Federal Register, Volume 76 Issue 79 (Monday, April 25, 2011)[Federal Register Volume 76, Number 79 (Monday, April 25, 2011)]
[Proposed Rules]
[Pages 22833-22848]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-9446]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 46
[3038-AD48]
Swap Data Recordkeeping and Reporting Requirements: Pre-Enactment
and Transition Swaps
AGENCY: Commodity Futures Trading Commission.
ACTION: Proposed rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing rules to implement new statutory provisions
introduced by Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (``Dodd-Frank Act''). The Dodd-Frank Act amends
the Commodity Exchange Act (``CEA'' or ``Act'') directing that rules
adopted by the Commission shall provide for the reporting of data
relating to swaps entered into before the date of enactment of the
Dodd-Frank Act, the terms of which have not expired as of the date of
enactment of that Act (``pre-enactment swaps'') and data relating to
swaps entered into on or after the date of enactment of the Dodd-Frank
Act and prior to the compliance date specified in the Commission's
final swap data reporting rules (``transition swaps''). This proposal
would establish recordkeeping and reporting requirements for pre-
enactment swaps and transition swaps.
DATES: Comments must be received by June 9, 2011.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD48,
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: 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.
[[Page 22834]]
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
All comments must be submitted in English, or must be 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 may be exempt from disclosure under the Freedom of
Information Act, you may submit a petition for confidential treatment
according to the procedures established in CFTC Regulation 145.9.\1\
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.
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\1\ Commission regulations referred to herein are found at 17
CFR Ch. 1.
FOR FURTHER INFORMATION CONTACT: David Taylor, Branch Chief, Market
Continuity, Division of Market Oversight, 202-418-5488,
[email protected]; or Irina Leonova, Financial Economist, Division of
Market Oversight, 202-418-5646, [email protected]; Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
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Washington, DC 20581.
SUPPLEMENTARY INFORMATION: The Commission is proposing rules under its
part 46 regulations relating to recordkeeping and reporting
requirements applicable to both pre-enactment and transition swaps, and
is soliciting comment on all aspects of the proposed rules. These
rules, when adopted, will supersede interim final rules previously
adopted by the Commission in part 44 of its regulations.
Table of Contents
I. Background
A. Swap Data Provisions of the Dodd-Frank Act
B. The Commission's Proposed Rule on Swap Data Recordkeeping and
Reporting Requirements
C. The Interim Final Rules for Pre-Enactment and Transition
Swaps
II. Proposed New Regulations, Part 46
III. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Analysis
IV. Proposed Compliance Date
V. General Solicitation of Comments
I. Background
A. Swap Data Provisions of the Dodd-Frank Act
On July 21, 2010, President Obama signed into law the Dodd-Frank
Act.\2\ Title VII of the Dodd-Frank Act \3\ amended the CEA \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 derivatives 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\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010). 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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To enhance transparency, promote standardization, and reduce
systemic risk, Section 728 of the Dodd-Frank Act establishes a newly-
created registered entity--the swap data repository (``SDR'') \5\--to
collect and maintain data related to swap transactions as prescribed by
the Commission, and to make such data electronically available to
regulators.\6\
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\5\ See also CEA Sec. 1a(40)(E).
\6\ Regulations governing core principles and registration
requirements for, and the duties of, SDRs are the subject of a
separate notice of proposed rulemaking under part 49 of the
Commission's regulations. See CFTC Swap Data Repositories: Proposed
Rule, 75 FR 80898 (Dec. 23, 2010).
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Section 728 directs the Commission to prescribe standards for swap
data recordkeeping and reporting. Specifically, Section 728 provides
that:
The Commission shall prescribe standards that specify the data
elements for each swap that shall be collected and maintained by
each registered swap data repository.\7\
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\7\ CEA Sec. 21(b)(1)(A).
These standards are to apply to both registered entities and
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counterparties involved with swaps:
In carrying out [the duty to prescribe data element standards],
the Commission shall prescribe consistent data element standards
applicable to registered entities and reporting counterparties.\8\
\8\ CEA Sec. 21(b)(1)(B).
Section 727 of the Dodd-Frank Act requires that each swap, either
cleared or uncleared, shall be reported to a registered SDR. That
Section also amends Section 1(a) of the CEA to add the definition of
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swap data repository:
The term `swap data repository' means any person that collects
and maintains information or records with respect to transactions or
positions in, or the terms and conditions of, swaps entered into by
third parties for the purpose of providing a centralized
recordkeeping facility for swaps.\9\
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\9\ CEA Sec. 1a(48).
Section 728 also directs the Commission to regulate data collection
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and maintenance by SDRs.
The Commission shall prescribe data collection and data
maintenance standards for swap data repositories.\10\
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\10\ CEA Sec. 21(b)(2).
Section 729 of the Dodd-Frank Act added to the CEA new Section 4r,
which addresses reporting and recordkeeping requirements for uncleared
swaps. Pursuant to this section, each swap not accepted for clearing by
any derivatives clearing organization (``DCO'') must be reported to an
SDR (or to the Commission if no SDR will accept the swap).
Section 729 ensures that at least one counterparty to a swap has an
obligation to report data concerning that swap. The determination of
this reporting counterparty depends on the status of the counterparties
involved. If only one counterparty is a swap dealer (``SD''), the SD is
required to report the swap. If one counterparty is a major swap
participant (``MSP''), and the other counterparty is neither an SD nor
an MSP (``non-SD/MSP counterparty''), the MSP must report. Where the
counterparties have the same status--two SDs, two MSPs, or two non-SD/
MSP counterparties--the counterparties must select a counterparty to
report the swap.\11\
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\11\ See CEA Sec. 4r(a)(3).
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Section 729 also provides for reporting to the Commission of
uncleared swaps that are not accepted by any SDR. Under this provision,
counterparties to such swaps must maintain books and records pertaining
to their swaps in the manner and for the time required by the
Commission, and must make these books and records available for
inspection by the Commission or other specified
[[Page 22835]]
regulators if requested to do so.\12\ It also requires counterparties
to such swaps to provide reports concerning such swaps to the
Commission upon its request, in the form and manner specified by the
Commission.\13\ Such reports must be as comprehensive as the data
required to be collected by SDRs.\14\
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\12\ CEA Sec. 4r(c)(2) requires individuals or entities that
enter into an uncleared swap transaction that is not accepted by an
SDR to make required books and records open to inspection by any
representative of the Commission; an appropriate prudential
regulator; the Securities and Exchange Commission; the Financial
Stability Oversight Council; and the Department of Justice.
\13\ CEA Sec. 4r(c).
\14\ CEA Sec. 4r(d).
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Section 729 establishes in new CEA Section 4r(a)(2)(A) a
transitional rule applicable to pre-enactment swaps. Section
4r(a)(2)(A) provides for the reporting of pre-enactment swaps the terms
of which have not expired as of the enactment of the Dodd-Frank Act to
an SDR or the Commission, by a date that the Commission determines to
be appropriate.\15\ Section 4r(a)(2)(B) directed 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 such
pre-enactment swaps.\16\
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\15\ Subsection (A) of CEA Section 4r(a)(2) provides that ``Each
swap entered into before the date of enactment of the Wall Street
Transparency and Accountability Act of 2010, the terms of which have
not expired as of the date of enactment of that Act, shall be
reported to a registered swap data repository or the Commission by a
date that is not later than--(i) 30 days after issuance of the
interim final rule; or (ii) such other period as the Commission
determines to be appropriate.''
\16\ Pursuant to Section 4r(a)(2)(B), the Commission on October
14, 2010 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 a compliance
date to be established in reporting rules to be promulgated under
Section 2(h)(5)(A) of the CEA and advising counterparties of the
necessity, inherent in the reporting requirement, to retain
information pertaining to the terms of such swaps until reporting
can be effectuated under permanent rules. See Pre-Enactment Swaps
IFR, supra, note 17.
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Section 723 of the Dodd-Frank Act, which adds to the CEA new
Section 2(h)(5), addresses the reporting of swap data for both swaps
executed before the enactment of the Dodd-Frank Act \17\ and swaps
executed on or after the date of that enactment but before the
compliance date specified in the Commission's final swap data
recordkeeping and reporting rules.\18\ In a July 15, 2010 floor
statement concerning swap data reporting as well as other aspects of
the Dodd-Frank Act, Senator Blanche Lincoln emphasized that the
provisions of new CEA Section 4r (added by Section 729 of the Dodd-
Frank Act) and new CEA Section 2(h)(5) (added by Section 723 of the
Dodd-Frank Act) ``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 * * *'' \19\
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\17\ See CFTC Interim Final Rule for Reporting Pre-Enactment
Swap Transactions (``Pre-Enactment Swaps IFR''), 75 FR 63080 (Oct.
14, 2010).
\18\ See CFTC Interim Final Rule for Reporting Post-Enactment
Swap Transactions (``Post-Enactment Swaps IFR'' or ``Transition
Swaps IFR''), 75 FR 78892 (Dec. 17, 2010).
\19\ Senator Blanche Lincoln, ``Wall Street Transparency and
Accountability Act,'' Congressional Record, July 15, 2010, at S5923.
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This proposed rule refers to the two types of swaps addressed in
CEA Section 2(h)(5) as follows. ``Pre-enactment swap'' means a swap
executed before date of enactment of the Dodd-Frank Act (i.e., before
July 21, 2010) the terms of which have not expired as of the date of
enactment of that Act.\20\ ``Transition swap'' means a swap executed on
or after the date of enactment of the Dodd-Frank Act (i.e., July 21,
2010) and before the compliance date specified in the final swap data
reporting and recordkeeping requirements regulations in part 45 of this
chapter.\21\ Collectively, the proposed rule refers to pre-enactment
swaps and transition swaps as ``historical swaps.''
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\20\ Subsection (A) of CEA Section 2(h)(5) Reporting Transition
Rules provides that ``Swaps entered into 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.''
