FR Doc 2010-31579[Federal Register: December 17, 2010 (Volume 75, Number 242)]
[Rules and Regulations]
[Page 78892-78896]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17de10-5]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 44
RIN 3038-AD29
Reporting Certain Post-Enactment Swap Transactions
AGENCY: Commodity Futures Trading Commission.
ACTION: Interim final rule; request for comment.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is publishing for comment an interim final rule to implement
new statutory provisions introduced by Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (``Dodd-Frank Act''). Section
723 of the Dodd-Frank Act amends Section 2 of the Commodity Exchange
Act (``CEA'' or the ``Act'') by adding new Section 2(h)(5)(B), which
directs that rules adopted by the Commission under this section shall
provide for the reporting of ``transition'' swaps--that is, swaps
entered into on or after the date of enactment of the Dodd-Frank Act
and prior to the effective date of swap data reporting rules to
implement Section 2(h)(5)(B)--to a registered swap data repository
(``SDR'') or to the Commission. Each category of data is subject to a
reporting timetable specified in Section 2(h)(5). The Commission
intends shortly to notice for comment substantive rules implementing
the swap data reporting provisions of Section 2(h)(5)(B). In order to
ensure the preservation of data pending implementation of such rules,
the Commission is today adopting an interim final rule directing
specified counterparties to post-enactment, or transition, swap
transactions entered into prior to the effective date of the swap data
reporting and recordkeeping rules implementing Section 2(h)(5)(B) of
the CEA to retain information pertaining to the terms of such swaps.
DATES: This interim final rule is effective December 17, 2010. Comments
on all aspects of the interim final rule must be received on or before
January 18, 2011.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD29,
by any of the following methods:
Agency Web Site: via its Comments Online process: http://
comments.cftc.gov. Follow the instructions for submitting comments
through the Web site.
Mail: Address to David A. Stawick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW., Washington, DC 20581.
Hand Delivery/Courier: Same as mail above.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
All comments must be submitted in English or, if not, accompanied by an
English translation. Comments will be posted as received to http://
www.cftc.gov. You should submit only information that you wish to make
available publicly. If you wish the Commission to consider information
that is exempt from disclosure under the Freedom of Information Act, a
petition for confidential treatment of the exempt information may be
submitted according to the procedures established in Sec. 145.9 of the
Commission's Regulations.\1\
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\1\ 17 CFR 145.9.
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The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT: Susan Nathan, Senior Special Counsel,
Division of Market Oversight, Commodity Futures Trading Commission,
1155 21st Street, NW., Washington, DC 20581, at (202) 418-5133.
SUPPLEMENTARY INFORMATION: The Commission is adopting an interim final
rule under part 44 of its regulations under the Commodity Exchange Act
and is soliciting comments on all aspects of the rule. The Commission
will carefully consider all comments received and will address them, as
applicable, in connection with the permanent reporting rules to be
adopted under the Dodd-Frank Act.
I. Background
On July 21, 2010, President Obama signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\
Title VII of the Dodd-Frank Act \3\ amended the Commodity Exchange Act
(``CEA'' or the ``Act'') \4\ to establish a comprehensive new
regulatory framework for swaps and security-based swaps. The
legislation was enacted to reduce risk, increase transparency, and
promote market integrity within the financial system by, among other
things: (1) Providing for the registration and comprehensive regulation
of swap dealers and major swap participants; (2) imposing clearing and
trade execution requirements on standardized derivative products; (3)
creating robust recordkeeping and real-time reporting regimes; and (4)
enhancing the Commission's rulemaking and enforcement authorities with
respect to, among others, all registered entities and intermediaries
subject to the Commission's oversight.
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\2\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010), hereinafter cited as
``Dodd-Frank Act.'' The text of the Dodd-Frank Act may be accessed
at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
\3\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\4\ 7 U.S.C. 1 et seq.
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Among other things, the Dodd-Frank Act requires that swaps be
reported to a registered SDR \5\ or to the Commission if there is no
registered SDR that would accept the swap. Section 723 of the Dodd-
Frank Act adds to the CEA new Section 2(h)(5)(B), to require that
transition swaps be reported to a registered SDR or the Commission
according to specified timetables. As described below, pursuant to its
authority under Sections 4r and 2(h)(5)(A) of the CEA the Commission
previously has adopted an interim final rule addressing the reporting
timetable for swaps entered into prior to the enactment of the Dodd-
Frank Act the terms of which had not expired by that date.
