Federal Register, Volume 77 Issue 88 (Monday, May 7, 2012)[Federal Register Volume 77, Number 88 (Monday, May 7, 2012)]
[Proposed Rules]
[Pages 26709-26713]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10918]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 49
RIN 3038-AD83
Swap Data Repositories: Interpretative Statement Regarding the
Confidentiality and Indemnification Provisions of Section 21(d) of the
Commodity Exchange Act
AGENCY: Commodity Futures Trading Commission.
ACTION: Proposed interpretative statement.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing this interpretative statement to provide
guidance regarding the applicability of the confidentiality and
indemnification provisions set forth in new section 21(d) of the
Commodity Exchange Act (``CEA'') added by section 728 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (``Dodd-Frank Act'').
The Commission requests comment on all aspects of the proposed
interpretative statement. The proposed interpretative statement
clarifies that the provisions of section 21(d) should not operate to
inhibit or prevent foreign regulatory authorities from accessing data
in which they have an independent and sufficient regulatory interest,
even if that data also has been reported pursuant to the CEA and
Commission regulations.
DATES: Comments must be received on or before June 6, 2012.
ADDRESSES: Comments, identified by RIN number 3038-AD83, may be sent 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
[[Page 26710]]
Trading Commission, Three Lafayette Centre, 1155 21st Street NW.,
Washington, DC 20581.
Hand Delivery/Courier: Same as mail above.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
FOR FURTHER INFORMATION CONTACT: Adedayo Banwo, Counsel, Office of the
General Counsel, at (202) 418.6249, [email protected]; With respect to
questions relating to international consultation and coordination:
Jacqueline Mesa, Director, Office of International Affairs, at (202)
418.5386, [email protected], Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that may be exempt from disclosure under the Freedom of
Information Act (``FOIA''),\1\ a petition for confidential treatment of
the exempt information may be submitted according to the procedures
established in Sec. 145.9 of the CFTC's regulations.\2\ The Commission
reserves the right, but shall have no obligation, to review, prescreen,
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 FOIA.
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\1\ 5 U.S.C. 552.
\2\ 17 CFR 145.9.
SUPPLEMENTARY INFORMATION: In this release, the Commission addresses
issues raised by foreign regulators with respect to the scope and
application of the confidentiality and indemnification provisions of
new section 21(d) of the CEA and proposes to clarify that these
provisions should not operate to inhibit or prevent foreign regulatory
authorities from accessing data in which they have an independent and
sufficient regulatory interest.
I. Background: Statutory and Regulatory Authorities
On July 21, 2010, President Obama signed into law the Dodd-Frank
Act.\3\ Title VIIamended the CEA to establish a comprehensive new
regulatory framework for swaps and security-based swaps.\4\ The
legislation was enacted to reduce risk, increase transparency and
promote market integrity within the financial system by, among other
things: (1) Providing for the registration and comprehensive regulation
of swap dealers and major swap participants; (2) imposing clearing and
trade execution requirements on standardized derivative products; (3)
creating robust recordkeeping and real-time reporting regimes; and (4)
enhancing the Commission's rulemaking and enforcement authorities with
respect to, among others, all registered entities and intermediaries
subject to the Commission's oversight.
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\3\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. 111-203, 124 Stat. 1376 (2010), available at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.
\4\ Pursuant to section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010;'' 7 U.S.C. 1 et seq.
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To enhance transparency, promote standardization and reduce
systemic risk, section 727 of the Dodd-Frank Act added to the CEA new
section 2(a)(13)(G),\5\ which requires all swaps--whether cleared or
uncleared--to be reported to swap data repositories (``SDRs'').SDRs are
new registered entities created by section 728 of the Dodd-Frank
Act.\6\ SDRs are required to perform specified functions related to the
collection and maintenance of swap transaction data and information.\7\
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\5\ 7 U.S.C. 2(a)(13)(G).
\6\ Section 721 of the Dodd-Frank Act amends section 1a of the
CEA to add a definition of the term ``swap data repository.''
