2015-17959
Federal Register, Volume 80 Issue 142 (Friday, July 24, 2015)
[Federal Register Volume 80, Number 142 (Friday, July 24, 2015)]
[Notices]
[Pages 44078-44080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17959]
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COMMODITY FUTURES TRADING COMMISSION
Order Extending the Designation of the Provider of Legal Entity
Identifiers To Be Used in Recordkeeping and Swap Data Reporting
Pursuant to the Commission's Regulations
AGENCY: Commodity Futures Trading Commission.
ACTION: Order.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'') has
issued an order (``Order'') to extend the Commission's designation of
the Depository Trust and Clearing Corporation (``DTCC'') and Society
for Worldwide Interbank Financial Telecommunication (``SWIFT'') joint
venture (``DTCC-SWIFT'') as the provider of legal entity identifiers,
or ``LEIs,'' pursuant to applicable provisions of the Commodity
Exchange Act and the Commission's regulations. DTCC-SWIFT's designation
was made by Commission order issued on July 23, 2012, for a term of two
years. An Amended and Restated Order issued on July 22, 2014 amended
the
[[Page 44079]]
Commission's order of July 23, 2012, as previously amended on June 7,
2013, to extend DTCC-SWIFT's designation for an additional one year.
This Order supersedes the Commission's Amended and Restated Order
issued on July 22, 2014 and further extends DTCC-SWIFT's designation
for an additional one year while the transition to a fully operational
global LEI system continues. This Order permits registered entities and
swap counterparties subject to the Commission's jurisdiction to comply
with the legal entity identifier requirements of parts 45 and 46 of the
Commission's regulations by using identifiers issued by DTCC-SWIFT, or
any other pre-Local Operating Unit (``pre-LOU'') that has been endorsed
by the Regulatory Oversight Committee (``ROC'') of the global LEI
system as being globally acceptable and as issuing globally acceptable
legal entity identifiers.
FOR FURTHER INFORMATION CONTACT: Srinivas Bangarbale, Chief Data
Officer, Office of Data and Technology, (202) 418-5315,
[email protected], or Benjamin DeMaria, Special Counsel, Division of
Market Oversight, (202) 418-5988, [email protected], Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Legal Entity Identifiers: CEA Section 21(b) and Section 45.6
of the Commission's Regulations
B. Amended and Restated Order of July 22, 2014
II. Further Extension of Designation of the DTCC-SWIFT Utility
III. Order
I. Background
A. Legal Entity Identifiers: CEA Section 21(b) and Section 45.6 of the
Commission's Regulations
Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'') \1\ amended the Commodity Exchange
Act (``CEA'') \2\ to establish a comprehensive new regulatory framework
for swaps. Amendments to the CEA included the addition of provisions
requiring the retention, and the reporting to Commission-registered
swap data repositories (``SDRs''), of data regarding swap transactions,
in order to enhance transparency, promote standardization and reduce
systemic risk.\3\ Pursuant to these newly added provisions, the
Commission added to its regulations part 45,\4\ which sets forth
recordkeeping rules, and rules for the reporting of swap transaction
data to a registered SDR; and part 46,\5\ which sets forth
recordkeeping and swap data reporting rules for historical swaps.
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\1\ Public Law 111-203, 124 Stat. 1376 (2010).
\2\ 7 U.S.C. 1 et seq.
\3\ See, e.g., section 2(a)(13)(G) of the CEA, which requires
all swaps, whether cleared or uncleared, to be reported to a
registered SDR; new section 21(b) of the CEA, which directs the
Commission to prescribe standards for swap data reporting and
attendant recordkeeping; and new sections 4r and 2(h)(5) of the CEA,
which, among other things, establish reporting requirements for
swaps in effect as of the enactment of the Dodd-Frank Act (``pre-
enactment swaps''), as well as swaps in effect after such enactment
but prior to the effective date for compliance with the Commission's
final recordkeeping and swap data reporting rules (``transition
swaps'' and, collectively with pre-enactments swaps, ``historical
swaps'').
\4\ Swap Data Recordkeeping and Reporting Requirements, 77 FR
2136 (January 13, 2012).
\5\ Swap Data Recordkeeping and Reporting Requirements: Pre-
Enactment and Transition Swaps, 77 FR 35200 (June 12, 2012).
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Under the authority granted by section 21(b) of the CEA, which,
among other things, directs the Commission ``to prescribe standards
that specify the data elements for each swap that shall be collected
and maintained'' by a registered SDR,\6\ the Commission, in its part 45
regulations, prescribed the use of a legal entity identifier, or
``LEI,'' in required recordkeeping and swap data reporting. Section
45.6 provides that ``[e]ach counterparty to any swap subject to the
jurisdiction of the Commission shall be identified in all recordkeeping
and all swap data reporting pursuant to [part 45] by means of a single
legal entity identifier as specified in this section.'' \7\ In adopting
this requirement, the Commission highlighted the LEI as a crucial
regulatory tool to facilitate data aggregation by regulators, which
furthers, among other goals, the systemic risk mitigation and market
manipulation prevention purposes of the Dodd-Frank Act.\8\
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\6\ CEA section 21(b).