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\5\ The term ``swap data repository'' is defined in Section
1a(48) of the CEA to mean ``any person that collects and maintains
information or records with respect to transactions or positions in,
or the terms and conductions of, swaps entered into by third parties
for the purpose of providing a centralized recordkeeping facility
for swaps.''
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Separately, Section 729 of the Dodd-Frank Act established in new
Section 4r(a)(2)(A) a transition rule applicable to pre-enactment
swaps, providing for the reporting, by a date certain, of each swap
entered into before the date of enactment of the Dodd-Frank Act, the
[[Page 78893]]
terms of which had not expired as of that date.\6\ Section 4r(a)(2)(B)
directs the Commission to promulgate an interim final rule within 90
days of the date of enactment of the Dodd-Frank Act providing for the
reporting of each swap entered into before the date of enactment. On
October 14, 2010, the Commission published in part 44 of its
regulations an interim final rule instructing specified counterparties
to pre-enactment swaps to report data to a registered SDR or to the
Commission by the compliance date to be established in reporting rules
to be promulgated under CEA Section 2(h)(5), and advising such
counterparties of the necessity, inherent in the reporting requirement,
to preserve information pertaining to the terms of such swaps until
reporting can be effectuated under permanent rules. The reporting
requirements established by Section 4r and Sec. Sec. 44.00-44.02 of
the Commission's Regulations will remain in effect until the effective
date of the permanent reporting rules to be adopted by the Commission
pursuant to Section 2(h)(5) of the CEA.\7\
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\6\ The statute provides that reporting must occur either (i) 30
days after issuance of the interim final rule; or (ii) such other
date as the Commission determines to be appropriate.
\7\ See Interim Final Rule for Reporting Pre-Enactment Swap
Transactions, 75 FR 63080, Oct. 14, 2010.
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Section 4r did not mandate an interim final rulemaking addressing
reporting provisions for transition swap transactions entered into on
or after the date of enactment of the Dodd-Frank Act and prior to the
effective date of the swap data reporting rule to implement the
provisions of Section 2(h)(5)(B). The instant interim final rule is
intended to provide clarity and guidance with respect to such swaps by
(i) establishing that transition swaps \8\ be subject to Section
2(h)(5)(B)'s reporting requirements and to Commission regulations to be
promulgated thereunder; and (ii) advising potential counterparties to
such swaps that implicit in this reporting requirement is the need to
retain relevant data.
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\8\ The term ``transition swap'' refers to a swap executed on or
after the date of enactment of the Dodd-Frank Act and before the
effective date of the swap data reporting and recordkeeping rules
implementing Section 2(h)(5)(B) of the CEA. As discussed infra.,
Sections 2(h)(5)(A) and 4r describe as a separate category of swaps
those executed prior to the enactment of the Dodd-Frank Act, the
terms of which had not expired by that date (``pre-enactment
swaps'').
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The Commission intends to establish permanent data recordkeeping
and reporting requirements for transition swaps in a separate
rulemaking under Section 2(h)(5)(B) of the CEA.\9\ The Commission
anticipates that its rulemaking for transition swaps will address
specifically the records, information and data regarding transition
swaps that must be retained and the timeframe for reporting such
information to a registered SDR or to the Commission.
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\9\ See Notice of Proposed Rulemaking Relating to Swap Data
Recordkeeping and Reporting Requirements n. 10, approved for
publication by the Commission at an open meeting on November 19,
2010 and expected to be published shortly in the Federal Register
(to be codified at 17 CFR part 45). Rules adopted by the Commission
under this section shall provide for the reporting of swap data as
follows:
(A) Swaps entered into on or before the date of the enactment of
this subsection shall be reported to a registered swap data
repository or the Commission no later than 180 days after the
effective date of this subsection.
(B) Swaps entered into on or after such date of enactment shall
be reported to a registered swap data repository or the Commission
no later than the later of--
(i) 90 days after such effective date; or
(ii) Such other time after entering into the swap as the
Commission may prescribe by rule or regulation.