\21\ Subsection (B) of CEA Section 2(h)(5) Reporting Transition
Rules provides that ``Swaps entered into on or after [the] date of
enactment [of the Dodd-Frank Act] shall be reported to a registered
swap data repository or the Commission no later than the later of
(i) 90 days after [the] effective date [of Section 2(h)(5)] or (ii)
such other time after entering into the swap as the Commission may
prescribe by rule or regulation.''
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B. The Commission's Proposed Rule on Swap Data Recordkeeping and
Reporting Requirements
On December 8, 2010, the Commission published for comment a notice
of proposed rulemaking concerning swap data (the ``Swap Data NPRM'')
that would establish swap data recordkeeping and reporting requirements
applicable to registered SDRs, derivatives clearing organizations
(``DCOs''), designated contract markets (``DCMs''), swap execution
facilities (``SEFs''), SDs, major swap participants MSPs, and non-SD/
MSP counterparties.\22\ The latter category of swap counterparties
would include but not be limited to counterparties who qualify for the
statutory end user exception with respect to particular swaps.\23\
Consistent with the purposes of the Dodd-Frank Act, the Swap Data NPRM
would require generally that all DCOs, DCMs, SEFs, and swap
counterparties keep full, complete and systematic records, together
with all pertinent data and memoranda, of all activities relating to
the business of such entities or persons with respect to swaps. The
proposed rules contemplate that swap data reporting should include data
from each of two important stages in the existence of a swap: the
creation of the swap, and the continuation of the swap over its
existence until its final termination or expiration. The proposed rules
call for reporting of two sets of data generated in connection with the
creation of the swap: primary economic terms data and confirmation
data.\24\ Reporting of swap continuation data can follow either of two
conceptual approaches described in the Swap Data NPRM: The life cycle
or event flow approach, or the state or snapshot approach.\25\
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\22\ 75 FR 76574 (Dec. 8, 2010) (``Swap Data NPRM'').
\23\ CEA Section 2(h)(7).
\24\ See Swap Data NPRM, supra, note 22 at 76580-76582.
\25\ Id. at 76583-76584.
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The Swap Data NPRM did not address CEA Section 2(h)(5)'s mandate
that the Commission adopt recordkeeping and reporting rules applicable
to pre-enactment swaps or transition swaps, but instead noted that a
separate rulemaking to establish requirements for these historical
swaps would address the records, information and data required to be
maintained and the timeframe for reporting such information to a
registered SDR or to the Commission.\26\ This proposal would establish
recordkeeping and reporting standards applicable to pre-enactment and
transition swaps.
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\26\ Id. at 76580 note 37.
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C. The Interim Final Rules for Pre-Enactment and Transition Swaps
Interim Final Rule for Pre-Enactment Swaps. As described above,
Title VII of the Dodd-Frank Act added new Section 4r(a)(2) to the CEA,
which provided for the reporting of pre-enactment swaps and directed
that the Commission promulgate, within 90 days of enactment of the
Dodd-Frank Act, an interim final rule (``IFR'') providing for the
reporting of such swaps. On October 14, 2010, pursuant to the mandate
of CEA Section 4r(a)(2)(B), the Commission published in new part 44 of
its regulations an IFR instructing specified counterparties to pre-
enactment swaps to report data to a registered SDR or to the Commission
by
[[Page 22836]]
a 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 was
effectuated under permanent rules.\27\ This Pre-Enactment Swaps IFR
stated that the reporting and recordkeeping provisions established by
Section 4r and Sec. Sec. 44.00-44.02 of the Commission's regulations
would 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.\28\ A principal purpose of this IFR was to advise
counterparties of the need to retain data related to swap transactions
so that reporting could be effectuated under permanent rules
subsequently to be adopted.
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\27\ See Pre-Enactment Swaps IFR, supra note 17, at 63083.
\28\ See Pre-Enactment Swaps IFR, supra note 17.
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With respect to the scope and coverage of the Pre-Enactment Swaps
IFR, the Commission acknowledged inconsistencies between the two Dodd-
Frank provisions governing the Commission's rulemaking. Specifically,
new CEA Section 4r(a)(2) limits reportable pre-enactment swaps to those
whose terms have not expired on the date of enactment of the Dodd-Frank
Act; Section 2(h)(5) does not contain the same qualifying language. As
discussed in the Pre-Enactment Swaps IFR, the Commission believes that
failure to limit the term ``pre-enactment swap'' to unexpired swaps
would require reporting of every swap that has ever been entered into;
accordingly, the Commission concluded that reportable pre-enactment
swaps should be limited to those whose terms had not expired at the
time of enactment.\29\
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\29\ Id. at 63082.
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Interim Final Rule for Transition Swaps. Section 4r of the CEA did
not mandate an IFR establishing reporting provisions for transition
swaps. The Commission nonetheless believed that such a rule would
provide clarity and guidance with respect to such swaps, by
establishing that transition swaps will be subject to Section
2(h)(5)(B)'s reporting requirements and to Commission regulations to be
promulgated thereunder. The Commission also believed it was prudent to
advise potential counterparties to such swaps that implicit in this
prospective reporting requirement is the need to retain relevant data
until such time as reporting can be effected. Accordingly, on December
17, 2010 the Commission published under Part 44 of its regulations
interim final rules establishing that counterparties to transition
swaps will be subject to permanent recordkeeping and reporting
requirements to be adopted by the Commission pursuant to Section
2(h)(5)(B) of the CEA.\30\
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\30\ See Transition Swaps IFR, supra note 18.
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The Commission intended both the Pre-Enactment Swaps IFR and the
Transition Swaps IFR to put counterparties on notice that swap data
should be retained pending the adoption of permanent rules for pre-
enactment and transition swaps under proposed part 46 of this chapter.
With respect to both pre-enactment and transition swaps, the Commission
stated that counterparties to these transactions should retain material
information about such transactions. The Commission emphasized,
however, that in the context of the interim rules, no counterparty was
being required to create new records with respect to transactions that
occurred in the past; instead, records relating to the terms of such
transactions could be retained in their existing format to the extent
and in such form as they presently exist.\31\
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\31\ See Pre-Enactment Swaps IFR, supra note 17, at 63086, and
Transition Swaps IFR, supra note 18, at 78894.
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Comments Received. The Commission received a number of comments in
response to each of the IFRs. Comments generally fell into one or more
of several broad categories and in a number of instances were common to
both IFRs. Some commenters observed that issuance of IFRs in advance of
regulations further defining the term ``swap'' (or defining other key
terms in the Dodd-Frank Act) creates legal and regulatory uncertainty
and increases compliance risk; most of these commenters urged the
Commission to further detail the record retention aspects of the
interim final rules.\32\ In this connection, commenters requested that
the Commission issue guidance clarifying and limiting the information
that must be retained,\33\ or create a safe harbor for good faith
compliance efforts.\34\ Energy interests suggested that the Commission
should ensure that end users need only report basic data in a
simplified reporting scheme, or should outline categories of
information that need not be retained by persons who anticipate
becoming eligible for the end user exemption under the Dodd-Frank
Act.\35\ One commenter urged greater specificity with respect to the
Pre-Enactment IFR's requirements, as well as consistency with the
standards adopted by the Securities and Exchange Commission (``SEC'')
and international regulators, and proposed alternatives to the
requirements adopted in the IFR for pre-enactment swaps, particularly
with respect to reporting protocols, record retention, and
confidentiality issues (notably, those confidentiality issues arising
in the context of cross-border transactions).\36\ Another commenter
urged that U.S. swap data reporting requirements should not apply with
respect to foreign swaps transactions, where counterparties are non-
U.S. entities.\37\
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\32\ See, e.g., letters dated November 15, 2010 and January 18,
2011 from the Working Group of Commercial Energy Firms (``Working
Group letters''); letter dated November 15, 2010 from Hess
Corporation (``Hess Corporation letter''); letter dated November 15,
2010 from the Edison Electric Institute (``EEI letter''); letters
dated November 15, 2010 and January 18, 2011 from the Not-for-Profit
Electric End User Coalition (``Coalition letters''); letter dated
January 18, 2011 from the American Gas Association (``AGA letter'').
\33\ EEI letter.
\34\ Working Group letters; EEI letter; Hess Corporation letter.
\35\ AGA letter; Coalition letters.
\36\ Letter dated November 12, 2010, from the International
Swaps and Derivatives Association, Inc. and the Futures Industry
Association.
\37\ Letter dated January 11, 2011, from Barclays Bank PLC, BNP
Paribas S.A., Deutsche Bank AG, Royal Bank of Canada, The Royal Bank
of Scotland Group PLC, Soci[eacute]t[eacute] G[eacute]n[eacute]rale
and UBS AG.
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The Commission is mindful of these concerns and expects to consider
and address them, as well as all comments received in response to this
proposed rule, in formulating permanent rules applicable to pre-
enactment and transition swaps.
II. Proposed New Regulations, Part 46
As provided in the Commission's Swap Data NPRM,\38\ Pre-Enactment
Swaps IFR,\39\ and Transition Swaps IFR,\40\ this proposed rule
addresses the records, information, and data that must be retained for
historical swaps, the timeframe for reporting data to an SDR or the
Commission concerning such swaps, and the specific data to be reported.
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\38\ See Swap Data NPRM, supra note 20, at fn. 37.
\39\ See Pre-Enactment Swaps IFR, supra note 17.
\40\ See Transition Swaps IFR, supra note 18.
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Recordkeeping. For historical swaps in existence on or after the
date of publication of the proposed rule, the rule would impose
limited, specific recordkeeping obligations. Counterparties to such
swaps would be required to keep records of an asset class-specific set
of specified, minimum primary economic terms. The Commission believes
that counterparties to historical swaps will possess this limited set
of asset class-specific information as part of their normal
[[Page 22837]]
business practices.\41\ Commission staff have consulted with industry
representatives, including buy-side counterparties, concerning
information routinely kept in this connection for swaps in different
asset classes. Counterparties to historical swaps in existence on or
after the date of publication of this proposed rule would also be
required to keep records of a confirmation of their swaps if they have
that information in their possession on or after the publication date
(the date from which public notice of this specific proposed
recordkeeping requirement is available). The Commission requests
comment concerning the appropriateness of these limited recordkeeping
requirements, and specifically requests comment concerning whether all
counterparties to historical swaps will possess the limited set of
asset class-specific information called for by the proposed rule as
part of their normal business practices. If there are any
counterparties to historical swaps who do not possess the limited set
of asset class-specific information called for by the proposed rule,
the Commission requests comment from such counterparties concerning
what information concerning historical swaps such counterparties do
possess, and concerning what information such counterparties retain
concerning their swaps in order to meet the requirements of other
applicable law, such as hedge accounting requirements or the
requirements of applicable state law.