Pursuant to CEA section 1a(48), 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.'' 7
U.S.C. 1a(48).
\7\ See 7 U.S.C. 24a(c). See also Commission, Final Rulemaking:
Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136, Jan.
13, 2012 (``Data Final Rules''). The Data Final Rules, among other
things, set forth regulations governing SDR data collection and
reporting responsibilities under part 45 of the Commission's
regulations.
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CEA section 21(c)(7) requires that SDRs make data available to
certain domestic and foreign regulators \8\ under specified
circumstances.\9\ Separately, section 21(d) mandates that prior to
receipt of any requested data or information from an SDR, a regulatory
authority described in section 21(c)(7) shall agree in writing to abide
by the confidentiality requirements described in section 8 of the
CEA,\10\ and to indemnify the SDR and the Commission for any expenses
arising from litigation relating to the information provided under
section 8 of the CEA.\11\
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\8\ The Commission's regulations designate such regulators as
either an ``Appropriate Domestic Regulator'' or an ``Appropriate
Foreign Regulator'' in Sec. 49.17(b). See Commission, Final
Rulemaking: Swap Data Repositories: Registration Standards, Duties
and Core Principles, 76 FR 54538, 54554 Sept. 1, 2011 (``SDR Final
Rules'').
\9\ 7 U.S.C. 24a(c)(7).
\10\ 7 U.S.C. 12.
\11\ 7 U.S.C. 24a(d).
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Section 752 of the Dodd-Frank Act seeks to ``promote effective and
consistent global regulation of swaps,'' and provides that the CFTC and
foreign regulators ``may agree to such information-sharing arrangements
as may be deemed to be necessary or appropriate in the public interest.
* * *'' \12\ In light of this statutory directive, the Commission has
been working to provide sufficient access to SDR data to appropriate
domestic and foreign regulatory authorities.
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\12\ See section 752(a) of the Dodd-Frank Act.
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On June 8, 2011, the Chairman of the CFTC and the Chairman of the
Securities and Exchange Commission (``Chairmen'') jointly submitted a
letter to Michel Barnier, European Commissioner for Internal Markets
and Services,\13\ highlighting their desire for international
cooperation. In the letter, the Chairmen expressed their belief that
indemnification and notice requirements need not apply when a
registered SDR is also registered in a foreign jurisdiction and the
foreign regulator, acting within the scope of its jurisdiction, seeks
information directly from the SDR.
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\13\ See letter from Gary Gensler, Chairman of the Commission,
and Mary Schapiro, Chairman of the SEC, to Michel Barnier, European
Commissioner for Internal Markets and Services, European Commission,
dated June 8, 2011.
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On September 1, 2011, the Commission adopted regulations
implementing CEA section 21's registration standards, duties, and core
principles for SDRs. To implement the provisions of section 21(c)(7)
and (d), the Commission adopted definitions and standards for
determining access by domestic and foreign regulators to data
maintained by SDRs.
The Commission acknowledged in the SDR Final Rules that the CEA's
indemnification requirement could have the unintended effect of
inhibiting direct access by other regulators to data maintained by
SDRsdue to various home country laws and regulations.\14\ The SDR Final
Rulesprovided that
[[Page 26711]]
under specified circumstances, certain ``Appropriate Domestic
Regulators'' \15\ may gain access to the swap data reported and
maintained by SDRs without being subject to the notice and
indemnification requirements of CEA sections 21(c)(7) and (d).\16\ In
connection with foreign regulatory authorities, the Commission
determined in the SDR Final Rules that confidential swap data reported
to and maintained by an SDR may be accessed by an Appropriate Foreign
Regulator \17\ without the execution of a confidentiality and
indemnification agreement when the Appropriate Foreign Regulator has
supervisory authority over an SDR registered with it pursuant to
foreign law and/or regulation that is also registered with the
Commission.
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\14\ See SDR Final Rules at 54554.