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II. The Scope of the Interim Final Rule
This interim final rule will apply to all swaps entered into on or
after the date of enactment of the Dodd-Frank Act and before the
effective date of the swap data reporting and recordkeeping rules
implementing Section 2(h)(5)(B) of the CEA.
1. Reporting Obligations
The Commission expects that the reporting obligations outlined in
Sec. 44.03 will implicate swap transaction information and data that
counterparties normally retain as sound business practice. Interim
Sec. 44.03 establishes that reporting requirements are applicable to
transition swaps and describes the information that would be reported
to a registered SDR or to the Commission with respect to such
transaction: (i) A copy of the transaction confirmation in electronic
form, if available, or in written form if there is no electronic copy;
(ii) if available, the time the transaction was executed; and (iii)
additional information of the character described in Section 4
(``Record Preservation'') below.
In addition, Interim Sec. 44.03 provides that a designated
counterparty \10\ to a transition swap \11\ must provide to the
Commission on request any information relating to such transaction
during the time that this interim final rule is in effect. The
Commission expects that such information would vary depending upon the
needs of the Commission and may include actual as well as summary trade
data. Such summary data may include a description of a swap dealer's
counterparties or the total number of post-enactment pre-effective swap
transactions entered into by the dealer and some measure of the
frequency and duration of those contracts. The Commission believes that
this requirement will facilitate its ability to understand and evaluate
the current market for swaps and may inform its analysis of other
required rulemakings under the Dodd-Frank Act.
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\10\ The reporting obligations of specified counterparties are
delineated in Section 4r(a)(3) of the CEA, as amended. Unlike
certain other provisions of Section 4r, these obligations are not
limited to pre-enactment swaps.
\11\ The term ``transition swap'' is defined in Sec. 44.00(c)
of the Commission's Regulations to mean ``any swap entered into
after the enactment of the Dodd-Frank Act of 2010 (July 21, 2010)
and prior to the effective date of the swap data reporting and
recordkeeping rules implemented pursuant to Section 2(h)(5)(B)'' of
the CEA.
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2. Reporting Party
Section 4r(a)(3) of the CEA specifies the party obligated to report
a particular swap transaction. Specifically, this section provides,
with respect to a swap in which only one counterparty is a swap dealer
or major swap participant, that entity must report the swap. With
respect to a swap in which one counterparty is a swap dealer and the
other counterparty is a major swap participant, the swap dealer is
responsible for reporting the swap. With respect to any other swap, the
counterparties shall select one of them to report the swap. Interim
Sec. 44.03 incorporates these provisions.
3. Effective Date for Reporting Transition Swaps
Section 2(h)(5)(B) of the CEA requires that rules adopted by the
Commission shall provide for the reporting of data for transition swaps
no later than the later of 90 days after the effective date of the
Dodd-Frank Act \12\ or such other time after entering into the swap as
the Commission may prescribe. Section 4r(a)(2)(C) establishes that the
reporting obligations described in Section 4r shall be effective on the
enactment of that section--July 21, 2010. In a July 15, 2010 floor
statement, Senator Lincoln addressed inconsistencies between Sections
4r and 2(h)(5), emphasizing that the provisions of these two sections
``should be interpreted as complementary to one another to assure
consistency between them. This is particularly true with respect to
issues such as the effective dates of these reporting requirements.''
\13\ Accordingly,
[[Page 78894]]
Section 4r(a)(2)(C) should be read to require that the reporting
obligations of Section 2(h)(5)(B) became effective on enactment of the
Dodd-Frank Act and that counterparties who are or may become subject to
this obligation should, as of that date, be prepared to report swap
data relating to post-enactment pre-effective swaps at such time as
reporting is required: the later of 90 days after July 15, 2011 or such
other time after entering into the swap as the Commission may
prescribed by rule. The Commission believes that this result achieves
Senator Lincoln's goal of assuring consistency between the legislative
provisions embodied in Sections 4r and 2(h)(5).
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\12\ As relevant here, the effective date is 360 days after the
enactment of the Dodd-Frank Act--July 15, 2011.