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\41\ The Commission understands that the terminology used to
describe the specific terms and conditions of a swap can vary among
market participants, and that agreed definitions for certain terms
could increase consistency among participants in how historical
swaps are described. The Commission therefore requests comment on
whether the proposed minimum primary economic terms for each asset
class are sufficiently clear in terms of what economic data is
expected to be reported, or whether further clarification is needed
in this respect.
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For historical swaps that were in existence as of the date of
enactment of the Dodd-Frank Act but have expired or been terminated
prior to the publication date of this proposed rule, a counterparty
would only be required to keep records as provided in the Commission's
IFRs concerning pre-enactment and transition swaps: namely, the
information and documents relating to the terms of the swap that the
counterparty possessed when the applicable IFR was published, in
whatever format that information is kept by the counterparty.\42\
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\42\ As used in the IFRs, ``format'' refers to the method by
which the information is organized and stored. It does not refer to
a recording format (i.e., a format for electronic encoding of data).
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The Commission understands that the minimum primary economic terms
for a swap can vary widely depending on the asset class of the
underlying products or on the nature of a particular product within an
asset class. Consequently, the Commission encourages the industry to
reach an internal consensus about the appropriate, asset class-
specific, minimum primary economic terms to be reported for pre-
enactment and transition swaps. The Commission welcomes comments from
industry and market participants in this regard, and will consider them
in determining the minimum primary economic terms to be specified in
the final swap data recordkeeping and reporting rules.
Reporting timeframe. The proposed rule provides that swap data
reporting for historical swaps would commence on the compliance date
specified in the Commission's final swap data recordkeeping and
reporting regulations in part 45 of this chapter.\43\ The Commission
believes that the purposes of the Dodd-Frank Act can be best served by
establishing a single date for the commencement of all swap data
reporting pursuant to that Act. It also believes that the compliance
date for the final swap data reporting regulations in part 45--the date
on which reporting must commence--is the most practicable and
appropriate date for this purpose. The effective date will be set by
the Commission in its final swap data reporting regulations.\44\ In the
Swap Data NPRM, the Commission requested comments concerning the time
needed to prepare automated systems for swap data recordkeeping and
reporting prior to implementation of the regulations, and it will
carefully consider the comments received in response to that request.
The Commission similarly requests comment concerning the proposal to
specify the same compliance date as the date for initial data reporting
concerning pre-enactment and transition swaps, and the time needed in
this connection for preparation of necessary automated systems prior to
the specified compliance date.
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\43\ 17 CFR part 45.
\44\ As provided in CEA Section 2(h)(5)(B), the effective date
must be no sooner than 90 days after the effective date of CEA
Section 2(h)(5), but may be a later date set by the Commission.
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Data to be reported. The proposed rule specifies data to be
reported for historical swaps. For pre-enactment and transition swaps
in existence on or after the date of publication of this proposed rule,
the rule specifies the data elements to be reported. For historical
swaps in existence as of enactment of the Dodd-Frank Act which expired
or were terminated prior to publication of this proposed rule, the rule
provides for reporting of the information relating to the terms of the
transaction that was in the possession of a reporting counterparty as
of publication of the applicable Commission IFR regarding pre-enactment
or transition swaps, in such format as it is kept by the reporting
counterparty.
As noted above, the Dodd-Frank Act requires reporting of data
concerning all swaps in existence as of the legislation's
enactment.\45\ Data concerning pre-enactment swaps and transition swaps
will assist achievement of the systemic risk mitigation, market
transparency, and market supervision purposes for which the Dodd-Frank
Act was enacted. Such data will be needed to give regulators the
complete picture of the swap market which the comprehensive regulatory
framework and reporting requirements of the statute are designed to
provide. Data concerning historical swaps also is necessary for the
Commission to prepare the semi-annual reports it is required to provide
to Congress regarding the swap market.
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\45\ CEA Section 4r(a)(2)(A).
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The Commission is aware that internal swap data retention policies
are not uniform among swap counterparties, and that the current
automated systems of market participants vary with respect to their
suitability for swap data reporting. The Commission believes it is
appropriate to limit the burden placed on swap counterparties in
connection with data reporting for historical swaps, to the extent that
this can be done in a manner consistent with the requirements of the
Dodd-Frank Act and the Commission's need for such data. The Commission
has also considered comments received concerning the Pre-Enactment
Swaps IFR and Transition Swaps IFR which requested that the Commission
specify clearly what data would be required to be reported concerning
historical swaps.
Data reporting for historical swaps in existence as of or after
publication of this proposed rule. For each pre-enactment or transition
swap in existence as of or after publication of this proposed rule, the
rule calls (a) for an initial data report on the compliance date for
data reporting, and (b), if such a historical swap has not expired or
been terminated as of the compliance date specified in the final part
45 swap data reporting regulations, for ongoing reporting of required
swap continuation data (as defined in the Commission's final part 45
swap data reporting
[[Page 22838]]
regulations) during the remaining existence of the swap.
The proposed rule calls for the initial data report for historical
swaps in existence as of or after publication of this proposed rule to
include the transaction terms included in the swap confirmation if the
confirmation was in the reporting counterparty's possession on or after
the publication date of this proposed rule,\46\ and in any event to
include all of the minimum primary economic terms for a pre-enactment
or transition swap specified in the appropriate table in the Appendix
to the proposed rule.
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\46\ The Commission understands that counterparties may use
either a short-form or a long-form confirmation. Either form can be
used to satisfy this requirement.
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The Commission understands that industry definitions used in
documenting some swap transactions, for instance in some master
agreements or confirmations, may not match exactly the asset class
definitions included in this proposed rule, which are the same as the
asset class definitions in the Commission's part 45 proposed rules
regarding swap data recordkeeping and reporting requirements. The
Commission requests comment on how the proposed asset class definitions
in this proposed rule and the overall swap classification scheme
embodied in them might most appropriately be aligned with current swap
instrument classifications used by the industry, and with definitions
employed by, e.g., the International Swaps and Derivatives Association
(``ISDA''), the Edison Electric Institute, the North American Energy
Standards Board, and others.
In addition, the Commission anticipates that some swaps subject to
its jurisdiction may belong to two other swap categories: mixed swaps,
and multi-asset swaps. Generally, a mixed swap is in part a security-
based swap subject to the jurisdiction of the SEC and in part a swap
belonging to one of the swap asset classes subject to the jurisdiction
of the Commission.\47\ Multi-asset swaps are those that do not have one
easily identifiable primary underlying notional item within the
Commission's jurisdiction. The Dodd-Frank Act defines ``mixed swap'' as
follows: ``The term `security-based swap' includes any agreement,
contract, or transaction that is as described in section 3(a)(68)(A) of
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)) and is
also based on the value of 1 [sic] or more interest or other rates,
currencies, commodities, instruments of indebtedness, indices,
quantitative measures, other financial or economic interest or property
of any kind (other than a single security or a narrow-based security
index), or the occurrence, non-occurrence, or the extent of the
occurrence of an event or contingency associated with a potential
financial, economic, or commercial consequence (other than an event
described in subparagraph (A)(iii).'' \48\ The Commission requests
comment concerning how such swaps should be treated with respect to
swap data reporting for historical swaps, and concerning the category
or categories under which swap data for such swaps should be reported
to SDRs and maintained by SDRs.
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\47\ See Swap Data NPRM, supra note 20, at 76586.
\48\ Dodd-Frank Act Sec. 721(21), CEA Sec. 1a(47)(D).
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The initial data report for historical swaps in existence as of or
after publication of this proposed rule would also be required to
include the Unique Counterparty Identifier of the reporting
counterparty (as defined in part 45),\49\ and the reporting
counterparty's internal system identifiers for the non-reporting
counterparty and the particular swap transaction in question.
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\49\ The Commission intends to take the need for reporting
counterparties to obtain Unique Counterparty Identifiers into
account in setting the effective date for the data reporting rules
in part 45.
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The proposed rule would give non-reporting counterparties an
additional 180 days after the compliance date specified in the
Commission's final part 45 rules for data reporting before they would
be required to obtain and use a Unique Counterparty Identifier in
connection with pre-enactment and transition swaps. The Commission is
proposing this additional time because it understands that the majority
of non-reporting counterparties are likely to be non-SD/MSP
counterparties. While SDs and MSPs are likely to have infrastructure in
place that can incorporate and track Unique Counterparty Identifiers,
non-SD-MSP counterparties could need to acquire new automated systems
or undertake modifications of existing systems in order to incorporate
identifiers. The Commission requests comment concerning the
appropriateness of this additional time, concerning the length of the
additional time provided, and concerning whether the Commission should
differentiate further between SD and MSP counterparties versus non-SD/
MSP counterparties with respect to use of Unique Counterparty
Identifiers for non-reporting counterparties to pre-enactment and
transition swaps.
The proposed rule also requires the reporting counterparty to
report the master agreement identifier (if any) used by the reporting
counterparty's automated systems to identify the master agreement
governing a pre-enactment or transition swap. This information would
allow the Commission and other regulators to aggregate transactional
data to calculate net or gross exposure of a particular counterparty.
The Commission requests comment concerning whether its final swap data
recordkeeping and reporting regulations for pre-enactment and
transition swaps should require such reporting of a master agreement
identifier.
