Statement of Commissioner Brian D. Quintenz before the Open Commission Meeting on February 20, 2020

Open Meeting on Proposed Rule: Amendments to the Real-Time Public Reporting Requirements (Part 43); Proposed Rule: Amendments to the Swap Data Recordkeeping and Reporting Requirements (Part 45); and Reopening of Comment Period: Certain Swap Data Repository and Data Reporting Requirements (Part 49 Verification)

February 20, 2020

Good morning.  I am pleased to support the data proposals before the Commission today.  These proposed amendments to part 45 regulatory reporting and part 43 real-time reporting hopefully represent the beginning of the end of this agency’s longstanding efforts to collect and utilize accurate, reliable swap data to further its regulatory mandates.

There is frequently a trade-off between being first and being right. That is especially true when it comes to regulation and specifically true when it comes to the CFTC’s historical approach to uncleared swap data reporting. Although the CFTC was the first regulator in the world to implement swap data reporting requirements, it did so only in a partial, non-descriptive, and non-technical fashion, which has led to the fact that, even today, the Commission has great difficulty aggregating and analyzing data for uncleared swaps across swap data repositories (SDRs). 

However, I’m very pleased that over the past few years, the CFTC continued to lead global efforts to reach international consensus on reporting requirements so that derivatives regulators can finally get a clear picture of the uncleared landscape.

I wish we could have arrived at this stage sooner.  Nevertheless, I would like to recognize the diligent efforts of DMO staff to finally get us over the finish line.  The proposals before us today seek to provide the Commission with the homogeneous data it needs to readily analyze swap data for both cleared and uncleared swaps, across jurisdictions.  The proposals would eliminate unnecessary reporting fields, implement internationally agreed to “critical data elements,” or CDE fields, and revisit aspects of our current reporting regimes that can be further perfected.  

It is important to note the differentiation between the poor usability of current uncleared swaps data and the significant usability of swaps data produced by clearinghouses for cleared swaps trades.  In fact, the swap data for cleared swap transactions is regularly used by the Commission to monitor risk in real time at the client portfolio level.

Part 45 Regulatory Reporting

The proposal would provide reporting counterparties with a longer time to report trades accurately to an SDR by moving to a “T+1” reporting timeframe for swap dealer (SD) and derivatives clearing organization (DCO) reporting parties, and a “T+2” reporting timeframe for non-SD/DCO reporting counterparties.  I support providing additional time for market participants to meet their regulatory reporting obligations.  A later regulatory reporting deadline should help counterparties report the trade correctly the first time, instead of reporting an erroneous trade that then needs to be corrected later.  This proposed change would also more closely harmonize the CFTC’s and ESMA’s reporting deadlines.

The proposal would also implement a number of CDE fields consistently with the detailed technical standards put forth by CPMI-IOSCO.[1]  Importantly, the proposal would remove the current “catch-all” reporting requirement to report “any other term(s) of the swap matched or affirmed” by the counterparties.  It would also require, for the first time, certain reporting counterparties to report valuation, margin, and collateral information daily to the Commission.  Significantly, in order to alleviate burdens on small reporting counterparties, non-SD/MSP reporting counterparties would not be subject to these new requirements.  With respect to swaps on physical commodities, the proposal seeks input from market participants about how certain data elements should be reported, including quantity unit of measure and price unit of measure.  The CDE technical guidance did not harmonize many fields that are relevant to the physical commodity asset class.  I know DMO will continue to play an active role through CPMI-IOSCO’s CDE governance process to ensure that additional guidance and specificity are provided regarding the data elements for this asset class.  I hope that commenters use this as an opportunity to help inform the additional steps that must be taken at the international level to ensure the effective reporting of commodity swaps.

The technical specification describing each of these data elements is being put out for public comment and I urge market participants to comment on all of the proposed elements.  To the extent the CFTC can adopt basic data elements that are identical to other jurisdictions’ elements, global aggregation and measurement of risk, including counterparty credit risk, can become a reality.  However, the goal of global data harmonization, in my opinion, should also be balanced against the burdens and practical realities facing reporting counterparties.  This proposal tries to strike an appropriate balance and I look forward to hearing from commenters on this point.

Part 43 Real-Time Reporting

The real-time reporting proposal generally maintains the “as soon as technologically practicable” reporting standard for most trades, but would adjust the delay for public dissemination of block transactions.  The proposal also updates the block size thresholds and cap sizes and makes adjustments to the block swap categories. 

With respect to the timing requirement for reporting block trades, the proposal would establish a time delay of 48 hours after execution of the trade.  The Commodity Exchange Act (CEA) specifically directs the Commission to ensure that real-time public reporting requirements for swap transactions (i) do not identify the participants; (ii) specify the criteria for what constitutes a block trade and the appropriate time delay for reporting such block trades, and (iii) take into account whether public disclosure will materially reduce market liquidity.[2]  Several commenters requested that the Commission reconsider the current delays for block trades under CFTC regulations, citing concerns about market liquidity, counterparty confidentiality, or the pricing of block trades.[3]  Taking into account the CEA’s directives and commenters’ concerns, the proposal seeks to recalibrate the balance among price transparency, price discovery, and market liquidity.  I am very interested to hear from commenters about whether or not the Commission struck the right balance in this proposal, and, if another time delay is more appropriate for particular asset classes of trades, I hope commenters will include their suggestions. 

Conclusion

In the past, the leadership of the CFTC has likened the construction of a swap data reporting system to the building of a transcontinental railroad—a monumental infrastructure project, requiring considerable time and resources. However, in my opinion the best way to build a functioning intercontinental railroad is not to let every state decide how wide they want to make the tracks—the approach the agency tried when it rushed out its uncleared swap reporting framework almost eight years ago.  Subsequent progress on this issue has always been stymied by transitioning away from that view—away from the lack of specificity and consistency in how reporting counterparties should report basic data elements.  Today, as a result of the decisive leadership and hard work of this agency, I am optimistic that we have finally turned the corner towards complete visibility into the global swaps market landscape.  I look forward to hearing feedback from market participants and SDRs about how our proposals can be further improved.  

-CFTC-