\13\ Lincoln, ``Wall Street Transparency and Accountability,''
Congressional Record (July 15, 2010) at S5923.
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4. Record Preservation
While neither Section 4r nor Section 2(h)(5) expressly requires
that counterparties retain data related to transition swaps, implicit
in the reporting requirements established by these provisions is the
necessity for counterparties to these transactions to retain
information and data related to the terms of each transaction so that
it may subsequently be reported. In this regard, Sec. 44.03 includes a
Note to paragraphs (a)(1) and (a)(2) advising potential counterparties
to a post-enactment pre-effective swap transaction to retain all
information and documents relating to the terms of the transaction, to
the extent and in such form as they presently exist. The Commission
expects that counterparties to existing swaps routinely retain,
consistent with reasonable business practice, information including but
not limited to: (i) Any information necessary to identify and value the
transaction (e.g., underlying asset and tenor); (ii) the date and time
of execution of the transaction; (iii) volume (e.g., notional or
principal amount); (iv) information relevant to the price and payment
of the transaction until the swap is terminated, reaches maturity, or
is novated; (v) whether the transaction was accepted for clearing by
any clearing agency or derivatives clearing organization, and if so,
the identity of such agency or organization; (vi) any modification(s)
to the terms of the transaction; and (vii) the final confirmation of
the transaction.
The Commission believes that counterparties that may be required to
report transition swap transactions should preserve such information in
order to ensure that they will be able to comply with the reporting
requirements of Interim Sec. 44.03 as well as with permanent reporting
rules to be promulgated under CEA Section 2(h)(5). The Commission is
mindful that the data retention requirement may be perceived as
burdensome, and in that regard the Note attempts to limit the data to
material information that may be expected to assist the Commission in
performing its oversight functions under the CEA. In addition, to
ensure that important information relating to the terms of such swaps
may be retained with minimal burden on the counterparties, the Note
does not require any counterparty to a transition swap transaction to
create new records, and permits records to be retained in their
existing format. Similarly, the Commission recognizes that information
that the counterparty does not have prior to the effective date of the
interim final rule cannot be reported.
III. Request for Comments
The Commission requests comments on the questions outlined below:
1. Should the date on which data concerning transition swaps is
required to be reported to a registered swap data repository or to the
Commission be more than 90 days following the July 15, 2011 effective
date of the Dodd-Frank Act? If so, what date(s) should the Commission
consider and why?
2. Should the date for such reporting be different for reporting
counterparties who are swap dealers or major swap participants than it
is for reporting counterparties who are not swap dealers or major swap
participants?
3. What information should be reported with respect to transition
swaps? Who would use this information, and for what purpose(s)?
4. Should data reporting for transition swaps be asset-class
specific?
5. What methods of data accuracy verification should be used for
transition swap data?
6. Should the Commission's permanent rules concerning data
reporting for transition swaps between counterparties who are not swap
dealers or swap participants specify how such counterparties should
determine which counterparty will report the swap data? If so, what
factors should govern this choice?
7. The Note to the interim final rule advises that counterparties
retain, in their existing format, all information and documents
relating to the terms of the transition swap, including but not limited
to certain data elements. What documents and data typically are kept by
swap market participants to memorialize their transactions? In what
format? How long are such records currently maintained by market
participants?
8. What additional records should be kept, if any, and what burdens
or costs would the retention of such information entail?
In addition to the specific requests for comment above, the
Commission welcomes comment on all aspects of the interim final rule
and invites interested persons to submit written presentations of
views, data and arguments on all aspects of the interim final rule.
IV. Related Matters
A. Administrative Procedure Act
The Administrative Procedure Act \14\ (``APA'') generally requires
an agency to publish notice of a proposed rulemaking in the Federal
Register.\15\ This requirement does not apply, however, when the agency
``for good cause finds * * * that notice and public procedure are
impracticable, unnecessary, or contrary to the public interest.'' \16\
Moreover, while the APA requires generally that an agency publish an
adopted rule in the Federal Register 30 days before it becomes
effective, this requirement does not apply if the agency finds good
cause to make the rule effective sooner.\17\
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\14\ 5 U.S.C. 553.
\15\ 5 U.S.C. 553(b).
\16\ Id.