The Commission requests comment concerning the appropriateness and
adequacy of these initial data report requirements. Additionally, the
Commission requests comment on the appropriate method for identifying
the association of an individual swap transaction with a particular
master agreement or with a swap portfolio, in order to identify
individual swaps that may be subject to close-out netting and other
provisions typical in portfolio compression.\50\ Identifying this
association could be a necessary means of enabling regulators to
determine a counterparty's net exposure (current or future) on the
basis of transactional data reported to SDRs. In particular, the
Commission requests comment on whether reporting of a master agreement
identifier as provided in this proposed rule is needed in this
connection and would provide a workable means of achieving this goal.
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\50\ The Commission's proposed rule regarding confirmation,
portfolio reconciliation and portfolio compression requirements for
SDs and MSPs, 17 CFR part 23, defines portfolio compression as a
mechanism whereby substantially similar transactions among two or
more counterparties are terminated and replaced with a smaller
number of transactions of decreased notional value, in an effort to
reduce the risk, cost, and inefficiency of maintaining unnecessary
transactions on the counterparties' books. See CFTC Notice of
Proposed Rulemaking: Confirmation, Portfolio Reconciliation and
Portfolio Compression Requirements for Swap Dealers and Major Swap
Participants, 75 FR 81519 (Dec. 28, 2010).
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The Commission has chosen to propose limited requirements for
recordkeeping and initial data reports concerning pre-enactment and
transition swaps because it understands that the current recordkeeping
and reporting systems that some counterparties to such swaps have at
present might not be able to fulfill, with respect to historical swaps,
recordkeeping and reporting requirements as extensive as those proposed
in part 45. In these circumstances, the Commission believes it is
appropriate to limit the burden imposed on such counterparties, to the
extent that this can be done in a way
[[Page 22839]]
that is consistent with the requirements of the Dodd-Frank Act and the
Commission's need for data concerning historical swaps. The Commission
believes, however, that the limited set of minimum primary economic
terms data set forth in this proposed rule with respect to historical
swaps is the minimum necessary to give regulators a picture of the risk
exposures and counterparty participation in such swaps at the minimum
level necessary for the Commission and other regulators to fulfill
their regulatory responsibilities. The Commission requests comment
concerning the appropriateness of this approach to initial data
reporting for pre-enactment and transition swaps.
Regarding ongoing reporting of required swap continuation data
during the remaining existence of a pre-enactment or transition swap
after the compliance date, the proposed rule follows the life cycle
approach for credit swaps and equity swaps, and the state or snapshot
approach for interest rate swaps, currency swaps, and other commodity
swaps. This same distinction is made in the Commission's Swap Data
NPRM, which sets forth the Commission's reasons for making this
distinction, reasons which also apply with respect to part 46. The
Commission believes that this unified approach to swap data reporting
rules for pre-enactment, transition, and post-compliance-date swaps
will minimize recordkeeping and swap data reporting burdens for
industry and provide a coherent and consistent picture of the overall
swap market to regulators. Since the proposed part 45 continuation data
reporting requirements are aligned with the approach taken in the SEC's
proposed rules for security-based credit and equity swaps, this also
serves to avoid differing requirements for security-based swaps and
swaps. The Commission requests comment concerning whether required
reporting of the same swap continuation data for pre-enactment and
transition credit swaps and equity swaps, in line with the requirements
of proposed part 45 and of the SEC's proposed rules, is appropriate in
this connection.
For pre-enactment or transition interest rate swaps, currency
swaps, and other commodity swaps, this proposed rule also limits
continuation data reporting obligations for non-SD/MSP reporting
counterparties. Specifically, the proposal requires that SD or MSP
reporting counterparties must meet continuation data reporting
requirements for pre-enactment and transition swaps in those asset
classes that are the same as the continuation data reporting
requirements of proposed part 45 for swaps in those asset classes.
While non-SD/MSP reporting counterparties for such swaps are required
to report the state data \51\ necessary to provide a daily snapshot
view of the primary economic terms of the swap, the state data that
must be reported by non-SD/MSP reporting counterparties for such swaps
is limited to the state data available to the non-SD/MSP reporting
counterparty on the compliance date. This may consist of only the data
elements contained in the table of minimum primary economic terms for
various swap asset classes, as set forth in Appendix 1 to part 46, if
that is all that was available to the non-SD/MSP reporting counterparty
on that date. This approach is designed to avoid placing undue
recordkeeping and reporting burdens on non-SD/MSP counterparties, who
are the reporting counterparties least likely to have the automated
systems needed for more extensive reporting with respect to pre-
enactment or transition swaps. The Commission requests comment
concerning the appropriateness of this approach to continuation data
reporting for pre-enactment and transition swaps.
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\51\ For purposes of this proposed rule, ``state data'' has the
meaning defined in part 45 of this chapter. See Swaps Data NPRM,
supra note 20, at 76599.
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Data reporting for historical swaps in existence as of enactment of
the Dodd-Frank Act but expired or terminated prior to publication of
this proposed rule. For historical swaps in existence as of enactment
of the Dodd-Frank Act which expired or were terminated prior to
publication of this proposed rule, only an initial data report would be
required.\52\ For such swaps, the proposed rule would require that the
reporting counterparty report such information relating to the terms of
the transaction as was in that counterparty's possession as of issuance
of the relevant Commission IFR.\53\ This information would be permitted
to be reported in the format in which it was kept by the reporting
counterparty.\54\
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\52\ By its nature, continuation data reporting occurs during
the continuation of a swap prior to its expiration or termination.
\53\ Pre-Enactment Swaps IFR, supra note 15, and Transition
Swaps IFR, supra note 18.
\54\ This could include submission of a PDF file.
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Selection of reporting counterparty. This proposed rule provides
that determination of which counterparty to a pre-enactment or
transition swap is the reporting counterparty for that swap shall be
made according to Dodd-Frank Act's hierarchy of counterparty types for
reporting obligation purposes, in which SDs outrank MSPs, who outrank
non-SD/MSP counterparties. Where both counterparties are at the same
hierarchical level, the statute calls for them to select the
counterparty obligated to report. The proposed rule establishes a
mechanism for counterparties to follow in choosing the counterparty to
report in situations where both counterparties have the same
hierarchical status. Where both counterparties are SDs, or both are
MSPs, or both are non-SD/MSP counterparties, the proposed rule requires
the counterparties to agree as on term of their swap transaction which
counterparty will fulfill reporting obligations. The proposed rule also
provides that, where only one counterparty to a swap is a U.S. person,
the U.S. person should be the reporting counterparty. The Commission
believes, preliminarily, that this approach may be necessary in order
to ensure compliance with reporting requirements in such situations. In
these respects, the proposed rule mirrors the provision of the part 45
Swap NPRM regarding selection of the reporting counterparty.
The proposed rule also provides that determination of the reporting
counterparty shall be made with respect to the current counterparties
to the swap as of the compliance date (for historical swaps in
existence as of that date) or as of the prior expiration or termination
of the swap (for historical swaps expired or terminated prior to the
compliance date), regardless of who the counterparties to the swap were
when it was originally executed.
As noted above, where both counterparties have the same
hierarchical status, the proposed rule calls for the counterparties to
agree as one term of their swap transaction which counterparty will
fulfill reporting obligations. In the case of a historical swap
executed prior to publication of this proposed rule, for which the
agreement to enter into the swap has already been made, agreement by
the counterparties on selection of the reporting counterparty would
require negotiation occurring after the agreement to enter into the
swap was made, and could require amendment of the agreement to enter
into the swap in this respect. The Commission requests comment
concerning how two SD counterparties, two MSP counterparties, or two
non-SD/MSP counterparties should select the reporting counterparty for
a pre-enactment or transition swap which was executed prior to the
publication date of this proposed rule, and thus does not include an
agreement term selecting the reporting counterparty. The Commission
also requests comment concerning whether its final data recordkeeping
and
[[Page 22840]]
reporting rules for historical swaps should prescribe a method for
selecting a reporting counterparty in such circumstances. The
Commission may include such a method in the final data recordkeeping
and reporting rules for historical swaps.
The Commission has received comments regarding the part 45 Swap
NPRM suggesting that, where only one counterparty to a swap is a U.S.
person, the counterparty designated as the reporting counterparty under
the hierarchical approach based on the Dodd-Frank Act and discussed
above should be applied in the same way as for a swap where both
counterparties are U.S. persons. This would mean, for example, that for
a swap between a non-U.S. SD and a U.S. non-SD/MSP counterparty, the
non-U.S. SD would be the reporting counterparty. The Commission
requests comment concerning how the reporting counterparty for a
historical swap should be selected when one counterparty is a non-U.S.
person.
Non-duplication of previous reporting. The Commission is aware that
in some instances, reporting counterparties may have reported data
concerning pre-enactment or transition swaps to a presently-existing
trade repository prior to the compliance date. If such a repository is
registered with the Commission as an SDR as of the compliance date, the
Commission would not require reporting counterparties to report
duplicate information to the SDR, although it would require reporting
on the compliance date of any information required by this proposed
rule that had not already been reported to the SDR.
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \55\ requires that
agencies consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and, if so, provide a regulatory flexibility analysis respecting the
impact.\56\ The regulations proposed by the Commission would affect
SDs, MSPs, and non-SD/MSP counterparties who are counterparties to one
or more pre-enactment or transition swaps. 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.\57\
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\55\ 5 U.S.C. 601 et seq.
\56\ 5 U.S.C. 601 et seq.
\57\ 47 FR 18618 (Apr. 30, 1982).
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The Commission hereby determines that SDs and MSPs should not be
considered small entities for purposes of the RFA. SDs and MSPs will
play a central role in the national regulatory scheme overseeing the
trading of swaps. With respect to SDs, the Commission previously has
determined that Futures Commission Merchants (``FCMs'') should not be
considered to be small entities for purposes of the RFA.\58\ Like FCMs,
SDs will be subject to minimum capital and margin requirements and are
expected to comprise the largest global financial firms.\59\ Similarly,
with respect to MSPs, the Commission has previously determined that
large traders are not ``small entities'' for RFA purposes.\60\ Like
large traders, MSPs will maintain substantial positions, creating
substantial counterparty exposure that could have serious adverse
effects on the financial stability of the U.S. banking system or
financial markets.
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\58\ 47 FR 18618 (Apr. 30, 1982).
