to report such information could be inconsistent with the
scope of reporting required by DCO Core Principle L, which requires a
DCO to disclose publicly and to the Commission daily settlement prices,
volume, and open interest for each contract settled or cleared by the
DCO. CME noted that an alternative would be to require reporting of
contracts with no open interest, but without requiring pricing
information.
The Commission is persuaded by the comments that settlement
information for contracts with no open interest would not be
particularly useful to it, given that it does not impact a DCO's risk
profile, among other things. Therefore, the Commission has determined
not to adopt the proposed requirement at this time.
D. Non-Substantive and Technical Edits to Appendix C to Part 39
The Commission has made a variety of non-substantive and technical
edits to appendix C to part 39. Some of the edits are intended to
ensure that, to the extent that a requirement appears in multiples
places in appendix C, its title and description are uniform throughout.
Other edits include the deletion of duplicate fields, the deletion of
surplus language, formatting instructions, or technical instructions,
or the replacement of abbreviations with complete words. Other edits
rename fields or clarify, simplify, or rephrase descriptions. For
example, the ``Universal Product Identifier'' field is being renamed
``Unique Product Identifier'' (UPI), and its description is being
changed from ``Uniquely identifies the product of a security using ISO
4914 standard, Unique Product Identifier'' to ``[a] unique set of
characters that represents a particular swap. The Commission will
designate a UPI pursuant to 17 CFR 45.7.'' Another example is that the
description for the Implied Volatility field is being changed from
``implied volatility'' to ``[t]he implied volatility and quotation
style for the contract, typically in natural log percent or index
points.''
[[Page 53670]]
E. Individual Customer Account Identification Requirements--Sec.
39.19(c)(1)(i)(A) and (D)
Regulation Sec. 39.19(c)(1)(i)(D) requires the daily reporting of
end-of-day positions for each clearing member, by house origin and by
each customer origin, and by each individual customer account. In
January 2020, the Commission amended this provision to require, among
other things, that a DCO identify each individual customer account
using both a legal entity identifier (LEI) and any internally-generated
identifier, where available, within each customer origin for each
clearing member.\14\ The Commission intended that this requirement
apply to all instances within Sec. 39.19(c)(1) where a DCO is required
to report information at the individual customer account level.
However, this may not have been clear because paragraph (c)(1)(i)(D)
addresses only the reporting of end-of-day positions. Therefore, the
Commission proposed to amend Sec. 39.19(c)(1)(i)(A) to clarify that
the requirement that a DCO identify each individual customer account by
LEI and internally-generated identifier was not intended to be limited
to end-of-day position reporting under paragraph (c)(1)(i)(D), but
rather to apply to all instances in Sec. 39.19(c)(1) where a DCO is
required to report information at the individual customer account
level. Furthermore, the Commission also proposed a technical change to
clarify that the requirement that a DCO identify each individual
customer account using both an LEI and any internally-generated
identifier, ``where available,'' is intended to mean this information
is required, in either case, only if the DCO has the information
associated with an account.
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\14\ 85 FR 4800, 4817.
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CCP12, OCC, CME, and Eurex supported this proposal. Eurex noted
that in Europe there is no requirement that LEIs be provided to DCOs
and that, consequently, not all Multilateral Trading Facilities or
Approved Trade Sources transmit LEIs to DCOs. On the other hand, CME
observed that LEI reporting to DCOs has become more routine. ICE
opposed the requirement that a DCO identify each individual customer
account by LEI because extensive systems changes would be required to
add identifiers to the reportable data, and since DCOs are unlikely to
have customer-level LEI information, the costs associated with
implementing this requirement outweigh the benefits. In response to
ICE's comment, the Commission further emphasizes that the requirement
that a DCO identify each individual customer account using both an LEI
and any internally-generated identifier, ``where available,'' is
intended to mean this information is required, in either case, only
when the DCO has the information associated with an account, and the
information is both maintained and associated with the account in a
reportable format, such that reporting will not impose a significant
additional burden on the DCO.
F. Daily Reporting of Margin Model Backtesting--Sec. 39.19(c)(1)(i)
The Commission proposed to add to Sec. 39.19(c)(1)(i) a
requirement that a DCO include in its daily reports the results of the
margin model backtesting that a DCO is required to perform daily
pursuant to Sec. 39.13(g)(7)(i). The Commission also proposed to add
to new appendix C to part 39 the data fields it believes would be
relevant and necessary to capture the backtesting results that would
have to be reported under this provision. The Commission is adopting as
proposed the amendment to Sec. 39.19(c)(1)(i) to require that a DCO
include in its daily reports its margin model backtesting results. As
explained below, in response to concerns expressed by commenters, the
Commission is modifying certain of the proposed data fields in new
appendix C for reporting margin model backtesting results.\15\
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\15\ The Commission is also changing the term ``back testing''
to ``backtesting'' in all places that this term, or a variation
thereof, appears in part 39 of the Commission's regulations.
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Chris Barnard supported the proposal, stating that daily reporting
of backtesting results will improve the Commission's oversight of DCOs
and should work to increase the accuracy, relevance, and effectiveness
of DCOs' margin calculations. Nodal generally supported requiring DCOs
to provide the Commission with daily backtesting results, noting that
it already provides such information to the Commission on a voluntary
basis. CME requested that the Commission provide DCOs with ample time,
preferably 18 months, to test and implement daily reporting of
backtesting results. OCC stated that it has no objection to reporting
its margin model backtesting results.
ICE opposed the proposal. ICE argued that the manner in which the
Commission currently supervises DCO margin models, including the
requirement in Sec. 39.13(g)(3) that margin models be independently
validated, and the requirement in Sec. 39.19(c)(4)(xxiii) that a DCO
report to the Commission regarding material issues with its margin
model, is sufficient for the Commission to supervise margin model
performance over time.
Nodal and Eurex argued that the Commission should collaborate with
DCOs to determine the specific information needed and the data fields
via which it should be reported to ensure that the Commission is
receiving the data and information it needs, in a manner that is
consistent across all DCOs, to provide effective oversight of the
performance of DCOs' margin models.
Commenters expressed concern regarding the new fields that the
Commission proposed to add to new appendix C for the purpose of
reporting backtesting results, with commenters focusing on the fields
for reporting detailed information related to margin model breaches.
The Commission had proposed that breach details be reported using three
fields: initial margin; VM; and breach amount, which was defined as the
difference between the initial margin and VM. ICE, OCC, and Eurex
argued that the proposed fields would not provide the Commission with
meaningful information regarding margin model breaches. ICE stated that
because initial margin requirements and VM payments may not be
associated with the same set of positions, ``from a formal statistical
(hypothesis testing) point of view, the backtesting of the initial
margin model should consider fixed positions over the implemented
margin period of risk.'' Similarly, OCC argued that the VM field should
be replaced with a field titled ``Static Portfolio Profit/Loss,'' which
would reflect ``profit or loss on the same portfolio against which the
initial margin was assessed.'' OCC also argued that the Breach Amount
field description be revised to delete the reference to VM and instead
reflect the ``difference between the initial margin and static
portfolio profit/loss.'' Along the same lines, Eurex argued that VM
should be replaced as a measure for backtesting by a more general
backtesting profit/loss, which would include further mandatory fields
detailing how backtesting profit/loss is calculated (including profit/
loss horizon, ``clean'' vs. ``dirty'' profit/loss, mark-to-market vs.
mark-to-model profit/loss). Lastly, both Eurex and ICE emphasized the
importance of the margin period of risk as a component of evaluating
backtesting results.
In response to these comments, the Commission is amending the
fields for reporting margin model backtesting results. The Commission
is replacing the VM field with a new field titled
[[Page 53671]]
``Backtesting Metric,'' which provides DCOs with the flexibility to
designate the type of profit and loss calculation used for backtesting:
VM; static portfolio profit and loss (also known as clean profit and
loss); dirty profit and loss; mark to market profit and loss; or mark
to model profit and loss. In connection with that change, the
Commission is amending the Breach Amount field description to be the
``difference between the Initial Margin and Backtesting Metric
Amount.'' Lastly, the Commission is adding a field titled ``Margin
Period of Risk'', which is defined as the ``holding period for which
the Backtesting Metric is calculated in days.''
G. Fully Collateralized Positions--Sec. 39.19(c)(1)(ii)
The Commission proposed to amend Sec. 39.19(c)(1)(ii) to clarify
that the daily reporting requirements of Sec. 39.19(c)(1)(i) do not
apply to fully collateralized positions. The Commission did not receive
any comments on the proposal. The Commission is adopting the amendments
to Sec. 39.19(c)(1)(ii) as proposed.
H. Voluntary Reporting--Sec. 39.19(c)(1)(iii)
The Commission proposed to add, as new Sec. 39.19(c)(1)(iii), the
ability for a DCO to, after consultation with the Division, voluntarily
submit any additional daily reporting data fields it believes would be
necessary or appropriate. OCC supported the proposal. OCC recommended
that the Commission remove the phrase ``consultation with'' and replace
it with ``notification to,'' given the potential timing issues
attendant to daily reporting generally, potential ambiguity regarding
the extent and nature of the ``consultation'' required in the proposal,
and to provide DCOs with greater flexibility. OCC also recommended that
the Commission clarify that voluntarily reporting of additional
information does not create an obligation to continue reporting the
information, unless agreed to in writing by the DCO and Commission
staff. No commenters opposed the proposal.
The Commission agrees with OCC that, absent any agreement to the
contrary, voluntary reporting by a DCO of additional information does
not create an obligation to continue reporting that information. As for
the mechanics of how a DCO should proceed with voluntarily reporting
additional information, the Commission believes that the best approach
is for the DCO to coordinate with Division staff to ensure that any
necessary accommodations are in place so that the Division has the
ability to receive the additional information and to incorporate it
into its analytics. The Commission therefore disagrees with OCC because
it believes that the collaborative approach encompassed within the
phrase ``consultation with'' is preferable to the unilateral approach
described in the phrase ``notification to.'' The Commission is adopting
new Sec. 39.19(c)(1)(iii) as proposed.
I. Reporting Change of Control of the DCO--Sec. 39.19(c)(4)(ix)(A)(1)
The Commission proposed to amend Sec. 39.19(c)(4)(ix)(A)(1) to
require a DCO to report any change to the entity or person that holds a
controlling interest, either directly or indirectly, in the DCO. Eurex
supported the proposal. OCC also supported the proposal, but requested
that the Commission clarify whether the phrase the ``entity . . .
holding a controlling interest'' refers to the specific corporate
entity holding an ownership interest in the DCO, or whether it refers
to any parent entity of one or more owners that collectively own more
than 50 percent of the DCO. Better Markets opposed the proposal,
asserting that the Commission instead should reinstate the 2011
versions of this regulation and Sec. 39.3(f) because, unlike the
current requirements, the 2011 version referenced Sec. 39.3(f), which
required Commission approval of the transfer of a DCO registration in
connection with any corporate change involving the transfer of all or
substantially all of a DCO's assets to another legal entity.
In response to OCC's request for clarification, the Commission
notes that the phrase the ``entity . . . holding a controlling
interest'' is intended to refer to both the specific corporate entity
holding an ownership interest in the DCO, as well as to any parent
entity of one or more owners that collectively own more than 50 percent
of the DCO. With respect to the comments from Better Markets, the
Commission initially notes that the comments do not address the merits
of the proposal, but instead focus on changes the Commission made to a
different regulation in a different rulemaking.\16\ In any event, the
Commission does not believe that it is necessary to reconsider its 2020
amendment of Sec. 39.3(f).\17\ The Commission is adopting the
amendments to Sec. 39.19(c)(4)(ix)(A)(1) as proposed.
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\16\ 85 FR 4800, 4802-4803.
\17\ In the 2020 amendment of this regulation, Sec. 39.3(f) was
renumbered as Sec. 39.3(g), and was revised to provide that a DCO
seeking to transfer its open interest would be required to submit
rules for Commission approval pursuant to Sec. 40.5, rather than
submitting a request for a Commission order. The 2020 amendments
were intended to, among other things, simplify the requirements for
a DCO to request a transfer of open interest and to separate the
process from the procedures used to report a change to a DCO's
corporate structure or ownership. 85 FR 4800, 4802-4803.
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J. Reporting Changes to Credit Facility Funding and Liquidity Funding
Arrangements--Sec. 39.19(c)(4)(xii) and (xiii)
The Commission proposed to amend Sec. 39.19(c)(4)(xii) and (xiii),
which require a DCO to report changes to credit facility funding
arrangements and liquidity funding arrangements, respectively, to
clarify that the reporting requirements include reporting new
arrangements as well as changes to existing ones. Eurex and OCC
supported both proposals, with OCC noting that they are consistent with
its interpretation of the existing regulations. No commenters opposed
the proposals. The Commission is adopting the amendments to Sec.
39.19(c)(4)(xii) and (xiii) as proposed.
K. Reporting Issues With Credit Facility Funding Arrangements,
Liquidity Funding Arrangements, and Custodian Banks--Sec.
39.19(c)(4)(xv)
The Commission proposed to amend Sec. 39.19(c)(4)(xv) to require
that a DCO report to the Commission within one business day after it
becomes aware of any material issues or concerns regarding the
performance, stability, liquidity, or financial resources of any credit
facility funding arrangement, liquidity funding arrangement, custodian
bank, or settlement bank used by the DCO or approved for use by the
DCO's clearing members. The Commission proposed to extend the reporting
requirement, which previously applied only to any settlement bank used
by the DCO or approved for use by the DCO's clearing members, to apply
as well to any credit facility funding arrangement, liquidity funding
arrangement, or custodian bank used by the DCO or approved for use by
the DCO's clearing members. The Commission also proposed to change the
threshold that triggers a DCO's reporting obligations by replacing the
requirement that a DCO report to the Commission within one business day
after any material issues or concerns arise, with the requirement that
a DCO report to the Commission within one business day after it becomes
aware of any material issues or concerns.
Eurex, OCC, and ICE supported the proposal. OCC observed that the
proposal properly addresses the variety
[[Page 53672]]
of arrangements that DCOs use to meet their ongoing and situational
funding requirements, and OCC also stated that DCOs should not be
subject to potential enforcement action for not reporting an issue of
which they are not even aware. With regard to the requirement to report
material issues or concerns related to credit facility funding
arrangements, ICE supported the proposal, but believes, as a technical
matter, that it would be more accurate to refer to the provider of the
arrangement, as opposed to the arrangement itself. No commenters
opposed the proposal. Better Markets recommended that the Commission
remove the materiality standard from the proposed requirement that DCOs
report to the Commission regarding material issues with credit facility
funding arrangements, liquidity funding arrangements, and custodian
banks. Better Markets argued that because the subjective nature of
materiality would result in inconsistent and inadequate reporting, the
Commission instead should require DCOs to report whenever there are any
issues or concerns.
With respect to ICE's comment that Sec. 39.19(c)(4)(xv) should
specify that a DCO must report material issues or concerns related to
the provider of a credit facility funding arrangement, as opposed to
reporting issues or concerns related to the arrangement itself, the
Commission intends that the amended regulation apply to issues or
concerns related to the provider as well as to the arrangement itself.
The amended regulation is intended to ensure that the Division receives
notice when a DCO learns that it may not be able to obtain the
resources from the provider pursuant to the arrangement. The Commission
disagrees with the suggestion from Better Markets that DCOs be required
to report all issues or concerns regarding the performance, stability,
liquidity, or financial resources of any credit facility funding
arrangement, liquidity funding arrangement, custodian bank, or
settlement bank used by the DCO or approved for use by the DCO's
clearing members. Although Better Markets correctly noted the
subjectivity inherent in a materiality standard, the Commission does
not believe that it would be useful for it to be notified of all issues
or concerns, especially since, in connection with its supervision of
DCOs and engagement with DCO staff regarding reporting of issues or
concerns related to settlement banks, Division staff has not found that
the materiality standard impedes necessary reporting. Because the
Commission believes that the threshold for reporting is properly
calibrated, the Commission is adopting Sec. 39.19(c)(4)(xv) as
proposed.
L. Reporting of Updated Responses to the Disclosure Framework for
Financial Market Infrastructures--Sec. 39.19(c)(4)(xxv)
The Commission proposed new Sec. 39.19(c)(4)(xxv), which would set
forth the requirement currently in Sec. 39.37(b)(2) that, when a DCO
updates its responses to the Disclosure Framework for Financial Market
Infrastructures published by the Committee on Payment and Settlement
Systems and the Board of the International Organization of Securities
Commissions in accordance with Sec. 39.37(b)(1), the DCO shall provide
notice of those updates to the Commission. Eurex and OCC supported the
proposal, with OCC noting that it is a non-substantive change to
existing DCO reporting obligations. No commenters opposed the proposal.
ICE recommended that, to be consistent with Sec. 39.37(b)(2), the
Commission should state explicitly that the proposed reporting
requirement only applies to material changes that a DCO makes to its
disclosures under the PFMI Disclosure Framework. The Commission does
not believe that such clarification is necessary, given that new Sec.
39.19(c)(4)(xxv) simply references the reporting requirements in Sec.
39.37(b)(2) without altering the substance of those requirements. The
Commission is adopting new Sec. 39.19(c)(4)(xxv) as proposed.
VI. Amendments to Sec. 39.21(c)
Regulation Sec. 39.21 requires a DCO to publish on its website a
variety of information designed to enable market participants to make
informed decisions about using the clearing services provided by the
DCO. The Commission proposed several amendments to these requirements
to better align a DCO's disclosure obligations with the type of
clearing services that the DCO provides. Specifically, the Commission
proposed to amend Sec. 39.21(c)(3) and (4) to provide that a DCO that
clears only fully collateralized positions is not required to disclose
its margin-setting methodology, or information regarding the size and
composition of its financial resource package for use in a default, if
instead the DCO discloses that it does not employ a margin-setting
methodology or maintain a financial resource package because it clears
only fully collateralized positions. Additionally, the Commission
proposed to amend Sec. 39.21(c)(7) to provide that a DCO may omit any
non-FCM clearing member that clears only fully collateralized
positions, and therefore does not share in the mutualized risk
associated with clearing activity, from its published list of clearing
members. The Commission did not receive any comments on these proposed
changes, and is therefore adopting them as proposed.
VII. Amendments to Sec. 39.37(c) and (d)
Regulation Sec. 39.37 requires each systemically important DCO
(SIDCO) and each DCO that elects to comply with subpart C of part 39 of
the Commission's regulations (subpart C DCO) to disclose certain
information to the public and to the Commission. Regulation Sec.
39.37(c) and (d) require, respectively, a SIDCO or subpart C DCO to
``disclose, publicly, and to the Commission'' transaction data, and
information regarding the segregation and portability of customers'
positions and funds. The Commission proposed to amend these provisions
to clarify that public disclosure of the information is sufficient and
a separate report directly to the Commission is not required. OCC
supports and appreciates the proposal, stating that it would relieve
DCOs of duplicative requirements to report this information both
publicly and to the Commission. The Commission is adopting this
amendment as proposed.
VIII. Amendments to Sec. 140.94(c)(10)
Regulation Sec. 140.94(c) is a delegation of authority from the
Commission to the Director of the Division of Clearing and Risk to
perform certain specific functions. The Commission proposed to amend
Sec. 140.94(c)(10) to delegate to the Director the authority in
existing Sec. 39.19(a) to require a DCO to provide to the Commission
the information specified in Sec. 39.19 and any other information that
the Commission determines to be necessary to conduct oversight of the
DCO, and in existing Sec. 39.19(b)(1) to specify the format and manner
in which the information required by Sec. 39.19 must be submitted to
the Commission.
OCC generally supported the proposed changes to Sec.
140.94(c)(10), as OCC agreed that the proposed delegations would
appropriately empower Commission staff to facilitate efficient
administration of part 39, and ensure that the Commission and its staff
can obtain relevant information in a timely manner. OCC stated that
changes to a DCO's reporting obligations can pose significant technical
or logistical challenges, and necessitate substantial investment of
time and resources to effect compliance. Therefore, while OCC supported
the proposed changes, it urged the Division to continue to engage
[[Page 53673]]
in open dialogue with DCOs prior to exercising the delegated authority
to seek additional information pursuant to Sec. 39.19 or to change the
format or manner of any required reporting. The Commission takes notes
of this comment, and expects that information collection or any changes
to the format and manner of required reporting would continue to
involve engagement with DCOs. The Commission is adopting these changes
as proposed.
IX. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires that agencies
consider whether the regulations they propose will have a significant
economic impact on a substantial number of small entities and, if so,
provide a regulatory flexibility analysis on the impact.\18\ The final
rule adopted by the Commission will affect only DCOs. The Commission
has previously established certain definitions of ``small entities'' to
be used by the Commission in evaluating the impact of its regulations
on small entities in accordance with the RFA.\19\ The Commission has
previously determined that DCOs are not small entities for the purpose
of the RFA.\20\ Accordingly, the Chairman, on behalf of the Commission,
hereby certifies pursuant to 5 U.S.C. 605(b) that the rule adopted
herein will not have a significant economic impact on a substantial
number of small entities.
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\18\ 5 U.S.C. 601 et seq.
\19\ 47 FR 18618 (Apr. 30, 1982).
\20\ See 66 FR 45604, 45609 (Aug. 29, 2001).
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B. Paperwork Reduction Act
The Paperwork Reduction Act (PRA) \21\ provides that Federal
agencies, including the Commission, may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a valid control number from the Office of Management
and Budget (OMB). This final rulemaking contains reporting and
recordkeeping requirements that are collections of information within
the meaning of the PRA. Responses to the collections of information are
required to obtain a benefit.
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\21\ 44 U.S.C. 3501 et seq.
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This final rulemaking modifies the existing information collection
associated with part 39, ``Requirements for Derivatives Clearing
Organizations, OMB control number 3038-0076.'' In accordance with the
PRA, 44 U.S.C. 3507(d), the Commission has submitted these information
collection requirements to OMB for its review.
1. Subpart B--Requirements for Compliance with Core Principles
a. Risk Management
The Commission is adopting as proposed new Sec. 39.13(h)(5)(iii)
to provide that a DCO that clears fully collateralized positions may
exclude from the requirements of paragraphs (h)(5)(i) and (ii) those
clearing members that clear only fully collateralized positions. The
requirements would still apply to clearing members that clear fully
collateralized positions but also clear margined products. This change
will reduce the burden for DCOs that clear fully collateralized
products, but does not affect the burden for the majority of DCOs that
are subject to daily reporting requirements, as only four of the
fifteen currently registered DCOs clear fully collateralized positions.
As a result, the Commission believes that this reduction will have a
negligible impact on the overall reporting burden for DCOs, and
therefore the Commission is leaving the reporting burden for these
reporting requirements unchanged.
b. Treatment of Funds
The Commission is amending Sec. 39.15(b)(2), which applies when a
DCO and its clearing members seek to commingle customer positions in
futures, options, foreign futures, foreign options, and swaps, or any
combination thereof, and any money, securities, or property received to
margin, guarantee or secure such positions, in an account subject to
the requirements of sections 4d(a) or 4d(f) of the CEA. The Commission
is consolidating paragraphs (b)(2)(i) and (ii) and renumbering
paragraphs accordingly. These changes pertain only to the structure and
organization of the regulation and therefore do not impact the
reporting requirement. The Commission is amending Sec. 39.15(b)(2) to
clarify that the requirement in paragraph (b)(2)(i)(G) that a DCO
discuss the systems or procedures that the DCO has implemented to
oversee its clearing members' risk management of eligible products may
be addressed by describing why existing risk management systems and
procedures are adequate, and to add language clarifying that the
requirements and standard of review of Sec. 40.5 apply to commingling
rule submissions. Because these changes are mere clarifications of
existing requirements, they also have no impact on the reporting
burden.