\15\ The term Appropriate Domestic Regulator is defined in 17
CFR 49.17(b)(1) as the Securities and Exchange Commission; each
prudential regulator identified in section 1a(39) of the CEA. 7
U.S.C. 1a(39); the financial Stability Oversight Council; the
Department of Justice; any Federal Reserve Bank; the Office of
Financial Research; and any other person the Commission deems
appropriate.
\16\ In the Commission's view, it is appropriate to permit
access to the swap data maintained by SDRs to Appropriate Domestic
Regulators that have concurrent regulatory jurisdiction over such
SDRs, without the application of the notice and indemnification
provisions of sections 21(c)(7) and (d) of the CEA. See SDR Final
Rules at 54554 n.163. Accordingly, these provisions do not apply to
an Appropriate Domestic Regulator that has regulatory jurisdiction
over an SDR registered with it pursuant to a separate statutory
authority that is also registered with the Commission, if the
Appropriate Domestic Regulator executes an MOU or similar
information sharing arrangement with the Commission and the
Commission, consistent with CEA section 21(c)(4)(A), designates the
Appropriate Domestic Regulator to receive direct electronic access.
See 17 CFR 17(d)(2).
\17\ The term Appropriate Foreign Regulator is defined in 17 CFR
49.17(b)(2) as a foreign regulator with an existing memorandum of
understanding (``MOU'') or similar type of information sharing
arrangement executed with the Commission, and/or a foreign regulator
without an MOU as determined on a case-by-case basis by the
Commission.
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The confidentiality and indemnification provisions of new CEA
section 21 apply only when a regulatory authority seeks access to data
from an SDR. In the SDR Final Rules, the Commission noted that section
8(e) of the CEA provides for the Commission (as opposed to an SDR) to
share confidential information in its possession with any department or
agency of the Government of the United States, or with any foreign
futures authority, department or agency of any foreign government or
political subdivision thereof,\18\ acting within the scope of its
jurisdiction.\19\
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\18\ Section 725(f) of the Dodd-Frank Act amended section 8(e)
of the CEA to include foreign central banks and ministries.
\19\ See SDR Final Rules at 54554.
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The SDR Final Rules became effective on October 31, 2011.\20\ Under
these rules, trade repositories may apply to the Commission for full
registration as SDRs.Pending the adoption and effectiveness of other,
related regulatory provisions and definitions, however, such
registrations are deemed ``provisional.'' \21\
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\20\ Id.
\21\ See 17 CFR 49.3(b).
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II. Considerations Relevant to the Commission's Proposed Interpretative
Statement \22\
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\22\ Legislation has been introduced in Congress that would
amend the CEA to eliminate or substantially limit the SDR
indemnification provision.
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A. International Considerations
As noted above, section 752(a) of the Dodd-Frank Act directs the
Commission to consult and coordinate with foreign regulatory
authorities regarding the establishment of consistent international
standards for the regulation of swaps and various ``swap entities.''
Section 752(a) also provides that the Commission ``may agree to such
information-sharing arrangements [with foreign regulatory authorities]
as may be deemed to be necessary or appropriate in the public
interest'' or for the protection of investors and counterparties.\23\
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\23\ See section 752(a) of the Dodd-Frank Act.
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The Commission is committed to a cooperative international approach
to the registration and regulation of SDRs, and consulted extensively
with various foreign regulatory authorities in promulgating both its
proposed and final regulations concerning SDRs.\24\ The Commission
notes that the SDR Final Rules are largely consistent with the
recommendations and goals of the May 2010 ``CPSS-IOSCO Consultative
Report, Considerations for Trade Repositories in the OTC Derivatives
Market'' (``Working Group Report'').\25\
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\24\ See public comment file in response to the proposal for the
SDR Final Rules, available at http://comments.cftc.gov/PublicComments/CommentList.aspx?id=939 and SDR Final Rules note 6 at
54539, supra.
\25\ This working group was jointly established by the Committee
on Payment and Settlement Systems (``CPSS'') of the Bank of
International Settlements and the Technical Committee of the
International Organization of Securities Commissions (``IOSCO'').