\59\ Additionally, the Commission is required to exempt from
designation entities that engage in a de minimis level of swaps. Id.
at 18619.
\60\ 47 FR at 18620.
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With respect to non-SD/MSP counterparties, the Commission believes
that the proposed regulations will not create a significant economic
impact on a substantial number of small entities. The proposed rule
sets forth recordkeeping and reporting requirements with respect to
pre-enactment and transition swaps. The Commission believes that the
records the proposed rule would require to be kept are already kept by
swap counterparties in their normal course of business. The proposed
rule would require limited swap data reporting for pre-enactment or
transition swaps, and would require such reporting by non-SD/MSP
counterparties only with respect to such swaps in which neither
counterparty is an SD or MSP. The considerable majority of swaps
involve at least one SD or MSP. In addition, most end users and other
non-SD/MSP counterparties who are regulated by the Employee Retirement
Income Security Act of 1974 (``ERISA''), such as pension funds, which
are among the most active participants in the swap market, are
prohibited from transacting directly with other ERISA-regulated
participants.\61\ For these reasons, the Commission does not believe
that the regulations would have a significant economic impact on a
substantial number of small entities.
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\61\ 29 U.S.C. 1106.
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Accordingly, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that the proposed rule will not
have a significant economic impact on a substantial number of small
entities. Nonetheless, the Commission specifically requests comment on
the impact this proposed rule may have on small entities.
B. Paperwork Reduction Act
Introduction. Provisions of the proposed rule would result in new
collection of information requirements within the meaning of the
Paperwork Reduction Act (``PRA'').\62\ 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 ``Regulations 46.2 and
46.3--Swap Data Recordkeeping and Reporting: Pre-Enactment and
Transition Swaps,'' OMB control number 3038-NEW. If adopted, responses
to this new collection of information would be mandatory. The
Commission will protect proprietary information according to the
Freedom of Information Act and 17 CFR part 145, ``Commission Records
and Information.'' In addition, section 8(a)(1) of the Act strictly
prohibits the Commission, unless specifically authorized by the Act,
from making public ``data and information that would separately
disclose the business transactions or market positions of any person
and trade secrets or names of customers.'' The Commission also is
required to protect certain information contained in a government
system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.
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\62\ 44 U.S.C. 3501 et seq.
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Information Provided by Reporting Entities/Persons. The proposed
rule sets forth recordkeeping and reporting requirements for SDs, MSPs,
and non-SD/MSP counterparties.
Recordkeeping Burdens. Under proposed Regulation 46.2, all
counterparties to pre-enactment or transition swaps would be required
to keep records relating to such swaps. For swaps that are in existence
as of or after the enactment of the Dodd-Frank Act, but are expired as
of the publication of the proposed rule, the proposed Regulation 46.2
requires that parties simply maintain the swap records already in their
possession, in the form in which they are already maintained. For
purposes of the PRA, the Commission will not calculate the burden for
this requirement; the Commission has previously calculated the burden
for this requirement in the
[[Page 22841]]
PRA analyses for the interim final rules for pre-enactment and
transition swaps.
For pre-enactment or transition swaps that are in existence as of
or after the publication of the proposed rule, the proposed Regulation
46.2 would require counterparties to keep records of a minimum set of
primary economic data relating to such swaps. The Commission believes
that counterparties already would possess this set of primary economic
data as part of their normal business practices. The proposed
regulation provides that counterparties must record certain additional
information (e.g., information relating to confirmation) only if the
counterparty is in possession of that information on or after the
publication date of the proposed rule. After the compliance date
specified in the Commission's final swap data rules in Part 45,
proposed Regulation 46.2 provides that counterparties must record
information required by recordkeeping provisions of those final swap
rules only if such information is available to the counterparty on or
after the compliance date specified in those rules.
For historical swaps that are in existence as of or after the
publication date of the proposed rule, the rule would require the
counterparties to keep the records beginning on the publication date of
the proposed rule and through the life of the swap, and for a period of
at least five years from the final termination of the swap. In
calculating the burden of this recordkeeping requirement for purposes
of the PRA, the Commission will not include the burdens occurring after
the compliance date specified in the Commission's final swap data rules
in Part 45; the burden occurring after the compliance date is and will
be subsumed by the recordkeeping burdens calculated for those final
rules.\63\ Therefore, for this proposed rule, the Commission will only
calculate a recordkeeping burden for the time period beginning with the
publication date of this proposed rule, and ending on the compliance
date. The Commission estimates this period of time to be approximately
one year. The Commission estimates that 30,300 SDs, MSPs, and non-SD/
MSP counterparties will be affected by these recordkeeping burdens
during this time.\64\ With respect to SDs and MSPs (an estimated 300
entities or persons), which will have higher levels of swap recording
activity than non-SD/MSP counterparties, the Commission estimates that
the average one-time burden per entity is 40 hours, excluding customary
and usual business practices. With respect to non-SD/MSP reporting
counterparties (an estimated 30,000 entities or persons), who will have
lower levels of swap recording activity, the Commission estimates that
the average one-time burden per entity is 10 hours, excluding customary
and usual business practices. Therefore, the total aggregate one-time
burden is 312,000 hours. The Commission requests comment on this
estimate.
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\63\ The recordkeeping burden for those final rules is
calculated based on the number of annual counterparties to swaps and
therefore implicitly includes counterparties to pre-enactment and
transition swaps that are unexpired after the effective date.
\64\ As noted, the applicable recordkeeping burden applies
during a period estimated by the Commission to be one year. The
Commission has previously estimated that there are annually 30,000
non-SD/MSP entities who are counterparties to a swap (see, e.g., the
Commission's Paperwork Reduction Act statement for the Swap Data
Recordkeeping and Reporting Requirements Proposed Rulemaking). The
Commission has also previously estimated that there are 250 SDs and
50 MSPs. Therefore, a total of 30,300 entities would be subject to
the recordkeeping burdens of the proposed rule.
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Reporting Burdens. The reporting obligations set forth in proposed
Regulation 46.3 involve both an initial data report and ongoing
reporting of required swap continuation data relating to pre-enactment
and transition swaps. For historical swaps that are in existence as of
or after the enactment of the Dodd-Frank Act, but expired prior to
publication of the proposed rule, the rule would require only an
initial data report.
The proposed regulation provides that reporting counterparties for
pre-enactment or transition swaps must make an initial data report
relating to those swaps. The frequency of the report would be once per
swap, and the report would occur on the compliance date of the
Commission's final swap data recordkeeping and reporting regulations in
Part 45. The report would not be required to be made for historical
swaps that are expired as of the enactment of the Dodd-Frank Act. The
Commission estimates that there are 1,800 affected entities who will be
reporting counterparties for pre-enactment and transition swaps.\65\
The Commission estimates that the average one-time reporting burden for
each affected entity is 24 hours. Therefore, the total aggregate one-
time burden is 43,200 hours. The Commission requests comment on this
estimate.
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\65\ The Commission has previously estimated that there are
annually 1,500 non-SD/MSP counterparties who are a ``reporting
counterparty'' (see, e.g., the Commission's Paperwork Reduction Act
statement for the Swap Data Recordkeeping and Reporting Requirements
Proposed Rulemaking). In addition, the Commission has previously
estimated that there are 250 SDs and 50 MSPs. The Commission
believes that the number of entities who are reporting
counterparties to pre-enactment or transition swaps (that are in
existence as of or after the enactment of the Dodd-Frank Act) is
similar to the number of annual reporting counterparties. The
Commission requests comment on this estimate.
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The proposed regulation also provides for an ongoing reporting
obligation that must be fulfilled by reporting counterparties to pre-
enactment and transition swaps that are in existence as of the
compliance date specified in the Commission's final swap data reporting
rules in part 45. The burden for this ongoing reporting is and will be
subsumed by the reporting burden calculated for the Commission's final
swap data recordkeeping and reporting regulations in part 45.\66\
Therefore, for this proposed rulemaking, the Commission will not
calculate a burden estimate for ongoing reporting.
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\66\ The reporting burden for those final rules is calculated
based on the number of annual ``reporting counterparties'' to swaps
and therefore implicitly include reporting counterparties to pre-
enactment and transition swaps that are unexpired after the
effective date.
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Information Collection Comments. The Commission invites the public
and other federal agencies to comment on any aspect of the reporting
and recordkeeping burdens discussed above. Pursuant to 44 U.S.C.
3506(c)(2)(B), the Commission solicits comments in order to: (i)
evaluate whether the proposed collections of information are necessary
for the proper performance of the functions of the Commission,
including whether the information will have practical utility; (ii)
evaluate the accuracy of the Commission's estimate of the burden of the
proposed collections of information; (iii) determine whether there are
ways to enhance the quality, utility, and clarity of the information to
be collected; and (iv) minimize the burden of the collections of
information on those who are to respond, including through the use of
automated collection techniques or other forms of information
technology.
Comments may be submitted directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at
[email protected]. Please provide the Commission with a copy
of submitted comments so that all comments can be summarized and
addressed in the final rule preamble. Refer to the Addresses section of
this notice of proposed rulemaking for comment submission instructions
to the Commission. A copy of the supporting statements for the
collections of information discussed above may be obtained by visiting
RegInfo.gov. OMB is required to make a decision
[[Page 22842]]
concerning the collection of information between 30 and 60 days after
publication of this release. Consequently, a comment to OMB is most
assured of being fully effective if received by OMB (and the
Commission) within 30 days after publication of this notice of proposed
rulemaking.
C. Cost-Benefit Analysis
Introduction. Section 15(a) of the CEA requires the Commission to
consider the costs and benefits of its actions before issuing a
rulemaking under the Act. By its terms, section 15(a) does not require
the Commission to quantify the costs and benefits of the rulemaking or
to determine whether the benefits of the rulemaking outweigh its costs;
rather, it requires that the Commission ``consider'' the costs and
benefits of its actions. Section 15(a) further specifies that the costs
and benefits shall be evaluated in light of five broad areas of market
and public concern: (1) Protection of market participants and the
public; (2) the efficiency, competitiveness and financial integrity of
markets; (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
and could in its discretion determine that, notwithstanding its costs,
a particular rule is necessary or appropriate to protect the public
interest or to effectuate any of the provisions of or accomplish any of
the purposes of the Act.