Similarly, the Commission is removing existing paragraph
(b)(2)(iii), which provides that the Commission may request additional
information in support of a rule submission filed under existing
paragraph (b)(2)(i) or (ii), and adding new paragraph (b)(2)(viii),
which provides that the Commission may request supplemental information
to evaluate the DCO's submission and requires a DCO to submit any other
information necessary for the Commission to evaluate the DCO's rule's
compliance with the CEA and the Commission's regulations. This does not
impact the reporting burden because new paragraph (b)(2)(viii), like
existing paragraph (b)(2)(iii), would ensure that the Commission can
consider all information relevant to the rule submission. Although
existing paragraph (b)(2)(iii) does not contain explicit language
similar to new paragraph (b)(2)(viii)'s requirement that the DCO submit
any other information necessary for the Commission to evaluate the
rule's compliance with the CEA and the Commission's regulations, the
fact that existing paragraph (b)(2)(iii) permits the Commission to
request such information implies a DCO's obligation to supply it.
Simply making this implication explicit does not impact the reporting
burden.
The Commission is deleting paragraphs (b)(2)(i)(C), (E), (H), and
(L) because they require a DCO to submit information the Commission can
already access or has not needed in its review of commingling rule
submissions. This change will decrease the reporting burden. In
addition, the Commission is removing existing paragraph (b)(2)(i)(I),
which requires the DCO to provide information related to its margin
methodology, while adding related paragraph (b)(2)(vii), which will
require that a DCO discuss whether it anticipates allowing portfolio
margining of commingled positions, describe and analyze any margin
reductions it would apply to correlated positions, and make an express
confirmation that any portfolio margining will be allowed only as
permitted under Sec. 39.13(g)(4). These changes will collectively
decrease the reporting burden because the requirements being removed
through the deletion of paragraph (b)(2)(i)(I) are, as a whole, more
burdensome than the requirements being added in paragraph (b)(2)(vii).
Similarly, the Commission is removing the requirement in existing
paragraph (b)(2)(i)(K) to discuss a DCO's default management procedures
generally and maintaining only the requirement to address default
management procedures unique to the products eligible for commingling
and moving that requirement to paragraph (b)(2)(vi). This narrowing of
the scope of
[[Page 53674]]
the requirement reduces the reporting burden on the relevant DCOs.
The Commission is amending paragraph (b)(2)(i)(B) (renumbered as
paragraph (b)(2)(ii)), which requires the DCO to provide an analysis of
the risk characteristics of the products that would be eligible for
commingling, to specify that the DCO should address any risk
characteristics of products to be commingled that are unusual in
relation to the other products the DCO clears, such as margining,
liquidity, default management, pricing, or other risk characteristics,
and how the DCO plans to manage any risks identified. Because such
analysis was not previously explicitly required, and because DCOs that
would not otherwise have addressed such issues in their analysis of the
risk characteristics of the eligible products will now be required to
do so, this will increase the reporting burden. However, the Commission
expects this increase to be negligible, as this provision would only
apply when a DCO is considering a new commingling of customer positions
in various products, and only when the risk characteristics of products
to be commingled are unusual in relation to other products the DCO
clears.
The Commission is amending paragraph (b)(2)(i)(F) (and renumbering
it as paragraph (b)(2)(iv)), which currently requires the DCO to
describe the financial, operational, and managerial standards or
requirements for clearing members that would be permitted to commingle
eligible products, to require only that the DCO describe any additional
requirements that would apply to clearing members permitted to
commingle eligible products. The Commission believes that this
amendment will have no impact on the reporting burden. Although the new
requirement that the DCO describe any additional requirements is
broader than the current requirement to describe financial,
operational, and managerial standards or requirements, the existing
paragraph requires the DCO to report even if no additional requirements
would apply. The amendment only requires reporting when additional
requirements are, in fact, applicable.
The Commission believes that the reductions in the reporting burden
resulting from the deletion of paragraphs (b)(2)(i)(C), (E), (H), and
(L) and the narrowing of the reporting burden resulting from the
deletions of paragraphs (b)(2)(i)(I) and (K) (even after giving effect
to the addition of new paragraphs (b)(2)(vi) and (vii)) are at least as
great as the increase in the reporting burden resulting from the
amendments to paragraph (b)(2)(i)(B) (renumbered as paragraph
(b)(2)(ii)). Because the Commission lacks the data to fully quantify
each of these changes, it is conservatively estimating that these
changes collectively do not alter the reporting burden. The Commission
is of the view that to the extent that the cross-margining program
would be submitted as part of a new rule or rule amendment filing
pursuant to Sec. 40.5, the changes are already covered by OMB control
number 3038-0093 and there is no change in the burden estimates.
c. Daily Reporting
The Commission is adopting the proposed amendments to Sec.
39.19(c)(1)(i)(A) that clarify that the existing requirement to
identify individual customer accounts by LEI and internally-generated
identifier was intended to apply to all instances in Sec. 39.19(c)(1)
where reporting is required at the individual customer account level,
and not only to end-of-day positions. The Commission therefore is
amending Sec. 39.19(c)(1)(i)(A) to specify that when a DCO reports
initial margin requirements and initial margin on deposit by each
individual customer account as required, the DCO also must identify
each individual customer account by LEI and internally-generated
identifier, where available. The clarification will not affect the
burden on DCOs because DCOs already provide this information and the
impact of this amendment on the existing burden is negligible.
The Commission also is amending Sec. 39.19(c)(1)(i)(B) and (C),
which require a DCO to report daily variation margin and cash flow
information by house origin and separately by customer origin and by
each individual customer account, to remove the requirement that a DCO
report daily variation margin and cash flows by individual customer
account. This change is anticipated to result in a negligible decrease
from the current burden of 0.5 burden hours per report.\22\
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\22\ DCOs currently are not reporting variation margin and cash
flow information by each individual customer account because the
Division issued a no-action letter addressing compliance with the
amended requirements in Sec. 39.19(c)(1). See CFTC Letter No. 21-01
(Dec. 31, 2020); see also CFTC Letter No. 21-31 (Dec. 22, 2021). As
noted, the proposed amendments to Sec. 39.19(c)(1)(i)(B) and (C)
would eliminate the requirement for which additional time was
provided in the staff letter.
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The Commission also is adopting new Sec. 39.19(c)(1)(iii), as
proposed, which will give a DCO the ability, after consultation with
the Division, to voluntarily submit any additional data field in its
daily reports that is necessary or appropriate to better capture the
information that is being reported. The Commission believes that adding
this provision to Sec. 39.19(c)(1) does not affect the existing burden
estimates for daily reporting. Although it is unclear at this time
whether any DCOs will decide to voluntarily submit additional data
fields in their daily reports and how frequently they will do so, the
Commission believes that the impact of this new provision on the
existing daily reporting burden is negligible. The Commission does not
anticipate that DCOs will add information to their daily reports if
doing so is a burden. The Commission instead anticipates that voluntary
reporting by DCOs likely will consist only of data that already is
maintained in reportable format and that can be included in the daily
reports with minimal effort.
The Commission is also adding to part 39 an appendix that will
codify the existing reporting fields for the daily reporting
requirements in Sec. 39.19(c)(1). The codification of existing
reporting fields in new appendix C will not change the reporting
burden.\23\
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\23\ The current burden estimates for complying with the daily
reporting requirements in Sec. 39.19(c)(1) included in OMB Control
No. 3038-0076 take into account the burden associated with reporting
in accordance with the Reporting Guidebook.
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The Commission is adding new fields within new appendix C that
would further implement the existing daily reporting requirements under
Sec. 39.19(c)(1). Specifically, the Commission is adopting a
requirement that a DCO include in its daily reports, with regard to
interest rate swaps only, the delta ladder, gamma ladder, vega ladder,
zero rate curves, and yield curves that the DCO uses in connection with
managing risks associated with interest rate swaps positions. The
Commission also is adopting a requirement that a DCO that clears
interest rate swaps, forward rate agreements, or inflation index swaps
to include in its daily reports the actual trade date for each
position, along with an event description. The Commission is not
adopting a proposed requirement that each DCO include in its daily
reports timing information about variation margin calls and payments,
but is adopting a proposed requirement to include in its daily reports
information that reflects that the daily report is complete. Lastly, in
connection with adopting a new requirement in Sec. 39.19(c)(1)(i) that
a DCO include in its daily reports the results of its required daily
margin model backtesting, the Commission also is adding to new appendix
C amended versions of the additional data fields necessary to implement
this requirement.
[[Page 53675]]
With respect to adding new fields to new appendix C, and adding to
Sec. 39.19(c)(1)(i) a requirement that a DCO include in its daily
reports the results of its required margin model backtesting, the
Commission believes that the incremental capital investment costs
associated with implementing these requirements would be negligible. In
many cases, the new fields are data that are already being used for DCO
risk management and operations, and in some cases are already being
reported to the Commission on a voluntary basis. Further, the
Commission believes that any capital investment implementation for the
reporting of these fields would leverage the DCO's existing server
architecture that could be scaled up to meet these requirements with
negligible costs. However, to the extent that a DCO does not currently
use any of the information that would be required under the new fields,
or if that information is not accessible on an automated basis, then a
DCO may incur start-up costs associated with reporting information
pursuant to the new fields, specifically including costs for coding, as
well as testing, quality assurance, and compliance review. As explained
below in connection with its discussion of cost-benefit considerations,
the Commission has estimated \24\ that DCOs may incur other start-up
costs of approximately $69,667.21 per DCO.\25\ CME commented that it
believes the time required to implement the proposed changes would be
``an order of magnitude greater than predicted,'' which would add to
the costs. However, CME did not quantify the amount by which it
believes that costs would be increased, and as a result, the Commission
is reluctant to adjust its estimates based on this comment.
Furthermore, the Commission is not adopting all of the new fields that
were proposed, which would reduce the costs that may be incurred by
DCOs to implement the required changes relative to the initial
proposal. Accordingly, the Commission believes that retaining its
initial estimates of these costs in the proposal (excluding estimates
of any proposals not being adopted in the final rule) addresses CME's
concern that the Commission's initial estimates of the costs of
implementation were not adequate, while accounting for the fact that
costs were reduced by the Commission's decision not to adopt all of the
relevant proposals.
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\24\ To estimate the start-up costs, the Commission relied upon
internal subject matter experts in its Divisions of Data and
Clearing and Risk to estimate the amount of time and type of DCO
personnel necessary to complete the coding, testing, quality
assurance, and compliance review. The Commission then used data from
the Department of Labor's Bureau of Labor Statistics from May 2021
to estimate the total costs of this work. According to the May 2021
National Occupational Employment and Wage Estimates Report produced
by the U.S. Bureau of Labor Statistics, available at https://www.bls.gov/oes/current/oes_nat.htm, the mean salary for a computer
systems analyst in management companies and enterprises is $103,860.
This number is divided by 1800 work hours in a year to account for
sick leave and vacations and multiplied by 2.5 to account for
retirement, health, and other benefits, as well as for office space,
computer equipment support, and human resources support, all of
which yields an hourly rate of $144.25. Similarly, a computer
programmer has a mean annual salary of $102,430, yielding an hourly
rate of $142.26; a software quality assurance analyst and tester has
a mean annual salary of $99,460, yielding an hourly rate of $138.14;
and a compliance attorney has a mean annual salary of $198,900,
yielding an hourly rate of $276.25.
\25\ The estimate of total start-up costs consists of the
following: $14,101.10 for the delta ladder, gamma ladder, vega
ladder, and the zero rate curves, based on 20 hours of systems
analyst time, 40 hours of programmer time, and 40 hours of tester
time; $7,248.61 for adding interest rate, forward rates, and end of
day position fields, based on 8 hours of systems analyst time, 4
hours of programmer time, and 40 hours of tester time; $14,140.83
for the manifest file, based on 40 hours of systems analyst time, 40
hours of programmer time, and 20 hours of tester time; and
$22,676.67 for adding the backtesting fields, based on 40 hours of
systems analyst time, 80 hours of programmer time, and 40 hours of
tester time. The estimate of total start-up costs also includes
$11,500.00 for compliance attorney review. The amount that was
estimated for the payment file in the proposal, $39,907.22, is not
being included here, because the Commission did not adopt the
proposal for the payment file.
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Lastly, because the Commission understands that the preparation and
submission of the daily reports required under Sec. 39.19(c)(1)(i) is
largely automated, the Commission estimates that adding the new fields
to new appendix C, and adding to Sec. 39.19(c)(1)(i) a requirement
that a DCO include in its daily reports the results of the margin model
backtesting, will result in a negligible increase to the current
estimate of 0.5 burden hours per report. Accordingly, the Commission
retains its existing estimate for the burden associated with daily
reporting under Sec. 39.19(c)(1).
The aggregate burden estimate for daily reporting remains as
follows:
Estimated number of respondents: 13.
Estimated number of reports per respondent: 250.
Average number of hours per report: 0.5.
Estimated gross annual reporting burden: 1,625.
d. Event-Specific Reporting
Regulation Sec. 39.19(c)(4) requires a DCO to notify the
Commission of the occurrence of certain events; Sec.
39.19(c)(4)(ix)(A)(1) requires a DCO to report any change in the
ownership or corporate or organizational structure of the DCO or its
parent(s) that would result in at least a 10 percent change of
ownership of the DCO. The Commission is amending Sec.
39.19(c)(4)(ix)(A)(1) to require the reporting of any change in the
ownership or corporate or organizational structure of the DCO or its
parent(s) that would result in a change to the entity or person holding
a controlling interest in the DCO, whether through an increase in
direct ownership or voting interest in the DCO or in a direct or
indirect corporate parent entity of the DCO. This increases the
reporting requirement. However, the changes of control contemplated by
the amendment occur infrequently. In addition, DCOs have typically
notified the Commission of such changes of control even if not
technically required by the current regulations. Finally, although
changes of control usually require the preparation of documents such as
a purchase agreement and the amendment of corporate governance
documents and organizational charts, those burdens are a result of the
change in control itself and not of the reporting requirement. The
administrative burden of notifying the Commission--preparing a
notification, attaching relevant but pre-existing supporting documents
such as the revised organizational chart, and submitting to the
Commission--is negligible. Therefore, the increase in the reporting
requirement resulting from this amendment is negligible.
Regulation Sec. 39.19(c)(4)(xii) and (xiii) require notification
of changes in a liquidity funding arrangement or settlement bank
arrangement. The Commission is amending these regulations to clarify
that the reporting requirements include reporting new arrangements as
well as changes to existing ones. The clarification will not affect the
burden on DCOs because such reporting is already implied in the
regulation.
Separately, the Commission is amending Sec. 39.19(c)(4)(xv) to add
credit facility funding arrangements, liquidity funding arrangements,
and custodian banks to the list of arrangements or banks for which the
DCO must report to the Commission any issues or concerns of which the
DCO becomes aware. Although this increases the number of entities or
arrangements for which reporting may be required, given that a DCO is
only required to report these issues when it becomes aware of them, and
given that these events are not very common, any increase should be
negligible.
The Commission proposed to revise Sec. 39.18(g) to delete the
materiality threshold. Proposed changes would also
[[Page 53676]]
have required notification of each security incident or threat that
compromises or could compromise the confidentiality, availability, or
integrity of any automated system, or any information, services, or
data, including, but not limited to, third-party information, services,
or data, relied upon by the DCO in discharging its responsibilities; as
well as operator errors that may impair the operation, reliability,
security, or capacity of an automated system. The Commission estimated
that these changes would require DCOs to file an additional four
reports per year, on average. The Commission received several comments
stating that this estimate is too low. The Commission is not adopting
these changes, however, and is therefore removing the proposed
additional four reports per year from the reporting burden.
The Commission proposed modifying the reporting obligations under
Sec. 39.18(g)(1) and new Sec. 39.18(g)(2) to specify that only events
that impact, or potentially impact, a DCO's clearing operations must be
reported under each subsection. The Commission is not adopting these
changes.
Finally, the Commission is adding Sec. 39.19(c)(4)(xxv) to
centralize an existing reporting obligation under Sec. 39.37(b)(2) in
Sec. 39.19. This does not create a new reporting obligation. The
Commission is also revising Sec. 39.37(c) and (d) to remove the
requirement to make certain disclosures to the Commission while
retaining a requirement to make such disclosures publicly. This will
cause a negligible decrease in costs that will not affect the reporting
burden. The reporting burden under existing Sec. 39.37 is covered in
the PRA estimate for that regulation.
The aggregate burden estimate of Sec. 39.19(c)(4) adjusted for the
changes described above is as follows:
Estimated number of respondents: 13.
Estimated number of reports per respondent: 14.
Average number of hours per report: 0.5.
Estimated gross annual reporting burden: 91.
e. Public Information
The Commission is revising Sec. 39.21(c)(3) and (4) to exclude
DCOs that clear only fully collateralized positions from the specific
disclosure requirements of these paragraphs. Similarly, the Commission
is amending Sec. 39.21(c)(7), which requires a DCO to publish on its
website a current list of its clearing members, to provide that a DCO
may omit any clearing member that clears only fully collateralized
positions and is not an FCM from the list of clearing members that it
must publish on its website. Because such DCOs are still required to
report per other parts of Sec. 39.21, such as to disclose the terms
and conditions of each contract cleared, the fees it charges its
members, and daily settlement prices, volumes, and open interest for
each contract, the number of respondents will remain unchanged. The
changes do not affect the burden for the majority of DCOs that are
subject to the public disclosure requirements. For fully collateralized
DCOs, the changes would result in a negligible decrease in the amount
of time required per report. The aggregate estimated burden for Sec.
39.21 remains as follows:
Estimated number of respondents: 13.
Estimated number of reports per respondent: 4.
Average number of hours per report: 2.
Estimated gross annual reporting burden: 104.
C. Cost-Benefit Considerations
1. Introduction
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA or issuing certain orders.\26\ Section 15(a) further
specifies that the costs and benefits shall be evaluated in light of
the following five broad areas of market and public concern: (1)
protection of market participants and the public; (2) efficiency,
competitiveness, and financial integrity of futures markets; (3) price
discovery; (4) sound risk management practices; and (5) other public
interest considerations. The Commission considers the costs and
benefits resulting from its discretionary determinations with respect
to the section 15(a) factors (collectively referred to herein as
section 15(a) factors).
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\26\ 7 U.S.C. 19(a).
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The Commission recognizes that the final rule may impose costs. The
Commission has endeavored to assess the expected costs and benefits of
the final rule in quantitative terms, including PRA-related costs,
where possible. In situations where the Commission is unable to
quantify the costs and benefits, the Commission identifies and
considers the costs and benefits of the applicable rules in qualitative
terms. The lack of data and information to estimate those costs is
attributable in part to the nature of the final rule. Additionally, any
initial and recurring compliance costs for any particular DCO will
depend on the size, existing infrastructure, practices, and cost
structure of the DCO.
To further the Commission's consideration of the costs and benefits
imposed by the proposal, the Commission invited comments from the
public on all aspects of its cost-benefit considerations, including the
identification and assessment of any costs and benefits not discussed
by the Commission; data and any other information to assist or
otherwise inform the Commission's ability to quantify or qualitatively
describe the costs and benefits of the proposed amendments; and
substantiating data, statistics, and any other information to support
positions posited by commenters with respect to the Commission's
discussion. To the extent that the Commission received comments
specific to the costs and benefits of the proposed changes, those
comments are discussed in the relevant sections below.
2. Baseline
The baseline for the Commission's consideration of the costs and
benefits of this final rule is: (1) the DCO Core Principles set forth
in section 5b(c)(2) of the CEA; (2) the information requirements
associated with commingling customer funds and positions in futures and
swaps in the same account under Sec. 39.15(b)(2); (3) the reporting
obligations under Sec. 39.18(g) related to a DCO's system safeguards;
(4) daily reporting requirements under Sec. 39.19(c)(1); (5) event-
specific reporting requirements under Sec. 39.19(c)(4); (6) public
information requirements under Sec. 39.21(c); (7) disclosure
obligations for SIDCOs and subpart C DCOs under Sec. 39.37; and (8)
delegation of authority provisions under Sec. 140.94.
The Commission notes that this consideration of costs and benefits
is based on its understanding that the derivatives market regulated by
the Commission functions internationally with: (1) transactions that
involve U.S. entities occurring across different international
jurisdictions; (2) some entities organized outside of the United States
that are registered with the Commission; and (3) some entities that
typically operate both within and outside the United States and that
follow substantially similar business practices wherever located. Where
the Commission does not specifically refer to matters of location, the
discussion of costs and benefits below refers to the effects of the
final rule on all relevant derivatives activity, whether based on their
actual occurrence in the United
[[Page 53677]]
States or on their connection with, or effect on U.S. commerce.\27\
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\27\ See, e.g., 7 U.S.C. 2(i).
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3. Amendments to Sec. 39.13(h)(5)
a. Benefits
The Commission is adopting new Sec. 39.13(h)(5)(iii), which
provides that a DCO that clears fully collateralized positions may
exclude from the requirements of paragraphs (h)(5)(i) and (ii), which
concern clearing members' risk management policies and procedures,
those clearing members that clear only fully collateralized positions.
The requirements would still apply to clearing members that clear fully
collateralized positions but also clear margined products.
Fully collateralized positions do not expose DCOs to many of the
risks that traditionally margined products do. Full collateralization
prevents a DCO from being exposed to credit or default risk stemming
from the inability of a clearing member or customer of a clearing
member to meet a margin call or a call for additional capital. This
limited exposure and full collateralization of that exposure renders
certain provisions of part 39 inapplicable or unnecessary, including
Sec. 39.13(h)(5). The Commission is adopting this provision in order
to provide greater clarity to DCOs and future applicants for DCO
registration regarding how Sec. 39.13(h)(5) applies to DCOs that clear
fully collateralized positions. Furthermore, the Commission believes
that this amendment will provide a benefit to DCOs that clear fully
collateralized positions, as they will no longer need to meet a
requirement that does not apply to their clearing model.
b. Costs
The Commission does not anticipate any costs associated with this
change, as it would codify the removal of requirements that need not
apply to fully collateralized positions.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits in light of the specific considerations
identified in section 15(a) of the CEA. In consideration of section
15(a)(2)(B) of the CEA, the Commission believes that Sec.
39.13(h)(5)(iii) may increase operational efficiency for DCOs that
clear fully collateralized positions. The provision should not impact
the protection of market participants and the public, the financial
integrity of markets, or sound risk management practices, as the
requirements that the Commission is proposing to exclude for fully
collateralized positions do not further these factors when applied to
such positions. The Commission has considered the other section 15(a)
factors and believes that they are not implicated by this provision.
4. Amendments to Sec. 39.15(b)(2)
a. Benefits
The Commission is amending Sec. 39.15(b)(2) to clarify its
requirements and revise the information a DCO must provide to the
Commission when it seeks to commingle customer positions and associated
funds from different account classes. The Commission anticipates that
the amendments will help DCOs, the Commission, and the public to focus
on those issues that are most important in considering the submission,
and will generally reduce compliance burdens on DCOs.