The Working Group Report presented a set of factors to consider in
connection with the design, operation and regulation of SDRs. A
significant focus of the Working Group Report is access to SDR data
by appropriate regulators. The Working Group Report urges that a
trade repository ``should support market transparency by making data
available to relevant authorities and the public in line with their
respective information needs.'' The Working Group Report is
available at http://www.bis.org/publ/cpss90.pdf. See also CPSS-IOSCO
Consultative Report, Principles of Financial Market Infrastructures
(March 2011) available at http://www.bis.org/publ/cpss94.pdf. See
also Financial Stability Board (``FSB''), Implementing OTC
Derivatives Market Reforms, Oct. 25, 2010 (``FSB Report''); FSB,
Derivative Market Reforms, Progress Report on Implementation, Apr.
15, 2010 (``FSB Progress Report'').
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B. Public Comments on SDR Regulations
In developing the SDR Final Rules, the Commission received several
comments regarding access to SDR data by foreign regulatory authorities
and the confidentiality and indemnification provisions of CEA section
21(d). The Commission has considered these comments in formulating this
proposed interpretation but requests further comment concerning the
specific interpretative statement proposed.
Managed Funds Association (``MFA'') requested that the Commission
actively participate in facilitating foreign regulatory access and
confirming a foreign regulator's authority in connection with any SDR
data request.\26\ The CME Group Inc. (``CME'') argued against the
Commission designating any third party to receive swap data, and
TriOptima suggested that the Commission ``adopt as flexible an
interpretation as possible'' regarding the indemnification provisions
in CEA section 21(d).\27\
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\26\ See comment letter from MFA.
\27\ See comment letters from CME and TriOptima.
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The Depository Trust & Clearing Corporation (``DTCC'') stated that
the ``indemnification provisions should not apply in situations where
regulators are carrying out regulatory responsibilities, acting in a
manner consistent with international agreements and maintaining the
confidentiality of data.'' \28\ Additionally, the Commission received a
comment letter from the European Securities and Markets Authority
(``ESMA'') \29\ stating that it believes the indemnification provision
``undermines'' principles of trust and consultation.
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\28\ See comment letter from DTCC.
\29\ See comment letter from ESMA.
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C. Consultations With Foreign Regulatory Authorities
Consistent with the international harmonization envisioned by
section 752 of the Dodd-Frank Act, the Commission has engaged in
consultations with foreign regulatory authorities regarding the
Commission's regulations relating to the Dodd-Frank Act. During these
consultations, many foreign regulatory authorities have expressed
concern about the difficulty in complying with the indemnification
provisions of CEA section 21(d).
As a consequence of these consultations with foreign regulatory
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authorities, and pursuant to the mandate for cooperation under section
752, the Commission concludes that further guidance is necessary to
ensure that appropriate access by foreign regulatory authorities is not
unnecessarily inhibited. For example, the Commission has learned that
foreign regulatory authorities have asked whether a recognition regime
with respect to SDRs, and/or access by foreign authorities that do not
regulate an SDR, would conflict with Sec. 49.17(d)(3) and Sec.
49.18(c) of the SDR Final Rules, which refer to registration with
Appropriate Foreign Regulators. Foreign regulatory authorities have
also taken action to harmonize regulatory reporting rules.
While the SDR Final Rules address foreign regulators with
supervisory authority and regulatory responsibility, the Commission is
proposing the following interpretative statement, pursuant to section
752, to ensure that foreign regulators receive sufficient access to
data reported to SDRs where such foreign regulators have an independent
and sufficient regulatory interest.
III. Commission Proposed Interpretative Statement
In this proposed interpretative statement, the CFTC provides
guidance regarding the confidentiality and indemnification provisions
of CEA section 21(d). As noted above, the Commission seeks comment from
interested members of the public on all aspects of this proposed
interpretative statement.
A. Data Reported to Registered SDRs
The Commission understands that some registered SDRs also maybe
registered, recognized or otherwise authorized in a foreign
jurisdiction and may accept swap data reported pursuant to the foreign
regulatory regime. The Commission concludes that the confidentiality
and indemnification provisions of CEA section 21(d) generally apply
only to such data reported pursuant to the CEA and Commission
regulations.
