Statement of CFTC Commissioner J. Christopher Giancarlo Regarding the Final Rule on Amendments to the Definitions of “Portfolio Reconciliation” and “Material Terms” for Purposes of Swap Portfolio Reconciliation

May 2, 2016

I support the final rule amending the definitions of portfolio reconciliation and material terms for purposes of swap portfolio reconciliation. I commend the Commission and Division of Swap Dealer & Intermediary Oversight staff for replacing no-action relief with a rulemaking subject to a cost-benefit analysis and the notice and comment requirements of the Administrative Procedure Act.

In the proposal I raised two concerns. First, I questioned the logic of the proposed rule to require the exchange of all terms throughout the life of a swap as part of a portfolio reconciliation exercise, but then require reconciliation of only the material terms. I am pleased that the Commission has amended the definition of portfolio reconciliation to require the exchange of material terms so that the terms that must be exchanged are the same as those that must be reconciled.

Second, I questioned the logic of the proposed rule to treat as material terms, and thus require the reconciliation of, data fields that will not change over time, such as execution timestamp and timestamp for submission to a swap data repository. I am also pleased that the Commission has revised the definition of material terms to mean the minimum primary economic terms as defined in appendix 1 of part 45 of the Commission’s regulations and to exclude several additional data fields that are not relevant to the ongoing rights and obligations of the parties and the valuation of the swap.

The final rule streamlines the portfolio reconciliation process and reduces costs for market participants without undermining the Commission’s objectives for portfolio reconciliation. The final rule is much improved from the proposal so I am pleased to support it.

Last Updated: May 2, 2016