Based on its experience in reviewing commingling rule submissions,
the Commission believes the changes to the information requirements
would improve the quality of future submissions and enhance protection
of market participants. The existing requirements often result in rule
submissions that provide information the Commission already has and
lack sufficient focus on the commingling itself, making it difficult
for both the Commission and the public to properly assess the risks
that commingling of customer funds may pose. The amendments would
improve the quality of the submissions by providing the information
needed to evaluate the risks posed to customers by commingling products
that otherwise would be held in separate accounts.
The amendments would reduce compliance burdens for DCOs by removing
existing paragraphs (b)(2)(i)(C), (E), (H), and (L), provisions that
call for submission of information the Commission can otherwise access
or has not needed in its review of commingling rule submissions.
Replacing existing paragraph (b)(2)(i)(I) and adding the related Sec.
39.15(b)(2)(vii) would focus DCO efforts on providing the most useful
information on the topic of margin methodology, and eliminates a
requirement to provide margin methodology information with which the
Commission is already familiar. Similarly, by maintaining only that
part of paragraph (b)(2)(i)(K) concerning default management procedures
unique to the products eligible for commingling and moving that
requirement to paragraph (b)(2)(vi), the amended regulation would focus
the discussion of the DCO's default management procedures on changes
necessitated by the commingling of eligible products rather than
general information on default management procedures already available
to the Commission.
b. Costs
As discussed above, the Commission expects that the amendments to
Sec. 39.15(b)(2) will decrease DCOs' costs associated with seeking
commingling approval. These changes most meaningfully reduce costs by
no longer requiring a DCO to produce certain information it was
previously required to provide to the Commission. This is partly offset
by the addition of new information requirements. Paragraph (b)(2)(vii),
as amended, would require information concerning portfolio margining
that is largely a subset of the margin methodology information required
by existing paragraph (b)(2)(i)(I). The new requirement in this
paragraph amounts to a one sentence confirmation of compliance with
Sec. 39.13(g)(4). Paragraph (b)(2)(viii), intended to ensure a DCO
provides all information the Commission needs to evaluate a commingling
rule submission, incorporates the requirements of existing paragraph
(b)(2)(iii). Further, the amendment to existing paragraph (b)(2)(i)(B)
on risk characteristics (renumbered as Sec. 39.15(b)(2)(ii)), in
addition to focusing the discussion on unusual characteristics, extends
the analysis to include a discussion of the DCO's management of
identified risk characteristics, which is information that should
likely be readily available to DCOs. The Commission is adding to Sec.
39.15(b)(2)(ii) the requirement that a DCO's analysis address any
characteristics that are unusual in relation to the other products
cleared by the DCO, such as margining, liquidity, default management,
pricing, or other risk characteristics. The Commission believes that a
DCO may incur additional minor costs, but only to the extent that the
products do in fact have margining, liquidity, default management,
pricing, or other risk characteristics that are unusual in relation to
those currently cleared by the DCO. Lastly, to the extent paragraph
(b)(2)(vi) on default management procedures extends beyond the scope of
existing paragraph (b)(2)(i)(J) or (K), DCOs should already have this
information.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendments to
[[Page 53678]]
Sec. 39.15(b)(2) in light of the specific considerations identified in
section 15(a) of the CEA. The Commission believes that the amendments
will have a beneficial effect on the protection of market participants
and on sound risk management practices. The amendments better focus the
DCO submissions on risk management considerations that are relevant to
address the commingling of customer positions and associated funds, and
assure that DCOs provide the Commission with the information it needs
to consider the regulatory adequacy of their efforts. These activities
are ultimately directed towards protecting market participants whose
accounts are exposed to risks the commingled positions introduce. The
Commission has considered the other section 15(a) factors and believes
that they are not implicated by the amendments to Sec. 39.15(b)(2).
5. Notification of Exceptional Events--Sec. 39.18(g)
a. Benefits
For reasons discussed in greater detail above, the Commission is
declining to adopt the proposal to amend Sec. 39.18(g)(1) to expand
the scope of hardware or software malfunctions for which a DCO must
provide notice to the Division by deleting the materiality element from
the requirement to report malfunctions that materially impair, or
create a significant likelihood of material impairment of, the DCO's
automated systems. Similarly, the Commission is also declining to adopt
the remaining proposed changes to Sec. 39.18(g), including the
elimination of the materiality threshold for reporting of other
exceptional events, the addition of new language regarding reporting
for operator error, the addition of untargeted threats as a reporting
event, and definitions for ``hardware or software malfunction'' and
``automated system.'' The retention of the current regulatory
framework, including the reporting threshold which affords discretion
to DCOs to report only material events, will benefit DCOs by allowing
the expenditure of less time and fewer resources to report events of no
significance, the knowledge of which would provide little or no
informational value to the Division.
b. Costs
Commenters stated that the Commission underestimated the increase
in reporting obligations as a result of the proposal to eliminate the
materiality threshold for the reporting of exceptional events under
Sec. 39.18(g) (estimated at four reports per DCO per year) as well as
the costs of such notifications (estimated at $152 per year). The
Commission is not adopting the proposal to remove the materiality
threshold or any of the other proposed changes to Sec. 39.18(g).
c. Section 15(a) Factors
As the Commission is not adopting the proposed amendments to Sec.
39.18(g), a consideration of costs and benefits under section 15(a) is
not applicable for this subsection.
6. Removing the Requirement To Report Variation Margin and Cash Flow
Information by Individual Customer Account in Sec. 39.19(c)(1)(i)(B)
and (C)
a. Benefits
The Commission is amending Sec. 39.19(c)(1)(i)(B) and (C) to
remove the requirement that DCOs report to the Commission on a daily
basis variation margin and cash flows by individual customer account.
In removing these requirements from Sec. 39.19(c)(1)(i)(B) and (C),
the Commission anticipates benefits to DCOs and their clearing members
in that their operational, technological, and compliance burdens would
be reduced. The Commission did not receive any comments on the costs or
benefits associated with these changes.
b. Costs
The Commission expects that DCOs and their clearing members will
not incur any costs related to the amendments to Sec.
39.19(c)(1)(i)(B) and (C), as the Commission is eliminating the
existing requirement that DCOs report to the Commission on a daily
basis variation margin and cash flows by individual customer account.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendments to Sec. 39.19(c)(1)(i)(B) and
(C) in light of the specific considerations identified in section 15(a)
of the CEA. The Commission believes that the amendments to Sec.
39.19(c)(1)(i)(B) and (C) will have a moderately beneficial effect by
reducing technological, operational, and compliance burdens of DCOs,
and of their clearing members. The Commission also believes that the
amendments will not have any effect on protection of market
participants and the public or on sound risk management practices
because, although the Commission is slightly reducing the amount of
information that DCOs must report to the Commission, the Commission is
confident that it will continue to receive from DCOs sufficient
information to effectively and efficiently supervise and oversee DCOs
and the derivatives markets. The Commission has considered the other
section 15(a) factors and believes that they are not implicated by the
amendments to Sec. 39.19(c)(1)(i)(B) and (C).
7. Codifying the Existing Reporting Fields for the Daily Reporting
Requirements in New Appendix C to Part 39
a. Benefits
The Commission is adding a new appendix C to part 39 that codifies
the existing reporting fields for the daily reporting requirements in
Sec. 39.19(c)(1). Until now, the instructions, reporting fields, and
technical specifications for daily reporting have been contained in the
Reporting Guidebook, which the Division provides to DCOs to facilitate
reporting pursuant to Sec. 39.19(c)(1). Although codifying the
Reporting Guidebook will not result in material benefit to currently
registered DCOs, the Commission believes that it likely will benefit
prospective DCO applicants, as well as members of the industry and
general public, by providing a detailed list of DCO daily reporting
obligations, in contrast to the more general requirements in Sec.
39.19(c)(1). The Commission did not receive any comments on the costs
or benefits associated with these changes.
b. Costs
The Commission does not expect that DCOs will incur increased costs
related to codifying the reporting fields from the Reporting Guidebook
in new appendix C to part 39. DCOs have been relying on the Reporting
Guidebook for nearly a decade to satisfy their daily reporting
obligations under Sec. 39.19(c)(1). Codifying these requirements into
a regulatory appendix does not alter the existing burden that DCOs have
in complying with Sec. 39.19(c)(1).
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of codifying the Reporting Guidebook as appendix
C to part 39 in light of the specific considerations identified in
section 15(a) of the CEA. The Commission has considered the section
15(a) factors and believes that adding new appendix C to part 39 to
codify the reporting fields set forth in the existing Reporting
Guidebook does not implicate the section 15(a) factors.
[[Page 53679]]
8. Additional Reporting Fields for the Daily Reporting Requirements--
Sec. 39.19(c)(1)
a. Benefits
The Commission is adding several new reporting fields that will be
incorporated into new appendix C to part 39.\28\ The Commission is
requiring that DCOs that clear interest rate swaps include in their
daily reports the delta ladder, gamma ladder, vega ladder, zero rate
curves, and yield curves that those DCOs use in connection with
managing risks associated with interest rate swaps positions.
Additionally, the Commission is requiring DCOs that clear interest rate
swaps, forward rate agreements, or inflation index swaps to include in
their daily reports the actual trade date for each position along with
an event description. Additionally, the Commission is requiring DCOs to
include in their daily reports information that reflects that the daily
report is complete. Lastly, in connection the new requirement in Sec.
39.19(c)(1)(i) that a DCO include in its daily reports the results of
its required daily margin model backtesting, the Commission also is
adding to new appendix C amended versions of the additional data fields
necessary to implement this requirement.\29\ This information,
separately and in the aggregate, is expected to assist the Commission
in conducting more effective oversight of DCOs, thereby enhancing the
protections afforded to the markets generally. The Commission did not
receive any comments on the benefits associated with these changes.
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\28\ As noted previously, the Commission is not adopting the
proposal that each DCO include in its daily reports timing
information about VM calls and payments.
\29\ Although the costs, benefits, and section 15(a) factors
associated with the requirement in Sec. 39.19(c)(1)(i) that a DCO
include backtesting results in its daily report are addressed
separately below, the costs associated with the implementation of
this requirement via the amended new daily reporting fields in
appendix C are addressed in this section.
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b. Costs
The Commission believes that the costs associated with adding these
new daily reporting fields to appendix C are negligible. The Commission
believes that DCOs already possess this information in read-ready
format and use it in the ordinary course of business, and the
regulation only requires that they transmit it to the Commission in a
standardized format. Despite these beliefs and out of an abundance of
caution, the Commission is estimating the cost of developing and
producing the new daily reporting fields that would be incorporated
into new appendix C.
The Commission estimates that the capital costs associated with the
addition of new daily reporting fields in new appendix C, and the
requirement that DCOs include information on their backtesting results
in their daily reports are negligible. The Commission also estimates
that any ongoing costs are negligible because the Commission
understands that the preparation and submission of the daily reports
required pursuant to Sec. 39.19(c)(1)(i) is largely automated.
However, to the extent that a DCO does not currently use any of the
information that would be required under the new fields, or if that
information is not accessible on an automated basis, then a DCO may
incur start-up costs associated with reporting information pursuant to
the new fields, specifically including costs for coding, as well as
testing, quality assurance, and compliance review. To estimate these
start-up costs, the Commission relied upon internal subject matter
experts in its Divisions of Data and Clearing and Risk to estimate the
amount of time and type of DCO personnel necessary to complete the
coding, testing, quality assurance, and compliance review. The
Commission then used data from the Department of Labor's Bureau of
Labor Statistics from May 2021 to estimate the total costs of this
work.\30\ Using this method, the Commission estimates the total start-
up costs to be approximately $69,667.21 per DCO.\31\
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\30\ To estimate the start-up costs, the Commission relied upon
internal subject matter experts in its Divisions of Data and
Clearing and Risk to estimate the amount of time and type of DCO
personnel necessary to complete the coding, testing, quality
assurance, and compliance review. The Commission then used data from
the Department of Labor's Bureau of Labor Statistics from May 2021
to estimate the total costs of this work. According to the May 2021
National Occupational Employment and Wage Estimates Report produced
by the U.S. Bureau of Labor Statistics, available at https://www.bls.gov/oes/current/oes_nat.htm, the mean salary for a computer
systems analyst in management companies and enterprises is $103,860.
This number is divided by 1800 work hours in a year to account for
sick leave and vacations and multiplied by 2.5 to account for
retirement, health, and other benefits, as well as for office space,
computer equipment support, and human resources support, all of
which yields an hourly rate of $144.25. Similarly, a computer
programmer has a mean annual salary of $102,430, yielding an hourly
rate of $142.26; a software quality assurance analyst and tester has
a mean annual salary of $99,460, yielding an hourly rate of $138.14;
and a compliance attorney has a mean annual salary of $198,900,
yielding an hourly rate of $276.25.
\31\ The estimate of total start-up costs consists of the
following: $14,101.10 for the delta ladder, gamma ladder, vega
ladder, and the zero rate curves, based on 20 hours of systems
analyst time, 40 hours of programmer time, and 40 hours of tester
time; $7,248.61 for adding interest rate, forward rates, and end of
day position fields, based on 8 hours of systems analyst time, 4
hours of programmer time, and 40 hours of tester time; $14,140.83
for the manifest file, based on 40 hours of systems analyst time, 40
hours of programmer time, and 20 hours of tester time; and
$22,676.67 for adding the backtesting fields, based on 40 hours of
systems analyst time, 80 hours of programmer time, and 40 hours of
tester time. The estimate of total start-up costs also includes
$11,500.00 for compliance attorney review. The amount that was
estimated for the payment file in the proposal, $39,907.22, is not
being included here, because the Commission did not adopt the
proposal for the payment file.
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CME commented on the cost-benefit considerations related to the
addition of these new daily reporting fields, arguing that the
Commission severely underestimated the amount of time that would be
required to comply with the requirement. Specifically, CME commented
that it believes the time required to implement the proposed changes
would be ``an order of magnitude greater than predicted,'' which would
add to the costs. However, CME did not quantify the amount by which it
believes that costs would be increased, and as a result, the Commission
is reluctant to adjust its estimates based on this comment.
Furthermore, the Commission is not adopting all of the new fields that
were proposed, which would reduce the costs that may be incurred by
DCOs to implement the required changes. Accordingly, the Commission
believes that retaining its initial estimates of these costs in the
proposal (excluding estimates of any proposals not being adopted in the
final rule) addresses CME's concern that the Commission's initial
estimates of the costs of implementation were not adequate, while
accounting for the fact that costs were reduced by the Commission's
decision not to adopt all of the relevant proposals.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of adding these daily reporting fields to new
appendix C to part 39 in light of the specific considerations
identified in section 15(a) of the CEA. Requiring DCOs to include in
their daily reports delta ladder, gamma ladder, vega ladder, zero rate
curve, and yield curve information for interest rates swaps, as well as
trade dates for interest rate swaps, forward rate agreements, and
inflation index swaps, are expected to provide information necessary
for the Commission to improve its supervision and oversight of DCOs and
the derivatives markets, which in turn is expected to result in
improved protection of market participants and
[[Page 53680]]
the public, improved financial integrity of the futures markets, and
potentially improved DCO risk management practices. The Commission has
considered the other section 15(a) factors and believes that they are
not implicated by this change.
9. Daily Reporting of Margin Model Backtesting--Sec. 39.19(c)(1)(i)
a. Benefits
The Commission is adding to Sec. 39.19(c)(1)(i) a requirement that
DCOs include in their daily reports the results of the margin model
backtesting that DCOs are required to perform daily pursuant to Sec.
39.13(g)(7)(i). Because margin model backtesting results are a crucial
element of an effective risk surveillance program, obtaining this
information will allow the Commission to conduct more effective
oversight of DCOs, thereby enhancing the protections afforded to the
markets generally. The Commission did not receive any comments on the
costs or benefits associated with these changes.
b. Costs
The Commission expects that requiring DCOs to report backtesting
results daily will impose only a negligible cost on DCOs because DCOs
already possess this information, and they are being required only to
transmit it to the Commission in a standardized format. Additionally,
the Commission has revised the fields in new appendix C to part 39 for
reporting backtesting results to address concerns expressed by
commenters and better align those fields with the manner in which DCOs
calculate their backtesting results, since DCOs do not perform
backtesting and calculate the results in a uniform manner. However, to
the extent that a DCO does not maintain the required information in the
required standardized format, a DCO may incur initial costs related to
modifying its systems to convert the information to the standardized
format, specifically including costs for coding, as well as testing,
quality assurance, and compliance review. An estimate of these start-up
costs is included in the discussion of the estimated costs associated
with reporting information pursuant to the new fields in appendix C.
The Commission notes, however, that some DCOs are already voluntarily
providing backtesting information to the Commission on a weekly or
monthly basis.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of requiring DCOs to report backtesting results
daily in light of the specific considerations identified in section
15(a) of the CEA. Requiring DCOs to report backtesting results daily is
expected to improve the Commission's supervision of DCO risk management
and, therefore, is expected to yield enhanced protection of market
participants and the public, improved financial integrity of the
futures markets, and also potentially improve DCO risk management
practices. The Commission has considered the other section 15(a)
factors and believes that they are not implicated by adding to Sec.
39.19(c)(1)(i) a requirement that DCOs include in their daily reports
the results of their daily margin model backtesting.
10. Fully Collateralized Positions--Sec. 39.19(c)(1)(ii)
a. Benefits
The Commission is amending Sec. 39.19(c)(1)(ii) to clarify that
this regulation does not apply to fully collateralized positions.
Because Sec. 39.19(c)(1)(ii) merely expands on Sec. 39.19(c)(1)(i),
which already does not apply to fully collateralized positions, and
therefore has no independent force or effect, this amendment does not
represent a substantive change. Making this change to Sec.
39.19(c)(1)(ii) provides greater certainty to DCOs, their clearing
members, and their customers, and may prevent them from having to
request guidance on this matter from the Commission or the Division in
the future. Further, the Commission believes that this amendment may
increase operational efficiency for DCOs that clear fully
collateralized positions. The Commission did not receive any comments
on the costs or benefits associated with these changes.
b. Costs
The Commission does not anticipate any non-negligible change in
costs resulting from amending Sec. 39.19(c)(1)(ii) to clarify that it
does not apply to fully collateralized positions.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of amending Sec. 39.19(c)(1)(ii) to clarify
that this regulation does not apply to fully collateralized positions
in light of the specific considerations identified in section 15(a) of
the CEA. The Commission believes that this amendment may increase
operational efficiency for DCOs that clear fully collateralized
positions, which is in the public interest. The Commission has
considered the other section 15(a) factors and believes that they are
not implicated by the amendment.
11. Reporting Change of Control of the DCO--Sec. 39.19(c)(4)(ix)(A)(1)
a. Benefits
Regulation Sec. 39.19(c)(4)(ix)(A)(1) requires a DCO to report any
change in the ownership or corporate or organizational structure of the
DCO or its parent(s) that would result in at least a 10 percent change
of ownership of the DCO. The Commission is amending Sec.
39.19(c)(4)(ix)(A)(1) to require a DCO to report any change in the
ownership or corporate or organizational structure of the DCO or its
parent(s) that would result in a change to the entity or person holding
a controlling interest in the DCO, whether through an increase in
direct ownership or voting interest in the DCO or in a direct or
indirect corporate parent entity of the DCO. This amendment will ensure
that the Commission has accurate knowledge of the individuals or
entities that directly or indirectly control a DCO regardless of the
corporate structures of the equity holders of the DCO. The Commission
did not receive any comments on the costs or benefits associated with
these changes.
b. Costs
The Commission expects the costs related to the amendment to Sec.
39.19(c)(4)(ix)(A)(1) to be negligible. Specifically, the Commission
expects a negligible cost burden with respect to the changes, in part
because the changes of control contemplated by the amendment occur
infrequently. In addition, DCOs have typically notified the Commission
of such changes of control even if not technically required by the
current regulations. The administrative burden of notifying the
Commission--preparing a notification, attaching relevant but pre-
existing supporting documents such as the revised organizational chart,
and submitting to the Commission--is negligible.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendments to Sec. 39.19(c)(4)(ix)(A)(1)
in light of the specific considerations identified in section 15(a) of
the CEA. The Commission believes that the amendments may have a
moderately beneficial effect on protection of market participants and
the public, as well as on the financial integrity of the futures
markets, because the amendments are anticipated to provide the
Commission with a better understanding of the
[[Page 53681]]
organizational structure of the ownership of the DCO, potentially
illuminating whether any individuals or entities that directly or
indirectly control a DCO also have ownership stakes in other
registrants or registered entities. The Commission has considered the
other section 15(a) factors and believes that they are not implicated
by the amendments to Sec. 39.19(c)(4)(ix)(A)(1).
12. Reporting Issues With Credit Facility Funding Arrangements,
Liquidity Funding Arrangements, Custodian Banks, and Settlement Banks--
Sec. 39.19(c)(4)(xv)
a. Benefits
The Commission is amending Sec. 39.19(c)(4)(xv) to require that a
DCO report to the Commission within one business day after it becomes
aware of any material issues or concerns regarding the performance,
stability, liquidity, or financial resources of any credit facility
funding arrangement, liquidity funding arrangement, custodian bank, or
settlement bank used by the DCO or approved for use by the DCO's
clearing members. This amendment expands the reporting requirement,
which previously applied only to any settlement bank used by the DCO or
approved for use by the DCO's clearing members, to apply as well to any
credit facility funding arrangement, liquidity funding arrangement, or
custodian bank used by the DCO or approved for use by the DCO's
clearing members. This amendment also changes the threshold that
triggers a DCO's reporting obligations by replacing the requirement
that a DCO report to the Commission within one business day after any
material issues or concerns arise, with the requirement that a DCO
report to the Commission within one business day after it becomes aware
of any material issues or concerns. Given the importance of credit
facility funding arrangements, liquidity funding arrangements,
custodian banks, and settlement banks to both DCOs and clearing
members, it is imperative that the Commission be informed of any known
issues or concerns regarding these entities or arrangements, especially
considering the broader impact that problems with these entities or
arrangements could have on DCOs and clearing members, as well as the
derivatives markets as a whole. As such, the reporting of this
information is expected to improve the Commission's oversight and
supervision of DCOs, clearing members, and the derivatives markets
generally. The Commission did not receive any comments on the costs or
benefits associated with these changes.
b. Costs
The Commission expects that the costs related to the amendments to
Sec. 39.19(c)(4)(xv) will be negligible. Specifically, because a DCO
is only required to report these issues when it becomes aware of them,
and given that these events are not very common, any cost increase is
estimated to be negligible.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendments to Sec. 39.19(c)(4)(xv) in
light of the specific considerations identified in section 15(a) of the
CEA. The Commission believes that the amendments to Sec.
39.19(c)(4)(xv) may potentially have a beneficial effect on protection
of market participants and the public, as well as on the financial
integrity of the futures markets, because the amendments would provide
the Commission with new, additional information that is anticipated to
assist the Commission in its supervision of DCOs and oversight of the
derivatives markets. Additionally, this information could be time-
sensitive and critically important in times of market stress or broader
economic upheaval. The Commission has considered the other section
15(a) factors and believes that they are not implicated by the
amendments to Sec. 39.19(c)(4)(xv).