Summary of Proposed Requirements. The proposed rule provides that
counterparties to pre-enactment or transition swaps must keep records
of, and must report, certain information relating to the swaps. The
proposed reporting requirements involve both an initial report and
ongoing reporting that continues until the final termination of the
swap.
Costs. There are recordkeeping and reporting costs associated with
the proposed requirements to record and report certain swap
information. The Commission has crafted the rule to be efficient in
terms of those costs and has also attempted to minimize the burden on
non-SD/MSP counterparties. The proposed rule provides that certain
records must be kept by a counterparty only if the counterparty is in
possession of that information on or after certain dates as provided in
the regulations. The proposed rule would require a counterparty to a
pre-enactment or transition swap in existence as of or after
publication of this proposed rule to keep, at a minimum, records of a
specified set of primary economic terms data; however, the Commission
believes that counterparties already would possess this information as
part of their normal business practices. For non-SD/MSP reporting
counterparties for pre-enactment or transition swaps in the interest
rate, currency, or other commodity asset classes, the proposed rule
limits the scope of required continuation data reporting to the data
elements available to the reporting counterparty on the compliance date
specified in the Commission's final swap data rules in Part 45.
Benefits. In addition to being mandated by the Dodd-Frank Act,
reporting of data concerning pre-enactment and transition swaps is
essential to the fundamental systemic risk mitigation, transparency,
and market supervision purposes for which the Dodd-Frank Act was
enacted. This reporting is necessary to give regulators complete
information regarding the entire swap market. It provides the
Commission and other financial regulators with necessary insight
concerning the number of transactions and the number and type of
participants involved in the swap market, as well as its outstanding
notional size. Such information provides both a baseline against which
to assess the development of the swap market over time and a first step
toward a transparent and well-regulated market for swaps. Data
concerning pre-enactment and transition swaps also is necessary for the
Commission to prepare the semi-annual reports it is required to provide
to Congress.
Public Comment. For the reasons set forth above, the Commission
believes that the benefits of the proposed regulations outweigh their
costs, and has decided to issue them. The Commission invites public
comment on its cost-benefit considerations. Commenters are also invited
to submit any data or other information that they may have quantifying
or qualifying the costs and benefits of the proposal with their comment
letters.
IV. Proposed Compliance Date
The Commission understands that, after the date on which the
Commission issues final swap data recordkeeping and reporting
regulations, including its final regulations concerning pre-enactment
and transition swaps, the industry will need a reasonable period of
time to implement the requirements of those regulations. Time may be
required for entities to register as SEFs, DCMs, DCOs, or SDRs (or for
extant DCMs or DCOs to revise their rules and procedures) pursuant to
new Commission regulations concerning such entities. Time may also be
needed for registered entities and potential swap counterparties to
adapt or create automated systems capable of fulfilling the
requirements of Commission regulations concerning swap data
recordkeeping and reporting. Accordingly, it may be appropriate for the
Commission's final swap data recordkeeping and reporting regulations,
including those for pre-enactment and transition swaps, to establish a
compliance date that is later than the date the final regulations are
issued.
The Commission requests comment concerning the need for a
compliance date for its final swap data recordkeeping and reporting
regulations, including those for pre-enactment and transition swaps,
that is later than the date of their issuance; concerning the benefits
or drawbacks of such an approach; concerning the length of time needed
for registered entities and potential swap counterparties to prepare
for implementation in the ways discussed above, or otherwise; and
concerning the compliance date which the Commission should specify in
its final regulations concerning swap data recordkeeping and reporting.
V. General Solicitation of Comments
The Commission requests comments concerning all aspects of the
proposed regulations, including, without limitation, all of the aspects
of the proposed regulations on which comments have been requested
specifically herein.
Proposed Rules
List of Subjects in 17 CFR Part 46
Swaps, Data recordkeeping requirements and Data reporting
requirements.
For the reasons set forth in the preamble, and pursuant to the
authority in the Commodity Exchange Act, as amended, and in particular
Sections 2(h)(5) and 4r(a), the Commission also hereby proposes to
amend Chapter 1 of Title 17 of the Code of Federal Regulations by
adding Part 46 to read as follows:
PART 46--SWAP DATA RECORDKEEPING AND REPORTING REQUIREMENTS: PRE-
ENACTMENT AND TRANSITION SWAPS
Sec.
46.1 Definitions.
46.2 Recordkeeping for pre-enactment swaps and transition swaps.
46.3 Swap data reporting for pre-enactment swaps and transition
swaps.
46.4 Unique identifiers.
[[Page 22843]]
46.5 Determination of which counterparty must report.
46.6 Third-party facilitation of data reporting.
46.7 Reporting to a single swap data repository.
46.8 Data reporting for swaps in a swap asset class not accepted by
any swap data repository.
46.9 Required data standards.
46.10 Reporting of errors and omissions in previously reported data.
Appendix to Part 46--Tables of Minimum Primary Economic Terms Data
for Pre-Enactment and Transition Swaps.
Authority: Title VII, sections 723 and 729, Pub. L. 111-203,
124 Stat. 1738.
Sec. 46.1 Definitions.
Terms used in this part are defined as follows:
Asset class means the particular broad category of goods, services
or commodities underlying a swap. The asset classes include interest
rate, currency, credit, equity, other commodity, and such other asset
classes as may be determined by the Commission.
Compliance date means the compliance date specified in the final
swap data recordkeeping and reporting regulations in part 45 of this
chapter as the date on which those regulations will be implemented,
i.e., the date on which registered entities and swap counterparties
must begin to comply with those regulations.
Confirmation (confirming) means the consummation (electronically or
otherwise) of legally binding documentation (electronic or otherwise)
that memorializes the agreement of the parties to all terms of a swap.
A confirmation must be in writing (whether electronic or otherwise) and
must legally supersede any previous agreement (electronically or
otherwise).
Confirmation data means all of the terms of a swap matched and
agreed upon by the counterparties in confirming the swap.
Credit support agreement means an International Swaps and
Derivatives Association, Inc. credit support agreement or equivalent
agreement.
Credit swap means any swap that is primarily based on instruments
of indebtedness, including, without limitation: any swap primarily
based on one or more broad-based indices related to instruments of
indebtedness; and any swap that is an index credit swap or total return
swap on one or more indices of debt instruments.
Currency swap means any swap which is primarily based on rates of
exchange between different currencies, changes in such rates, or other
aspects of such rates. This category includes foreign exchange swaps as
defined in Commodity Exchange Act Section 1a(25).
Electronic reporting or reporting electronically means reporting
data in compliance with Sec. 46.9 of this part. The obligation to
report electronically is not satisfied by electronic transmission of an
image of a document.
Equity swap means any swap that is primarily based on equity
securities, including, without limitation: any swap primarily based on
one or more broad-based indices of equity securities; and any total
return swap on one or more equity indices.
Interest rate swap means any swap which is primarily based on one
or more interest rates, such as swaps of payments determined by fixed
and floating interest rates.
Major swap participant has the meaning set forth in Commodity
Exchange Act, Section 1a(33), and any Commission regulation
implementing that Section.
Master agreement means an agreement, signed by the counterparties,
providing comprehensive documentation of standard terms and conditions
covering one or more swap transactions between such counterparties.
Non-swap dealer/major swap participant counterparty means a swap
counterparty that is neither a swap dealer nor a major swap
participant.
Other commodity swap means any swap not included in the credit
swap, currency swap, equity swap, or interest rate swap categories,
including, without limitation, any swap for which the primary
underlying item is a physical commodity or the price or any other
aspect of a physical commodity.
Pre-enactment swap means any swap entered into prior to enactment
of the Dodd-Frank Act of 2010 (July 21, 2010), the terms of which have
not expired as of the date of enactment of that Act.
Reporting counterparty means the counterparty required to report
swap data pursuant to Sec. 45.5 of this chapter.
Swap data repository has the meaning set forth in Commodity
Exchange Act Section 1a(48), and any Commission regulation implementing
that Section.
Swap dealer has the meaning set forth in Commodity Exchange Act,
Section 1a(49), and any Commission regulation implementing that
Section.
Transition swap means any swap entered into on or after the
enactment of the Dodd-Frank Act of 2010 (July 21, 2010) and prior to
the compliance date specified in the final swap data reporting and
recordkeeping requirements regulations in part 45 of this chapter.
Sec. 46.2 Recordkeeping for pre-enactment swaps and transition swaps.
(a) Recordkeeping for pre-enactment and transition swaps in
existence on or after April 25, 2011. Each counterparty to any pre-
enactment swap or transition swap that is in existence on or after
April 25, 2011 shall keep the following records concerning each such
swap:
(1) Minimum records required. The minimum records required to be
kept concerning each pre-enactment swap and transition swap shall be as
follows:
(i) Each counterparty shall keep records of all of the minimum
primary economic terms data specified in the appendix to this part.
(ii) If at any time on or after April 25, 2011 a counterparty is in
possession of a confirmation of the swap executed by the
counterparties, the counterparty shall keep records of all terms of
that confirmation.
(2) Additional records required to be kept if possessed by a
counterparty. In addition to the minimum records required pursuant to
paragraph (a)(1) of this part, a counterparty that is in possession at
any time on or after April 25, 2011 of any of the following
documentation shall keep copies thereof:
(i) Any master agreement governing the swap, and any modification
or amendment thereof.
(ii) Any credit support agreement or equivalent documentation
relating to the swap, and any modification or amendment thereof.
(3) Records created or available after the compliance date. In
addition to the records required to be kept pursuant to paragraphs
(a)(1) and (2) of this section, each counterparty to any pre-enactment
swap or transition swap that remains in existence on the compliance
date shall keep for each such swap, from the compliance date forward,
all of the records required to be kept by Sec. 45.2 of this chapter,
to the extent that any such records are created by or become available
to the counterparty on or after the compliance date.