The Commission further concludes that the confidentiality and
indemnification provisions should not operate to inhibit or prevent
foreign regulatory authorities from accessing data in which they have
an independent and sufficient regulatory interest (even if that data
also has been reported pursuant to the CEA and Commission regulations).
Accordingly, and consistent with the Commission's SDR Final Rules,
the Commission proposes to interpret CEA section 21(d) such that a
registered SDR would not be subject to the confidentiality and
indemnification provisions of that section if:
Such registered SDR also is registered, recognized or
otherwise authorized in a foreign jurisdiction's regulatory regime; and
The data sought to be accessed by a foreign regulatory
authority has been reported to such registered SDR pursuant to the
foreign jurisdiction's regulatory regime.
This proposed interpretative guidance is grounded in principles of
international law and comity. For example, in F. Hoffmann-La Roche Ltd.
v. Empagran S.A., the U.S. Supreme Court, in reviewing the
extraterritorial applicability of a different federal statute, stated
that extraterritorial jurisdiction should be construed, where
ambiguous, ``to avoid unreasonable interference with the sovereign
authority of other nations.'' \30\ In cases considering concepts of
international law and comity in evaluating the extraterritorial scope
of federal statutes, the Supreme Court has noted that the principles in
the Third Restatement of Foreign Relations Law are relevant to the
interpretation of U.S. law.\31\
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\30\ F. Hoffmann-LaRoche, Ltd. v. Empagran S.A., 542 U.S. 155,
164 (2004). In Hoffmann-LaRoche, the Supreme Court also stated that
canons of statutory construction ``assume that legislators take
account of the legitimate sovereign interests of other nations when
they write American laws.'' Id.
\31\ Id. at 164-165.
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Specifically, section 403 of the Third Restatement of Foreign
Relations Law states, in relevant part:
Whether exercise of jurisdiction over a person or activity is
unreasonable is determined by evaluating all relevant factors,
including, where appropriate:
(a) The link of the activity to the territory of the regulating
state, i.e., the extent to which the activity takes place within the
territory, or has substantial, direct, and foreseeable effect upon
or in the territory;
(b) The connections, such as nationality, residence, or economic
activity, between the regulating state and the person principally
responsible for the activity to be regulated, or between that state
and those whom the regulation is designed to protect;
(c) The character of the activity to be regulated, the
importance of regulation to the regulating state, the extent to
which other states regulate such activities, and the degree to which
the desirability of such regulation is generally accepted;
(d) The existence of justified expectations that might be
protected or hurt by the regulation;
(e) The importance of the regulation to the international
political, legal, or economic system;
(f) The extent to which the regulation is consistent with the
traditions of the international system;
(g) The extent to which another state may have an interest in
regulating the activity; and
(h) The likelihood of conflict with regulation by another
state.\32\
\32\ Rest. 3d., Third Restatement Foreign Relations Law section
403 (scope of a statutory grant of authority must be construed in
the context of international law and comity including, as
appropriate, the extent to which regulation is consistent with the
traditions of the international system).
To avoid unreasonable interference with the sovereign authority of
foreign regulators, this proposed interpretative statement is supported
and underpinned by principles of international law and comity.
B. Foreign Regulatory Access
In the Commission's view, a foreign regulator's access to data held
in a registered SDR that also is registered, recognized, or otherwise
authorized in a foreign jurisdiction's regulatory regime, where the
data sought to be accessed has been reported pursuant to that
regulatory regime, should be governed by such foreign jurisdiction's
regulatory regime. The Commission concludes that application of the
requirements of CEA section 21(d) in these circumstances is
unreasonable in light of, among other things, the importance of such
data to the foreign jurisdiction's regulatory regime, foreign
regulators' interest in unfettered access to such data, and the
traditions of mutual trust and cooperation among international
regulators.\33\
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\33\ The Commission notes that access to data held by trade
repositories is a concept under discussion and development among
international regulators. At the request of the FSB, CPSS and IOSCO
have established a working group of relevant authorities to produce
a forthcoming report regarding authorities' access to trade
repository data.