13. Reporting of Updated Responses to the Disclosure Framework for
Financial Market Infrastructures--Sec. 39.19(c)(4)(xxv)
a. Benefits
The Commission is adopting new Sec. 39.19(c)(4)(xxv) to codify in
Sec. 39.19 the requirement in Sec. 39.37(b)(2) that, when a DCO
updates its responses to the Disclosure Framework for Financial Market
Infrastructures published by the Committee on Payment and Settlement
Systems and the Board of the International Organization of Securities
Commissions in accordance with Sec. 39.37(b)(1), the DCO shall provide
notice of those updates to the Commission. This amendment further
centralizes within Sec. 39.19 the obligations of DCOs to report
information to the Commission, which benefits affected DCOs by
consolidating their reporting obligations within one location. The
Commission did not receive any comments on the costs or benefits
associated with these changes.
b. Costs
The Commission does not anticipate any costs associated with the
adoption of Sec. 39.19(c)(4)(xxv) because it does not alter the
existing reporting obligations of DCOs.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the adoption of Sec. 39.19(c)(4)(xxv) in
light of the specific considerations identified in section 15(a) of the
CEA. The Commission has considered the section 15(a) factors and
believes that they are not implicated by the adoption of Sec.
39.19(c)(4)(xxv).
14. Publication of Margin-Setting Methodology and Financial Resource
Package Information--Sec. 39.21(c)(3) and (4)
a. Benefits
The Commission is amending Sec. 39.21(c)(3) and (4) to provide
that a DCO that clears only fully collateralized positions is not
required to disclose its margin-setting methodology, or information
regarding the size and composition of its financial resource package
for use in a default, if instead the DCO discloses that it does not
employ a margin-setting methodology or maintain a financial resource
package because it clears only fully collateralized positions. The
Commission anticipates the public may benefit from increased clarity
regarding the risks that market participants may face at such a DCO
because the full collateralization requirement is intended to mitigate
such risk.
b. Costs
The Commission does not anticipate any costs associated with the
amendment to Sec. 39.21(c)(3) and (4).
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendments to Sec. 39.21(c)(3) and (4)
in light of the specific considerations identified in section 15(a) of
the CEA. The Commission believes that the amendments to Sec.
39.21(c)(3) and (4) serve the broader public interest due to the
increased clarity regarding the risks that market participants may face
at such a DCO, as the full collateralization requirement is intended to
mitigate such risk. The Commission has considered the other section
15(a) factors and believes that they are not implicated by the
amendments to Sec. 39.21(c)(3) and (4).
[[Page 53682]]
15. Excluding Eligible DCOs From the Requirement in Sec. 39.21(c)(7)
To Publish a List of Clearing Members
a. Benefits
The Commission is amending Sec. 39.21(c)(7) to provide that a DCO
may omit any non-FCM clearing member that clears only fully
collateralized positions, and therefore does not share in the
mutualized risk associated with clearing activity, from its published
list of clearing members. The Commission anticipates that the amendment
will reduce operational and compliance burdens on eligible DCOs. This
is a significant benefit because, given the manner in which they engage
directly with market participants, DCOs that provide for fully
collateralized clearing may have a large number of non-FCM clearing
participants and a high volume of turnover among such participants.
b. Costs
The Commission does not anticipate any costs associated with the
amendments to Sec. 39.21(c)(7), as the rule reduces the public
disclosure requirements that apply to DCOs that provide for fully
collateralized clearing.
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendments to Sec. 39.21(c)(7) in light
of the specific considerations identified in section 15(a) of the CEA.
The Commission believes that the amendments to Sec. 39.21(c)(7) will
have a limited and rather moderately beneficial effect on the
operations of the eligible DCOs themselves, because eligible DCOs would
enjoy the reduced burden of being excused from including non-FCM
clearing members that clear only fully collateralized positions in
their published lists of clearing participants. Additionally, with
respect to public interest considerations, the Commission believes that
the amendments to Sec. 39.21(c)(7) will have a moderately beneficial
effect on non-FCM market participants that clear through eligible DCOs,
because those market participants would benefit from the additional
privacy afforded to them when they are not publicly listed as clearing
members on the DCO's website. The Commission has considered the other
section 15(a) factors and believes that they are not implicated by the
amendments to Sec. 39.21(c)(7).
16. Clarifying the Disclosure Obligations in Sec. 39.37
a. Benefits
The Commission is amending Sec. 39.37(c) and (d) to clarify that
public disclosure of the information described in those paragraphs is
all that is required. The changes to Sec. 39.37(c) and (d) will
provide a modest benefit to SIDCOs and subpart C DCOs by clarifying
that a separate report directly to the Commission of information that
the DCO discloses publicly pursuant to Sec. 39.37(c) and (d) is not
required.
b. Costs
The Commission has not identified any costs associated with the
changes to Sec. 39.37(c) and (d).
c. Section 15(a) Factors
In addition to the discussion above, the Commission has evaluated
the costs and benefits of the amendment of Sec. 39.37(c) and (d) in
light of the specific considerations identified in section 15(a) of the
CEA. The Commission has considered the section 15(a) factors and
believes that they are not implicated by the changes.
17. Amendments to Sec. 140.94(c)(10)
a. Benefits
The Commission is amending Sec. 140.94(c)(10) to provide the
Director of the Division with delegated authority to request additional
information that the Commission determines to be necessary to conduct
oversight of the DCO, and to specify the format and manner of the DCO
reporting requirements. The Commission believes the delegation of
authority will promote a more expedient process to address these
aspects of the reporting requirements under Sec. 39.19.
b. Costs
The Commission has not identified any costs associated with the
amendments to Sec. 140.94(c)(10).
c. Section 15(a) Factors
The Commission has considered the section 15(a) factors and
believes that they are not implicated by this amendment.
D. Antitrust Considerations
Section 15(b) of the CEA requires the Commission to take into
consideration the public interest to be protected by the antitrust laws
and endeavor to take the least anticompetitive means of achieving the
purposes of the CEA, in issuing any order or adopting any Commission
rule or regulation.\32\
---------------------------------------------------------------------------
\32\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------
The Commission believes that the public interest to be protected by
the antitrust laws is the promotion of competition. In the proposal,
the Commission requested comment on whether: (1) the proposed
rulemaking implicates any other specific public interest to be
protected by the antitrust laws; (2) the proposed rulemaking is
anticompetitive and, if it is, what the anticompetitive effects are;
and (3) whether there are less anticompetitive means of achieving the
relevant purposes of the CEA that would otherwise be served by adopting
the proposed rule amendments. The Commission did not receive any
comments in response.
The Commission has considered the final rule to determine whether
it is anticompetitive and has identified no anticompetitive effects.
Because the Commission has determined that the rules are not
anticompetitive and have no anticompetitive effects, the Commission has
not identified any less anticompetitive means of achieving the purposes
of the CEA.
List of Subjects
17 CFR Part 39
Reporting and recordkeeping requirements.
17 CFR Part 140
Authority delegations (Government agencies).
For the reasons stated in the preamble, the Commodity Futures
Trading Commission amends 17 CFR chapter I as follows:
PART 39--DERIVATIVES CLEARING ORGANIZATIONS
0
1. The authority citation for part 39 continues to read as follows:
Authority: 7 U.S.C. 2, 6(c), 7a-1, and 12a(5); 12 U.S.C. 5464;
15 U.S.C. 8325; Section 752 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. 111-203, title VII, sec. 752, July
21, 2010, 124 Stat. 1749.
Sec. 39.2 [Amended]
0
2. Amend Sec. 39.2 by removing ``Back test'' and adding in its place
``Backtest''.
Sec. 39.5 [Amended]
0
3. Amend Sec. 39.5 in paragraph (b)(3)(vi) by removing ``back
testing'' and adding in its place ``backtesting''.
0
4. Amend Sec. 39.13 as follows:
0
a. In paragraph (g)(7), remove ``Back tests'' and ``back tests''
wherever they appear and add in their places ``Backtests'' and
``backtests'', respectively.
[[Page 53683]]
0
b. In paragraph (h)(5)(i)(A), add the word ``and'' at the end of the
paragraph;
0
c. Revise paragraph (h)(5)(i)(B);
0
d. Remove paragraph (h)(5)(i)(C); and
0
e. Add paragraph (h)(5)(iii).
The revision and addition read as follows:
Sec. 39.13 Risk management.
* * * * *
(h) * * *
(5) * * *
(i) * * *
(B) Require its clearing members to provide to the derivatives
clearing organization or the Commission, upon request, information and
documents regarding their risk management policies, procedures, and
practices, including, but not limited to, information and documents
relating to the liquidity of their financial resources and their
settlement procedures.
* * * * *
(iii) A derivatives clearing organization that clears fully
collateralized positions may exclude from the requirements of
paragraphs (h)(5)(i) and (ii) of this section those clearing members
that clear only fully collateralized positions.
* * * * *
0
5. Amend 39.15 by revising paragraph (b)(2) to read as follows:
Sec. 39.15 Treatment of funds.
* * * * *
(b) * * *
(2) Commingling. In order for a derivatives clearing organization
and its clearing members to commingle customer positions in futures,
options, foreign futures, foreign options, and swaps, or any
combination thereof, and any money, securities, or property received to
margin, guarantee or secure such positions, in an account subject to
the requirements of sections 4d(a) or 4d(f) of the Act, the derivatives
clearing organization shall file rules for Commission approval pursuant
to the requirements and standard of review of Sec. 40.5 of this
chapter. Such rule submission shall include, at a minimum, the
following:
(i) Identification of the products that would be commingled,
including product specifications or the criteria that would be used to
define eligible products;
(ii) Analysis of the risk characteristics of the eligible products
and of the derivatives clearing organization's ability to manage those
risks, addressing any characteristics that are unusual in relation to
the other products cleared by the derivatives clearing organization,
such as margining, liquidity, default management, pricing, or other
risk characteristics;
(iii) Analysis of the liquidity of the respective markets for the
eligible products, the ability of clearing members and the derivatives
clearing organization to offset or mitigate the risk of such eligible
products in a timely manner, without compromising the financial
integrity of the account, and, as appropriate, proposed means for
addressing insufficient liquidity;
(iv) A description of any additional requirements that would apply
to clearing members permitted to commingle eligible products;
(v) A description of any risk management changes that the
derivatives clearing organization will implement to oversee its
clearing members' risk management of eligible products, or an analysis
of why existing risk management systems and procedures are adequate in
connection with the proposed commingling;
(vi) An analysis of the ability of the derivatives clearing
organization to manage a potential default with respect to any of the
eligible products that would be commingled, including a discussion of
any default management procedures that are unique to the products
eligible for commingling;
(vii) A discussion of the extent to which the derivatives clearing
organization anticipates allowing portfolio margining of commingled
positions, including a description and analysis of any margin reduction
applied to correlated positions and the language of any applicable
clearing rules or procedures, and an express confirmation that any
portfolio margining will be allowed only as permitted under Sec.
39.13(g)(4); and
(viii) Any other information necessary for the Commission to
determine the rule submission's compliance with the Act and the
Commission's regulations in this chapter, which the Commission may
request as supplemental information if not provided in the initial
submission. The Commission may extend the review period for the rule
submission in accordance with Sec. 40.5(d) of this chapter in order to
request and obtain supplemental information as necessary.
* * * * *
0
6. Amend Sec. 39.19 as follows:
0
a. Revise paragraph (c)(1)(i) and the introductory text of paragraph
(c)(1)(ii);
0
b. Add paragraph (c)(1)(iii);
0
c. Revise paragraphs (c)(4)(ix)(A)(1) and (c)(4)(xii), (xiii), and
(xv); and
0
d. Add paragraph (c)(4)(xxv).
The revisions and additions read as follows:
Sec. 39.19 Reporting.
* * * * *
(c) * * *
(1) * * *
(i) A derivatives clearing organization shall compile as of the end
of each trading day, and submit to the Commission by 10 a.m. on the
next business day, a report containing the results of the backtesting
required under Sec. 39.13(g)(7)(i), and the following information
related to all positions, other than fully collateralized positions, in
accordance with the data fields set forth in appendix C to this part:
(A) Initial margin requirements and initial margin on deposit for
each clearing member, by house origin and by each customer origin, and
by each individual customer account. The derivatives clearing
organization shall identify each individual customer account, using
both a legal entity identifier, where available, and any internally-
generated identifier, within each customer origin for each clearing
member;
(B) Daily variation margin, separately listing the mark-to-market
amount collected from or paid to each clearing member, by house origin
and by each customer origin;
(C) All other daily cash flows relating to clearing and settlement
including, but not limited to, option premiums and payments related to
swaps such as coupon amounts, collected from or paid to each clearing
member, by house origin and by each customer origin; and
(D) End-of-day positions, including as appropriate the risk
sensitivities and valuation data that the derivatives clearing
organization generates, creates, or calculates in connection with
managing the risks associated with such positions, for each clearing
member, by house origin and by each customer origin, and by each
individual customer account. The derivatives clearing organization
shall identify each individual customer account, using both a legal
entity identifier, where available, and any internally-generated
identifier, within each customer origin for each clearing member.
(ii) The report shall contain the information required by
paragraphs (c)(1)(i)(A) through (D) of this section for each of the
following, other than fully collateralized positions:
* * * * *
(iii) Notwithstanding the specific fields set forth in appendix C
to this part, a derivatives clearing organization may choose to submit,
after consultation with staff of the Division of Clearing and Risk, any
additional data field that is necessary or appropriate to better
[[Page 53684]]
capture the information that is being reported.
* * * * *
(4) * * *
(ix) * * *
(A) * * *
(1) Result in at least a 10 percent change of ownership of the
derivatives clearing organization or a change to the entity or person
holding a controlling interest in the derivatives clearing
organization, whether through an increase in direct ownership or voting
interest in the derivatives clearing organization or in a direct or
indirect corporate parent entity of the derivatives clearing
organization;
* * * * *
(xii) Change in credit facility funding arrangement. A derivatives
clearing organization shall report to the Commission no later than one
business day after the derivatives clearing organization enters into,
terminates, or changes a credit facility funding arrangement, or is
notified that such arrangement has changed, including but not limited
to a change in lender, change in the size of the facility, change in
expiration date, or any other material changes or conditions.
(xiii) Change in liquidity funding arrangement. A derivatives
clearing organization shall report to the Commission no later than one
business day after the derivatives clearing organization enters into,
terminates, or changes a liquidity funding arrangement, or is notified
that such arrangement has changed, including but not limited to a
change in provider, change in the size of the arrangement, change in
expiration date, or any other material changes or conditions.
* * * * *
(xv) Issues with credit facility funding arrangements, liquidity
funding arrangements, custodian banks, or settlement banks. A
derivatives clearing organization shall report to the Commission no
later than one business day after it becomes aware of any material
issues or concerns regarding the performance, stability, liquidity, or
financial resources of any credit facility funding arrangement,
liquidity funding arrangement, custodian bank, or settlement bank used
by the derivatives clearing organization or approved for use by the
derivatives clearing organization's clearing members.
* * * * *
(xxv) Updates to responses to the Disclosure Framework for
Financial Market Infrastructures. A systemically important derivatives
clearing organization or a subpart C derivatives clearing organization
that updates its responses to the Disclosure Framework for Financial
Market Infrastructures published by the Committee on Payment and
Settlement Systems and the Board of the International Organization of
Securities Commissions pursuant to Sec. 39.37(b)(1) must provide to
the Commission, within ten business days after such update, a copy of
the text of the responses that shows all deletions and additions made
to the immediately preceding version of the responses, as required by
Sec. 39.37(b)(2).
* * * * *
0
7. Amend Sec. 39.21 by revising paragraphs (c)(3), (4), and (7) to
read as follows:
Sec. 39.21 Public information.
* * * * *
(c) * * *
(3) Information concerning its margin-setting methodology, except
that a derivatives clearing organization that clears only fully
collateralized positions instead may disclose that it does not employ a
margin-setting methodology because it clears only fully collateralized
positions;
(4) The size and composition of the financial resource package
available in the event of a clearing member default, updated as of the
end of the most recent fiscal quarter or upon Commission request and
posted as promptly as practicable after submission of the report to the
Commission under Sec. 39.11(f)(1)(i)(A), except that a derivatives
clearing organization that clears only fully collateralized positions
instead may disclose that it does not maintain a financial resource
package to be used in the event of a clearing member default because it
clears only fully collateralized positions;
* * * * *
(7) A current list of all clearing members, except that a
derivatives clearing organization may omit any clearing member that
clears only fully collateralized positions and is not a futures
commission merchant;
* * * * *
0
8. Amend Sec. 39.25 by revising paragraph (c) to read as follows:
Sec. 39.25 Conflicts of interest.
* * * * *
(c) Have procedures for identifying, addressing, and managing
conflicts of interest involving members of the board of directors.
0
9. Amend Sec. 39.37 by revising paragraph (c) and the introductory
text of paragraph (d) to read as follows:
Sec. 39.37 Additional disclosure for systemically important
derivatives clearing organizations and subpart C derivatives clearing
organizations.
* * * * *
(c) Publicly disclose relevant basic data on transaction volume and
values consistent with the standards set forth in the Public
Quantitative Disclosure Standards for Central Counterparties published
by the Committee on Payments and Market Infrastructures and the
International Organization of Securities Commissions;
(d) Publicly disclose rules, policies, and procedures concerning
segregation and portability of customers' positions and funds,
including whether each of:
* * * * *
0
10. Add appendix C to part 39 to read as follows:
Appendix C to Part 39--Daily Reporting Data Fields
A. Daily Cash Flow Reporting
----------------------------------------------------------------------------------------------------------------
House & Individual
Field name Description customer customer
origin account
----------------------------------------------------------------------------------------------------------------
Common Fields (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Total Message Count.......................... The total number of reports included M M
in the file.
FIXML Message Type........................... Financial Information eXchange Markup M M
Language (FIXML) account summary
report type.
Sender ID.................................... The CFTC-issued derivatives clearing M M
organization (DCO) identifier.
To ID........................................ Indicate ``CFTC''.................... M M
Message Transmit Datetime.................... The date and time the file is M M
transmitted.
Report ID.................................... A unique identifier assigned by the M M
Commodity Futures Trading Commission
(CFTC) to each clearing member
report.
Report Date.................................. The business date of the information M M
being reported.
Base Currency................................ Base currency referenced throughout M M
report; provide exchange rate
against this currency.
Report Time (Message Create Time)............ The report ``as of'' or information M M
cut-off time.
DCO Identifier............................... CFTC-assigned identifier for a DCO... M M
Clearing Participant Identifier.............. DCO-assigned identifier for a M M
particular clearing member.
[[Page 53685]]
Clearing Participant Name.................... The name of the clearing member...... M M
Fund Segregation Type........................ Clearing fund segregation type....... M M
Clearing Participant LEI..................... Legal entity identifier (LEI) for a C C
particular clearing member per
International Organization for
Standardization (ISO) 17442.
Clearing Participant LEI Name................ The LEI name associated with the C C
clearing member LEI.
Customer Position Identifier................. Proprietary identifier for a C N/A
particular customer position account.
Customer Position Name....................... The name associated with the customer M N/A
position identifier.
Customer Position Account Type............... Type of account used for reporting... C N/A
Customer LEI................................. LEI for a particular customer; N/A C
provide if available.
Customer LEI Name............................ The LEI name associated with the N/A C
customer position LEI.
Margin Account............................... Margin account identifier............ M N/A
Customer Margin Name......................... The name associated with the customer N/A C
margin identifier.
Unique Margin Identifier..................... A single field that uniquely M M
identifies the margin account. This
field is used to identify associated
positions.
Customer Margin Identifier................... Proprietary identifier for a N/A M
particular customer.
Customer Margin Account Type................. Account type indicator............... N/A M
----------------------------------------------------------------------------------------------------------------
Futures and Options (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Concentration Risk........................... Risk factor component to capture C C
costs associated with the
liquidation of a large position.
Delivery Margin.............................. Margin collected to cover delivery C N/A
risk.
Initial Margin............................... Margin requirement calculated by the M M
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons.
Liquidity Risk............................... Risk component to capture bid/offer C C
costs associated with the
liquidation of a large portfolio..
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The total margin requirement for the M N/A
origin. This margin requirement
should include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Market Move Risk............................. Margin amount associated with market C C
move risk.
Margin Savings............................... The margin savings amount for the C N/A
clearing member where there is a
cross-margining agreement with
another DCO.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Option Premium............................... Premium registered on the given C C
trading date. The amount of money
that the options buyer must pay the
options seller.
Net Option Value............................. The credit or debit amount based on C C
the long or short options positions.
Backdated Profit and Loss.................... The profit and loss (P&L) attributed O N/A
to positions added that were novated
on a prior date.
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark-to-market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L).
Customer Margin Omnibus Parent............... The margin identifier for the omnibus N/A C
account associated with the customer
margin identifier. (Conditional on
reported customer position being
part of a separately reported
omnibus account position.).
----------------------------------------------------------------------------------------------------------------
Commodity Swaps (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Initial Margin............................... Margin requirement calculated by the M M
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons.
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The total margin requirement for the M M
origin. This margin requirement
should include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Option Premium............................... Premium registered on the given C N/A
trading date. The amount of money
that the options buyer must pay the
options seller.
Net Cash Flow................................ Net cash flow recognized on report C N/A
date (with actual settlements
occurring according to the
currency's settlement conventions).
E.g., profit/loss, price alignment
interest, cash payments (fees,
coupons, etc.).
Backdated Profit and Loss.................... The P&L attributed to positions added C N/A
that were novated on a prior date.
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark to market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L).
----------------------------------------------------------------------------------------------------------------
Credit Default Swaps (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Concentration Risk........................... Risk factor component to capture C C
costs associated with the
liquidation of a large position.
Initial Margin............................... Margin requirement calculated by the M M
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons.
Liquidity Risk............................... Risk component to capture bid/offer C C
costs associated with the
liquidation of a large portfolio..
[[Page 53686]]
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The total margin requirement for the M C
origin. This margin requirement
should include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Spread Response Risk......................... Risk factor component associated with C C
credit spread level changes and
credit term structure shape changes.
Systemic Risk................................ Risk factor component to capture C C
parallel shift of credit spreads.
Curve Risk................................... Risk factor that captures curve C C
shifts based on portfolio.
Index Spread Risk............................ Risk factor component associated with C C
risks due to widening/tightening
spreads of credit default swap (CDS)
indices relative to each other.
Sector Risk.................................. Risk factor component to capture C C
sector risk.
Jump to Default Risk......................... Risk factor component to capture most C C
extreme up/down move of a reference
entity.
Basis Risk................................... Risk factor component to capture C C
basis risk between index and index
constituent reference entities.
Interest Rate Risk........................... Risk factor component associated with C C
parallel shift movements in interest
rates.
Jump to Health Risk.......................... Risk factor component to capture C C
extreme narrowing of credit spreads
of a reference entity; also known as
``idiosyncratic risk''.
Other Risk................................... Any other risk factors included in C C
the margin model.
Recovery Rate Sensitivity Risk............... Risk factor component to capture C C
fluctuations of recovery rate
assumptions.