(b) Recordkeeping for pre-enactment and transition swaps expired or
terminated prior to April 25, 2011. Each counterparty to any pre-
enactment swap or transition swap that is expired or terminated prior
to April 25, 2011 shall keep the following records concerning each such
swap:
(1) Pre-enactment swaps expired prior to April 25, 2011. Each
counterparty to any pre-enactment swap that expired or was terminated
prior to April 25, 2011 shall retain the information and documents
relating to the terms of the transaction that were possessed by the
counterparty on or after October 14,
[[Page 22844]]
2010 (17 CFR 44.00 through 44.02). Such information may be retained in
the format in which it existed on or after October 14, 2010, or in such
other format as the counterparty chooses to retain it. This paragraph
(b)(1) does not require the counterparty to create or retain records of
information not in its possession on or after October 14, 2010, or to
alter the format, i.e., the method by which the information is
organized and stored.
(2) Transition swaps expired prior to April 25, 2011. Each
counterparty to any transition swap that expired or was terminated
prior to April 25, 2011 shall retain the information and documents
relating to the terms of the transaction that were possessed by the
counterparty on or after December 17, 2010 (17 CFR 44.03). Such
information may be retained in the format in which it existed on or
after December 17, 2010, or in such other format as the counterparty
chooses to retain it. This paragraph (b)(2) does not require the
counterparty to create or retain records of information not in its
possession on or after December 17, 2010, or to alter the format, i.e.,
the method by which the information is organized and stored.
(c) Retention period. All records required to be kept by this Sec.
46.2 shall be kept from the applicable dates specified in paragraph (b)
of this section through the life of the swap, and for a period of at
least five years from the final termination of the swap, in a form and
manner acceptable to the Commission.
(d) Retrieval. Records required to be kept pursuant to this Sec.
46.2 shall be retrievable as follows:
(1) Each record required to be kept by a counterparty that is a
swap dealer or major swap participant shall be readily accessible via
real time electronic access by the counterparty throughout the life of
the swap and for two years following the final termination of the swap,
and shall be retrievable by the registrant or its affiliates within
three business days through the remainder of the period following final
termination of the swap during which it is required to be kept.
(2) Each record required to be kept by a non-swap dealer/major swap
participant counterparty shall be retrievable by the counterparty
within three business days through the period during which it is
required to be kept.
(e) Inspection. All records required to be kept pursuant to this
section shall be open to inspection upon request by any representative
of the Commission, the United States Department of Justice, or the
Securities and Exchange Commission, or by any representative of a
prudential regulator. Copies of all such records shall be provided, at
the expense of the entity or person required to keep the record, to any
representative of the Commission upon request, either by electronic
means, in hard copy, or both, as requested by the Commission.
Sec. 46.3 Swap data reporting for pre-enactment swaps and transition
swaps.
(a) Reporting for pre-enactment and transition swaps in existence
on or after April 25, 2011. (1) Initial data report. For each pre-
enactment swap or transition swap in existence on or after April 25,
2011, the reporting counterparty shall report electronically to a swap
data repository (or to the Commission if no swap data repository for
swaps in the asset class in question is available), on the compliance
date, the following:
(i) All of the terms of the confirmation that are recorded in the
automated systems of the reporting counterparty, if the terms so
reported include all of the minimum primary economic terms data
specified in the appendix to this part; or all of the minimum primary
economic terms data specified in the appendix to this part;
(ii) The Unique Counterparty Identifier required pursuant to Sec.
46.4 of this part; and
(iii) The following additional identifiers:
(A) The internal counterparty identifier used by the automated
systems of the reporting counterparty to identify the non-reporting
counterparty;
(B) The internal transaction identifier used by the automated
systems of the reporting counterparty to identify the swap; and
(C) The internal master agreement identifier (if any) used by the
automated systems of the reporting counterparty to identify the master
agreement governing the swap.
(2) Non-duplication of previous reporting. If the reporting
counterparty for a pre-enactment or transition swap has reported any of
the information required as part of the initial data report by
paragraph (a) of this section to a trade repository prior to the
compliance date, and if as of the compliance date that repository has
registered with the Commission as a swap data repository, then:
(i) The counterparty shall not be required to report such
previously reported information to the swap data repository again;
(ii) The counterparty shall be required to report to the swap data
repository on the compliance date any information required as part of
the initial data report by Sec. 46.3(a) of this part that has not been
reported prior to the compliance date; and
(iii) The initial data report required by paragraph (b)(2) of this
section and all subsequent data reporting concerning the swap shall be
made to the same swap data repository to which data concerning the swap
was reported prior to the compliance date (or to its successor in the
event that it ceases to operate, as provided in part 49 of this
chapter).
(3) Reporting of required swap continuation data for a credit swap
or equity swap. For each pre-enactment or transition swap in either the
credit swap or equity swap asset class, that is in existence on or
after April 25, 2011, throughout the existence of the swap following
the compliance date, the reporting counterparty, as defined in part 45
of this chapter, shall report all required swap continuation data
required to be reported for credit swaps or equity swaps under part 45
of this chapter.
(4) Reporting of required swap continuation data for an interest
rate swap, other commodity swap, or currency swap. For each pre-
enactment or transition swap in the interest rate, other commodity, or
currency asset class, that is in existence on or after April 25, 2011,
throughout the existence of the swap following the compliance date, the
reporting counterparty as defined in part 45 shall report required swap
continuation data as follows:
(i) Swaps for which the reporting counterparty is a swap dealer or
major swap participant. For each pre-enactment swap or transition swap
in existence on or after April 25, 2011, for which the reporting
counterparty as defined in part 45 is a swap dealer or major swap
participant, the reporting counterparty shall report to a swap data
repository electronically all required swap continuation data
concerning the swap as provided in part 45.
(ii) Swaps for which the reporting counterparty is a non-swap
dealer/major swap participant counterparty. For each pre-enactment swap
or transition swap in existence on or after April 25, 2011, for which
the reporting counterparty as defined in part 45 is a non-swap dealer/
major swap participant counterparty, the reporting counterparty shall
report to a swap data repository electronically all required swap
continuation data concerning the swap as provided in part 45. However,
notwithstanding any other provision of part 45, the state data reported
to provide a snapshot view, on a daily basis, of the primary economic
terms of the swap shall be the greater of the following which is in the
possession of
[[Page 22845]]
the reporting counterparty on the compliance date:
(A) The state data, or any part thereof, for the swap as defined in
part 45 of this chapter; or
(B) All of the data elements contained in the table of minimum
primary economic terms for pre-enactment or transition swaps in the
asset class of the swap in question that is included in the appendix to
this part.
(b) Reporting for pre-enactment and transition swaps expired or
terminated prior to April 25, 2011. (1) Pre-enactment swaps expired or
terminated prior to April 25, 2011. For each pre-enactment swap which
expired or was terminated prior to April 25, 2011, the reporting
counterparty shall report to a swap data repository (or to the
Commission if no swap data repository for swaps in the asset class in
question is available), on the compliance date, such information
relating to the terms of the transaction as was in the reporting
counterparty's possession on or after October 14, 2010 (17 CFR 44.00
through 44.02). This information can be reported via any method
selected by the reporting counterparty.
(2) Transition swaps expired or terminated prior to April 25, 2011.
For each transition swap which expired or was terminated prior to April
25, 2011, the reporting counterparty shall report to a swap data
repository (or to the Commission if no swap data repository for swaps
in the asset class in question is available), on the compliance date,
such information relating to the terms of the transaction as was in the
reporting counterparty's possession on or after December 17, 2010 (17
CFR 44.03). This information can be reported via any method selected by
the reporting counterparty.
Sec. 46.4 Unique identifiers.
The unique identifier requirements for swap data reporting with
respect to pre-enactment or transition swaps shall be as follows:
(a) By the compliance date, the reporting counterparty (as defined
by part 45 of this chapter) for each pre-enactment or transition swap
in existence on or after April 25, 2011, for which an initial data
report is required by this part 46, shall obtain a Unique Counterparty
Identifier, as provided in part 45, for itself, and shall include its
own Unique Counterparty Identifier in the initial data report
concerning the swap. With respect to that Unique Counterparty
Identifier, the reporting counterparty and the swap data repository to
which the swap is reported shall comply thereafter with all unique
identifier requirements of part 45 respecting Unique Counterparty
Identifiers.
(b) Within 180 days after the compliance date, the non-reporting
counterparty for each pre-enactment or transition swap in existence on
or after April 25, 2011 for which an initial data report is required by
this part 46, shall obtain a Unique Counterparty Identifier, as
provided in part 45, for itself, and shall provide that Unique
Counterparty Identifier to the reporting counterparty. Upon receipt of
the non-reporting counterparty's Unique Counterparty Identifier, the
reporting counterparty shall provide that Unique Counterparty
Identifier to the swap data repository to which swap data for the swap
was reported. Thereafter, with respect to the Unique Counterparty
Identifier of the non-reporting counterparty the counterparties to the
swap and the swap data repository to which it is reported shall comply
with all requirements of part 45 respecting Unique Counterparty
Identifiers.
(c) The Unique Counterparty Identifier requirements of parts 46 and
45 of this chapter shall not apply to pre-enactment or transition swaps
expired or terminated prior to April 25, 2011.
(d) The Unique Swap Identifier and Unique Product Identifier
requirements of part 45 of this chapter shall not apply to pre-
enactment or transition swaps.
Sec. 46.5 Determination of which counterparty must report.
(a) Determination of which counterparty must report swap data
concerning each pre-enactment or transition swap shall be made as
follows:
(1) If only one counterparty is an SD, the SD shall fulfill all
counterparty reporting obligations.
(2) If neither party is an SD, and only one counterparty is an MSP,
the MSP shall fulfill all counterparty reporting obligations.
(3) For each pre-enactment swap or transition swap for which both
counterparties are SDs, or both counterparties are MSPs, or both
counterparties are non-SD/MSP counterparties, the counterparties shall
agree as one term of their swap transaction which counterparty shall
fulfill reporting obligations with respect to that swap; and the
counterparty so selected shall fulfill all counterparty reporting
obligations.