\7\ 77 FR 2204. In addition, in part 46 of the Commission's
regulations, Sec. 46.4 provides that each counterparty to a
historical swap in existence on or after April 25, 2011, for which
an initial data report is required pursuant to part 46, must obtain
a legal entity identifier, which must be used for purposes of
recordkeeping and swap data reporting under part 46 as prescribed in
Sec. 46.4. 77 FR 35228-35229.
\8\ See 77 FR 2138.
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Section 45.6 sets forth requirements that the legal entity
identifier to be used to comply with the Commission's recordkeeping and
swap data reporting rules must meet, including satisfaction of
specified technical and governance principles. In adopting these
requirements, the Commission took into consideration work that had
commenced at the international level to establish a global LEI
system.\9\ The Commission expressed its agreement that ``optimum
effectiveness of [the LEI] as a tool for achieving the systemic risk
mitigation, transparency and market protection goals of the Dodd-Frank
Act--goals shared by financial regulators world-wide--would come from
creation of [an LEI] . . . that is capable of becoming the single
international standard for unique identification of legal entities
across the world financial sector.'' \10\ The Commission cited its
involvement in an international initiative, coordinated by the
Financial Stability Board (``FSB''),\11\ to establish standards, and a
governance framework, for a global LEI system--including the
Commission's participation in an ad hoc, expert group of regulatory
authorities convened by the FSB to develop recommendations regarding
the implementation of such a system.\12\
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\9\ See 77 FR 2163.
\10\ Id.
\11\ The FSB is an international body that develops and promotes
the implementation of effective regulatory, supervisory and other
policies in the interest of financial stability. Established in 2009
as a successor to the Financial Stability Forum, the FSB coordinates
the work of national financial authorities, international standards
setting bodies and international financial institutions. Its
membership includes G-20 members, the International Monetary Fund
and the World Bank. The FSB Secretariat is located in Basel,
Switzerland. The FSB's Web site can be accessed at http://www.financialstabilityboard.org.
\12\ See 77 FR 2162.
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B. Amended and Restated Order of July 22, 2014
On July 22, 2014 the Commission issued an Amended and Restated
Order, which amended the Commission's July 23, 2012 order, as
previously amended on June 7, 2013, to extend its designation of the
DTCC-SWIFT utility while the terms of transition to a fully operational
global LEI system were finalized and implemented. In the Amended and
Restated Order, the Commission aligned the legal entity identifier
terminology used therein with the terminology that is currently in use
at the international level, and removed certain provisions that, given
the current state of implementation of the global LEI system, were no
longer applicable.
In the preamble to the Amended and Restated Order, the Commission
noted that the process to establish the global LEI system continued to
move forward since the issuance of the Amendment on June 7, 2013,
noting various
[[Page 44080]]
implementation milestones,\13\ and that while progress towards the
establishment of the global LEI system continued, the system would not
be fully operational before the expiration of DTCC-SWIFT's two-year
term of designation under the July 23, 2012 Order. The Commission
believed it was appropriate, in order to further the smooth transition
to a fully operational global LEI system, to extend its designation of
the DTCC-SWIFT utility, given the significant progress made in
establishing the global LEI system--including the ROC's endorsement of
the DTCC-SWIFT utility as a globally acceptable pre-LOU.
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\13\ In the second half of 2013, the ROC adopted endorsement
standards for pre-LOUs and the identifiers issued by them, and
endorsed sixteen member-sponsored pre-LOUs--including DTCC-SWIFT--as
globally acceptable. The Global LEI Foundation that will provide the
Central Operating Unit (``COU''), managing the central operations of
the global LEI system, was formally established under Swiss law. The
ROC and the Global LEI Foundation are developing a framework for the
transition of full operational management of the global LEI system
to the COU, with supervisory oversight by the ROC in the public
interest.
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II. Further Extension of Designation of the DTCC-SWIFT Utility
Progress towards the establishment of the global LEI system
continues. The Global LEI Foundation (``GLEIF'') is incorporated and
currently in the process of finalizing the Master Agreement with pre-
LOUs, including DTCC-SWIFT's Global Markets Entity Identifier
(``GMEI'') utility. The ROC continues, within its authority, to
facilitate that process. The finalization of the Master Agreement is a
deliberative process that includes several multi-party discussions.\14\
Progress has been made and all parties involved are putting forth
efforts to conclude the necessary steps expeditiously. Once pre-LOUs
sign the Master Agreement and become accredited, they will become LOUs
and will be under the direct operational oversight of the GLEIF, which
in turn will be under the oversight of the ROC. While it is expected
that the Master Agreement will be signed and DTCC-SWIFT accredited in
the near term, given the international and deliberative nature of the
process, the Commission finds it appropriate to provide sufficient time
for the process to conclude successfully and smoothly.