Wrong Way Risk............................... Risk that occurs when exposure to a C C
counterparty is adversely correlated
with the credit quality of that
counterparty. It arises when default
risk and credit exposure increase
together.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Option Premium............................... Premium registered on the given C N/A
trading date. The amount of money
that the options buyer must pay the
options seller.
Initial Coupon............................... Amount of coupon premium amount O N/A
accrued from the start of the
current coupon period through the
trade date. (Indicate gross pay/
collect amounts.).
Upfront Payment.............................. The difference in market value O N/A
between the standard coupon and the
market spread as well as the coupon
accrued through the trade date.
(Indicate gross pay/collect
amounts.).
Trade Cash Adjustment........................ Additional cash amount on trades. C N/A
(Indicate gross pay/collect
amounts.).
Quarterly Coupon............................. Regular payment of quarterly coupon O N/A
premium amounts. (Indicate gross pay/
collect amounts.).
Credit Event Payments........................ Cash settlement of credit events. C N/A
(Indicate gross pay/collect
amounts.).
Accrued Coupon............................... Coupon obligation from the first day M N/A
of the coupon period through the
current clearing trade date. The sum
of accrued coupon for each position
in the clearing member's portfolio
(by origin)..
Final Mark to Market......................... Determined by marking the end-of-day M N/A
position from par (100%) to the end-
of-day settlement price.
Backdated Profit and Loss.................... The P&L attributed to positions added C N/A
that were novated on a prior date.
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark-to-market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L).
Previous Accrued Coupon...................... Previous day's accrued coupon........ M N/A
Previous Mark to Market...................... Previous day's mark to market........ M N/A
Price Alignment Interest..................... To minimize the impact of daily cash M N/A
variation margin payments on the
pricing of swaps, the DCO will
charge interest on cumulative
variation margin received and pay
interest on cumulative variation
margin paid.
----------------------------------------------------------------------------------------------------------------
Foreign Exchange (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Initial Margin............................... Margin requirement calculated by the M M
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons..
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The total margin requirement for the M M
origin. This margin requirement
should include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Other Payments............................... Includes any upfront and/or final/ M N/A
settlement payments made/received
for the trade date. (Indicate gross
pay/collect amounts.).
Option Premium............................... Premium registered on the given C N/A
trading date. The amount of money
that the options buyer must pay the
options seller.
Price Alignment Interest..................... To minimize the impact of daily cash M N/A
variation margin payments on the
pricing of swaps, the DCO will
charge interest on cumulative
variation margin received and pay
interest on cumulative variation
margin paid.
Backdated Profit and Loss.................... The P&L attributed to positions added C N/A
that were novated on a prior date.
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark-to-market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L).
----------------------------------------------------------------------------------------------------------------
Interest Rate Swaps (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
[[Page 53687]]
Initial Margin............................... Margin requirement calculated by the M M
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons.
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The total margin requirement for the M M
origin. This margin requirement
should include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Cross-Margined Products Profit/Loss.......... P&L resulting from changes in value C N/A
due to changes in the futures price.
This P&L should only include changes
to the cross-margined futures in the
account.
Option Premium............................... Premium registered on the given C N/A
trading date. The amount of money
that the options buyer must pay the
options seller.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Other Payments............................... Includes any upfront and/or final/ C N/A
settlement payments made/received
for the trade date. (Indicate gross
pay/collect amounts.).
Net Coupon Payment........................... Net amount of any coupon cash flows M N/A
recognized on report date but
actually occurring on currency's
settlement convention date.
(Indicate gross pay/collect
amounts.).
Net Present Value............................ Net present value (NPV) of all M N/A
positions by currency.
Net Present Value Previous................... Previous day's NPV by currency....... M N/A
PV of Other Payments......................... Includes the present value of any M N/A
upfront and/or final/settlement
payments that will be settled after
the report date. Only include
amounts that are affecting the NPV
of current trades.
Price Alignment Interest..................... To minimize the impact of daily cash M N/A
variation margin payments on the
pricing of swaps, the DCO will
charge interest on cumulative
variation margin received and pay
interest on cumulative variation
margin paid.
Accrued Coupon............................... Coupon obligation from the first day M N/A
of the coupon period through the
current clearing trade date. The sum
of accrued coupon for each position
in the clearing member's portfolio
(by origin).
Backdated Profit and Loss.................... The P&L attributed to positions added C N/A
that were novated on a prior date.
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark-to-market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L)..
----------------------------------------------------------------------------------------------------------------
Equity Cross Margin (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Initial Margin............................... Margin requirement calculated by the M M
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons resulting from liquidity/
concentration charges.
Liquidity Risk............................... Risk component to capture bid/offer C C
costs associated with the
liquidation of a large portfolio.
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date..
Total Margin................................. The total margin requirement for the M N/A
origin. This margin requirement
should include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin..
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Option Premium............................... Premium registered on the given C N/A
trading date. The amount of money
that the options buyer must pay the
options seller.
Net Option Value............................. The credit or debit amount based on C C
the long or short options positions.
Backdated Profit and Loss.................... The P&L attributed to positions added C N/A
that were novated on a prior date..
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark to market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L).
----------------------------------------------------------------------------------------------------------------
Consolidated (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Initial Margin............................... Margin requirement calculated by the M N/A
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons.
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The consolidated non-U.S. margin M N/A
requirement for the origin. The
consolidated non-U.S. margin
requirement should include the
initial margin requirement plus any
additional margin required by the
DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Option Premium............................... Premium registered on the given C N/A
trading date. The amount of money
that the options buyer must pay the
options seller.
Backdated Profit and Loss.................... The P&L attributed to positions added C N/A
that were novated on a prior date.
Day Trading Profit and Loss.................. The P&L attributed to the day's C N/A
trades.
Position Profit and Loss..................... The P&L of the previous day's C N/A
position with today's price movement.
Total Profit and Loss........................ Unrealized P&L or mark-to-market M N/A
value of position(s) including
change in mark to market (Total P&L
= Position P&L + Day Trading P&L +
Backdated P&L).
----------------------------------------------------------------------------------------------------------------
[[Page 53688]]
Exempt DCO (Daily Cash Flow Reporting)
----------------------------------------------------------------------------------------------------------------
Additional Margin............................ Any additional margin required in M N/A
excess of initial margin. For
example, this figure should include
any liquidity/concentration charge
if the charge is not included in the
initial margin.
Initial Margin............................... Margin requirement calculated by the M N/A
DCO's margin methodology. Unless an
integral part of the margin
methodology, this figure should not
include any additional margin add-
ons.
Margin Calls................................. Any outstanding margin call that has M N/A
been issued but not collected as of
the end of the trade date.
Total Margin................................. The U.S. person margin requirement M N/A
for the origin by currency
contribution. If the traded
currency's swaps (i.e., JY) offset
risk of other currencies, include an
amount of zero for that currency.
This margin requirement should
include the initial margin
requirement plus any additional
margin required by the DCO.
Variation Margin............................. Variation margin should include the M N/A
net sum of all cash flows between
the DCO and clearing members by
origin.
Collateral on Deposit........................ The collateral on deposit for an M N/A
origin. This amount should include
all collateral after all haircuts
that have been deposited to cover
the total margin requirement.
Mark-to-Market............................... Determined by marking the end of day M N/A
position(s) from par (100%) to the
end of day settlement price.
----------------------------------------------------------------------------------------------------------------
M = mandatory C = conditional O = optional.
B. Daily Position Reporting
------------------------------------------------------------------------
Field name Description Use
------------------------------------------------------------------------
Common Fields (Daily Position Reporting)
------------------------------------------------------------------------
Total Message Count............... The total number of M
reports included in the
file.
FIXML Message Type................ FIXML account summary M
report type.
Sender ID......................... The CFTC-issued DCO M
identifier.
To ID............................. Indicate ``CFTC''......... M
Message Transmit Datetime......... The date and time the file M
is transmitted.
Report ID......................... A unique identifier M
assigned by the CFTC to
each clearing member
report.
Report Date....................... The business date of the M
information being
reported.
Base Currency..................... Base currency referenced M
throughout report;
provide exchange rate
against this currency.
Report Time (Message Create Time). The report ``as of'' or M
information cut-off time.
Message Event..................... The event source being M
reported.
Market Segment ID................. Market segment associated M
with the position report.
DCO Identifier.................... CFTC-assigned identifier M
for a DCO.
Clearing Participant Identifier... DCO-assigned identifier M
for a particular clearing
member.
Clearing Participant Name......... The name of the clearing M
member.
Fund Segregation Type............. Clearing fund segregation M
type.
Clearing Participant LEI.......... LEI for a particular C
clearing member.
Clearing Participant LEI Name..... The LEI name associated C
with the clearing member
LEI.
Customer Position Identifier...... Proprietary identifier for C
a particular customer
position account.
Customer Position Name............ The name associated with M
the customer position
identifier.
Customer Position Account Type.... Type of account used for C
reporting.
Customer Position LEI............. LEI for a particular C
customer; must be
provided when available.
Customer Position LEI Name........ The LEI name associated C
with the Customer
Position LEI.
Customer Margin Identifier........ Proprietary identifier for C
a particular customer.
Customer Margin Name.............. The name associated with C
the customer margin
identifier.
Unique Margin Identifier.......... A single field that M
uniquely identifies the
margin account. This
field is used to identify
associated positions.
------------------------------------------------------------------------
Futures and Options (Daily Position Reporting)
------------------------------------------------------------------------
Settlement Price/Currency......... Settlement price, prior M
settlement price,
settlement currency, and
final settlement date.
Cross-Margin Entity............... Name of the entity C
associated with a cross-
margined account.
Exchange Commodity Code........... Contract commodity code M
issued by the exchange;
e.g., ticker symbol, the
human recognizable
trading identifier.
Clearing Commodity Code........... Registered commodity M
clearing identifier. The
code is for the contract
as if it was traded in
the form it is cleared.
For example, if the
contract was traded as a
spread but cleared as an
outright, the outright
symbol should be used.
Product Type...................... Indicates the type of C
product with which the
security is associated.
Security Type..................... Indicates type of security M
Maturity Month Year............... Month and year of the M
maturity.
Maturity Date..................... The date on which the C
principal amount becomes
due.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Asset Subtype..................... Provides a more specific C
description of the asset
type.
Security Group (Sector)........... A name assigned to a group C
of related instruments
which may be concurrently
affected by market events
and actions.
Unit Leverage Factor.............. The multiplier needed to M
convert a change of one
point of the quoted index
into local currency P&L
for a 1-unit long
position.
Units............................. Unit of measure........... M
Settlement Method................. Method of settlement...... C
Exchange Identifier (MIC)......... Exchange where the M
instrument is traded, per
ISO 10383.
Security Description.............. Used to provide a textual M
description of a
financial instrument.
Unique Product Identifier......... A single field that M
uniquely identifies a
given product. All
positions with this
identifier will have the
same price.
Alternate Product Identifier-- When a contract represents C
Spread Underlying Long. a differential between
two products, the product
code that represents the
long position in the
spread for long position
in the combined contract.
[[Page 53689]]
Alternate Product Identifier-- When a contract represents C
Spread Underlying Short. a differential between
two products, the product
code that represents the
long position in the
spread for short position
in the combined contract.
Last Trading Date................. The last day of trading in M
a futures contract.
First Notice Date................. The first date on which C
delivery notices are
issued.
Position (Long)................... Long position size. If a M
position is quoted in a
unit of measure (UOM)
different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Position (Short).................. Short position size. If a M
position is quoted in a
UOM different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Settlement FX Info................ Settlement price foreign M
exchange conversion rate.
Change in Settlement Price........ The quoted price change M
between the prior trading
day's settlement and
today's settlement.
Unit Currency P&L................. The local currency P&L M
between the prior trading
day's settlement and
today's settlement for a
1-unit long position.
Outright Initial Margin........... Initial margin for the C
position as if it were a
stand-alone outright
position.
Option Exercise Style............. Exercise style............ C
Option Strike Price............... Option strike price....... C
Option Put/Call Indicator......... Option type............... C
Underlying Settlement Price/ Settlement price, prior C
Currency. settlement price,
settlement currency, and
final settlement date.
Underlying Exchange Commodity Code Underlying Contract code C
issued by the exchange.
Underlying Clearing Commodity Code Registered commodity C
clearing identifier. The
code is for the contract
as if it was traded in
the form it is cleared.
For example, if the
contract was traded as a
spread but cleared as an
outright, the outright
symbol should be used.
Underlying Product Type........... Indicates the type of C
product the security is
associated with.
Underlying Security Type.......... Indicator which identifies C
the underlying derivative
type.
Underlying Security Group (Sector) A name assigned to a group C
of related instruments
which may be concurrently
affected by market events
and actions.
Underlying Maturity Month Year.... Month and year of the C
maturity.
Underlying Maturity Date.......... The date on which the C
principal amount becomes
due.
Underlying Asset Class............ The underlying broad asset C
category for assessing
risk exposure.
Underlying Asset Subclass......... The subcategory C
description of the asset
class.
Underlying Asset Type............. Provides a more specific C
description of the asset
subclass.
Underlying Asset Subtype.......... Provides a more specific C
description of the asset
type..
Underlying Exchange Code (MIC).... Exchange where the C
underlying instrument is
traded.
Underlying Security Description... Textual description of a C
financial instrument.
Unique Underlying Product Code.... A single field that is the C
result of concatenating
relevant fields that
create a unique product
ID that is associated
with a unique price.
Primary Options Exchange Code-- This field identifies the C
Implied Volatility Quote. main options chain for
the future that provides
the implied volatility
quote.
DELTA............................. Delta is the measure of C
how the option's value
varies with changes in
the underlying price.
Implied Volatility................ The implied volatility and C
quotation style for the
contract, typically in
natural log percent or
index points.
Customer Margin Omnibus Parent.... The margin identifier for C
the omnibus account
associated with the
customer margin
identifier. (Conditional
on reported customer
position being part of a
separately reported
omnibus account position).
------------------------------------------------------------------------
Commodity Swaps (Daily Position Reporting)
------------------------------------------------------------------------
Settlement Price/Currency......... Settlement price, prior M
settlement price,
settlement currency, and
final settlement date.
Exchange Commodity Code........... Contract commodity code M
issued by the exchange;
e.g., ticker symbol, the
human recognizable
trading identifier.
Clearing Commodity Code........... Registered commodity M
clearing identifier. The
code is for the contract
as if it was traded in
the form it is cleared.
For example, if the
contract was traded as a
spread but cleared as an
outright, the outright
symbol should be used.
Product Type...................... Indicates the type of C
product with which the
security is associated.
Security Group (Sector)........... A name assigned to a group C
of related instruments
which may be concurrently
affected by market events
and actions.
Unique Product Identifier......... A unique set of characters O
that represents a
particular swap. The
Commission will designate
a UPI pursuant to 17 CFR
45.7.
Maturity Month Year............... Month and year of the M
maturity.
Maturity Date..................... The date on which the C
principal amount becomes
due.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Unit Leverage Factor.............. The multiplier needed to C
convert a change of one
point of the quoted index
into local currency P&L
for a 1-unit long
position.
Minimum Tick...................... Minimum price tick C
increment.
Units............................. Unit of measure........... M
Settlement Method................. Swap settlement method.... C
Exchange Identifier (MIC)......... Exchange where the M
instrument is traded.
Security Description.............. Used to provide a textual C
description of a
financial instrument.
Security Type..................... Indicates type of security M
Position (Long)................... Long position size. If a M
position is quoted in a
UOM different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Position (Short).................. Short position size. If a M
position is quoted in a
UOM different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Net Cash Flow..................... Net cash flow recognized C
on report date (with
actual settlements
occurring according to
the currency's settlement
conventions). E.g.,
profit/loss, price
alignment interest, cash
payments (fees, coupons,
etc.).
Settlement FX Info................ Settlement price foreign M
exchange conversion rate.
Universal (or Unique) Swap Universal (or Unique) Swap M
Identifier. Identifier (USI)
namespace and USI. The
USI namespace and the USI
should be separated by a
pipe ``[verbar]''
character.
Option Exercise Style............. Exercise style............ C
Option Put/Call Indicator......... Option type............... M
Option Strike Price............... Option strike price....... M
Underlying Settlement Price/ Settlement price, prior M
Currency. settlement price,
settlement currency, and
final settlement date.
Underlying Exchange Commodity Code Underlying Contract code C
issued by the exchange.
[[Page 53690]]
Underlying Clearing Commodity Code Registered commodity M
clearing identifier. The
code is for the contract
as if it was traded in
the form it is cleared.
For example, if the
contract was traded as a
spread but cleared as an
outright, the outright
symbol should be used.
Underlying Product Type........... Indicates the type of C
product the security is
associated with.
Underlying Security Group (Sector) A name assigned to a group C
of related instruments
which may be concurrently
affected by market events
and actions.
Underlying Maturity Month Year.... Month and year of the M
maturity.
Underlying Maturity Date.......... The date on which the C
principal amount becomes
due.
Underlying Asset Class............ The underlying broad asset M
category for assessing
risk exposure.
Underlying Asset Subclass......... The subcategory C
description of the asset
class.
Underlying Asset Type............. Provides a more specific C
description of the asset
subclass.
Underlying Exchange Code (MIC).... Exchange where the M
underlying instrument is
traded.
Underlying Security Type.......... Indicates type of security M
Underlying Security Description... Textual description of a C
financial instrument.
DELTA............................. Delta is the measure of C
how the option's value
varies with changes in
the underlying price.
------------------------------------------------------------------------
Credit Default Swaps (Daily Position Reporting)
------------------------------------------------------------------------
Settlement Price/Currency......... Settlement price, prior M
settlement price,
settlement currency, and
final settlement date.
Exchange Security Identifier...... Contract code issued by O
the exchange.
Redcode........................... The code assigned to the M
CDS by Markit that
identifies the referenced
entity or the index,
series and version.
(Underlying instrument is
required for Security
Type = SWAPTION.).
Unique Product Identifier......... A unique set of characters O
that represents a
particular swap. The
Commission will designate
a UPI pursuant to
Commission regulation 17
CFR 45.7.
Security Type..................... Indicator which identifies M
the derivative type.
Restructuring Type................ This field is used if the M
index has been
restructured due to a
credit event.
Seniority Type.................... The class of debt......... M
Maturity Date..................... The date on which the C
principal amount becomes
due.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Reference Entity Type (Sector).... Specifies the type of M
reference entity for
first-to-default CDS
basket contracts. The
Markit sector code should
be provided when
available.
Coupon Rate....................... The coupon rate associated M
with this CDS transaction
stated in Basis Points.
Security Description (Reference Name of CDS index or M
Entity). single-name or sovereign
debt.
Recovery Factor................... The assumed recovery rate O
used to determine the CDS
price.
Position (Long)................... Long position size. If a M
position is quoted in a
UOM different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Position (Short).................. Short position size. If a M
position is quoted in a
UOM different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
5 YR Equivalent Notional.......... The five-year equivalent M
notional amount for each
risk factor/reference
entity CDS contract.
Accrued Coupon.................... Coupon obligation from the M
first day of the coupon
period through the
current clearing trade
date.
Profit and Loss................... Unrealized P&L or mark to M
market value of
position(s) including
change in mark to market
plus change in accrued
coupon plus change in
unsettled upfront fees.
Does not include cash
flows related to
quarterly coupon
payments, credit event
payments, or price
alignment interest.
Credit Exposure (CS01)............ The credit exposure of the C
swap at a given point in
time. CS01 = Spread DV01
= ``dollar'' value of a
basis point = In currency
(not percentage) terms,
the change in fair value
of the leg, transaction,
position, or portfolio
(as appropriate)
commensurate with a 1
basis point (0.01
percent) instantaneous,
hypothetical increase in
the related credit spread
curves. CS01/Spread DV01
may refer to non-dollar
currencies and related
curves. From the DCO's
point of view: positive
CS01 = gain in value
resulting from 1 basis
point increase, negative
CS01 = loss of value
resulting from 1 basis
point increase.
Mark to Market.................... Determined by marking the M
end of day position(s)
from par (100%) to the
end of day settlement
price.
Price Value of a Basis Point Change in P&L of a M
(PV01). position given a one
basis point move in CDS
spread value. May also be
referred to as DV01, Sprd
DV01.
Previous Accrued Coupon........... Previous day's accrued M
coupon.
Previous Mark to Market........... Previous day's mark to M
market.
Universal (or Unique) Swap Universal (or Unique) Swap O
Identifier. Identifier (USI)
namespace and USI. The
USI namespace and the USI
should be separated by a
pipe ``[verbar]''
character.
Option Strike Price............... Option strike price....... C
Settlement Method................. Method of settlement...... C
Option Exercise Style............. Exercise style............ C
Option Put/Call Indicator......... Option type............... C
Option Type....................... Specifies the option type. C
Option Start Date................. The option adjusted start C
date.
Option Expiration Date--Adjusted.. The CDS option adjusted C
expiration date.
Underlying Exchange Security The underlying contract O
Identifier. alias used by outside
vendors to uniquely
identify the contract.
Underlying Clearing Security The underlying code C
Identifier (Red Code). assigned to the CDS by
Markit that identifies
the referenced entity or
the index, series and
version.
Underlying Unique Product A unique set of characters O
Identifier. that represents a
particular swap. The
Commission will designate
a UPI pursuant to
Commission regulation 17
CFR 45.7.
Underlying Security Type.......... Indicator which identifies C
the underlying derivative
type.
Underlying Restructuring Type..... This field is used if the C
underlying index has been
restructured due to a
credit event.
Underlying Seniority Type......... The underlying class of C
debt.
Underlying Maturity Date.......... The date on which the C
principal amount becomes
due.
Underlying Asset Class............ The underlying broad asset C
category for assessing
risk exposure.
Underlying Asset Subclass......... The subcategory C
description of the asset
class.
Underlying Asset Type............. Provides a more specific C
description of the asset
subclass.
Underlying Reference Entity Type Specifies the type of C
(Sector). underlying reference
entity for first-to-
default CDS basket
contracts.
Underlying Coupon Rate............ The underlying coupon rate C
associated with this CDS
transaction stated in
basis points.
Underlying Security Description... Textual description of a C
financial instrument.
Underlying Recovery Factor........ The assumed recovery rate C
used to determine the
underlying CDS price.
DELTA............................. Delta is the measure of M
how the option's value
varies with changes in
the underlying price.
GAMMA............................. Gamma is the rate of M
change for delta with
respect to the underlying
asset's price.
RHO............................... Rho measures the M
sensitivity of an
option's price to a
variation in the risk-
free interest rate.
[[Page 53691]]
THETA............................. Theta is the rate at which M
an option loses value as
time passes.
VEGA.............................. Vega is the measurement of M
an option's sensitivity
to changes in the
volatility of the
underlying asset.
Option Premium.................... Premium registered on the C
given trading date. The
amount of money that the
options buyer must pay
the options seller.
Option Premium Date............... Date swaption premium is C
paid.
------------------------------------------------------------------------
Foreign Exchange (Daily Position Reporting)
------------------------------------------------------------------------
Settle Date....................... Settle date of the M
position.
Settlement Price/Fixing Currency.. Settlement price of the M
position.
Discount Factor................... Discount factor for the M
position. Use the factor
for the Mark to Market
(MTM) currency.
Valuation Date.................... Valuation date of the M
position.