(4) Notwithstanding the provisions of paragraphs (a)(1) through (3)
of this section, if only one counterparty to a pre-enactment swap or
transition swap is a U.S. person, that counterparty shall be the
reporting counterparty and shall fulfill all counterparty reporting
obligations.
(5) If a reporting counterparty selected pursuant to paragraphs
(a)(1) through (4) of this section ceases to be a counterparty to a
swap due to an assignment or novation, and the new counterparty is a
U.S. person, the new counterparty shall be the reporting counterparty
and fulfill all reporting counterparty obligations following such
assignment or novation. If a new counterparty to a swap due to an
assignment or novation is not a U.S. person, the counterparty that is a
U.S. person shall be the reporting counterparty and fulfill all
reporting counterparty obligations following such assignment or
novation.
(b) For pre-enactment and transition swaps in existence as of the
compliance date, determination of the reporting counterparty shall be
made by applying the provisions of paragraph (a) of this section with
respect to the current counterparties to the swap as of the compliance
date, regardless of whether either or both were original counterparties
to the swap when it was first executed.
(c) For pre-enactment and transition swaps for which reporting is
required, but which have expired or been terminated prior to the
compliance date, determination of the reporting counterparty shall be
made by applying the provisions of paragraph (a) of this section to the
counterparties to the swap as of the date of its expiration or
termination, regardless of whether either or both were original
counterparties to the swap when it was first executed.
Sec. 46.6 Third-party facilitation of data reporting.
Counterparties required by this part 46 to report swap data for any
pre-enactment or transition swap, while remaining fully responsible for
reporting as required by this part 46, may contract with third-party
service providers to facilitate reporting.
Sec. 46.7 Reporting to a single swap data repository.
All data reported for each pre-enactment or transition swap
pursuant to this part 46, and all corrections of errors and omissions
in previously reported data for the swap, by any registered entity or
counterparty, shall be reported to the same swap data repository to
which the initial data report concerning the swap is made (or to its
successor in the event that it ceases to operate, as provided in part
49 of this chapter).
[[Page 22846]]
Sec. 46.8 Data reporting for swaps in a swap asset class not accepted
by any swap data repository.
Should there be a swap asset class for which no swap data
repository currently accepts swap data, each counterparty required by
this part 46 to report swap data with respect to a pre-enactment or
transition swap in that asset class must report that same data at a
time and in a form and manner determined by the Commission.
Sec. 46.9 Required data standards.
In reporting swap data to a swap data repository as required by
this part 46, each reporting counterparty shall use the facilities,
methods, or data standards provided or required by the swap data
repository to which counterparty reports the data.
Sec. 46.10 Reporting of errors and omissions in previously reported
data.
(a) Each swap counterparty required by this part 46 to report swap
data shall report any errors and omissions in the data so reported.
Corrections of errors or omissions shall be reported as soon as
technologically practicable after discovery of any such error or
omission.
(b) For pre-enactment or transition interest rate swaps, currency
swaps, or other commodity swaps in existence as of the compliance date,
reporting counterparties fulfill the requirement to report errors or
omissions in state data previously reported as part of required
continuation data reporting by making appropriate corrections in their
next daily report of state data as required by this part 46 and part 45
of this chapter.
(c) Each counterparty to a pre-enactment or transition swap that is
not the reporting counterparty as determined pursuant to part 45, and
that discovers any error or omission with respect to any swap data
reported to a swap data repository for that swap, shall promptly notify
the reporting counterparty of each such error or omission. Upon
receiving such notice, the reporting counterparty shall report a
correction of each such error or omission to the swap data repository,
as provided in Sec. 45.10(a) and (b) of this chapter.
(d) Unless otherwise approved by the Commission, or by the Director
of Market Oversight pursuant to part 45 of this chapter, each swap
counterparty reporting corrections to errors or omissions in data
previously reported as required by this part 46 shall report such
corrections in the same format as it reported the erroneous or omitted
data.
Appendix to Part 46--Tables of Minimum Primary Economic Terms Data for
Pre-Enactment and Transition Swaps
Minimum Primary Economic Terms Data for Pre-Enactment and Transition
Credit Swaps and Equity Swaps
------------------------------------------------------------------------
Sample category Comment
------------------------------------------------------------------------
An indication of the counterparty E.g., option buyer and option
purchasing protection and of the seller; buyer and seller.
counterparty selling protection.
Information identifying the reference The entity that is the subject
entity. of the protection being
purchased and sold in the
swap.
An indication of whether or not both ...............................
counterparties are swap dealers.
An indication of whether or not both ...............................
counterparties are major swap
participants.
An indication of whether or not either ...............................
counterparty is a swap dealer or major
swap participant.
The date and time of trade, expressed ...............................
using Coordinated Universal Time
(``CUT'').
The venue where the swap was executed. ...............................
The effective date for the swap. ...............................
The expiration date for the swap. ...............................
The price.............................. E.g., strike, initial price,
spread, etc.
The notional amount, the currency in ...............................
which the notional amount is
expressed, and the equivalent notional
amount in U.S. dollars.
The amount and currency or currencies ...............................
of any up-front payment.
A description of the payment streams of E.g., coupon.
each counterparty.
The title of any master agreement E.g., annex, credit agreement.
incorporated by reference and the date
of any such agreement.
If the transaction involved an existing E.g., assignment.
swap, an indication that the
transaction did not involve an
opportunity to negotiate a material
term of the contract, other than the
counterparty.
The data elements necessary for a ...............................
person to determine the market value
of the transaction.
Whether or not the swap will be cleared ...............................
by a derivatives clearing
organization.
The name of the derivatives clearing ...............................
organization that will clear the swap,
if any.
If the swap is not cleared, all of the ...............................
settlement terms, including, without
limitation, whether the swap is cash-
settled or physically settled, and the
method for determining the settlement
value.
Any other primary economic term(s) of ...............................
the swap matched by the counterparties
in verifying the swap.
------------------------------------------------------------------------
Minimum Primary Economic Terms Data for Pre-Enactment and Transition
Currency Swaps
------------------------------------------------------------------------
Sample data field Comments
------------------------------------------------------------------------
1 Contract type........................ E.g., swap, swaption, forwards,
options, basis swap, index
swap, basket swap, other.
2 Swap transaction date................ Date when the swap was entered.
[[Page 22847]]
3 Currency 1........................... International Organization for
Standardization Code.
4 Currency 2........................... International Organization for
Standardization Code.
5 Notional amount 1.................... For currency one.
6 Notional amount 2.................... For currency two.
7 Settlement agent of the reporting ID of the settlement agent.
counterparty.
8 Settlement agent of the non-reporting ID of the settlement agent.
counterparty.
9 Settlement currency.................. If applicable.
10 Exchange rate 1..................... At the moment of trade/
agreement.
11 Exchange rate 2..................... At the moment of trade/
agreement, if applicable.
12 Swap delivery type.................. Cash or physical.
13 Expiration date..................... Expiration date of the
contract.
Any other primary economic term(s) of
the swap matched by the counterparties
in verifying the swap.
------------------------------------------------------------------------
Minimum Primary Economic Terms Data for Pre-Enactment and Transition
Interest Rate Swaps
------------------------------------------------------------------------
Sample data field Comment
------------------------------------------------------------------------
1 Contract type........................ E.g., swap, swaption, option,
basis swap, index swap, etc.
2 Swap transaction date................ Date when the swap was entered.
3 Swap effective date.................. Effective date of the contract.
4 Swap end-date........................ Expiration date of the
contract.
5 Notional amount one.................. The current active notional in
local currency.
6 Notional currency one................ International Organization for
Standardization code of the
notional currency.
7 Notional amount two.................. The second notional amount
(e.g., receiver leg).
8 Notional currency two................ International Organization for
Standardization code of the
notional currency.
9 Payer (fixed rate)................... Is the reporting party a fixed
rate payer? Yes/No/Not
applicable.
10 Fixed leg payment frequency......... How often will the payments on
fixed leg be made.
11 Direction........................... For swaps--if the principal is
paying or receiving the fixed
rate. For float-to-float and
fixed-to-fixed swaps, it is
unspecified. For non-swap
instruments and swaptions, the
instrument that was bought or
sold.
12 Option type......................... E.g., put, call, straddle.
13 Fixed rate..........................
14 Fixed rate day count fraction.......
15 Floating rate payment frequency.....
16 Floating rate reset frequency.......
17 Floating rate index name/rate period
18 Leg 1............................... If two floating legs, report
what is paid.
19 Leg 2............................... If two floating legs, report
what is received.
Any other primary economic term(s) of
the swap matched by the counterparties
in verifying the swap.
------------------------------------------------------------------------
Minimum Primary Economic Terms Data for Pre-Enactment and Transition
Other Commodity Swaps
------------------------------------------------------------------------
Sample data field Comment
------------------------------------------------------------------------
1 Contract type........................ E.g., swap, swaption, option,
etc.
2 Swap transaction date................ Date when the swap was entered.
3 Quantity............................. The unit of measure applicable
for the quantity on the swap.
4 Start date........................... Predetermined start date from
which payments will be
exchanged.
5 End-date............................. Predetermined end date from
which payments will be
exchanged.
6 Buyer pay index...................... The published price as paid by
the buyer.
7 Seller pay index..................... The published price as paid by
the seller.
8 Buyer................................ Party purchasing product, e.g.
payer of the fixed price (for
swaps), or payer of the
floating price (for put
swaption), or payer of the
fixed price (for call
swaption).
9 Seller............................... Party offering product, e.g.
payer of the floating price
(for swaps), payer of the
fixed price (for put
swaption), or payer of the
floating price (for call
swaption).
10 Price............................... E.g., fixed price, the heat
rate value, etc.
11 Price unit.......................... The unit of measure applicable
for the price on the
transaction.
12 Grade............................... E.g., the grade of oil or
refined product being
delivered.
Any other primary economic term(s) of
the swap matched by the counterparties
in verifying the swap.
------------------------------------------------------------------------
[[Page 22848]]
Issued in Washington, DC, on April 6, 2011, by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2011-9446 Filed 4-22-11; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: April 25, 2011