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Therefore, the Commission proposes that a foreign regulator's
access to data from a registered SDR that also is registered,
recognized, or otherwise authorized in a foreign jurisdiction's
regulatory regime, where the data to be accessed has been reported
pursuant to that regulatory regime, will be dictated by that foreign
jurisdiction's regulatory regime and not by the CEA or Commission
regulations. Such access is appropriate, in the Commission's view, even
if the applicable data is also reported to the registered SDR pursuant
to the Commission's Data Final Rules.\34\
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\34\ Regarding the Commission's access to SDR data, section
21(b)(1)(A) of the CEA states 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.''
Section 21(c)(1) of the CEA requires registered SDRs to ``accept
data prescribed by the Commission for each swap under subsection
(b).'' Therefore, with respect to Commission access to data held in
registered SDRs, the Commission concludes that the direct electronic
access provisions of CEA section 21(c)(4) apply only to such data
that the SDR is required to accept under section 21(c)(1), which is
further defined by part 45 of the Commission's regulations. In this
respect, the Commission concludes that its direct electronic access
applies only to such data reported pursuant to section 21 and
Commission regulations promulgated thereunder.
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Additionally, the Commission reiterates that a foreign regulatory
authority, like domestic regulators, can nonetheless receive
confidential data, without the execution of a confidentiality and
indemnification agreement, from the Commission (as opposed to an SDR)
pursuant to section 8(e) of the CEA.\35\ Such data sharing and access
would be governed by the confidentiality provisions of section 8 of the
CEA.
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\35\ As noted above, CEA section 8(e) allows the Commission to
share confidential information in its possession obtained in
connection with the administration of the CEA with ``any department
or agency of the Government of the United States'' or with any
foreign futures authority or a department, central bank or ministry,
or agency of a foreign government or political subdivision thereof,
acting within the scope of its jurisdiction. The Commission
acknowledges the difficulty that registered SDRs may face in
determining what data or reporting falls within the jurisdiction of
a regulatory authority. In this regard, the Commission is
considering a separate release regarding section 2(i) of the CEA.
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C. Request for Comment
The Commission requests comment on all aspects of its proposed
interpretative statement. In particular, the Commission requests
comment on the following issue: How would the timing and implementation
of foreign jurisdictions' regulatory regimes affect the Commission's
proposed interpretative guidance?
By the Commission.
Dated: Issued in Washington, DC, on April 30, 2012.
David A. Stawick,
Secretary of the Commission.
Appendices To Swap Data Repositories: Interpretative Statement
Regarding the Confidentiality and Indemnification Provisions of Section
21(d) of the Commodity Exchange Act Interpretive Statement--Commission
Voting Summary and Statements of Commissioners
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendix 1--Commission Voting Summary
On this matter, Chairman Gensler and Commissioners Sommers,
Chilton, O'Malia and Wetjen voted in the affirmative; no
Commissioner votes in the negative.
Appendix 2--Statement of Chairman Gary Gensler
I support the proposed interpretative statement regarding the
application of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) indemnification provisions for swap
data repositories (SDRs). The Commission is working closely with
international regulators on a collaborative approach regarding how
data may be accessed by regulators. The proposed guidance, which
benefited from international input, states the Commission's view
that foreign regulators will not be subject to the indemnification
provisions in the Dodd-Frank Act if the SDR is registered,
recognized or otherwise authorized by foreign law and the data to be
accessed is reported to the SDR pursuant to foreign law. The public
will now have an opportunity to comment on the proposed guidance,
and I look forward to the public's input.
Appendix 3--Statement of Commissioner Jill E. Sommers
I concur in the issuance of this Proposed Interpretative
Statement Regarding the Confidentiality and Indemnification
Provisions of Section 21(d) of the Commodity Exchange Act (Proposed
Interpretive Statement). It provides some additional clarification
with respect to how the Commission intends to interpret the
application of the Section 21(d) indemnification provisions beyond
what the Commission stated when it finalized the swap data
repository (SDR) rules. See Swap Data Repositories: Registration
Standards, Duties and Core Principles, 76 FR 54,538 (Sept. 1, 2011).
