Federal Register, Volume 77 Issue 156 (Monday, August 13, 2012)[Federal Register Volume 77, Number 156 (Monday, August 13, 2012)]
[Rules and Regulations]
[Pages 48060-48061]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19664]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 43
RIN 3038-AD08
Real-Time Public Reporting of Swap Transaction Data; Correction
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule; correction.
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[[Page 48061]]
SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or
``Commission'') published the Real-Time Public Reporting of Swap
Transaction Data (``Real-Time Public Reporting'') rule and an
accompanying preamble in the Federal Register on Monday, January 9,
2012 (77 FR 1182). This document makes an editorial correction to
language of the preamble that conflicted with the rule text of the
final rule.
DATES: Effective Date: These corrections are effective August 13, 2012.
FOR FURTHER INFORMATION CONTACT: Nancy Markowitz, Deputy Director, 202-
418-5453, [email protected], Laurie Gussow, Attorney-Advisor, 202-
418-7623, [email protected], Division of Market Oversight, Commodity
Futures Trading Commission, Three Lafayette Center, 1155 21st Street
NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
The Commission published the final rule entitled Real-Time Public
Reporting of Swap Transaction Data (``Final Rule'') in the Federal
Register on January 9, 2012, (77 FR 1182), adopting rules to implement
a framework for the real-time public reporting of swap transactions and
pricing data for all swap transactions. The final rule, which became
effective on March 9, 2012, contains a sentence in a footnote that
created an inconsistency as to the type of swap transactions that may
be considered ``publicly reportable swap transactions'' under the Final
Rule. The sentence is corrected in this release to eliminate the
inconsistent language in the footnote and, thus, make clear that
certain, and not all, covered transactions as described in Sections 23A
and 23B of the Federal Reserve Act may be considered ``publicly-
reportable swap transactions.''
II. Summary of the Correction to the Real-Time Public Reporting Rule
The Commission received inquiries whether it considered all
``covered transactions'' between affiliates, as defined in Sections 23A
and 23B of the Federal Reserve Act \1\ to be ``publicly reportable swap
transactions.'' As published, the last sentence of footnote 44 of the
Final Rule reads: ``The Commission considers any covered transaction
between affiliates as described in Sections 23A and 23B of the Federal
Reserve Act to be publicly reportable swap transactions.'' This
sentence unintentionally conflicts with the text of Sec. 43.2 defining
``publicly reportable swap transaction,'' and with the preamble of the
Final Rule.
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\1\ Section 608 of the Dodd-Frank Act adds to paragraph 7 of the
definition of ``covered transaction'' in Section 23A of the Federal
Reserve Act (12 U.S.C. 371(c)): ``A derivative transaction, as
defined in paragraph (3) of section 5200(b) of the Revised Statutes
of the United States (12 U.S.C. 84(b)), with an affiliate, to the
extent that the transaction causes a member bank or a subsidiary to
have credit exposure to the affiliate.'' Hence, all derivatives
transactions will be subjected to Section 23A of the Federal Reserve
Act to the extent that they cause the bank to have credit exposure
to the affiliate. Section 23B of the Federal Reserve Act contains an
arm's-length requirement stating that a member bank and its
subsidiaries may engage in any covered transaction with an affiliate
only ``on terms and under circumstances, including credit standards,
that are substantially the same, or at least as favorable to such
bank or its subsidiary, as those prevailing at the time for
comparable transactions with or involving other nonaffiliated
companies, or in the absence of comparable transactions, on terms
and under circumstances, including credit standards, that in good
faith would be offered to, or would apply to, nonaffiliated
companies.''
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Section 43.2 defines the term ``publicly reportable swap
transaction,'' and also provides an example of certain swap
transactions that do not fall within the definition. Under Sec. 43.2,
in paragraph (2)(i) of the definition of ``publicly reportable swap
transaction,'' certain inter-affiliate trades may not be reportable as
the rule excludes from the definition of reportable swap transactions:
``Internal swaps between one hundred percent owned subsidiaries of the
same parent entity.'' Paragraph (3) of the definition states that the
examples of transactions set forth paragraph (2) of the definition that
do not fall within the publicly reportable swap transaction definition
``represent swaps that are not at arm's length and thus are not
publicly reportable swap transactions, notwithstanding that they do
result in a corresponding change in the market risk position between
two parties.'' Indeed, there may be covered transactions as defined in
Sections 23A and 23B of the Federal Reserve Act that are not at ``arm's
length'' transactions under Part 43, but which nevertheless result in a
corresponding change in market risk between the two parties. Under
Sec. 43.2, those types of covered transactions would not be ``publicly
reportable swap transactions.''
Further, correction of the footnote 44 sentence will remove any
conflict with the preamble language. The preamble language immediately
preceding the footnote states: ``As adopted, the definition of a
publicly reportable swap transaction also provides, by way of example,
that internal transactions to move risk between wholly-owned
subsidiaries of the same parent, without having credit exposure to the
other party would not presently require public dissemination because
such swaps are not arm's-length transactions.'' Again, there may be
covered transactions as defined in Sections 23A and 23B of the Federal
Reserve Act that may be internal transactions to move risk between
wholly-owned subsidiaries of the same parent, without having credit
exposure to the other party. Those transactions thus do not require
public dissemination because they are not arm's-length transactions.
Accordingly, this document revises the language of the last
sentence of footnote 44 on page 1187 of the Federal Register to read as
follows: ``Certain covered transactions between affiliates as described
in Sections 23A and 23B of the Federal Reserve Act may be considered to
be publicly reportable swap transactions.''
For compliance purposes, this correction of the footnote sentence
will result in a more accurate reflection of the regulatory language
that the determination of whether a covered transaction under Section
23A or 23B of the Federal Reserve Act is a publicly reportable swap
transaction should be made by the parties to the swap, rather than the
Commission. In turn, the Commission's review of such determination will
be based upon the standards as set forth in Sec. 43.2.
III. Correction
In FR Doc. 2011-33173 appearing on page 1182 in the Federal
Register on Monday, January 9, 2012, the following correction is made:
On page 1187, revise the last sentence of footnote 44 to read,
``Certain covered transactions between affiliates as described in
Sections 23A and 23B of the Federal Reserve Act may be considered to be
publicly reportable swap transactions.''
Dated: August 7, 2012.
Sauntia S. Warfield,
Assistant Secretary of the Commission.
[FR Doc. 2012-19664 Filed 8-10-12; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: August 13, 2012