\17\ 5 U.S.C. 553(d).
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By way of background, Section 729 of the Dodd-Frank Act amended the
CEA to add new Section 4r, which in turn requires the Commission to
adopt, within 90 days of enactment of the Dodd-Frank Act, an interim
final rule providing for the reporting of swaps entered into before the
date of enactment of the Dodd-Frank Act the terms of which had not
expired as of that date. In response to that mandate, the Commission
adopted in new part 44 of the CEA an interim final rule whose purpose
was to establish reporting requirements for pre-enactment unexpired
swaps and to serve as notice to potential reporting entities of a
subsequent requirement to report certain data \18\ associated with such
swaps. This interim rule provides notice to counterparties to preserve
data associated with transition swaps until the Commission issues
permanent reporting and recordkeeping rules for all swaps pursuant to
CEA Section 2(h)(5).\19\
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\18\ 75 FR 63080 (Oct. 14, 2010).
\19\ Id. at 63084.
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The Commission is mindful that the Dodd-Frank Act did not mandate
an interim final rule relating to transition swaps (those entered into
after the date of enactment of the Act and prior to its effective
date), although such swaps will in the future be subject to a permanent
reporting requirement
[[Page 78895]]
pursuant to new Section 2(h)(5)(B) of the CEA. The Commission believes
that these circumstances similarly warrant notice to potential
counterparties of a present obligation to retain data relating to such
swaps until the Commission issues permanent rules pursuant to Section
2(h)(5)(B). Moreover, the Commission believes that issuance of such a
rule as an interim final rule serves the public interest. The
availability of this data will facilitate the Commission's ability to
understand and evaluate the current market for swaps and may inform its
analysis of other required rulemaking under the Dodd-Frank Act; any
delay in adopting such rules likely will result in a substantial loss
of significant swap data. Accordingly, the Commission believes that
good cause exists under 5 U.S.C. 553(b) and (d) because delay in
clarifying the potential scope of Section 2(h)(5)'s reporting and
record preservation obligations likely will result in a substantial
loss of material data relating transition swaps that would assist the
Commission in performing its oversight and analytic functions under the
CEA.
B. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA'') provides that an agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number from the Office of Management and Budget (``OMB'').\20\ OMB has
not yet assigned a control number to the new collection. As described
below, the Interim Final Rule will result in new collection of
information requirements within the meaning of the PRA.
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\20\ 44 U.S.C. 3501 et.seq.
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1. Reporting Requirements
The Commission has determined that this interim final rulemaking
will not impose on swap counterparties any new reporting requirements
that would be collections of information requiring the approval of the
Office of Management and Budget (``OMB'') under the Paperwork Reduction
Act (``PRA'').\21\ The Commission intends to propose permanent
reporting requirements associated with Section 723 of the Dodd-Frank
Act, at which time the Commission will issue a notice of proposed
rulemaking, seek comments on the proposed reporting requirements, and
seek OMB approval for the collections of information as provided by 5
CFR 1320.8 and 1320.11.
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\21\ 44 U.S.C. 3501 et seq.
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2. Recordkeeping Requirements
In order to comply with the reporting requirements contained in
Sec. 44.03, and in anticipation of permanent recordkeeping and
reporting requirements to be adopted by the Commission pursuant to
Section 2(h)(5)(B) of the CEA, each potential counterparty to a
transition swap that may be required to report such transaction should
retain information relating to the terms of the swap transaction. The
Commission believes that this recordkeeping element, while not
explicit, is considered to be a collection of information within the
meaning of the PRA. The Commission therefore is submitting this
proposal to the Office of Management and Budget (OMB) for review in
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The title for this
collection of information is ``Regulation 44.03--Interim Final Rule for
Reporting Certain Post-Enactment Swap Transactions. OMB control number
3038-NEW.''
The Commission will, by separate action, publish in the Federal
Register a notice and request for comment on the paperwork burden
associated with the recordkeeping element of this interim final rule in
accordance with 5 CFR 1320.8. If approved, this new collection of
information will be mandatory.
C. Cost-Benefit Analysis
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its action before issuing a new regulation or
order under the Act. By its terms, Section 15(a) does not require the
Commission to quantify the costs and benefits of its action or to
determine whether the benefits of the action outweigh its costs.