However, a legislative fix is the only real solution to providing
appropriate regulators, both foreign and domestic, with timely
access to relevant data. I agree with Commissioner O'Malia that the
Commission should publicly support repeal of the indemnification
provisions, and note that the SEC has already done so.
When finalizing the SDR rules, the Commission stated that a
foreign regulator may have direct access to confidential swap data
reported to and maintained by an SDR registered with the Commission
without executing a Confidentiality and Indemnification Agreement
when the SDR is also registered with the foreign regulator and the
foreign regulator is acting in a regulatory capacity with respect to
the SDR. See id. at 54,554. The Proposed Guidance clarifies that
this should be the case even if the data the foreign regulator seeks
also has been reported pursuant to the CEA and Commission
regulations.
Aside from making this point, the Proposed Interpretive
Statement does not provide any information that cannot be otherwise
gleaned from the SDR final rules, with one notable exception. The
final SDR rules define an ``Appropriate Foreign Regulator'' as one
that has supervisory authority over an SDR that is registered with
the foreign regulator and with the CFTC. The Proposed Interpretive
Statement expands this concept to SDRs that are registered,
recognized, or otherwise authorized in a foreign jurisdiction's
regulatory regime. Thus, registration and recognition are
equivalent. This is a welcome clarification and a step in the right
direction.
I should note that the indemnification provisions of Section
21(d) may have an adverse effect on U.S. regulators too. The
Proposed Interpretive Statement touches on a distinction drawn in
Part 49 between ``Appropriate Domestic Regulators,'' which include a
number of domestic regulatory authorities, and an ``Appropriate
Domestic Regulator with Regulatory Responsibility over a Swap Data
Repository'' (a single entity subcategory of Appropriate Domestic
Regulators, namely, the Securities and Exchange Commission (SEC)).
Only the latter category of domestic regulator (i.e. the SEC) is
exempt from the indemnification provisions of Section 21(d). While
it makes sense that the SEC should be able to receive SDR data
directly from an SDR absent an indemnification agreement, I
encourage comments as to whether other Appropriate Domestic
Regulators should have similar access.
Appendix 4--Statement of Commissioner Scott D. O'Malia
I concur in support of the Commission's proposed interpretative
statement (``Proposed Interpretative Statement'') regarding the
confidentiality and indemnification provisions of Section 21(d) of
the Commodity Exchange Act (``CEA'').
Ultimately, Congress should repeal the confidentiality and
indemnification provisions of Section 21(d) of the CEA and the
Commission should publicly support that repeal. Absent a legislative
fix, however, I believe the Commission is taking the right step to
allay the concerns expressed by many foreign regulatory authorities.
I am somewhat concerned that the Proposed Interpretative
Statement does not address one important issue. Specifically, the
Proposed Interpretative Statement would not provide foreign
regulatory authorities with access to swaps data if those
authorities had not yet finalized their regulations. In order to
better understand the public's view on this issue, I have added a
question seeking comment on how the timing and implementation of
foreign jurisdictions' regulatory regimes should affect the
Commission's final interpretation.
Lastly, I am pleased that this Proposed Interpretative Statement
is based on principles of international harmonization and comity.
The Commission should continue to consult with foreign regulatory
authorities in a manner consistent with international agreements
regarding the registration of swap data repositories and the sharing
of swaps data. In my view, these principles should establish the
foundation of the Commission's forthcoming rulemaking concerning the
extraterritorial application of the Dodd-Frank Act to foreign-based
entities. Several foreign jurisdictions are in the process of
finalizing new rules for the regulation of swaps and it is important
that those rules provide a level and competitive playing field for
U.S. firms as well.
[FR Doc. 2012-10918 Filed 5-4-12; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: May 7, 2012