Delivery Date..................... Delivery date of the M
position.
Clearing Security Identifier...... Code assigned by the DCO M
for a particular contract.
Unique Product Identifier......... A unique set of characters O
that represents a
particular swap. The
Commission will designate
a UPI pursuant to
Commission regulation 17
CFR 45.7.
Security Type..................... Registered commodity M
clearing identifier.
(Underlying instrument is
required for Security
Type = FXOPT [verbar]
FXNDO.).
Maturity Month Year............... Month and year of the C
maturity.
Maturity Date (Expiration)........ Specifies date of maturity C
(a calendar date). Used
for FXFWD/FXNDF. For non-
deliverable forwards
(NDFs), this represents
the fixing date of the
contract.
Maturity Time (Expiration)........ The contract expiration C
time. (Used for FXFWD/
FXNDF.).
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Valuation Method.................. Specifies the type of C
valuation method applied.
Security Description.............. Used to provide a textual C
description of a
financial instrument.
Foreign Exchange Type............. Identifies the type of FX M
contract. Use Typ = 7 for
direct FX (e.g., EUR/
USD). Use Typ = 16 for
NDFWD contracts (e.g.,
THB/INR settled in USD).
Currency One...................... Specifies the first or M
only reference currency
of the trade.
Currency Two...................... Specifies the second M
reference currency of the
trade.
Quote Basis....................... For foreign exchange M
quanto option feature.
Fixed Rate........................ (FXFWD or FXNDF only). C
Specifies the forward FX
rate alternative.
Spot Rate......................... Specifies the FX spot C
rates the first or only
reference currency of the
trade.
Forward Points.................... (FXFWD or FXNDF only) The C
interest rate
differential in basis
points between the base
and quote currencies in a
forward rate quote. May
be a negative value. (The
number of basis points
added to or subtracted
from the current spot
rate of a currency pair
to determine the forward
rate for delivery on a
specific value date.).
Delivery Type Indicator........... Delivery type indicator... M
Position--Long.................... Gross long position. An M
affirmative zero value
should be reported for
the long position. (Both
long and short positions
are required.) For FXNDF
use Typ = DLV for
settlement currency.
Position--Short................... Gross short position. An M
affirmative zero value
should be reported for
the short position. (Both
long and short positions
are required.) For FXNDF
use Typ = DLV for
settlement currency.
Final Mark to Market.............. Mark to market which M
includes the discount
factor.
Dollar Value of a Basis Point The dollar value of a one M
(DV01)--Long Currency. basis point change (DV01)
in the yield of the
underlying security and
that of the hedging
vehicle.
Dollar Value of a Basis Point The dollar value of a one M
(DV01)--Short Currency. basis point change (DV01)
in the yield of the
underlying security and
that of the hedging
vehicle.
Net Cash Flow..................... Net cash flow recognized M
on report date (with
actual settlements
occurring according to
the currency's settlement
conventions). E.g.,
profit/loss, price
alignment interest, cash
payments (fees, coupons,
etc.).
Undiscounted Mark to Market....... Mark to market, which does M
not include the discount
factor.
Price Alignment Interest.......... To minimize the impact of M
daily cash variation
margin payments on the
pricing of swaps, the DCO
will charge interest on
cumulative variation
margin received and pay
interest on cumulative
variation margin paid.
Universal (or Unique) Swap Universal (or Unique) Swap M
Identifier. Identifier (USI)
namespace and USI. The
USI namespace and the USI
should be separated by a
pipe ``[verbar]''
character.
Option Put/Call Indicator......... Option type............... C
Strike Rate....................... Option strike rate........ C
Option Exercise Style............. Exercise style............ C
Option Cut Name................... The code by which the C
expiry time is known in
the market.
Underlying Settlement Price/Fixing Settlement price for the C
Currency. position. (Underlying
settlement is required
for FXOPT, FXNDO.).
Underlying Exchange Security Code. Security code issued by C
the exchange; e.g.,
ticker symbol, the human
recognizable trading
identifier.
Underlying Clearing Security Code assigned by the DCO C
Identifier. for the underlying
contract.
Underlying Unique Product A unique set of characters O
Identifier. that represents a
particular swap. The
Commission will designate
a UPI pursuant to
Commission regulation 17
CFR 45.7.
Underlying Security Type.......... Indicator which identifies C
the underlying derivative.
Underlying Maturity Month Year.... Month and year of the C
maturity.
Underlying Maturity Date For FXFWD/FXNDF, the date C
(Expiration). on which the principal
amount becomes due. For
NDFs, this represents the
fixing date of the
contract.
Underlying Exchange Identifier Exchange where the C
(MIC). underlying instrument is
traded.
Underlying Security Description... Textual description of a C
financial instrument.
Option Long/Short Indicator....... Indicates whether the C
option is short or long.
Option Expiration................. Adjusted option expiration C
date.
Notional Long/Short............... FX currency notional long M
or short.
Implied Volatility................ The implied volatility and C
quotation style for the
contract, typically in
natural log percent or
index points.
DELTA............................. Delta is the measure of M
how the option's value
varies with changes in
the underlying price.
GAMMA............................. Gamma is the rate of M
change for delta with
respect to the underlying
asset's price.
RHO............................... Rho measures the M
sensitivity of an
option's price to a
variation in the risk-
free interest rate.
THETA............................. Theta is the rate at which M
an option loses value as
time passes.
VEGA.............................. Vega is the measurement of M
an option's sensitivity
to changes in the
volatility of the
underlying asset.
Option Premium MTM................ Premium mark to market, C
which includes the
discount factor.
------------------------------------------------------------------------
Interest Rate Swaps (Daily Position Reporting)
------------------------------------------------------------------------
Cleared Date...................... Date on which the trade M
was cleared at the DCO.
[[Page 53692]]
Position Status................... Position status: active, M
or terminated. Terminated
positions should only be
reported on the day of
termination.
DCO Pays Indicator................ Indicate which cash flow M
the DCO pays.
DCO Receives Indicator............ Indicate which cash flow M
the DCO receives.
Clearing Participant Pays Indicate which cash flow M
Indicator. the clearing member pays.
Clearing Participant Receives Indicate which cash flow M
Indicator. the clearing member
receives.
Clearing Security Identifier...... Code assigned by the DCO M
for a particular contract.
Unique Product Identifier......... A unique set of characters O
that represents a
particular swap. The
Commission will designate
a UPI pursuant to
Commission regulation 17
CFR 45.7.
Security Type..................... Registered commodity M
clearing identifier.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Swap Class........................ The classification or type M
of swap.
Swap Subclass..................... The sub-classification or C
notional schedule type of
the swap.
Security Description.............. Used to provide a textual M
description of a
financial instrument.
Leg Type.......................... Identifies if the leg is M
fixed or floating.
Leg Notional...................... Notional amount associated M
with leg.
Leg Notional Currency............. Currency of the leg's M
notional amount.
Leg Start Date Adj Bus Day Conv... If start date falls on a C
weekend or holiday, value
defines how to adjust
actual start date.
Leg Start Date.................... Leg's effective date...... M
Leg Maturity Date Adj Bus Day Conv If the maturity date falls C
on a weekend or holiday,
value defines how to
adjust actual maturity
date.
Leg Maturity Date................. The date on which the M
leg's principal amount
becomes due.
Leg Maturity Date Adj Calendar.... Regarding the maturity C
date, this specifies
which dates are
considered holidays.
Leg Calculation Period Adjusted If a date defining the C
Business Day Convention. calculation period falls
on a holiday, this
adjusts the actual dates
based on the definition
of the input.
Leg Calculation Frequency......... Calculation frequency, M
also known as the
compounding frequency for
compounded swaps.
Leg First Reg Per Start Date...... If there is a beginning C
stub, this indicates the
date when the usual
payment periods will
begin.
Leg Last Reg Per End Date......... If there is an ending C
stub, this indicates the
date when the usual
payment periods will end.
Leg Roll Conv..................... Indicates the day of the C
month when the payment is
made.
Leg Calc Per Adj Calendar......... Regarding the calculation C
period, this specifies
which dates are
considered holidays.
Leg Daycount...................... Defines how interest is C
accrued/calculated.
Leg Comp Method................... If payments are made on C
one timeframe but
calculations are made on
a shorter timeframe, this
describes how to compound
interest.
Leg Pay Adj Bus Day Conv.......... If cash flow pay or C
receive date falls on a
weekend or holiday, value
defines actual date
payment is made.
Leg Pay Frequency................. Frequency at which M
payments are made.
Leg Pay Relative To............... Payment relative to the C
beginning or end of the
period.
Leg Payment Lag................... Number of business days C
after payment due date on
which the payment is
actually made.
Leg Pay Adj Calendar.............. Regarding dates on which C
cash flow payments/
receipts are scheduled,
this specifies which
dates are considered
holidays.
Leg Reset Relative To............. Specifies whether reset C
dates are determined with
respect to each adjusted
calculation period start
date or adjusted
calculation period end
date.
Leg Reset Date Adj Bus Day Conv... Business day convention to C
apply to each reset date
if the reset date falls
on a holiday.
Leg Reset Frequency............... Frequency at which resets C
occur. If the Leg Reset
Frequency is greater than
the calculation per
frequency, more than 1
reset date should be
established for each
calculation per frequency
and some form of rate
averaging is applicable.
Leg Fixing Date Bus Day Conv...... Business day convention to C
apply to each fixing date
if the fixing date falls
on a holiday.
Leg Fixing Date Offset............ Specifies the fixing date C
relative to the reset
date in terms of a
business days offset.
Leg Fixing Day Type............... The type of days to use to C
find the fixing date
(i.e., business days,
calendar days, etc.).
Leg Reset Date Adj Calendar....... Regarding reset dates, C
this specifies which
dates are considered
holidays.
Leg Fixing Date Calendar.......... Regarding the fixing date, C
this specifies which
dates are considered
holidays.
Leg Fixed Rate or Amount.......... Only populate if Leg1 is C
Type ``Fixed''. This
should be expressed in
decimal form (e.g., 4%
should be input as
``.04'').
Leg Index......................... If Stream is floating C
rate, this gives the
index applicable to the
floating rate.
Leg Index Tenor................... For the floating rate leg, C
the tenor of the leg. For
the fixed rate leg, NULL.
Leg Spread........................ Describes if there is a C
spread (typically an add-
on) applied to the coupon
rate.
Leg Pmt Sched Notional............ Variable notional swap C
notional values.
Leg Initial Stub Rate............. The interest rate C
applicable to the Initial
Stub Period in decimal
form (e.g., 4% should be
input as ``.04'').
Leg Initial Stub Rate Index 1..... Stub rate can be a linear C
interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the first index.
Leg Initial Stub Rate Index 2 Stub rate can be a linear C
Tenor. interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the second index.
Leg Final Stub Rate............... The interest rate C
applicable to the final
stub period in decimal
form (e.g., 4% should be
input as ``.04'').
Leg Final Stub Rate Index 1....... Stub rate can be a linear C
interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the first index.
Leg Final Stub Rate Index 2 Tenor. Stub rate can be a linear C
interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the second index.
Accrued Coupon (Interest)......... Net accrued coupon amount M
since the last payment in
the leg currency. If
reported by leg, indicate
the associated stream
(leg) description (e.g.,
``FIXED/FLOAT,'' ``FLOAT1/
FLOAT2'').
Profit/Loss....................... Profit/loss resulting from M
changes in value due to
changes in underlying
curve movements or
floating index rate
resets. This should
exclude impacts to NPVs
from extraneous cash
flows (price alignment
interest, fees, and
coupons).
Leg Current Period Rate........... If leg is a floating leg, M
this indicates the
current rate used to
calculate the next
floating Leg coupon in
decimal form (e.g., 4%
should be input as
``.04'').
Leg Coupon Payment................ Coupon amount for T + 1 in M
the leg currency. This
should reflect the net
cash flow that will
actually occur on the
following business day.
Negative number indicates
that a payment was made.
Dollar Value of Basis Point (DV01) Change in value in USD if M
the relevant pricing
curve is shifted up by 1
basis point. DV01 =
``dollar'' value of a
basis point in currency
(not percentage) terms,
the change in fair value
of the leg, transaction,
position, or portfolio
(as appropriate)
commensurate with a 1
basis point (0.01
percent) instantaneous,
hypothetical increase in
the related zero-coupon
curves. DV01 may refer to
non-dollar currencies and
related curves. From the
DCO's point of view:
positive DV01 = profit/
gain resulting from 1
basis point increase,
negative DV01 = loss
resulting from 1 basis
point increase.
Net Cash Flow..................... Net cash flow recognized M
on report date (with
actual settlements
occurring according to
the currency's settlement
conventions). E.g.,
Profit/Loss, price
alignment interest, cash
payments (fees, coupons,
etc.).
[[Page 53693]]
Net Present Value................. Net present value (NPV) of M
all positions by currency.
Present Value of Other Payments... Includes the present value M
of any upfront and/or
final/settlement payments
that will be settled
after the report date.
Only include amounts that
are affecting the NPV of
current trades.
Net Present Value Previous........ Previous day's NPV by C
currency.
Price Alignment Interest.......... To minimize the impact of M
daily cash variation
margin payments on the
pricing of swaps, the DCO
will charge interest on
cumulative variation
margin received and pay
interest on cumulative
variation margin paid.
Other Payments.................... Includes any upfront and/ C
or final/settlement
payments made/received
for the trade date.
(Indicate gross pay/
collect amounts.).
Universal (or Unique) Swap Universal (or Unique) Swap C
Identifier. Identifier (USI)
namespace and USI. The
USI namespace and the USI
should be separated by a
pipe ``[verbar]''
character.
Leg Initial Exchange.............. Amount of any exchange of C
cash flow at initiation
of trade being cleared.
Leg Initial Exchange Date......... Date that the initial C
exchange is set to occur.
Leg Final Exchange................ Amount of any exchange of C
cash flow at maturity of
trade.
Leg Final Exchange Date........... Date that the final C
exchange is set to occur.
Option Exercise Style............. Exercise style............ C
Option Type....................... Specifies the option type. C
Option Start Date................. The option adjusted start C
date.
Option Adjusted Expiration Date... The IRS swaption adjusted C
expiration date.
Option Buy/Sell Indicator......... Indicates the buyer or C
seller of a swap stream.
Underlying Clearing Security Code assigned by the DCO C
Identifier. for the underlying
contract.
Underlying Unique Product A unique set of characters C
Identifier. that represents a
particular swap. The
Commission will designate
a UPI pursuant to 17 CFR
45.7.
Underlying Security Type.......... Indicator which identifies C
the underlying derivative.
Underlying Asset Class............ The underlying broad asset C
category for assessing
risk exposure.
Underlying Asset Subclass......... The subcategory C
description of the asset
class.
Underlying Asset Type............. Provides a more specific C
description of the asset
subclass.
Underlying Swap Class............. The classification or type C
of swap.
Underlying Swap Subclass.......... The sub-classification or C
notional schedule type of
the swap.
Underlying Security Description... Textual description of a C
financial instrument.
Underlying Security Leg Type...... Identifies if the leg is C
fixed or floating.
Underlying Security Leg Notional.. Notional amount associated C
with leg.
Underlying Security Leg Currency.. Currency of this leg's C
notional amount.
Underlying Security Leg Index..... If stream is floating C
rate, this gives the
index applicable to the
floating rate.
Underlying Security Leg Index For the floating rate leg, C
Tenor. the tenor of the leg. For
the fixed rate leg, NULL.
Underlying Security Leg Fixed Rate Only populate if Leg1 is C
Or Amount. type ``Fixed''. This
should be in decimal form
(e.g., 4% should be input
as ``.04'').
Underlying Security Leg Spread.... Indicates whether there is C
a spread (typically an
add-on) applied to the
coupon rate.
DELTA............................. Delta is the measure of M
how the option's value
varies with changes in
the underlying price.
GAMMA............................. Gamma is the rate of M
change for delta with
respect to the underlying
asset's price.
RHO............................... Rho measures the M
sensitivity of an
option's price to a
variation in the risk-
free interest rate.
THETA............................. Theta is the rate at which M
an option loses value as
time passes.
VEGA.............................. Vega is the measurement of M
an option's sensitivity
to changes in the
volatility of the
underlying asset.
Option Premium.................... Premium registered on the C
given trading date. The
amount of money that the
options buyer must pay
the options seller.
Option Premium Date............... Date option premium is C
paid.
Trade Date........................ Date a transaction was M
originally executed,
resulting in the
generation of a new USI.
For clearing swaps, the
date when the DCO accepts
the original swap.
Event Description................. Description for each C
position record.
------------------------------------------------------------------------
Forward Rate Agreements (Daily Position Reporting)
------------------------------------------------------------------------
Previous Business Date............ Previous business date.... M
Position Status................... Position status: active or M
terminated. Terminated
positions should only be
reported on the day of
termination.
DCO Pays Indicator................ Indicates which cash flow M
the DCO pays.
DCO Receives Indicator............ Indicates which cash flow M
the DCO receives.
Clearing Participant Pays Indicates which cash flow M
Indicator. the clearing member pays.
Clearing Participant Receives Indicates which cash flow M
Indicator. the clearing member
receives.
Clearing Security Identifier...... Code assigned by the DCO M
for a particular contract.
Unique Product Identifier......... A unique set of characters O
that represents a
particular swap. The
Commission will designate
a UPI pursuant to 17 CFR
45.7.
Security Type..................... Registered commodity M
clearing identifier.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
FRA Type.......................... Type of swap stream....... M
Notional Amount................... Stream notional amount.... M
Notional Currency................. Currency of leg notional M
amount.
Start Date........................ Date the position was M
established.
Maturity Date..................... The date on which the M
principal amount becomes
due.
Payment Day Count Convention...... Defines how interest is M
accrued/calculated.
Payment Accrual Days.............. Number of accrual days M
between the effective
date and maturity date.
First Payment Date................ Date on which the payment C
is made. Always report
the adjusted date.
Reset Date Bus Day Convention..... Business day convention to M
apply to each fixing date
if the fixing date falls
on a holiday.
Reset Date Fixing Date............ Date on which the payment M
is fixed. Always report
the adjusted date.
Fixed Rate........................ The fixed amount in M
decimal terms.
Float Index....................... The index for the floating M
portion of the Forward
Rate Agreement (FRA).
Float First Tenor................. First tenor associated M
with the index.
Float Second Tenor................ Second tenor associated C
with the index.
Float Spread...................... In basis point terms...... M
Float Reference Rate.............. The fixed floating rate in M
decimal terms.
PV01.............................. Change in value in native M
currency if the relevant
pricing curve is shifted
up by 1 basis point.
[[Page 53694]]
Dollar Value of Basis Point (DV01) Change in value in USD if M
the relevant pricing
curve is shifted up by 1
basis point. DV01 =
``dollar'' value of a
basis point in currency
(not percentage) terms,
the change in fair value
of the leg, transaction,
position, or portfolio
(as appropriate)
commensurate with a 1
basis point (0.01
percent) instantaneous,
hypothetical increase in
the related zero-coupon
curves. DV01 may refer to
non-dollar currencies and
related curves. From the
DCO's point of view:
positive DV01 = profit/
gain resulting from 1
basis point increase,
negative DV01 = loss
resulting from 1 basis
point increase.
Net Present Value................. Net present value (NPV) of M
all positions by currency.
Settlement FX Info................ Settlement price foreign M
exchange conversion rate.
Net Present Value Previous........ Previous day's NPV by M
currency.
Price Alignment Interest.......... To minimize the impact of M
daily cash variation
margin payments on the
pricing of swaps, the DCO
will charge interest on
cumulative variation
margin received and pay
interest on cumulative
variation margin paid.
Universal (or Unique) Swap Universal (or Unique) Swap C
Identifier. Identifier (USI)
namespace and USI. The
USI namespace and the USI
should be separated by a
pipe ``[verbar]''
character.
Settlement Amount................. The amount paid/received M
on the Payment Date.
Always report adjusted
date. (The position pays
on a negative amount.).
Other Payments.................... Includes any upfront and/ C
or final/settlement
payments made/received
for the trade date.
(Indicate gross pay/
collect amounts.).
Net Cash Flow..................... Net cash flow recognized C
on report date (with
actual settlements
occurring according to
the currency's settlement
conventions). E.g.,
profit/loss, price
alignment interest, cash
payments (fees, coupons,
etc.).
Profit/Loss....................... Profit/Loss resulting from C
changes in value due to
changes in underlying
curve movements or
floating index rate
resets. Should exclude
impacts to NPVs from
extraneous cash flows
(price alignment
interest, fees, and
coupons).
Present Value of Other Payments... Includes the present value C
of any upfront and/or
final/settlement payments
that will be settled
after the report date.
Only include amounts that
are affecting the NPV of
current trades.
Trade Date........................ Actual trade date for each M
position record
(including specifically,
the cleared date and the
trade date).
Event Description................. Description for each C
position record.
------------------------------------------------------------------------
Inflation Index Swaps (Daily Position Reporting)
------------------------------------------------------------------------
Cleared Date...................... Date on which the trade M
was cleared at the DCO.
Position Status................... Position's status: active M
or terminated. Terminated
positions should only be
reported on the day of
termination.
DCO Pays Indicator................ Indicate which cash flow M
the DCO pays.
DCO Receives Indicator............ Indicate which cash flow M
the DCO receives.
Clearing Participant Pays Indicate which cash flow M
Indicator. the clearing member pays.
Clearing Participant Receives Indicate which cash flow M
Indicator. the clearing member
receives.
Clearing Security Identifier...... Code assigned by the DCO M
for a particular contract.
Unique Product Identifier......... A unique set of characters O
that represents a
particular swap. The
Commission will designate
a UPI pursuant to 17 CFR
45.7.
Security Type..................... Registered commodity M
clearing identifier.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Swap Class........................ The classification or type M
of swap.
Swap Subclass..................... The sub-classification or C
notional schedule type of
the swap.
Security Description.............. Used to provide a textual M
description of a
financial instrument.
Leg Type.......................... Identifies if the leg is M
fixed or floating.
Leg Notional...................... Notional amount associated M
with leg.
Leg Notional Currency............. Currency of the leg's M
notional amount.
Leg Start Date Adj Bus Day Conv... If start date falls on a C
weekend or holiday, value
defines how to adjust
actual start date.
Leg Start Date.................... Leg's effective date...... M
Leg Maturity Date Adj Bus Day Conv If the maturity date falls C
on a weekend or holiday,
value defines how to
adjust actual maturity
date.
Leg Maturity Date................. The date on which the M
leg's principal amount
becomes due.
Leg Maturity Date Adj Calendar.... Regarding the maturity C
date, this specifies
which dates are
considered holidays.
Leg Calc Per Adj Bus Day Conv..... If a date defining the C
calculation period falls
on a holiday, this
adjusts the actual dates
based on the definition
of the input.
Leg Calc Frequency................ Calculation frequency, M
also known as the
compounding frequency for
compounded swaps.
Leg Roll Conv..................... Describes the day of the C
month when the payment is
made.
Leg Calc Per Adj Calendar......... Regarding the calculation C
period, this specifies
which dates are
considered holidays.
Leg Stream Daycount............... Defines how interest is M
accrued/calculated.
Payment Stream Comp Method........ If payments are made on C
one timeframe but
calculations are made on
a shorter timeframe, this
describes how to compound
interest.