Rather, Section 15(a) requires the Commission simply to ``consider the
costs and benefits'' of the subject rule or order. Section 15(a)
further specifies that the costs and benefits of Commission regulations
shall be evaluated in light of five broad areas of market and public
concern: (1) Protection of market participants and the public; (2)
efficiency, competitiveness, and financial integrity of the market for
listed derivatives; (3) price discovery; (4) sound risk management
practices; and (5) other public interest considerations. The Commission
may, in its discretion, give greater weight to any one of the five
enumerated areas of concern and may, in its discretion, determine that
notwithstanding its costs, a particular regulation is necessary or
appropriate to protect the public interest or to effectuate any of the
provisions or accomplish any of the purposes of the CEA.
Title VII of the Dodd-Frank Act requires the Commission to
undertake a number of rulemakings to implement the regulatory framework
for swaps dictated by that Act, including the reporting of swap
transactions. This interim final rule implements the Dodd-Frank Act by
providing clarity and guidance with respect to the reporting of
transition swaps by (i) establishing that transition swaps will be
subject to Section 2(h)(5)(B)'s reporting requirements and to
Commission regulations to be promulgated thereunder; and (ii) advising
potential counterparties to such transition swaps that implicit in this
reporting requirement is the present obligation to retain data for
reporting at a time to be determined by rules promulgated under Section
2(h)(5)(B). This interim final rule will enable the Commission to
obtain data on transition swaps and will also ensure the preservation
of such data until permanent recordkeeping and reporting rules are
issued by the Commission. The availability of data relating to
transition swaps will enable the Commission to gain a better
understanding of the swap market--including the size and scope of that
market. This understanding ultimately will lead to a more robust and
transparent environment for the swaps market. Further, the Commission
expects this rule to make available information that could inform the
Commission's decision-making with respect to the rules it is required
to implement under the Dodd-Frank Act.
The Note to Interim Sec. 44.03(a)(1) and (2) addresses the
retention of records relating to transition swaps. Although there are
recordkeeping costs associated with retention of existing swap
transaction information, the Commission has crafted the Interim Final
Rule to be efficient in terms of these costs. The Interim Rule does not
require market participants to modify data for retention purposes, and
the information that is to be reported should be information that is
already kept by swap counterparties in their normal course of
business--and it may be reported in the format in which it is kept.
Moreover, counterparties must report the time of execution only to the
extent such information is available.
The recordkeeping and reporting rules that the Commission is
required to adopt under new CEA Section 2(h)(5)(B) will apply to
transition swaps. Accordingly, in adopting this Interim Rule the
Commission has sought to limit the burden on market participants by
[[Page 78896]]
not imposing substantial or potentially conflicting reporting
requirements.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,
requires federal agencies, in promulgating rules, to consider the
impact of those rules on small entities. The term ``rule'' under the
RFA is defined as ``any rule for which the agency publishes a general
notice of proposed rulemaking pursuant to Section 553(b) of this title,
or any other law * * *.'' \22\ However, a general notice of proposed
rulemaking under Section 553(b) does not apply ``when the agency for
good cause finds (and incorporates the finding and a brief statement of
reasons therefor) in the rules [issued] that notice and public
procedure thereon are impracticable, unnecessary or contrary to the
public interest.'' \23\ As noted above, the Commission believes that
good cause exists under 5 U.S.C. 553(b) because delay in clarifying the
scope of 2(h)(5)'s reporting and record preservation obligations will
likely result in a substantial loss of material data relating to post-
enactment pre-effective swaps that would assist the Commission in
performing its oversight functions under the CEA.
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\22\ 5 U.S.C. 601(2).
\23\ 5 U.S.C. 553(b).
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List of Subjects in 17 CFR Part 44
Swap markets, Counterparties, Reporting and Recordkeeping
requirements.