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\14\ In its 2014 Annual Report, the GLEIF reported certain
milestones regarding the development and implementation of the
Master Agreement including: Achieving consensus on core principles
among the pre-LOUS and the GLEIF; developing a common set of terms
and conditions for LOU operations to be executed in 2015; and
arriving at an agreed framework for business operations between the
GLEIF and the LOUs. See GLEIF 2014 Annual Report, available at
https://www.gleif.org/content/1-about/4-governance/9-annual-report/20150622_V1_1_RZ_GLEIF_AR_web.pdf.
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Accordingly, the Commission is issuing this Order, to further
extend the Commission's designation of the DTCC-SWIFT utility while the
transition to a fully operational global LEI system is finalized and
implemented. The Commission is not otherwise modifying the terms or
conditions found in the Amended and Restated Order.
III. Order
It is ordered, pursuant to section 21(b) of the CEA and Sec. 45.6
of the Commission's regulations that:
1. Subject to Section 2(a), below, the Depository Trust and
Clearing Corporation (``DTCC'') and Society for Worldwide Interbank
Financial Telecommunications (``SWIFT'') joint venture (``DTCC-SWIFT'')
is designated as the provider of legal entity identifiers (``LEIs''),
to be used in recordkeeping and swap data reporting pursuant to parts
45 and 46 of the Commission's regulations.
a. This designation is conditioned on DTCC-SWIFT's continuing
compliance, for as long as it is authorized to provide LEIs by this
order or any future order of the Commission, with all of the legal
entity identifier requirements of part 45 of the Commission's
regulations, and any related requirements as set forth in this order or
in the requirements document provided to DTCC-SWIFT during the
determination and designation process; including, without limitation,
the requirement to be subject to supervision by a governance structure
that includes the Commission and other financial regulators in any
jurisdiction requiring use of legal entity identifiers pursuant to
applicable law, for the purpose of ensuring that issuance and
maintenance of LEIs and of associated reference data adheres on an
ongoing basis to the Commission's requirements set forth in part 45.
b. This designation is further conditioned on the requirement that,
subject to applicable confidentiality laws and other applicable law,
(1) DTCC-SWIFT shall make public all LEIs and associated reference
data, utility operations, and identity validation processes, and (2) if
DTCC-SWIFT fails to satisfy the conditions of this designation, or upon
any termination of this designation pursuant to Section 2(c)(2) below,
DTCC-SWIFT shall, as instructed by the Commission, pass to a successor
LEI utility specified by the Commission, or to the global LEI system,
free of charge, all LEIs issued by DTCC-SWIFT and associated reference
data and all LEI intellectual property rights.
c. This designation is made for a limited term, expiring on July
22, 2016 and may be terminated by the Commission on three months'
notice in connection with (1) the establishment of the global LEI
system, or (2) DTCC-SWIFT's exit from the global LEI system.
2. To comply with the legal entity identifier requirements of parts
45 and 46 of the Commission's regulations:
a. Registered entities and swap counterparties subject to the
Commission's jurisdiction may use LEIs provided by DTCC-SWIFT, or any
other pre-Local Operating Unit (``pre-LOU'') approved by the Regulatory
Oversight Committee of the global LEI system (``ROC'') as globally
acceptable and as issuing globally acceptable LEIs. The list of pre-
LOUs that are currently approved by the ROC as globally acceptable and
as issuing globally acceptable LEIs, including the Web site address via
which registered entities and swap counterparties may contact each such
pre-LOU, is available at http://www.leiroc.org/publications/gls/lou_20131003_2.pdf.
b. As provided in Sec. 45.6(b)(1) of the Commission's regulations,
registered entities and swap counterparties subject to the Commission's
jurisdiction shall be identified in all swap recordkeeping and swap
data reporting by a single LEI.
3. This Order supersedes the Commission's Amended and Restated
Order issued on July 22, 2014.
Issued in Washington, DC, on July 17, 2015, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Appendix To Order Extending the Designation of the Provider of Legal
Entity Identifiers To Be Used in Recordkeeping and Swap Data Reporting
Pursuant to the Commission's Regulations--Commission Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative. Commissioner Wetjen did not participate in this matter.
[FR Doc. 2015-17959 Filed 7-23-15; 8:45 am]
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