Payment Stream Business Day Conv.. If cash flow pay or C
receive date falls on a
weekend or holiday, value
defines actual date
payment is made.
Payment Stream Frequency.......... Frequency at which M
payments are made.
Payment Stream Relative To........ Specifies the anchor date C
when the payment date is
relative to that date.
Payment Stream First Date......... The unadjusted first C
payment date.
Payment Stream Last Regular Date.. The unadjusted last C
regular payment date.
Payment Leg Calendar.............. Regarding dates on which C
cash flow payments/
receipts are scheduled,
this specifies which
dates are considered
holidays.
Leg Reset Date Bus Day Conv....... Business day convention to C
apply to each reset date
if the reset date falls
on a holiday.
Leg Reset Date Relative To........ Specifies the anchor date C
when reset date is
relative to that date.
Leg Reset Frequency............... Frequency at which resets C
occur. If the Leg Reset
Frequency is greater than
the calculation per
frequency, more than 1
reset date should be
established for each
calculation per frequency
and some form of rate
averaging is applicable.
Leg Reset Fixing Date Offset...... Specifies the fixing date C
relative to the reset
date in terms of a
business days offset.
Leg Fixing Day Type............... The type of days to use to C
find the fixing date
(i.e., business days,
calendar days, etc.).
Leg Reset Date Calendar........... Regarding reset dates, C
this specifies which
dates are considered
holidays.
Leg Fixing Date Bus Day Conv...... Business day convention to C
apply to each fixing date
if the fixing date falls
on a holiday.
Leg Fixing Date Calendar.......... Regarding the fixing date, C
this specifies which
dates are considered
holidays.
Fixed Leg Rate or Amount.......... Only populate if Leg1 is C
Type ``Fixed''. This
should be expressed in
decimal form (e.g., 4%
should be input as .04).
Floating Leg Inflation Index...... If leg is floating rate, C
this gives the index
applicable to the
floating rate.
Floating Leg Spread............... Describes if there is a C
spread (typically an add-
on) applied to the coupon
rate.
Floating Leg Payment Inflation Lag Number of business days C
after payment due date on
which the payment is
actually made.
[[Page 53695]]
Floating Leg Payment Inflation The method used when C
Interpolation Method. calculating the inflation
index level from multiple
points. The most common
is the linear method.
Floating Leg Inflation Index Initial known index level C
Initial Level. for the first calculation
period.
Floating Leg Inflation Index Indicates whether a O
Fallback Bond Ind. fallback bond as defined
in the 2006 International
Swaps and Derivatives
Association (ISDA)
Inflation Derivatives
Definitions, sections 1.3
and 1.8, is applicable or
not. If not specified,
the default value is
``Y'' (True/Yes).
Leg Pmt Sched Notional............ Variable notional swap C
notional values.
Leg Stub Type..................... Stubs apply to initial or C
ending periods that are
shorter than the usual
interval between payments.
Leg Initial Stub Fixed Rate....... The interest rate C
applicable to the Initial
Stub Period in decimal
form (e.g., 4% should be
input as ``.04'').
Leg Final Stub Fixed Rate......... The interest rate C
applicable to the final
stub period in decimal
form (e.g., 4% should be
input as ``.04'').
Leg Initial Stub Floating Rate Stub rate can be a linear C
Index 1 Tenor. interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the first index.
Leg Initial Stub Floating Rate Stub rate can be a linear C
Index 2 Tenor. interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the second index.
Leg Final Stub Floating Rate Index Stub rate can be a linear C
1 Tenor. interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the first index.
Leg Final Stub Rate Floating Index Stub rate can be a linear C
2 Tenor. interpolation between two
floating rate tenors.
E.g., if the stub period
is 2 months, rate is
linear interpolation of 1-
month and 3-month
reference rates. Specify
the second index.
Leg First Reg Per Start Date...... If there is a beginning C
stub, this describes the
date when the usual
payment periods will
begin.
Leg Last Reg Per End Date......... If there is an ending C
stub, this describes the
date when the usual
payment periods will end.
Leg Accrued Interest (Coupon)..... The net accrued coupon M
amount since the last
payment in the leg
currency. If reported by
leg, indicate the
associated stream (leg)
description (e.g.,
``FIXED/FLOAT,'' ``FLOAT1/
FLOAT2'').
Profit/Loss....................... Profit/Loss resulting from M
changes in value due to
changes in underlying
curve movements or
floating index rate
resets. This should
exclude impacts to NPVs
from extraneous cash
flows (price alignment
interest, fees, and
coupons).
Leg Coupon Amount................. Coupon amount for T + 1 in M
the leg currency. This
should reflect the net
cash flow that will
actually occur on the
following business day. A
negative number indicates
payment was made.
Leg Current Period Coupon Rate.... If leg is a floating leg, M
this indicates the
current rate used to
calculate the next
floating leg coupon in
decimal form (e.g., 4%
should be input as
``.04'').
I01............................... Change in value in native M
currency if the relevant
pricing curve is shifted
up by 1 basis point.
Dollar Value of Basis Point (DV01) Change in value in native M
currency of the swap/
swaption/floor/cap if
relevant pricing curve is
shifted up by 1 basis
point. DV01 = ``dollar''
value of a basis point in
currency (not percentage)
terms, the change in fair
value of the leg,
transaction, position, or
portfolio (as
appropriate) commensurate
with a 1 basis point
(0.01 percent)
instantaneous,
hypothetical increase in
the related zero-coupon
curves. DV01 may refer to
non-dollar currencies and
related curves. From the
DCO's point of view:
positive DV01 = profit/
gain resulting from 1
basis point increase,
negative DV01 = loss
resulting from 1 basis
point increase.
Net Cash Flow..................... Net cash flow recognized M
on report date (with
actual settlements
occurring according to
the currency's settlement
conventions). E.g.,
profit/loss, price
alignment interest, cash
payments (fees, coupons,
etc.).
Net Present Value................. Net present value (NPV) of M
all positions by currency.
Present Value Of Other Payments... Includes the present value M
of any upfront and/or
final/settlement payments
that will be settled
after the report date.
Only include amounts that
are affecting the NPV of
current trades.
Net Present Value Previous........ Previous day's NPV by C
currency.
Price Alignment Interest.......... To minimize the impact of M
daily cash variation
margin payments on the
pricing of swaps, the DCO
will charge interest on
cumulative variation
margin received and pay
interest on cumulative
variation margin paid.
Universal or Unique) Swap Universal (or Unique) Swap C
Identifier. Identifier (USI)
namespace and USI. Enter
the USI Namespace and the
USI separated by a pipe
``[verbar]'' character..
Stream Initial Exchange........... Amount of any exchange of C
cash flow at initiation
of trade being cleared.
Stream Initial Exchange Date...... Date that the initial C
exchange is set to occur.
Stream Final Exchange............. Amount of any exchange of C
cash flow at maturity of
trade.
Stream Final Exchange Date........ Date that the final C
exchange is set to occur.
Other Payments.................... Includes any upfront and/ C
or final/settlement
payments made/received
for the trade date.
(Indicate gross pay/
collect amounts.).
Trade Date........................ Actual trade date for each M
position record
(including specifically,
the cleared date and the
trade date).
Event Description................. Description for each C
position record.
------------------------------------------------------------------------
Equity Cross Margin (Daily Position Reporting)
------------------------------------------------------------------------
Exchange Security Identifier...... Contract code issued by M
the exchange.
Clearing Security Identifier...... Code assigned by the DCO M
for a particular contract.
Product Type...................... Indicates the type of C
product the security is
associated with.
Security Type..................... Indicates type of security M
Maturity Month Year............... Month and year of the M
maturity.
Maturity Date..................... The date on which the C
principal amount becomes
due. For NDFs, this
represents the fixing
date of the contract.
Asset Class....................... The broad asset category M
for assessing risk
exposure.
Asset Subclass.................... The subcategory C
description of the asset
class.
Asset Type........................ Provides a more specific C
description of the asset
subclass.
Security Description.............. Used to provide a textual M
description of a
financial instrument.
Position (Long)................... Long position size. If a M
position is quoted in a
unit of measure (UOM)
different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Position (Short).................. Short position size. If a M
position is quoted in a
UOM different from the
contract, specify the
UOM. If a position is
measured in a currency,
specify the currency.
Settlement Price/Currency......... Settlement price, prior M
settlement price,
settlement currency, and
final settlement date.
Option Strike Price............... Option strike price....... C
Option Put/Call Indicator......... Option type............... C
Underlying Exchange Commodity Code Underlying Contract code C
issued by the exchange.
Underlying Clearing Commodity Code Registered commodity C
clearing identifier. The
code is for the contract
as if it were traded in
the form it is cleared.
For example, if the
contract was traded as a
spread but cleared as an
outright, the outright
symbol should be used.
Underlying Product Type........... Indicates the type of C
product the security is
associated with.
Underlying Security Type.......... Indicator which identifies C
the underlying derivative.
Underlying Maturity Month Year.... Month and year of the C
maturity.
Underlying Maturity Date.......... The date on which the C
principal amount becomes
due.
Underlying Asset Class............ The underlying broad asset C
category for assessing
risk exposure.
[[Page 53696]]
Underlying Asset Subclass......... The subcategory C
description of the asset
class.
Underlying Asset Type............. Provides a more specific C
description of the asset
subclass.
Underlying Settlement Price/ Settlement price, prior C
Currency. settlement price,
settlement currency, and
final settlement date.
------------------------------------------------------------------------
M = mandatory C = conditional O = optional.
C. Risk Metric Ladder Reporting
------------------------------------------------------------------------
Field name Description Use
------------------------------------------------------------------------
Common Fields (Risk Metric Ladder Reporting)
------------------------------------------------------------------------
Total Message Count............... The total number of M
reports included in the
file.
FIXML Message Type................ FIXML account summary M
report type.
Sender ID......................... The CFTC-issued DCO M
identifier.
To ID............................. Indicate ``CFTC''......... M
Message Transmit Datetime......... The date and time the file M
is transmitted.
Report ID......................... A unique identifier M
assigned by the CFTC to
each clearing member
report.
Report Date....................... The business date of the M
information being
reported.
Base Currency..................... Base currency referenced M
throughout report;
provide exchange rate
against this currency.
Report Time (Message Create Time). The report ``as of'' or M
information cut-off time.
Message Event..................... The event source being M
reported.
Ladder Indicator.................. Indicator that identifies M
the type of risk metric
ladder.
DCO Identifier.................... CFTC-assigned identifier M
for a DCO.
Clearing Participant Identifier... DCO-assigned identifier M
for a particular clearing
member.
Clearing Participant Name......... The name of the clearing M
member.
Fund Segregation Type............. Clearing fund segregation M
type.
Clearing Participant LEI.......... LEI for a particular M
clearing member.
Clearing Participant LEI Name..... The LEI name associated M
with the clearing member
LEI.
Customer Identifier............... Proprietary identifier for C
a particular customer
position account.
Customer Name..................... The name associated with C
the customer position
identifier.
Customer Account Type............. Type of account used for C
reporting.
Customer LEI...................... LEI for a particular C
customer; provide if
available.
Customer LEI Name................. The LEI name associated C
with the customer
position LEI.
Unique Margin Identifier.......... A single field that C
uniquely identifies the
margin account. This
field us used to identify
associated positions.
------------------------------------------------------------------------
Delta Ladder (Daily Reporting)
------------------------------------------------------------------------
Currency.......................... ISO 4217 currency code.... M
FX Rate........................... Rate used to convert the M
currency to USD.
Curve Name........................ Name of the reference M
curve.
Tenor............................. Number of days from the M
report date.
Sensitivity....................... Theoretical profit and M
loss with a single upward
basis point shift.
------------------------------------------------------------------------
Gamma Ladder (Daily Reporting)
------------------------------------------------------------------------
Currency.......................... ISO 4217 currency code.... M
FX Rate........................... Rate used to convert the M
currency to USD.
Curve Name........................ Name of the reference M
curve.
Tenor............................. Number of days from the M
report date.
Sensitivity....................... Theoretical profit and M
loss with a single upward
basis point shift.
------------------------------------------------------------------------
Vega Ladder (Daily Reporting)
------------------------------------------------------------------------
Currency.......................... ISO 4217 currency code.... M
FX Rate........................... Rate used to convert the M
currency to USD.
Curve Name........................ Name of the reference M
curve.
Tenor............................. Number of days from the M
report date.
Sensitivity....................... Theoretical profit and M
loss with a single upward
basis point shift.
------------------------------------------------------------------------
M = mandatory C = conditional O = optional.
D. Curve Reference Reporting
------------------------------------------------------------------------
Field name Description Use
------------------------------------------------------------------------
Common Fields (Curve Reference Reporting)
------------------------------------------------------------------------
Total Message Count............... The total number of M
reports included in the
file.
FIXML Message Type................ FIXML account summary M
report type.
Sender ID......................... The CFTC-issued DCO M
identifier.
To ID............................. Indicate ``CFTC''......... M
Message Transmit Datetime......... The date and time the file M
is transmitted.
Report ID......................... A unique identifier M
assigned by the CFTC to
each clearing member
report.
Report Date....................... The business date of the M
information being
reported.
Base Currency..................... Base currency referenced M
throughout report;
provide exchange rate
against this currency.
Report Time (Message Create Time). The report ``as of'' or M
information cut-off time.
Message Event..................... The event source being M
reported.
DCO Identifier.................... CFTC-assigned identifier M
for a DCO.
------------------------------------------------------------------------
[[Page 53697]]
Currency Curve (Daily Reporting)
------------------------------------------------------------------------
Curve............................. Reference curve name...... M
Currency.......................... ISO 4217 currency code.... M
Maturity Date..................... The date on which the M
principal amount becomes
due.
Par Rate.......................... Rate such that the M
maturity will pay in
order to sell at par
today.
------------------------------------------------------------------------
Zero Rate Curve (Daily Reporting)
------------------------------------------------------------------------
Currency.......................... ISO 4217 currency code.... M
Curve............................. Reference curve name...... M
Maturity Date..................... The date on which the M
principal amount becomes
due.
Offset............................ The difference in days M
between the maturity date
and reporting date.
Accrual Factor.................... The difference in years M
between the maturity date
and reporting date.
Discount Factor................... Value used to compute the M
present value of future
cash flows values.
Zero Rate......................... Averages of the one-period M
forward rates up to their
maturity.
------------------------------------------------------------------------
M = mandatory C = conditional O = optional.
E. Backtesting Reporting
------------------------------------------------------------------------
Field name Description Use
------------------------------------------------------------------------
Common Fields (Backtesting Reporting)
------------------------------------------------------------------------
Total Message Count............... The total number of M
reports included in the
file.
FIXML Message Type................ FIXML account summary M
report type.
Sender ID......................... The CFTC-issued DCO M
identifier.
To ID............................. Indicate ``CFTC''......... M
Message Transmit Datetime......... The date and time the file M
is transmitted.
Report ID......................... A unique identifier M
assigned by the CFTC to
each clearing member
report.
Report Date....................... The business date of the M
information being
reported.
Base Currency..................... Base currency referenced M
throughout report;
provide exchange rate
against this currency.
Report Time (Message Create Time). The report ``as of'' or M
information cut-off time.
Message Event..................... The event source being M
reported.
Breach Indicator.................. Indicates the breach file. M
DCO Identifier.................... CFTC-assigned identifier M
for a DCO.
Clearing Participant Identifier... DCO-assigned identifier M
for a particular clearing
member.
Clearing Participant Name......... The name of the clearing M
member.
Fund Segregation Type............. Clearing fund segregation M
type.
Clearing Participant LEI.......... LEI for a particular M
clearing member.
Clearing Participant LEI Name..... The LEI name associated M
with the clearing member
LEI.
Customer Identifier............... Proprietary identifier for C
a particular customer
position account.
Customer Name..................... The name associated with C
the customer position
identifier.
Customer Account Type............. Type of account used for C
reporting.
Customer LEI...................... LEI for a particular C
customer; provide if
available.
Customer LEI Name................. The LEI name associated C
with the customer
position LEI.
Unique Margin Identifier.......... A single field that C
uniquely identifies the
margin account. This
field us used to identify
associated positions.
------------------------------------------------------------------------
Breach Details (Daily Reporting)
------------------------------------------------------------------------
Initial Margin.................... Margin requirement M
calculated by the DCO's
margin methodology.
Unless an integral part
of the margin
methodology, this figure
should not include any
additional margin add-ons.
Backtesting Metric................ Indicates the type of M
profit and loss
calculation used for
backtesting:.
VM--Variation
Margin.
STATIC--Static
Portfolio P/L (Clean P/L).
DIRTY--Dirty P/L.
MTMA--Mark to
Market P/L.
MTMO--Mark to
Model P/L.
OTHER............
Backtesting Metric Amount......... Amount on the positions M
for which Initial Margin
is computed.
Breach Amount..................... Difference between the M
Initial Margin and
Backtesting Metric Amount.
Margin Period of Risk............. Holding period for which M
the Backtesting Metric is
calculated in days.
------------------------------------------------------------------------
Breach Summary (Daily Reporting)
------------------------------------------------------------------------
Total Instance.................... Total number of testing M
dates for the account.
Number of Breaches................ Total number of breaches M
in the testing period.
Test Range Start.................. Beginning date of the test M
Test Range End.................... End date of the test...... M
------------------------------------------------------------------------
M = mandatory C = conditional O = optional.
F. Manifest Reporting
------------------------------------------------------------------------
Field name Description Use
------------------------------------------------------------------------
Manifest Reporting
------------------------------------------------------------------------
Total Message Count............... The total number of M
reports included in the
file.
FIXML Message Type................ FIXML account summary M
report type.
[[Page 53698]]
Sender ID......................... The CFTC-issued DCO M
identifier.
To ID............................. Indicate ``CFTC''......... M
Message Transmit Datetime......... The date and time the file M
is transmitted.
Filenames......................... List of files to be sent.. M
------------------------------------------------------------------------
M = mandatory C = conditional O = optional.
PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION
0
11. The authority citation for part 140 continues to read as follows:
Authority: 7 U.S.C. 2(a)(12), 12a, 13(c), 13(d), 13(e), and
16(b).
0
12. Amend Sec. 140.94 by revising paragraph (c)(10) to read as
follows:
Sec. 140.94 Delegation of authority to the Director of the Division
of Swap Dealer and Intermediary Oversight and the Director of the
Division of Clearing and Risk.
* * * * *
(c) * * *
(10) All functions reserved to the Commission in Sec. 39.19(a),
(b)(1), (c)(2), (c)(3)(iv), and (c)(5) of this chapter;
* * * * *
Issued in Washington, DC, on July 31, 2023, by the Commission.
Christopher Kirkpatrick,
Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Reporting and Information Requirements for Derivatives
Clearing Organizations--Commission Voting Summary and Chairman's and
Commissioners' Statements
Appendix 1--Commission Voting Summary
On this matter, Chairman Behnam and Commissioners Johnson,
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No
Commissioner voted in the negative.
Appendix 2--Statement of Support of Chairman Rostin Behnam
Today the Commission considered a final rule addressing
reporting and information requirements for derivatives clearing
organizations (DCOs). As with the proposal, the final rule provides
greater transparency, clarity, and certainty to our DCOs and market
participants. It also streamlines how the Commission receives
information necessary to carry out its supervisory role. By
periodically updating our regulations, the agency can incorporate
our experiences with the industry and market participants directly
into our ruleset. We can also use these opportunities to respond to
emerging technologies, issues, and risks with responsive and
targeted regulation. This both creates efficiencies and a level
playing field, and provides a forum to address ongoing compliance
concerns on each of our respective sides through open dialogue.
I fully support the final rule. Ensuring our regulations are
operating as intended is paramount. DCOs play a critical role in
U.S. derivatives markets. Any lapse in their duties or even the
perception that compliance is nothing more than window dressing puts
our markets and the larger financial system at risk, especially when
it comes to entities that have been designated as systemically
important by the Financial Stability Oversight Council known as
``SIDCOs.''
The majority of the proposed Part 39 amendments--with the
exception of those addressing system safeguards--were considered
today. Several amendments in the final rule, codify existing staff
letters and Commission practices and interpretations with the goal
of ensuring that DCOs understand their reporting obligations and the
Commission receives the information it needs to perform its
supervisory responsibilities in the most effective and least
burdensome manner. For example, an amendment to Rule 39.19 will
codify an existing staff letter \1\ providing for no-action relief
by removing the requirement that a DCO report daily variation margin
and cash flows by individual customer account. The final rule will
also codify existing reporting fields for the daily reporting
requirements in new appendix C to Part 39.\2\ Additional amendments
will update information requirements associated with commingling
customer funds and positions in futures and swaps in the same
account.
---------------------------------------------------------------------------
\1\ See CFTC Letter No. 21-01, Request for Temporary No-Action
Relief from the Reporting Requirements in Commission Regulation
39.19(c)(1) (Dec. 31, 2020), https://www.cftc.gov/csl/21-01/download; CFTC Letter no. 21-31, Extension of Temporary No-Action
Relief from the Reporting Requirements in Commission Regulation
39(c)(1) (Dec. 22, 2021), https://www.cftc.gov/csl/21-31/download;
and CFTC Letter No. 22-20, Extension of No-Action letter Regarding
Reporting Requirements in Commission Regulation 39.19(c)(1) (Dec.
19, 2022), https://www.cftc.gov/csl/22-20/download.
\2\ Commodity Futures Trading Commission Guidebook for Part 39
Daily Reports, Version 1.0.1, Dec. 10, 2021 (Reporting Guidebook).
---------------------------------------------------------------------------
Acknowledging that different risk profiles require more tailored
consideration, the final rule will adopt specific obligations for
fully collateralized positions which specify that certain
requirements for risk management, daily reporting, and website
publication do not apply to DCOs that clear fully collateralized
positions. In addition, to ensure that the Commission maintains
unfettered access to data, an amendment to Part 140 of the
Commission rules will delegate to the Director of the Division of
Clearing and Risk (DCR) existing authority to require a DCO to
provide to the Commission the information specified in Rule 39.19
and any other information that the Commission determines to be
necessary to conduct oversight of the DCO, and to specify the format
and manner in which the information required must be submitted to
the Commission.
Given that what we do as regulators is as important as what we
do not do, based on the concerns raised regarding the system
safeguards proposals, the Commission did not vote on the adoption of
any of the proposed amendments. This determination does not alter
the current landscape or diminish Commission concerns regarding
cyber resilience. However, significant and important concerns and
meaningful alternatives raised by commenters require additional
consideration and analysis. The Commission will continue to consider
how best to address the issues targeted in the proposed rule while
incorporating additional information gained through this rulemaking
process and additional examination.
Appendix 3--Statement of Support of Commissioner Kristin N. Johnson
Today, the Commission considers several amendments to Part 39
regulations. In January of 2020, the Commission amended a number of
the provisions in Part 39 to enhance certain risk management and
reporting obligations and clarify the meaning of certain provisions
including registration and reporting requirements.\1\ Last November,
the Commission considered a proposed rulemaking seeking to further
update certain Part 39 regulations to reflect developments in risk
management. I support the Commission's consideration of these
amendments designed to improve derivatives clearing organizations'
(DCO) risk management practices and clarify reporting requirements
set out in Part 39.