0
In consideration of the foregoing, and pursuant to the authority in the
Commodity Exchange Act, as amended, and in particular Sections 2(h)(5),
4r(a) and 12a(5), the Commission hereby proposes to amend Chapter 1 of
Title 17 of the Code of Federal Regulations by amending part 44 as
follows:
PART 44--INTERIM FINAL RULE FOR PRE-ENACTMENT SWAP TRANSACTIONS
Authority and Issuance
0
1. The authority citation for part 44 shall continue to read as
follows:
Authority: 7 U.S.C. 2(h)(5), 4r and 12a(5), as amended by Title
VII of the Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act of 2010), Pub. L. 111-203, 124 Stat. 1376 (2010).
0
2. Section 44.00 is amended by redesignating paragraphs (c) through (e)
as paragraphs (d) through (f) and by revising paragraph (c) to read as
follows:
Sec. 44.00 Definition of terms used in Part 44 of this chapter.
* * * * *
(c) Transition swap means any swap entered into after the enactment
of the Dodd-Frank Act of 2010 (July 21, 2010) and prior to the
effective date of the swap data reporting and recordkeeping rule
implemented under Section 2(h)(5)(B) of the CEA.
* * * * *
0
3. Section 44.03 is added to read as follows:
Sec. 44.03 Reporting transition swaps to a swap data repository or to
the Commission.
(a) A counterparty to a post-enactment pre-effective swap
transaction shall:
(1) As required by the reporting rules required to be adopted
pursuant to Section 2(h)(5)(B) of the Commodity Exchange Act, report
data related to a transition swap to a registered swap data repository
or the Commission by the compliance date established in such reporting
rules or within 60 days after an appropriate swap data repository
becomes registered with the Commission and commences operations to
receive and maintain data related to such swap, whichever occurs first,
the following information with respect to the swap transaction:
(i) A copy of the transaction confirmation, in electronic form if
available, or in written form if there is no electronic copy;
(ii) The time, if available, that the transaction was executed; and
(2) Report to the Commission on request, in the form and manner
prescribed by the Commission, any information relating to the swap
transaction.
Note to Paragraphs (a). In order to comply with the reporting
requirements contained in paragraphs (a)(1) and (a)(2) of this
section, each counterparty to a post-enactment pre-effective swap
transaction that may be required to report such transaction should
retain, in its existing format, all information and documents, to
the extent and in such form as they exist on the effective date of
this section, relating to: the terms of a swap transaction,
including but not limited to any information necessary to identify
and value the transaction (e.g., underlying asset and tenor); the
date and time of execution of the transaction; volume (e.g.,
notional or principal amount); information relevant to the price and
payment for the transaction until the swap is terminated, reaches
maturity or is novated; whether the transaction was accepted for
clearing and, if so, the identity of such clearing organization; any
modification(s) to the terms of the transaction; and the final
confirmation of the transaction.
(b) Reporting party. The counterparties to a swap transaction shall
report the information required under paragraph (a) of this section as
follows:
(1) Where only one counterparty to a swap transaction is a swap
dealer or a major swap participant, the swap dealer or major swap
participant shall report the transaction;
(2) Where one counterparty to a swap transaction is a swap dealer
and the other counterparty is a major swap participant, the swap dealer
shall report the transaction; and
(3) Where neither counterparty to a swap transaction is a swap
dealer or a major swap participant, the counterparties to the
transaction shall select the counterparty who will report the
transaction.
Issued in Washington, DC, on December 9, 2010, by the
Commission.
David A. Stawick,
Secretary of the Commission.
Appendices to Interim Final Rule for Reporting Certain Post-Enactment
Swap Transactions--Commission Voting Summary and Statements of
Commissioners
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendix 1--Commission Voting Summary
On this matter, Chairman Gensler and Commissioners Dunn, Sommers,
Chilton and O'Malia voted in the affirmative; no Commissioner voted in
the negative.
Appendix 2--Statement of Chairman Gary Gensler
I support the interim final rulemaking regarding the reporting
timetable for swaps entered into after the date of enactment of the
Dodd-Frank Act but prior to the effective date of swap data reporting
rules, or ``transition'' swaps. The interim final rule is intended to
ensure that data and information related those transition swaps will be
preserved until reporting to swap data repositories or regulators can
occur. The rule is indeed to prevent a substantial loss of data on
transition swaps and to assist the Commission in performing its
oversight functions under the Commodity Exchange Act.
[FR Doc. 2010-31579 Filed 12-16-10; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: December 17, 2010