---------------------------------------------------------------------------
\1\ Derivatives Clearing Organization General Provisions and
Core Principles, 85 FR 4800 (Jan. 27, 2020), https://www.federalregister.gov/documents/2020/01/27/2020-01065/derivatives-clearing-organization-general-provisions-and-core-principles.
---------------------------------------------------------------------------
The Dodd-Frank Wall Street Reform and Consumer Protection Act
set out to implement reforms to mitigate systemic risk and promote
transparency and stability.\2\ DCOs play a significant role in
mitigating risk and facilitating stability in our markets by
providing essential clearing and settlement market infrastructure.
Clearinghouses enhance visibility, introduce and enforce uniform
contractual obligations, and establish standards for critical risk
management tools such as initial and variation margin. They
facilitate dispute resolution among counterparties, ensure the
maintenance of necessary liquidity reserves,
[[Page 53699]]
introduce important operating systems and cyber-risk management
measures, and implement governance measures that mitigate conflicts
of interest and monitor systems safeguards.\3\
---------------------------------------------------------------------------
\2\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010).
\3\ Statement of Commissioner Kristin N. Johnson in Support of
Notice of Proposed Amendments to Reporting and Information
Requirements for Derivatives Clearing Organizations, Nov. 10, 2022,
https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement060723d.
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In light of the role of DCOs in our markets, we must provide a
framework that not only supports market stability but is functional
and can be practically integrated. The implementation of the
proposed final amendments to existing regulations will address gaps
in reporting data to the Commission.
Cyber Security
We live in a digital age, and our dependence on technology,
digital operational infrastructure systems, and software is
increasingly undeniable. The security and integrity of cyber systems
is important for the effective functioning of individual firms.
Interconnectedness in financial markets creates the possibility that
a cyber-threat that impacts certain actors in our markets may also
impact the safety and soundness of counterparties or customers. In
some instances, these cyber events will lead to more significant
disruption, impeding clearing and settlement of transactions or
impacting price discovery. Just a few months ago, ION, a significant
service provider in global derivatives markets, experienced a
cybersecurity event that triggered concerning effects across
derivatives markets. The ION cybersecurity event underscores the
importance of cyber security monitoring, prevention, and reporting.
Under DCO Core Principle I, DCOs must ``establish and maintain a
program of risk analysis and oversight to identify and minimize
sources of operational risk through the development of appropriate
controls and procedures . . . .'' \4\ In accord with this Core
Principle, the Commission adopted Regulation 39.18(g) requiring DCOs
to promptly notify the Division of Clearing and Risk (DCR) of any
cyber security event or targeted threat that materially impairs, or
creates a significant likelihood of material impairment of automated
system operation, reliability, security, or capacity.\5\
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\4\ 7 U.S.C. 7a-1(c)(2)(I)(i).
\5\ 17 CFR 39.18(g).
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In November of 2022, DCR proposed amendments to Regulation
39.18(g), recommending improvements to certain cyber-event reporting
requirements. The proposed amendment would have eliminated the
materiality threshold, which would have required DCOs to report all
such events regardless of magnitude.\6\ The amendment would have
increased reporting of DCO cyber events and automated system
impairments, including impairments concerning third-party provided
services.
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\6\ Reporting and Information Requirements for Derivatives
Clearing Organizations, 87 FR 76698, 76700 (Dec. 15, 2022), https://www.cftc.gov/sites/default/files/2022/12/2022-26849a.pdf.
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While I appreciate the Commission's careful response to public
comments received regarding proposed amendments to Regulation
39.18(g), it is important to balance thoughtful consideration of
cyber regulation with the emergent need for action. Our markets
cannot afford to wait for continued attacks or delayed action over a
significant period of time. The potential disruption that may be
created by cyber-events requires a timely response.
As market participants integrate, adopt, and partner with
significant technology firms and adopt software and technology that
facilitates the technical operations for their businesses, it is
imperative that our regulation focus on monitoring, reporting,
transparency and the development of cyber recovery and resilience
programs.
Four months ago, the Market Risk Advisory Committee (MRAC) that
I sponsor held a meeting in this room. The director of national
cybersecurity at the White House's Office of the National Cyber
Director and others joined a thoughtful dialogue focused on
preventing or mitigating the threat of cyber events and cyber
security threats. In addition to valuable dialogue during the MRAC
meeting, my staff and I traveled to the White House executive
offices to meet with the Office of the National Cyber Director. Our
discussions and dialogue continue.
DCR is correctly focused on refining and updating Regulation
39.18(g). There is a clear need for immediate and careful study of
the cyber-risk issues that present for DCOs. To this end, an MRAC
subcommittee focused on technical and operational resilience will
begin to examine several of the issues raised in the proposed
amendment and comment letters. Hopefully, our collective efforts
will enhance cyber resilience of the registrants in our markets as
well as the critical third- and fourth-party service providers that
registrants may depend on.
Segregation of Customer Funds
DCO Core Principle F and requires DCOs to establish standards
and procedures for protecting and ensuring the safety of clearing
member and customer funds. In addition, Core Principle F requires
DCOs to establish standards and procedures that are designed to
protect and to ensure the safety of funds and assets held in
custody, to hold such funds and assets in a way designed to minimize
risk, and to limit investment of such funds and assets to
instruments with minimal credit, market, and liquidity risks. The
DCO risk mitigation function is imperative for the segregation and
safekeeping of clearing member and customer funds and assets.
Today, DCR proposes amendments that seek to close a gap with
respect to DCO regulations that govern segregation of customer
assets.
While there are robust regulations governing segregation of
customer funds by futures commission merchants (FCMs),\7\ those same
protections may not reach all DCO customers. In some instances, the
divergence in our rules is based on the history and structure of the
markets for certain assets and products. As innovative financial
products and market structures proliferate, we must be mindful of
the consequences of the lack of parallelism in our customer
protection regulations.
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\7\ Section 4d(a)(2) of the CEA requires each FCM to segregate
from its own assets all money, securities, and other property
deposited by futures customers to margin, secure, or guarantee
futures contracts and options on futures contracts traded on
designated contract markets. 7 U.S.C. 6d(a)(2). In addition, Section
4d(a)(2) requires an FCM to treat and deal with futures customer
funds as belonging to the futures customer, and prohibits an FCM
from using the funds deposited by a futures customer to margin or
extend credit to any person other than the futures customer that
deposited the funds. Id.
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I support the Commission's adoption of the proposed amendments
that enhance customer protections, namely segregation of customer
funds, treatment of customer funds, and the introduction of
financial resource requirements for certain DCOs.
Liquidity Reserves
The amendments today also include updates addressing liquidity-
related transparency. When market participants fail to manage
liquidity risk effectively, enterprise risk management failures may
occur and, depending on the size and significance of the market
participants experiencing risk management failures, the effects may
trigger disruption across global financial markets.
The transparency amendments proposed today, enhance reporting
requirements for credit and liquidity facilities. Specifically,
Regulation 39.19(c)(4)(xv) will require DCOs to report within one
business day after becoming aware of any material issues or concerns
regarding the performance, stability, liquidity, or financial
resources of any credit facility funding arrangement, liquidity
funding arrangement, custodian bank, or settlement bank used by the
DCO or approved for use by the DCO's clearing members. These
amendments will improve the Commission's risk surveillance of DCOs
and clearing members. Prudent risk management--the management of
liquidity needs, in particular--is critical to DCO resilience. I
support the amendments to enhance transparency. Each adds value to
the Core Principles we uphold and our mandate to the protect
customers and preserve the integrity of the financial markets that
we regulate.
I want to thank the staff of DCR--Eileen Donovan, August
Imholtz, Gavin Young, and Parisa Nouri--for their diligent and
thoughtful work on these amendments.
Appendix 4--Statement of Support of Commissioner Christy Goldsmith
Romero
Clearinghouses play an important public interest role--they are
critical market infrastructure intended to foster financial
stability, trust, and confidence in U.S. markets. Dodd-Frank Act
reforms increased central clearing, thereby increasing financial
stability. Those reforms also concentrated risk in clearinghouses.
With that concentrated risk, it is critical that the Commission
maintain vigilance in its oversight over clearinghouses to identify
and monitor risk and promote financial stability. This is most
important for the CFTC's monitoring of systemic risk.
[[Page 53700]]
Clearinghouse reporting is a cornerstone to the Commission's
oversight, including monitoring risk and promoting financial
stability. I support this rule because it strengthens and improves
certain clearinghouse reporting requirements.
Strengthening Reporting on Risk Characteristics of Unusual Products
To Be Commingled Facilitates Effective Commission Oversight in
Areas of Emerging Risk
First, the final rule strengthens requirements for reporting the
risk characteristics of products to be commingled that are unusual
in relation to other products that the clearinghouse clears. A
clearinghouse must obtain CFTC approval to commingle customer
positions and associated funds of products that would otherwise be
held in separate customer accounts.
This rule facilitates effective Commission oversight, as
clearinghouses will provide better information for the CFTC to
evaluate a request to commingle customer positions across asset
classes. This practice can be used to reduce margin requirements for
customers with offsetting positions. Margin requirements are an
important element of financial stability, so any reduction should be
carefully considered.
In addition to providing the CFTC an analysis of risk
characteristics of the products to be commingled, this rule adds an
analysis of any risk characteristics that are unusual in relation to
the products that clearinghouse clears, as well as how it plans to
manage any identified risk. This addition will help the Commission
better understand the risks posed by the commingling arrangement.
I also appreciate that the final rule incorporates the
suggestion by a public interest group that the Commission go further
and add that the analysis should specifically address the commingled
products' margining, liquidity, default management, pricing, and
volatility risks that are unusual in relation to those currently
cleared by the clearinghouse. This is particularly important given
that the derivatives industry is seeing a change with emerging
products such as digital assets for example, that can carry emerging
risk in each of these areas.
Expanding Reporting of Change of Control of the Clearinghouse
I support the expansion of the rule requiring a clearinghouse to
report any change to the entity or person that holds a controlling
interest, either directly or indirectly, rather than the existing
rule of reporting a change that would result in at least a 10
percent change of ownership. The existing rule could mean that there
would be no reporting when an entity increases its ownership stake
in a clearinghouse from 45 percent to 51 percent. That would leave
the Commission blind to important changes of control. This proposed
rule would provide the CFTC with better understanding of the
organizational structure of the clearinghouse, including control and
ownership. This is a critical change.
I read with interest the comment about changes to Regulation
39.19(c)(4) during the last Administration regarding Commission
approval when a clearinghouse seeks to transfer its registration and
open interest in connection with a corporate change. While that is
not the subject of this rule, I would be interested in learning more
about the effects of those amendments and what is needed for the
Commission to have greater control over a transfer of registration.
This is an issue that arose when it became apparent that LedgerX
would be sold in FTX's bankruptcy.
Strengthening the Enforceability of Reporting Fields
Clearinghouses report information daily to the Commission such
as initial margin, variation margin, cash flow, and position
information for each clearing member, by house origin, and by each
customer origin and customer account. Over time, the Commission has
provided detailed instructions and technical specifications in the
Reporting Guidebook. The whole purpose of the Reporting Guidebook
was to ensure uniformity in clearinghouse reporting, as well as to
ensure that the Commission received the right information for its
surveillance and oversight of clearinghouses and the derivatives
markets.
I am pleased to support the Commission now requiring the
reporting fields, rather than just serving as a guide, which will
strengthen the enforceability of reporting fields and aid in
clearinghouse accountability. First, the Reporting Guidebook
contains some reporting fields that are only optional, not required,
but that would help the Commission in its oversight. It is important
to require these fields, removing a clearinghouse's option not to
report them. Second, the types of clearinghouses registering with or
applying to register with the Commission are changing. Recently, for
example, we have seen digital asset companies registering or
applying to register, some with no history of being regulated. It
has become increasingly important that we have rules and
regulations, rather than guides that can be ignored by new
clearinghouses.
However, I do agree with the comment from a public interest
group that it is important for the Commission to be nimble,
particularly in light of emerging products and emerging risk. I urge
the staff to consider how we can both implement this new rule
requiring the reporting fields, while also staying ahead of the risk
curve in gathering the information needed or releasing additional
guidance or rules.
Continuing Concerns Over Cyber and Other Incident Reporting
When it comes to expanding the reporting of cyber incidents and
other incidents, the final rule dropped proposed requirements for
expanded Commission reporting. Let me start by saying that drafting
new regulation is a process that works best with public input from
the full range of interested parties. While I supported this
requirement at the proposal stage, I also understand the importance
of listening to commenters about the practical effect of our
regulations.\1\
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\1\ Commissioner Christy Goldsmith Romero, ``Statement of
Commissioner Christy Goldsmith Romero on Proposed Rule on
Cybersecurity Incident Reporting'' (Nov. 10, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement111022.
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However, the concern that caused us to propose the rule still
exists. The cyber threat is pervasive and increasing. In fact, since
the Commission issued this proposal last November, cyber incidents
have continued to threaten the derivatives markets. Notably, in
January 2023, a third-party service provider, ION Markets, suffered
a ransomware attack that disrupted trade processing at affected
brokers.
Early notification is key for the Commission's ability to
protect markets, including working with registrants and all those
affected to coordinate a response. The original proposal was based
on CFTC staff finding a troubling lack of uniformity in how
clearinghouses were reporting cyber incidents or incidents of other
disruptions. As discussed in the open meeting on the proposed rule,
there were 120 reports of an incident made in fiscal year 2022.
Examination staff have learned of about perhaps as many incidents
that they considered material where the CFTC should have been
notified.\2\ They found that some clearinghouses did an excellent
job of reporting, while others lagged way behind.\3\
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\2\ See ``CFTC to Hold an Open Commission Meeting November 10''
at 1:15:00 (posted Nov. 15, 2022), https://youtu.be/hZn2Vv5uNRE.
\3\ See Id.
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The goal of the rule was to improve the uniformity of reporting
incidents to the CFTC. While I appreciate the commenters' concerns
about the consequences of removing the limitation that the incident
be material, as well as other proposed changes, we still need to
address the underlying problem in some way.
Additionally, the proposal also clarified that incidents
requiring notification were not just those caused by cyber
attackers, but also those triggered by accidents or malfunctions. At
the recent Technology Advisory Committee meeting, TAC member
Professor Hilary Allen of American University Washington College of
Law described how by some estimates, losses from accidental tech
glitches exceed those from cyberattacks.\4\ I appreciate the
discussion in the rule's preamble, which reminds clearinghouses that
the existing notification requirements already cover many instances
of operator error.
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\4\ See CFTC Technology Advisory Committee (July 18, 2023)
https://www.youtube.com/watch?v=8ro4Iu0N17I.
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Ultimately, given the experiences of the CFTC staff, the
Commission needs to find the right fix that improves notifications.
I am pleased to see a commitment here to addressing this urgent need
as cyber threats are the threats of our day. The Technology Advisory
Committee's Cybersecurity Subcommittee is working on advising the
Commission on how best to promote cyber resilience.
I am thankful for the Commission's continued attention to this
topic and I urge
[[Page 53701]]
the staff to continue engaging with commenters, financial
regulators, and the public, and to then propose new requirements. In
the interim, the Commission should also continue to work closely
with clearinghouses to maintain two-way communication, and use our
supervision and enforcement tools to ensure that we are staying on
top of cyber and other incidents so that we can fulfill our
responsibility in protecting markets.
Appendix 5--Statement of Support of Commissioner Caroline D. Pham
I support the final rule on reporting and information
requirements for derivatives clearing organizations (DCOs) (DCO
Reporting Final Rule) because of its careful attention and response
to public comments received. I would like to thank Clark Hutchison,
Eileen Donovan, Parisa Nouri, August Imholtz, Gavin Young, Theodore
Polley, and Elizabeth Arumilli of the Division of Clearing and Risk
(DCR) for their work on the DCO Reporting Final Rule. I appreciate
the staff addressing my concerns.
The Commission has a great deal to be proud of with respect to
its DCO registration and oversight regimes. Mandatory clearing for
swaps was a pillar of the G20 reforms, and the U.S. was one of the
first jurisdictions to adopt a clearing requirement pursuant to the
directive.\1\ Since then, the CFTC has amended its rules to keep
them up to date and ensure they reflect changes that take place in
the industry.\2\
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\1\ G20 Pittsburgh Summit (Sept. 24-25, 2009); Clearing
Requirement Determination Under Section 2(h) of the CEA, 77 FR 74283
(Dec. 13, 2012).
\2\ Derivatives Clearing Organization General Provisions and
Core Principles, 85 FR 4800 (Jan. 27, 2020).
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I am pleased that the DCO Reporting Final Rule is appropriately
responsive to industry concerns that the Commission's existing rules
were unworkable.\3\ I continue to stress the need that the
Commission evaluate its rules to ensure they are functioning as
intended, and propose workable solutions to any operational or
implementation challenges to enable firms to more effectively
achieve compliance, particularly for technical issues that do not
meaningfully impact our oversight or systemic risk concerns.
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\3\ In January 2020, as part of updates to its DCO regulations,
the CFTC amended the daily reporting requirements for DCOs to
require, among other things, the reporting of margin and position
information by each individual customer account. The Commission then
learned of concerns about futures commission merchants' ability to
provide this information to DCOs. As a result, CFTC staff issued a
no-action letter extending the compliance date for this reporting
requirement in order to resolve this issue. See CFTC Letter No. 21-
01, United States Commodity Futures Trading Commission (Dec. 31,
2020), https://www.cftc.gov/csl/21-01/download; see also CFTC Letter
No. 21-31, United States Commodity Futures Trading Commission (Dec.
22, 2021), https://www.cftc.gov/csl/21-31/download; CFTC Letter No.
22-20, United States Commodity Futures Trading Commission (Dec. 19,
2022) (further extending the compliance date), https://www.cftc.gov/csl/22-20/download.
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In this instance, Regulation 39.19(c)(1) required a DCO to
report to the Commission on a daily basis initial margin, variation
margin, cash flow, and position information for each clearing
member, by house origin, by each customer origin, and by individual
customer account.\4\ Since providing certain information by
individual customer account was unworkable, the Commission proposed
amending Regulation 39.19(c)(1)(i)(B) and (C) to remove the
requirement that a DCO report daily variation margin and cash flows
by individual customer account.\5\ In response to commenters, all of
whom supported removing this part of the requirement, the Commission
is removing the unfeasible part of the requirement.
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\4\ 17 CFR 39.19(c)(1).
\5\ Reporting and Information Requirements for Derivatives
Clearing Organizations, 87 FR 76698 (Dec. 15, 2022).
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There are other instances of the Commission responding to
overwhelming support from commenters on unworkable proposals. These
include significant amendments the Commission had proposed to the
system safeguards rules for DCOs. To highlight one, Regulation
39.18(g)(1) requires that a DCO promptly notify DCR staff of any
hardware or software malfunction, security incident, or targeted
threat that materially impairs, or creates a significant likelihood
of material impairment of, automated system operation, reliability,
security, or capacity.\6\
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\6\ 17 CFR 39.18(g)(1).
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The Commission had proposed amending Regulation 39.18(g)(1) to
eliminate the materiality threshold, requiring DCOs to report all
such events regardless of their magnitude.\7\ Eight out of nine
commenters opposed this proposal, and took the time to detail the
compliance issues the proposal created. Reasons included that DCOs
would report events that do not impact the DCO; the requirement
would divert attention and resources away from incidents that
deserve greater focus and planning, with little corresponding
benefit to the Commission; and the requirement would be inconsistent
with other notification regimes, including similar Commission rules
and reporting obligations to other agencies and authorities. In
general, the commenters' position was that the CFTC underestimated
the increase in reporting the amended rule would create.
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\7\ See footnote 5, supra.
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Speaking from personal experience, I think that if we had
removed the materiality requirement, there would be a nonstop flood
of notifications coming in to the staff because there are
operational issues that occur all the time, many of which are
insignificant and are resolved with de minimis impact. But
nonetheless, without a materiality threshold then all such incidents
would need to be reported promptly. So, I am pleased that we are
taking the time to consider this aspect of the proposed rule
further, particularly since there is ongoing work around the world
on international standards, and the Fed and the Securities and
Exchange Commission (SEC) are also both updating their incident
reporting requirements. There is no doubt that the maintenance of
strong incident reporting regimes is critical to CFTC oversight, but
I also believe that it is important for the Commission to harmonize
it's reporting regime with other similar regulatory approaches.
The SEC's Reg SCI is most analogous to our DCO systems
safeguards and systems incident reporting requirements.\8\ It was
promulgated in 2014 after our system safeguard rules, and after a
joint CFTC-SEC advisory committee examined the cause of the 2010
flash crash, which showed the interconnectedness between the stock
and futures markets and made recommendations for market structure
reforms. Many firms operate DCOs that are either dually registered,
or have affiliates that are registered as SEC clearing agencies, and
have already implemented policies, procedures, and processes to
comply with Reg SCI. Accordingly, it should be simpler and faster
for them to apply the same SEC reporting framework to the DCOs if we
are considering an update to our system safeguards requirements.
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\8\ See generally Regulation Systems Compliance and Integrity,
79 FR 72251 (Dec. 5, 2014) (codified at 17 CFR 240).
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In looking at the preamble to the NPRM for Reg SCI, I note that
it dates back to two policy statements by the SEC on ``Automated
Systems for Self-Regulatory Organizations'' dated 1989 and 1991.\9\
And, these policy statements are based on SEC reports dating back to
1986. Ultimately these policy statements established the initial
framework for what would later become Reg SCI.
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\9\ Automated Systems of Self-Regulatory Organizations, 54 FR
48703 (Nov. 16, 1989); Automated Systems of Self-Regulatory
Organizations, 56 FR 22490 (May 15, 1991).
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Both the securities and futures markets experienced the same
shift to electronic trading and reliance on automated systems in the
wake of rapid technological advance, and given how these
developments dominated the industry, I believe it is reasonable to
infer that the contemporaneous use of the term ``automated systems''
in CFTC regulations would have similar meaning to the SEC's use of
that term in the context of securities regulation.\10\ If the CFTC
revisits these rules, I would be interested in learning more about
the genesis of the DCO systems safeguards and reporting
requirements, and reviewing the original CFTC rulemakings, to
confirm whether that was the case.
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\10\ Regulation Systems Compliance and Integrity, 79 FR 72251,
72272 (codified at 17 CFR 240) (noting the definition of SCI systems
to include ``all computer, network, electronic, technical,
automated, or similar systems of, or operated by or on behalf of, an
SCI entity that, with respect to securities, directly support
trading, clearance and settlement, order routing, market data,
market regulation, or market surveillance'').
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[[Page 53702]]
Therefore, I think it would make sense to evaluate whether to
adopt essentially the same definition for ``automated systems'' as
the SEC definition of ``SCI systems'' because I think the intent and
scope would be the same. In fact, the SEC explicitly acknowledged
the similarities in the securities and U.S. commodities markets with
respect to systems issues and incidents in its preamble to the final
rule.\11\
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\11\ See id. at 72256 (``Systems issues are not unique to the
U.S. securities markets, with similar incidents occurring in the
U.S. commodities markets as well as foreign markets.'').
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Overall, this rule is an example of how good government works,
and I am pleased to support it. Thank you.
[FR Doc. 2023-16591 Filed 8-7-23; 8:45 am]
BILLING CODE 6351-01-P
